Ex-Dewey partner claims Citibank conspired to lure laterals

A former Dewey & LeBoeuf partner is attempting to block Citibank securing a summary judgment against him by arguing that the bank colluded with the now-defunct firm to entice lateral hires in the run-up to the firm’s collapse this year.

Houston energy partner Steven Otillar is objecting to Citibank’s action against him, stating that the US firm and its management “conspired” with the bank to devise a capital loan programme to attract lateral hires such as Otillar, who joined from Baker & McKenzie in August 2011. He opposed the motion in papers filed last month in the New York federal court.

Citibank is seeking a summary judgment against Otillar after it pursued him for an unpaid capital loan totalling $207,000.

The partner, who is now at Akin Gump Strauss Hauer & Feld, alleges that Citibank, Dewey’s lender, devised the programme to offset its imminent loss resulting from the law firm’s likely collapse. He also claims that Citibank had a duty to inform him of the grave financial situation of the firm, with which he started negotiations over a lateral move in late 2010.

He claims: “The scheme was intended to lure unsuspecting lateral hires to join the failing firm as equity partners, who would then be responsible for making significant capital contributions to DL [Dewey & LeBoeuf] when its revenue was insufficient to pay its obligations, particularly the hundreds of millions of dollars in guaranteed compensation and bonuses to existing partners, some of whom were directly involved in the fraud. Clearly, Citibank was facing a significant loss, which it reduced by virtue of the programme and specifically by virtue of the loan.”

The suit adds: “DL and its management team conspired with Citibank to devise the programme as a means to entice new hires to make capital contributions as soon as possible after joining the firm. Citibank and DL and its management knew or should have known that DL would never be able to pay the interest on the loan and that DL would never be able to repay the capital contributions that they fraudulently induced Otillar and other new partners to borrow from Citibank.”

A Citibank spokesperson said in a statement: “These claims are without merit and we intend to defend ourselves against them vigorously.”

Citibank was one of the banks pursuing Dewey ex-partners for professional practice loans, with Otillar telling partners on a mass conference call in June that the US bank had come after him (25 June 2012).

Earlier this year another former partner, Henry Bunsow, filed a lawsuit against Dewey accusing management of running a Ponzi scheme (14 June 2012).