Dewey & LeBoeuf’s senior management ran a Ponzi scheme for the purpose of self-enrichment and maliciously misrepresented the firm’s finances, according to a lawsuit brought by a former partner.
The defunct US firm faces a lawsuit from former IP partner Henry Bunsow, who claims over 200 Dewey partners including ex-chairman Steve Davis committed fraud and “acted with an improper and evil motive amounting to malice”.
The suit, brought in the Superior Court of the State of California in San Francisco, alleges the defendants engaged in “grand theft, grand larceny, false pretences and embezzlement”.
The defendants are Davis, litigation head Jeffrey Kessler, chief financial officer Joel Sanders, executive director Stephen DiCarmine and partner James Woods, as well as 200 unnamed individuals.
Bunsow, who now runs a San Francisco IP boutique, claims the defendants misrepresented the firm’s financial situation and insecure future when persuading him to join the firm on a $5m (£3.2m) guaranteed annual profit share from Howrey, another extinct US firm, in 2010.
He claims the defendants breached fiduciary duty owed to him by “misrepresenting and concealing material facts”, according to the filing. Bunsow also claims the firm’s demise damaged his client relationships.
He alleges the defendants “concocted and participated in a scheme and conspiracy intended to misrepresent the financial performance of Dewey” and claims that Davis and the other defendants “were running a Ponzi scheme in order to enrich themselves and select partners of the firm”.
The lawsuit also alleges that the defendants conspired to deprive Dewey partners of their capital investment in the business by requiring them to deposit 36 per cent of their estimated annual income in the firm’s capital account by the end of each year with no intention of returning the amounts to them. Rather, Bunsow alleges that the defendants “intended to selectively distribute said capital investments to themselves and others” and deny return of capital to most partners.
Bunsow also alleges that Davis withdrew his capital funds from the firm when he was ousted as chairman “to the disadvantage of the firm and his fellow partners”.
He is claiming damages for debts, guaranteed partnership draw and distributions and other amounts, instructing Lynch Gilardi & Grummer to represent him.
Kessler told The Lawyer: “The allegations against me are outrageous, baseless and without any merit.”
Woods and Davis declined to comment. Bunsow, DiCarmine and Sanders could not be reached for comment.