LAW BLOG NEWSLETTER
from The Wall Street Journal Online
January 29, 2009 -- 7:55 p.m. EST
___________________________________
TODAY'S POSTS
- Indictment: Marc Dreier Used Fraud Proceeds to Support Lavish Lifestyle
- Breaking News: Blagojevich Gone But Not Soon Forgotten
- In a Counterintuitive Twist: Lateral Moves Are All the Rage
- Sun Shines in Carona Case, But Does More Work Loom?
- Harvard Scores $10M Gift in Honor of Larry Tribe
- Q4 Losses and the $4 Billion Question: Thain and Lewis on the Hot Seat
- Rounding up Madoff: The 17th Floor, A Poor Employee and JPMorgan
- Firms Ask Partners to Pony Up
- Blago's Last Stand
- MoFo, Linklaters to Cut Deeply
***
Indictment: Marc Dreier Used Fraud Proceeds to Support Lavish Lifestyle
After his law firm fell to pieces in the midst of his alleged $400 million fraud, New York plaintiffs lawyers Marc Dreier has now been indicted by a federal grand jury. The charges are securities and wire fraud along with the conspiracy to commit those frauds. (Here's the news release from the U.S. Attorney's office, Southern District of New York.)
Dreier, who still sits in a New York jail, is accused of falsely representing to hedge funds that he had the authority to sell promissory notes by a New York development company (which has been independently identified as Solow Realty) that would be used to finance real estate deals in the US and abroad. The notes, which the indictment says turned out to be false, had interest rates that ranged from 8% to 12% and had terms of one or two years. To convince the funds that the notes were legitimate, the indictment says Dreier supplied the funds with fake financial statements. In another component of the alleged scheme, Dreier impersonated a lawyer representing a Canadian pension plan and represented to a hedge fund that he was the lawyer.
The indictment (found here) states: In order to carry out these impersonations as part of the fraudulent scheme, Dreier obtained numerous cellphones, designated phone lines at Dreier LLP, and set up various fake email addresses. Dreier told the purchasers of the fictitious notes to contact the issuers or holders of the notes at those phone numbers and fake email addresses.
"It was not unexpected. There are no surprises," said Gerald L. Shargel, Dreier's lawyer told reporter Chad Bray in this WSJ.com story. "As I've said before we're looking for a fair and appropriate resolution of the matter."
The indictment said the alleged scheme was carried out to support his lavish lifestyle. (Some glimpses of the Harvard Law School grad's lifestyle was laid out in this WSJ story.)
The forfeiture allegation included with the indictment gives us another opportunity to enviously peruse some of the possessions (detailed previously on this blog here), including his 2005 Heesen yacht sitting at Pier 66 in Fort Lauderdale, that his alleged fraud allowed him to acquire.
See and Post Comments: http://blogs.wsj.com/law/2009/01/29/indictment-marc-dreier-used-fraud-proceeds-to-support-lavish-lifestyle?mod=djemWLB&reflink=djemWLB&reflink=djemWLB
***
Breaking News: Blagojevich Gone But Not Soon Forgotten
After a jury convicted former Alaska Senator Ted Stevens on corruption charges, Stevens made a curious argument. He claimed that because the judge had yet to rule on his motion to set aside his conviction, he had yet to be formally convicted.
So it would be interesting to know if the former Alaska senator could come up with a legal theory as to why Illinois Governor Rod Blagojevich hasn't just been kicked out of office. Regardless, as far as the Illinois Senate is concerned, he's gone forthwith. Here's the WSJ story.
After thumbing his nose at the impeachment process, preferring the company of Diane Sawyer among others, Blagojevich made a last minute attempt to save his job. (Some argue that Blagojevich had a chance to fare well at his impeachment trial, had he only played along.) Speaking before the Senate for a little less than an hour, he repeatedly said he "never intended" to break any laws and insisted, "If I felt I did something wrong, I would have resigned in December."
In his closing statement, Blagojevich asked senators how they could vote him out of office based on criminal charges that haven't been proven. "There hasn't been a single piece of evidence that proves any wrongdoing," he said. "How can you throw a governor out of office with incomplete and insufficient evidence?"
See and Post Comments: http://blogs.wsj.com/law/2009/01/29/breaking-news-blagojevich-gone-but-not-soon-forgotten?mod=djemWLB&reflink=djemWLB&reflink=djemWLB
***
In a Counterintuitive Twist: Lateral Moves Are All the Rage
The nations largest firms hired partners from other large firms at a record pace last year. All told, 2,509 partners moved laterally between Am Law 200 firms, according to the February issue of the American Lawyer magazine.
Heres a summary of the findings from the magazines editor Aric Press.
At first blush, it makes no sense. Firms are firing lawyers and cutting costs at a record pace. And lateral partner hiring is a costly proposition. Typically, newbie partners take months of ramp-up time before they can turn a profit. Economic downturns are supposed to be times when partners hunker down and firms become more conservative and less willing to take on newcomers, Press says.
Yet, even in these woeful times, there was a 4% increase in partners jumping ship from one big firm to another. And this figure, Press says, doesnt even taken into account the hundreds of partners who were hired in the wake of meltdowns at Heller, Thelen and Thacher Profitt. (Am Laws lateral survey only tracks movement through September 30.)
So what gives? How can there be so much hiring activity? Part of it can be chalked up to skittishness. Lawyers are scared of being one of the last on a sinking ship-and are eager to move to firms perceived strong enough to weather the storm. Accidental laterals, e.g., lawyers who have been pushed out of their firms, are also driving the spike in movement, Press says.
And then there are the carnivores-firms that see the downturn as a prime opportunity to lure partners from weaker competitors.
Is all of this partner movement good or bad for BigLaw? Its good for the talent, allowing many partners to command big salary premiums on the open market. But it has also helped foster a cut-throat environment, with firms focused intensely on boosting profits so that they will be in the running for star partners.
Photo: iStockPhoto
See and Post Comments: http://blogs.wsj.com/law/2009/01/29/in-a-counterintuitive-twist-lateral-moves-are-all-the-rage?mod=djemWLB&reflink=djemWLB&reflink=djemWLB
***
Sun Shines in Carona Case, But Does More Work Loom?
Associated Press Former Orange County Sheriff Mike Carona with his wife Deborah speaks at a news conference outside court in Santa Ana, Calif., Friday, Jan 16, 2009. Will this be a case of the Lord Giveth, the Lord Taketh Away? After a federal jury acquitted Orange County, Calif., Sheriff Mike Carona, also known as Americas Sheriff, on conspiracy and mail fraud charges in a case alleging that he used his office to enrich himself and his friends and family, he was quoted in the LA Times as saying the acquittals were an "absolute miracle."
Brian Sun (pictured, right), the lawyer who defended Carona, told the National Law Journal that he eventually handled the case pro bono because his client could no longer afford to keep him on.
But Carona didn't get off completely; he was convicted on one count of witness tampering tied to recorded audiotapes in which he attempted to influence the grand jury testimony of a man who had served as his assistant sheriff, the NLJ reports. But the case ended with a twist: juror notes were unsealed stating two jurors in the case said they felt intimidated and pressured to side with Carona. (LAT on that here.)
Sun's take on that follows:
National Law Journal: Since the verdict, juror notes have come out saying some jurors felt pressured to acquit. What effect does that have on the verdict?
Brian Sun: Some of that may impact our post-trial motions, but it's too early or premature to comment on it until we do more review. There's a lot more to it than what's being reported in the press. On the other hand, we need to do due diligence on that in terms of these things having any legal impact on the case.
Charges that his wife and mistress benefited from the scheme Carona was orchestrating were dropped today.
See and Post Comments: http://blogs.wsj.com/law/2009/01/29/sun-shines-in-carona-case-but-does-more-work-loom?mod=djemWLB&reflink=djemWLB&reflink=djemWLB
***
Harvard Scores $10M Gift in Honor of Larry Tribe
Someone really likes Laurence Tribe. Really likes him.
Today, Harvard Law School, where Tribe teaches con law, received an anonymous gift of $10 million in honor of Tribe. According to an email sent out by Dean and Solicitor General-designate Elena Kagan to the HLS faculty, the chair will be named for Tribe (Harvard, Harvard Law) when he retires from the faculty. Until then, by Tribes request, the chair will be named for Thurgood Marshall.
"I do not know of any comparable gift ever made to HLS in honor of a faculty member," wrote Kagan. "Perhaps that is just one measure of how incomparable Larrys role at HLS has been."
See and Post Comments: http://blogs.wsj.com/law/2009/01/29/harvard-scores-10m-gift-in-honor-of-larry-tribe?mod=djemWLB&reflink=djemWLB&reflink=djemWLB
***
Q4 Losses and the $4 Billion Question: Thain and Lewis on the Hot Seat
December was a poor month for former Merrill CEO John Thain. January has been far worse. Last week, he resigned. On Tuesday, New York AG Andrew Cuomo said he was seeking testimony from Thain and BofAs chief administrative officer on its decision to accelerate bonus payments to Merrill employees.
Merrill Lynch Chairman and CEO John Thain, left, and Bank of America Chairman and CEO Ken Lewis, Sept. 15, 2008. (AP) The latest: Cuomo is expanding the scope of his investigation into bonuses, with the inquiry now likely to include whether directors and shareholders were misled about Merrill's giant fourth-quarter losses. Here's the WSJ report.
In addition, Cuomo wants to know why BofA didn't disclose that Merrill's condition was deteriorating. BofA's CEO, Ken Lewis, is also likely to face questions from Cuomo about bonus payouts by Merrill, including what he told directors about them.
Thain and BofA declined to comment.
On the bonus issue, Cuomo's office is reportedly looking at possible remedies such as trying to recover bonuses already paid, fines or alleging securities-law violations. In a statement, Cuomo said Bank of America faces a "$4 billion question" about "why it failed to stop Merrill Lynch from issuing year-end bonuses as it was taking over the company."
See and Post Comments: http://blogs.wsj.com/law/2009/01/29/q4-losses-and-the-4-billion-question-thain-and-lewis-on-the-hot-seat?mod=djemWLB&reflink=djemWLB&reflink=djemWLB
***
Rounding up Madoff: The 17th Floor, A Poor Employee and JPMorgan
Lots of interesting tidbits on the Madoff front. Here's a round-up:
A look at the 17th floor: Today, the Journal yanks up the blinds on Bernie Madoff's investment-advisory business, which was housed on the 17th floor of midtown Manhattan's Lipstick Building. Several of the employees from that group have received subpoenas from regulators seeking documents about their dealings with defrauded investors, though no evidence has emerged that these employees knew about a $50 billion Ponzi scheme.
On the hook for a Benz: Craig Kugel, a human resources employee at Madoff's firm who wasn't involved in the alleged fraud scheme could be on the hook for the remaining lease payments on a Benz used by Madoff.
Dow Jones Newswires (link unavailable) reports that, in a Wednesday court filing, William A. Gogel, a lawyer for Kugel, said Kugel never intended to be a personal guarantor for a lease taken out on a 2009 Mercedes-Benz S550-4 sedan, but executed the lease as an accommodation to the company. Kugel works in human resources at Bernard L. Madoff Investment Securities LLC. As we noted last week, Irving Picard, the trustee in the Madoff case, asked a federal judge to cancel leases the firm had on six luxury cars, including the S550-4.
Mercedes-Benz Financial reportedly intends to sell the car next month. But Gogel said in his filing that the wholesale sale of the car will minimize the proceeds, creating a substantial deficiency, subjecting Craig Kugel to financial loss and impairment of his credit."
Why did JPMorgan cut its exposure to Madoff? Some angry European investors, reports the NYT, want to know when JPMorgan cut its exposure to Madoff and why. As early as 2006, the bank had started offering investors a way to leverage their bets on the future performance of two hedge funds that invested with Madoff. To protect itself from the resulting risk, the bank put $250 million of its own money into those funds. But the bank, reports the Times, suddenly began pulling its millions out of those funds in early autumn, months before Madoff was arrested. The bank did not notify investors of its move, and several of them are furious that it protected itself but left them holding notes that the bank itself now says are probably worthless.
A bank spokeswoman said JPMorgan withdrew from the Madoff-linked funds last fall after a wide-ranging review of our hedge fund exposure. Lemkau acknowledged, however, that the bank also became concerned about the lack of transparency to some questions we posed as part of our review.
Loyal LB'ers: Should the bank have notified investors of its concerns?
See and Post Comments: http://blogs.wsj.com/law/2009/01/29/rounding-up-madoff-the-17th-floor-a-poor-employee-and-jpmorgan?mod=djemWLB&reflink=djemWLB&reflink=djemWLB
***
Firms Ask Partners to Pony Up
Laying off lawyers and freezing salaries are probably the two most visible indicators of tough times for law firms. Today, our very own Ashby Jones reports on another angle: Firms turning to their own lawyers in order to reduce and avoid debt.
When it comes to raising money, law firms generally have fewer options than publicly traded companies, which can sell bonds or issue equity shares, Jones writes. Ethical rules prohibit nonlawyers from owning equity in law firms, so firms typically structure themselves as partnerships, with the most senior lawyers owning the equity. That generally limits the firms to two fund-raising options: taking out a bank loan or passing the hat to their equity-holding partners.
Here's how three firms are handling it:
Dewey & LeBoeuf: Last fall it announced it would withhold certain monthly distributions from its partners to build up its capital base.
Clifford Chance: Last fall the firm, which has offices in 21 countries, asked all of its partners to kick in as much as $150,000 each to build the firm's nest egg.
DLA Piper: Toward the end of last year, DLA, which has some 3,500 lawyers world-wide, announced it would reduce some partner payouts and converted more than 200 nonequity partners into equity partners, which would require them to contribute more than $100,000 each to the firm's coffers.
See and Post Comments: http://blogs.wsj.com/law/2009/01/29/firms-ask-partners-to-pony-up?mod=djemWLB&reflink=djemWLB&reflink=djemWLB
***
Blago's Last Stand
"His career tattered but his dramatic flair intact . . ."
That's the lead to today's Chicago Trib story on "embattled" Illinois Gov. Rod Blagojevich, who, after choosing a publicity tour over participation in his impeachment trial, pulled an about-face yesterday. In approximately two hours from now, Blago will present a 90-minute closing argument. The Senate could vote on impeachment as soon as today. Here's more from the WSJ.
"He will not testify or subject himself to cross-examination," Senate President John Cullerton told the chamber.
Blagojevich spokesman Lucio Guerrero told the Trib: "Sen. Cullerton asked him to come down. I don't think he's going down there to resign; I think he's going to make his appeal to senators."
A vote by 40 of the legislature's 59 state senators to convict Blagojevich on charges of abuse of power would instantly make Lt. Gov. Patrick Quinn the state's 41st governor.
See and Post Comments: http://blogs.wsj.com/law/2009/01/29/blagos-last-stand?mod=djemWLB&reflink=djemWLB&reflink=djemWLB
***
MoFo, Linklaters to Cut Deeply
Even though, these days, layoffs seem to spark far less commotion than they did this time last year, we'd be remiss if we didn't mention the following two massive law firm cuts:
201: West Coast firm Morrison & Foerster is cutting 201 jobs -- 53 attorneys and 148 staff. Here's a statement from the firm. Here's a story from the Recorder.
The firm issued a statement saying the layoffs were meant "to align our firm with client needs in this extraordinary economic downturn." Associates and staff from around the country at all levels of seniority were affected by the cuts, sources told the Recorder. More than 5 percent of the firm's 1,000 attorneys were laid off.
As the Recorder notes, MoFo has cut more people, in this cycle, than any other Bay Area firm. In November, Orrick laid off 40 lawyers and 35 staff in November. Cooley cut 52 lawyers and 62 staff earlier this month. On Monday, Wilson Sonsini laid off 45 lawyers and 68 staff.
270: In what appears to be the largest round of layoffs thus far, Linklaters has announced "a formal redundancy consultation with up to 120 lawyers and 150 business support staff in London expected to lose their jobs." News of the layoffs was first reported last week by the the Lawyer. Here's another report from Legal Week.
All UK staff are involved in the consultation which is likely to see between 100-120 lawyers -- representing up to 17.5% of the firm's UK non-partner fee earners -- and 130-150 business services staff losing their jobs, notes legal Weeks. Partner cuts may also be in the offing.
See and Post Comments: http://blogs.wsj.com/law/2009/01/29/mofo-linklaters-to-cut-deeply?mod=djemWLB&reflink=djemWLB&reflink=djemWLB
___________________________________
ADVERTISEMENT
Take Advantage of Online Journal Research and Tools!
Utilize our valuable research and tools for important business,
investing and financial planning decisions. Our research includes
quotes and up-to-date information on nearly 30,000 companies as well
as an article archive and extensive market data.
http://online.wsj.com/advanced_search?mod=emtdfix
Contact WSJ's Law Blog at lawblog@wsj.com
__________________________________
ONLINE JOURNAL E-MAIL CENTER
TO UNSUBSCRIBE DIRECTLY from this list, go to:
http://setup.wsj.com/EmailSubMgr/do/delete?addr=ignoble.experiment%40ARCONATI.US&id=145
Your request will take effect within 48 hours.
TO VIEW OR CHANGE any of your e-mail settings, go to the E-Mail Setup Center:
http://online.wsj.com/email
You are currently subscribed as ignoble.experiment@ARCONATI.US
FOR FURTHER ASSISTANCE, please contact Customer Service at 1-800-369-2834
or 1-609-514-0870 between the hours of 7 am - 10 pm Monday - Friday and 8 am - 3 pm Saturday or e-mail onlinejournal@wsj.com.
___________________________________
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved.
Privacy Policy -
http://online.wsj.com/public/privacy_policy
Contact Us -
http://online.wsj.com/public/contact_us
No comments:
Post a Comment
Keep a civil tongue.