The former chairman and four others at Dewey & LeBoeuf LLP, which collapsed in the biggest-ever law firm bankruptcy, were sued by the U.S. Securities and Exchange Commission over claims they led a “bold and long-running accounting fraud.”
Steven Davis, 60, LeBoeuf’s chairman; Stephen DiCarmine, 57, executive director; Joel Sanders, 55, chief financial officer; Francis Canellas, finance director; and controller Thomas Mullikin, 43, were sued by the SEC over claims the five men, Dewey’s top legal and business professionals, ran an accounting fraud that had its roots in the 2008 financial crisis, when declining revenue threatened the firm’s access to credit.
The firm fraudulently inflated its 2008 and 2009 profits by $59 million as part of a $150 million bond offering, according to the SEC. The SEC cited a pervasive “culture of financial chicanery” at Dewey, evidenced by e-mails in which defendants referred to “cooking the books,” “fake income,” “accounting tricks” and fooling a “clueless auditor.”
Davis, DiCarmine, Sanders, and Zachary Warren, a client relations manager, face criminal charges today by Manhattan District Attorney Cyrus R. Vance Jr., according to the New York Times. Vance’s office said in a statement it has scheduled an 11 a.m. press conference with the Federal Bureau of Investigation and the SEC to announce a major fraud case.
Dewey, which once had 1,300 lawyers in Manhattan and 3,000 internationally, was the No. 3 legal adviser to banks handling merger deals. It filed for bankruptcy in May 2012, and liquidated under court protection amid disputes among employees and partners.
The case is U.S. Securities and Exchange Commission v. Davis, 14-cv-01528, U.S. District Court, Southern District of New York (Manhattan).
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