Former executives of bankrupt law firm obtained L/Cs to guarantee salaries

Former top executives of Dewey & LeBoeuf LLP, the law firm now in bankruptcy, obtained letters of credit (L/Cs) to ensure that they were paid, even if the now-defunct firm failed to do so.

The L/C revelations emerged from a witness during the trial of three former executives.

Lack of funds

The court heard that when the law firm refinanced some US$250 million in debt in 2010, Dewey’s was already seriously behind on payments to suppliers, retirees and partners.

But instead of telling its creditors, the firm’s executives and employees made the accounts look healthier than they were, according to testimony from former finance director, Francis Canellas.

Salary protection

To protect his own salary, Canellas told the court that he obtained an L/C to ensure that if the firm failed to pay him, the bank would.

Two of the executives on trial – former chief financial officer, Joel Sanders and former executive director, Stephen DiCarmine – also obtained L/Cs for the same purpose.

L/Cs cancelled

The third Dewey executive facing charges – former chairman, Steven Davis – has not been named as obtaining an L/C to guarantee his payments.

According to Canellas, the L/Cs were not drawn upon and were cancelled at the end of 2011.



Categories: Trade Based Financial crimes News

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