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Is Fraud, Breach of Fiduciary Duty Suit Against Dewey Leaders a Good Idea?


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1/1/2016
Jonathan Cooper
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I doubt anyone could say they were surprised by this, but as part of the aftermath of the incredibly rapid disintegration of Dewey LeBoef, a former partner of the firm has now sued the firm's former leadership, charging that these leaders defrauded the partners by not only concealing the firm's true financial situation in an effort to lure these new partners to join the firm under false pretenses, but even going further, and actually inflating the firm's accounting numbers.

 

As a corollary to those claims, this partner has also alleged entitlement to unpaid guaranteed compensation and lost profits based upon a breach of their fiduciary duties to the plaintiff.

 

There is a part of the case I have difficulty with, however:

 

Granted, the plaintiff sued these partners in their individual capacities, and did not sue the firm, which has filed for Chapter 11 bankruptcy protection. But I wonder what the likelihood is that he will ever see a dime from them.

 

Here's why:

 

There have been numerous news reports indicating that criminal investigations of Dewey's leadership are well underway. The facts underlying this partner's allegations are presumably the same ones that would underlie a criminal complaint, and the presumed defendants in the criminal context are constitutionally guaranteed a speedy trial. Thus, even assuming this particular partner were to prevail, the defendants' assets would likely be depleted in large measure by criminal and civil defense costs, plus any fines that might be levied.

 

Moreover, it certainly stands to reason that if fraud was indeed involved, there should be reason to suspect that a bankruptcy trustee might try to claw some money back for the firm's creditors from these same individuals, which would deplete their resources even further.



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