Posted Jul 02, 2009 01:10 am CDT
The bank is making them do it, firm managers say.
Thacher Proffitt took a fusillade of criticism in the legal community for trying to claw back funds loaned to incoming first-years before its decision to fold.
It’s not as bad as it looks, according to Thacher Proffitt.
“There appears to be some confusion and misstatements in the market regarding the manner in which Thacher Proffitt in dissolution has approached the loans made to its former first-year associates,” said Omer S.J. Williams, chairman of the firm’s dissolution committee, in a statement. “Pursuant to the terms of its lending arrangements, the firm has no ability to forgive these loans.
“However … the firm has made no collection efforts with respect to these loans and has been very clear with its former first-year associates that … the firm was not requiring that the loans be due and payable upon their termination and that they could make payments, to the extent possible, on a going-forward basis. … Assertions that the firm or its lenders are involved in collection efforts against the former first-years are … inaccurate.”
The firm declined to say whether it or its lenders would begin collection efforts against former first-years who fail to fork over the funds.
So do the ex-first-years actually owe Thacher Proffitt any money?
“If it’s clear these funds were a loan, they owe the money,” says Edward Neiger, who heads his own firm in New York City. “Just because the firm dissolved, it doesn’t mean the associates don’t have to pay it back.”
True, but as any lawyer knows, the answer to the question hinges on the terms of the associates’ employment contract, which Thacher Proffitt also declined to discuss.
“I doubt very much if there’s anything in that contract that in the event the firm dissolves the firm gets that money back,” says Russell Long, a partner at Davis & Kuelthau in Milwaukee. “I’m guessing this is something the bank sent out hoping some people would send money back. It’s an aggressive move on behalf of the bank and very unusual.”
Thacher Proffitt & Wood is the only failed firm known to be pursuing incoming first-years for funds advanced before they reported for work. Representatives of three other defunct firms—Dreier, WolfBlock and Heller Ehrman—didn’t respond to a request for comment or declined comment. However, Thelen, whose partners voted to dissolve at the end of 2008, isn’t seeking the return of any fees paid to incoming associates.
“It just wasn’t anything we considered in connection with administering the windup of the firm,” says Doug Davidson from the firm’s dissolution committee. “I don’t believe the amounts were material relative to other items,” he says, “and had we discussed the matter, my belief is that we would have concluded that those students were incurring enough difficulty as a result of not having a job with Thelen and having to find another job elsewhere.”