Posted Jul 30, 2014 12:44 pm CDT
Financial guarantees paid by Bingham to every partner at the former McKee Nelson law firm after the firms’ 2009 merger caused internal dissension and led to the departures of some partners over the last few years, according to a published report.
The Am Law Daily (sub. req.) wrote about the guarantees in a story based on interviews with several former Bignham partners. Bingham told partners the total value of the guarantees was $59 million in 2010 and $70 million in 2011, the story says, citing sources briefed on the matter. The value decreased as the guarantees expired. The largest of the guarantees ended last year.
The five largest annual payments to McKee Nelson partners ranged from $4 million to $5 million, the story says.
Bingham confirmed to the publication that guarantees were paid, but said it could not comment on amounts paid to individuals. According to the story, the deal to pay guarantees “now raises questions as to what role it played in the lead-up to the firm’s current financial state, with revenue and profits plunging in 2013 to mark its worst financial performance ever.” The story notes that the slowing of countercyclical practice areas and increased expenses also contributed to lower profits.
Bingham had an open compensation system, but the law firm agreed to keep guarantees paid to individual lawyers at McKee Nelson secret for their duration, in keeping with McKee Nelson’s closed compensation system, the story says.
Bingham is looking for a merger partner and reportedly approached at least four major firms within the last three months, according to a report published earlier this month.
Bingham issued a statement to the Am Law Daily saying guarantees ranging from one to three years compensated McKee Nelson partners for expenses after a period of downsizing. Bingham also says its partnership agreement guarantees partners 75 percent of what they earned the previous year, so only 25 percent of the amount paid to former McKee Nelson partners counts as guarantees.
“The McKee Nelson combination was an extraordinarily successful one for Bingham and our clients,” the statement said. “We added several market-leading practices and tremendous lawyers to our firm.”
Bingham also paid financial guarantees after merging with Swidler Berlin in 2006 and Aschuler Grossman in 2007, the firm confirmed to the Am Law Daily.