Business of Law

Former Dewey Partner Alleges He and Others Were 'Fraudulently Induced' to Get Citibank Loans

After being sued by Citibank for allegedly defaulting on a loan, a former partner of Dewey & LeBoeuf is firing back with a claim that he and others were “fraudulently induced” into signing up for bank loans to finance their capital contributions to the law firm.

In a motion filed in federal court in New York earlier this month, ex-partner Steven Otillar contends that the bank had a fiduciary duty to alert him to Dewey’s precarious financial position at the time he took out the loan. But instead, he alleges, the bank participated in a “fraudulent scheme” by the law firm’s leaders to hide its dire finances from lateral partners who were helping Dewey stay afloat through their capital contributions, Reuters reports.

Otillar, who joined Dewey in 2011 from Baker & McKenzie, is now an energy practitioner with Akin Gump Strauss Hauer & Feld in Houston. He declined to comment when contacted by the news agency. However, his lawyer, Helen Davis Chaitman of Becker & Poliakoff, told Reuters in an email that “If Citibank knew that Dewey was going under and solicited Otillar’s loan in order to pay down the Dewey exposure, Citibank could be liable for aiding and abetting a fraud.”

It is unclear whether Citibank had a fiduciary duty, or any duty, to advise Otillar of Dewey’s financial situation, the article notes.

Otillar, who joined Dewey in early 2011, says in the filing that he took out a six-year $207,000 capital loan in September of that year. Dewey was to pay the interest for the first three years, Otillar for the last three years. Under the terms of the loan, it would be considered to be in default if Otillar left the firm or Dewey collapsed. The bank sued him in May, around the time the law firm filed for bankruptcy.

A Citibank representative declined to comment and several former members of Dewey’s management team either did not respond or declined to comment when contacted by the news agency.

Related coverage: “Individual Dewey Partners and Banks That Loaned Them Equity to Pay to Firm Are Now at Odds” “Former Dewey Partner’s Suit Compares Firm Leaders’ Lateral Partner Recruitment to ‘Ponzi Scheme’” “Defendant Dewey Leader Calls Ex-Partner’s ‘Ponzi Scheme’ Suit ‘Sad,’ Says Plaintiff Got Bigger Bucks”

The Lawyer: “Dewey paid top duo $1.1m bonuses on eve of collapse, filings show”

We welcome your comments, but please adhere to our comment policy and the ABA Code of Conduct.

Commenting is not available in this channel entry.