Posted Aug 21, 2012 12:01 pm CDT
Greenberg Traurig’s recently announced capital call is a “small step” taken during uncertain times for the legal industry, according to CEO Richard Rosenbaum.
In an interview with the Daily Business Review, Rosenbaum said the amount that will be raised pales in comparison to capital calls at other law firms. “I’m shocked at how much has been made of this,” he told the legal publication.
“Remember, the average capital that most firms have asked for from partners is 30 to 45 percent,” he said. “In 2012, we will raise $12 million from our shareholders. That is 1 percent of our revenues and 2 percent of all our shareholder compensation. We will do the same thing in 2013. That number is much more significant in a small firm. It’s a very small percentage for a $1 billion-plus law firm.”
Greenberg recently renewed “substantial lines of credit on a long-term basis which have no borrowing on them,” Rosenbaum said. The credit line is for a rainy day, he said. “I don’t believe you should rely on debt. We have almost a Depression-era mentality when it comes to debt,” he said.
Rosenbaum acknowledged that the firm does not disclose individual shareholder compensation, but said the firm does communicate its financial picture to partners. He and executive chairman Cesar Alvarez approve compensation, allowing them to run what amounts to a large business “without visible competition between our shareholders. This has been a major plus in our culture.”
Rosenbaum responded to the interviewer’s suggestion that closed compensation systems can be problematic. “What Dewey & LeBoeuf didn’t have is transparency in how their business is doing,” he told the Daily Busienss Review. “We regularly report in detail on every aspect of our business. I owe that to my shareholders.”
A separate Daily Business Review article profiles other troubles at the law firm. “Over the last decade,” the story says, “the firm has been battered by the prosecutions of lobbyist Jack Abramoff in 2004 and Chicago partner Mark McCombs in 2010; malpractice suits filed by former NFL players, a Jupiter-based bio-tech company, a New York real estate investment firm, an Arizona investor group and the failed law firm Heller Ehrman.”
In the latest incident, a Miami judge criticized the firm for discovery errors in a suit by investors who accused TD Bank of aiding and abetting fraud by then-lawyer Scott Rothstein.
“When you have 1,750 lawyers,” Rosenbaum told the Daily Business Review, “it’s impossible to be without an occasional incident.” Greenberg’s work in the troubled real estate industry has also been a factor, since investors who lose money are looking for a deep pocket, he said. The firm now has a commitment to excellence program, full-time auditors and a global operating shareholder to make sure all the practice groups are properly trained and integrated.