Now in Legal Rebels:
Posted Mar 14, 2014 09:25 pm CDT
News that former leaders of Dewey & LeBoeuf had been criminally charged concerning the collapse of the once-mighty New York-based law firm wasn’t a major surprise to those who had been following the firm’s bankruptcy and claims of mismanagement by angry partners.
In fact, the firm’s chairman, executive director and chief financial officer, aged 60, 57 and 55, respectively, had already retained prominent criminal lawyers before they were indicted, writes James B. Stewart in a Friday column in the New York Times (req. req.).
But observers are scratching their heads, Stewart says, trying to figure out how Zachary Warren came to be included as a defendant in the Manhattan case. Warren is a 29-year-old magna cum laude law graduate of Georgetown University, and hadn’t even begun studying for his juris doctor degree when he worked at Dewey. He is charged alongside law firm leaders accused of masterminding a scheme to “cook the books” in order to qualify for a $100 million line of credit and obtain some $150 million through a private-placement law firm bond offering.
Warren, the son of a retired California state-court judge and a law professor, originally applied to work at Dewey as a paralegal after receiving a bachelor’s degree at Stanford University. He was hired to work for the law firm for $40,000 a year as a client debt collector and quickly promoted to a $100,000-a-year job as a “client relations manager,” recounts Stewart.
Warren left Dewey before a 2010 private bond offering that sparked a parallel Securities and Exchange Commission civil enforcement action, and Warren is not named as a defendant in that civil action. Yet, even though the bond offering is at the heart of the criminal case, Warren was not only indicted along with the three former law firm leaders but indicted in a separate case that accuses him of falsifying business records.
How could that be? Warren’s biggest mistake, Stewart suggests, may have been naively cooperating with SEC civil investigators, who brought in the Manhattan district attorney’s office, not realizing that he was a potential criminal-case target who needed to be represented by legal counsel.
Warren talked with the government voluntarily; he wasn’t subpoenaed. But such cooperation between prosecutors and civil enforcement agencies is common throughout the country and can be a trap for the unwary, criminal defense attorney Thomas J. Curran told the Times. “It’s a serious threat to civil liberties, and people should know about it. … They’re using civil proceedings to advance their criminal investigations. It’s a real threat to the cherished right to counsel.”
A spokeswoman for the Manhattan DA’s office said it is “preposterous” to suggest “that an attorney with a federal clerkship could have any misunderstanding of what it means to speak with and agree to meet with the DA’s office.”
At least for now, Warren continues to work in a prestigious clerkship for Judge Julia Smith Gibbons on the 6th U.S. Circuit Court of Appeals and has a job offer from Williams & Connolly, notes Stewart. Warren himself declined to talk with the newspaper.
Meanwhile, the criminal case against Warren and the other three defendants will continue to unfold. Calling the way it has been handled “bizarre,” Curran, who worked in the Manhattan DA’s office under a former district attorney, Robert Morgenthau, said it would have been addressed differently in his day.
“Why indict him twice? Why indict him at all?” said Curran. “I can tell you that in Morgenthau’s office, a more measured approach would likely have prevailed. We’d have told him, ‘You’d better get a lawyer because the train is pulling out and you’re on the tracks.’ There must be a reason the district attorney proceeded against this young kid this way, and I and a lot of other people will be very interested to hear what it is.”
ABAJournal.com (April 2010): “Dewey Refinances Its Debt in $125M Bond Offering”
ABAJournal.com (May 2012): “Report: Dewey Bond Offering Painted ‘Rosy Picture,’ Didn’t Disclose Partner Guarantees”