Dewey & LeBouef's leaders explain the firm's collapse

This article gives an account of an interview in DealBook with Martin Bienenstock and L. Charles Landgraf, both of whom served as the ‘office of the Chairman’ at Dewey LeBouef, which was created in March of this year to try to avert the disaster that has now toppled the firm. Bienenstock explained that the firm’s troubles began with offering partners guaranteed long-term pay contracts the time of the merger. The firm got through the lean years of 2008 to 2010, but in the second half of 2011 Dewey’s revenue was down by $30 million, and there was some concern about the firm’s ability to renew its $100 credit line with its banks. In the hopes of getting the renewal, Dewey only drew $75 million of the $100 million revolving line. So there was a $55 million shortfall which prevented the firm from paying its partners what they were owed. The moves toward recovery in 2012 were thwarted when partners — concerned about the firm’s finances and their ability to get paid — started to leave the firm. This in turn made the lenders concerned, and the firm responded by putting together a new budget and slashing partner compensation by half.” Attempt to salvage some value in the firm via a merger also failed. “As office of the chairman, we served for no compensation and we wanted to make sure we were the last ones out the door,” Mr. Bienenstock said. “The spirit of the office of the chair was not typical of a distressed environment. There’s normally a lot of anger, recriminations and negative energy. As the situation grew more negative, the desire to make the landing softer grew larger.” Late last week Bienenstock announced he was leaving for Proskauer Rose. Mr. Landgraf said he had not decided on his next move, though he was weighing offers from several firms. For now, he is focused on the practice of law, he said.

Dewey & LeBouef's leaders explain the firm's collapse dealbook.nytimes.com Fri, May 18, 2012