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Dewey & LeBoeuf Chairman, Officers Indicted for Fraud, Grand Larceny

March 07, 2014, 07:02 AM
Filed Under: Fraud
Related: Fraud

Manhattan District Attorney Cyrus R. Vance, Jr., announced the indictments of Steven Davis, Stephen DiCarmine, Joel Sanders, and Zachary Warren. The first three defendants were, respectively, the Chairman, the Executive Director, and the Chief Financial Officer at the now-bankrupt law firm Dewey & LeBoeuf LLP; the fourth defendant was a Client Relations Manager at the firm. The indictment alleges that the defendants defrauded and stole from the firm’s lenders, investors, and others. This case is the result of a nearly two-year investigation by the DA’s Major Economic Crimes Bureau and the Federal Bureau of Investigation. The Securities and Exchange Commission conducted its own parallel investigation, and also is bringing charges today.
Davis, DiCarmine, and Sanders are charged with Grand Larceny in the First Degree, Scheme to Defraud in the First Degree, Martin Act Securities Fraud, Falsifying Business Records in the First Degree, and Conspiracy in the Fifth Degree. Warren is charged in two indictments with Scheme to Defraud in the First Degree, Falsifying Business Records in the First Degree, and Conspiracy in the Fifth Degree. 
“Fraud is not an acceptable accounting practice,” said District Attorney Vance. “The defendants are accused of concocting and overseeing a massive effort to cook the books at Dewey & LeBoeuf. Their wrongdoing contributed to the collapse of a prestigious international law firm, which forced thousands of people out of jobs and left creditors holding the bag on hundreds of millions of dollars owed to them. Those at the top of the firm directed employees to hide the firm’s true financial condition from creditors, investors, auditors, and even partners of the firm, until the scheme unraveled and resulted in the largest law firm bankruptcy in history. Seven of the firm’s employees have already pled guilty to crimes related to their roles in the scheme. My Office’s Major Economic Crimes Bureau will continue to work with our law enforcement partners to prosecute accounting fraud and other economic crimes – regardless of the target company’s size or status.”
FBI Assistant Director in Charge George Venizelos said: “As alleged, rather than speaking openly with creditors about mounting debt and shrinking revenue, the defendants deliberately manipulated the firm’s financial statements. In the height of the crisis, the defendants used every trick in the book in an elaborate attempt to cover-up the increasingly dire situation. But as bad went to worse, the defendants doubled down, and continued to exaggerate, manipulate, and downright lie in a vain attempt to right a sinking ship. It is incumbent on people and the institutions where they work to do the right thing, to follow the law, and not just when the FBI is watching.”
SEC Division of Enforcement Director Andrew J. Ceresney said: “Investors were led to believe they were purchasing bonds issued by a prestigious law firm that had weathered the financial crisis and was poised for growth. Dewey & LeBoeuf’s senior-most finance personnel used a grab bag of accounting gimmicks to create that illusion, and top executives green-lighted the decision to sell $150 million in bonds to investors as a desperate grasp for cash on the basis of blatantly falsified financial results.”

To read the New York County District Attorney’s news release, click here.

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