The encyclopedia · Legal & Compliance · Financial decision · 2007–2012
Dewey & LeBoeuf collapsed when 200 partners fled a $935M firm built on guaranteed pay
Dewey & LeBoeuf was a 1,050-lawyer firm that collapsed in 2012 when partners fled guaranteed compensation deals that the firm could not afford.
Dewey & LeBoeuf · 2012-05-28
What happened
Dewey & LeBoeuf was formed in October 2007 through the merger of two prestigious law firms: Dewey Ballantine (founded 1909) and LeBoeuf, Lamb, Greene & MacRae (founded 1929). At its peak, the firm employed approximately 1,050 lawyers across 26 offices worldwide, with about 300 partners. It reported $935 million in revenue in 2011.
The firm's collapse began when its revenue figures were revised downward in March 2012. Partners, many of whom had been given multi-year guaranteed compensation packages, began departing. By late April 2012, 46 partners had left; by May 12, approximately 200 of the firm's 300 partners had fled. The guaranteed compensation structure meant the firm was locked into paying partners at levels it could no longer sustain.
On May 28, 2012, Dewey & LeBoeuf filed for Chapter 11 bankruptcy. In March 2014, chairman Steven Davis, CFO Stephen DiCarmine, and executive director Joel Sanders were indicted for grand larceny and fraud for allegedly cooking the books to obtain loans. Joel Sanders was convicted in 2017. The firm's collapse was one of the largest law firm failures in history.
Why it happened
- Multi-year guaranteed compensation locked the firm into paying partners at unsustainable levels. When revenue fell, the guarantees turned a dip into a death spiral.
- The firm's leaders allegedly inflated revenue figures to secure loans, hiding the true financial state until the debt was insurmountable.
- When revenue was revised downward in March 2012, partners fled in a cascade — 200 of 300 partners left within weeks, making the collapse inevitable.
The lesson
Guaranteed compensation is a poison pill in a professional services firm — it locks in costs you cannot cut when revenue falls, and it is the fastest way to turn a revenue dip into a death spiral.
Sources
- Dewey & LeBoeuf — Wikipedia
- Reuters (archived) — The Dewey chronicles: The rise and fall of a legal giant, 12 May 2012
spotted an error? The club wants to know.
More like this
Raytheon recorded bribes as commissions and paid the SEC $124M
DWS said ESG was in its DNA — the SEC found its own policy wasn't followed
Binance skipped anti-money-laundering controls for six years — DOJ fined it $4.3B
Somewhere, someone solved the problem this company failed at. 2nd Opinion →
Comments · 0
Sign in to join the comments.