Embattled law firm Dewey & LeBoeuf said on Sunday it removed its former chairman from various leadership positions amid a probe by the Manhattan district attorney and said that talks with rival firm Greenberg Traurig about a potential transaction ended with no deal.
According to an internal firm memo obtained by Reuters, Dewey's executive committee voted to oust Steven Davis from its ranks and remove him from a five-member management team put in place during a leadership shakeup last month. The firm's management also disclosed that talks with Greenberg Traurig had ended.
"We are in discussions with other firms about a possible transaction and will consider those and other options for the firm moving forward," the memo said.
Dewey, saddled by high debt, has been considering filing bankruptcy as a vehicle to merge with or be acquired by one or more firms.
A person close to the firm told Reuters before news of Davis's ouster, that Dewey was close to securing a 90- to 120-day extension of roughly $75 million in loan debt due on Monday, providing a temporary reprieve on a default that could trigger a bankruptcy.
But it was unclear whether the extension discussions hinged on a transaction and where the discussions stood in the wake of the Greenberg talks falling through.
In the internal memo, Dewey's management said the decision to remove Davis from his leadership position was unrelated to the end of talks with Greenberg Traurig. It also said the move should not be read as a judgment on the merits of the district attorney's probe.
"The executive committee felt it was in the best interests of the firm to take this action," the memo said.
Davis had previously been the firm's chairman, but became part of a five-member "office of the chairman" in March, after Dewey overhauled its leadership structure. Davis has now effectively been removed from all leadership positions.
In an e-mail to partners Sunday obtained by Reuters, Davis said he was "saddened" by the committee's decision, and said he had done his best to "navigate the firm through challenging and turbulent times."
"My decisions as chairman were made in good faith and in the firm's best interests," Davis said. "I trust as this process continues, a dispassionate and disinterested review of the facts will confirm that I have not engaged in any misconduct."
The move comes two days after the firm disclosed the office of Manhattan District Attorney Cyrus Vance had opened an investigation into allegations of wrongdoing by Davis. A source familiar with the probe said a preliminary investigation was prompted after a group of Dewey partners asked Vance to examine "financial irregularities" at the firm.
About 77 of Dewey's 300 partners have left the firm this year amid Dewey's financial turmoil. The firm hired several high-profile attorneys last year and has struggled to afford the full compensation of other partners.
Greenberg Traurig in a statement on Sunday confirmed that talks with Dewey had ended.
"Dewey is a firm we hold in high regard with many fine lawyers, though we never considered a merger," Greenberg Traurig CEO Richard Rosenbaum said in the statement.
NEARING AN EXTENSION
Dewey was close to securing a long-term extension on a Monday deadline on $75 million owed under a credit line to lenders led by JPMorgan Chase & Co, the source said before news of the Greenberg talks collapsing.
The extension, likely in the 90- to 120-day range, would stave off a default that could trigger a bankruptcy, said the person, who declined to be named because talks are private.
The banks have offered a term sheet for the extension, but the sides are still trying to hash out details, including the length of the extension and the nature of covenant terms proposed by the banks, the person said.
The lending core also includes Bank of America Corp, Citigroup and HSBC Holdings.
Lenders had initially offered a one-week extension, but that idea was shelved when parties decided it would not provide enough time for the firm to work out its underlying debt issues.
A spokesman for Dewey declined to comment on discussions with the banks.
A spokesman for JPMorgan declined to comment. A lawyer for the lenders did not immediately respond to a request for comment.
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