March 22, 2012 6:06 PM
Dewey Officially Doing Damage Control
Posted by Sara Randazzo
Less than a month after rumors first began to swirl about the state of the firm’s financesâ€”and with its 2012 partner losses already reaching 30â€”Dewey LeBoeuf has turned to a top crisis communications professional in its effort to push back hard against a growing wave of negative publicity.
Michael Sitrickâ€”a public relations specialist once labeled the “Ninja Master of the Dark Art of Spin” by Gawkerâ€”is helping Dewey navigate what has become a media minefield, including helping firm leaders shape their response to what they contend is an inaccurate Wall Street Journal story posted online in the wake of a regular monthly partners meeting on Wednesday meant to rally the troops.
Asked via e-mail Thursday about his relationship with the firm, Sitrick said that he has a number of friends at the firm and has “worked with Dewey on and off on a number of projects for mutual clients for years.” (Legal observers may remember Sitrick for his role in helping to prepare a 2007 Kasowitz Benson Torres Friedman press release attributing the firing of partner Jeremy Pitcock to “extremely inappropriate personal conduct.”)
At Wednesday’s meeting, according to a statement released by Dewey in response to the Journal article, chairman Steven Davis told partners that though 2011 was a strong and profitable year that saw revenue increase, the firm’s financial performance nonetheless fell short of internal profit projections. Davis also assured the partnershipâ€”which numbered 291 as of Thursday, according to the firm’s Web siteâ€”that 2012 is off to a strong start and that the firm expects it to be “our best year yet.”
As previously reported by The Am Law Daily, Dewey’s gross revenue rose slightly last year, to $935 million from roughly $910 in 2010, while profits per equity partner rose 1 percent. At the same time, the firm recently announced that it plans to aggressively cut costs this year as well as trim 5 percent of its lawyer head count and 6 percent of its nonlawyer staff.
At a separate meeting this weekâ€”as first reported by the Journal and confirmed to The Am Law Daily by partner Richard Shutran on Thursdayâ€”firm leaders told associates that their 2011 bonus payments will be delayed. The payments, which range from $7,500 to $42,500, will be paid out no later than May 31, said Shutran, who cochairs Dewey’s corporate department and is a member of the firm’s operations committee. Shutran said the associates were told that Dewey is delaying the bonus payments as part of its effort to manage expenses while it renegotiates its line of credit with its bank lenders.
Dewey confirmed to The American Lawyer earlier this month that its $100 million line of credit is due to be renegotiated in April. In the statement issued in response to the Journal story, Dewey stressed that the credit line is renegotiated every two years as part of the “ordinary course of business.” Starting next year, the firm must also begin repaying $125 million in bonds it issued in 2010.
Dewey also took issue in the statement with what it described as mischaracterizations about the firm’s finances being made in the press by former partners, claiming that “some people feel compelled to strike out at an institution that lays them off or [makes] changes with which they don’t agree.”
In sum, the firm said in its statement, “Dewey’s financial position is strong and the vast majority of its partners are supportive of the changes being made to further strengthen the firm…. We are producing the best work in the history of the firm and producing some of its strongest ever results. The overwhelming majority of our partners are excited about our future.”
In another sign that a counteroffensive is under way, Davis gave a lengthy interview to Fortune for a story the magazine posted online Thursday. In the article, Davis disputed that Dewey is in dire financial straits, and maintained that Dewey is at no risk whatsoever of violating the covenants that govern its sizable debt. “Those rumors are utterly and completely bogus,” Davis told Fortune.
At least 30 Dewey partners have left the firm since January. Those departures include executive committee member William Marcoux, who jumped to DLA Piper; a pair of finance partners, including Dewey’s local office leader Sean Moran, who moved to Sidley Austin in Los Angeles, and, most recently, a dozen partners from the firm’s core insurance practice, who joined Willkie Farr Gallagher. That team was expected to bring in $47 million in 2012, according to a memo from Davis to the partnership that The American Lawyer obtained.
American Lawyer senior reporter Julie Triedman contributed reporting.
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