Bloomberg Law
Free Newsletter Sign Up
Bloomberg Law
Advanced Search Go
Free Newsletter Sign Up

Ex-Dewey & LeBoeuf Executive Sanders Avoids Prison in Fraud Case

Oct. 10, 2017, 3:41 PM

By Chris Dolmetsch, Bloomberg News

More than five years after Dewey & LeBoeuf LLP filed for the largest law firm bankruptcy in U.S. history, a criminal probe into its collapse ended without anyone going to prison.

A judge in New York on Tuesday ordered the firm’s former chief financial officer, Joel Sanders, 59, who was convicted of fraud and conspiracy in May, to spend three years on probation, serve 750 hours of community service and pay a $1 million fine.

The sentence ends a more than a three-year, two-trial legal odyssey over Dewey’s downfall and deals a loss to prosecutors who had sought a prison sentence.

The case, pursued by Manhattan District Attorney Cyrus Vance Jr., involved the kind of complex financial fraud typically investigated by federal authorities rather than local prosecutors. It also demonstrated the difficulties faced when attempting to hold individuals responsible for corporate crimes.

“Instead of acting as a loyal steward ‎of his firm’s finances, a jury found that Joel Sanders repeatedly lied to Dewey’s lenders and investors, who lost tens of millions of dollars, and lined his own pockets along the way,” Vance said in a statement after Sanders was sentenced. “This case demonstrates the office’s commitment to prosecuting those who sacrifice professional integrity for financial gain.”

Sanders had faced as long as four years in prison, and prosecutors had urged Justice Robert Stolz to impose the maximum sentence. They argued that the former executive had a “principal role” in a $250 million fraud scheme that produced false financial information, causing lenders and insurers to extend hundreds of millions of dollars in credit to the firm.

“This was a scheme that Joel Sanders helped craft and perpetuate as the chief financial officer of one of the largest law firms in the world,” Assistant District Attorney Pierce Moser told the judge Wednesday at a sentencing hearing.

Sanders had asked the judge to spare him from prison, saying prosecutors didn’t prove that he intended to steal money, violated any tax laws or that his misrepresentations led to the firm’s downfall. While all of Dewey’s lenders may not have known about all of the alleged accounting issues, they knew the firm was struggling financially, his lawyers said in a sentencing memo. Some had already stopped extending credit when the criminal probe was revealed, the lawyers said.

Sanders’s attorney, Andrew Frisch, told the judge Wednesday that Sanders wouldn’t be in the position he is today if he didn’t accept responsibility for his actions.

“The prosecutors have it backwards,” Frisch said. “Joel’s defining characteristic is that if anything, he accepts too much responsibility. He takes on everything. He takes on responsibility for everything and everyone.”

The firm, created in 2007 by the merger of Dewey Ballantine LLP and LeBoeuf, Lamb, Greene & McRae LLP, at one time had more than 1,300 attorneys in 12 countries and was ranked as high as 28th in gross revenue among large law firms by the American Lawyer, a trade publication.

Sanders spoke briefly before the judge handed down the sentence, apologizing for his role in the firm’s failure.

“After the merger I was completely focused on keeping the firm going,” Sanders said. “I didn’t mean to cause anyone harm.”

The courtroom was filled with Sanders’s family and friends, who erupted in cheers when the judge said the case calls for a sentence with no prison time.

Dewey & LeBoeuf filed for bankruptcy in May 2012, listing debt of $245 million and assets of $193 million. The previous month, Chairman Steven Davis was removed from his leadership roles after it became known that Vance was investigating allegations of wrongdoing.

In March 2014, Davis, Sanders, former executive director Stephen DiCarmine and ex-client relations manager Zachary Warren were indicted on more than 100 counts, accused of using accounting tricks to hide the firm’s condition from investors.

Seven former employees pleaded guilty and agreed to cooperate with prosecutors.

Sanders initially went on trial in 2015 but after three months of testimony jurors deadlocked on fraud and larceny charges following more than 20 days of deliberations. The jury cleared Davis, DiCarmine and Sanders of charges that they falsified business records.

Struck Deal

Davis struck a deal with prosecutors last year to avoid a second trial without admitting wrongdoing, and was barred from practicing law in New York or acting as an officer of a publicly traded company for five years. Warren agreed to perform 350 hours of community service under a similar deal the following month.

In February 2016 Stolz threw out grand larceny counts against Sanders and DiCarmine, meaning they wouldn’t face the most serious charges, which carried a maximum 25 year prison sentence. Sanders was convicted after a second trial, while DiCarmine walked free.

The case is People v. Davis, 773-2014, New York State Supreme Court, New York County (Manhattan).