New York (HedgeCo.Net) – The SEC has charged five executives and finance professionals with facilitating a $150 million fraudulent bond offering by the now out of business Dewey & LeBoeuf, the international law firm where they worked.
Chairman Steven Davis, executive director Stephen DiCarmine, chief financial officer Joel Sanders, finance director Frank Canellas, and controller Tom Mullikin have been charged, the SEC said. In a parallel action, the Manhattan District Attorney’s Office today announced criminal charges against Davis, DiCarmine, and Sanders.
For example, in the mad scramble at year-end 2008 to meet obligations to bank lenders, Sanders boasted to DiCarmine in an e-mail, “We came up with a big one: Reclass the disbursements.” DiCarmine responded, “You always do in the last hours. That’s why we get the extra 10 or 20% bonus. Tell [Sanders’ wife], stick with me! We’ll buy a ski house next.” DiCarmine later e-mailed Sanders, “You certainly cheered the Chairman up. I could use a dose.” Sanders answered, “I think we made the covenants and I’m shooting for 60%.” He cryptically added, “Don’t even ask – you don’t want to know.”
The SEC alleges that the five turned to accounting fraud when the firm needed money to weather the economic recession and steep costs from a merger. Fearful that declining revenue might cause its bank lenders to cut off access to the firm’s credit lines, Dewey & LeBoeuf’s leading financial professionals combed through its financial statements line by line and devised ways to artificially inflate income and distort financial performance.
“As Dewey & LeBoeuf’s revenue was falling and the firm was struggling to meet commitments, its top executives and finance professionals brazenly looked for ways to create fake income and retain their lucrative salaries and bonuses,” said Andrew M. Calamari, director of the SEC’s New York Regional Office.