The fallout from the collapse of the once-blue chip law firm of Dewey and LaBoeuf is spreading. The New York Times reports that life for the former one percenters at the top of the firm is about to get much, much worse:
They are likely to lose the money they were required to invest in the firm. They could lose their pensions. They may have to give back money they have already been paid. And even if creditors eventually agree to accept a small portion of what they are owed, the partners may owe taxes on the forgiven debt.
And what does your financial adviser say at a time like this?
“I tell them that the minute they leave my office or end our phone call, they should immediately contact a personal bankruptcy lawyer and take steps to protect themselves,” said Jerome Kowalski, a lawyer who is consulting with some Dewey partners and has been involved in the demise of previous law firms.
It’s not known if former Dewey big shots will get professional courtesy discounts from the bankruptcy lawyers, but the average reader will be far more moved by the plight of the clerks, assistants and other employees of the firm who are not only losing their jobs: their defined benefit pensions look like toast.
“I have to drastically cut down on my lifestyle, sell my home and lower my overhead in order to have my I.R.A. last me the rest of my life,” said Grace Hobelman, a widow in her middle 70s who owns a town house in the affluent Kalorama section of Washington.
The lucky ones appear to be those not covered by a defined-benefit pension plan. Employees with 401(k) accounts will be paid in full.Dewey LaBoeuf is shinking from 2000 employees to none as a result of some decisions that went spectacularly wrong. Thinking that the legal bubble would go on forever, partners arranged such lavish packages for themselves that when times got worse the firm fell off a cliff, and as a result, many will lose everything they once thought that they had.It’s a sad story for those involved; for the rest of us (and especially for students wondering whether law school is a good investment) it should be a reminder that the legal business is changing and will likely be less of a sure thing going forward than it has been in the past.