Proskauer Rose 'House of Cards' Crumbling

Proskauer lays off 35 associates and 25 staff
Legal Week by Zach Lowe - December 5, 2008

Proskauer Rose is laying off 35 associates and 25 administrative staff, reports The Am Law Daily. The news was announced in a memo, sent out by the firm yesterday (4 December), although which offices or practice areas will suffer the most is not specified. The New York firm said the layoffs are due to both the economic crisis and the "unprecedented reduction in our historical lawyer attrition rate." Proskauer launched an office in London last year with hire of Matthew Hudson, the former head of O'Melveny & Myers' City arm. In September, the firm also secured its long-awaited Asia launch after hiring a two-partner team in Beijing from Heller Ehrman. Proskauer has been one of the most upwardly-mobile practices in the US in recent years, successfully expanding beyond its core employment practice into a stronger corporate profile. During the last two weeks a raft of US firms have made layoffs, including Reed Smith, White & Case, Orrick Herrington & Sutcliffe, while firms including Cravath Swaine & Moore and Simpson Thacher & Bartlett have cut back associate bonuses.

On Friday, August 24, 2007, we ran "Justice Department Widens 'Patentgate' Probe Buried by Ethics Chief Thomas J. Cahill:

In a letter dated July 16, 2007, the U.S. Department of Justice, Office of Professional Responsibility, announced from its Washington, D.C. headquarters that it was expanding its investigation into a bizarrely stalled FBI investigation that involves an almost surreal story of the theft of nearly 30 U.S. Patents, and other intellectual property, worth billions of dollars. The probe reaches some of New York's most prominent politicians and judges, and has already proven to be a stunning embarrassment to the State's ethics watchdog committees. (Click here to see the July 16, 2007 letter "D.O.J. Widens Patentgate Probe")

The Fox and the Hen House

It was only recently exposed in July that the underlying "Patentgate" inquiries were effectively buried, or derailed, under the leadership of Manhattan's top State ethics Chief Counsel, Thomas J. Cahill, Esq. Mr. Cahill's "retirement" was then quickly announced after his own ethical failings in the Patentgate matter, along with other ethics complaints that were made, became known.

While no one can exactly figure out how inquiries under Mr. Cahill's charge went so awry, one thing is certain. At the same time the Patentgate probes were being secreted by state officials in New York, the United States Patent and Trademark Office Patent bar increased their own investigation into the same matter implicating the same attorneys. (Note: Mr. Cahill's replacement was recently decided, and an announcement is expected as early as next week by the Appellate Division, First Department Presiding Justice, Jonathan Lippman.)

"Patentgate"

The defrauded company is called "Iviewit" – pronounced, "I-view-it." The company's internet site originally advertised their groundbreaking technology. Now, the opening page of the company website (www.iviewit.tv) displays unsettling photographs of the inventor's family vehicle after it was bombed.

"This is quite serious," says an investigator close to the federal probe. "The charges allege that valuable 'back-bone enabling digital imaging technology'-- MPEG type intellectual property-- was stolen by the inventor's own attorneys, the once-untouchable Manhattan based law firm Proskauer Rose. This is going to get very ugly," he says.

Members of the U.S. Senate and U.S. House Judiciary Committees have known about the Iviewit investigation since about September of 2006, and it is in our nation's capital where the matter quickly earned its moniker "Patentgate." And the story was also globally known in technical, Intellectual Property circles. But the big question remains: how did such an explosive story like Patentgate stay off every mainstream media's radar screen—especially in New York.

"I know how," says a retired federal agent who asked not to be identified. "Phone calls were made—many phone calls. Plain and simple." And while this retired federal agent isn't surprised by the apparent "cover-up," he is alarmed by his own findings after a month-long independent review of all submitted Iviewit papers. "I can't find one discrepancy in the allegations, not one unsubstantiated charge," he says. "For one, you have the highest state courts in New York white-washing this thing with 'unpublished' rulings. And then you have state ethics committees contradicting themselves-- in writing, no less. It's a complete meltdown," he concludes. "The broken system appears to have finally fallen apart."

"Iviewit was been radio-active from day one," says one prosecutor who asked not to be named. "Considering who was involved, you know the phones were ringing off the hook, and with a simple directive: 'don't go near it' (an inquiry)." He believes, however that a serious shake-up is imminent. "The powers that be can't contain this story anymore—it's out, U.S. Senators and Congressman are talking about it. This involves national Commerce issues: attorneys stealing U.S. Patents from their own client, and the illegal failings of a state's ethics agency by its own cover-up, and selective, self-dealing, politically-based inaction. Patentgate appears to have exposed the true, and troubling, underbelly of ethics investigations in New York State. And its not pretty."

Additional Background Information

The original complaint involving Thomas Cahill and the Proskauer Rose law firm has been "pending" since February of 2004. The Cahill Proskauer Complaint is a high priority for the new State Chief Administrative Judge, the Honorable Ann T. Pfau.

The Cahill Proskauer issue became a hot topic in Washington, D.C. in early 2007 at the U.S. House Energy and Commerce Committee, the U.S. House Judiciary Committee and the U.S. Department of Commerce (The United States Patent and Trademark Office). And it has specifically caught the attention of U.S. Senator Dianne Feinstein, and U.S. House Representatives John D. Dingell and Nita Lowey. The Cahill Proskauer Scandal involves many allegations: the alleged theft by Proskauer of numerous U.S. Patents from their own client; claimed losses over 10 years on a trillion dollar technology pool that has affected all forms of digital imaging and video; and the March, 2005 bombing in Boynton Beach, Florida of the inventor-client-complainant's family mini-van.

It is alleged that Mr. Cahill masterminded the scheme to indefinitely delay complaints against Proskauer Rose, himself, and former New York State Bar Association President and Proskauer partner Steven C. Krane, Proskauer Partner Kenneth Rubenstein, chief counsel for MPEGLA, and attorney Raymond Joao of Yonkers. It is also alleged that attorney Steven C. Krane initially interceded, with Mr. Cahill's knowledge and consent, in handling disciplinary complaints involving himself at the same time he was associated with the 1st Department in Manhattan. Attorney Krane's conflicts were exposed when officials from the Iviewit company contacted Katherine O'Hagan Wolfe, who contradicted Cahill's statements and Krane's written denial of his 1st Dept roles. Ms. O'Hagan Wolfe advised that she was, in fact, on a Committee at the 1st Dept with both Cahill and Krane, and that they even had a meeting that same night.

The various Cahill Proskauer issues bounced around under the public radar screen at the Court of Appeals in Albany and were ultimately transferred from the 1st Department to the 2nd Department in Brooklyn. This was done after 5 justices of the 1st Dept ruled unanimously to investigate Krane, Rubenstein and Joao for conflict of interest and the appearance of impropriety after their review of the 1st Department complaint. The Cahill inquiry is apparently "still pending" under attorney Martin R. Gold who, insiders say, was directed to "sit on it…forever." Earlier this year, FBI headquarters in Washington, D.C. assigned additional agents to the Public Integrity Corruption squad at 26 Federal Plaza in Manhattan, and where agents have been actively conducting interviews.