Ethics Panel Cover-Up, Fraud, and Now Layoffs, Plague Latham & Watkins

3 Stories follow:

1.   Latham & Watkins Cuts 190 Lawyers 

2.   Ex-Latham Partner Pleads to Federal Fraud Scheme

3.   NY Ethics Scandal Tied to International Espionage Scheme

Latham & Watkins Cuts 190 Lawyers

Huge Global Firm Lays Off 250 Others
The Washington Post by V. Dion Haynes - February 28, 2009

In a vivid illustration of how the global recession is battering the legal profession, Latham & Watkins, one of the largest law firms in the nation, announced yesterday that it will let go 190 lawyers and 250 paralegal and support staff. Latham & Watkins, which represents clients such as District-based Carlyle Group, Goldman Sachs, Harrah's Entertainment and UBS, has nearly 270 lawyers in Washington and more than 2,000 worldwide. The firm is struggling with declining profits as corporate clients slash legal spending because of a reduction in mergers and acquisitions, capital finance and transactions. The job cuts are among thousands that have roiled through the industry in recent months. In February, hundreds of jobs were cut at firms with District offices, including 243 at Holland & Knight, 134 at Bryan Cave and 29 at Dechert. Officials at Latham and the other firms declined to say how many of the dismissals were in Washington. Legal experts say 2008, following years of steady expansion and growing profits, was the worst year in recent memory for many law firms. Given the spate of layoffs this year, they expect 2009 to be no better.

"I think in 2009 you'll see that more [firms will experience a lower] profit level than we've ever seen. No doubt about it," said Thomas S. Clay, principal of Altman Weil, which provides management consulting services to law firms. Clay, noting that profits dropped 30 percent at some firms, added: "They could go through another round of layoffs if the work doesn't come back." Bob Dell, who is Latham's chairman and managing partner and works out of the firm's San Francisco office, said yesterday that the 440 jobs being eliminated represent 12 percent of the firm's associates and 10 percent of its paralegals. The cuts will occur in several of Latham's 28 offices, including those in the District, New York and Los Angeles, the firm said. In recent years, the firm expanded its hiring of associates, based on revenue that were growing 15 percent annually, Dell said. But revenue declined to $1.9 billion in 2008 from $2 billion in 2007 as transactional work fell off, prompting an examination of staffing levels, he said.

"We had an overcapacity [in staff] for some time. We were willing to live with that," Dell said in an interview. But in talking to clients, "we concluded this is not a normal recession. It will be longer lasting and a slower recovery. We couldn't maintain that overcapacity." Nationwide, the number of employees working in the legal profession grew steadily during the past decade before taking a turn last year, according to Bureau of Labor Statistics data. Last January, 1.16 million were working in the profession, down from 1.17 million in January 2007. It fell to 1.15 million in January 2009. Many lawyers have indicated that they think the job cuts will continue this year. In a recently published survey by the ABA Journal, 39 percent of 14,000 lawyers polled said they expected layoffs at their firm this year. Nearly 20 percent said they expected to lose their jobs this year.

Firms also are cutting costs through voluntary reductions. Hogan & Hartson this month offered buyouts in an attempt to reduce 257 support staff positions -- including 149 in the District. "As technological capabilities evolve, our attorneys are able to generate more of their work product and we're finding out we don't need the same level of support," firm Chairman J. Warren Gorrellsaid. "We're trying to make sure we're being appropriately cost conscious," he added. "We've been living with overcapacity for some time." Latham's growth strategy reversed quickly. Just three months ago, Latham announced it had named 28 associates and two other lawyers as partners in Chicago, Hamburg, London and several other offices. Dell said the workers losing their jobs will be offered a more generous severance package than usual. The employees will receive salary for six months, instead of two to three months, he said. They also will retain their health coverage for that period, he said.

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Ex-Latham Partner Pleads to Federal Fraud Scheme 
Ex-Latham Partner Pleads to Fraud Charge
The New York Law Journal by Anthony Lin - March 31, 2008

A former partner at Latham & Watkins pleaded guilty Friday to defrauding both clients and his own firm by charging them more than $300,000 in personal or false expenses. Samuel A. Fishman, a mergers and acquisition specialist in Latham's New York office from 1993 to 2005, was designated billing partner for a number of firm clients. According to prosecutors at the Southern District U.S. Attorney's Office, Mr. Fishman, 51, used his position to carry out a fraudulent scheme over the course of several years. Responsible for supervising and approving invoices sent to clients, Mr. Fishman added to the bills a number of inappropriate items, mischaracterizing them as charges for photocopying or express mail. He also fraudulently sought reimbursement from his firm for a number of personal expenses he claimed were for business. The U.S. Attorney's Office did not identify Latham as Mr. Fishman's firm in a criminal information filed with the guilty plea, nor was the firm's name mentioned in court yesterday afternoon when Mr. Fishman entered his plea to one count of mail fraud. But in a statement yesterday, the firm acknowledged Mr. Fishman as a former partner and said his misconduct had come to light in 2005.

Latham "immediately acted to protect our clients fully, and disclosed the matter to appropriate law enforcement authorities," said David Gordon, Latham's New York managing partner. "Mr. Fishman resigned from the firm at the time the issues were discovered. Since that time, we have cooperated fully with the investigation." In announcing Mr. Fishman's guilty plea, prosecutors noted that the firm had reimbursed its clients hundreds of thousands of dollars that had been fraudulently charged. A firm spokesman yesterday declined to identify the clients defrauded by Mr. Fishman. The criminal information said Mr. Fishman's clients were in the banking, utilities, telecommunications and entertainment industries. He has previously acted as lead counsel for companies including movie theater chain AMC Entertainment Inc. and JPMorgan Partners, the private equity arm of JPMorgan Chase & Co. Accompanied at yesterday's hearing by defense lawyer Jack Litman of Litman, Asche & Goiella, Mr. Fishman expressed remorse to Southern District Judge Victor Marrero. "I am very sorry for what I did," he told the judge. Mr. Fishman's sentencing is scheduled for June 27. The mail fraud charge carries a maximum sentence of 20 years in prison. Mr. Fishman also has agreed to forfeit $350,000 in ill-gotten wealth. He also faces likely disbarment. A number of major firms have had to deal in recent years with fraud by partners, though most instances have resulted in disbarment or other disciplinary sanction as opposed to criminal prosecution.

In 2006, former WilmerHale intellectual property partner William P. DiSalvatore resigned from the bar after admitting to a litany of misconduct, including falsifying expense reports and assigning associates to perform "pro bono" work for friends and family. He claimed more than $109,000 in false personal expense. (NYLJ, Aug. 14, 2006) Willkie Farr & Gallagher and the former Kronish Lieb Weiner & Hellman are two other firms that have also terminated partners for fraudulently seeking reimbursement for personal expenses. (NYLJ, July, 31, 2006 and June 19, 2002) In most such cases, including that of Mr. Fishman, the defrauded amounts have been small compared to what the perpetrators earn as partners. Last month, Latham said it had profits per partner of $2.3 million in 2007. Steven Lubet, a legal ethics professor at Northwestern University School of Law, said he always found it "incredible" that highly paid partners would resort to fraud. He said he could only imagine that such people were overspending trying to emulate the lifestyles of those they represented.

"The clients have that kind of money, the lawyers don't," said Mr. Lubet. "Sometimes, lawyers decide they want to live like their clients and that extra money has to come from somewhere." Perhaps the most well-known case of a lawyer bilking his clients and firm was Webster Hubbell, the former associate attorney general under President Bill Clinton. Mr. Hubbell was forced to resign his position in 1994 after his former partners at Arkansas' Rose Law Firm discovered billing irregularities. He later pleaded guilty to fraudulently charging almost $500,000 for personal expenses and legal work never actually performed. He served 16 months in prison.  Anthony Lin can be reached at alin@alm.com. Additional reporting by Mark Hamblett.

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NY Ethics Scandal Tied to International Espionage Scheme
Tammany Hall II Ethics Scandal Reaching New Heights - April 1, 2008

Reports surfaced in New York and around Washington, D.C. last week detailing a massive communications satellite espionage scheme involving major multi-national corporations and the interception of top-secret satellite signals. The evidence in the corporate eavesdropping cover-up “is frightening,” according to an informed source who has reviewed the volumes of documentation. The espionage scheme, he says, is directly tied to the growing state bar ethics scandal at the Appellate Division First Department, Departmental Disciplinary Committee (DDC) in Manhattan. Rumors had been Circulating Linking the NY Bar Scandal to International Corporate Espionage Ops Using Satellites. The highflying spy operation involves private and public companies, mainly in the U.S. and Europe, that operate apart- but not too far- from national intelligence services. Confidential sources have learned that the original source of much of the secret information comes from satellite intercepts sold by telecom companies under contract to government spy agencies.

Although it’s rarely addressed in any official proceedings, basically all private telephone conversations and email transmissions in the U.S., and essentially worldwide, are routinely intercepted by one government authority or another. Much of the work is done by independent telecom companies that transmit the signals on to giant computers that translate the text in real time. This instant translation capability put an end to many embarrassing backlogs, as in the case of the first World Trade Center bombing, where the FBI had received an intercept, but hadn’t translated the key incriminating conversation before that 1993 event. Once translated, the reviewing super computers search for key words to flag suspect conversations and transmissions. Proper names of people, buildings, addresses, codes, arms, explosives and the like will trip a full-scale investigation of a transcript.

Apart from the official surveillance of signal intelligence (or “sigint” in the spy trade), what confidential sources have discovered is that there is lots of freelance spying going on, where top-secret corporate information is being offered for sale to the highest bidder. The payments are allegedly made for a tip of such secrets as planned corporate acquisitions, mergers, or some very positive or negative performance reports. Advance knowledge of corporate information, and the corresponding improper company stock activity, has long been the focus of many insider trading investigations but has not, until now, directly involved New York City’s attorney ethics committee. One source says it’s been the ‘perfect crime.’ "The brains behind this organized scheme have thwarted attorney ethics investigations in New York, federal criminal inquiries and various civil actions around the country by simply citing ‘national security,’” says the source.

Enter the DDC, again

Since this secret corporate information is sent across public telecom networks that are constantly subject to interception, the black market in top-secret corporate intel continues to grow, and it generally evades detection. Last week, however, investigators tripped across evidence of a law firm protecting a client that had been on the selling side of corporate espionage. When complaints were filed with the New York Attorney Disciplinary Committee against the firm for a series of ethical violations, those grievances apparently disappeared into one of the now-well-known DDC black holes. Another trusted source from outside New York has indicated that federal court filings will soon provide detailed evidence showing how the dysfunctional DDC machinery covered-up actions by certain New York attorneys involved in the corporate spying activities.