“I DON’T WANT TO COOK THE BOOKS ANYMORE”

THE FALL OF DEWEY & LEBOEUF This is a story we have followed for over a year. For those unfamiliar with it, Dewey & LeBoeuf, LLP, at its height had over 1,300 lawyers world wide. The firm crashed during the financial crisis and ultimately filed bankruptcy in 2012. As is often the case when there is significant financial stress and a culture of entitlement —  financial misconduct and bad judgment follows. This proved to be the case at Dewey as four members of the firm were recently indicted in New York in a 106 count indictment which accuses them of participating in a scheme to overstate revenue and hide losses in order to continue accessing a much needed line of credit. In other words, the desire of the members to continue getting paid was allegedly more important to them than telling the truth. The specific crimes charged included grand larceny, securities fraud, conspiracy and falsifying records. Seven of the firm’s employees have already pled guilty to related crimes. FELONY FRAUD CHARGES The recent indictment alleges that the firm was struggling to meet its financial obligations in 2008. The firm was apparently dependent on a revolving credit line extended jointly by four banks. This credit line had a covenant requiring the firm to maintain certain cash flow levels in order to access the line. Perhaps the most damaging evidence referenced in the indictment is that allegation that the firm’s Chief Operating Officer sent an email on December 4, 2008, saying “I don’t want to cook the books anymore.” However, this was apparently only a fleeting concern as the firm allegedly...

HOMEOWNERS ASSOCIATION NOT LIABLE FOR BOAT WRECK

Because we have represented a number of homeowner’s associations over the years, we noted with interest the recent decision by the Mississippi Court of Appeals rejecting an attempt to hold a homeowner’s association liable for a boating accident. The case itself involves the Lake Caroline Owners Association (“LCOA”) and its 800 acre lake. The underlying accident occurred on a summer evening after sunset in 2011. Two couples were enjoying themselves on a pontoon boat that was anchored in the middle of the lake. Another boat was apparently speeding across the water when it took a hard turn and crashed into the pontoon boat causing injuries to two of the people on the boat. The two injured people not only sued the operator of the speeding boat, but also the LCOA. The legal theory asserted was that the LCOA failed to maintain a safe lake. In response to the lawsuit, the LCOA filed a motion for summary judgment arguing that it did not have any reason to anticipate the boating accident, and thus owed no duty to the plaintiffs. In an attempt to defeat summary judgment, the plaintiffs presented an affidavit by a boating safety expert who claimed that the accident was reasonably foreseeable because there had been a previous boating accident in 2005. The plaintiffs also presented nonspecific affidavit testimony that other boats had been seen traveling at a high speed in the past.  Based on these affidavits the plaintiffs claimed that the existence of dangerous boat drivers was a known problem on the lake, and that this problem should have been addressed by better rules and a safety...