Special Agent in Charge Richard Frankel prepared the following remarks concerning the fraud charges filed against former management of Dewey & Leboeuf.
New York, NY - March 6, 2014 - Today’s indictment of the chairman and three former managers at Dewey & Leboeuf is the latest example of corporate malfeasance.
But before I begin, this would not have been possible without the Manhattan District Attorney Cyrus Vance and his talented staff of Assistant District Attorneys including Peirce Moser and Steve Pilnyak. The Securities and Exchange Commission, represented by Enforcement Director Andrew Ceresney, also played a crucial role in the investigation as they so often do.
I’d also like to thank the talented team of FBI agents from my office, including Supervisory Special Agent Darrin Kibel and Special Agent Sylvia Hilgeman.
In 2008, two competing law firms merged, just a few months before the financial crisis. For many, these were austere times with shrinking balance sheets and tighter credit. Dewey & Leboeuf was no exception.
Rather than speaking openly with creditors about mounting debt and shrinking revenue, the defendants began deliberately manipulating the firm’s financial statements. At a time when everyone was feeling the crunch, the defendants used every old trick in the book.
They backdated checks, changed write-offs, and even misappropriated loan payments as revenue all in an elaborate attempt to cover-up the increasingly dire situation.
It brought a whole new meaning to cooking the books.
The defendants, who were charged with providing council and knowing the law, seemed to break it at every turn. As alleged in the indictment, the defendants lost their moral compass and put their own interests above the firm, its employees, and its creditors.
But as bad went to worse, the defendants doubled down, and continued to exaggerate, manipulate, and downright lie in a vain attempt to right a sinking ship.
The FBI’s role in the financial capitol of the world is of great importance. It is paramount that the integrity of our financial system, our legal system, and accounting systems are sound, true, and accurate. When people produce a cash flow statement, an annual report, or file a 10-q form with regulators, that information must be correct.
We’ve seen this office of the FBI investigate banks, hedge funds, and law firms. But it’s incumbent on people and the institutions where they work to do the right thing, to follow the law, and be transparent. We can’t arrest our way out of this problem.
We need companies and their principles to do the right thing and not just when the FBI is watching.