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June 12, 2015

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anon

"What was it about this place that stifled, or lulled, any hint of dissent?"

Gosh, Bernie. After everything we read in these threads about legal academia's response to claims that it sanctioned and has defended fraud or something close to it, is it really necessary to ask this question?

Anon123

From Davis, DiCarmine and Saunders joint motion to dismiss

Mr. Davis, who had an undergraduate degree in medieval history, had practiced
energy law before he became D&L's chair, and had no training in accounting;

• Mr. Sanders, although CFO of the firm, was a non-practicing lawyer and not a
CP A or even an accountant, and had no special training in law firm accounting;
and

• Mr. DiCarmine, another non-practicing lawyer and not a CPA or even an
accountant, had no training in accounting, and his responsibilities at D&L
focused on personnel matters and operations and not accounting.


I really doubt they lied here. Some questions remain as to why the firm chose a CFO who was not a CPA nor had training in accounting. Do lawyers have that much disdain for accountants? Easier to cook books if you can claim you don't know what is going on?

Just saying...

"What was it about this place that stifled, or lulled, any hint of dissent?"

Bernie: From what I have heard, this is shockingly common in firms. It seems in some, a small cabal of loud, brash, bullying types can get themselves on the executive committee and pretty much control things, even their partners, who are too cowered to open their mouths.

Anon123

Just saying, I think you have a point. Years ago, at least one of the large accounting firms, Deloitte, instituted protections for partners. They established a Chairman position, NOT to run the firm, but solely to have procedures, such as fair votes, compliance with laws, etc.

anon

What is relevant here are the amoral attitudes conveyed to students groomed for positions in BigLaw by elite law schools.

Did elite law schools create the entire ethos of BigLaw and corporate America? Of course not.

Do law schools (and business schools) train students to believe that something must be done to curb the rampant corruption that is Wall Street and corporate America? Of course not.

Maybe if instead of snooty comments about how bad law partnerships are we had some recognition that legal academia has shown itself to be just as capable of questionable practices, and some recognition that there is no such recognition, we could get somewhere.

Anon123

If I came off as snooty about law partnerships, I apologize. That was not my intent. I am concerned that it appears that neither law firms not law schools (almost all of which have an accounting for lawyers course), are universally effective in, respectively, demanding or teaching what is an effective CFO. Assuming that a CFO is a CPA is not always a good assumption. By the way, the Enron CFO Andy Fastow was not a CPA, but had spent his career putting together structured finance deals, which is not the ideal background for a CFO. Attorneys review public and private offerings, but it seems they do not care if there is a competent CFO. Maybe I am overreacting. The New Yorker article on the Dewey Leboeuf collapse indicated that one partner thought that Davis surrounded himself with bad people.

anon

Anon123

The ABA was concerned enough about the failure of the attorneys of Enron, and other prominent failures at the time to appoint a task force and amend the Model Rules (isn't it telling that these exposures occurred only briefly, and under the Justice Dept. of which president, exactly?).

Lately, even after the biggest crash since the Great Depression, not so much. What we get is a relatively inconsequential attack on the business practices of a law firm unrelated to the HUGELY consequential conduct that caused the 2008 crash.

Legal academics, who are preaching amorality at every turn, can be counted on to do NOTHING to stop the egregious dishonesty and ruthless practices and naked greed in corporate America, which is supported by the graduates of elite law and business schools.

A law school course in Accounting for Lawyers? Really?

My point was this: look at the reaction, by and large, by the ABA and the law school establishment to demonstrably misleading conduct hawking their wares. Was there a frank mea culpa, followed by honest and rigorous efforts to reform? Or, does the same conduct continue, more or less, in other forms and formats?

And, let's get beyond just spinning to the point of misrepresentation in order to fill the seats and then rationalizing endlessly about the reasons to have done so (see, e.g., the latest from that preeminent labor economist who posts on another of these prof blogs). Let's speak about the contribution of the law academy to the ethos of corporate America. Let's return again to the spirit of self examination that led the ABA to question after Enron the role that attorneys played, and should have played. Let's ask how the training provided by the elite law and business schools sets students up to believe that money, prestige and advancement are not values: these are the ONLY values.

Or, not. Let's instead pretend that trying cobras for biting pythons is somehow a solution to the problem of snake biting. Let's question, in an ever so holier than thou manner, what ever could it be about BigLaw that could have caused these lapses in judgment?

As if we don't already know.

Anon123

Again, if I was unclear I apologize. I do not think the purpose of Accounting for Lawyers should be to turn them into accountants, but rather to help lawyers understand what should be happening.

anon

Anon 123

It doesn't. Not even close. A single semester of "Accounting for Lawyers" is about as helpful, to the ends I've argued are most important, as "Mindfulness for Lawyers."

Nothing, repeat NOTHING, can be taught in one semester of law school that will impart anything of lasting significance. The best a prof can hope for is to incite the student's interest, provide some tools to get started with a learning experience, and point the way to depth.

Unfortunately, we now have JDs in academia pretending to be experts in just about every subject imaginable, and then, and this is the really sad thing, purporting to teach these subjects to naïve and entirely uninformed students, who can't discern the difference between a charming dilettante and the master of a subject.

Again, law schools don't exist to support law professors (those profs who believe this are stuck at that stage of development when the child, when asked why it snows, answers "For me to play in!"). Law schools exist to support the legal systems of this society, and are failing, miserably.

THe public perceives that all legal academia seems to care about is prestige, money, advancement and recognition. Accordingly, some are fascinated by the defalcations of a law firm, that affected no others but the sharks that fed in the same turbid waters.

Let's focus on what is wrong with the values in legal academia, and be bold enough to question the reason that the amoral ethos imparted by elite law schools is permitted to go almost entirely unchallenged in these pages.

These crimes are about as meaningful as Martha Stewart's. Gossip value? Sure. Not much more to see here.

anon

Add, of course, "alleged" crimes. .... we don't know if there will be any convictions here.

John Steele

Anon123, your position has strong support from a survey of biglaw firms that hire out of Harvard. You can find the study on SSRN: "What Courses Should Law Students Take? Harvard's Largest Employers Weigh In." Speaking from my experience, and based upon my experience as hiring partner and head of associate evaluations, new transactional lawyers with a good grounding in the basics of corporate finance, how to read a balance sheet, corporate tax, etc., have a considerable advantage in those all-important first few years.

Returning to Bernie's original question, about how the alleged wrongdoing could occur at Dewey, can't we point to scandals about faking the data/numbers in almost every field of human endeavor? Does a month go by without a major scandal of that sort reaching headline status?

Wouldn't it be nice if law schools were in a position to teach by word and by example that it's important that students (1) realize the prevalence of that danger, and (2) develop an internal discipline to eliminate or mitigate that danger? Unfortunately, law schools have taught the opposite lessons. As I've been saying at my blog since it started over a decade ago, law schools have been teaching bad ethics in the most compelling manner possible (i.e., by example) and the students are acutely aware of that the schools have been up to.

Bernie Burk

Anon123, 6/12 at 10:57 p.m.: Anon123 says he or she understands from the record that firm CFO Sanders was not a CPA or even an accountant. Reports of Sanders's opening statement say that Sanders was a lawyer and a CPA, and had a business degree as well. I'm not sure who's right here. It would be very surprising if the CFO of a billion-dollar business were not an accountant. Apparently Mullikan (the Comptroller) and Canellas (the Financial Director) were accountants but had not completed their CPAs.

Anyone with solid information on this issue is welcomed to speak up.

--Bernie

Anon123

Thank you John, but I am also concerned that lawyers understand how CFOs should function. When Bernie started off with the assumption that Sanders, the CFO of Dewey was a CPA, not only was he incorrect, but that it bothered me that he made that assumption. Right now, in the Dewey trial, the defense attorneys are hammering it home that Sanders was NOT an accountant. There is a major problem here. If not being a CPA lessens one's criminal liability, then why are shareholders or owners (in this case, the Dewey partners) accepting a non-CPA CFO?

Bernie Burk

Note to all the Commenters: I'm asking a somewhat different question from the one you're all addressing. John Steele is of course right (and thanks for pointing it out, John) that financial fraud occurs from time to time in every area of business endeavor, including professional firms. But the "from time to time" part is critical. Notwithstanding the rather hysterical tenor of a number of the Comments that they (whoever they are) are all crooks, and more crooks taught them to be that way, or never taught them not to be, the point I'm trying to highlight is that fraud doesn't occur everywhere all the time. Not even close. In fact, given the pervasive motive, means, opportunity (and, according to some, inclination), it is worth noting that it is not all that common, particularly in large law firms. So why at Dewey and not elsewhere? One Commenter's point that "a small cabal of loud, brash, bullying types can get themselves on the executive committee and pretty much control things, even their partners, who are too cowered to open their mouths" is undoubtedly right, and in some sense is true at many large firms that have centralized power over the last 20 years. But again, why was there multimillion-dollar fraud at Dewey and not at scores of other large firms?

--Bernie

amon

Bernie

There is.

And, the hyperbole in your response does not make your claim of hysteria more credible.

Let's consider this: Upon what level of understanding do you think the votes were based?

What possible reason do you have to believe that an internet poll about the guilt or innocence of persons, at the outset of a trial of obviously complicated matters, would be relevant or useful?

anon

John Steele

You are correct that "new transactional lawyers with a good grounding in the basics of corporate finance, how to read a balance sheet, corporate tax, etc., have a considerable advantage in those all-important first few years."

My point was that taking a semester of "Accounting for Lawyers" will not provide that good grounding. The law academia is so attuned to its own dilettantism that it can no longer recognize what "good grounding" really means.

As for the rest of your comment, we are in complete agreement.

anon

Bernie asks: "But again, why was there multimillion-dollar fraud at Dewey and not at scores of other large firms?"

Of course, the 2008 debacle was caused not only by mismanagement, incompetence and greed. There were outright frauds, multi-million dollar frauds.

Now, the question is: at scores of BigLaw firms? Let's leave aside the hyperbolic "scores" and say, oh yes, Bernie, yes.

The argument that BigLaw was not culpable for the crimes of the Wall Streeters usually goes like this: 1.) There were no crimes, after all, where are the successful prosecutions? or 2.) a lawyer is not liable for his clients' fraudulent acts, even if the lawyer counsels that such acts are legal (or, more usually, not likely to be detected and prosecuted).

As for one, most of those who have studied the matter realize that alleged crimes like the ones at issue in this post are about as relevant to the overall criminal conduct on Wall Street as Martha Stewart's. We ask why no prosecutions of Wall Street actors, and the answer, if folks are being honest, always comes back the same. It is inconceivable that no crimes were committed in connection with the greatest financial collapse in world history (at least since the Great Depression), given the scope and breadth of the laws governing such matters.

As for lawyers who perpetuated and often perpetrated such crimes, it is the myth of invulnerability that accompanies most BigLaw bigshots that really riles, or should rile, those who decry the ethical lapses rampant in legal academia. These pompous individuals have for too long been allowed to believe this myth of invulnerability. When some of us say we want to add to legal academia folks who understand the practice of law, it is decidedly not these folks that we have in mind.

Perhaps, one day, there will be an educational establishment that sees its role as training attorneys committed to the law and studying the ways that financial, legal and social structures combine to undermine the purpose and intent of financial regulations, instead of maintaining an immoral and neutral stance to unethical conduct in order to preserve the money, prestige, advancement and recognition the existing order affords the elite interests in this culture.

Anon123

Bernie, I have tried to post links to the Motion to Suppress, but am unable to post the link. In any event, it is readily available and on page 21, Sanders claims not to be an accountant. I repeat my question, do you really think he and his lawyers would misrepresent that? And if the did, the prosecution would not be all over it?

I don't know where there were "reports" that in the opening statements, it was claimed that Sanders was a CPA. There would be no reason for the defense to claim that, and if the prosecution did, the defense would be all over it. I have googled and find no reports that anyone claimed Sanders was a CPA.

anon123

I will see if this posts, but the Economist on July 4th, 2002, had an interesting article how many CFOs, including Fastow of Enron were not CPAs.


"A decade ago, most CFOs had a professional accountancy qualification. Today, that is much less common. Last year, Peter McLean, who leads the CFO practice at Spencer Stuart, a firm of headhunters, looked at the qualifications of CFOs at Fortune 500 companies. He found that only 20% were Certified Public Accountants; 35% had MBAs, and 5% had both qualifications. Mr Fastow had a master's degree in business administration from Northwestern University's acclaimed Kellogg School of Management; Mr Sullivan had a degree in business administration from the State University of New York; Dan Cohrs, CFO at Global Crossing, another troubled firm, had a swanky doctorate in finance and public policy from Cornell University"

anon

There is a trend away from CPA CFOs just as the practices in the corporate world become ever more questionable. Is there really any mystery here?

Any parallel in legal academia? Has dilettantism become the norm to hide some deeper lack of competence and the rapacious desire for attention and recognition (the coin of the realm in legal academia)?

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