With Dewey & LeBoeuf now mired in bankruptcy, Barclays and Citibank are clamping down on former partners who took out loans to fulfill their capital contribution obligationsworth 36 percent of their target compensationand Citi has gone so far as to initiate legal action against at least one former partner in order to get its money back.
At the time they were hired, Dewey partners were given until the end of the calendar year in which they joined the firm to chip in 36 percent of their target compensation as a capital contribution. Through the years, Dewey worked first with Barclays, and later with Citibank, to establish loan programs that the firm stressed were the easiest way for partners to quickly fulfill their capital obligations.
Dewey acted as the middleman in the granting of the loans, according to several former partners who participated in the programs, and often agreed to pay the interest for a number of years to ease the burden on its partners. According to two former partners, the amount asked of Dewey partners increased as target compensation increased, even though, as is now widely reported, the firm failed for years to pay partners what was promised.
Now that Dewey is dead, former partners are personally obligated to pay back any loans they took out, with interest, and the banks have started taking action to get their money. Two former partners say they have received statements directly from Citi and Barclays, with both banks suggesting unfavorable terms for repayment; another partner says there has been no word yet from Citi and believes others are in the same situation.
