“Follow the money?”

Well, we can try.

Using a combination of now-public material—the 2010 bond offering PPM being a godsend in that  regard—and my own carefully constructed estimates based on other published reports including interviews with people in a position to know, I have done my level best to reconstruct the:

  • Revenue
  • Net Income, and
  • Partner draws and distributions

of Dewey & LeBoeuf.

Here’s what I’ve come up with.


2004-2011 Financials (click to enlarge in separate window)

Permit me to reproduce the “Notes” here verbatim in case they’re difficult to read above:


1. Dewey Ballantine 2007 revenue ($341) = Jan-Sept 07 ($274) + Oct-Dec 06 ($67)

2. LeBoeuf Lamb 2007 figures = 12 months of LeBoeuf Lamb  minus 3 months of Dewey Ballantine

3. “Net Income” = cash provided by operating activities

4. Sources: 2010 Dewey bond offering PPM, Adam Smith, Esq. estimates

To me, this tells several stories:

  • Legacy Dewey Ballantine’s performance from 2004—2007, boom years by all accounts, was (to be charitable) flat:
    • Revenue went from $375-million (2004) to $341-million (2007), or down 9.1%
    • Net income dropped even more drastically, from $134M to $56M, or down 58.2%
  • Legacy LeBoeuf Lamb’s performance during those same years was little short of spectacular:
    • Revenue rose from $341-million (2004) to $614-million (2007), or 80.1%
    • Net income went up even faster in percentage terms, from $129M to $261M, or up 102.3%

Here we see it in graphical form.  First, revenue:


Next, net income:


Finally, let me draw your attention to what may be the core financial issue:  The fact that the post-merger Dewey & LeBoeuf was, for four years, paying out more in partner draws and distributions than its net income.  The figures appear at the bottom of the spreadsheet displayed above, but here it is in graphical, and dare I say quite vivid, format:


If I could add a comment or observation more shocking than the story told by that simple graph, I would—but that’s an impossibility.  For four years running since the merger, the firm has consistently and without fail paid out more to partners than it earned—and significantly more.  You almost have to admire the audacity.

For the record, as I calculate the amounts, the firm earned about $1.157-billion in net income over those four years but paid out $124-million more than that, or 12%, to partners.

Where did the money come from?  An enormous clue lies in the firm’s reported book equity, which dropped 32% between 2007 and 2008 from $173-million to $117-million, and fell another 17% from 2008 to 2009, $117-million down to $97-million.  I understand this number was barely above $30-million by year-end 2011.

“Follow the money”?

I always worried that was a bit too glib as a catch-phrase—better suited to screenwriters than hard cold reality—but lo these many years after Watergate, it may yet contain wisdom.



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