The former finance director of the bankrupt law firm Dewey & LeBoeuf, who pleaded guilty earlier this year to taking part in a scheme to manipulate the firm’s financial statements, told New York prosecutors that the firm’s former chairman, Steven Davis, was nervous before a meeting with an auditor to discuss the firm’s 2010 finances.
Francis Canellas, in a statement made as part of his plea agreement with New York prosecutors, said he believed that Mr. Davis was nervous because he was worried the auditor from Ernst & Young would detect some of the “inappropriate adjustments†that were being made to Dewey’s financial statements by the firm’s finance team.
The statement from Mr. Canellas and his plea on Feb. 13 to one count of grand larceny were unsealed on Thursday by Justice Michael J. Obus of the New York State Supreme Court in Manhattan.
Elkan Abramowitz, the lawyer for Mr. Davis, was not immediately available for comment.
Mr. Canellas is one of seven former employees of Dewey who have pleaded guilty to taking part in what the Manhattan district attorney Cyrus Vance, Jr. has said was a four-year plan to manipulate the financial statements of the once prominent law firm in an ultimately fruitless attempt to keep it from collapsing. The pleas of most of the other Dewey employees are expected to be unsealed on Friday, according to officials with Mr. Vance’s office.
The cooperation of Mr. Canellas and some of the other former employees is seen as critical in the pending criminal case against Mr. Davis and two other former top executives at Dewey: Stephen DiCarmine, the firm’s onetime executive director, and Joel Sanders, its chief financial officer. The three men, along with a low-level employee, Zachary Warren, were indicted by a New York grand on multiple accounts of grand larceny and falsifying business records earlier this month. The four men have pleaded innocent to the charges.
The prosecution of the former Dewey employees has captured the attention of the legal industry because of the onetime prominence of the firm, which at its peak employed more than 1,300 lawyers. The firm collapsed in bankruptcy in 2012 after its revenues slumped badly during the financial crisis.
In announcing the indictment against the four men, Mr. Vance said that his office obtained pleas from seven former employees but initially declined to identify the seven, listing them simply as either John Doe or Jane Doe. The New York Times filed a motion challenging the sealing of the pleas and the identities of the former employees.
In the five-page statement that Mr. Canellas provided to prosecutors, he described how he was instructed by Mr. Sanders to make adjustments to the firm’s finances to comply with cash flow covenant provisions contained in the firm’s bank lines of credit. He also talked about instructing other employees who reported to him on how to carry out those adjustments and said that Mr. Davis and Mr. DiCarmine were aware of what he was doing.
With regard to the meeting with the auditor over the firm’s 2010 financial records, Mr. Canellas said the auditor told the firm’s top executives, including Mr. Davis, that the firm’s “accounting records were in good shape.†After the meeting was over, Mr. Canellas said, Mr. Davis told Mr. Sanders “in a very sarcastic tone,†that he was “doing a great job.
Mr. Canellas’ statement identified at least six other former employees by name who he said had a hand in some of the inappropriate adjustments.
Two of those employees, Thomas Mullikin, the firm’s controller, and Ilya Alter, the firm’s director of budget, along with Mr. Canellas were previously identified by The Times as having pleaded guilty. Mr. Canellas, in the statement, said most of the adjustments to the firm’s finance were made by Mr. Mullikin and Diane Cascino, who was director of revenue support at the firm.
Ms. Cascino and her lawyer were not immediately available for comment. Brian Maas, the lawyer for Mr. Canellas declined to comment. Kenneth Kaplan, the lawyer for Mr. Mullikin, declined to comment.
The other former employees identified by Mr. Canellas included two women who worked in the firm’s accounting and billing department and a man who was the firm’s partner relations specialists. Lawyers for the three employees could not be immediately determined.
The unsealing of Mr. Canellas’ plea deal came after The Times filed its motion to intervene in the case and ask the judge to unseal the cases. Mr. Vance opposed The Times intervention but said in court papers that his office intended to unseal most of the plea agreement in Mr. Canellas’ case.
The plea agreement in Mr. Canellas’ case was unsealed after a brief hearing on Thursday morning before Justice Obus. The prosecutor is expected to unseal the other cases after another state judge rules on Friday on the other outstanding motions.
