Dewey Trial: Who are the Victims?

In criminal trials, prosecutors often want juries to sympathize with the victims. But in the ongoing trial against three former Dewey & LeBoeuf LLP leaders, it’s been hard to tell at times who, exactly, is being labeled as the victim.

As the Manhattan district attorney’s office pointed out in its 2014 indictment against three ex-law firm leaders, Dewey’s collapse “forced thousands of people out of jobs and left creditors holding the bag on hundreds of millions of dollars owed to them.”

The firm’s May 2012 bankruptcy hurt Dewey’s former employees and lawyers, including retirees who were suddenly faced with declining prospects for their future income. Dewey’s partners were asked to contribute large sums of money through the bankruptcy to pay creditors, even though many felt the firm actually owed them money.

But the alleged crimes the D.A. says Dewey’s former chairman, Steven Davis, ex-chief financial officer, Joel Sanders, and former executive director, Stephen DiCarmine, committed aren’t really about what led the firm to collapse.

Instead, prosecutors allege the three conspired to hide the true nature of the firm’s precarious financial condition from its banks and auditors, which led the banks to continue lending Dewey money and convinced a group of insurance companies to buy into a 2010 bond offering floated by the firm. All three deny wrongdoing.

Prosecutors are painting the dozen or so insurance companies that bought into the bond as some of the victims of the alleged financial fraud. And a recent filing made in the case shows exactly how much the companies lost:

Monumental Life Insurance Co.: Expects to lose $3 million of its $10 million investment

Transamerica Life Insurance Co.: Expects to lose $4.5 million of its $15 million investment

Transamerica Life (Bermuda) Ltd.: Lost $1.5 million of its $5 million investment

Life Insurance Co. of the Southwest: Lost $2.2 million of its $5 million investment

Aviva Life and Annuity Co.: Lost $14.8 million of its $33 million investment when it sold its stake in 2012

Aviva Life and Annuity Co. of New York: Lost $0.9 million of its $2 million investment when it sold its stake in 2012

AXA Equitable Life Insurance Co.: Lost $8.9 million of its $20 million investment when it sold its stake in 2012

CUNA Mutual Insurance Society: Lost $8 million of its $15 million investment when it sold its stake in 2012

Pan-American Life Insurance Co.: Lost $1.75 million of its $5 million investment when it sold its stake in 2012

Prosecutors initially planned to call a representative from each of the nine insurance companies to testify about why they thought investing in Dewey was a good decision based on the information they were told at the time. The D.A.’s office agreed to spare the jury the repetitive testimony in lieu of each company saying in writing how much they lost and why they decided to invest back in 2010.

One insurance company representative did testify, from the Hartford Financial Services Group. According to the American Lawyer, the rep, Robert Mills, told the jury that Dewey management assured him the firm was doing well financially when Hartford invested $40 million in the private placement. He said Hartford later sold the notes for 60 cents on the dollar.

The D.A.’s office is expected to wrap up its case before Labor Day, and the judge overseeing the case recently told the jury that deliberations could begin by late September or early October.