10:29, September 13 429 0 law.com

2017-09-13 10:29:05
DA Seeks Prison Sentence for Former Dewey CFO

Joel Sanders, former CFO at Dewey & LeBoeuf, during a break on the first day of trial.

NYLJ/Rick Kopstein

The Manhattan district attorney is recommending the maximum sentence for former Dewey & LeBoeuf chief financial officer Joel Sanders, urging a New York judge that a prison sentence is “absolutely warranted” because he hasn’t taken responsibility for his actions and his “lies put others’ money at risk but never his own.”

While Sanders has urged Manhattan Supreme Court Justice Robert Stolz to impose no jail time—his convictions do not require a prison term—the maximum sentence is one and a third to fours years.

In a new court filing, prosecutors said anything but prison time for Sanders “will simply foster the misguided notion that an executive can lie and scheme to obtain money, as long as he is doing so to try to keep a business afloat, even if he harms others and ensures his own pockets are lined.”

Sanders is due to be sentenced Oct. 6, after a jury found him guilty of concealing the firm’s precarious finances before it was driven into bankruptcy. He was convicted of two Class E felonies and one misdemeanor.

Even if he receives the maximum sentence, Sanders could still walk away from prison in less than a year under certain merit-release and other early-release programs.

In a filing disclosed this week, Assistant District Attorney Peirce Moser turned to a law firm staff survey to show how much Sanders’ compensation dwarfed the average law firm CFO pay, even while Dewey was hemorrhaging money and taking on millions of dollars in debt.

Moser said Sanders was paid nearly $9.3 million by Dewey, from January 2009 until May 2012, when the firm collapsed, including receiving discretionary bonuses.

Breaking down his pay further, Moser said Sanders was paid under an employment agreement providing $900,000 in base salary, $200,000 in guaranteed bonus, $200,000 in contributions to a long-term incentive plan and a “performance bonus” based on Dewey’s economic performance and his own, awarded at the discretion of chairman Steven Davis.

Despite Dewey’s money woes, Sanders’ “discretionary” bonus was between $900,000 and $1.3 million each year between 2008 and 2011, according to Moser.

And to put the $9.3 million in compensation into context, nearly 20 percent of the firm’s additional debt that Sanders and co-conspirators were able to obtain in their scheme “found its way into defendant Sanders’ pocket,” Moser said.

Moser cited a 2009 Towers Perrin New York City law firm staff compensation survey, which the District Attorney’s Office obtained in its investigation.

The survey showed that law firms with 400 or more attorneys reported average compensation to CFOs to be $549,000.

In 2009, Sanders was paid $2.4 million, plus a $200,000 contribution to his long-term incentive plan, Moser said.

“No matter how once slices it, Joel Sanders was paid a lot of money. For what?” Moser said. “If defendant Sanders was being paid to be a loyal steward of Dewey’s finances, then it was his job to deliver the bad news, even the very bad news, to the partners, lenders and investors. But he refused to do that. Instead, he lied.”

Moser also argued that a prison term is needed in light of seven cooperators who have already pleaded guilty for their role and who worked under Sanders in Dewey’s accounting department.

Unlike the seven cooperators, Sanders has refused to take any responsibility for his conduct, instead blaming others, including Dewey’s partners, Moser said.

Come next month, Stolz will have wide say on Sanders’ sentence.

“New York state law affords tremendous discretion to the trial judge in determining an appropriate sentence,” said Justin Shur, a former state and federal prosecutor and partner at litigation boutique Molo Lamken. Depending on the class of felony, there is a wide range for the court to consider, Shur said. And, unlike the federal system, there are no sentencing guidelines to provide some direction.

Whatever the final outcome for Sanders, it will be far narrower than what the district attorney initially sought when it brought the case against Sanders and two other Dewey executives, Davis and Stephen DiCarmine, in 2014.

Since then, DiCarmine was acquitted at a retrial this year and Davis signed a deferred prosecution agreement. The indictment’s top count, which required prison time upon conviction—first degree grand larceny—was dismissed.

In a statement, Andrew Frisch, Sanders’ attorney, said that as his client prepares for sentencing, the firm’s “high-earning partners, the principal beneficiaries of the credit extended by banks and investors, found welcoming homes at other global law firms and continue to earn lucrative compensation; many of those same lawyers were architects of the policies that befell Dewey; while the two other architects are scarred but free.”

“Joel is broken and struggling from day to day; the prosecution’s demand that he be destroyed as if he were a Ponzi schemer lacks even a pretense of perspective.”