SEC Charges Five Executives and Finance Professionals Connected to Law Firm with Fraudulent Bond Offering

The SEC charged five executives and finance professionals with facilitating a $150 million fraudulent bond offering by Dewey LeBoeuf, the international law firm where they worked.

According to the SEC's complaint, the fraud began in 2008, when senior financial officers started to manipulate various entries in Dewey LeBoeuf's internal accounting system to inflate the firm's profitability by approximately $36 million (15 percent). The SEC cited an example where compensation for certain personnel was falsely reclassified as an equity distribution in the amount of $13.8 million when, in fact, those personnel had no equity in the firm.

Additionally, the SEC alleged that the improper accounting also reversed millions of dollars of uncollectible disbursements, mischaracterized millions of dollars of credit card debt owed by the firm as bogus disbursements owed by clients, and inaccurately accounted for significant lease obligations held by the firm.

The SEC stated that Dewey LeBoeuf eventually resorted to the bond markets to raise significant amounts of cash through a private offering that seized on the phony financial numbers. The bond offerings fraudulently led investors to believe that they were purchasing bonds issued by a prestigious law firm that had weathered the financial crisis and was poised for growth.

See: SEC Complaint.