August 11, 2009

And You Thought You Had Money Problems

The allegations about the final financial shenanigans at now-defunct Heller Ehrman (a local law firm that had been around since the late 1890s) are shocking.

Many of the partners have moved on to other firms since its spectacular unraveling, but if the Bankruptcy Committee gets its way, they may be required to pay back some $106 Million in distributions made to them or on their behalf.

In terms of scale, this is nothing compared to the big banks failing. But, what's amazing to me is that partners, who ostensibly are the owners in control of (and personally liable for) a legal business, could be receiving checks in the high hundreds of thousands of dollars or even millions without any insight into the accounting of the money they are receiving.

Apparently, one of the last distributions was put on the books as a "Shareholder Loan" but when the accountants tried to notify the shareholders (partners), they were requested not to do so.

So, basically, there are probably over 100 ex-heller partners who thought they were receiving their profit share, but actually received a "loan."

Ouch.

2 comments:

Anonymous said...

And while this was all happening, employees were begging shareholders to do something about the trainwreck at the top -- yes, I mean Barry, Matt and especially Phyllis -- they were just taking their massive paychecks and averting their eyes. Every single one of the shareholders, who had a responsibility to be on top of this stuff, should pay back every penny they got in 2008 and 2007, until employees get their accrued vacation, at LEAST. There are other monies owed, but you can't call yourself a human being, let alone a lawyer with any ethics, if you hold on to that money and stiff the secretaries, the IT people, the records staff, the paralegals etc.

Elmer said...

Anonymous: I completely agree -- assuming the allegations are true, the shareholders had a duty to know what was going on, and a duty to stop it if it was unethical. The head in the sand is not an excuse.