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Defunct law firm's execs found not guilty of some counts

Posted On: Oct. 7, 2015 12:00 AM CST

(Reuters) — A New York jury on Wednesday found three former executives of defunct law firm Dewey & LeBoeuf not guilty of some charges but remained deadlocked on others, including the most serious charge of grand larceny.

Former Dewey Chairman Steven Davis, former Executive Director Stephen DiCarmine and former Chief Financial Officer Joel Sanders were found not guilty on numerous falsifying business records counts after a judge ordered the jury to render a partial verdict.

They are accused of using illegal accounting adjustments to mask the firm's teetering finances between 2008 and 2012, convincing lenders and investors, including Bank of America Corp. and Citigroup Inc., that the law firm was healthy despite a crushing debt load and revenue shortfalls.

Dewey's 2012 bankruptcy was the largest ever for a U.S. law firm.

Following the partial verdict, Robert Stolz, the judge overseeing the trial in New York state court, ordered jurors to continue deliberating despite their differences.

“It is not uncommon for a jury to believe they will never be able to reach a unanimous verdict,” he said, in an instruction sometimes known as the “dynamite charge” when given to deadlocked juries.

“But after further deliberations, most juries are able to reach a unanimous verdict,” he added.

All told, the jurors found Messrs. Davis, DiCarmine and Sanders not guilty of 19, 17 and 13 charges of falsifying business records, respectively.

The defendants, who did not have any visible reaction as the verdict was announced in court, still face charges of grand larceny, fraud and conspiracy as well as additional falsifying business records counts.

But the partial verdict could not have been encouraging for the office of Manhattan District Attorney Cyrus Vance, which has devoted extensive resources to a trial that has lasted more than four months.

Prosecutors argued at trial that the three executives directed the firm's finance department to back-date checks, reclassify certain expenses as assets and reverse write-offs, among other adjustments.

But the defense responded that the accounting practices in question were not necessarily illegal and that the firm's demise was primarily due to a rash of defections by its top partners, rather than any adjustments.

After 13 full days of deliberations, the jurors informed Judge Stolz on Tuesday they had failed to reach consensus on a “majority” of the charges.

Despite objections from Messrs. DiCarmine's and Sanders' lawyers, Judge Stolz ordered the jury to render its verdict on the counts it could agree on.