Francis Canellas, 34, faces anywhere between no jail time and five
to 15 years, the documents showed, for his role in the accounting
fraud at Dewey & LeBoeuf, which became the largest U.S. law firm
collapse when it went bankrupt in May 2012.
He is one of seven firm employees who have pleaded guilty to the
fraud, according to prosecutors, and has agreed to cooperate in the
case against the firm's management.
Dewey & LeBoeuf's former chairman Steven Davis, 60, executive
director Stephen DiCarmine, 57, chief financial officer Joel
Sanders, 55, and client relations manager Zachary Warren, 29, were
all criminally charged March 6 for the alleged use of accounting
gimmicks and fraud to cheat banks and investors in a failed attempt
to keep the law firm alive.
"We all knew that adjustments were being made to deceive our lenders
and others," Canellas said in a five-page statement unsealed on
Thursday by Manhattan State Supreme Court Justice Michael Obus.
Dewey's lenders included JPMorgan Chase & Co, Citigroup Inc's
private banking unit, Bank of America Corp and HSBC Holdings Plc.
Canellas said the "inappropriate" adjustments began in late 2008
after Sanders told him that DiCarmine and Davis said they needed to
meet cash flow covenants in the firm's credit agreements. Over the
years, he said, he instructed others to make the adjustments.
Canellas also said he, Sanders and others provided information "that
we knew to be false" to investors in a $150 million bond offering in
2010, and that he participated in efforts to keep the firm's
auditors, Ernst & Young, in the dark.
[to top of second column]
"We're not surprised that a cooperating witness who has admitted to
a crime is trying to implicate others and blame them, especially
when he got such a sweet deal," said New York attorney Edward
Little, who represents Sanders.
Attorney Austin Campriello, who represents DiCarmine, called the
statement a "very thin reed on which to build a case against Steve
DiCarmine." He said the case against his client "will crumble."
Lawyers for Davis and Warren did not immediately return calls for
Agreements for the six other employees who have pleaded guilty are
expected to be unsealed on Friday.
A separate civil case was filed by the U.S. Securities and Exchange
Commission over the bond offering.
The case is New York v Davis et al, New York State Supreme Court,
New York County.
(Reporting by Karen Freifeld; editing by Diane Craft)
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