Overleveraged Dewey & LeBoeuf (Dewey Ballentine) going down.

Reuters says the Pension Benefit Guaranty Corporation–the federal government’s private pension insurance unit—is going at the firm’s pension assets, too.

Dewey has been one of these white shoe, big city firms that walks into a courtroom and wins. Just because, it seems. Although I bet traditionally, a lot of work went into the cases. The Dewey in Dewey Ballentine was a mid-20th century Governor of New York, Thomas Dewey, who so many people used to know about when I was a kid, but nowadays virtually no one seems to. He was the “[Little] Man on the Wedding Cake” in the 1948 U.S. presidential election versus Harry Truman. That’s what passed for Swift-boating in those days . . .

What’s happening at Dewey is interesting. In order to be competitive, Dewey merged with other firms. To have more money at the table, the company borrowed a lot. It also made big promises to certain “key players”, and cemented them in such a way that the money would flow regardless. But the producers of the firm, though, weren’t necessarily the ones getting the big payouts over the years. Obviously, the name partners, like Governor Dewey, were no longer performing, except from beyond.

The performers decided to go elsewhere. Slowly, the firm became a transfer scheme between lawyer-grunts to people who had the guaranteed payout. The derisive term is what? Socialism? Except socialism from the bottom of the top 1% to the more zero-decimaled (top .01% etc.)

That wasn’t going to last.

I wish I could remember where I had it on this site. [Oh, here!] It was a quote from a big partner [Philip K. Howard] of a New York firm, maybe White & Case [Covington & Burling]. He said, in so many words, that lawyering got in trouble in America when it became more of a business and less of a profession. The business aspect drove out the profession. (Not necessarily the professionalism, although people might debate that, too.)

Law has always been about money, but it used to be less so. It was also more regulated, in the sense that partners didn’t screw each other over with such abandon. I also think partners didn’t screw the grunts similarly, especially even after the law schools got done doing that (like today.)

People who study the 2008 financial panic and Lehman point out that the Lehman Brothers’ key players seemed a bit like dupes who didn’t understand all the new rules of Wall Street finance. They knew how to cheat and screw, just not well enough. They did it in a way that left a smell (i.e. Repo 105). Not like Goldman.

I have a feeling that the Dewey guys (and gals, but probably mostly guys) were similar fish at the table. They thought they understood the new rules of Big Law. But now, they are just trying to segregate or separate their assets from what their creditors can come after (just like Lehman).

[Update 5/12/12: The New York Times with more on the hardships of sorts that the various Dewey pensioners will face.]

[Update 5/13/12: New York Times DealBook with more on Dewey LeBoeuf. Who caused the implosion?]