Ben Walsh

The $61 million resignation letter

Ben Walsh
May 9, 2012 01:08 UTC

Sometimes lawyers, like bankers, seem to write their own headlines. The most recent example: Morton Pierce, the ex-vice chairman of unraveling of law firm Dewey & LeBoeuf, reportedly said in his resignation letter that the firm owed him $61 million. In one sense, penning an “I quit and you owe me $61 million” letter as you move to a competitor with seven senior colleagues is an example of off-the-charts 1%er chutzpah.

But it’d be easier to cue up the outrage if we had the details of Pierce’s $61 million claim, or under what circumstances he’s owed it. It’s likely that the bulk of the sum comes from a combination of deferred compensation and some form of equity Pierce held in Dewey. That means it’s also likely that given Dewey’s precarious position and Pierce’s departure, he knows there’s only a small chance he’s getting that money in the short term.

Yet lawyers choose nothing if not their words carefully, so what was Pierce trying to do? Two things, I think. First, as a large equity holder, assuming Dewey’s current leadership do not file for bankruptcy (as they say they won’t), Pierce is offering the first indication that he will try to recover as much of that $61 million as he can. Second, he’s trying, albeit in a perverse way, to justify jumping ship by pointing to the pile of money he left behind.

Both motivations are a cue to play the world’s smallest violin, and its understandable why an aggrieved Dewey employee would leak the letter. But it’s unlikely Pierce is concerned. He got out of Dewey while he could, landed a new senior role at a top firm and is happy to play out whatever option value he has on that $61 million.

Superficially, what Pierce did was a bit shocking. But it’s not really surprising. Just like with bankers, altruism is rarely a dominant trait in the best M&A lawyers. If someone won’t even negotiate the best deal for themselves, how can you expect them to do it for you?

A defense of private equity from another era

Ben Walsh
May 2, 2012 06:12 UTC

The current Businessweek cover shows a chainsaw-wielding Patrick Bateman-esque figure in behind a blood-red block typeface. The story itself, by Brendan Greeley, is about private-equity firm Monomoy Capital Partners and does little to justify the violent imagery. In fact,  the story seems to be an attempt at rehabilitating the image of a entire industry through the story of a very small player. The NYT’s Kevin Roose, who wrote about Monomoy in January, took to Twitter to call it an “absurdly flattering cover story”.

That description is right. There are no discussions of the darker sides of private equity, things like dividend recapitalizations, management shakeups, asset sales, exploitation of tax loopholes, or shockingly quick exits.

Instead, we get a fully MBA-approved description of Monomoy’s efficiency “boot camps” that preach “kaizen”, a Japanese management idea focused on continuous improvement that was developed by Toyota, and has recently been called into question. There are of course layoffs that accompany this strategy. But they are presented more like inevitable hurdles to success: “to survive, you cut people. To grow, you cut waste.”

from Felix Salmon:

Counterparties: The Inflation question

Ben Walsh
May 1, 2012 21:52 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com

As European leaders are being criticized for their austere approach to economic recovery, Fed Chairman Ben Bernanke is similarly fending off critics who believe he's not doing enough to grow the economy. Europe's obssed with cuts; Bernanke, the argument goes, is obssessed with inflation.

Remember, the Fed has two mandates: to create "stable prices" (largely, keeping inflation in check) and to help maintain "full employment". Bernanke's critics, of late, have accused him of worrying far too much about the former.