The Securities and Exchange Commission alleged the five turned to accounting fraud when the firm -- international law firm Dewey & LeBoeuf -- needed money to withstand the economic recession and steep costs from a merger, the agency said in a release.
The SEC alleged the law firm's top professionals scoured its financial statement and devised ways to artificially inflate income and distort financial performance because they feared declining revenue might cause its lenders to cut off access to the firm's credit lines. Dewey & LeBoeuf then used bond markets to raise cash through a private offering that seized on the phony financial numbers.
"Investors were led to believe they were purchasing bonds issued by a prestigious law firm that had weathered the financial crisis and was poised for growth," said Andrew J. Ceresney, director of the SEC's Division of Enforcement. "Dewey & LeBoeuf's senior-most finance personnel used a grab bag of accounting gimmicks to create that illusion, and top executives green-lighted the decision to sell $150 million in bonds to investors as a desperate grasp for cash on the basis of blatantly falsified financial results."