Dechert Ex-Partner Leak, Hack Allegations Threaten Firm Damage

Dechert will soon start to find out how much damage the law firm faces from an onslaught of accusations against former UK partner Neil Gerrard, including that he leaked information about a client to authorities and aided a hacking operation.

A British court March 6 will begin a trial to decide how much Dechert owes a former client that operated mines in Kazakhstan. A judge has found Gerrard breached his duty by giving information about the client, a subsidiary of Luxembourg-based Eurasian Resources Group, to UK fraud investigators.

Dechert separately faces two more UK trials next year, and two US lawsuits, stemming from Gerrard-led representation for one of the United Arab Emirates. The firm is accused of aiding a hacking operation that targeted perceived enemies of the emirate, Ras Al Khaimah.

The spate of allegations has ensnared other lawyers at the firm, two of whom have exited in recent months, while raising questions about how many dollars in damages and reputational costs Dechert will rack up before litigation tied to Gerrard is finished.

“Law firms have brands just like anybody else,” said James Jones, a senior fellow at Georgetown University Law Center and former Arnold & Porter managing partner. “It can certainly take a toll.”

The Philadelphia-based law firm has resources for plaintiffs to go after, with revenue surpassing $1.3 billion in 2021, ranking it near the top 30 in the US, according to the American Lawyer. It has roughly 1,000 lawyers in 21 offices across the globe.

Big Law firms typically carry liability coverage that can run into the hundreds of millions of dollars, likely offering a shield in litigation, but insurance costs could rise.

“Some firms have huge deductibles, that would be a direct cost,” said Tom Sharbaugh, a professor at Penn State Law and former managing partner of operations at Morgan Lewis & Bockius. “The indirect costs are hard to estimate, but you may have an adverse impact with clients and on recruiting.”

Dechert has denied allegations of impropriety and is aggressively defending itself in the UK trials and against the US lawsuits. Dechert has also distanced itself from Gerrard, a one-time star lawyer the firm recruited in 2011 who retired nine years later. Counsel for the firm last year stopped representing Gerrard as an individual in the lawsuits.

An alleged claim in the US that Gerrard and the firm violated the Racketeer Influenced and Corrupt Organizations, or RICO, Act “is denied and will be defended,” Dechert said in a statement. Gerrard’s lawyers didn’t respond to a request for comment.

‘Reckless Breach’

Gerrard, a one time London police officer, came to Dechert after 20 years as a practicing lawyer. He established a white collar practice at a UK shop that is now part of the global firm DLA Piper, and he built a reputation as a brash lawyer in areas including financial crime.

He joined Dechert with assurances that he could bring in at least $24 million in fees, court documents show. He brought his mining client, Eurasian Natural Resources Corp., then listed on the London Stock Exchange, with him when he joined Dechert.

Eurasian had hired Gerrard to aid an internal probe after an anonymous whistleblower alleged corruption in its Kazakhstan operation. The company later alleged Gerrard ended up working against Eurasian by leaking information to UK investigators and the media in an effort to expand the probe—all in a bid to increase his fees.

The UK opened a criminal investigation of the mining conglomerate’s activities in Kazakhastan and Africa in 2013, and that probe is ongoing, according to court documents.

Gerrard defended the “appropriateness of my actions,” citing his over 30 “untainted years as a solicitor.”

But a London judge last year found Gerrard acted in “reckless breach of duty” by giving up information on his client to the UK investigators. The judge also concluded that Gerrard instigated leaks to the news media and gave wrong advice to his client about potential criminal liability.

The judgment did not implicate any others from Dechert. But it came down as Gerrard’s legal exposure—and by extension the law firm’s—began to escalate, this time over his work for the UAE emirate.

UAE Work

The emirate, Ras Al Khaimah, hired Gerrard in 2013 to aid an investigation into Khater Massaad, the former CEO of its sovereign investment fund who would later be convicted of fraud in the UAE.

A US aviation executive, Farhad Azima, who said he had been working with Massaad to publicize human rights abuses in the UAE, claimed that as part of Gerrard’s work his emails were stolen and posted online.

The emails allegedly showed Azima had made fraudulent misrepresentations in a prior commercial agreement with the emirate’s investment fund. The fund successfully sued him in the UK for $4.2 million.

Azima is fighting that judgment, saying it should be thrown out because it was the result of a hack and conspiracy to mislead the court.

Separately, he filed suit in the US, saying a hacking enterprise involving several parties, as well as a cover up that he claims Gerrard led and Dechert aided, violated the RICO Act.

Jay Solomon, a former Wall Street Journal foreign affairs reporter, filed a similar lawsuit, alleging the leak of his correspondence with Azima cost him his job.

It’s not surprising that plaintiffs are using RICO to target the firm, said Jeffrey Grell, a lawyer at Grell Feist PLC and RICO expert. “One of the reasons to use RICO is because it extends the scope of liability and you can get into deep pockets like banks and law firms,” he said.

But “it’s still a big hurdle to get over in proving intent by the law firm,” Grell said. “It is one thing to have a rogue partner. It would all depend on what the law firm knew, when they knew it, so establishing the law firm’s liability even if all the allegations are true is still a pretty big step.”

Lawyers Move On

The firm in recent months has lost two lawyers who were drawn into the allegations Gerrard faces.

Linda Goldstein, a New York-based partner since 2011, who had represented the emirate’s investment authority in prior US proceedings, left the firm at the end of 2022.

While Goldstein is not named as a defendant in any lawsuit, the Azima complaint alleges she remotely attended two meetings where Gerrard organized a “false narrative” on coming across the hacked documents.

Goldstein referred questions on Azima’s lawsuit to Dechert. She is now a full-time senior counsel at the Center for Reproductive Rights, a group she had worked with in a pro bono capacity since 2015.

Caroline Black, a London-based partner who joined Dechert from DLA Piper shortly after Gerrard’s 2011 arrival, left the firm in early February.

Black is named as a defendant in a UK lawsuit against Dechert by a former emirate investment fund official. The official, Karam Al Sadeq, alleges Black, Gerrard and former Dechert London partner David Hughes participated in his unlawful detention and mistreatment.

Jihad Quzmar, a former emirate legal adviser, brought a similar suit that targets Dechert and Gerrard. Both cases are set for trial as soon as next year.

Black did not respond to a request for comment. She said on her LinkedIn profile that she is “enjoying a sabbatical from the law to focus on family and wellbeing.”

Dechert, Gerrard, Black and Hughes in court documents have denied the allegations of Al Sadeq and Quzmar.

Dechert, Gerrard and Hughes have also claimed in separate court filings that they didn’t know about any hacking operation targeting Azima. Dechert has previously said it discovered the documents through public sources.

Bessie Venters

Next Post

After longwinded debate, Senate kills controversial school choice bill

Wed Mar 1 , 2023
A divisive education savings account (ESA) bill died in the Senate Monday afternoon — in a 12-23 vote that came after over two hours of floor debate. Senate Bill 1038 would have established a universal education savings account program, providing $5,950 scholarships to students who are homeschooled, or attend non-public […]
After longwinded debate, Senate kills controversial school choice bill

You May Like