Three former top executives of Dewey & LeBoeuf, the giant law firm that filed for bankruptcy protection in 2012, are expected to be charged on Thursday with misleading other lawyers and lenders about the financial health of the firm.
The Manhattan district attorney, Cyrus Vance Jr., is expected to announce the filing of criminal charges against the three, Steven H. Davis, the firm’s former chairman; Stephen DiCarmine, the former chief executive; and Joel Sanders, the former chief financial officer, people briefed on the matter said.
The details of the charges are still unclear. However, two of those people, who spoke on the condition of anonymity, said that Mr. Vance would accuse the lawyers of grand larceny among other charges related to financial and accounting irregularities. The charges stem from accusations that former Dewey partners themselves presented to the district attorney’s office in 2012.
The filing of charges against the three lawyers would be the most significant event yet in the collapse of a once-mighty firm that was created by the 2007 merger of Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae, two of New York City’s most prestigious law firms. The collapse of the firm, which once had 26 offices around the globe and employed 1,300 lawyers, was closely followed in the New York legal community as large groups of lawyers at the firm left to join other practices.
New York prosecutors have been investigating accusations that Dewey’s leadership committee misled other lawyers about the firm’s financial health, along with investors in a private sale of debt to raise financing for the firm. A grand jury has been reviewing evidence, gathered by Mr. Vance’s office and the F.B.I. in Manhattan, since the fall, focusing on Mr. Davis and Mr. DiCarmine, who were known as “the Steves” inside the firm.
The Securities and Exchange Commission is also expected to file a civil action related to apparent misrepresentations in the firm’s 2010 sale of $125 million in debt notes to refinance some of its bank debt, another person briefed on the matter said. The agency might claim that Dewey and its executives masked the dire state of the firm’s finances.
Civil and criminal charges could also be filed against others who once worked for the firm, these people said.
Erin Duggan Kramer, a spokeswoman for Mr. Vance, declined to comment. An S.E.C. spokesman also had no comment.
Lawyers for the three former Dewey executives either declined to comment or could not be reached. But Mr. Sanders’s current employer issued a statement of support, saying: “During his tenure with Greenspoon Marder, Joel Sanders has demonstrated his honesty, integrity and dedication to the firm. We will continue to support Joel through this ordeal and look forward to a successful outcome.”
A series of off-color emails about Dewey & LeBoeuf’s health — messages that emerged in the wake of the firm’s collapse — are likely to underpin the indictment, a person close to the matter said. In turn, defense lawyers will most likely argue that the emails are being taken out of context.
Prosecutors are expected to home in on the aftermath of the merger between the two firms.
On paper, the merger seemed to be a brilliant way to bring together the talents of two top law firms. But soon after the merger was completed, the firm began experiencing financial difficulty because of long-term commitments it made to pay multimillion-dollar salaries to some of its star lawyers.
The firm agreed to those contracts just as the financial crisis hit and took a big bite out of legal work at top firms, including Dewey. Law firm consultants, however, said the financial crisis hurt Dewey more than most firms because of the large debts it owed to its star lawyers and lenders.
The autopsy of Dewey’s wreckage during its bankruptcy proceeding showed a classic case of mismanagement and borrowing to try to stay afloat. After piling up tens of millions of dollars in i.o.u.’s to its partners, the firm tried to make up for lost revenue by hiring new lawyers so it could increase its billings. But the plan failed as expenses continued to rise and the sour economy depressed the firm’s ability to sharply increase its revenue.
In the bankruptcy case, the largest ever involving a law firm, the former partners agreed to return some of their pay to meet some of the creditors’ claims, which totaled about $550 million. They contributed about $72 million to pay down those debts.
The collapse of Dewey led to much second-guessing by lawyers at the firm.
Some partners accused the firm’s executive committee of not keeping a closer eye on the three men now expected to be charged, who were responsible for running the firm’s daily affairs. Other lawyers privately conceded that they should have been paying closer attention to the firm’s finances and not relying on the leadership team to make all the decisions.
Mr. Davis has been firm in defending his conduct. In an email to his partners in 2012, Mr. Davis wrote, “A dispassionate and disinterested review of the facts will confirm that I have not engaged in any misconduct.”
An earlier version of this article misstated the size of the firm’s staff. At its peak, the firm employed 1,300 lawyers; that was not the size of its overall staff.