The clawbacks have begun. Just last week the Dewey mortuary team conference called the former partners about getting enough of them to sign up to a program where each would pay a certain amount of money in exchange from immunity from “clawbacks.” Clawbacks are a strategy lenders use to squeeze money owed from former partners who left before bankruptcy. For the plan to work, enough partners must join in and meet a “critical mass.” Meanwhile, Citi is attempting to claw back loans made to lateral hires and internal power promotion.
The targets of attack have not been delineated, but at least a few of those partners contacted had joined up in 2010 and 2011. Citi and other banks have proved individual loans to new hires to pay their Capital contribution, the fee firms expect new partners to pay. Those who borrowed from Citi in the last two years are grouping together to gain a net settlement.
During the conference call that spelled out this plan, former partner Steven Miller, who joined Dewey in 2011 and now works with the Akin Group testified that Citibank indeed was seeking repayment on his loan.
With such sharks circling in the water, perhaps enough partners will join ship to man it to safety. They have till the end of July to decide.