Tuesday, October 25, 2011

Law Firms Forget Their Culture at Their Peril

(Thanks to Martin Rowson)

Jotwell has just published my review of Milton Regan's chapter on Taxes and Death: The Rise and Demise of an American Law Firm in Austin Sarat's edited collection, Law Firms, Legal Culture, and Legal Practice, 52  Stud. in Law, Politics, and Society 107 (special issue) (2010), available at SSRN.

Here is part of the review:
Jenkens & Gilchrist was a small but high-end law firm in Texas with desires to grow, especially into New York. But its profits per partner (PPP) were insufficient to attract the best lateral hires even though by Texas standards it was successful. (See Sida Liu’s review of profits.) Having been through a bad spell in the early 1980s the firm had rebuilt itself but it remained at heart a regional law firm. Then enter stage left Paul Daugerdas in 1998.
Daugerdas was a lawyer and an accountant who had worked for Arthur Andersen and Altheimer & Gray where he had developed a tax shelter practice. (Both of these firms have subsequently folded.) He claimed he could bring in a book of business worth $6 million a year and moreover he wanted to be compensated based on his revenues, not those of the firm. After much argument over Daugerdas himself and the legitimacy of his work he was taken on. In his first year at Jenkens he generated $28 million in revenue, the firm’s PPP rose and the firm went from 77th to 57th in the AmLaw 100.
It didn't take long for IRS to become involved and for both the firm and Daugerdas to die professional deatths. Daugerdas was convicted on all counts and the firm folded. Jenkens traded its traditional professionalism for a quick and assured buck. It didn't work and Regan has written its obituary. RIP Jenkens & Gilchrist.




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