[ by Howard  Haykin ]

Throughout the Dewey & LeBoeuf collapse, finger-pointing has been so prevalent that a former partner decided it's only appropriate that now be brought Citibank into the fray. Well, in this case, it's not exactly a surprise.

The former partner, Steven Otillar, filed his complaint with the courts, accusing Citibank of conspiring with Dewey management to hide the law firm's true financial condition in the months before its collapse.  Mr. Otillar was motivated by a lawsuit that Citibank brought against him - it's seeking repayment of a $210,000 loan that Mr. Otillar used to pay his capital contribution to Dewey when he joined the partnership in August 2011.  Mr. Otillar was one of the new partners that Dewey heavily recruited in 2010, as part of an aggressive growth plan.  Mr. Otillar and several dozen other lawyers were lured to the firm with lavish multiyear pay guarantees.

Otillar's premise is that Citi extended the loan as part of a fraudulent scheme intended to benefit Citibank and Dewey's management.  By recruiting him and other partners to join the financially troubled firm in the months leading up to its demise - and collecting millions of dollars from them - Dewey's partners enriched themselves and kept the firm afloat.

Mr. Otillar says Citibank had a legal obligation to disclose Dewey's, and that he never would have joined Dewey and taken out a loan from the bank if he had been provided with an accurate picture of the firm's condition.

Similar to an Earlier Claim. Another former partner, Henry Bunsow, filed earlier this year a similar lawsuit accusing firm leadership with running a Ponzi scheme - whereby money contributed by new partners were paid to existing partners and to help finance the imperilled firm.  Mr. Bunsow also joined Dewey just months before it filed for bankruptcy.

Recent Clawback Agreement by Former Partners. Several weeks ago, about half of Dewey's former partners agreed to return about $70 million of their past compensation to help pay the firm's creditors, which are owed over $300 million.  By agreeing to this "clawback" settlement, the partners insulate themselves from future lawsuits related to the firm's dissolution.

A group of partners who did not sign on to the settlement have asked a judge to appoint an examiner to investigate the unwinding of the firm.  The Manhattan D.A also is investigating whether there were any financial improprieties committed by Steven Davis, Dewey's former chairman. Mr. Davis has denied any wrongdoing.

Citibanks General Role with Dewey. Citibank was one of the banks that facilitated Dewey's growth. It had a varied and lucrative relationship with the firm, not only financing its operations through a large line of credit, but it also by lending money to newly hired partners to cover their capital contributions to the firm.

Mr. Otillar said that when Dewey recruited him from Baker & McKenzie in 2010, he raised concerns about the firm's finances. Management assured him that the firm was in growth mode and that he was joining at the perfect time, according to the court filing. And then after he came on board, he said, Dewey and Citibank pushed him to participate in the bank's loan program so he could make his capital contribution as soon as possible.

Mr. Otillar has landed a new home with the Houston office of Akin Gump Strauss Hauer & Feld.  He joins as a partner.

For further details, go to:  [Dealbook, 9/3/12].