Citibank is denying allegations that it fraudulently induced former Dewey & LeBoeuf partners to sign up for a capital loan program by hiding the firm’s precarious financial condition.
Former Dewey partner Steven Otillar made the claims last month, after the bank sued him for defaulting on a $207,000 loan that he had taken out to finance his initial capital contribution to the firm. According to Citi, the loan agreement included a provision that triggered default of the loan if Otillar left Dewey or the firm collapsed. After Dewey declared bankruptcy in May, the bank sued Otillar for failure to repay his loan.
Otillar fired back with a court filing accusing the bank of conspiring with Dewey management to cover up the firm’s monetary struggles and entice partners into the loan program, purportedly so Citibank could reduce its own losses resulting from Dewey’s impending collapse. In the filing, Otillar argues that Citibank had a fiduciary duty to disclose Dewey’s financial woes to prospective partners.
Citibank, however, says that the disgruntled partner has no hard evidence to back up his claims. In a court filing Wednesday, the bank added that Otillar himself was responsible for investigating Dewey’s financial condition and that Citibank had no fiduciary duty to reveal confidential information about the firm’s finances.
"Having failed to ensure that the firm's finances were in order, Otillar cannot now be heard to complain that he was defrauded by Citibank for failing to disclose the firm's allegedly deteriorating financial condition," Citi’s filing said.
Read more at Thomson Reuters.
For more InsideCounsel coverage of Dewey’s collapse, see: