This year more than 20 partners have quit White & Case. But do the departures, at offices across the globe, indicate deep-seated problems? Or are they merely a blip? DAVID ROBINSON reports.
In the first few months of this year, 14 partners quit White & Case for Latham & Watkins. They came from a range of practice areas and were based in London, New York and a number of Middle East offices.
Since then,White & Case has been hit by further partner departures, taking the total number of leavers to more than 20. (See page 14 for a full list.) The firm’s critics claim that the exodus, which included high-profile names, indicates deep divisions that threaten the firm’s position among the global elite.
They say that White & Case’s sprawling network of global offices, coupled with a strong eat-what-you-kill culture, has meant it has struggled to
develop a coherent firm-wide strategy. This, they say, has led to internecine rivalries and poor
firm-wide morale.
But White & Case argues that, as the firm has more than 400 partners across 36 global offices, the recent leavers represent a small but surmountable setback. Do White & Case’s recent troubles suggest deep-seated problems that the firm is failing to address? Or are they merely a blip?
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The roots of the firm’s recent turmoil go back to the bitterly contested 2007 election for firm chairman.
Former chair Duane Wall stepped down after seven years at the helm. A serious clash followed as a number of heavyweight figures at the firm competed in the subsequent election. Four members of White & Case’s eight-person management board ran for the top job, and this opened longsimmering disagreements about the firm’s future. White & Case is something of a two-headed beast.
Its strengths lie in its top-tier banking and finance departments in London and New York and its energy, infrastructure and projects division that operates
across a number of emerging markets, including unusual locations like Almaty, Istanbul and São Paulo. By 2007, the combination had helped White & Case become one of the world’s largest firms. But it hadn’t enabled it to keep up with the white shoe firms the firm saw as its peers in terms of profitability.
White & Case’s PEP in 2006 had been $1.5 million, a long way behind firms like Sullivan & Cromwell ($2.8 million) and Milbank Tweed Hadley McCloy ($2.1 million).
“The fundamental problem is that the firm has not been as profitable as the white shoe firms it likes to think of as its peer group,” says a former finance partner. “Therefore there’s less money to go round and people feel dissatisfied.”
Many New York-based partners wanted to prioritise investment in the finance department.
Many projects lawyers, naturally, argued otherwise. The battle to become the next chairman came down to a straight fight between Moscow head Hugh Verrier, a projects specialist, and New York-based banking chief Eric Berg. “There was a real fault line within the partnership,” says a former partner.
Verrier had the backing of influential London-based projects chief Philip Stopford.
But Berg had the support of high-profile London-based finance duo Mike Goetz and Maurice Allen – two of the highest earning partners at the firm.
“The level of animosity between the two camps in London was of a different magnitude to that which you see at most law firms,” says a former partner.
At White & Case’s New York headquarters, many lawyers felt a Berg victory was a foregone conclusion. Verrier, a Canadian who had spent most of his career overseas in Indonesia, Turkey and Russia, was something of a dark horse.
Verrier’s narrow victory surprised many people. “It wasn’t obvious that the next leader of the firm would be a guy who’d spent 20 years outside New York,” says a senior ex-finance partner. “It was a shock.”
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The election had exposed deep splits, but sources say that Verrier – by nature a relatively restrained and uncommunicative leader – did little to heal the wounds after he moved to New York from Moscow to take up the top job. “Hugh basically holed himself up in his office,” says a former partner. In October 2007, Verrier appointed a four-person executive committee. The firm had previously had an eight-person management board. This move alienated some partners, who felt they had less of a voice in key management decisions.
“Hugh relies on a small coterie of people and this has caused some people to feel excluded,” says a leading legal consultant. The few partners Verrier has allowed into his inner circle, sources say, he doesn’t always listen to. “Hugh does what he wants to do and ignores people around him, even those on the executive committee,” says a former partner.
Meanwhile, Verrier’s well-meaning attempts to shape the firm into more cohesive unit would, over time, backfire. One of the principal criticisms levelled at
White & Case was that its sprawling international network was made up of individual fiefdoms, with little directive from above on how to share clients and grow the business.
Verrier called in management consultants McKinsey in an attempt to address this. The McKinsey review led to the creation of new regional divisions, and placed emphasis on practice groups rather than individual offices. The
aim was to promote greater global unity within practice areas and stop individual offices operating as independent fiefdoms. “The McKinsey review was an attempt to deal with some of the fiefdoms and silos,” says a former partner. “Some of the partners that had been there a long time claimed huge origination figures.” These changes did not go down well with many partners.
In March 2008, high-profile banking partners Maurice Allen and Mike Goetz – who had been strong supporters of Eric Berg’s candidacy in the leadership election – quit White & Case for Freshfields.
Their departure created a lot of instability in the London finance department. Goetz was central to White & Case’s deep relationship with Deutsche Bank.
The McKinsey programme was finally implemented in October 2008. But the timing, shortly after the collapse of Lehman Brothers sent the global economy into a tailspin, was unfortunate.
“What they put in place was a clever structure for a boom time which proved a disaster during a recession,” says a former partner. “McKinsey created another six tiers of management, which created even more divisions.”
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At the start of this year, a respected four-partner bank finance and capital markets team – led by bank and finance co-head Chris Kandel – quit White & Case’s London office for Latham & Watkins. Kandel’s exit reportedly placed further strains on White & Case’s relationship with Deutsche Bank.
“To build a top-level leveraged finance practice you need the support of a leading restructuring practice,” says Kandel, explaining his reasons for the move. “There are only a small number of firms that have that kind of stature on both sides of the Atlantic.”
But, given that the departures were in the bank finance group, they were not totally unexpected. “Their guy lost the election,” points out a former
partner. “The departure of a few people from the banking group was not a particularly surprising fallout.”
White & Case’s management likes to pin a lot of the recent problems on the fallout from Allen and Goetz’s departure. The fact that a few finance partners left in January, their logic goes, is an unfortunate but manageable side effect.
“People have their own agendas,” says a senior partner at White & Case’s London office.
But the departure in March of a number of project finance, energy and infrastructure partners – also to Latham & Watkins – casts doubt on that explanation. This second exodus included London-based energy partner Craig Nethercott and global mining co-head Glen Ireland, as well as a number of other energy,
infrastructure and projects partners in Abu Dhabi, New York, Riyadh and London.
Meanwhile, the head of White & Case’s metals and mining practice, Tanneke Heersche, joined Canadian firm Fasken Martineau. “The lieutenants from Hugh Verrier’s own camp are also leaving,” says a former partner.
Former partners say the reason is simple. In his three years in charge – albeit with the backdrop of the global recession – Hugh Verrier has been unable to inspire confidence in the wider partnership.
“Hugh Verrier is not a charismatic leader. He has been unable to rally the troops around him,” says a partner specialising in energy who left for Latham.
“There’s no real vision of what the firm ought to be, and how to find a consensus to take the enterprise forward.”
“There’s still too much political infighting in the firm,” adds another recent leaver. “Disagreements between some very fundamental groups within the firm continue, and make it difficult to focus on your practice.”
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White & Case maintains that the recent departures represent a small setback and that it can easily plug the holes. “We don’t dispute that a whole bunch of partners moving to Latham was notable. It did have an impact, but that was short lived,” says a White & Case spokesman. (White & Case declined to put any of its senior management forward for interview for the purposes of this article.)
“One of the advantages of a firm of our global nature is the deep bench of partners available to us.We have more than 400 partners, which is a significant resource. It enabled us to respond quickly and effectively.”
In February, the firm relocated a number of partners in an effort to steady the ship. New York finance partner Jake Mincemoyer relocated to London and energy specialist Doug Peel moved from Singapore to Abu Dhabi. New York corporate partner Neal Grenley was moved to Riyadh on a temporary basis.
The spokesman denies accusations that Hugh Verrier has been a weak leader. “Hugh has not shied away from the taking the tough decisions.”
And indeed,White & Case’s response to the recession has been robust. A major redundancy programme saw more than 200 associates shown the door last year. “We started partner headcount reductions and associate and support staff reductions in October 2008.Many firms didn’t start that process until 2009,” points out the spokesman.
Under Verrier’s leadership the firm has also shut its Dresden office, and pulled out of Bangkok, in addition to opening offices in Geneva and Doha (although that office suffered one of the recent departures).
The McKinsey review, the firm claims, put in place a clear strategy that reorganised the structure and put the management of the business into the hands of business leaders on the ground.
“Yes, there will be people who may not agree with that strategy. But I think the PEP is proof that the strategy is working during a very difficult year,” the spokesman adds.
In 2009,White & Case’s profits-per-partner stayed the same at $1.59 million. “If people were spending all their time infighting rather than working [as some former partners allege], would we have been able to maintain our PEP last year, during one of the most difficult downturns on record?”
But the number of partner departures may have helped keep White & Case’s PEP steady. The firm’s global revenues fell 11% last year to $1.9 billion.
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White & Case’s PEP remains a long way behind peer firms like Sullivan & Cromwell ($2.9 million) and Millbank Tweed ($2.2 million). It also lags behind Latham & Watkins ($1.9 million) – the destination of many of its partners.
Hugh Verrier has struggled to mend the tensions in the firm. But, in his defence, he took over at a particularly difficult time that has made it very tricky to achieve any significant upturn in the firm’s financials.
His efforts to create a coherent firm-wide strategy may yet help unify the firm, but the recent departures suggest that, for the time being, divisions remain. Unless the firm’s financials improve, occasional ‘blips’, like the exodus at the start of the year, could well continue.