The definitive account thusfar may be from Reuters; this updated story reads like a novel.

If Dewey is looking less like a law firm, why might it have been more like a hologram? A hologram is a projection that looks like a three-dimensional image, but really isn’t. Its meaning also depends upon your point of view, and if you get too close to it, and try to touch it, you’ll find that it really doesn’t exist at all.

There are at least three things that made Dewey less like a true law firm and more like a hologram:

1. Partners who weren’t really partners. The key issue that was the catalyst of the core meltdown of Dewey appears to be the fact that some partners had special deals, priority financial guarantees that placed them ahead of other partners. Many of these deals may not have been disclosed to other partners until October of last year. When those partners learned early this year that their distributions would be cut, they started to bail. Under the circumstances, could you blame them?

2. Excessive debt secured by nothing more than the “brand.” Peter Lattman of the New York Times reported that a $125 million bond offering did not disclose special compensation guarantees mentioned above. Incredibly, the offering memorandum did not contain any risk factors. This from a firm that assuredly insists upon a laundry list of risk factors when it is underwriters’ counsel for the blue-chip clients. (Last year, I wondered what a BigLaw S-1 would look like. A fair question in retrospect.)

3. There are no “firm clients.” As the partner exodus accelerated this year, it became apparent that clients typically run with these key partners. That is nothing new, but it is a useful counterpoint to the “institutional firm” meme that permeates a lot of AmLaw 200 marketing. Add to that the “global platform” moniker and you have something that sounds impressive, but is really is based on highly skilled partners who can attract and retain high-margin work. That has long been the coin of the legal realm; never more so than today.

Caught in this turmoil are junior partners, associates, and support staff. You know, the people that actually do a lot of the work. They thought Dewey was solid. But, alas, it was something of an illusion.

We have seen in the past a large financial firm taken down by a rogue trader. That is sudden and climactic. It is harder to perceive the difference between an aggressive and a rapacious managing partner. You have to look really closely.

Paul uses the terms of Old Normal and New Normal to organize a comprehensive chart to run through how things were in 25 categories and how they will be. While I shot a year-end spitball at the latter term, I am coming around to thinking that New Normal is as good as any to remind lawyers that change is here to stay.

Or something like that.

I would just put the emphasis on the “New” in “New Normal,” since next year’s N Squared may not be the same as this year’s. In fact, it almost certainly will not be.

Take a close look at Paul’s effort at charting change. There is a lot of thought behind something that looks rather simple.

I t was May of 2005. I met John Edwards at my law school’s commencement, where he was the featured speaker. He spoke about public service and the ongoing problem of poverty in the United States. He was laying the groundwork for his 2008 presidential run, less than a year after the 2004 election.

To call Mr. Edwards engaging and charismatic doesn’t begin to describe it. I managed to get one picture with him, just as he emerged from an elevator and entered a reception before the event. We talked briefly as the photographer set up for the shot. I thanked him and said that I hoped his wife was doing better. He said “I appreciate that.”

A swarm of people surrounded him seconds later. Now that his trial has started and the witness list is set, here is that picture:

In the weeks that followed, I sent the picture to a few friends, along with an email captioned something like: “Dream Ticket for 2008?”

Even in brief meeting like this, I could see why John Edwards was so successful as a plaintiffs’ lawyer. I understand how he was able to become a U.S Senator, and a candidate for Vice President and President. While his politics didn’t exactly square with my own, he seemed to have something that was lacking in most politicians.

Some in the press have called Mr. Edwards’ downfall an example of hubris (“excessive pride or self-confidence; arrogance”). I am reminded, however, of a professor in my first semester in college who explained that many great works of Greek literature involved hamartia, “the flaw in character which leads to the downfall of the protagonist in a tragedy.”

That seems to fit here. Lawyers abound, and not just the prosecution and defense teams. It’s the defendant with his daughter at his side at the counsel table. And the memory of his departed wife.

People want someone to believe in. Maybe more than anything.

A prime example is this article from Bloomberg yesterday:

Click on the image to read the work of Bloomberg reporter Paul Barrett. He takes a detailed look at the situation facing Dewey, and even talks about what it may mean for large law firms (and even law students) generally. Here’s a sample, quoting J. Stephen Poor of Seyfarth Shaw:

“Law firms whose business model remains what it has been for more than 30 years — namely, every year we just raise our rates and expect clients to pay up — well, those law firms will find the old ways aren’t sustainable.”

(Just this morning, as I was revising this post, Reuters Legal is reporting that Dewey may have retained bankruptcy counsel.)

Mr. Barrett’s article is required reading. Print it, share it, give it to an aspiring law student. (Thanks to Ron Friedmann and Jordan Furlong for pointing it out; both also mention this one from The Atlantic as well.)

Two aspects of Mr. Barrett’s work contribute to its quality. First, he doesn’t fall for the “some law firms are raising prices” trap that I mentioned earlier this week. The reports that some lawyers are charging $1,000 per hour are not news. They are legal trivia. Anyone who pays close to that is doing so because they have to not because they want to. They won’t pay that for very long and they won’t come back and pay it the following month, retainer-style. You can’t build a large corporate law firm on the backs of $1,000 per hour lawyers.

Second, Mr. Barrett zeros in on what is the real problem at most large law firms: the instability of a high-cost, rainmaker-fueled business model:

Partnership doesn’t nurture broad-minded managers skilled in running sizable operations. In a business increasingly characterized by fierce bidding for talent and high-level defections, many successful attorneys jealously hoard clients and keep an eye on the American Lawyer numbers to see whether they ought to take their “book of business” elsewhere. Under these circumstances, client loyalty at many firms has deteriorated.

Bingo. If Bloomberg wants to continue to add to the quality of the large law firm business model debate, it should publish its own annual list of top law firms. But this one should also include two new columns: (a) percentage of firm revenues among the top 20 billing partners and (b) total debt. The latter one can help separate the firms that can handle some defections from those that likely can’t.

Next week, a longer look at the once and future rainmaker. What was once this:

May now be this:

(To be clear, no right-thinking lawyers take pleasure in challenges faced by any law firm. But this firm in question did tell the New York Times that many partners who departed were “laggards.” What goes around, as someone once said.)

(Click on the image to see the article, but please come back…)

Mr. Lattman details the ongoing travails of that firm, and even quotes the expert and always engaging Bruce MacEwen of Adam Smith, Esq. According to the Times, Dewey is allegedly in negotiations with its lenders over compliance with loan covenants due to partner departures.

In this case, AFA refers to Alternative Financing Arrangements, and Dewey may need some soon. Hopefully this can work out, and Dewey can recede a bit from such a prominent position in the press. When one of your banks is forced to put out a statement like this, it’s obvious you’re in a tough spot:

“Dewey & LeBoeuf is a client in good standing with Citi Private Bank,” said Dan Di Pietro, the chairman of the law firm group at Citi Private Bank. “Citi has had a banking relationship with the firm dating back to the early 1970s and continues to provide banking services to a significant percentage of the partners and associates.”

One part of this article really caught my eye, however. It was a statement about how much of the firm’s rebound strategy relies on certain key partners:

Among the so-called rainmakers who are crucial to the firm’s survival, these people say, are Jeffrey L. Kessler, the head of the litigation department and a prominent sports lawyer; Richard E. Climan, a Silicon Valley mergers and acquisitions lawyer; Berge Setrakian, a corporate lawyer with a large international practice; and Martin J. Bienenstock, a bankruptcy partner.

See if you can find the rainmaker here:

I highlighted “rainmakers” because I think that term is becoming outdated. We all know what it has meant historically. But the relationship between law firms and key clients is no longer what it was and is changing rapidly.

Next week, I will outline some reasons why law firms should think carefully about marketing their “rainmakers” as such, and then expand upon what that term has come to mean to many clients.