Sunday, September 27, 2009

Behind the veil - Legalweek

Behind the veil - Legalweek
When a member of the French elite is in trouble they call Jean Veil. Michael Goldhaber charts the rise of the legendary French litigator and the firm to which he gives his name
On Monday, January 21, 2008, back when extreme stock volatility was still a novelty, world equity markets plunged 6% with no full explanation apparent. Then, on Thursday, the mystery abated when at least a partial explanation for the sell-off appeared. The French bank Societe Generale (Soc Gen) announced that a young trader named Jerome Kerviel had somehow, without the bank noticing, bet €50bn that stock markets would rise. Soc Gen had spent the past few days desperately selling his positions - and set a new standard for rogue trading losses at €6.4bn. Hit by scandal and a potential legal mess, Soc Gen did what plenty of other rich and powerful French institutions would do in such a situation: It hired Jean Veil.
Veil (pronounced "vay"), name partner of Paris' Veil Jourde, is to the business and political elite of Paris what Edward Bennett Williams was to Washington, DC in the 1960s or David Boies is today: the man to see when you are in trouble. A generalist who occasionally competes with the big boys in mergers and acquisitions, Veil is best-known for his litigation practice, where his client list is a sort of French who's who. They range from oversight-challenged Soc Gen to the scandal-prone oil giant Total; from former French president Jacques Chirac on the right to the former socialist presidential contender Dominique Strauss-Kahn, now chief of the International Monetary Fund. Even the wife of French tennis star and pop singer Yannick Noah called Veil when they needed a divorce. "He's just the best lawyer in town," says Strauss-Kahn. "That's it."
But analogies to Williams or Boies have their limits. The Americans stamped their imprints on elite in-stitutional law firms, which have grown to more than 200 lawyers each - and, in the case of Williams & Connolly, thrived after its founder's death. The Frenchman has no such aspirations. Veil Jourde is a 44-lawyer boutique scrapping for survival against the Anglo-American bruisers. After being ravaged by raids by US firms, Veil Jourde has slowly rebuilt itself with a few precious lateral hires, most notably Emmanuel Rosenfeld from White & Case. Veil and Rosenfeld see their unique brand of litigation, and the corporate advice that ac-companies it, as key to the survival of French independent law firms. And they see the boutique model as one worth fighting for.
Veil was born into an iconic family of the French meritocratic establishment. His mother, Simone Veil, is a figure of moral authority - both as an outspoken survivor of the Holocaust, where she lost her parents and brother; and as leader of the fight to legalise abortion in the mid-1970s, when she was health minister in the first administration of Jacques Chirac. As president of the European Parliament in the early 1980s, she earned the sobriquet "La premiere dame d'Europe."
But arguably Veil's father, Antoine Veil, is even more firmly entrenched in the establishment, a product of the Ecole Nationale d'Administration (ENA), the pinnacle of the French academy. ENA's graduates - known as 'enarques' - have long dominated French public service and business, and implicitly rele-gated all other pursuits, law included, to lower rungs of prestige. Antoine eventually became chief executive at a series of French corporate standardbearers, including the airline Union des Transports Aeriens, Lagardere Transport, and the railcar manufacturer Compagnie International des Wagonlits, which at the time operated the Sofitel hotel chain.
Jean, who now shares his mother's air of jowly gravitas, can still remember the pride he felt as a child of five or six when his father passed his ENA exams. He also recalls his father's disdain when his mother at first suggested that she become a private lawyer. They compromised, and Simone trained to be a magis-trate judge, which is at least a post in France's revered bureaucracy. But when Jean himself graduated from university in 1969, his scholastic record did not qualify him for the high civil service. Antoine was forced to accept that his boy would be a mere lawyer. Jean's younger brother, Pierre-Francois, who is now a partner at Veil Jourde, followed suit a few years later. "It was a sort of revenge," remarks Veil wryly.
Veil takes his parents' fame "as a permanent challenge to create my own first name," he says. An indifferent student, he found his calling as a trainee at Gide Loyrette Nouel. "To me," Veil says, "the law was a sort of miracle." Gide grew from 20 to 100 lawyers during Veil's years 13 years there, emerging as France's leading institutional firm. In 1982 Veil left to share premises (but not a partnership) with the country's leading M&A star, Jean-Michel Darrois. They parted ways in the late 1980s when Darrois founded the corporate boutique Darrois Villey Maillot Brochier, while Veil began to collaborate on cases with Georges Jourde, one of France's top insolvency litigators. They founded the firm that became Veil Jourde in 1990.
For all of his celebrated court cases, Veil devotes half his time to corporate work for regular clients such as the investment bank Lazard and the global ad agency Publicis Groupe. Veil worked with Darrois Villey and Gide for the French bank Groupe Caisse D'Epargne on its €40bn domestic megamerger with Groupe Banc Populaire, a shotgun match arranged by French regulators at the height of the financial crisis this autumn. Furthermore, in 2008, he and Clifford Chance helped L'Oreal, another regular client, add Yves Saint Laurent perfume to its stable for €21.3bn.
While Veil has become a corporate rainmaker, he retains his parents' ethos. "I never imagined that I would make much money," he says. "I consider that to be a lawyer is to be a public servant, participating in the regulation of society." Arguably, Veil's white-collar litigation gives him a chance to put those words into action; at least it makes him an adjunct of the enarques.
Veil's family ties have led to some high-profile cases. Veil was a child when he first met Jacques Chirac (pictured left), who came to dinner at the Veil family home. As a young man, Veil became friends with Ann Sinclair, a journalist who often interviewed Simone Veil on her Newsnight-style television programme and who married Dominique Strauss-Kahn, a prominent politician and sometime lawyer. In 1999 Strauss-Kahn stepped down as finance minister under accusations that he had backdated $84,000 (£55,000) in invoices for legal work he had performed on behalf of the national student health insurance plan. Veil won him a complete acquittal. Now Veil is defending an investigation as to whether Chirac - who lost his immunity when he stepped down as president in 2007 - had used public funds early in his career, as mayor of Paris, to pay the salaries of political supporters. (Chirac has said that the political financing laws at the time allowed practices that later became illegal.)
The fact that Strauss-Kahn was practising law is itself interesting. It is now common for the most eminent public servants, such as Segolene Royal and Dominique de Villepin, to gain admission to the bar when they are out of power. There was a moment during the Strauss-Kahn inquiry when Veil assured the judge that he would be glad to have the grand politician practice in his law firm. It was a stunning reversal of France's traditional pecking order, a bit like a lower league football manager vouching that he'd be happy to take on a top Premiership player. To Veil, it is gratifying that French society has upgraded lawyers' status. "The vision and influence of lawyers has become much more important than 20 or 30 years ago," he says.
Veil's mix of high-profile litigation and corporate work looks strange to American eyes, but Veil argues it is a huge advantage. "I can tell M&A clients what judges will think [if litigation develops], and explain to the judge why the business works the way it works," he says. "This model is extremely precious. It is our sole chance to survive." But as Veil concedes, the mixed practice model can be a tough sell, especially on the M&A side.
Over the course of 2005 and 2006, 20 corporate lawyers left Veil Jourde for US firms - representing a staggering one-third of the firm. Three star dealmakers led the exodus: Guillaume Kuperfils to Mayer Brown; Ariel Harroch to Gibson, Dunn & Crutcher; and Patrick Jais to Fried, Frank, Harris, Shriver & Jacobson.
Veil Jourde co-founder Georges Jourde attributes the outflow to the appeal of working for a stable institution. "Why did we lose partners?" he asks rhetorically. "Not for money. Not for quality of life. It was for employment security." The defectors, he explains, wanted to work at firms that they knew would exist in 50 years, after their founders' demise. Harroch says that a US firm such as Gibson, Dunn was a better platform for his cross-border transactional practice; at the time of going to press Kuperfils and Jais had not responded to requests for comment.
Veil Jourde rebuilt its partnership between 2005 and 2007 with four laterals, including a partner from White & Case and a senior associate from Willkie Farr & Gallagher. From a height of 12 partners - 60 lawyers in total - Veil Jourde has stabilised at ten partners, 44 lawyers total (including trainees). Revenue per lawyer in 2008 was projected to be $500,000, which is competitive with all but the top foreign law firms in Paris. Jourde says that he would like some day to reach 60 lawyers again.
Jourde credits his firm's rebound partly to the appeal of an unstructured boutique. "The spirit of our business is that of an artist," says Jourde, who does his own gardening in the courtyard adjoining his office. "In a French firm you have a right to be a free spirit."
But more fundamentally, Jourde says that litigation gives French boutiques a competitive advantage. It's no accident that most of the new laterals build their practices around French litigation or insolvency proceedings. "The mentality of US and UK firms is not adapted to French litigation," argues Jourde, who served as the lead French litigator for Eurotunnel after it declared insolvency in 2006. Nor are Anglo-American firm finances well-tuned to French litigation. Veil notes that, in white-collar cases, French directors' and officers' insurance routinely demands lean staffing and low fees. The big US and UK firms have therefore dipped only sparingly into the talent pool of French white-collar litigators. Two notable exceptions came in 2007, when Davis Polk & Wardwell poached Georges Terrier (a corporate and litigation generalist) from JeantetAssocies, and Linklaters stole Kiril Bougartchev (a white-collar criminal defence and international investigations specialist) from Gide.
In particular, Veil hopes that the future of his firm lies with litigators such as Emmanuel Rosenfeld - whose practice and personal story provide a neat complement to Veil's. As the second enarque to practise law, qualifying in 1984, Rosenfeld shares Veil's veneration for public service. But whereas Veil excels in domestic investigations and criminal defense on behalf of executives, Rosenfeld has expanded from that base to coordinate international fraud and corruption investigations on behalf of French multi-nationals. In a nutshell, Rosenfeld's business plan is to reinvent the French boutique as a buffer between French business and American investigators.
For five years after graduating ENA, Rosenfeld trained with his father, a respected litigator and real estate lawyer who practised solo, and was so old-fashioned that he would throw out any furniture made after 1700. The idea that law is a business and lawyers should promote themselves were anathema to Pierre Andre Rosenfeld. "It was exactly like practising in 1840," remembers his son. From 1990 to 2006, Emmanuel Rosenfeld sojourned at a firm founded by American expatriates (Salans) and two American firms (Willkie and White & Case) - but he always carried in his heart his father's old-fashioned biases. He hopes to finish his career with Veil Jourde. Here, Rosenfeld says, he has found a setting conducive to international litigation that preserves some of the camaraderie and freedom of Paris legal chambers before Anglo-American firms arrived in force in the 1990s. "The American model has developed in every aspect of the French legal profession," says Rosenfeld. That means an elevation of the law's prestige - but also a trend toward gargantuism and endless committee meetings.
Veil and Rosenfeld became close in 1999, when Veil helped Total Fina to take over Elf Aquitaine, the scandal-plagued former national oil producer. Elf had hired Rosenfeld to assist in a corruption investigation of its former executives. Total asked Veil to take over the pending investigation, but Veil insisted that Rosenfeld stay on. Together, they helped the merged company to participate as a civil third party in the prosecution of dozens of former Elf executives. The investigation revealed a swamp of corruption by enarques in business and politics, replete with allegations of multibillion-franc kickbacks in a weapons deal with the Taiwanese navy, and mistresses kept in high style (leading one to publish the memoir Whore of the Republic). It ended with the conviction of, among others, Elf's former chief executive Loik Lefloch-Prigent and second-in-command Alfred Sirven.
As securities fraud and corruption inquiries increasingly cross borders - often originating in the United States - Rosenfeld routinely shares clients with US firms such as Cravath, Swaine & Moore, Patton Boggs, and Zuckerman Spaeder. Rosenfeld is currently advising Total on US bribery investigations re-garding sales to Iraq and Iran. (Total denies any wrongdoing.) When US authorities pressure French companies to conduct an "internal investigation" led by an outside law firm - in practice, usually a US firm - Veil Jourde often acts as an intermediary between the French company and the American law firm, while taking the lead in any parallel French proceeding.
"It's not culturally easy for French companies to accept that their lawyers are essentially deputised by the US government," observes litigation partner Daniel Schimmel of Kelley Drye & Warren in New York, who sometimes works with Rosenfeld on international investigations. "They like to hire a firm that serves as a buffer." The courtly Rosenfeld, who briefly taught French literature at Yale as a young man, clearly revels in his role as interpreter. "There is one main difference between internal investigations in the US and France," he says. "And that is that the concept doesn't exist in France. You must understand that the exercise is totally unbearable at first for a European company."
For other Rosenfeld clients, such as the aerospace giant European Aeronautic Defence and Space Company (EADS -parent of Airbus SAS) and the chief financial officer of Vivendi, which are being investigated for insider trading, Veil Jourde's role is largely to contend with domestic probes. (Both clients deny any wrongdoing.) But in Jean Veil's most notorious case, l'affaire viel, his client is facing no French investigation at all - a fact that surprises some.
"I can't imagine that the [UK] Financial Services Authority would not have asked how a leading bank didn't identify a position of that size," says Paul Lomas of Freshfields Bruckhaus Deringer, co-author of a new book Corporate Internal Investigations: An International Guide. The Anglo-American model of light preemptive regulation of finance is due for serious revision, but it still has the world's toughest post-hoc regulation. In the Kerviel (pictured right) case, post-hoc regulation will fall to US plaintiffs' lawyers, who have filed three class actions against Soc Gen in US courts. Skadden, Arps, Slate, Meagher & Flom is defending Soc Gen in that litigation.
In France, though, the bank has relied exclusively on French boutique litigators for the investigation of Kerviel. As well as Veil, the independent dream team is rounded out by Jean Reinhart of 40-lawyer Reinhart Marville Torre and Francois Martineau of Lussan & Associes, a 20-lawyer firm founded in 1932 that is unusual in Paris for outlasting its founder, if only just (Claude Lussan argued his last case aged 98, shortly before his death in 2008). Having completed its own investigation of Kerviel, Soc Gen is working closely with French prosecutors - and taking positions with a careful eye to the bank's expo-sure in the US
The Soc Gen trio maintains that Kerviel committed fraud, forgery, breach of trust, and breach of the computer system to introduce false data. Kerviel, who at press time was expected to be indicted, has protested that his superiors were aware of his actions. But Veil's strategy is to broadcast an image of Kerviel, who came from a humble background in Brittany, as a desperate social climber. After being rejected by the grandes ecoles like ENA, Kerviel entered Soc Gen through the back office, and was making less than €100,000 (£84,000) a year when the scandal broke.
"Kerviel was not coming from the best school," says Veil. "Perhaps he felt a necessity to take re-venge."
It is an argument that resonates in the French psyche. Especially, perhaps, for a lawyer who emerged from the shadow of his enarque father to craft his own successful rebellion.
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