Gery Chico and the firm that failed
BY ABDON M. PALLASCH Political Reporter
NOTE: This article was originally published on Oct. 5, 2003.
When Gery Chico launched his campaign for U.S. Senate last year, he
boasted to reporters of his business experience as chairman of the
prestigious Chicago law firm Altheimer & Gray.
He doesn’t make that boast anymore.
While Chico was running for office, Altheimer & Gray collapsed this
summer, closing its doors abruptly after 88 years. Hundreds of
employees were left without jobs. Some partners saw their
retirement and investment plans go up in smoke. And the
finger-pointing -- just who exactly was to blame -- began
At the center of the blame game is Chico. As chairman of the firm,
he was first among equals -- seven top partners -- who were
supposed to handle the firm’s finances. And while it’s true the
firm was hit hard by the weak economy -- the official explanation
for the firm’s collapse -- critics say Chico and other top partners
completely mishandled the emerging financial crisis.
Even as the firm’s debt climbed to $24 million, critics say, top
partners took $100,000 “advances,” kept attorneys on board when
there was little work for them, and paid unrealistically high
salaries to themselves and favored attorneys.
“The firm ended up where it was because of a combination of
mismanagement and malfeasance, a lack of character and team
effort,” one former partner said. “There was a self-serving club of
leadership at the top.”
“ Chico pretty much abandoned his post,” said another. “He was
supposed to be chairman of the firm. He stopped. His department
fell apart. His business went way down.”
Chico’s defenders point out that he took a $500,000 pay cut and
trimmed the number of lawyers in his department from 15 to nine.
But if the leadership was working to solve the firm’s financial
woes, others ask, why was there no warning the firm could close-
Gabriel Wujek, head of the firm’s profitable 36-lawyer Warsaw
office, sat on the executive committee and said he was assured a
week before the breakup that the firm was solving its financial
“There was no indication that something like this was coming,”
Wujek said. “So either it also came as a surprise to the managing
partners, or the information was not fully revealed to certain
members of the executive committee.”
A partner at the London office said, “To give you 24 hours’ notice
of dissolution for an equity partner, that’s outrageous.”
Did Chico and others know the firm was dying and conceal it- Or did
they believe to the end it could all work out-
“Are they that stupid, or are they totally crooked- “ one former
high-ranking partner asked. “The answer might be that they’re that
stupid. Was Chico greedy- Yes. Was he a bad leader- Yes. But he
had so much help from these other guys. Chico doesn’t take the
whole fall for this. To have the greed and stupidity to destroy a
place in just two years, it’s unthinkable.”
Said another partner: “I just don’t understand how they couldn’t
have known. These are smart people. If they didn’t know, they
should have known.”
Interviews with Chico’s former partners at home and abroad paint a
picture of an earnest whiz kid in over his head trying to run a law
firm at the same time he was running for the Senate.
“It’s very distracting to simultaneously chair a law firm and run
for nomination to the U.S. Senate,” said Joel Henning, a consultant
Chico hired to grow the firm. “But ... he was willing to have his
own compensation cut.”
Distracted as he may have been, Chico was the most successful
rainmaker at the firm, bringing in millions of dollars in business
while on the campaign trail and, before that, running the Chicago
Public Schools. His defenders note he was not the managing partner
responsible for day-to-day operations.
Gery Chico’s rise
Through charisma and deal-making ability, Chico became chairman of
Altheimer at 44, just four years after he came there in 1996 from
Sidley & Austin, a more prestigious firm.
“Nobody leaves Sidley & Austin to go to Altheimer & Gray,” a former
partner said. “That should have set off the warning bells. He
wanted a seat at the table at Sidley. He had a growing business.
The graybeards at Sidley patted him on the head and said,
‘Someday,’ so he came here.”
Chico made his name as Mayor Daley’s chief of staff in the early
1990s, then as School Board president in the late ‘90s.
It was a Daley pal, Oscar D’Angelo -- a former Altheimer partner
disbarred for giving judges free rental cars from a client, Avis --
who suggested to the firm’s managing partner Norman Gold that he
“We were told he was a young Hispanic, politically connected, he’s
got $2 million to $3 million worth of business a year, a
go-getter,” a former partner said. “At his high point, he was
bringing in $13 million to $14 million. Every year, his practice
got bigger. He hired more and more people. He was riding high at
the School Board. He was getting small pieces of work from great
big Chicago companies represented by blue-chip firms. I think they
were saying, ‘This guy’s a comer, so let’s develop a relationship
with him.’ He was handing out contracts at the School Board, and
they were being nice to him for that reason. I don’t think anything
illegal was occurring. He was a comer who could do them some good,
could do them some more good later.”
Chico abstained on all school board votes involving Altheimer
Two years after joining Altheimer & Gray, Chico teamed up with
three other rising stars at the firm to vote out the decades-old
leadership of Gold and Myron Lieberman.
Louis Goldman built the firm’s European practice.
“Goldman created a world for us where we had no franchise in
Chicago, but we were the best name in Eastern and Central Europe,”
a former partner said. The firm had offices in London, Warsaw,
Prague, Kiev, Bucharest, Bratislava, Istanbul and Shanghai.
Phillip Gordon headed the “hospitality law” division, representing
hotel investors. Sy Peck handled mergers and acquisitions.
“At every law firm, the next generation kicks out the old
generation,” a former partner said. “In the ‘70s, Gold kicked out
Milton Gray. Gold and Lieberman ruled together starting in 1980.
They were benevolent despots, sometimes more benevolent, sometimes
more despotic. The next generation grew up chafing under these
guys. They couldn’t wait to throw off the yoke of their oppressors.
These guys’ practices became bigger and bigger. When Chico
ascended, that gave them the balls to oust Gold and Lieberman. We
had a big party, gave them gold watches.”
Goldman and Chico fought over the chairmanship, so all four became
co-chairs. Eventually, they gave Chico alone the title and named an
executive committee that included them, Wujek, Jeremy Margolis -- a
friend of Gov. George Ryan who headed up the litigation section --
and Jeffrey Smith, another whiz kid whom they named managing
Hit by the bad economy, the mergers and acquisitions business dried
up. So did hotel investment. The London office lost $3 million.
Political business slowed for Margolis and Chico.
“Once Daley let him know he didn’t want him to be head of the
School Board anymore, his business went to hell,” a former partner
said. “He was no longer somebody to be courted. He couldn’t do you
any good on the School Board contracts anymore. He was no longer
even the leading Hispanic. Victor Reyes had become that.”
“Hell” is relative: The $6 million Chico brought in in 2002 was
more than anybody else brought in.
“Between 1996 and 2003, he brought in $50 million -- he carried the
firm,” said former partner Bob Markin, former School Board general
counsel. Without Chico, he said, the firm might have folded
Altheimer’s lawyers were billing only 1,300 hours a year instead of
2,200. But Chico did not want to order firmwide layoffs.
“I did not want to simply fire people, many of whom would have no
place to go,” Chico said.
Chico thinned his own ranks. His friend Rolando Acosta left. But
other top partners did not cut their departments.
“If they started working on their problem in 2002, getting rid of
... lawyers who had nothing to do but twiddle their thumbs and go
to movies in the afternoon and still make $400,000 a year, the
collapse would never have happened,” a former partner said.
Since 1992, the firm “borrowed from the future,” holding the books
open after the end of the fiscal year until $2 million more came
in, a former partner said. In 2002, he said, “they essentially
borrowed $9 million from 2003.”
Chico says it was only $6 million.
The firm redecorated and gave hundreds of thousands of dollars to
the campaigns of Gov. Blagojevich and Attorney General Lisa
Madigan, which may have helped Chico’s own campaign. Some top
partners took $100,000 “advances.”
“These weren’t ‘advances,’” a former partner said. “If the firm
hadn’t gone under, they probably never would have been repaid. They
would have been treated as bonuses.”
Chico said all advances were paid back. And the last advance he
took was in 2002, he said.
The managing partners improperly went years without depositing
money withheld from partners’ paychecks into retirement and
investment accounts, two former partners said. The bank even
declared a $1.4 million default because the firm failed to deposit
the money into the investment account, one said.
Chico said he does not believe that is true: “Altheimer met its
final pension, health and payroll obligations,” he said.
The firm’s bank is LaSalle Bank, whose CEO, Norm Bobbins, is a top
Chico campaign finance coordinator and who also served on the
School Board with Chico.
Henning said he could never get detailed balance sheets on the
European offices. He and leaders of other Chicago firms say the
overseas expansion and the new office in San Francisco drained the
firm. Goldman left the firm after other partners complained about
the London office’s losses.
The firm canceled job offers to eight law school graduates and 10
summer associates. But the managing partners sent out a memo
denying news accounts of the firm’s ills.
Seven of its real estate lawyers jumped to Greenberg Taurig.
“They got a lot of bad press, and it makes partners nervous,”
Henning said. “There’s a tipping point where some partners start to
put their resumes out on the street, then a few partners start to
leave, then all of a sudden there’s a hemorrhaging, and it’s very
hard to stop that.”
Altheimer’s principals met with the firm of Sonnenschein, Nath and
Rosenthal to discuss merging. Sonnenschein agreed to take a few
lawyers but did not want to merge and inherit Altheimer’s debt.
Chico and the others decided to pull the plug immediately. Chico
said that gave the best chance for everyone down to the secretaries
to get final paychecks and health benefits before the firm went any
deeper in debt. Prolonging the end would just make it worse, he
“Sometimes management is doing the best you can under the most
trying circumstances,” Chico said.