Freshfields Bruckhaus Deringer paid out £24m in severance packages as part of its controversial partnership restructuring, it emerged today (16 July), as chief executive Ted Burke was called as a witness in the ongoing age discrimination case brought against Freshfields by one of its former partners.
Burke told the tribunal how around 25 partners leaving the magic circle law firm last year received severance pay equating to approximately one year’s pay as part of the ‘size and shape’ initiative. The restructuring was separate from the pension reforms the firm later adopted.
Burke explained how Freshfields was keen to deal with all exceptional costs resulting from the restructuring and pensions arrangements in the 2006-07 financial year so the firm could “[reap] the full benefit of the slimmer equity base” in 2007-08.
The revelations came during the tribunal called to resolve allegations of age discrimination made by former Freshfields restructuring chief Peter Bloxham, who claims he was effectively ‘forced’ to retire from the firm early due to changes to Freshfields’ pension scheme.
Burke told the tribunal that while Freshfields’ initial offer of consultancy to Bloxham was unconditional, there had subsequently been an assumption that the offer was subject to him dropping claims against the firm.
In addition to the age discrimination claim, Bloxham was also involved in a partnership dispute, alleging the partnership council had acted in bad faith in relation to voting on the pension reforms.
In his witness statement, Burke said: “It would have been entirely inappropriate for [Bloxham] to continue working at the firm, in all respects held out and acting as a partner, while making claims of this nature against the partners.”
All partners who wanted a consultancy and whom the firm wanted to retain were offered consultancies, he said.
The case continues, with Blackstone Chambers’ Dinah Rose QC detailing Freshfields’ case in her closing speech this afternoon.
This morning she joked that if Freshfields’ new pension scheme had aimed to rid the firm of older partners at the top of the equity, it must have been “incompetently handled” as only nine plateau partners left the firm.
Tim Pitt-Payne of 11KBW is counsel for Bloxham throughout the nine-day hearing and will make his closing speech tomorrow (17 July).
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