Prominent law firm rocked as charges fly after relationship between partners sours

Carol Perrin says it all began one February evening over dinner with Steve Goldberg. Perrin, at the time managing partner in the recently opened L.A. office of Greenberg Traurig LP, had been working with him for less than two months and was becoming uncomfortable over the attention he had been giving her.

Theirs had been an unusual relationship for some time. He was her divorce attorney, and had since become a partner at Greenberg. His house in the gated community of Bel Air Crest was across the street from hers. His two children were friends with her children.

Perrin suspected that Goldberg was interested in a romantic relationship, so she asked him one night to meet her at the now-defunct Italian hideaway Santo Pietro to clear the air. She wanted to tell him that she was dating again and asked him to leave her alone. "Our relationship was creeping me out," she recalls.

She says he didn't take it well.

"He just turned to me and in a normal tone said, 'You have no idea how evil I am and you have no idea how evil I can be,'" she remembers. "He said, 'I've never done anything evil to you, and I don't know that I can control myself.'"

The next morning, Perrin claims, she found Goldberg in her office with several of the firm's partners. He had called an emergency meeting to question her management style.

"He said, 'Well, everybody has complaints, and we think it may get out of hand, and we want to talk to you about it,'" Perrin says. What followed would rock the L.A. office of Miami-based Greenberg Traurig, one of the nation's fastest growing law firms that among other things is noted for representing then-candidate George W. Bush in the litigation following last year's presidential election.

There were accusations of billing fraud against Perrin, a months-long investigation conducted by Greenberg Chairman Larry Hoffman, unexpected hirings and promotions, Goldberg's ultimate resignation, and, as could be expected in a story involving lawyers, lots of litigation.

To this day, two questions linger:

Did Goldberg hold a personal grudge against Perrin?

Was Perrin as bad a manager as Goldberg claims?

Both tell very different stories. Goldberg claims that he and Perrin had a one-month "fling" before they formed Greenberg's L.A. office, and that it ended by mutual consent. He says he never even had dinner with Perrin that February evening, nor arranged an emergency meeting the next day. And he continues to believe the firm covered up months of over-billing in the thousands of dollars at least $20,000 a month.

Perrin flatly denies ever having a sexual relationship with Goldberg and defends her billing practices and management style, although in retrospect she recognizes why things got out of hand. "I didn't really get it," she concedes in a lengthy interview with the Business Journal, the first time she has spoken publicly about the matter. "I didn't take time to meet with the people I was working with and say, 'Hi, how are you, how's your daughter?'"

'Like caged animals'

Law firms are often not the best-managed businesses. Because they are formed as partnerships, where organizational lines of authority and profit participation are sometimes murky, infighting and recrimination are not unusual. Inflated egos don't help.

"The training lawyers receive and the skills they can bring to their legal practice are at odds with the reasoning and human interaction it takes to run a good firm," says Samuel Culbert, professor of management at UCLA's Anderson School and author of the new book, "Don't Kill the Bosses."

"A lot of attorneys work so intensively on cases sitting in an office, pouring through legal briefs and case law," he continues. "They're like caged animals and when they come out for air, they're often seen in the office as socially inappropriate."

But what happened at the L.A. office of Greenberg Traurig is extreme, even by law firm standards. It's also a lesson in what could happen when a fast-growing national firm quickly opens a branch office with attorneys they don't know well and then tries to gain control of an out-of-control personality clash.

In retrospect, Hoffman now concedes as much.

"We try to give people the benefit of the doubt," he says, noting that he's never conducted an inquiry quite like this before. "I probably gave Goldberg too much benefit of the doubt. And I probably initially expected too much from Carol."

Greenberg Traurig first planned to open an office in Los Angeles several years ago, when the firm began its rapid growth spurt that included new offices in Boston, Phoenix and Wilmington, Del.

Perrin, who received her J.D. from the Western New England College School of Law, had settled in Los Angeles and established a small practice where she specialized in transactional work estates, contracts and the like.

In August 1999, she met with Marvin Rosen, a Greenberg Traurig managing partner and former colleague while in New York for her high school reunion. Over breakfast, she mentioned how she was having trouble getting enough associates and staff for her small office.

Bringing on Goldberg

Rosen flew out with Hoffman a few months later and decided that Perrin would be a good candidate to open the office in January 2000.

To help build the litigation side, Perrin thought of Goldberg.

She first met the husky ex-New Yorker in 1998 at a community swimming pool. "I was in the middle of a terrible divorce and he said basically 'how's it going?' and I said, 'not very well' and we kept talking," she recalls. She had a motion in her divorce that was to be filed the next week and was concerned about her own lawyer's work.

Goldberg offered to look it over. While he seemed controlling and was certainly not short on ego she felt he was a good attorney.

"He used to tell me how his favorite book is 'Art of War' and how you should always have your soldiers in place and always be steps ahead of everybody else, and that's why he was so successful," she says.

Goldberg co-founded his firm, Goldberg Scott Belfield Steinberg & Cohen, in 1996 with colleagues at Manatt Phelps & Phillips, where he worked from 1980 to 1988. Those partners Jeff Scott, George Belfield and Matthew Steinberg followed him to Greenberg Traurig and remain there today.

At the time, Goldberg was competing with the larger firms that could afford higher-pay associates during the dot-com upswing. The timing seemed right to fold his practice into Greenberg Traurig's litigation department, where he could get the benefits of a large firm and retain some autonomy over the local office.

And he liked Perrin. "She seemed funny and pleasant and engaging and unpretentious and bright," he now says. "She seemed quite likeable."

But problems arose almost immediately after the office opened.

Perrin believes that much of went wrong can be tied to her awkward relationship with Goldberg. Given that their kids were close and their homes were practically next to one another, the two would spend a lot of time together, Perrin says. Goldberg would seldom have much food in his house, so he and his children would routinely walk over to her place and have meals. She says she and Goldberg once took their families on vacation to Hawaii although she insists they stayed in separate rooms.

Plus, there was the divorce work. "Divorce lawyers know everything about you how you eat, how you sleep, how you cry, how you spend," she says. "So he knew everything."

Eventually, she wanted to pull back. That's why she arranged to meet him that February evening. "I told him I didn't think we should hang out at all anymore other than in the office," she remembers saying. "That we were partners and should stay partners."

'He was ice cold'

After the early morning confrontation with the other partners the next day, Perrin says she walked into Goldberg's office wanting to know what was going on. "I was upset. He was ice cold and said that things were going to change around here. He said, 'I was trying to hold these guys off for you, but I don't think I can protect you anymore.'"

Goldberg remembers none of this not that Perrin's management style wasn't an issue. Within a week of working with her, Goldberg says he began hearing stories of her brusque approach. He says he defended her for a time, but when he began to hear her yell at staff members from her office which was next door to his he started taking the allegations seriously.

Deborah Fox, who had been a corporate associate at Greenberg Traurig, says Perrin would not take responsibility for problems in the office. Goldberg, in a deposition given as part of a lawsuit by Perrin's former legal secretary, Sheila Tiner, accused Perrin of small-scale dishonesty, such as having underlings tell clients she wasn't there when in fact she was. "I also was hearing that Carol was misrepresenting her own background and expertise to clients," Goldberg said in the deposition.

Hoffman concedes that her management wasn't up to par.

"It's clearly something we picked up on," he says. "She was an extremely hard-working lawyer who had a large number of client meetings during a typical day and tended to work long hours, and it was not a good situation for her to divert herself to administrative duties," he said.

But Perrin and several other staff members say Goldberg's behavior was unprofessional.

"Goldberg would go out there every day and in a loud voice he would shout out, 'Carol wants everybody to work 20 hours a day and she doesn't want us to have holidays and she says everybody from Goldberg Scott is a sloucher.' And he would boom this out for everybody to hear."

One day in March, while Perrin was at a conference out of state, she found out Goldberg fired her secretary. Goldberg said the secretary had questionable behavior and that he approved her firing with Perrin over the phone.

When Perrin called Hoffman to complain, Goldberg's demeanor got worse, she says.

"Steve said, 'You should've gone along with it; I rip my shirt of you,'" she remembers.

Promoting the renegade

As the office conflict escalated, a new name popped up Rex Beaber.

Hoffman had interviewed Beaber several times when the office first opened, but the firm didn't hire him because he wasn't needed. Even so, Goldberg kept pushing.

Beaber and Goldberg had been friends for more than a year. They met at the Santa Monica Chess Club to play tournament chess on Monday nights, but they also passed work to one another.

They also bragged about how smart they are.

Unlike Goldberg's strict legal background, Beaber has a doctorate in clinical psychology from USC and a law degree from UCLA. He had been an adjunct professor of law at Pepperdine University and an adjunct assistant professor of medicine at UCLA Medical School.

"I am a very manipulative person," declares the former Vietnam War protester, who wore a black T-shirt and black jeans during a recent interview.

Hoffman refers to him as "a maverick, but a brilliant one." He was hired of-counsel a relatively low-level position at the firm with a salary believed to be in the five figures. But his relationship with Goldberg as well as with Perrin who he quickly befriended put him in an unusual role: that of mediator between the two squabbling partners. As a way of easing tension in the office, Beaber was quickly promoted to co-managing partner.

"If anyone suggested I would become that, I would have laughed at their face," Beaber recalls. "That would be like hiring the devil to monitor ethics."

Hoffman said Beaber was not hired because of his management capabilities but to ease the personality disputes in the office. But it was too late for that. Allegations of Perrin's over-billing had taken on a life of their own.

The matter first cropped up in early March when, during a smoke break, Tiner, Perrin's secretary, mentioned to Fox that Perrin was having her keep records of her time, even though Tiner was not technically a billable employee. Fox told Tiner that Perrin shouldn't be billing clients for her time because most of her work was flat fee.

Several weeks later, Fox went to one of the Goldberg partners over a mistake she thought Perrin would wrongly blame on Tiner. She then mentioned Tiner's time records.

Although 90 percent of Perrin's bills were flat fee, some were based on time. Hoffman, who didn't want to take a chance that she had over-billed some clients, spent more than 300 hours investigating the matter.

"We were working day and night," Perrin says. "Larry went through every entry I made, whether billable or not. He took every client file, he went through my calendar, my telephone log. He must have sent me e-mails explaining 12 minutes, five minutes, even flat fee services. My secretary was at my house every weekend, and we were in the office until 12 or 1 at night."

Results of inquiry

His initial review was over three questionable invoices. Two turned out to be flat fee-based and one was never billed. But Goldberg insisted that there was more to it and that the firm needed to hire an outside investigator.

"Every time I turned around, Goldberg or the people from his former firm provided me with additional information," Hoffman said.

Dewonda Flowers, a billing representative at Akin Gump Strauss Hauer & Feld LLP, who did the billing at Greenberg Traurig during those months, says she received calls from 10 clients over various billing issues. Two asked why they got billed at Perrin's rate for something they knew she didn't do, Flowers says.

Flowers collected time records for all the partners. She noticed that three people working under Perrin would hand in time records on client work that later appeared on Perrin's bills with Perrin's billable rate. Tiner, in her deposition, also said she received similar calls from some clients.

But Hoffman based his investigation on the bills themselves. And on Aug. 8, 2000, he met with the partners of the L.A. office to discuss his final report, a 26-page review with 50 pages of explanatory material.

Hoffman said the initial investigation was over 6.6 hours of time and potentially $2,500 in total billings. In the final report, he said, "The shareholder (Perrin) used some methods of recording time that could be improved. By using time notations of others that worked very closely with her to help her remember and record her time, the shareholder created an appearance of impropriety."

But he added: "It is highly unlikely that clients have been overcharged as a result of the shareholder's timekeeping."

In fact, the firm concluded that Perrin billed fewer hours than she spent on actual work for clients that year.

Beaber and Goldberg were outraged by the findings. And Beaber claims that the conclusions ran counter to what Hoffman told him at a meeting the night before. "Hoffman came to me and told me he looked at it carefully and there was no question, she's in billing fraud," Beaber says.

Hoffman has a different recollection. He says he met with Beaber the night before, but never indicated there was anything wrong with Perrin's billing.

Leaked billing records

The billing matter remains open to debate.

In July, the American Lawyer published an account of the Greenberg Traurig saga that included an outside audit of billing records that were leaked from the firm. The conclusion: More than half of the 65.8 hours billed to clients at Perrin's rate during April 2000 were initially on the time sheets of three individuals who worked for Perrin.

Hoffman says the audit was missing 70 percent of the documents it needed to conduct an accurate investigation. Where did the American Lawyer get the records? Goldberg says he has no idea, but notes that there were perhaps a dozen employees familiar with the issue who were disgruntled enough to have helped out the publication.

American Lawyer's parent company, American Lawyer Media, defends its story. The company's spokesman, Lee Feldman, said Hoffman met with the reporter or the editor of the publication three times, and that the firm had ample opportunity to tell its side of the story. Perrin declined to be interviewed for that story.

Beaber resigned soon after Hoffman's report. Goldberg left after his demands to head the office were not granted, Hoffman says. Perrin was put in charge of trusts and estates, and Richard Davis was named managing shareholder later that year.

Goldberg wasn't finished. He filed a contract dispute against the firm and Perrin over $160,000 in wages not paid as part of his shares in the firm. The lawsuit was settled three weeks later, and the suit against Perrin was dismissed. Neither the firm nor Perrin filed a response to the suits.

Perrin said Goldberg purposely included information in his lawsuit about the billing investigation including an alleged time sheet that recorded 25.4 hours of billable time in one day in order to defame her. That's also why he dismissed his claim against her before she had a chance to respond in the courts, she says.

"There are people who are upset with me that the complaint was as detailed as it was," Goldberg says. "But in litigation, as in war, if you want it over fast, you use your best weapons."

Goldberg says he litigates because he's not afraid to use the system to get what he wants. He says he dismissed the case against Perrin because he got what he wanted from Greenberg Traurig.

Perrin and Goldberg no longer speak. Goldberg sometimes talks to his former partners at Greenberg Traurig, but rarely over the events of last year.

Those three partners declined to speak to the Business Journal, but sent a lengthy e-mail backing up Hoffman and the firm. "We do not feel it is appropriate to discuss with people outside of the firm the details of what primarily was a personality dispute," the e-mail said.

Goldberg said he didn't leave because of personality disputes, but because of how the over-billing was handled. He is now a partner at Manatt Phelps & Phillips.

"I was most disappointed by the number of people who could see something bad going on and were prepared to look away," he says. "That a person could have inappropriate billing practices is unfortunate, but it happens. That the senior management at a very respected national firm would look away from it is shocking."

Perrin points to court documents that kept the billing fraud issue out of Tiner's lawsuit. In fact, Tiner admits in the deposition of her lawsuit that she never actually saw any bills.

Perrin says the allegations came from one source only: Goldberg himself.

"I think he would be embarrassed to go around and tell people how he had been courting me and was turned down by me," she says. "Because that would make all this make sense. Until that dinner meeting, there was no tension in the office. Now it's more than a year later, there are no tensions or issues or allegations. All these allegations regarding staff and billing disappeared when he disappeared."

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