Mariusz Kowalski of Waterwalk Partners, an adviser with decades of experience in management, strategy and business development across professional services firms, moderated this session with Chris Vaagt, who has consulted to law firms since 1997 on organisation development, strategy and economics. They were joined by Per Magnusson, a Swedish attorney (advokat) and a founding partner of Magnusson Minds, having extensive experience in setting up and running law firms, and by audience participant Ron Given, who offered a US perspective. Together they used real cases to examine where a managing partner’s responsibility ends, and personal liability begins.

Overview

Vaagt noted that his LinkedIn post on managing partners facing prison was among his most widely read, a sign of how closely the topic touches leaders. He urged looking beyond criminal exposure to civil liability, and at how firm culture limits a managing partner’s ability to lead. The speakers’ shared view was that these failures rarely come from nowhere: they combine bold personal risk-taking with partners who stop asking questions while the money flows.

The cases made the point. Magnusson described a prominent San Francisco firm that took stakes in dot-com clients, leaving fees dependent on their success. When the clients failed, the firm had almost no cash flow and its managing partner became the target of partners, clients, and banks. Vaagt compared the aggressive lateral hiring at Dewey, where fixed profit shares were guaranteed and later ended in a prison sentence for the managing partner. Kowalski described a leading Danish IP firm where royalties collected for film and television producers were improperly charged, with the courts finding more than ten million euros involved. The firm collapsed within about two years, and its partners were imprisoned. Vaagt added German cases in which partners were reluctant to confront a colleague who had taken a million from the firm account, and in which associates refused to work on a suspect tax scheme that partners nonetheless backed.

On the practical side, Vaagt argued that appeals to behave well are not enough, because finance staff depend on partners who can override them, so governance itself must be strengthened. Given said prudence must start with the managing partner, with everyone subject to audit and good-faith criticism welcomed. Magnusson added a psychological barrier: partners hesitate to criticise a colleague because they fear their turn will come. Kowalski stressed that a posted policy is not a control, and that a CFO must feel able to voice concerns.

Key Takeaways

• Treat civil liability as the more common risk. Several cases began as reckless financial gambles rather than deliberate crime, so leaders should test major commitments as they would advise a client to.
• Ask whether you would advise a client to do this. Magnusson’s Dewey example shows that guaranteed equity schemes went unchallenged because everyone was pleased with the money.
• Listen to finance and business services colleagues. Vaagt suggested warnings from controllers and finance heads were probably ignored, so give them a real voice and independence from partners.
• Replace trust with verification. Audit everyone, including the managing partner and star performers, and do not rely on policies alone.
• Overcome the reluctance to challenge colleagues. Leaders can invite good-faith criticism openly, and partners should act on what they see rather than staying passive while profits are strong.
• Carry out due diligence on a firm before joining it. Given suggested that lateral hires should ask how a firm is run as a business, a step that helped Magnusson’s firm walk away from a candidate.