Two attorneys from Fox Rothschild LLP have been accused of aiding a fraudulent real estate scam that bilked a hotel company of more than $20 million from 2008 to 2010, according to The Philadelphia Inquirer. The scam included paperwork signed by a man who had been dead for months.
One of the largest hotel owners in the country, Host Hotels & Resorts Inc., claims in a lawsuit that two partners from Fox Rothschild LLP aided a Virginia real estate broker in building scam partnerships. The broker has been identified as Robert Koger. Koger convinced Host to sell three of its hotels to partnerships. He then flipped the hotels to another buyer for $15 million in commissions and profits.
In the case, federal wire-fraud charges were brought against a former Koger employee and a friend of Koger’s. Those two people entered guilty pleas. Koger is in prison on an unrelated case that accuses him of bilking money from a hotel owner in Pittsburgh.
Fox Rothschild is being defended by Duane Morris LLP. Scott H. Marder, from Duane Morris, said, “The claims asserted in the lawsuit are entirely meritless, the Fox Rothschild lawyers acted consistently within their obligations under the rules of professional conduct, and appropriately represented their clients. Fox Rothschild will vigorously defend against this lawsuit.”
On May 20, Maryland Circuit Court Judge Ronald B. Rubin denied a motion to dismiss the lawsuit by Fox Rothschild. This was a major victory for Host, which is headquartered in Bethesda, Maryland.
“There are ample facts pled from which a jury could find that Fox substantially assisted Koger and others with committing the underlying torts,” Rubin wrote. “The facts alleged in the amended complaint, if proven, show that Fox committed overt acts that furthered Koger’s scheme to defraud Host.”
The scam started in 2008 when Koger was the broker for the sale of hotels located in Stamford, Connecticut and in Herndon, Virginia. According to Host, Koger had a duty to come up with the highest bidder for the properties. Instead, Koger used scam partnerships flipped the properties at a profit with the help of lawyers from Fox Rothschild.
The lawyers named in the lawsuit include Michael Kornacki and Mark Morris. Kornacki is a commercial real estate lawyer and Morris specializes in the hotel industry.
“This case is about a fraudulent scheme perpetrated by Fox and its clients,” Host said in a legal filing. “This is not a case about a law firm merely representing a ‘bad’ client; this is a case about a law firm actively participating in a client’s fraud.”
In one of the deals, Terence Lloyd was named as the principal of the partnership. Lloyd was a Koger information technology manager. Lloyd was found in his home on February 3, 2010 dead of an unidentified cause. His name appeared on a contract dated March 17 of the same year. Lloyd’s signature was also on the closing documents, which were dated June 3, 2010.
“Lloyd, although now dead for nearly four months, purportedly signed the relevant closing documents,” the lawsuit alleges.