JD Journal » fraud

Former Aide to Abramoff Must Pay Firm Millions in Restitution

rebneely — Thu, 21 Apr 2011 21:11:39 +0000

According to today’s article at AmLawDaily.com, Michael Scanlon, former aide to Greenberg Traurig partner Jack Abramoff, “cannot challenge the firm’s request that he pay $17.7 million in restitution to the firm for money it distributed to victims in a fraud scheme,” according to a federal judge’s ruling in Washington, D.C.. In other words, Scanlon will now have to pay the law firm the millions of dollars the law firm had to pay in restitution to fraud victims.

Scanlon, then a public affairs specialist, worked with now convicted felon and former lobbyist and Greenberg Traurig partner Jack Abramoff, on Native American casino issues. The pair stole nearly $20 million from certain Native American tribes. In February, Scanlon was sentenced to nearly two years in prison for his part in the scheme.

Many of the tribes have sued, or threatened to sue Greenberg Traurig for what the pair did.

The argument Stephen Braga of Ropes & Gray presented on behalf of Scanlon was that Greenberg Traurig knew about certain fees Scanlon was paying Abramoff.

Kevin Downey of Williams & Connolly has consistently fought Scanlon in court over the challenge to his making restitution.

Man Accused of Massive Ponzi Scheme to Remain in Jail to Await Trial

aostler — Wed, 16 Mar 2011 00:40:07 +0000

R. Allen Stanford, former Texas financier, tried to post bond and be released from jail while awaiting trial, but was refused by a federal appeals court. Stanford has been accused of a massive Ponzi scheme, which he was arrested for in 2009. He was charged by the SEC with “massive ongoing fraud” that involved a total of about $8 billion in certificates of deposits. His company, Stanford Financial Group, is accused of being a front for his Ponzi scheme, allowing him to misappropriate the money given to him by investors.

Stanford’s trial date was originally set for January 2011, but due to health problems it has been delayed until a later court appointed date. Psychiatrists examined him and said that he has been suffering with delirium associated with an addiction to a strong medication he has been taking for anxiety, and has suffered an injury to his brain after being beaten by a prison inmate in 2009, which would make him incompetent to stand trial.

There have been 21 counts of money laundering, fraud, and obstruction charged against Stanford, although he has pled not guilty to all of them. If he is convicted, he could face up to 375 years in jail. He is currently awaiting his trial at the Federal Detention Center in Houston.

Morning Roundup

joshua — Tue, 24 Aug 2010 12:59:06 +0000

Good morning everyon! Today is Tuesday, August 24th. Here’s a quick recap of yesterday’s stories.

The “Tax Lady’ Roni Deutch was slapped with a $34 million lawsuit for fraud by California Attorney General Jerry Brown…

Dickstein Shapiro added two partners, previously from Patton Boggs…

The American Lawyer publication Corporate Counsel announced the top coporate law firms…

McCarter & English named a new managing partner…

Wilson Sonsini Goodrich & Rosati added a partner, and expanded its Asia Practice…

Two principal members of Price Waicukauski & Riley were selected by peers for inclusion in The Best Lawyers in America…

‘Tax Lady’ Deutch Draws Wrath of Jerry Brown

joshua — Mon, 23 Aug 2010 22:41:28 +0000

“Tax Lady’ Roni Deutch was slapped with a $34 million lawsuit for fraud by California Attorney General Jerry Brown on Monday. The suit alleges Deutch’s law firm violated state law by making false claims of winning tax battles with the IRS.

According to Brown, who is the Democratic nominee for governor of California, Deutch’s firm advertises a success rate of 99 percent in tax disputes with the IRS, but in fact the amount of money her clients owe in taxes is reduced in just 10 percent of cases.

“She promises to significantly reduce their IRS tax debts, but instead preys on their vulnerability, taking large up-front payments but providing little or no help in lowering their tax bills,” Brown said.

Deutch is a frequent contributor on tax matters on such national networks as NBC, CNN, Fox and CNBC. Her firm is headquartered in suburban Sacramento. The Associated Press reports calls made to Deutch’s firm were forwarded to attorney Alexander Collins and were not returned immediately.

According to the suit, Deutch’s law firm makes at least $25 million annually and spends $3 million on advertising. It is seeking a preliminary injunction to block what it says are unfair business practices and false advertising, the AP reports.

Shepherd’s Flock Not So Diverse

julie — Tue, 30 Mar 2010 16:53:51 +0000

Willie Shepherd, formerly of Kamlet Shepherd & Reichert LLP., has been caught in a lie about the percentage of women and minorities with ownership in the firm. He told the E.I. du Pont de Nemours and Co. Diverse Legal Supplier Program that his firm had 48.5% when the actual percentage was 30.1%. DuPont’s website highlights the reason for Shepherd’s desire to qualify for their program, “DuPont purchases millions of dollars of goods and services annually from Minority and Woman-Owned Businesses to meet the needs of plant and office sites around the world.” It’s puzzling why Shepherd, a founding partner of Kamlet, Shepherd & Reichert, would not simply comply with the program’s requirements rather than lie about it. Not only was he in a position to make it happen, his presence in the firm helped him meet the goal.

The judge, who issued a public censure of Shepherd, also ordered him to pay a bizarre $127.50 in investigative costs related to another complaint.

Shepherd will be able to keep his license to practice law and is now on his own at Shepherd Law Group PC in Denver, CO.

Morning Roundup

sara — Thu, 25 Mar 2010 11:29:09 +0000

Good morning everyone! Today is Thursday, March 25, and here’s a look back at yesterday’s news…

Rosenfeld, Meyer & Susman LLP take on the band Green Day for copyright infringement…

Virginia Attorney General Ken Cuccinelli sues the federal government to stop the health care bill…

A new study details the “client revolution”…

UnitedHealth fraud is symptomatic of larger economic woes…

Seyfarth Shaw offers an overview of California employment law…

Former public relations specialist Susan Finkelstein is on trial after exchanging sex for World Series tickets…

Former FCC Commissioner Tyrone Brown leaves Wiley Rein…

Camille Cantrell has joined the Atlanta office of Hawkins, Parnell & Thackston…

Anna Nicole Smith’s estate loses a $300 million claim in court…

PrediWave Tsunami hits Simpson, Thatcher & Bartlett

joshua — Tue, 23 Mar 2010 21:41:23 +0000

There is a new wave of lawsuits filed in Santa Clara County in the wake of failed Silicon Valley Tech company PrediWave.

After his company was hit with a lawsuit, and lost, to the tune of $2.8 billion in 2006, CEO Jianping “Tony” Qu of PrediWave fled the country. Mr Qu had allegedly received more than $25 million in annual bonuses from a company which posted no profits and no sales. His current whereabouts are unknown.

March 22, 2010 brought a new charge that PrediWave’s legal counsel was fully aware of the shady accounting that brought the company down but did not pass that information on to PrediWave Corporation’s investors. The lawsuit not only charges that PrediWave’s counsel, Simpson, Thacher & Bartlett, knew about the cover-up, but in fact, were full participants. The law firm is now undergoing scrutiny for the approximately $100 million fraud. Among the allegations are charges that Simpson, Thatcher & Bartlett hired private investigators to gauge the likelihood of the fraud becoming public.

Former DLA Piper, Duane Morris Partner Convicted of Fraud

joshua — Tue, 23 Mar 2010 17:28:11 +0000

A former partner at DLA Piper and Duane Morris, Rudy Lim, was convicted of fraud and sentenced to two months in jail in Singapore Monday. Lim was convicted March 12 following a three-day trial for misrepresenting his annual salary when he moved from DLA Piper’s Singapore office to Duane Morris in January 2007.

According to The Straits Times, Lim inflated his monthly salary from $25,000 to $65,000 in order to get Duane Morris to match the amount. The forgery was discovered by his former colleagues at DLA Piper during a check of electronic records stored in the firm’s computer server.

When handing out the sentence, District Judge Jill Tan said Lim, given he was a lawyer, should have realized the consequences of making false documents and providing false information. According to The Straits Times, Lim is appealing the decision and remains free on $80,000 bail posted by his father.

Morning Roundup

sara — Fri, 12 Mar 2010 13:41:19 +0000

Good morning everyone! Today is Friday, March 12, and here’s a quick look back at yesterday’s news…

The Asian Pacific American Legal Center files a lawsuit against Trinity Law Associates for allegedly defrauding 30 Korean immigrants…

King & Spaulding reveals a new pay scale and bonuses…

Former U.S. Senators Lott and Breaux are in talks with Patton Boggs…

Snell & Wilmer opens a sports agency…

The Obama administration nominates two federal judges…

The Zeughauser Group reports that BigLaw hasn’t fared as badly as predicted…

Quinn Emanuel changes their name…

Howrey is cutting partners after a tough 2009…

White & Case promotes five to partner…

Greenberg Traurig Partner Charged in $1 Million Theft

sara — Mon, 08 Mar 2010 17:03:35 +0000

Local success story and Greenberg Traurig partner Mark J. McCombs has been charged with stealing more than $1 million in tax increment funds by billing Calumet Park, a suburb in the Chicago area, for work he never did. McComb grew up in Calumet Park and residents were so proud of his accomplishments a street in the village was named after him.

McCombs handled legal matters for the village for years. Former Mayor Buster Porch trusted McCombs to such an extent that he signed off on bills McCombs presented to him with little to no explanation provided. Porch’s successor Joseph DuPar continued to do the same. McCombs did not pocket the money personally but the substantial billing hours he presented enhanced his standing in the firm, providing him more opportunities for advancement and promotion, according to Assistant State’s Attorney John Mahoney.

If McCombs is convicted he could face a prison sentence of 6 to 30 years.

Update: Greeberg Traurig terminated Mr. McCombs after learning of the charges against him and is reviewing the report, according to Lourdes Martinez, Director of Communications for the firm.

Former Countrywide CEO Hires Prominent Williams & Connolly Lawyer

sara — Tue, 02 Mar 2010 16:24:44 +0000

Angelo Mozilo, the former CEO of Countrywide Financial Corp., has hired prominent Washington, D.C. based lawyer Brendan Sullivan to help defend him against an SEC lawsuit accusing him of securities fraud and insider trading. Sullivan is a senior partner at Williams & Connolly LLP. He is well known for representing Oliver North during the congressional hearings investigating the Iran-Contra affair in1987. Other former clients of Sullivan’s include former Alaska Senator Ted Stevens and former New York Stock Exchange Chief Executive Richard Grasso.

Countrywide was the largest mortgage company in the country before its liquidity dried up in 2007. In 2008 Bank of America Corp purchased the company. In June 2009 the SEC filed a civil lawsuit against Mozilo and two other former execs. Mozilo is accused of misleading investors about the quality of the loans his company made, which included subprime and adjustable rate mortgages, and of insider trading after he exercised 5.1 million Countrywide stock options in 2006 and 2007 when his company began to tank.

Morning Roundup

sara — Wed, 24 Feb 2010 12:55:22 +0000

Good morning everyone! Today is Wednesday, February 24, and here’s a look back at yesterday’s stories…

Curtis Mallet reports an increase in profits and revenues in 2009…

Revenue is down and profits are up at Patton Boggs…

Arnold & Porter report that revenue and profits increase…

Honolulu law firms are the target of an email scam…

Revenue and profits fall at Munger, Tolles…

Maryland courtrooms will ban electronic devices….

Christopher J. Austin joins Goodwin Procter’s Boston office…

Jonathan Guest joins McCarter & English’s Boston office…

DLA Piper increases their presence in Turkey…

Massachusetts challenges the Defense of Marriage Act…

The University of Maryland investigates payments to former law school dean Karen Rothenberg…

Sam Buffone leaves Ropes & Gray for BuckleySandler…

Revenue and profits increase at Crowell & Moring…

Alice Thomas earns her law degree at age 79…

Cannabis shops fight legal action in Los Angeles…

Attorney Announces Maryland Mortgage Task Force

Erik Even — Tue, 24 Feb 2009 05:45:35 +0000

On Friday, U.S. Attorney Rod J. Rosenstein announced a new effort to fight against mortgage fraud in the state of Maryland and beyond. The new Maryland Mortgage Task Force will go after fraud crimes that cross over city, county, and state lines, said Rosenstein. The task force will not just go after fraudulent mortgage consultants, but also after the lawyers, appraisers, and accountants who aid them in taking money from homeowners.

“None of our agencies alone has the resources to be able to confront this crisis, but working together we think we’ve been very effective in targeting some of the most significant offenders in the mortgage fraud industry here in Maryland, ” Rosenstein said.

The task force has two primary objectives: to raise public awareness of mortgage scams, and to provide deterrence by giving law enforcement the tools needed to aggressively prosecute mortgage-related crimes.

The agencies that will work in conjunction with the task force include the state Department of Labor, Licensing and Regulation, the Office of the Attorney General, the Maryland Insurance Administration, the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development.

Ticketmaster Settles With New Jersey, Changes Online Policy

Erik Even — Tue, 24 Feb 2009 05:32:55 +0000

On Monday, after upsetting Bruce Springsteen and many of his fans, Ticketmaster agreed to make changes in its online ticket sales procedures. The concert and event ticketing giant reached a settlement with the State of New Jersey, where the Springsteen concert in question was scheduled. The settlement was announced by the state’s Attorney General, Anne Milgram. Changes to Ticketmaster’s policies will be in effect nationwide.

People seeking tickets for the Springsteen concert were redirected from Ticketmaster’s main page to a second site that charged more for the tickets. Milgram noted that, at the time, redirecting fans could have violated New Jersey’s consumer fraud act.

In a statement released on Monday, Ticketmaster said that the problem was merely a software glitch. Ticketmaster claims the agreement with the state of New Jersey will formalize changes that the company has already implemented. While Ticketmaster admitted no wrongdoing, it did agree to pay the state $350,000.

Weil Gotshal Associate Never Graduated, Never Passed Bar

Erik Even — Fri, 06 Feb 2009 00:23:23 +0000

Tipsters tell Above the Law that an associate at New York-based Weil, Gotshal & Manges has been fired for lying about graduating law school and passing the bar.

Apparently, Weil Gotshal doesn’t know they have papers to prove that kind of thing.

According to multiple sources from both inside and outside Weil Gotshal, the firm recently fired an associate for failure to graduate from law school…

…Weil did not respond to our requests for comment. But we imagine that it is not unusual for firms to hire a summer based on 1L grades, make them an offer when the summer is over, and then never really look at a transcript again.

What we do know is that the associate “attended” NYU Law School. Tipsters report that he then did some study abroad and thought his credits would transfer back over to NYU. They did not. He never made them up, hence, no diploma, no graduation…

Having failed to actually graduate from an accredited law school, the associate (perhaps wisely) spared himself the pain of sitting through the Bar Exam. He simply didn’t take it…

But perhaps I’ve buried the [lede]. It looks like there is an opening at Weil for a junior associate. Just make sure you can “document” your J.D.

Via ATL.

Disbarred Attorney Caught in Madoff Web

Erik Even — Wed, 28 Jan 2009 17:01:11 +0000

A former lawyer, who was disbarred in the 1980s taking client escrow funds, has been charged with defrauding investors of out of millions of dollars as a hedge fund manager.

Say, Buffy, let us invest our wealth with the fellow who was disbarred for stealing funds!

Arthur G. Nadel, 76, made his initial appearance before a federal magistrate judge in the Middle District of Florida in Tampa. He turned himself in after spending two weeks on the lam. Next he will be charged in New York’s Southern District, where he faces securities and mail fraud allegations brought by prosecutors who say more than $200 million is missing.

Nadel, prominent in Sarasota, Florida social and philanthropic circles, claimed to investors and partners that returns on investments in two groups of funds he managed from 1999 through 2007 averaged more than 20% per year. Sound familiar?

FBI Special Agent Kevin G. Riordan tied Nadel’s flight to the publicity from the December arrest of Bernie Madoff in a multi-billion dollar Ponzi scheme. Nadel fled after a business partner, concerned about the Madoff affair, asked Nagel to audit the funds he ran.

Nadel left a note telling his family he would not return, and advising his wife to get a hold of certain funds before it was too late. He also said he might kill himself.

Nadel advised six funds divided into two groups. Hundreds of investors put $210 million into one group, several gave $60 million to Nadel to invest in the other. But by the end of 2008, there was less than $125,000 left in the two groups.

A 1957 graduate of New York University School of Law, Nadel was admitted to the New York bar in 1958, but lost his license to practice for taking client escrow funds.

Photo via May Blog.

Judges Plead Guilty to Corruption

Erik Even — Tue, 27 Jan 2009 19:53:00 +0000

Two Pennsylvania judges have plead guilty to fraud charges, after taking $2.6 million in kickbacks in return for placing juvenile offenders in specific detention facilities.

The plea agreements for Luzerne County President Judge Mark Ciavarella and Senior Judge Michael Conahan call for sentences of more than seven years in prison. Both have agreed to step down from the bench.

The judges took kickbacks between 2003 and 2007 in exchange for guaranteeing the placement of juvenile offenders into facilities operated by PA Child Care and Western PA Child Care LLC. In some cases, Ciavarella ordered children into detention even when juvenile probation officers did not recommend it.

“They sold their oaths of offices to the highest bidders,” said Deron Roberts, chief of the FBI’s Scranton office.

US Attorney Martin Carlson said the charges were “the first developments in an ongoing investigation” into public corruption at the courthouse in Wilkes-Barre.

PA Child Care and Western PA Child Care have not been charged with wrongdoing, for some bizarre reason beyond the comprehension of the human intellect.

County District Attorney Jackie Musto Carroll said her office would review cases in which offenders might have been improperly placed into juvenile detention.

The Juvenile Law Center, a Philadelphia-based advocacy group, complained last year to the state Supreme Court about the treatment of children in Luzerne County juvenile court, asking for the nullification of decisions in hundreds of cases. Juveniles were often denied their constitutional right to lawyers and were disproportionately sentenced to ill-advised, out-of-home placements, the group said.

Accountant Stole $1.6 Million from Law Firm

Erik Even — Mon, 26 Jan 2009 17:56:11 +0000

A law firm accountant was arrested on charges that he stole $1.6 million from his employer, according to the Pinellas County, Florida sheriff.

David J. Sarnowski, 50, was charged with scheme to defraud and grand theft. He is being held at Pinellas County Jail on $200,000 bail.

According to law enforcement, Sarnowski electronically transferred $1.6 million from the account of the law firm, Tanney, Eno, Griffith and Ingram of Clearwater, to his own personal account. The thefts occurred between June 2004 and February 2008.

Tanney Eno does not have a web site, at least not one Google knows about, and not under that name (is this them?). Either they can’t be bothered, or Sarnowski stole that too.

Law Firm Staffer Embezzles $57,000

Erik Even — Mon, 19 Jan 2009 20:42:39 +0000

The former business manager and secretary for Madison, Wisconsin lawyer Randall Skiles has been charged with embezzling at least $57,000 from early 2007 until she was caught in September 2008.

Krystyne M. Miller, 37, of Tomah, admitted to Monona Police that she began writing checks to herself out of Skiles’ office account, and eventually increased both the amounts and frequency of individual embezzlements.

Miller admitted to taking $57,867, the criminal complaint says. Miller was charged with five counts of felony theft, each carrying a maximum fine of $25,000 and a maximum combined term of prison and extended supervision of 10 years.

At least some of the stolen money came from Skiles’ lawyer trust account, an account that must be maintained for the benefit of clients under strict rules laid down by the state Supreme Court and regulated by the Office of Lawyer Regulation. Skiles has to immediately repay that money.

The thefts were discovered in September 2008 after Skiles had an accountant prepare his taxes.

Miller told detectives that she began stealing money from the firm when she was having financial troubles taking care of her elderly parents and dealing with a divorce. She said she used some of the money to pay outstanding bills, and spent other money gambling at casinos.

Via Tomah Journal.

Marc Deier Spent Ill-Gotten Gains on Art, Cars, Houses

Erik Even — Fri, 16 Jan 2009 23:17:19 +0000

Marc Dreier blew part of the $380 million he allegedly stole in failed investments, and used the rest to repay the funds, cover his firm’s expenses and buy art and property, according to prosecutors.

As part of a bail request, Dreier listed assets he owns, including 150 pieces of artwork and numerous cars and homes. He and his lawyer, Gerald Shargel, outlined how Dreier used the money the government says he stole.

All of Dreier’s assets have been frozen by the government, and his lawyer says he is not a flight risk.

Dreier, 58, has been charged with persuading two unidentified hedge funds to give him more than $100 million by falsely claiming he was selling at a discount notes issued by New York developer Sheldon Solow. Prosecutors have since said that “very sophisticated investors” lost $380 million.

Dreier, a graduate of Harvard Law School and Yale College, faces as long as 20 years in prison for securities and wire fraud. Separately, he faces charges in Toronto for impersonating another lawyer.

Lawyer Appointed to Probe $38.5M Dreier Debt

Erik Even — Fri, 09 Jan 2009 23:20:20 +0000

Steven J. Reisman, a partner in New York’s Curtis, Mallet-Prevost, Colt & Mosle, has been appointed to investigate allegations that Seattle’s 360networks and its creditors are owed up to $38.5 million in funds from the defunct Dreier LLP.

Reisman was appointed by Judge Allan L. Gropper of the US Bankruptcy Court for the Southern District of New York. He will be assisted by other Curtis lawyers, including Lynn P. Harrison III, T. Barry Kingham and Jerrold Bregman.

The funds in question should have been in a Drier client escrow account. Dreier had accumulated the roughly $38.5 million in cash from prosecuting actions that it brought as counsel to the committee appointed under 360networks’ Chapter 11 plan. The funds were to be shared among the reorganized telecommunications company and its creditors pursuant to the plan.

Dreier LLP collapsed after Marc Dreier, the firm’s founder and managing partner, was arrested in Toronto in December for allegedly impersonating another lawyer. He was arrested again in New York upon his return on securities and wire fraud charges that prosecutors say may have cost investors $380 million.

Via The NLJ.

8,000 Claims in Madoff Fiasco?

Erik Even — Mon, 05 Jan 2009 21:12:40 +0000

The Securities Investor Protection Corporation and the trustee handling the liquidation of Bernard L. Madoff Investment Securities LLC have mailed more than 8,000 claim forms to customers who lost money in the alleged investment fraud scheme of Bernard Madoff.

Madoff is accused of running a giant Ponzi scheme that could have duped investors out of as much as $50 billion.

The bankruptcy court overseeing the liquidation has set an initial deadline of March 4th for claims to be filed. Any forms received between March 4th and July 2nd will be subject to delayed processing and possibly less-than-favorable satisfaction of terms.

Forms and instructions are also available on the SIPC’s Web site.

Trustee Irving Picard will oversee the liquidation of assets from Madoff’s investment firm, as the SIPC attempts to help investors recoup their money. The SIPC was created by Congress in 1970 to protect investors when a brokerage firm fails. Funds can be used to satisfy the remaining claims of each customer up to a maximum of $500,000. The figure includes a maximum of up to $100,000 on claims for cash.

Aside from recovering money through the liquidation of Madoff’s investment firm and the SIPC, investors could get some money back if some of Madoff’s personal assets are sold. Last week, Madoff provided a list of his personal assets to the SEC. Details of the asset list were not disclosed.

Madoff’s personal wealth is said to be substantial. He has mansions in the Hamptons and Palm Beach, a penthouse in Manhattan and a handful of luxury yachts. His firm operated proprietary stock trading desks in New York and London that were supposedly investing the family’s vast fortune.

Madoff, 70, a former Nasdaq stock market chairman, is accused of running a scheme that paid fictitious returns to certain investors out of the principal received from others. Madoff remains under house arrest in his apartment in New York as part of an earlier bail agreement.

Anti-virus Firm Doesn’t Want to Pay WilmerHale for “Luxury Hotel Rooms, Limousines and Bar Tabs”

Erik Even — Mon, 05 Jan 2009 19:29:33 +0000

In more overbilling news, Wilmer Pickering Hale & Dorr has lost a bid to toss out a fraud claim in a $7 million lawsuit, that alleges the law firm overbilled a client it defended in a white-collar crime case.

The Court of Appeals of Texas denied the law firm’s petition for a writ of mandamus, which would have directed the trial court to dismiss a fraud claim brought by McAfee, the anti-virus software company. McAfee can move ahead with the fraud claim, its last surviving cause of action in its suit against the law firm.

McAfee asserts that WilmerHale inflated its legal fees when it defended McAfee former CFO Prabhat Goyal, who was convicted in 2007 of securities-related fraud for overstating the companies profits from 1998 to 2001.

The company says that $6.8 million of the $12 million it cost to defend Goyal included unjustifiable fees and expenses for numerous WilmerHale partners and associates, plus charges for luxury hotel rooms, limousines and bar tabs.

The law firm has denied the overbilling.

Via National Law Journal.

Canadian Law School to Boot Student With Fake Undergrad Degree

Erik Even — Wed, 31 Dec 2008 00:41:28 +0000

Toronto’s Osgoode Hall Law School of York University will review admissions procedures, after The Toronto Star discovered a third-year student had used a bogus undergraduate degree to enter the program.

According to dean Patrick Monahan, the Canadian law school is “investigating additional verification measures that could be put in place to detect cases of fraud in the admission process.”

The measures come after Osgoode student Quami Frederick was revealed to have used a degree purchased from a diploma mill on the Internet to get accepted into the program in 2006.

More recently, Frederick submitted photocopies of transcripts in which her Osgoode Hall marks were inflated when she successfully applied for an articling job at Toronto’s Wildeboer Dellelce LLP.

Frederick, 28, is now facing an Osgoode Hall disciplinary hearing that she expects will result in her expulsion. The law firm has withdrawn its job offer.

Frederick was one of 290 students admitted to Osgoode in 2006 from a pool of more than 2,500 applicants. Her credentials included a purported BS in Business Administration degree from St. George’s University in Grenada in 2000.

A phone call to Grenada in the West Indies three years ago would have revealed that Frederick was never a student at St. George’s.

Frederick’s name is on a list of bogus-degree buyers compiled by US Homeland Security and Secret Service agents who took down a Washington State diploma mill in 2005.

St. Regis University, which ran for six years under dozens of bogus names, sold more than 10,000 degrees worldwide through the Internet.

Via The Toronto Star. Also here.

Former Brown & Wood Partner Convicted in KPMG Case

Erik Even — Thu, 18 Dec 2008 18:03:30 +0000

A federal jury in Manhattan has convicted Raymond Ruble, a former partner at Brown & Wood, along with Robert Pfaff and John Larson, two former executives of BIg Four auditor KPMG, of multiple counts of fraud, conspiracy, and tax evasion.

A third KPMG executive, David Greenberg, was acquitted. Greenberg’s attorneys, David Pitofsky and Richard Strassberg of Goodwin Procter, told reporters they are “extremely pleased.”

Pfaff’s lawyer, David Scheper of Overland Borenstein Scheper & Kim, told reporters that he is “deeply disappointed” and will appeal.

Both Ruble’s lawyer, Jack Hoffinger of Hoffinger Stern & Ross, and Thomas Hagemann of Gardere, who represented Larson, declined to comment.

It’s a much needed win for the Manhattan US attorney’s office. After bringing indictments against 19 defendants, it has seen its case dramatically reduced by Judge Lewis Kaplan, who tossed charges against 13 of the defendants two years ago. The Second Circuit upheld that decision.

Brown & Wood exsited from 1914 to 2001, when it merged with Sidley & Austin to become Sidley Austin LLP.

Court Ruling May Have Encouraged Madoff Victims to Remain Silent

Erik Even — Wed, 17 Dec 2008 21:29:07 +0000

Today on Slate’s Big Money blog — a possible reason why suspicious Madoff investors may have kept their mouths shut:

Bayou [Hedge Fund Group] was a fund that blew up and was revealed in 2005 to be a fraud with some $450 million in investor losses. Bayou is memorable for two reasons. One is founder Samuel Israel III’s staged suicide. (He eventually rose from the dead and turned himself in after prosecutors went after the girlfriend who helped him disappear.) The other is a legal precedent set in the Bayou case that should scare the heck out of anyone who once invested with Madoff but who managed to get out safely in the last few years: Any investors who managed to take out profits from a fund like Bayou before the fraud was revealed had to give the money back. [Emphasis original]

The Bayou ruling seems to require that any investor or fund manager who learned that Madoff was bogus and (a) pulled out their money and/or (b) notified the authorities, would be required to share with other burned investors every single penny they ever earned from the investment.

Not only that, but any investment firm or fund that ever invested with Madoff, or invested with a firm or fund that invested with Madoff, might have to return any money they ever made. This would be quite an incentive for a suspicious investor to just keep quiet and hope for the best.

Thanks to the Bayou court decisions, however, the moment Madoff was revealed as a fraud, any money that these funds-of-funds would have managed to take back would become gains that have to be given back to be redistributed among all the losers in the Madoff scheme.

Read the whole story.

New York Law School Files Investor Suit Against Merkin

Erik Even — Wed, 17 Dec 2008 18:46:11 +0000

As we reported earlier today, New York Law School has filed an investor lawsuit against J. Ezra Merkin, one of his funds and its auditor over investments made through Bernard L. Madoff Investment Securities LLC, whose founder has been charged in a massive Ponzi scheme.

Filed in US District Court in Manhattan, the suit alleges recklessness, gross negligence and breach of fiduciary duties by Merkin; the fund, Ascot Partners; and its auditor, BDO Seidman LLP.

New York Law School, through its endowment entity, invested $3 million in Ascot in 2006 and the investment is now worthless, according to the lawsuit.

The complaint is seeking class action status for persons and entities who invested in Ascot between 2002 and 2008. It was filed on the law school’s behalf by law firm Abbey Spanier Rod & Abrams LLP.

The complaint alleges Merkin abdicated his responsibilities and duties as Ascot’s general partner and manager in entrusting substantially all of its assets – $1.8 billion – to the Madoff firm, and that Seidman failed to recognize “red flags” at the Madoff firm.

BDO Seidman insists that its audits of Ascot Partners “conformed to all professional standards,” and they intend to “vigorously defend ourselves against these unfounded allegations.” BDO Seidman says it “is not and has never been” the auditor for the Madoff firm.

“Mr. Merkin and his family are personally among the largest victims of the massive fraud confessed by Bernard Madoff,” said Andrew J. Levander, a lawyer for Merkin. “Like the other victims and the entire financial community, Mr. Merkin is shocked by these events. He intends to defend the lawsuit vigorously while seeking redress for himself and his investors from whoever perpetrated this fraud.”

Since Bernard Madoff’s arrest last week, dozens of investors, charities and companies have emerged as victims, including the foundation of Nobel laureate Elie Wiesel and a charity of Academy Award-winning director Steven Spielberg.

Via CNN Money.

Madoff’s (Alleged) Crimes Hit Charities Hard

Erik Even — Tue, 16 Dec 2008 22:21:36 +0000

Altman & Altman’s Boston Criminal Lawyer Blog is unamused by the illegal shenanigans of investor Bernard Madoff:

Ironically, the Defendant’s [Madoff's] gift of restraints and forced government housing was connected to charity and gift work throughout the nation. His actions have apparently brought about the destruction and near-destruction of various charities and philanthropies throughout the country. That’s right… that means fewer gifts for the under-privileged. It also means the same thing for victims of every financial level because they all have one thing in common now. They have been victims of white collar crime in a big way to the tune of approximately fifty billion dollars.

They also find a Boston connection (apart from the Bostonians who have lost their investments to Madoff):

You may be unfamilier with the term “Ponzi scheme”. For those so uninitiated, it is a fraudulent investment operation that involves paying abnormally high profits to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business. It is named after Charles Ponzi who apparently introduced the scheme to the United States in the early 1900’s from…of all places…Boston.

The post details some of the charities hard hit by Madoff’s alleged crimes:

The Defendant’s clients include philanthropists Carl and Ruth Shapiro, major donors to the Museum of Fine Arts, Brandeis University, and Beth Israel Deaconess Medical Center. The Shapiro family foundation lost almost half its money, or about $145 million, to the Defendant.

…the Robert I. Lappin Charitable Foundation, a private family organization that financed trips for Jewish youth to Israel for many years, as well as also supporting various Jewish educational and cultural services on the Boston’s North Shore, said it was forced to shut down and lay off employees after losing all of its estimated $8 million to the Defendant

Officials at the New York-based JEHT Foundation, a nonprofit focused on juvenile justice and fair elections, said it was freezing all its grants and would shut down at the end of January. The group gets all its funding from a couple, Jeanne and Kenneth Levy-Church, whose personal investments were managed by the Defendant.

Link.

Conman Who Posed as Barrister is Jailed

Erik Even — Mon, 15 Dec 2008 20:24:51 +0000

Ian Clegg, a 32-year-old conman who pretended to be a barrister and represented clients in court, has been jailed for two years by the Crown Court in Durham, England.

After buying a barristers’ robe and wig on eBay, Clegg appeared before magistrates and judges at county court to defend people accused of motoring offences and handle debt cases.

Charging £75 an hour, he made hundreds of pounds from the fraud before he was exposed as a fake.

Clegg pleaded guilty to three fraud offenses where he claimed to be a qualified barrister and represented clients before the county court.

He was also made subject of an anti-social behaviour order upon his release from prison, banning him from claiming that he was a lawyer and requiring him to report to police if he intends to accept a job.

Clegg has previous convictions for fraud. In May 2004 he received 140 hours’ community service after using someone else’s credit card to pay a £165 hotel bill.

In October 2005, he was given a 12-month prison sentence, suspended for two years, for running up hotel bills of £7,000 and claiming he worked for JD Wetherspoon.

A law was passed last year in the Legal Services Act which made it illegal to “wilfully pretend to be a barrister.”

Madoff Charged in $50 Billion-with-a-”B” Fraud, Sued by SEC [UPDATE]

Erik Even — Sat, 13 Dec 2008 00:36:03 +0000

Bernard Madoff, founder and president of a New York firm that invested funds for wealthy individuals, hedge funds and other institutions, has been charged with operating what he told employees was a long-running $50 billion Ponzi scheme, in what may be one of the largest frauds in history.

Madoff, 70, head of Bernard L. Madoff Investment Securities LLC, was arrested this morning by the FBI.

US Magistrate Judge Douglas Eaton released Madoff on $10 million bond. Madoff faces as much as 20 years in prison and a $5 million fine if convicted.

The New York-based firm was the 23rd largest market maker on Nasdaq in October, handling a daily average of about 50 million shares a day. It specialized in handling orders from online brokers in some of the largest US companies, including General Electric and Citigroup.

Madoff was also sued today by the Securities and Exchange Commission. The complaint, also filed in Manhattan federal court, accused Madoff of a “multi-billion dollar Ponzi scheme that he perpetrated on advisory clients of his firm.”

The agency said it’s seeking emergency relief for investors, including an asset freeze and the appointment of a receiver for the firm.

Madoff ran his investment advisory business from a separate floor of his firm’s office, keeping financial statements “under lock and key,” prosecutors said.

While meeting with co-workers at his home yesterday, Madoff conceded that he was “finished,” that his advisory business is “all just one big lie” and “basically, a giant Ponzi scheme,” the government said. The business had been insolvent for years with losses of about $50 billion, he told the employees, according to the criminal and SEC complaints.

Madoff said he had about $200 million to $300 million left and planned to distribute money to select employees, family and friends before surrendering to authorities in about a week, the government said.

UPDATE

From MarketWatch:

Milberg LLP and Seeger Weiss LLP announced today that the two firms have been retained by dozens of individual investors in Madoff Investment Securities. Collectively, these investors have lost hundreds of millions of dollars–and possibly more than a billion–due to the stunning fraud allegedly perpetrated by Bernard Madoff.

“We are moving quickly and decisively to represent the interests of outraged investors–both individual and institutional–who were persuaded to entrust their money with Madoff Investment Securities and its founder, Bernard Madoff,” said Brad Friedman, a partner at Milberg LLP.

“Those taken in by this Ponzi scheme who have turned to us for help include a senior citizens center, corporate executives, banks, hedge funds and a wide variety of others,” according to Stephen Weiss, a partner at Seeger Weiss LLP.

Prosecutor: $380 Million Lost in Dreier Fraud

Erik Even — Thu, 11 Dec 2008 18:07:34 +0000

A US prosecutor estimates losses of $380 million in an alleged hedge fund fraud linked to prominent New York attorney Marc Dreier.

Prosecutor Jonathan Streeter called Dreier a “Houdini of impersonation.” He was arrested Sunday in what federal authorities called a “stunning, brazen fraud.”

Streeter cited “over $380 million actual loss. … There’s a large amount of money completely unaccounted for.”

Magistrate Judge Douglas Eaton denied bail and ordered detention Thursday for Dreier.

“His life has completely unraveled,” said the prosecutor, adding that the fraud has been going on since at least 2006 and Dreier had duped “some of the most sophisticated investors in the world.”

Dreier’s lawyer, Gerald Shargel, calls the case “very complicated.” He sought $10 million bail.

Dreier LLP partner Joel Chernov says $27 million appears to be missing from escrow accounts.

Dreier also is charged in Toronto with impersonation in connection with the attempted sale of $45 million of notes to a hedge fund.

Dreier Arraigned, Receiver Assigned

admin — Tue, 09 Dec 2008 18:13:39 +0000

Dreier LLP founder Marc Dreier was arraigned yesterday on federal charges of selling $113 million in fake securities to two hedge funds.

Separately, the Securities and Exchange Commission filed suit to recover the $113 million. Southern District of New York Judge Miriam Goldman Cedarbaum will appoint Mark Pomerantz of Paul Weiss Rifkind Wharton & Garrison as receiver to protect Dreier’s assets.

In another civil suit filed Monday, Wachovia Bank alleged the Dreier firm had defaulted on a $9 million revolving credit note made in connection with a $14.5 million credit agreement and a term note in the amount of $5.5 million. Wachovia is asking the court to enjoin the firm or any of its current, former or departing attorneys from disposing of any collateral belonging to the bank.

The criminal complaint charges Dreier with one count each of securities and wire fraud. He faces a maximum sentence of 20 years in prison if convicted on either count. He also could be forced to pay a fine equal to twice the value of any illegal gains.

Via Law.com.

Dreier Indicted in Federal Court (UPDATE)

admin — Mon, 08 Dec 2008 20:08:06 +0000

Federal prosecutors have charged Marc Dreier, founder of Manhattan’s Dreier LLP, with theft in connection with his alleged attempt to secure a loan by impersonating another lawyer in Toronto.

Dreier has retained celebrity lawyer Gerald Shargel, and is scheduled to appear at US District Court for the Southern District of New York today.

Dreier allegedly impersonated a lawyer for the Ontario Teachers Pension Fund during a meeting with an executive for Fortress Investment Group, using the other lawyer’s business card, which Dreier had received from the lawyer earlier that day.

Dreier was allegedly seeking money for a sham transaction.

He spent three nights in an Ontario jail before making bond and flying back to New York with Shargel. Federal authorities were waiting at the airport and arrested Dreier.

Shargel has represented several high-profile clients, including mob boss John Gotti, lawyers who allegedly bribed and threatened witnesses, and an elderly Texas oil man who scammed the UN’s oil-for-food program with Iraq.

UPDATE

From WSJ LawBlog:

The Criminal Charge: … Dreier was arrested late Sunday night, presumably upon his arrival back in New York, on charges stemming from a $100 million fraud against various hedge funds.

The SEC Suit: The SEC also filed suit against Dreier on Monday, alleging that he has been marketing and selling fake promissory notes to investors.

The Wachovia Suit: Wachovia Bank sued Dreier LLP and Marc Dreier (in addition to a handful of others) today, alleging that a credit revolver and term loan extended to the firm are in default, as of November 1, upon which the bank is owed some $12.7 million.