2 Fla. Lawyers Charged in Alleged $800M Ponzi Scheme; Colleagues Stunned

Local practitioners are still stunned over news earlier this month that two prominent Fort Lauderdale, Fla., lawyers, Michael McNerney and Anthony Livoti Jr., are now defendants in a federal criminal case. And not just any federal criminal case: The two were indicted in connection with their work for an alleged Ponzi scheme known as Mutual Benefits in which 28,000 investors reportedly may have lost more than $800 million.

"I am in suspended disbelief over the allegations," says attorney Stuart Grossman of Grossman Roth in Miami, who formerly worked with McNerney as a fellow officer of the Florida Bar. "When a lawyer is charged, the whole legal community gasps, and when it's a lawyer of Mike McNerney's stature, I think they gasp, and they have a feeling of utter disbelief," he tells the Daily Business Review.

Both McNerney, 60, and Livoti, 59, a well-known litigator in Broward County, have been charged in federal court in the Southern District of Florida with mail and wire fraud, conspiracy and money laundering. Livoti served as an escrow agent and trustee for Mutual Benefits, according to his attorney, and McNerney served as general counsel for the company, according to the article. The law firm for which he was formerly a partner, then known as Brinkley Morgan Solomon & Tatum, was closing agent for on investment transactions, but is not part of the criminal case, the Daily Business Review says.

"According to prosecutors, members of the company's management team, including McNerney and Livoti, lied to potential investors about the risk of their investments and their anticipated rate of return," reports the South Florida Sun-Sentinel, in an article written when the charges were announced earlier this month. The indictment was actually filed in late December.

The newspaper also reports that McNerney is accused by prosecutors of giving the business an air of legitimacy by meeting personally with investors.

Their lawyers say the two attorneys have done nothing wrong, and should be vindicated at trial, reports the Daily Business Review. Lawyers for McNerney also say that the case should be of concern to other attorneys, since it potentially criminalizes work appropriately performed during a legal representation.

The company made a business of viaticals, paying up-front cash in exchange for for future life insurance policy proceeds from individuals who weren't expected to live for long. Mutual Benefits reportedly ran into trouble, however, when medical advances substantially prolonged the lives of many individuals with HIV or AIDS, resulting in much less income than expected.

The prosecution says Livoti's position with the company made him "purportedly responsible" both for safeguarding funds reserved to pay premiums and actually paying the premiums on insurance policies purchased by Mutual Benefits, according to the Daily Business Review. He was a sole practitioner at the time, the Sun-Sentinel notes.

The U.S. Securities and Exchange Commission closed the now-defunct company approximately five years ago. Nine other individuals connected with the company, including its former president, have pleaded guilty to criminal charges.

If McNerney and Livoti are found guilty, they could be sentenced to as much as 20 years in prison on each charge, reports the Miami Herald.

Additional coverage:

U.S. Department of Justice (PDF): "Four Defendants Charged in $1 Billion Investor Fraud"