International Law

Civil Suit Accuses Ex-Partner of Chinese BigLaw Firm of Conspiracy to Bilk US Clients of $10M

In a civil securities fraud suit filed in federal court in New York, a group of investors has accused a former partner in a Beijing-based BigLaw firm of conspiring with her husband to bilk them of $10 million.

Helen Lv and her former 1,200-attorney law firm, DeHeng Law Offices, are both named as defendants in a third amended complaint filed last month, the Asian Lawyer reports.

The suit says six plaintiff investment funds contributed $12.5 million to create an approximately $10 million fund that was to be used to purchase a Chinese company that operates dialysis centers and provides hospital equipment and pay $1.4 million in attorney fees, among other apparent expenses. Lv served as a principal adviser on the deal—which involved moving money through a complex variable interest entity structure and the use of foreign vehicles to allow a U.S. company to control Shanghai Atrip Medical Technology Co. Ltd.—and allegedly provided an opinion letter stating that the VIE structure was solid, the article explains.

However, instead of seeing their $10 million used to purchase SMT, the plaintiffs allege, they saw it disappear with Shao Ganghua, a man who they say they had understood to be merely a representative of one of the executives in the companies involved in structuring the deal. But the plaintiffs say they have since discovered that Shao not only had an ownership interest but was apparently married to Lv.

Attorney Jim McMullen of Shapiro & McMullen is one of the lawyers for the plaintiffs. He tells the legal publication that financial advisers and a New York law firm were also originally named as defendants in earlier federal complaints that have been dismissed and are now being sued by the plaintiff investors in New York state court for claimed fraud, negligence and breach of contract.

However, unlike these defendants, who have sought dismissal saying that they couldn’t have known there was anything wrong with the transaction, Lv and the DeHeng law firm of which she was then a partner, did have reason to know of the malfeasance, McMullen says, because “the lead partner at DeHeng [on the deal] actually and knowingly participated in the theft.”

A lawyer with Reed Smith, which has been representing the DeHeng firm, declined to comment when contacted by the legal publication about the new amended complaint. The DeHeng firm has successfully moved to dismiss earlier versions of the complaint filed in the Southern District of New York, alleging lack of jurisdiction and failure to state a claim on which relief can be granted. However, the plaintiffs were granted leave to replead.

Lv could not be reached for comment, but the DeHeng firm said in a written statement that “Both the two complaints were denied by the court due to lack of facts and legal relationships. The disputes in the complaints were those among investors, nothing to do with DeHeng, and their complaints were pure frivolous ones.”

Leagle provides a copy of an earlier complaint in the case, which reportedly has since been dismissed.

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