Holland & Knight Sued over Legal Work for Alleged Ponzi Schemer
Posted May 19, 2009 6:40 AM CDT
By Debra Cassens Weiss
Holland & Knight is facing another lawsuit over its legal work for alleged Ponzi schemer Arthur Nadel.
Several investors who lost about $4.5 million in funds overseen by Nadel claim in a state court lawsuit filed last week that offering documents prepared by the firm failed to mention important information, the American Lawyer reports. The private placement memos didn’t disclose that Nadel was disbarred in the 1980s, the suit says, and some of the documents didn’t make clear that an accountant for the funds was not a certified public accountant.
Another investor who says he lost $1.85 million through Nadel investments filed suit against Holland & Knight in federal court in March. That suit says the law firm should have disclosed Nadel was disbarred for taking money from a client's escrow account to pay off loan sharks.
Holland & Knight told the American Lawyer it plans to “vigorously” defend the new lawsuit.
Wayne State law professor Peter Henning told the American Lawyer the lawsuit could run into some hurdles. Investors alleging malpractice will have to prove they were Holland & Knight clients rather than third-party beneficiaries of the firm’s work. "That is very tough," he told the publication.
Negligence claims will also likely fail if the law firm simply reviewed the documents, he said. Plaintiffs could succeed if they can show the law firm actively drafted the documents or discussed the facts, he added.