Bankruptcy Law

Best friend's Ponzi scheme puts Shook Hardy lawyer -- and his firm -- under fire in trustee suit


Updated: A childhood friendship between a lawyer-to-be and another boy who, decades later, is serving a 20-year federal securities fraud prison term for masterminding a $930 million Ponzi scheme led to a legal representation that has put a prominent South Florida attorney and his law firm on the defensive.

Marc Levinson and Shook, Hardy & Bacon have been sued by the bankruptcy trustee for the imprisoned Nevin Shapiro’s former company, Capitol Investments USA Inc., reports the Miami Herald. A Daily Business Review (sub. req.) article first reported on the suit and provides additional details.

In a complaint filed in December in Miami-Dade Circuit Court, trustee Joel Tabas contends that the law firm and Levinson, who has been on administrative leave from Shook Hardy since November, advised Shapiro and his company and continued to do so and help them stay afloat financially even after they became aware of significant legal problems including the violation of securities laws.

Levinson, a junior lawyer whose expertise was in products liability litigation, became Shapiro’s lead counsel because Levinson was his best friend, the suit alleges. Supervised by two other Shook Hardy lawyers who, like Levinson, stepped outside their legal specialization and experience to represent Shapiro and his company, they not only failed to put the brakes on but, acting as Capital’s de facto general counsel, assisted the company and its officers in violations of securities law and their fiduciary duties.

As Shapiro obtained money from investors, backed by millions of dollars worth of promissory notes, to try to support the failing business, for example, Shook, Hardy “tacitly agreed with Capitol’s proliferation of its Ponzi scheme and Shook, Hardy & Bacon failed to ever deter Capitol from its additional borrowings,” contends the suit.

“Instead, Levinson actually encouraged Shapiro’s additional borrowings, telling Shapiro that he needed to make sure to get more funds so Capitol could stay afloat as Levinson knew that if Capitol failed, Shapiro would likely be prosecuted for securities fraud.”

The suit also accuses the Shook Hardy lawyers of helping Shapiro violate NCAA regulations through alleged cash payments to star athletes at the University of Miami, for which Shapiro reportedly served as a rogue booster.

Responding through a written statement provided to the newspaper by legal counsel, Shook Hardy said it is disappointed by the trustee’s suit and promised both a diligent defense and a continued “commitment to resolve any issues that arise in a reasonable, judicious and professional manner.” Shapiro, the statement goes on, “deceived many people, including those closest to him, and is serving a prison sentence for his reprehensible conduct.”

Tabas is seeking a clawback of legal fees from Shook Hardy, in order to try to repay investors some of the money they lost.

Related coverage:

STATS LLL / Associated Press: “Nevin Shapiro’s attorney insists she did nothing wrong”

Updated on Feb. 5 to provide link to Daily Business Review article.

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