Posted Jun 12, 2012 11:15 pm CDT
In a civil lawsuit, a Texas company describes a stunning claimed fraud of millions of dollars by its former in-house legal chief, who it says set up multiple fake law firms and sent them millions in legal fees in a little more than a year before absconding at some point during the last month or so.
Although Anthony Chiofalo’s wife is in custody in a related felony theft case, Chiofalo is nowhere to be found, according to a civil suit (PDF) filed Friday by Tadano America Corp. in Harris County. It asserts claims of theft, conversion, fraud and breach of fiduciary duty and seeks a freeze on the assets of its former acting general counsel and reimbursement of over $8 million, as well as punitive damages and attorney fees, as a Courthouse News Service post details.
Chiofalo is accused in the suit of setting up a fictitious Texas branch of a legitimate New York law firm in November 2010, and, after documenting the matter with a retainer agreement, submitting a $25,000 payment for legal services that were never provided. The suit says the money wound up in an account under Chiofalo’s control, as did millions more that the company paid to Maio & Cardenas, another fictitious law firm Tadano America says Chiofalo created.
Rapidly escalating legal costs prompted the company to ask Chiofalo for an explanation of its hefty legal bills, and the suit says he fabricated not only documentation for legal matters that never existed but biographies for the fictitious attorneys who worked on them.
“Upon information and belief, Chiofalo created other fictitious law firms, invoices for legal matters and devices to purposely misrepresent the nature and extent of TAC’s litigation costs,” the suit states. It says the company paid bills represented by Chiofalo to be legitimate to the Maio firm and other law firms and businesses in a scheme that continued until May of this year.
It appears that scrutiny by the company’s board, which opened an investigation in March 2012, may have cast doubt on some of Chiofalo’s explanations. At some point, an investigator traced payments from the company to bank accounts controlled by the legal chief, according to the suit.