Law Firms
Trustee Targets Smith Gambrell in Hedge Fund’s Downfall
Posted Aug 6, 2008, 09:52 am CST
By Debra Cassens Weiss
A bankruptcy trustee contends that the law firm of Smith, Gambrell & Russell failed to prevent the founder of a now-defunct Atlanta investment firm from embezzling from his clients.
Trustee William Perkins is seeking $80 million from the firm and its former counsel, C. Gladwyn Goins, according to the Fulton County Daily Report.
Perkins contends Smith Gambrell and its lawyer, Goins, breached their fiduciary duty to their client, International Management Associates, "by placing their own interest in securing fees and expectation of future profits” from the firm above their own professional judgment and duties, according to the story. Perkins also claims the law firm was negligent in its dealings with the Securities and Exchange Commission on behalf of IMA.
IMA founder Kirk Wright was convicted of mail fraud, securities fraud and money laundering in May. He created the hedge fund with money from a personal injury suit and lived lavishly, throwing himself a $500,000 wedding and driving six cars, including an Aston Martin and a Lamborghini. He hanged himself a week after his conviction.
Perkins claims Goins failed to discover that corporate financial statements submitted to the SEC were phony, according to the Fulton County Daily Report story. A close reading of the statements would have revealed that on one page the account balance was listed at $59 million and on another page it was listed at $43 million, according to the trustee's complaint.
"Had Goins reviewed the falsified account statements with even the slightest care, it would have been obvious to him that there were serious discrepancies," the trustee said.
Goins refused to comment to the Fulton County Daily Report. Law firm representatives said they would mount a vigorous defense to the allegations but declined further comment.