Legal Ethics

Client Sues McGuireWoods re Ex-Partner's Claimed $17M Trading Scheme

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A former client has sued McGuireWoods for malpractice over claimed illegal trading of the client’s stock by a law firm partner acting as issuer’s counsel. He allegedly made more than $17 million from selling stock of the plaintiff, Alternative Energy Sources Inc., and at least six other ethanol companies, but only Alternative Energy has so far filed suit.

The now-former partner, Louis Zehil, is also named as a defendant in the malpractice case; has been criminally charged in a federal fraud case in New York; and has been civilly sued there by the U.S. Securities and Exchange Commission, according to the Kansas City Star and the New York Law Journal. He reportedly worked in the New York office of the 750-lawyer Richmond, Va.-based firm until Feb. 16.

“The case has unfolded swiftly. According to the criminal complaint … Zehil’s actions were first uncovered by a McGuireWoods associate, who reported them to firm management on Feb. 9,” the legal publication recounts. “The firm then conducted an internal investigation, contacted clients, sought Zehil’s resignation and referred the matter to the SEC.”

William Allcott, counsel at McGuireWoods, declined to comment on the malpractice suit, which was filed yesterday in federal court. However, he says the firm acted immediately once Zehil’s conduct was discovered and is cooperating with authorities.

“We had strict procedures in place that were circumvented” by Zehil, he told the newspaper. “What we’ve done since then is to make it even more difficult, if not close to impossible, for someone to do this again.”

Zehil, whose age is given as either 41 or 42, is a 1995 Columbia Law School graduate. A partner of McGuireWoods since 2004, he previously worked for Jones Day; Hale and Dorr; and White & Case. He now reportedly lives in Ponte Vedra Beach, Fla., and apparently could not be reached for comment by either publication.

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