Sidley Austin is among defendants settling investor class action for $220M
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Sidley Austin and Deloitte are among five professional firms agreeing to pay $220 million to settle claims for aiding securities sales by a now-defunct investment firm accused of operating as a Ponzi scheme.
None of the defendants were charged with any wrongdoing, according to the proposed settlement filed in Oregon federal court July 9. Rather, they are accused of statutory liability under Oregon law for aiding Aequitas Management in its sale of the securities that caused investor losses.
The lawsuit had claimed that Sidley provided advice for Aequitas securities offerings, while Deloitte prepared audited statements for the investment firm. The amount each defendant will pay is governed by a confidential allocation agreement, according to a separate stipulation filed July 9.
The Securities and Exchange Commission had alleged in a separate action that Aequitas raised money from investors by issuing promissory notes with high rates of return. Much of the money was invested in student loan receivables and for-profit education provider Corinthian Colleges, which filed for bankruptcy in 2015. More money raised from investors was used in a last-ditch effort to save the firm and to pay earlier investors, the SEC said.
Bloomberg cited a Sidley statement that said the lawsuit would end “costly” and “burdensome” litigation.
“The plaintiffs did not allege that Sidley or the other six defendants knew about or were involved in the alleged fraudulent scheme perpetrated by Aequitas,” the statement said. “Two senior Aequitas executives pleaded guilty to conspiring to violate federal law in operating the funds and admitted to intentionally misleading investors and withholding information about the financial condition and business activities of Aequitas from their outside accounting and law firms.”
Deloitte told Law360 that it stands by its work, and it is participating in the settlement “to avoid the ongoing cost, distraction and uncertainty of extended litigation.”
The investors were represented by Hagens Berman Sobol Shapiro and Stoll Berne.