Sunday, December 11, 2016


From time to time, we have covered a number of cases involving the biggest American Ponzi schemers, where their lawyer also goes down with them. Remember the Joel Steinger/Mutual Benefits Corp. case ?  Both the attorney who was the principal outside counsel, as well as the lawyer who was the trustee of escrow funds, received felony convictions for their roles in that massive Ponzi scheme. We have always taken the position that, as soon as any attorney discovers that his client is engaged in any type of Ponzi scheme, he must resign forthwith, stop protecting his client, and notify law enforcement, as the attorney-client privilege does not apply to ongoing criminal conduct, where the lawyer is an unwitting facilitator.

Recently, we saw a Ponzi lawyer punished, in a slightly different way. The fraudster was Nevin Shapiro, who some of our readers may remember, ran a wholesale grocery business, that was actually a $930m Ponzi scheme. After Shapiro received a 20-year sentence, for money laundering and securities fraud, he contacted an attorney to represent him in the bankruptcy of his company.

Shapiro was reportedly angry at the University of Miami, to whose athletic program he had been a major contributor, including making illegal payments, gifts and gratuities to players. He was allegedly angry at the U for not supporting him when he was indicted.

His attorney, who knew that the NCAA wanted more details about UM violations of its rules, but had no subpoena powers, offered to assist the organization, by taking witness depositions, within the scope and authority of the bankruptcy proceeding, and followed Shapiro's instructions, in making that discovery available to the NCAA, who ultimately imposed sanctions upon the University of Miami.

The Florida Bar suspended the attorney for 91 days; this may not sound like much, but reinstatement after any suspension for over 90 days is not automatic, but requires proof of rehabilitation, meaning that the lawyer must show that he or she is rehabilitated, before being eligible to practice again. The reinstatement process can take several months, as there is an investigation, and a hearing. The lawyer's misplaced zeal in representing a criminal client, who was seeking revenge for some imaginary wrong, was costly.

In case after case, wherever we see a major Ponzi scheme, we see those around the principal Ponzi fraudster, also face justice for their role in the crime, and lawyers who have facilitated the scheme, are in for special attention.

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