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3. Co-founder of defunct firm LeClairRyan may…

Law Firms

Co-founder of defunct firm LeClairRyan may be able to avoid tax liability after 4th Circuit decision on his exit

By Debra Cassens Weiss

February 12, 2025, 10:44 am CST

The co-founder and former CEO of the defunct law firm LeClairRyan may be able to avoid tax liability in connection with the firm’s collapse because of a ruling Friday by a federal appeals court.

The 4th U.S. Circuit Court of Appeals at Richmond, Virginia, ruled for former partner Gary LeClair in a Feb. 7 opinion, Law360 reports.

The Legal Profession Blog published highlights.

The 4th Circuit ruled that LeClairRyan’s operating agreement didn’t bar LeClair from withdrawing as a partner after a vote to dissolve in July 2019. Bankruptcy and federal courts had reached the opposite conclusion, which made LeClair liable for some tax obligations because he was considered a partner on the day that the firm filed for bankruptcy in September 2019.

The firm had included LeClair on a list of equity holders filed with the bankruptcy court. LeClair wanted to amend the list to remove his name.

The 4th Circuit remanded for a determination.

“We leave it to the bankruptcy court on remand to determine whether any equitable considerations warrant denial of the motion to amend despite LeClair’s correct interpretation of the operating agreement,” the appeals court said.

See also:

Too big too soon: How LeClairRyan went under

LeClairRyan bankruptcy trustee targets firm co-founder, compares firm to movie ‘Weekend at Bernie’s’

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3. Lawyer accused of helping client defraud…

Criminal Justice

Lawyer accused of helping client defraud creditors is acquitted a second time

By Debra Cassens Weiss

February 19, 2025, 8:52 am CST

A former Freeborn & Peters lawyer in Illinois has been acquitted of wire fraud a second time in a case stemming from his representation of a neighbor, the owner of a Chicago business that eventually filed for bankruptcy.

Federal jurors acquitted lawyer Edward Lee Filer in a retrial after deliberating a little more than one hour, Law360 reports.

Filer’s lawyer, Ronald Safer, told Law360 that the verdict “is a hard-fought testament to the integrity of Mr. Filer, who was unjustly accused in a case that should never have been brought against him.”

Prosecutors had alleged that Filer schemed to defraud creditors of the business, the Barsanti Woodwork Corp., in two ways, according to an appellate ruling in the case and a Jan. 14 pretrial ruling by a federal judge overseeing the retrial.

First, Filer was accused of helping the Barsanti Woodwork Corp.’s owner obtain control of the company’s secured bank debt at a discount through a nominal purchaser. Second, Filer was accused of engaging in transactions that transferred the Barsanti Woodwork Corp.’s assets to a new company secretly controlled by the company’s owner. The Barsanti Woodwork Corp. then filed for bankruptcy.

In Filer’s first trial, jurors convicted Filer of wire fraud but now-deceased U.S. District Judge Harry Leinenweber of the Northern District of Illinois granted a judgment of acquittal or, in the alternative, a new trial.

The 7th U.S. Circuit Court of Appeals at Chicago reversed that first acquittal in December 2022. The appeals court held that prosecutors had presented sufficient evidence to support a wire fraud conviction, even though Filer did not profit, and some of his actions were inconsistent with an intent to defraud.

The 7th Circuit said the case should be reassigned to a new judge on remand.

Before the retrial, U.S. District Judge Steven C. Seeger of the Northern District of Illinois found that the government violated Filer’s attorney-client privilege when it obtained information about Filer’s confidential communications with the former general counsel at Freeborn & Peters. The government obtained the information while prepping the former general counsel for testimony, according to a Jan. 31 docket entry.

As a sanction, Seeger barred the former general counsel from testifying and barred evidence about documents withheld from the bankruptcy trustee, according to a Feb. 7 docket entry.

Freeborn & Peters merged with Smith, Gambrell & Russell in 2023. The merged law firm kept the Smith Gambrell name.

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3. Giuliani contempt decision blocks him from…

Tort Law

Giuliani contempt decision blocks him from doing this, putting his Florida condo at risk

By Debra Cassens Weiss

January 7, 2025, 10:34 am CST

Disbarred lawyer Rudy Giuliani is “in dire jeopardy” of having to turn over his Palm Beach, Florida, condo to two Georgia election workers who sued him for defamation after a federal judge held the former New York City mayor in civil contempt Monday, according to a report by Politico.

U.S. District Judge Lewis J. Liman of the Southern District of New York barred Giuliani from presenting evidence on the primary defense that would allow him to keep the Florida condo after he failed to provide information that would help determine whether the property was his primary residence, Politico reports.

Liman’s decision allows him to draw negative inferences about Giuliani’s Florida residency, report the New York Times and Law.com.

The trial on whether 80-year-old Giuliani is entitled to keep the condo is scheduled for next week before Liman. At issue is whether the condo is Giuliani’s homestead entitled to protection under the Florida Constitution.

Publications with coverage, in addition to Politico, Law.com and the New York Times, include Reuters, the Associated Press and CNN.

The election workers, Ruby Freeman and her daughter Wandrea “Shaye” Moss, won a $148 million defamation verdict against Giuliani after he accused them of election fraud in the 2020 election. Giuliani was formerly a lawyer for President-elect Donald Trump.

Giuliani had claimed in now-dismissed bankruptcy proceedings that his New York co-op apartment was his homestead residence, which protected a portion of it in bankruptcy proceedings, according to a Dec. 27 decision denying Giuliani’s motion for summary judgment. After the bankruptcy dismissal, Giuliani declared Florida to be his domicile.

The contempt finding was for Giuliani’s failure to provide evidence about his primary residence, according to the New York Times.

Giuliani did not turn over full names of his doctors or provide a full list of other professional service providers, leading the judge to conclude that none was in Florida before Giuliani changed his residence there in January 2024, the AP explains. Liman also barred Giuliani from presenting testimony or electronic communications to establish the Florida homestead.

Giuliani could also be held in contempt separately for failing to turn over property, the New York Times says.

Giuliani has already turned over designer watches and a 1980 Mercedes-Benz convertible. He is also moving to turn over his Manhattan apartment in New York City. He did not provide a framed jersey of baseball player Joe DiMaggio, however, which he said he can’t find. Nor did he turn over his grandfather’s pocket watch, which he pulled out during the hearing Monday, saying he fears that it will be lost.

The liability verdict was delivered in a trial held only to determine damages after a different federal judge entered a default liability judgment against Giuliani for failing to provide meaningful discovery. That federal judge, Judge Beryl A. Howell of the District of Columbia, has scheduled a separate contempt hearing against Giuliani for Friday for alleged violation of an agreement not to make new defamatory claims about the election workers, Politico reports.

Giuliani said in his podcast Monday evening the New York court’s request for information was “enormously burdensome,” and he had already released “hundreds and hundreds of pages of discovery.” according to reporting by CNN. He said he didn’t have to testify because the judge “had already made up his mind.”

Giuliani’s spokesperson, Ted Goodman, released a statement. Freeman and Moss “might be happy to fight to take away Mayor Giuliani’s most cherished personal belongings, including his signed baseball jersey of his childhood hero and his grandfather’s pocket watch, but they can never take away his extraordinary record of public service,” Goodman said.

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3. Former CFO at Tom Girardi’s law firm reaches…

Criminal Justice

Former CFO at Tom Girardi’s law firm reaches plea deal, agrees to $3.1M forfeiture

By Debra Cassens Weiss

October 10, 2024, 9:18 am CDT

The former chief financial officer at disbarred lawyer Tom Girardi’s law firm has reached a deal to plead guilty to two counts of wire fraud that caused losses of at least $3.5 million.

Former CFO Christopher K. Kamon agreed to plead guilty, to forfeit $3.1 million and to pay restitution, report Law360 and the Los Angeles Times.

The agreement was filed Tuesday in the U.S. District Court for the Central District of California.

The plea deal follows Girardi’s August conviction for stealing $15 million from four personal injury clients at his now-collapsed firm, Girardi Keese, over the course of a decade.

Girardi, 85, was famous for his legal team’s portrayal in the film Erin Brockovich and for his marriage to Erika Girardi, who has appeared on The Real Housewives of Beverly Hills reality TV show. He is now living in an assisted living facility and has a dementia diagnosis. His lawyers are seeking to overturn the conviction for an alleged inability to understand trial proceedings, Law.com reports.

Kamon acknowledges that he worked with Girardi to defraud clients, and that he participated in a “side fraud” scheme involving fraudulent invoices.

A factual statement says Girardi typically called Kamon each morning and asked how much money was in the firm’s bank accounts, including its client trust accounts. When operating accounts were low, Girardi allegedly instructed Kamon to move money out of client trust accounts and label them as attorney fees, even when attorney fees had already been paid.

“This was a common practice at Girardi Keese of which other senior lawyers in the firm were aware,” the statement of facts said.

Sometimes settlement funds belonging to current clients in trust accounts were used to pay other clients whose settlement funds had been stolen, according to the statement of facts.

Kamon and federal prosecutors in Los Angeles disagreed on the amount of the loss. Kamon said the amount is at least $3.5 million and no more than $9.5 million. Prosecutors reserved the right to argue that the amount ranged from more than $9.5 million to less than $25 million.

Kamon did not agree to a particular prison sentence. Money collected from Kamon in the bankruptcy proceedings for Girardi Keese would be credited toward the forfeiture amount.

The potential maximum prison sentence is 40 years. The offenses also carry a potential fine equal to twice the gain or losses resulting from the offenses or the amount of $500,000, whichever is greater.

Kamon, Girardi and a third lawyer are facing separate charges in Chicago for allegedly stealing settlement money from five relatives of victims killed in an October 2018 plane crash.

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3. No conflicts by Sullivan & Cromwell in representation…

Law Firms

No conflicts by Sullivan & Cromwell in representation of Samuel Bankman-Fried, report finds

By Debra Cassens Weiss

September 30, 2024, 2:05 pm CDT

Sullivan & Cromwell did not ignore “red flags” that would have alerted it to misconduct when it represented Samuel Bankman-Fried, the founder of cryptocurrency exchange FTX, in the purchase of shares in a mobile trading platform, according to a second report by a court-appointed bankruptcy examiner.

Sullivan & Cromwell’s representation of Bankman-Fried as regulatory counsel in the purchase of $500 million in shares of the trading platform Robinhood posed no conflict of interest in its current work as bankruptcy counsel for FTX, according to the examiner, Robert J. Cleary, a former Unabomber prosecutor. Cleary is currently of counsel with Patterson Belknap Webb & Tyler.

Law.com and Law360 covered the Sept. 20 report, which was entered on the docket Sept. 25.

Bankman-Fried was convicted of fraud and conspiracy in November 2023, a year after the collapse of FTX. Prosecutors said Bankman-Fried touted FTX as a safe platform for crypto asset trading while diverting billions of dollars in customer assets to his privately held hedge fund.

FTX employees had told lawyers at Sullivan & Cromwell that Bankman-Fried was using his money to fund the Robinhood investment, the examiner said.

“S&C did not know and had no reason to believe that the Robinhood shares were actually purchased with customer funds or that customer funds were being misappropriated for this purpose,” Cleary wrote.

Sullivan & Cromwell’s work for Bankman-Fried primarily consisted of four regulatory filings, the report said.

An initial report said there was no evidence that Sullivan & Cromwell was aware of fraud in its representation of FTX before the bankruptcy, and there was no error in the bankruptcy judge’s decision to approve Sullivan & Cromwell as FTX’s bankruptcy counsel. The report recommended further investigation, however, into Sullivan & Cromwell’s work for Bankman-Fried as an individual in connection with the purchase of the Robinhood shares.

“Sullivan & Cromwell is pleased that the examiner has again found no truth to allegations about our prepetition work for FTX,” a Sullivan & Cromwell spokesperson said in an emailed statement to the ABA Journal. “Our focus remains fully on achieving plan confirmation to facilitate the return of recovered assets to creditors.”

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3. Lawyer who wrote on ethics issues is suspended…

Ethics

Lawyer who wrote on ethics issues is suspended after he is accused of helping client hide assets

By Debra Cassens Weiss

March 7, 2024, 12:49 pm CST

An Iowa lawyer has received a two-year suspension for helping a client hide money from creditors and for “furtively” inserting a provision into a custody agreement.

The Iowa Supreme Court suspended 68-year-old lawyer David L. Leitner of Iowa in a Dec. 8 opinion, according to a March 4 story by the Iowa Capital Dispatch.

Leitner had argued that his ethics articles had contributed to the profession and should be taken into account by ethics regulators. The Iowa Supreme Court’s Attorney Disciplinary Board had responded that the assertion is “particularly eyebrow-raising when his misconduct involves financial fraud,” according to the Iowa Capital Dispatch.

The disciplinary board allegations against Leitner were deemed to be admitted because he did not respond to the initial complaint.

The hidden money case involved Leitner’s representation of an Iowa seed dealer who was convicted of bankruptcy fraud in 2007 for hiding assets. Leitner allegedly created a company for the seed dealer in 2013. Leitner made himself the managing member of the company, allowing the seed dealer to send part of his income to the company while hiding it from the government, which was owed about $71,000.

Although Leitner made himself the contact for the seed dealer’s corporation, neither he nor his client converted funds from anyone, the state supreme court acknowledged.

“Moreover, the record does not show that the federal government or any other creditor was actually trying to collect [the seed dealer’s] receivables,” the state supreme court said. “And so the record does not show that the federal government or any other creditor was actually deceived or otherwise hampered in its efforts to collect. At most, the record shows that [the client] and Leitner hoped to deceive any creditors who might
try to collect.”

Leitner was also accused in a second disciplinary count of “furtively” adding a stipulation to a custody agreement. An opposing lawyer had crafted a PDF of the agreement based on terms adopted in a mediation and had sent it to Leitner. Unbeknownst to the opposing lawyer, Leitner added a provision giving his client a “first right of refusal” to care for his minor child whenever his ex-wife couldn’t do so, according to the allegations.

Leitner’s client signed the modified agreement, and it was returned to the opposing counsel. The modified agreement was then filed with the district court.

Other counts in the disciplinary complaint alleged that Leitner violated rules regarding conflicts of interest, contact with represented parties and client trust accounts.

The Iowa Supreme Court cited two aggravating factors. Although Leitner acknowledged trust account issues, he had not taken responsibility “for his worst behavior,” the state supreme court said. He had also made misleading statements about reaching an agreement on a suspension.

In mitigation, Leitner had no disciplinary history. Leitner had also provided pro bono and reduced-fee representation and had accepted appointments for indigent criminal defendants.

A lawyer for Leitner, David L. Brown, did not immediately respond to an ABA Journal email requesting comment. The phone number for Leitner’s law office was not taking messages.

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3. Suit accuses Sullivan & Cromwell of employing…

Law Firms

Suit accuses Sullivan & Cromwell of employing ‘creative but misleading strategies’ that aided FTX fraud

By Debra Cassens Weiss

February 20, 2024, 4:00 pm CST

A proposed class action lawsuit filed by investors in cryptocurrency exchange FTX accuses Sullivan & Cromwell of aiding and abetting fraud by providing legal services that went “well beyond” usual legal work.

“As the evidence will reveal, S&C lawyers were eager to craft not only creative but misleading strategies that furthered FTX’s misconduct,” according to the Feb. 16 suit, filed in the U.S. District Court for the Southern District of Florida.

Law.com, Bloomberg Law and Reuters have coverage.

FTX founder Samuel Bankman-Fried was convicted in November 2023 on seven counts of fraud and conspiracy a year after the collapse of his company. Another law firm, Fenwick & West, is also facing a suit for its legal work for FTX.

The new suit that alleges Sullivan & Cromwell formed a close relationship with FTX U.S. as its outside counsel after the company hired firm partner Ryne Miller as its general counsel in 2021. The relationship between FTX and Sullivan & Cromwell was so close that Bankman-Fried often worked out of the firm’s New York office, the suit says.

While working as primary legal counsel over a 16-month period, Sullivan & Cromwell billed about $8 million in fees, the suit says. The firm was also hired to manage FTX’s bankruptcy and has since earned more than $180 million for FTX legal matters.

FTX was able to avoid the scrutiny of regulators such as the U.S. Commodity Futures Trading Commission by buying companies that already had the necessary licenses, the suit says. The firm also generated for FTX entities “the appearance of legitimate operations; strict adherence to regulatory obligations; and esteem for legal compliance, which permitted the scheme to grow in scale and persist in duration,” the suit alleges.

The suit alleges civil conspiracy, aiding and abetting fraud, aiding and abetting breach of fiduciary duty, and violation of the civil federal racketeering law.

The alleged RICO enterprise aimed to persuade customers to entrust FTX U.S. and FTX Trading Ltd. with their assets and to conceal misappropriation of customer funds, the suit says. The firm offered legal advice “knowingly, recklessly or with willful blindness to the nature of the RICO enterprise,” the suit says.

Sullivan & Cromwell has previously said its relationship with FTX was limited, and it reported concerns when it learned of problems. It did not respond to requests for comment by Reuters, Law.com and Bloomberg Law. Nor did it immediately respond to an email request for comment by the ABA Journal.

The case is Garrison v. Sullivan & Cromwell.

The investors are represented by the Moskowitz Law Firm.

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3. Ex-NRA CEO didn’t consult GCs office about…

Trials & Litigation

Ex-NRA CEO didn’t consult GCs office about key legal decisions, general counsel testifies

By Debra Cassens Weiss

January 31, 2024, 12:31 pm CST

Updated: Former National Rifle Association CEO Wayne LaPierre didn’t consult his general counsel before the group sued its advertising agency and sought bankruptcy protection, two legal filings that didn’t end well for the NRA, according to testimony Tuesday.

General counsel John Frazer testified that he wasn’t consulted about the lawsuit against ad agency Ackerman McQueen, which was very costly, or the bankruptcy filing, which was dismissed after a judge found that it was not filed in good faith.

Law.com and Courthouse News Service covered the testimony.

Frazer, LaPierre and the NRA are among the defendants in the civil fraud case filed by New York Attorney General Letitia James. The suit alleges that LaPierre exploited the NRA for the benefit of himself and his inner circle, using donor money to pay for private jets, expensive meals and family vacations.

James contends that Frazer was hired as general counsel for his loyalty, rather than his legal experience, according to Courthouse News Service.

NRA Watch concluded that Frazer’s testimony “painted a picture of a chief legal officer that was largely out of the loop on big legal decisions, and an organization that had largely given control of such legal decisions to” its outside law firm, Brewer, Attorneys & Counselors. NRA Watch receives funding from Everytown for Gun Safety, a nonprofit organization, according to the Brewer firm.

The NRA had sued the Ackerman McQueen agency in 2019 to obtain details about its contract with Oliver North, a former NRA president, who left the NRA after unsuccessfully seeking financial information from LaPierre. The ad agency counterclaimed. North testified about his rift with the NRA last week, Courthouse News Service and Newsweek reported.

Legal filings in the civil fraud case indicate that the NRA paid more than $12 million in settlement funds to Ackerman McQueen, according to a PRWeek story that ran in April 2023.

On Tuesday, Frazer was asked whether it was true that the Brewer firm received more than $100 million in legal fees from the NRA from 2018 to 2022. Frazer said he never calculated the amount.

Updated Jan. 31 at 2:15 p.m. to add information about NRA Watch’s funding.

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3. Ex-bankruptcy judge claims immunity in suit…

Judiciary

Ex-bankruptcy judge claims immunity in suit alleging he retaliated against litigant who revealed romance

By Debra Cassens Weiss

January 3, 2024, 12:22 pm CST

Former U.S. Bankruptcy Judge David R. Jones of Houston has said he is immune from an Oct. 4 lawsuit contending that he retaliated against a litigant who revealed the judge’s relationship with a lawyer whose law firm had cases before the court.

Jones argued in a Dec. 29 motion to dismiss that the plaintiff, Michael D. Van Deelen, can’t sue over his confirmation of a reorganization plan because it was a core judicial function for which judges have immunity, report Law360 and Reuters.

The reorganization is on appeal, which is the proper way to challenge a judgment, Jones said in the dismissal motion.

Van Deelen set in motion a chain of events that led to Jones’ October resignation. At the time, a pending ethics complaint accused Jones of having a romantic relationship with Elizabeth Freeman, a partner at Houston bankruptcy firm Jackson Walker, at the same time that the firm financially benefited from cases before Jones.

Van Deelen had earlier revealed the relationship allegations—received in an anonymous letter—when he sought Jones’ recusal in his June 2020 fraud and conspiracy case against employees of offshore drilling company McDermott International.

Van Deelen was a former shareholder in the company, and he objected when the suit that he filed in state court was removed to Jones’ court at the request of the Jackson Walker firm. A different judge denied Van Deelen’s recusal motion.

Jackson Walker represented McDermott International in its bankruptcy.

Jones had already approved a reorganization plan for McDermott International in March 2020—before Van Deelen’s case was removed to his court. After Van Deelen revealed the romance allegations in the recusal motion, Freeman resigned from Jackson Walker and formed her own firm.

The reorganization approved by Jones had wiped out common equity shares held by Van Deelen and other shareholders, Reuters explains. Van Deelen asked Jones to send his fraud case back to state court.

Jones refused and said in an order the reorganization was final and binding, according to Van Deelen’s Oct. 4 suit against Jones. Jones’ order also stated that any further state court litigation regarding McDermott International or the instant proceedings should be removed immediately to his court. The order was upheld by a federal district judge.

Van Deelen sued Jones on Oct. 4, arguing that Jones’ order was “retaliation for ‘outing’ defendant Jones and his paramour Freeman.”

See also:

“Partner denied any current relationship with bankruptcy judge, Jackson Walker firm says”

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3. Giuliani owes more than $152M, including…

Bankruptcy Law

Giuliani owes more than $152M, including $148M verdict, bankruptcy filing says

By Debra Cassens Weiss

December 22, 2023, 8:51 am CST

Lawyer Rudy Giuliani, who once represented former President Donald Trump, owes more than $152 million, and that doesn’t include the potential damages that he faces in pending lawsuits, according to his Chapter 11 bankruptcy filing Thursday.

The debts include $1.36 million owed to Davidoff Hutcher & Citron, a law firm that represented Giuliani in criminal cases, and more than $387,000 owed to a firm that represented him in legal ethics proceedings, the New York Times reports.

The largest debt, however, is the $148 million that Giuliani was ordered to pay to two Georgia election workers for defamation and emotional distress for false claims about vote tampering.

Giuliani estimates the value of his assets at $1 million to $10 million in the Dec. 21 petition, filed in the U.S. District Court for the Southern District of New York.

Publications besides the New York Times covering the bankruptcy filing include the Associated Press, Bloomberg Law, Reuters and Law.com.

Ted Goodman, a political adviser and a spokesperson for Giuliani, told the New York Times that the bankruptcy filing will give Giuliani time to pursue an appeal in the election-workers case, provide transparency for his finances, and “ensure all creditors are treated equally and fairly throughout the process.”

Giuliani’s potential liabilities include several pending suits, including two by voting machine companies Dominion Voting Systems and Smartmatic, which sued over stolen-election claims.

See also:

“Giuliani ordered to pay over $89K discovery sanction in poll workers’ suit”

“Giuliani should be disbarred for basing election suit on ‘speculation’ and ‘suspicion,’ ethics committee says”

“Rudy Giuliani defends election suit, claims persecution in ethics hearing that became ‘a tad argumentative’”