LOCKE LIDDELL: $ 22 Mil Settlement Serves as Warning to Other Law Firms
-----------------------------------------------------------------------
Locke Liddell & Sapp's agreement to pay $ 22 million to settle a suit
alleging it aided a client in defrauding investors is expected to serve
as a warning to other firms that they must take action when they learn a
client's alleged wrongdoing may be harming third parties. The
Dallas-based firm agreed April 14 to settle a suit stemming from its
representation of Russell Erxleben, a former University of Texas star
football kicker whose foreign currency trading company was allegedly a
Ponzi scheme. Erxleben pleaded guilty last November to federal
conspiracy and securities-fraud charges and is to be sentenced in May.
Locke Liddell's settlement comes on the heels of an $ 8.5 million
settlement by Houston's Sheinfeld, Maley & Kay and attorney Lee Polson.
The two settlements, minus attorneys' fees and expenses, are expected to
bring investors a recovery of more than 60 cents on the dollar. And if
those large settlements don't get lawyers' attention, the American Law
Institute is considering making a lawyer's duty to a third party clear
in its Restatement of the Law Governing Lawyers.
The Texas disciplinary rules state that a lawyer may disclose
confidential client information in order to prevent the client from
committing a criminal or fraudulent act. Jim George, an Austin lawyer
who is a member of the ALI, said he favors making it clear that a lawyer
must tell people if a client is hurting them. "It's a very simple legal
proposition a lawyer can't help people steal money," said George, of
George & Donaldson.
George represents investors who lost $ 34 million they placed in
Erxleben's Austin Forex International. Daniel N. Matheson III, a former
Locke Liddell partner who represented Erxleben, said in his deposition
that he knew in March 1998 that $ 8 million in AFI's losses hadn't been
reported to investors. AFI, which was founded in September 1996, shut
its doors in September 1998. A few days later, Texas securities
regulators seized its accounts and put the company into receivership.
Harriet Miers, co-managing partner of Locke Liddell, said the firm
denies liability in connection with its representation of Erxleben.
"Obviously, we evaluated that this was the right time to settle and to
resolve this matter and that it was in the best interest of the firm to
do so," Miers said.
The Locke Liddell settlement covers partner Curtis Ashmos of Austin and
former partners Daniel Matheson and Jane Matheson. Other defendants,
including an accounting firm and an Austin businessman, remain in the
case. The settlement agreement bars lawyers for the plaintiffs from
talking to the media about the settlement. Judge Paul Davis of Travis
County, Texas's 200th District Court agreed April 17 to certify a class
for settlement purposes.
If investors whose losses total more than $ 300,000 opt out of the
settlement, Locke Liddell can walk away from it, according to the
agreement. Janet Mortenson, the court-appointed receiver for Austin
Forex, testified that settlement was reached after two long days of
mediation. She said that investors would benefit from getting quick
payment. Had the case been certified as a class action, Locke Liddell
would have filed an interlocutory appeal, which could have delayed the
case from going to trial for at least a year, Mortenson said. Mortenson
also defended the 24.5 percent contingent fee being paid to Bickerstaff,
Heath, Smiley, Pollan, Kever & McDaniel in Austin, Texas, for
representing her. She said she had no money to pursue the claims against
the law firms and was turned down by several firms because of the
complexity of the case. "This is a perfect example of the
appropriateness of contingency fees," Mortenson said.
Bickerstaff partner Michael Shaunessy was the lead lawyer for Mortenson.
By filing the malpractice case on behalf of both Mortenson and the
investors, the plaintiffs' lawyers avoided a legal fight over who was
the proper party to file suit. The case came together after Davis ruled
that Mortenson owned the legal privilege and work product of Erxleben's
lawyers. Documents, including lawyers' notes contained in the boxes that
were turned over to Mortenson, formed the basis of the suit, which was
filed last October.
Test Case
The case was viewed as a test of the Texas Supreme Court's April 1999
ruling that a lawyer can be sued by a nonclient for negligent
misrepresentation. In McCamish Martin Brown & Loeffler v. Appling
Interests, however, the court made it clear that a lawyer could be
liable only when the lawyer invites the nonclient to rely upon the
lawyer's opinions and misrepresentations.
Kathy Patrick, who represented Locke Liddell, questioned Mortenson at
the fairness hearing about the state of the law on lawyers' duty to
third parties. Mortenson agreed that the case was on the "frontier of
Texas law." Patrick, of Houston's Gibbs & Bruns, also pointed out that
Locke Liddell had credible defenses, including evidence that Erxleben
may have concealed his conduct from his attorneys. Before the
settlements, Mortenson had recovered only about $ 300,000 in cash, four
cars and a $ 75,000 skybox for UT football games. As alleged in the
petition, Erxleben traded on his football reputation to solicit
investors. He allegedly represented that each investor's account was
maintained separately and that trading profits were allocated
appropriately. But the plaintiffs claim the funds were placed into a
single account and traded together as one large pool of money. The suit
alleges that Erxleben sometimes misappropriated funds for his personal
use and would allocate profits to individual investor accounts at his
own discretion, often favoring some investors over others. The petition
alleges the lawyers allowed AFI to sell unregistered securities, signed
off on brochures and promotional materials that contained
misrepresentations, and knew about the company's growing losses for
months before state securities regulators began investigating. This
story originally appeared in the Texas Lawyer. (The Legal Intelligencer,
April 26, 2000)
She led lawfirm which aided client in defrauding investors
Big Fat Freddy
location: Boise, Idaho
listening to: Elvis
registered: 2004.05.05
posts: 527
[view all posts]
[view all posts]
B
Big Fat Freddy
(view)
LOCKE LIDDELL: $ 22 Mil Settlement Serves as Warning to Other Law Firms
-----------------------------------------------------------------------
Locke Liddell & Sapp's agreement to pay $ 22 million to settle a suit
alleging it aided a client in defrauding investors is expected to serve
as a warning to other firms that they must take action when they learn a
client's alleged wrongdoing may be harming third parties. The
Dallas-based firm agreed April 14 to settle a suit stemming from its
representation of Russell Erxleben, a former University of Texas star
football kicker whose foreign currency trading company was allegedly a
Ponzi scheme. Erxleben pleaded guilty last November to federal
conspiracy and securities-fraud charges and is to be sentenced in May.
Locke Liddell's settlement comes on the heels of an $ 8.5 million
settlement by Houston's Sheinfeld, Maley & Kay and attorney Lee Polson.
The two settlements, minus attorneys' fees and expenses, are expected to
bring investors a recovery of more than 60 cents on the dollar. And if
those large settlements don't get lawyers' attention, the American Law
Institute is considering making a lawyer's duty to a third party clear
in its Restatement of the Law Governing Lawyers.
The Texas disciplinary rules state that a lawyer may disclose
confidential client information in order to prevent the client from
committing a criminal or fraudulent act. Jim George, an Austin lawyer
who is a member of the ALI, said he favors making it clear that a lawyer
must tell people if a client is hurting them. "It's a very simple legal
proposition a lawyer can't help people steal money," said George, of
George & Donaldson.
George represents investors who lost $ 34 million they placed in
Erxleben's Austin Forex International. Daniel N. Matheson III, a former
Locke Liddell partner who represented Erxleben, said in his deposition
that he knew in March 1998 that $ 8 million in AFI's losses hadn't been
reported to investors. AFI, which was founded in September 1996, shut
its doors in September 1998. A few days later, Texas securities
regulators seized its accounts and put the company into receivership.
Harriet Miers, co-managing partner of Locke Liddell, said the firm
denies liability in connection with its representation of Erxleben.
"Obviously, we evaluated that this was the right time to settle and to
resolve this matter and that it was in the best interest of the firm to
do so," Miers said.
The Locke Liddell settlement covers partner Curtis Ashmos of Austin and
former partners Daniel Matheson and Jane Matheson. Other defendants,
including an accounting firm and an Austin businessman, remain in the
case. The settlement agreement bars lawyers for the plaintiffs from
talking to the media about the settlement. Judge Paul Davis of Travis
County, Texas's 200th District Court agreed April 17 to certify a class
for settlement purposes.
If investors whose losses total more than $ 300,000 opt out of the
settlement, Locke Liddell can walk away from it, according to the
agreement. Janet Mortenson, the court-appointed receiver for Austin
Forex, testified that settlement was reached after two long days of
mediation. She said that investors would benefit from getting quick
payment. Had the case been certified as a class action, Locke Liddell
would have filed an interlocutory appeal, which could have delayed the
case from going to trial for at least a year, Mortenson said. Mortenson
also defended the 24.5 percent contingent fee being paid to Bickerstaff,
Heath, Smiley, Pollan, Kever & McDaniel in Austin, Texas, for
representing her. She said she had no money to pursue the claims against
the law firms and was turned down by several firms because of the
complexity of the case. "This is a perfect example of the
appropriateness of contingency fees," Mortenson said.
Bickerstaff partner Michael Shaunessy was the lead lawyer for Mortenson.
By filing the malpractice case on behalf of both Mortenson and the
investors, the plaintiffs' lawyers avoided a legal fight over who was
the proper party to file suit. The case came together after Davis ruled
that Mortenson owned the legal privilege and work product of Erxleben's
lawyers. Documents, including lawyers' notes contained in the boxes that
were turned over to Mortenson, formed the basis of the suit, which was
filed last October.
Test Case
The case was viewed as a test of the Texas Supreme Court's April 1999
ruling that a lawyer can be sued by a nonclient for negligent
misrepresentation. In McCamish Martin Brown & Loeffler v. Appling
Interests, however, the court made it clear that a lawyer could be
liable only when the lawyer invites the nonclient to rely upon the
lawyer's opinions and misrepresentations.
Kathy Patrick, who represented Locke Liddell, questioned Mortenson at
the fairness hearing about the state of the law on lawyers' duty to
third parties. Mortenson agreed that the case was on the "frontier of
Texas law." Patrick, of Houston's Gibbs & Bruns, also pointed out that
Locke Liddell had credible defenses, including evidence that Erxleben
may have concealed his conduct from his attorneys. Before the
settlements, Mortenson had recovered only about $ 300,000 in cash, four
cars and a $ 75,000 skybox for UT football games. As alleged in the
petition, Erxleben traded on his football reputation to solicit
investors. He allegedly represented that each investor's account was
maintained separately and that trading profits were allocated
appropriately. But the plaintiffs claim the funds were placed into a
single account and traded together as one large pool of money. The suit
alleges that Erxleben sometimes misappropriated funds for his personal
use and would allocate profits to individual investor accounts at his
own discretion, often favoring some investors over others. The petition
alleges the lawyers allowed AFI to sell unregistered securities, signed
off on brochures and promotional materials that contained
misrepresentations, and knew about the company's growing losses for
months before state securities regulators began investigating. This
story originally appeared in the Texas Lawyer. (The Legal Intelligencer,
April 26, 2000)
-----------------------------------------------------------------------
Locke Liddell & Sapp's agreement to pay $ 22 million to settle a suit
alleging it aided a client in defrauding investors is expected to serve
as a warning to other firms that they must take action when they learn a
client's alleged wrongdoing may be harming third parties. The
Dallas-based firm agreed April 14 to settle a suit stemming from its
representation of Russell Erxleben, a former University of Texas star
football kicker whose foreign currency trading company was allegedly a
Ponzi scheme. Erxleben pleaded guilty last November to federal
conspiracy and securities-fraud charges and is to be sentenced in May.
Locke Liddell's settlement comes on the heels of an $ 8.5 million
settlement by Houston's Sheinfeld, Maley & Kay and attorney Lee Polson.
The two settlements, minus attorneys' fees and expenses, are expected to
bring investors a recovery of more than 60 cents on the dollar. And if
those large settlements don't get lawyers' attention, the American Law
Institute is considering making a lawyer's duty to a third party clear
in its Restatement of the Law Governing Lawyers.
The Texas disciplinary rules state that a lawyer may disclose
confidential client information in order to prevent the client from
committing a criminal or fraudulent act. Jim George, an Austin lawyer
who is a member of the ALI, said he favors making it clear that a lawyer
must tell people if a client is hurting them. "It's a very simple legal
proposition a lawyer can't help people steal money," said George, of
George & Donaldson.
George represents investors who lost $ 34 million they placed in
Erxleben's Austin Forex International. Daniel N. Matheson III, a former
Locke Liddell partner who represented Erxleben, said in his deposition
that he knew in March 1998 that $ 8 million in AFI's losses hadn't been
reported to investors. AFI, which was founded in September 1996, shut
its doors in September 1998. A few days later, Texas securities
regulators seized its accounts and put the company into receivership.
Harriet Miers, co-managing partner of Locke Liddell, said the firm
denies liability in connection with its representation of Erxleben.
"Obviously, we evaluated that this was the right time to settle and to
resolve this matter and that it was in the best interest of the firm to
do so," Miers said.
The Locke Liddell settlement covers partner Curtis Ashmos of Austin and
former partners Daniel Matheson and Jane Matheson. Other defendants,
including an accounting firm and an Austin businessman, remain in the
case. The settlement agreement bars lawyers for the plaintiffs from
talking to the media about the settlement. Judge Paul Davis of Travis
County, Texas's 200th District Court agreed April 17 to certify a class
for settlement purposes.
If investors whose losses total more than $ 300,000 opt out of the
settlement, Locke Liddell can walk away from it, according to the
agreement. Janet Mortenson, the court-appointed receiver for Austin
Forex, testified that settlement was reached after two long days of
mediation. She said that investors would benefit from getting quick
payment. Had the case been certified as a class action, Locke Liddell
would have filed an interlocutory appeal, which could have delayed the
case from going to trial for at least a year, Mortenson said. Mortenson
also defended the 24.5 percent contingent fee being paid to Bickerstaff,
Heath, Smiley, Pollan, Kever & McDaniel in Austin, Texas, for
representing her. She said she had no money to pursue the claims against
the law firms and was turned down by several firms because of the
complexity of the case. "This is a perfect example of the
appropriateness of contingency fees," Mortenson said.
Bickerstaff partner Michael Shaunessy was the lead lawyer for Mortenson.
By filing the malpractice case on behalf of both Mortenson and the
investors, the plaintiffs' lawyers avoided a legal fight over who was
the proper party to file suit. The case came together after Davis ruled
that Mortenson owned the legal privilege and work product of Erxleben's
lawyers. Documents, including lawyers' notes contained in the boxes that
were turned over to Mortenson, formed the basis of the suit, which was
filed last October.
Test Case
The case was viewed as a test of the Texas Supreme Court's April 1999
ruling that a lawyer can be sued by a nonclient for negligent
misrepresentation. In McCamish Martin Brown & Loeffler v. Appling
Interests, however, the court made it clear that a lawyer could be
liable only when the lawyer invites the nonclient to rely upon the
lawyer's opinions and misrepresentations.
Kathy Patrick, who represented Locke Liddell, questioned Mortenson at
the fairness hearing about the state of the law on lawyers' duty to
third parties. Mortenson agreed that the case was on the "frontier of
Texas law." Patrick, of Houston's Gibbs & Bruns, also pointed out that
Locke Liddell had credible defenses, including evidence that Erxleben
may have concealed his conduct from his attorneys. Before the
settlements, Mortenson had recovered only about $ 300,000 in cash, four
cars and a $ 75,000 skybox for UT football games. As alleged in the
petition, Erxleben traded on his football reputation to solicit
investors. He allegedly represented that each investor's account was
maintained separately and that trading profits were allocated
appropriately. But the plaintiffs claim the funds were placed into a
single account and traded together as one large pool of money. The suit
alleges that Erxleben sometimes misappropriated funds for his personal
use and would allocate profits to individual investor accounts at his
own discretion, often favoring some investors over others. The petition
alleges the lawyers allowed AFI to sell unregistered securities, signed
off on brochures and promotional materials that contained
misrepresentations, and knew about the company's growing losses for
months before state securities regulators began investigating. This
story originally appeared in the Texas Lawyer. (The Legal Intelligencer,
April 26, 2000)
-
Bush nominates Harriet Miers to Supreme Court – Big Fat Freddy on October 3rd, 2005-
A paper-thin resume – Big Fat Freddy on October 3rd, 2005
She led lawfirm which aided client in defrauding investors – Big Fat Freddy on October 4th, 2005
Re: Bush nominates Harriet Miers to Supreme Court – blockdog on October 3rd, 2005
-