Con Man Had Friends in Legal Places, Firm Says
(CN) - A Los Angeles law firm helped a con artist fleece an investor for $11.25 million in a fictitious Facebook deal, the allegedly defrauded company claims in court.
ESG Capital Partners sued law firm Miller Barondess, partner Erik Syverson and Does 1-50 in Los Angeles County Superior Court.
Miller Barondess aided and abetted its client, "the notorious con-artist Troy Stratos in the misappropriation of $11.25 million from ESG, a crime for which Stratos is currently being held without bail under federal indictment," the complaint states. "Defendants had both knowledge of Stratos' misappropriate and substantially assisted him in defrauding ESG through a scheme involving the purported sale of pre-IPO Facebook shares. Rather than utilizing plaintiffs' $11.25 million to purchase Facebook shares, Stratos - with the defendants' assistance - simply stole plaintiffs' money."
A federal grand jury indicted Stratos, 47, in May on 20 counts of wire fraud, money laundering and obstruction of justice.
According to the FBI press release, Stratos claimed that he represented Mexican billionaire Carlos Slim, who planned to buy a large block of Facebook stock, and would sell the excess to ESG.
To perpetrate this fraud, Stratos allegedly posed as an international businessman named "Ken Dennis."
ESG says it placed $7.2 million as a deposit in a Bank of America account pending transfer of the shares, but fraud concerns led the bank to freeze and ultimately close Stratos' account shortly after receiving the money.
"Without an account in which to place ESG's money, Stratos' scheme faced imminent exposure," the complaint states. "Defendants, however, helped Stratos hide $5.8 million of ESG's funds in its client trust account. Defendants accepted these funds knowing that they rightfully belonged to ESG and were part of a larger deposit to purchase shares of Facebook stock."
Then, although the Facebook transaction had not closed, Miller Barondess "allowed Stratos to use its client trust account as his personal piggybank, funding Stratos' extravagant lifestyle and paying off his debts from earlier fraudulent schemes."
Federal prosecutors say Stratos spent months telling EGS that the deal would close soon, but was being delayed for various reasons, citing a fictitious deal with Steve Jobs, the founders of Google, and other Silicon Valley entrepreneurs. Even after he was arrested, Stratos continued to tell EGS that the deal was real, although he had spent nearly all of the $11.25 million, the FBI said.
EGS claims that "neither Syverson nor anyone else at Miller Barondess ever informed plaintiffs that their 'refundable' deposit had been moved from BOA to Miller Barondess, or that a person named Troy Stratos (of whom ESG had never even heard was freely spending the money ESG had earmarked to purchase Facebook shares. Instead, Miller Barondess paid itself hundreds of thousands of dollars directly from plaintiffs' funds." (Parentheses in original.)
The website for Miller Barondess says Syverson specializes in Internet and digital media issues, and was named a "Rising Star" by Super Lawyers magazine in 2012 and 2013.
Stratos was also indicted for a $7 million theft from Eddie Murphy's ex-wife, Nicole Murphy, according to the complaint.
The FBI press release does not identify the victim, but states that Stratos defrauded a woman of $7 million by convincing her he could manage the proceeds of her divorce by investing them overseas. He also claimed he could sell her home to a Middle Eastern royal family, but she needed to lease luxury cars to make the home more enticing.
In fact, Stratos lived in the house, and drove the cars himself.
ESG seeks punitive damages for aiding and abetting fraud, aiding and abetting conversion, conspiracy, conversion and unjust enrichment.
It is represented by Eugene Ashley with Hopkins & Carley.