Attorney Accused of Cheating Ethanol Client

KANSAS CITY, Kan. (CN) - The bankruptcy trustee for Ethanex Energy, an ethanol company, claims attorney Louis Zehil abused his position to profit by more than $8 million through short swing sales of Ethanex as he represented it during its IPO. Zehil, a partner in McGuire Woods LLP, allegedly did it through his companies Strong Branch Ventures and Chestnut Capital Partners, according to the federal complaint.

"Defendant Louis W. Zehil ('Zehil') was a partner in the law firm of McGuire Woods, LLP ('McGuire Woods')," the complaint states. "Defendants Zehil and McGuire Woods were retained to represent Ethanex in the process of becoming a public company and raising capital for the development of ethanol manufacturing plants. As explained in further detail below, Zehil used his position as a partner of McGuire Woods, and acting through two entities created and controlled by him, Defendants Strong Branch Ventures IV, LLP and Chestnut Capital Partners II, LLC, to perpetrate a fraudulent scheme in which Zehil unlawfully came into possession of unrestricted securities of Plaintiff Ethanex. Zehil then unlawfully sold these securities at great profit and at great harm to Ethanex. At all relevant times, Defendant Zehil was the former outside legal counsel and corporate secretary of Ethanex Energy, Inc. In late February 2007, Defendant Zehil was charged with criminal violations of United States securities laws in the U.S. District Court for the Southern District of New York arising out of the Ethanex transaction and several similar transactions."

During it all, Ethanex paid McGuire Woods more than $350,000 for its services, the complaint states.

The bankruptcy trustee is represented by John Edgar of Kansas City, Mo.

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