LOS ANGELES (CN) – A slew of law firms face civil claims they aided and abetted a multimillion-dollar securities scam run by convicted fraudster Robert Shapiro through the now-defunct real estate investment firm Woodbridge Group of Cos.
The lawsuit, filed in Los Angeles Superior Court on Monday but not made available to the press and public until Tuesday, describes a web of collusion with Woodbridge, through which Shapiro engineered a classic $1.3 billion Ponzi scheme that targeted the elderly and their retirement accounts.
Shapiro pleaded guilty to fraud in October and received a 25-year prison sentence. He was also ordered to return artwork by Pablo Picasso and Auguste Renoir, more than 600 bottles of wine, hundreds of diamonds and a vintage Mercury convertible – all funded with investor money.
Now in bankruptcy, Woodbridge is suing nine law firms through its trustee Michael Goldberg. The 170-page complaint alleges that the firms and several individual attorneys knowingly assisted in using investor money to purchase properties through sham loans to third parties actually controlled by Shapiro.
In some instances, properties that were supposedly part of the Woodbridge portfolio were never acquired. As Shapiro’s properties failed to generate cash flow to pay off investor loans, he and his associates resorted to siphoning off new investors’ money to cover the deficiency. Shapiro continued to solicit new investors despite knowing he was on the verge of bankruptcy, while fraudulently marketing the investments as safe and low-risk.
The firms are accused of helping conceal the third-party entities’ affiliation with Shapiro to dupe investors, as well as ongoing regulatory investigations into Woodbridge Group.
The defendant law firms are Halloran & Sage LLP, Robinson & Cole LLP, Finn Dixon & Herling LLP and Rome McGuigan P.C. of Connecticut; Balcomb & Green P.C. and Davis Graham & Stubbs LLP of Colorado; Bailey Cavalieri LLC of Ohio; and Haight Brown & Bonesteel LLC and Sidley Austin LLP of Illinois.
The Woodbridge Liquidation Trust seeks $500 million in general damages as well as an unspecified amount in restitution and punitive damages. It is represented by Louis “Skip” Miller with Miller Barondess LLP of Los Angeles.
Speaking to Courthouse News by phone, Miller said the law firms prepared the paperwork necessary to advance the scheme.
“They wrote the offering documents which were false and misleading and they gave opinion letters to investors which were false and misleading,” he said, adding he hopes the lawsuit will help the 8,400 Woodbridge victims recoup their losses.
“They are very substantial law firms,” Miller said. “I expect they have very deep pocket resources.”