WEST PALM BEACH (CN) - The former CEO of Reebok claims that after an accountant embezzled $17 million from his charitable foundation, a law firm "recklessly turned a blind eye" and helped the man invest the money in real estate, so it could collect more than $100,000 in legal fees.
Paul Fireman dba PFP Associates and the Paul and Phyllis Fireman Charitable Foundation sued the Cohen, Norris, Scherer, Weinberger and Wolmer law office and its partners: The Law Offices of Fred Cohen P.A., David Norris P.A., Robert Weinberger P.A., Kenneth Scherer P.A., Brent Wolmer P.A., Peter Ray P.A., Gregory Cohen P.A., James Telepman P.A., and Roger Stanton, in Palm Beach County Court.
Fireman claims his former accountant, nonparty Arnold Mullen, embezzled more than $17 million from his foundation.
The complaint states: "Although not directly engaged in the theft itself, the Cohen Firm and its lawyers are responsible for the damages caused to the Charitable Foundation and Fireman because among other things, their reckless actions aided Mullen and his former business partner, Lennard Kligler, in using the stolen funds to acquire an apartment complex located in Lake Worth, Florida for their own benefit.
"The Cohen Firm and its lawyers did so under circumstances where it was obvious, especially to a group of highly experienced lawyers, that an embezzlement was occurring.
"Despite the fact that the Cohen Firm was told that the money being used to fund the deal was from multiple 'individual investors,' they helped Mullen and Kligler use the funds solely for their own benefit.
"By following Mullen's instruction to take money known by the Cohen Firm to belong to 'other investors' and use it to buy property for the benefit of Mullen and Kligler alone, the Cohen Firm ignored ethical conflicts of interest. The Cohen Firm knew that others, including Fireman and the Charitable Foundation, would be harmed by their actions, yet they followed Mullen's instruction because they were being paid a substantial fee of $100,000 to close the deal.
"The Cohen Firm and its lawyers knew that Fireman was the source of the funds, and that Fireman was an investor in the deal. Fireman was identified on corporate documents as a 'member' and 'manager' of the limited liability company set up by Mullen to take the investors' interest.
"However, acting on the instructions of Mullen alone, and without ever contacting Fireman, the Cohen Firm altered and filed new corporate documents, in violation of Florida law, which allowed Mullen to use the stolen funds and complete the transaction without Fireman's knowledge or signature.
"The Cohen Firm knew, should have known, or recklessly disregarded that Mullen's acts were adverse to Fireman and that he would be harmed if they followed Mullen's instruction.
"Later, after the deal failed due to the crash in the housing market and the property fell into foreclosure, the Cohen Firm assisted Mullen in converting millions from the Charitable Foundation to acquire defaulted mortgages on the property for the benefit of Mullen. Again, the Cohen Firm did so knowing that the money was coming from the Charitable Foundation and did not belong to Mullen.
"At the time, attorney Fred Cohen had actual knowledge that Mullen was not reputable and was being accused by others of engaging in fraudulent conduct similar to what occurred in this instance. In fact, Fred Cohen warned the Cohen Firm's other client, Kligler, about the accusations against Mullen and to watch out for Mullen. Neither Fireman nor the Charitable Foundation received any such warning. Instead, the Cohen Firm and its lawyers recklessly, and in violation of their duties as escrow agents and otherwise, converted the Chartable Foundation's money and helped Mullen use it to acquire the defaulted mortgages.
"Among the numerous improper acts committed by the Cohen Firm, which also violated their duties as escrow agent in the transaction, the Cohen Firm followed Mullen's instruction and disbursed money belonging to Fireman and the Charitable Foundation without confirming that Mullen was authorized to direct the distribution of the Charitable Foundation and Fireman's funds, which the Cohen Firm held in escrow.
"In fact, despite knowing that the money came from Fireman and the Charitable Foundation, the Cohen Firm made no effort to confirm that Mullen was authorized to direct them (as escrow agent) on how to disburse the funds.
"To date, despite all that is now public knowledge, the Cohen Firm and its lawyers have not returned any of Fireman's or the Charitable Foundation's money. The Cohen Firm wrongfully took such funds to pay their own attorney's fees, which were well in excess of $100,000, and were paid to them ostensibly to perform a few isolated tasks that, if legitimate, would cost substantially less." (Parentheses in complaint.)
Thirty paragraphs later, the complaint states: "The Cohen Firm negligently and recklessly turned a blind eye to these facts and circumstances for its own profit and assisted others in accomplishing unlawful and unethical tasks."
Fireman seeks an accounting, imposition of a constructive trust, and damages for negligence, unjust enrichment, and aiding and abetting breach of fiduciary duty and fraud and conversion.
He is represented by Joseph Curley, with Gunster, Yoakley & Stewart.