SEATTLE (CN) - Fourteen lawsuits claim the Seattle law firm Graham & Dunn knew about a client's "massive fraud," including spending real estate investors' money on lavish vacations, luxury cars and a yacht, but did not warn the investors and helped the client conceal the scheme.
Click here to read Courthouse News' Securities Law Review.Angela Aggen heads the list of dozens of plaintiffs in one of the 14 complaints against Graham & Dunn, P.C. All the complaints were filed in King County Court.
Aggen claims that NDG Investment Group, headed by Jose Nino De Guzman, both non-parties, solicited more than $12 million to develop real estate projects in Peru that never materialized. The company repeatedly violated securities laws and De Guzman used investor money to fund his "lavish lifestyle," according to the complaint.
"Not surprisingly, the company that repeatedly violated the securities laws and concealed its violations from investors had other secrets as well," the complaint states. "Investors' funds were not being used for the purposes they were intended. Instead, investor funds were diverted to friends and associates of NDG's Chief Executive Officer, Jose Nino De Guzman, and were used to fund Mr. De Guzman's lavish lifestyle - which included a Bentley, a yacht, an expensive art collection, and hundreds of thousands of dollars spent in clubs in Las Vegas, Miami, and Hollywood. That massive fraud was made possible by De Guzman's lawyers, who aided, abetted, and conspired with NDG and De Guzman to carry out the scheme."
The plaintiff investors claim attorneys at Graham & Dunn knew about NDG's securities violations, helped the company mislead securities officials, and helped conceal De Guzman's misuse of funds.
Graham & Dunn did not respond to an e-mail requesting comment on the allegations.
De Guzman waived privilege and authorized Graham & Dunn to turn over documents to NDG whistleblowers' attorneys, according to the complaint. But it says Graham & Dunn omitted an incriminating email, later discovered in NDG's files, in which "Graham & Dunn cautioned its client" about terminating its vice president for business development, Nathan Hoerschelmann.
According to the complaint, the email states: "'As you know, we continue to be in violation of various state and federal securities laws with respect to most of our deals ... Although my instincts tell me that Nathan will not take it upon himself to disclose NDG's failures to the authorities or to NDG's investors, this causes a great deal of concern. We will, of course, incorporate a confidentiality agreement within the separation agreement that is being drafted. Unfortunately, the confidentiality agreement will only be worth anything so long as it is honored - because, as soon as the 'cat's out of the bag,' our ability to enforce this agreement really doesn't help us much. Because this would be a HUGE issue for you if these violations were publicly known, you may want to consider whether it makes sense to maintain Nathan's employment until the violations can be remedied.'
"Just weeks later, NDG and Graham & Dunn raised another $1 million from investors-including plaintiffs in this case-in another non-compliant securities offering. None of those investors was told that NDG and Graham & Dunn were concealing a 'HUGE' secret," according to the complaint.
The plaintiffs claim that NDG and De Guzman solicited money through various limited liability companies formed by Graham & Dunn.