Holland & Knight, the largest law firm in Florida, faces a lawsuit as a result of its dealings with <"http://www.yourlawyer.com/topics/overview/Arthur_Nadel_Ponzi_Scheme">accused Ponzi schemer Arthur Nadel. According to Bradenton.com, the class action lawsuit alleges that Holland & Knight prepared prospectuses for Nadelâ€™s hedge funds that left out critical information about the funds and their administrators.
Nadel was president of Scoop Management Inc., which managed six private investment funds. The funds managed by Scoop included Viking IRA, Valhalla Investment Partners LP, Viking, Victory, Victory IRA and Scoop Real Estate. Viking IRA, Valhalla and Viking funds were managed by Nadel under contract with his partners, Neil and Chris Moody.
Nadel disappeared on January 14, a day before he was to deliver a $50 million payout to investors. He left his family a purported suicide note, but it was always suspected that Nadel was alive and on the run.
Nadel turned himself in to the FBI in Tampa two weeks later. He was charged with one count each of securities fraud and wire fraud, and his case was moved to federal court in Manhattan. Nadel is in jail, having been unable to meet the conditions of a $5 million bond. If convicted, Nadel could face a maximum of 20 years in prison on each charge.
The class action lawsuit against Holland & Knight has been brought by Michael J. Sullivan on behalf of the Michael J. Sullivan IRA Account. According to Sullivan’s complaint, Holland & Knight prepared all Scoop Management’s Private Placement Memorandums, or PPMs, for its hedge funds after 2001.
The lawsuit claims that the PPMs prepared by Holland & Knight staff failed to reveal that Nadel was once disbarred as a lawyer for financial improprieties. According to a report on HeraldTribune.com, Nadel’s New York law career ended with disbarment in 1982, based on a 1978 episode in which he took $50,000 out of an escrow account to pay off a loan shark.
The complaint also alleges that the PPMs indicated that Scoop Management had retained the services of Michael Zucker, whom it identified as an independent CPA. As we’ve reported previously, Zucker is a former certified public accountant who let his credentials lapse in 1990, and who was once sanctioned by regulators for claiming to be a CPA.
The complaint also alleges that the PPMs failed to reveal:
* that no review of Nadel’s operations had been conducted by any licensed independent accountant;
* that insufficient profits were being generated by the Nadel funds to pay reported returns; that Nadel and his companies were acting as investment advisor without required registration;
* and that the various Nadel funds were really being operated as a Ponzi scheme.
Sullivan’s IRA invested and lost about $1.85 million in the Victory IRA Fund Ltd. His lawsuit, filed “on behalf of all others similarly situated,” claims that the PPM for Victory IRA “was substantially similar to the other PPMs prepared by H&K (Holland & Knight) for the other Nadel funds, and all of the H&K prepared PPMs had common deficiencies.”