Earlier this week, we reported on a former Locke Lord partner in the UK sentenced for operating a Ponzi scheme. Today, we talk about another Ponzi scheme involving Locke Lord, but this time in the United States. The law firm is alleged to have facilitated a scam run by their former client, a charge that has resulted in a $12.5 million settlement for a fraud estimated around $122 million. Despite settling, Locke Lord maintains that they did nothing wrong.
The doomed venture, Heartland Group Ventures, and its affiliates collected investments from hundreds of investors under the illusion of funding new projects. The capital raised was grossly misused for personal assets and luxuries rather than being invested as promised. The receiver of the bankrupt entity lodged accusations against Locke Lord, stating they ought to have known about Heartland’s dubious activities. If they had acted on such knowledge, the receiver argues, Locke Lord could have halted the illegal transactions earlier.
The charges leveled by the receiver against Locke Lord have vast potential implications. As counsel to certain Heartland-related parties in connection with oil-and-gas offerings and the Commission’s investigation, Locke Lord and its attorneys were within a position where they should have been aware of Heartland’s misconduct, the receiver alleges. They believe Locke Lord should have known Heartland was in violation of security laws, not in adherence with Commission regulations, and making improper payments. The Receiver’s motion forwarded potential allegations that Locke Lord poorly advised Heartland parties, failed to guide them about their disclosure obligations and failed to review key documents for investor protection.
Locke Lord, however, remains resolute that this was not a Ponzi scheme and that they had no participation in it. They opted for settlement in exchange for a release. This could certainly add a layer of complexity to Locke Lord’s ongoing merger talks with Troutman Pepper. It’s not every day that mergers are discussed amidst the backdrop of ‘Ponzi’ cropping up twice in a week.
For an in-depth look at Locke Lord’s settlement, see this Reuters article: Texas law firm to pay $12.5 mln over ex-client’s alleged fraud.