Lawyer Complaints

Big Law Firms DLA Piper and Fox Rothschild Accused of Turning A Blind Eye for Easy Cash

The receiver for investment funds accused of operating as a Ponzi scheme has sued DLA Piper and Fox Rothschild for allegedly facilitating the wrongdoing.

Receiver’s lawsuit alleges 2 BigLaw firms turned a blind eye to Ponzi scheme

Sept. 29, 2020

The receiver for investment funds accused of operating as a Ponzi scheme has sued DLA Piper and Fox Rothschild for allegedly facilitating the wrongdoing.

The Sept. 28 lawsuit filed by the receiver for EquiAlt investment funds and their investors claims that a partner who worked at both law firms was either grossly negligent or aided EquiAlt insiders in creating and perpetrating the Ponzi scheme.

EquiAlt was a private real estate firm that “raised more than $170 million from at least 1,100 unsuspecting investors around the country, by selling them fraudulent, unregistered securities, and then by comingling and diverting the investors funds for improper purposes,” the lawsuit says.

EquiAlt insiders used millions of dollars in investor money for such things as personal real estate, luxury cars, jewelry and jets by charging fees, commission and expenses that were not disclosed and were not earned, the suit contends.

The suit alleges that the partner, Paul Wassgren, prepared inadequate disclosures and compliance materials. Wassgren worked at Fox Rothschild from July 2010 through May 2017. He then began work at DLA Piper, where he was still employed when the complaint was filed Sept. 28.

The suit also says the law firms failed to protect the funds by recommending proper checks and balances and failed to have a system in place to prevent Wassgren from undertaking representation that involved conflicts of interest.

The law firms and Wassgren “never acquired any waivers of the multiple conflicts of interest existing between the investment funds, EquiAlt and the EquiAlt insiders, and in any event, the existing conflicts of interest were unwaivable,” the suit says.

The suit says the law firms received hundreds of thousands of dollars in legal fees “in exchange for aiding and turning a blind eye to the fraudulent activities of EquiAlt and the EquiAlt insiders.”

The suit alleges negligence, breach of fiduciary duty, and aiding and abetting fraud.

DLA Piper, Fox Rothschild and Wassgren did not immediately respond to the ABA Journal’s request for comment.

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