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Tuesday, March 16, 2010

Another New York Attorney Shows How Big Corrupt Deals Are Done

...and it appears to be just fine with corrupt ethics attorneys Alan W. Friedberg, Chief Counsel of the Appellate Division, First Department Departmental Disciplinary Committee (DDC), and Roy L. Reardon, DDC Chairman and Simpson Thacher Partner....

Ex-McGuireWoods Partner Pleads Guilty To Securities Fraud

The New York Law Journal by Mark Hamblett - March 16, 2010

A former McGuireWoods partner admitted yesterday to using his position as counsel to small companies to make $10 million in illegal profits. One-time securities lawyer Louis W. Zehil pleaded guilty to securities fraud and conspiracy to commit securities fraud before Southern District Judge Deborah A. Batts, admitting he used his position as counsel for several companies to secretly buy and then sell millions of shares at favorable prices. "I knew what I was doing was wrong," Mr. Zehil told the judge. "I take full responsibility for my actions." Mr. Zehil, 44, a resident of Florida, worked at McGuireWoods until 2007 when he was forced to resign after it was revealed he had issued fraudulent opinion letters for the handling of private investments in public entities. Mr. Zehil worked at the firm's Jacksonville, Fla., and New York offices, specializing in representing small companies that were going public through reverse mergers, transactions in which the companies become public by merging with publicly traded shell corporations. In these so-called "PIPE" transactions, investors commit to buying a set number of restricted shares at a discount price to the market price (or the anticipated market price following the reverse merger) and the issuer agrees to file a resale registration statement at a later date so the investor can resell the shares in the public market. Until the registration for the resale takes place, the shares are not freely tradeable. Mr. Zehil, however, issued opinion letters to the stock transfer agents of seven companies to which he was counsel, stating there was no need to have the shares they were sending Strong Branch Ventures IV and Chestnut Capital Partners II marked with a legend noting the shares were restricted. Both Strong and Chestnut were front companies owned by Mr. Zehil. With other PIPE investors holding restricted shares based on his legitimate opinion letters, Mr. Zehil was able to sell his own "unrestricted" shares and net $10 million between January 2006 and February 2007. The companies were Gran Tierra Energy Inc.; Foothills Resources Inc.; MMC Energy Inc.; Alternative Energy Sources Inc.; Ethanex Energy Inc.; GoFish Corp.; and Kreido BioFuels Inc. Mr. Zehil never informed his clients that he was buying the shares. He appeared to choke up yesterday when Judge Batts walked him through the procedures and consequences of his guilty plea. "I'm a little nervous," he told the judge, asking if he could allocute by reading a prepared statement.

The conspiracy involved an unnamed associate at the firm who has not been charged. Mr. Zehil said the associate mailed the opinion letters to the companies and was aware that what she was doing was illegal. Nonetheless, Mr. Zehil said he believed the associate went along with the scheme only because she was deferring to his senior position at McGuireWoods. "I acted alone," he told the judge, adding that he "circumvented my firm's opinion policies." When Judge Batts asked if that was entirely true that he acted alone, given that Mr. Zehil was admitting to a conspiracy, defense lawyer Andrew M. Lawler spoke up. "My client is just trying to make it clear that he is accepting primary responsibility" and that the associate followed directions because of his "position with the firm," Mr. Lawler said. Mr. Zehil's actions were first discovered by a firm associate, who reported the matter to the firm's managers in February 2007. Partners at McGuireWoods investigated. Mr. Zehil admitted issuing the opinion letters but at first denied owning the Strong and Chestnut front companies. The partners then informed clients what Mr. Zehil had done, forced his resignation and reported him to the Securities and Exchange Commission, which filed a companion civil suit against Mr. Zehil in the Southern District, Securities and Exchange Commission v. Zehil, 07 Civ. 1439. That suit is pending. "What Louis Zehil did was contrary to everything that McGuireWoods stands for," William Alcott, a partner at the 900-lawyer Richmond, Va.-based firm, said yesterday in an interview. Fortunately, he added, the firm "discovered what he was doing, although he took great pains to do it in secret. We demanded his resignation and we turned him in." Mr. Zehil, a 1995 graduate of Columbia Law School, worked at Hale & Dorr and White & Case before moving to the New York office of Jones Day as an associate. He joined McGuireWoods' 35-lawyer New York office as a partner in 2004. Mr. Zehil is scheduled to be sentenced in United States v. Zehil, 07 Cr. 659, on July 26. Securities fraud carries a maximum of 20 years in prison and conspiracy a maximum of five years, but the plea agreement between Mr. Zehil and the government states that his stipulated U.S. Sentencing Guidelines range is from five years and three months to 61/2 years. Southern District Assistant U.S. Attorney Eugene Ingoglia represented the government. Mr. Zehil and Mr. Lawler, a solo practitioner, declined comment following the guilty plea. Mark Hamblett can be reached at mhamblett@alm.com.

7 comments:

disgusted said...

Mother of God! This guy worked for White and Case also. Seems like all the big firms have the corruption covered.

Anonymous said...

Feds take care of the rat of Gary I. Greenwald, Esq. he is in to big fraud. Follow the money going in and out of the bank he manages in Middletown, New York Orange County. Lots of fraud with this rat go look at how the accounting of his office are been done. This Alcapone want to be belongs in jail been bubba's girlfriend.

Anonymous said...

Quote, " "What Louis Zehil did was contrary to everything that McGuireWoods stands for," needed to be followed by
"Cheat and steal to enrich our firm, but cover your tracks."
"The unnamed associate is an example of the faithful quality of our hired counsel, who follow orders no matter how corrupt and criminal."

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

With regards to the NYCLA Fee Dispute Program, if you are a Jewish Attorney or from a Big Law Firm, you get to keep your fees earned. If not, or you are a Minority Attorney or from a Small Law Firm, you don't get to keep the money you earned through billing. It's the same problem with the Departmental Disciplinary Committee, First Department.

Anonymous said...

I bet he learned everything he knew about criminal activities while he was at the training camp White & Case, crime central. How many complaints had been filed with the DDC on this bum? How many were covered up due to his position at White & Case? They do control the First Dept. as you know, no fooling.
Put him in JAIL forever!

Cetatzeanul said...

i work at a personal injury law firm nyc and i found your article really useful ( for my boss ). Just sent him the link, maybe i''ll get the day off.

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See Video of Senator John L. Sampson's 1st Hearing on Court 'Ethics' Corruption

The first hearing, held in Albany on June 8, 2009 hearing is on two videos:


               Video of 1st Hearing on Court 'Ethics' Corruption
               The June 8, 2009 hearing is on two videos:
         
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