General Counsel, Former State Enforcement Lawyer, Pleads Guilty to Securities Fraud
The former general counsel of an alleged ponzi scheme pleaded guilty to criminal charges and was barred from practicing before the SEC because he participated in the scheme by preparing misleading offering memoranda and approving fraudulent advertising. The U.S. Attorney and the SEC accused the GC, who had previously worked as a state securities enforcement attorney, with making statements in the offering memoranda that the offered notes delivered consistent returns and were fully secured by assets even though the lawyer knew that the issuer did not have nearly enough assets to pay off outstanding notes. The GC also approved misleading radio and TV advertisements and served as the primary interface with sales and marketing representatives. News reports indicate that the GC continues to cooperate with the ongoing investigation against his prior partner and firm.
The DoJ and the SEC hold lawyers to a higher standard to understand the applicable securities laws, determine whether statements are misleading, and stop ongoing fraud. Firms should also beware of lawyers, trying to prove their worth through aggressive practices, entering the private sector through the government revolving door.