Law Firm To Pay $25 Million To Settle Nadel Ponzi Charges

TAMPA, Fla. - (Mealey's) A federal judge in Florida on Aug. 29 approved Holland & Knight LLP's agreement to pay $25 million to settle charges brought by the Securities and Exchange Commission that it helped hedge fund manager Arthur Nadel conduct a $168 million Ponzi scheme (Securities and Exchange Commission v. Arthur Nadel, et al., No. 09-00087, M.D. Fla.).

(Motion to approve settlement available. Document #88-120924-228M.)

U.S. Judge Richard A. Lazzara of the Middle District of Florida endorsed the proposed order a receiver filed Aug. 28 as part of its motion to approve the settlement with Holland & Knight and its partner Scott R. MacLeod.

The law firm will pay the $25 million to Burton W. Wiand of Wiand Guerra King PL, the receiver appointed by the SEC to recover lost funds, in exchange for a release from liability. Holland & Knight and MacLeod neither admitted nor denied the allegations.

Allegations Against Firm

Nadel netted more than $397 million in investments for his hedge funds. According to federal prosecutors, he stole about $168 million from his investors to finance his lifestyle, which included buying private planes and funding several business ventures, including a real estate project and his wife's flower shop. In October 2010, Nadel was sentenced to 14 years in prison for the Ponzi scheme.

Holland & Knight and MacLeod worked with Nadel to help prepare documents that Nadel used to solicit investors from 2002 through 2009, when Nadel disappeared, Wiand said in an affidavit filed Aug. 28. Nadel's hedge funds paid approximately $500,000 in legal fees to Holland & Knight, Wiand said.

"H&K may have failed to appropriately respond to certain 'red flags' that could, upon further inquiry, have revealed Nadel's scheme," Wiand said. "I believe that H&K's conduct, in part, permitted Nadel to accomplish his fraudulent scheme."

The SEC is represented by Andre J. Zamorano and Scott A. Masel of the SEC in Miami. Wiand is represented by Gianluca Morello, Maya M. Lockwood and Michael S. Lamont of Wiand Guerra King, Jonathan Betten Cohen, Megan Elizabeth Davis, Sean P. Keefe and Terry Alan Smiljanich of James, Hoyer, Newcomer & Smiljanich and Ashley Bruce Trehan of Fowler White Boggs, all in Tampa. Holland & Knight and MacLeod are represented by Michael L. Chapman of Holland & Knight in Tampa.

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