Ben Boman, LawFuel contributor
Texas-based Locke Lord are in the midst of merger discussions with Troutman Pepper, but the embarrassing issue the firm faces is the Ponzi problems, following the jailing of a former London partner for a £25 million Ponzi fraud and now the $122 million fraud undertaken by a former client of the firm’s, which LL say did not involve anything they did wrong.
Jonathan Denton received a 15 year jail term for his role in a fraud while he worked in Locke Lord’s London office from 2012 to 2015.
Now the firm has faced a $12.5 million payout to settle a fraud from a former client Heartland Group Ventures, which received investments to go to new ventures but which went instead to a variety of non-investment toys like planes and helicopters.
Locke Lord have denied any wrongdoing, but Heartland’s receiver of the defunct entity alleged that Locke Lord should’ve known what Heartland was up to and taken appropriate action.
It’s not the sort of issue prospective merger partners want to talk about as Locke Lord pursues its marriage plans with Troutman Pepper.
And coming on the heels of the London ponzi scheme it could not have come at a worse time with any mention of the ‘P’ word.
The London Ponzi Scheme
Denton was convicted of defrauding around £21 million from investors was funneled into the firm’s accounts, but no legitimate returns were ever paid out and many investors lost superannuation and life savings in the fraud.
In 2017, Locke Lord was fined £500,000 by legal disciplinary authorities for failing to prevent Denton from entangling the firm in these “dubious financial arrangements.” The tribunal blasted the firm for not properly supervising the crooked lawyer.
Denton was disbarred in 2018 and ordered to pay £70,000 after a tribunal ruled his conduct represented “a flagrant breach of the trust” placed in him by clients who were misled by his status as a solicitor.
Denton promoted one of the sham schemes alongside former financial advisor Simon Oakley, described as the “architect” of the original Ponzi fraud. The court heard how investors trusted they were dealing with “honest, professional people” investing in a “virtually risk-free” plan – trust that was horrifically abused.
Many victims, including elderly and vulnerable individuals investing life savings and pensions, lost everything and suffered “devastating” financial and personal harm.
For now, despite a raft of bad publicity and millions in payouts on the Heartland issue, Locke Lord will be hoping to put the Ponzi talk to bed – and get into bed with Pepper Troutman.
