A class action lawsuit against one of the state’s largest law firms has been filed in connection with the case of Sarasota hedge fund manager Arthur Nadel, who is accused of defrauding investors out of hundreds of millions of dollars.
The suit, filed in Tampa federal court by Michael J. Sullivan on behalf of the Michael J. Sullivan IRA Account, names the Holland & Knight law firm as the defendant.
The suit alleges that the law firm handled prepared paperwork for investments made to Nadel’s hedge funds, but left out critical information about the funds and their administrators.
Nadel is being housed in a jail in New York City and is charged with one count of wire fraud and one count of securities fraud for what authorities allege was a Ponzi scheme.
Sullivan’s suit maintains that Holland & Knight should have revealed Nadel was once disbarred as a lawyer for financial improprieties and an employee of his was not a CPA.
“When these memorandums were prepared and distributed, had (the investors) known this obviously some different decisions would have been made,” said John Coleman, an attorney with the Tampa law firm Johnson, Pope, Bokor, Ruppel & Burns, which filed the suit. “They failed to give investors adequate information.”
The suit maintains that Holland & Knight staff had that information available to them, but chose not to disclose it.
“During the entire time of H & K’s involvement as counsel for the Nadel Funds and other related entities,” the suit states, “Nadel had been running a Ponzi scheme, and even a cursory review of the financial records of the Nadel Funds would have disclosed the existence of the Ponzi scheme. Holland and Knight failed themselves to uncover this scheme, although reasonable inquiry would have done so.”
Public relations officials with Holland & Knight said in an e-mail Monday the firm is not at fault. “We are aware of the lawsuit, we’ve done nothing wrong and we intend to vigorously defend it,” said Aimee Steel, public relations manager for Holland & Knight. The firm will have 20 days to formally respond to the federal law suit.
Coleman said Johnson Pope expects Holland & Knight’s response to be along the same lines as what Steel stated.
Sullivan, a resident of Illinois, states in the suit he was unaware of Nadel’s disbarment or financial improprieties ongoing at the funds. Sullivan had more than $1.8 million invested in Nadel’s funds, according to the suit.
Sullivan’s suit seeks judgment for damages and attorney and court costs. The suit also seeks a jury trial.
— Herald Staff Writer Grace Gagliano contributed to this report.
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