Bressler Risk Blog

“Canada’s Revised AML Framework: Sweeping Penalties And Compliance Requirements” —

• “Having received royal assent on March 26, 2026, Bill C‑12, the Strengthening Canada’s Immigration System and Borders Act, has significantly reshaped Canada’s anti‑money laundering (‘AML’) landscape. The bill established higher monetary penalties and stricter compliance requirements by, among other things, amending the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the ‘PCMLTFA’) and enhancing oversight by the Financial Transactions and Reports Analysis Centre of Canada (‘FINTRAC’). Indeed, entities and individuals now face heightened penalties and more stringent requirements, while, at the same time, enrolment obligations have been extended to a broader range of parties. Below, we will discuss some of the most prominent updates being implemented.”
• “Unprecedented penalties. Further to our commentary dated July 15, 2025 regarding Bill C-2, several of the amendments initially contemplated therein were restated in Bill C‑12. In fact, one of the most anticipated changes was the increase of administrative monetary penalties (‘AMPs’) to forty times their previous levels, as can be seen in the table below: ”
  Violation Class Old Maximum Penalty New Maximum Penalty. Minor CA$1,000 CA$40,000. Serious CA$100,000. CA$4,000,000. Very serious CA$500,000 CA$20,000,000.”
• “Similarly, the maximum penalty for a violation has gone from $100,000 to $4,000,000 if the violation is committed by a person, and from $500,000 to $20,000,000 if the violation is committed by an entity. Consequently, the financial burden of a penalty has significantly increased and ensuring compliance has become increasingly pressing.”
• “Bill C-12 has also imposed a more stringent requirement with respect to the establishment by entities of a compliance program. In fact, the bill requires the entities to put in place a compliance program which is ‘reasonably designed, risk-based and effective’. In practical terms, FINTRAC would no longer limit its oversight to the formal existence of a compliance program, but would scrutinize its effectiveness and its likelihood of achieving meaningful compliance outcomes.”

“FinCEN Proposes New Rules for AML Whistleblower Incentives and Protections” —

• “The Financial Crimes Enforcement Network (FinCEN) recently published a notice of proposed rulemaking (NPRM) titled ‘Whistleblower Incentives and Protections.’ The proposal implements 31 USC § 5323 as amended by the Anti-Money Laundering Act of 2020 (AML Act) and the AML Whistleblower Improvement Act of 2022, establishing procedures for submitting tips, applying for awards and obtaining confidentiality and anti-retaliation protections. The NPRM represents a significant step toward operationalizing a program that Congress authorized over five years ago, and it carries meaningful practical implications for financial institutions.”
• “Scope: Beyond the BSA.”The proposed program would cover potential violations of the Bank Secrecy Act (BSA) and certain sanctions-related statutes – including the International Emergency Economic Powers Act, the Trading with the Enemy Act and the Foreign Narcotics Kingpin Designation Act (the Kingpin Act). FinCEN also positions the program as supporting enforcement of the US Department of the Treasury’s (Treasury) Outbound Investment Security Program and the US Department of Justice’s (DOJ) Data Security Program where those matters fall within the scope of the covered statutes. The broad statutory reach means that potential whistleblowers are not limited to traditional AML scenarios – sanctions compliance failures and related conduct are squarely within scope.”
• “Awards: 10-30%, with a presumption of maximum for smaller cases”
• “A ‘covered action’ is defined in the NPRM as a Treasury or DOJ judicial or administrative action that is successfully enforced and results in monetary sanctions exceeding $1 million. Awards would be paid within a statutory range of 10-30% of collected monetary sanctions in covered and related actions, with awards paid from the Financial Integrity Fund.”
• “A key tension: The 120-day waiting period for compliance and audit personnel”
• “One of the most consequential provisions for financial institutions is the proposed 120-day waiting period. Certain individuals – including officers, directors and partners who learned information through internal reporting processes, and employees whose principal duties involve audit or compliance (including those at firms retained to perform audit or compliance functions) – would be required to wait at least 120 days after obtaining the information before submitting it to FinCEN to remain award-eligible. FinCEN’s stated rationale is to preserve incentives for robust internal compliance programs and to give entities time to review, remediate and voluntarily disclose issues, while minimizing harm from delayed reporting.”
• “For institutions, this window creates both an opportunity and an obligation. Companies should anticipate how their internal reporting, triage and escalation processes will operate within that 120-day period, and should ensure that appropriate remediation and voluntary disclosure mechanisms are in place to take advantage of it.”
• “FinCEN also proposes that no person may impede an individual from communicating directly with Treasury or DOJ about possible violations, including by discouraging, hindering or delaying such communications.”
• “Rights and remedies under the proposed rule would be nonwaivable – including through pre-dispute arbitration agreements, which would be invalid and unenforceable to the extent they require arbitration of a dispute arising under 31 USC § 5323 or the implementing regulation.”
• “Comments on the NPRM are due by June 1, 2026. Covered entities and other interested parties should consider submitting comments to help shape the final rule.”

“Gibson Dunn announces release of the International Comparative Legal Guide – Anti-Money Laundering 2026” —

• “Gibson Dunn is pleased to announce with Global Legal Group the release of the International Comparative Legal Guide – Anti-Money Laundering 2026. Gibson Dunn partners Stephanie L. Brooker and M. Kendall Day are the Contributing Editors of the publication, which covers issues including criminal enforcement, regulatory and administrative enforcement, and requirements for financial institutions and other designated businesses. The Guide, comprised of 4 expert analysis chapters and 16 jurisdictions, is live and FREE to access HERE.”

“A day in the life of the Law Society’s anti-money-laundering unit”

• “The Law Society’s dedicated anti-money-laundering unit is housed within the Regulation Department, where all AML matters are dealt with by a single team. Mary Hallissey acts a bit shady”
• “Solicitors who provide AML-regulated legal services must comply with certain statutory obligations that apply to how solicitors both manage their AML compliance requirements within their practices and their mandatory obligation to report suspicions of money-laundering to the relevant authorities.”
• “In 2023/2024, the Law Society took the strategic decision to set up a dedicated AML unit housed within its Regulation Department, where all AML matters relating to regulation, education, and external-stakeholder engagement are dealt with by a single team, with input from colleagues in Financial Regulation and Regulatory Legal Services.”
• “Ciara McQuillan and Riona Leahy are both AML executives and solicitors in this new unit.”
• “Ciara points out that a single rulebook is emerging for anti-money-laundering – and the majority of the EU AML Regulation will have direct effect in all EU member states, including Ireland.”
• “These requirements will include: A directly applicable EU regulation creating a more harmonised ‘single rulebook’ for preventive controls; A new directive that updates how national systems, FIUs, and supervisors operate; and A regulation establishing the EU Anti-Money-Laundering Authority.”
• “Separately, EU criminal-law measures continue to harmonise money-laundering offences and sanctions across member states.”
• “Customer due diligence (CDD) will become more prescriptive, with firms expected to apply more standardised checks and follow clearer, more detailed rule-sets than under many current national approaches.”
• “In practical terms, CDD will require the collection of more information, supported by more robust documentation, and a clearer evidential trail showing how identity, beneficial ownership, and the purpose and nature of the relationship were assessed.”
• “Firms should also expect a stronger emphasis on consistency of outcomes, record-keeping, and being able to demonstrate compliance – not just that checks were performed.”
• “In terms of the forthcoming changes to the regulations, Ciara explains: ‘Solicitors are now required to seek much stronger proof of identification from new clients, such as passports, along with proof of nationality and proof of birthplace. Solicitors must also verify more than one source of client identification, with many more data points to be collected, before starting to deliver any AML-regulated legal service – particularly, but not solely, those concerning real estate.'”
• “She points to the Register of Beneficial Ownership as an indicator of the beefed-up obligations to declare interests.”
• “The Law Society’s Regulation of Practice Committee and Conveyancing Committee together recently published guidance for solicitors in this arena. The consequences for solicitors who fail to comply are grave, including a potential risk to livelihood and professional reputation.”
• “Not only do solicitors have obligations to comply with AML legislation to ensure that their practices cannot be used as conduits to launder illicit funds but, additionally, they have an obligation to submit a suspicious transaction report (STR) to FIU Ireland and to Revenue if a suspicion arises of an offence of money-laundering or terrorist-financing. Failure to comply with this obligation is a criminal offence.”
• “In addition, she cautions that ‘solicitors should be particularly on the lookout for social-welfare fraud or tax fraud, where substantial funds may get laundered through a property transaction’.”
• “AML risk assessments should now be deeply embedded in business-risk assessments in every law firm, they stress. While minor compliance infringements are dealt with by the Law Society on a practical, case-by-case basis – with the focus on educating rather than heavy-handed sanctioning – failure to comply with the AML regulations is serious, not just with the Law Society as supervisor, but in terms of a criminal-offence element.”
• “Firms who fail to demonstrate that they have sufficient measures in place to mitigate risk, and that they have been applying those measures, may find themselves subject to an external AML audit, issued with a formal direction to take certain action or, at the most serious end of the non-compliance scale, could be referred to the Legal Practitioners Disciplinary Tribunal.”
• “It’s not enough to have a beautifully written suite of business-risk assessments, policies, controls, and procedures in place in a practice if the contents of them are not being applied by the solicitor on the files, advises Ciara. It is also crucially important that the reasons that a solicitor assesses risk in relation to a transaction in a certain way is fully documented.”
• “Ciara and Riona also point to the potential reputational damage to a law firm if, for instance, it is linked to a Criminal Asset Bureau investigation.”

“Fenwick & West Faces Federal Lawsuit Over Representation of FTX” —

• “Fenwick & West’s representation of defunct cryptocurrency exchange FTX continues to cause issues for the firm, which is facing a new lawsuit in federal district court in Washington, D.C., filed Wednesday by 20 plaintiffs asking for at least $525 million in compensatory damages.”
• “The suit was filed by Canadian citizen and Singapore resident Kent Byers, who is the lead plaintiff on the suit and claims he lost $2.5 million when FTX dissolved. Another Singaporean, Errol Alistair, claimed he lost $25 million to FTX. In total, the group of plaintiffs consists of 20 people from five different countries who had assets stored within FTX’s exchange before it collapsed in 2022 and ‘lost their life savings,’ according to the suit.”
• “Fenwick represented FTX and Alameda Research, the crypto trading company run by its now-imprisoned founder, fraudster Sam Bankman-Fried, for several years prior to the exchange’s demise. In addition to this suit, the firm has been caught up in a wave of multidistrict litigation brought by FTX investors since then, which was partially settled in February.”
• “The lawyers for the plaintiffs and Fenwick didn’t immediately respond to a request for comment. In addition to the entire firm, the lawsuit also names Fenwick complex litigation lead partner Tyler Newby, managing partner Richard Dickson, blockchain and cryptocurrency practice lead partner Andrew Albertson, former litigation chair and managing partner Rodger Cole, antitrust partner Thomas Ensign, former cryptocurrency practice chair Daniel Friedberg and assistant general counsel Noah Rosenthal as defendants, alongside nine other John Does.”
• “Like other lawsuits filed against Fenwick for backing FTX, this one lodges the claim that Fenwick represented both FTX and Alameda Research without a conflict waiver and was aware of FTX’s misuse of customer money. In particular, the suit alleges Friedberg vouched for Bankman-Fried on firm letterhead while a partner at the firm, and noted he later left Fenwick in March 2020 to join FTX as an in-house regulatory and compliance officer, ‘carrying with him direct knowledge of the legal structures Fenwick had built for FTX.'”
• “After leaving Fenwick, Friedberg was subsequently sued by FTX in July 2023 for allegedly helping Bankman-Fried get away with fraud, in part by allegedly directing him to create a shell company called North Dimension that was receiving stolen FTX client money, an allegation this suit repeats.”
• “The lawsuit also claims Fenwick was enriched by FTX’s fraudulent behavior while it was a client, and that it did little to stop the two from being associated initially. The firm stopped representing FTX when it filed for bankruptcy. ‘The connection between Fenwick’s institutional name and FTX’s legitimacy was not incidental. It was deliberate,’ the suit read. ‘FTX insiders specifically cited ‘the great Fenwick name’ as a tool for building investor and customer confidence.'”
• “Total damages requested by the plaintiffs are roughly $525 million, in addition to attorney fees. Plaintiffs are also requesting enhanced and punitive damages against Friedberg and Newby, and that Fenwick disgorge any of the fees and compensation each of its attorneys received during the case, a number that has yet to be determined.”

“Miner Looks To DQ Dorsey Under The ‘Hot Potato’ Doctrine” —

• “A uranium mining company is looking to disqualify Dorsey & Whitney LLP as counsel for potential intervenors in a lawsuit in Colorado federal court over an arbitration initiated by another mining company based on a mineral assets purchase, saying Dorsey can’t drop it like a ‘hot potato.'”
• “According to Uranium Energy’s Jan. 30 complaint, New Mexico-headquartered Cotter had a purchase agreement and a supply agreement with Anfield and Highbury that contained arbitration provisions. Uranium Energy seeks a court declaration that it never agreed to arbitrate disputes with Cotter and that no arbitral body has jurisdiction over it regarding Cotter’s claims.”
• “Uranium Energy was never a party to these agreements, never mentioned in them and never accepted any assignment of rights, the complaint claims, yet Cotter is trying ‘to drag UEC into arbitration’ despite the fact that arbitration must be consensual.”
• “To make matters worse, the disqualification motion says, the potential Anfield intervenors now want Dorsey & Whitney to represent them even though Uranium Energy is a longstanding client of Dorsey’s. The firm has been engaged to represent Uranium Energy on U.S. tax matters since February 2012 and has billed the company for ongoing work as recently as January 2026, according to the motion.”
• “‘Dorsey’s conduct triggers the ‘hot potato’ doctrine: neither party contemplated the end of the relationship, and Dorsey’s own communications confirm that its withdrawal was motivated solely by its desire to represent Anfield,’ Uranium Energy argues.”
• “‘A law firm may not drop a client ‘like a hot potato’ to avoid the constraints of a concurrent interest,’ Uranium Energy says, pointing to a 2009 District of Colorado decision in Pamlab LLC et al. v. Hi-Tech Pharmacal Co. , concerning a lawyer who left a firm and dropped a client behind when departing.”
• “Cotter on April 29 gave the court notice that it does not oppose Anfield and Highbury’s motion to intervene. Anfield moved to intervene April 13.”

David Kluft asks: “Can ‘per diem’ or ‘appearance’ attorneys be adverse to clients of their frequent lawyer customers?” —

• “The NY State Bar issued an opinion addressing conflict analyses for ‘per diem’ or ‘appearance’ attorneys, i.e., lawyers who other lawyers hire to make discrete one-time appearances to cover court conferences and the like.”
• “For the most part, the same conflict rules apply to them as everyone else. There was one question particular to appearance lawyers, which is whether an appearance lawyer can be adverse to a frequent customer, i.e., be adverse to a client represented by a lawyer who has or will hire them as appearance counsel in other matters.”
• “The bar opined that this could be a personal interest conflict for the appearance lawyer under Rule 1.7(a)(2) and, depending on how close the business relationship between appearance lawyer and lawyer customer is, the client’s informed consent may be required.”
• Opinion: here.

“Atty Seeks Docs To Back Ogletree DQ Bid In Bias Suit” —

• “A Georgia attorney on Monday asked a federal judge to allow discovery related to her bid to have Ogletree Deakins Nash Smoak & Stewart PC disqualified from defending ADT LLC against discrimination claims while concurrently defending Microsoft Corp. in the attorney’s own pregnancy bias suit.”
• “Amber Montgomery of ALM Legal LLC, who represents plaintiff Trinity Moore in the ADT discrimination suit, told the Georgia federal judge that in order to back claims that her attempt at disqualifying the firm is ‘speculation,’ Ogletree should be required to produce documents related to the potential conflict of interest incurred by working on both the ADT and Microsoft matters along with any communications between the attorneys working the two suits.”
• “In late April, Ogletree said on behalf of ADT and benefits administrator Matrix Absence Management that Montgomery’s motion to disqualify it should be tossed, arguing that the two matters are wholly separate and unrelated, so there’s no conflict. The firm said the legal theories, clients, factual bases and allegations in Moore’s case and Montgomery’s case are different.”
• “‘Defendants cannot have it both ways,’ Montgomery’s Monday motion said. ‘They cannot demand denial of the motion to disqualify on the asserted ground that plaintiff’s allegations are ‘speculation’ while opposing the very discovery that would convert speculation into either established fact or refuted theory. The choice before the court is not between plaintiff’s narrative and defendants’ narrative.'”
• “Montgomery is looking to have Ogletree produce information related to the timing and content of the firm’s conflict check procedures, a possible chain of communications between its Atlanta office and ADT during a late-January period in which Moore was terminated from her job at the company and the supervisory and reporting relationships between the attorneys who worked the two suits.”
• “‘It is between resolving the disqualification motion on a developed record — with conflict-check documents, the relevant communications, and limited testimony from the two attorneys at the center of the disputed events — or resolving it on defendants’ unsworn rhetorical characterizations of facts within their exclusive possession,’ Montgomery’s motion”
  said.”
• “Montgomery, a former Microsoft senior program manager, sued the software giant in 2025 for allegedly terminating her in 2024 after she announced she was pregnant and sought medical leave for pregnancy-related complications.”
• “Shortly after taking on the ADT suit in March, Montgomery argued that Moore may have faced negative repercussions from Ogletree’s involvement in both cases and that the day after Montgomery said she filed a response cooperating with Microsoft’s bid to transfer her case from Georgia federal court to Washington federal court, she said ADT terminated Moore in a phone call.”
• “‘Information about Ms. Montgomery’s litigation approach, case strategy, and professional vulnerabilities gained in the Microsoft case is institutionally available to Ogletree attorneys in this case,’ Montgomery’s motion said. ‘The termination of plaintiff one day after a strategic event in the Microsoft case, upon information and belief, is circumstantial evidence that this cross-contamination has already occurred.'”
  “Montgomery said that while the Southern District of Georgia, where the ADT suit is filed, doesn’t provide a special procedure for discovery related to disqualification motions, she cited the Middle District’s 1992 ruling in Cheeves v. Southern Clays Inc. , which says discovery is allowable in the case of a disqualification if it can be proven that the information would lead to admissible evidence and if the information isn’t obtainable from a more convenient source.”
• “‘Plaintiff plainly meets the Cheeves threshold,’ Montgomery’s motion said. ‘The threshold facts of concurrent representation are established on the public record. The discovery sought — conflict-check records, intake-system entries, internal Atlanta-Seattle communications, and limited testimony from the two Atlanta attorneys at the center of the disputed sequence — is reasonably calculated to lead to admissible evidence on the contested question of what Ogletree did once the cross-matter posture was (or should have been) recognized.'”

“Walkers to Face $500M Professional Negligence Claim in Court” —

• “A professional negligence claim worth more than $500 million against offshore law firm Walkers is due to be heard in court next year, in one of the largest claims ever brought against an offshore firm.”
• “The firm is being sued by a prominent Brazilian family as part of a long-running dispute that began in 2014. It centres on Walkers acting for the judicial administrator of the bankruptcy estate of Petroforte Brasiliero de Petroleo and the Petroforte Economic Group, which used disclosure obtained through Cayman proceedings to gain the assets from the claimants.”
• “The case was initially set aside after the claimants failed to provide $4.25 million in security for Walkers’ costs in 2022. Following an appeal, the Cayman Islands Court of Appeal gave them a further six weeks to pay, in a judgment handed down in October 2025. The case is now scheduled to be heard in 2027.”
• “The firm, which had represented the Rabello family in the Cayman Islands for 25 years, accepted instructions from a Brazilian bankruptcy administrator, Dr Afonso Braga, who then confiscated assets from the claimants amounting to hundreds of million of dollars in 2010, according to documents filed in the claim in the grand court of the Cayman Islands.”
• “The claim form says: ‘The defendant now accepts it should never have acted for Dr Braga. Acting for Dr Braga put the Defendant in the position where it was acting not only with a potential conflict of interest but with an actual conflict and directly against the interests of its own clients.'”
• “The claim form also alleges that Walkers failed to disclose that the judicial administrator, Dr Braga, was entitled to 6% of some of the assets confiscated and that Brazilian attorneys were entitled to receive 20-30% of some assets. However, according to the defendants, Dr Braga was under no obligation to disclose his fee arrangements due to them being sanctioned by the Brazilian courts.”
• “The claimants allege that Walkers breached its duty in failing to carry out conflict of interest procedures adequately and acting for the administrator whilst also acting for the claimants.”
• “The claim amounts to $500 million, with the claimants also looking to claim the interest on the assets lost as a result of the matter.”
• “Walkers has more than 100 lawyers in the Cayman Islands, according to Law.com Compass. Its next biggest offices are Dublin, London and Hamilton in Bermuda, according to the database. It also has operations in Hong Kong, Singapore, Tortola in the British Virgin Islands and Dubai.”
• “Late last year, it announced it had agreed to take private equity investment. Private equity firm Vitruvian will share ownership of the firm’s non-legal services arm, Walkers Professional Services.”

“Dispensary Owners Want Blank Rome DQed From Loan Suit” —

• “The owners of a New Jersey dispensary are asking a California federal court to disqualify Blank Rome LLP and its attorneys from representing a lender in a $1.6 million loan dispute, because the firm represented them as well and used confidential information in the lender’s suit.”
• “In a motion filed Wednesday, Charis and Luke Burrett, who own The Medicine Woman Group LLC, said they had retained Blank Rome to resolve a dispute with a landlord and in forming a special purpose vehicle with the owner of AuxoCAP JC LLC. Blank Rome had invoiced them for legal services just before filing the present suit on behalf of AuxoCAP, they said.”
• “This creates a conflict of interest that cannot be reconciled through a waiver, the Burretts argued, particularly as the present suit is based on confidential financial information that they handed to Blank Rome as part of the previous suit.”
• “According to the motion, the Burretts’ business, as it struggled to launch, was bailed out by investor Matthew Taetsch through his lending company, AuxoCAP LLC, in exchange for an ownership share, executive title and access to other records. Taetsch also introduced the pair to Blank Rome, as one of its partners, Craig Weiner, was a ‘trusted personal friend.'”
• “AuxoCAP JC, an affiliate of AuxoCAP, later extended a loan to The Medicine Woman, on which the company later defaulted. AuxoCAP JC sued — represented by Blank Rome — claiming that The Medicine Woman and the Burretts committed fraud and other torts, according to court documents.”
• “The Burretts said that Blank Rome had served as principal negotiator and architect of a settlement and new lease with their landlord in New Jersey, and that it relied on confidential financial information in that process, and the relationship continued, with Blank Rome also representing them in forming an SPV with AuxoCAP.”
• “And while the Burretts signed a waiver allowing Blank Rome to represent both them and AuxoCAP for the $1.6 million loan at issue and the formation of the SPV, that waiver explicitly said Blank Rome would not represent AuxoCAP in connection with a loan offer or other transactions, and the Burretts signed the waiver with the understanding that it applied only to the formation of the SPV, they argued.”
• “The same subject matter, parties, and information are at issue both in Blank Rome’s previous representation of the Burretts and the present suit, according to the memorandum, and that previous relationship gave it access to confidential information that it is now using in the present suit.”
• “The Burretts also said that Blank Rome can’t rely on ‘screening’ to save its representation, given Weiner had such a close relationship to the issues, and the firm hasn’t shown that the attorneys representing it here were cordoned off from him. Weiner has even been copied on emails with those attorneys, they said.”

“Staten Island case takes turn as judge boots attorney likened by client to ‘Godfather’ character” —

• “A high-profile defense attorney was removed from two federal cases tied to Staten Island, after prosecutors cited recorded conversations in which a client with alleged mob ties claimed the lawyer had knowledge of his criminal dealings.”
• “On Wednesday, a federal judge determined that attorney Joseph Corozzo Jr. had a conflict of interest in one case, which disqualified him from representing his client. The court’s ruling came days after Corozzo Jr. was removed from a separate case that involved an alleged international drug operation.”
  “Corozzo Jr., of Manhattan-based Rubenstein & Corozzo, did not return a request for comment Thursday. Judge Brian M. Cogan handed down the decision in Brooklyn federal court.”
• “The case from which Corozzo was most recently disqualified is centered around alleged mob associate Mark Liverano, 59, of Annadale.”
• “Liverano is accused of extortion and other crimes while allegedly participating in a loansharking scheme, an illegal gambling operation and a black market cannabis business. He also was facing weapons charges in a nine-count indictment handed down by a federal grand jury in December.”
• “In court documents, prosecutors stated Liverano at one point ‘referred to Mr. Corozzo as ‘Tom Hagen’ — a fictional character from ‘The Godfather’ who was both a lawyer and crime family consigliere.'”
• “In another conversation, Liverano discussed his hope that he would join ‘a crew’ that reported to Corozzo’s family, prosecutors alleged.”
  Feds allege ‘fully entangled’”
• “Federal prosecutors accused Corozzo of being ‘fully entangled’ in Liverano’s criminal conduct, which they argued would become an issue at trial. They alleged Liverano told another organized crime associate that Corozzo knew about his illegal gambling operation and would help enable its expansion.”
• “‘The defendant also directed an associate to contact Mr. Corozzo in the event the defendant was no longer able to collect his illegal loansharking payments,’ prosecutors stated.”
• “Prosecutors cited evidence of a personal relationship outside court dealings, including that Corozzo served as best man at Liverano’s wedding and that the two traveled to Europe together.”
• “Last week, Corozzo was ordered by a judge to remove himself from the case of Goran Gogic, a former professional boxer from Montenegro who stands accused of operating an international drug trafficking operation.”
• “Gogic is accused of helping organize a large-scale cocaine smuggling operation from South America to Europe and the United States.”
• “As that case was approaching trial, three men from Staten Island were accused of trying to bribe a juror with up to $100,000 in cash.”
• “‘Mr. Corozzo is the subject of an ongoing investigation into jury bribery and obstruction’ in the federal case against Gogic and others, prosecutors argued recently in court documents.”
• “Court documents alleged that ‘several conspirators participated in a scheme to approach and attempt to bribe Juror-1 with a cash payment in exchange for Juror-1 agreeing to vote not guilty at Gogic’s trial.'”
• “‘To the government’s knowledge, the only individuals with access to the juror list were court staff, the Assistant United States Attorneys handling the defendant’s prosecution, the defendant, and Mr. Corozzo,’ prosecutors argued in court documents.”
• “Corozzo and his law firm responded in court filings, saying the allegations were ‘baseless.'”
• “Corozzo’s uncle, Nicholas Corozzo, is a reputed made member of the Gambino family. He was sentenced to 13 years in prison in 2009 after being convicted in connection with two murders and racketeering schemes, according to multiple media reports.”
• “The attorney’s late father, Joseph ‘JoJo’ Corozzo, was accused of being a consigliere for the Gambino crime family and an associate of mobster John Gotti. The father was convicted on racketeering and extortion charges in 2008 in connection with a federal Gambino takedown. In that case, a then-Staten Island man who owned a trucking company in Travis cooperated with the government.”

“Big Law’s Alleged M&A Insider Traders Switched Firms With Ease” —

• “US charges that three M&A lawyers exploited client secrets for financial gain raise questions as to how they got hired at seven different Big Law firms over the course of their alleged crime spree.”
• “One of the three, Nicolo Nourafchan, worked at Sidley Austin, Latham & Watkins and Goodwin Procter between 2013 and 2023, federal indictments allege. After four years at Sidley, Latham brought him on and fired him after about two years. Goodwin next gave him a job before dismissing him in a couple years.”
• “He allegedly committed crimes at all three firms. Neither the indictments nor statements from Latham and Goodwin indicate the firms had knowledge of the alleged criminal activity. Latham and Goodwin didn’t immediately respond to requests for comment about why they fired Nourafchan.”
• “‘There’s kind of a presumption that you’re working with honest folks in the vetting process because of the other higher powers outside of an employer who have stronger investigatory tools and more incentives to catch this stuff,’ said Mathew Brown, a Washington DC-based legal recruiter. ‘A little skepticism about asking folks hard questions might be warranted going forward.'”
• “The allegations highlight how several large law firms can be dragged into wide-reaching white collar criminal investigations by a few bad actors. Big Law attorneys frequently change firms in today’s hiring market, and if they’ve been involved in illegal activity, recruiters say, it’s not always easy to filter them out.”
• “‘There’s no way, if you’re a firm of 1,500 lawyers, every lawyer you’re going to get is going to uphold their fiduciary duty to clients,’ said Jon Truster, a New York-based recruiter with Macrae. ‘I don’t know how firms are supposed to control this.'”
• “One of the other defendants, Gabriel Gershowitz, who is cooperating with the federal investigation, also worked at three law firms over a roughly 15-year period—Weil, Gotshal & Manges, Willkie Farr & Gallagher, and DLA Piper. He allegedly stole information from each of them for insider trading.”
• “Brown said if firms are not aware of a lawyer’s crimes, it becomes ‘quite difficult’ for a prospective employer to do any vetting that would catch any sort of criminal activity. ‘If they’re fired for suspicious activity, that’s not criminal,’ he said.”
• “When previously reached for comment on the allegations, Latham said Nourafchan hasn’t worked at the firm for five years and that the alleged conduct would constitute a violation of its policies. Goodwin said it was ‘deeply disappointed’ in the former employee and that it’s cooperating with law enforcement.”
• “Latham in July 2020 told Nourafchan he would be let go in the following month, according to the federal documents. By the time he was fired he had already allegedly fed information about deals involving Care.com and Zagg to his co-conspirators, according to the indictment. After the firm notified him of the firing, he accessed confidential information about Momenta, the indictment states.”
• “Within a year, Nourafchan got a job at Goodwin Procter. He worked there until September of 2023 when the firm fired him, the indictment states. During his time at the firm, Nourafchan allegedly used deal information about firm clients—including Citrix, and iRobot.”
• “The firm told Nourafchan in June of 2023 it was firing him in September. That didn’t stop him from using confidential information about a potential acquisition of NextGen in August to help co-conspirators allegedly buy securities, according to the complaint.”

“Everyone’s a winner in the Dentons AML case!” —

• “The proceedings arise out of work done by Dentons between 2013 and 2017 for ‘Client A’, treated internally as a politically exposed person and high AML risk. The SRA’s case focused on whether the firm took ‘adequate measures’ to establish source of wealth and source of funds, as required by regulation 14 of the Money Laundering Regulations 2007.”
• “In March 2024 the SDT found Dentons had breached regulation 14, but dismissed the SRA’s allegations that this amounted to breaches of Principle 7 of the SRA Principles 2011 (comply with legal and regulatory obligations) and Outcome 7.5 of the 2011 Code of Conduct (comply with legislation applicable to the business, including AML).”
• “The SDT’s rationale was that, on the facts found, the breach was not ‘serious, reprehensible or culpable’ enough to justify the label of professional misconduct.”
• “In 2025 the High Court quashed that decision, essentially accepting the SRA’s ‘strict’ approach that a proved legal breach automatically establishes a professional breach, and sent the matter back to a fresh SDT panel.”
• “But it rejected the High Court’s underlying reasoning on one point of wider importance: the court held that an allegation of professional misconduct under the SRA Principles and Code carries an inherent requirement of seriousness. A breach of legislation (including AML legislation) is not, therefore, automatically misconduct.”
• “However, it modified the original SDT judgement on this question, which was whether ‘serious, culpable and reprehensible conduct’ had been proved. The Court of Appeal held that this was not the correct test to use.”
• “In framing the test, the Court endorsed an objective professional-standard lens: whether the conduct would be regarded by competent and reputable solicitors as sufficiently serious to be categorised as professional misconduct.”
• “It also indicated unease with the SDT’s characterisation of the breach as ‘entirely inadvertent’, noting difficulties with that conclusion given the risk indicators recorded within the firm.”
• “However, the Court of Appeal did not itself make the misconduct finding; it left it to the tribunal to decide, on those findings, whether the seriousness threshold is met and, if so, what sanction follows.”
• “The practical effect is a more focused rehearing rather than a full-scale rerun of every allegation.”
• “For the SRA, the judgment may limit the attraction of a ‘strict liability’ route to misconduct where an underlying legal breach is proved. Therefore, it is fair to say that a breach of the AML regulations is not going to automatically be a misconduct breach.”
• “It may also reduce the broader use of Regulatory Settlement Agreements which are often used in AML breach cases particularly. Our article here considered whether these are always used fairly and appropriately: the Dentons case may help to inform a shift in how the SRA uses them.”
• “For firms, it is not a get out of jail-free card either: the court has made clear that AML compliance failures can still amount to misconduct where they cross the seriousness line. It has signalled that tribunals should not assume that ‘good faith’ or an absence of deliberate wrongdoing automatically keeps a breach on the ‘technical’ side of that line.”
• “The case is also a reminder that inherited relationships (post merger, post acquisition, or via lateral moves) create particular governance stress-tests: this all stemmed from the fact that a legacy firm hadn’t followed the Dentons centralised approach.”
• “As we march forward, there are going to be more cases where these ‘newer’ regulations are the ones applied, and this will be more helpful, as these are the ones which are going to be largely more relevant.”
• “Additionally, AML breaches will often turn on the application of the risk-based approach: it may be arguable in some cases that an alleged AML breach wasn’t, in fact, an AML breach, meaning that any associated misconduct could fall away.”
• “Finally, there is the potential of an uncomfortable message going out towards the profession. This judgement may uphold the fact that not every AML breach is automatically misconduct: that doesn’t mean, however, that every AML breach is ok.”
• “There is a danger that, in embracing the judgement too fulsomely, we lose sight of the fact that AML breaches – whether inadvertent or deliberate – are not good things. They are things that we must, and must want to, avoid. Many MLROs and Compliance Managers may have used the potential of a misconduct finding as a stick to bolster AML compliance amongst their solicitors: it’s a valid thing to do, and it will remain so.”
• “Regardless of this judgment, we should set a high bar for AML compliance: we have policies and procedures for a reason, and they need to be followed.”

“Musk, KKR Lawsuits Traded by Judges Over Conflict Concerns” —

• “A Delaware judge Monday reassigned litigation over a $720 million payout to KKR & Co. insiders, completing a swap with the judge who recently stepped away from a batch of cases targeting Elon Musk.”
• “Vice Chancellor Bonnie W. David responded to conflict-of-interest concerns by handing the KKR case to Chancellor Kathaleen St. J. McCormick, who recently sent the Musk lawsuits to David after he raised bias allegations. David swiftly dismissed the Musk suits from Delaware’s Chancery Court, effectively sending them to Tesla Inc.’s new home, Texas, where corporate cases are harder for shareholders to bring and win.”
• “Musk’s judicial recusal gambit immediately sparked fears that other aggrieved businesses or billionaires might follow his lead, a possibility David addressed head on in Monday’s ruling.”
• “‘As officers of the court, Delaware lawyers owe a duty not to seek judicial reassignment to obtain a perceived litigation advantage,’ the judge wrote. ‘I am hopeful that this motion is an outlier.'”
• “The two case reassignments were parallel but far from symmetrical. The world’s richest person spent years slamming McCormick and trying to incite a mass ‘DExit’ from the state after she voided his $56 billion compensation. Lawmakers spooked by the attacks scrambled to lower the guardrails around powerful founders, and Delaware’s top court later reinstated the record pay plan.”
• “McCormick finally stepped away from Musk’s remaining cases after he scored a hit with his allegation that she’d endorsed a LinkedIn post taunting him. The judge—who has said she engaged with the social media post accidentally if at all—presided over an ad hoc reassignment procedure using Scrabble tiles.”
• “The decision to let go of the KKR litigation involved far less drama, but it was still unusual in a state where bids for judicial recusal are exceedingly rare. The motion for disqualification by the pension fund suing KKR concerned David’s ties to her former firm, Skadden, Arps, Slate, Meagher & Flom LLP, which is representing the KKR conflicts committee that signed off on the payout and restructuring.”
• “Although the investment firm and its co-founders fought the request—referring to it in a May 1 court filing as an act of ‘gamesmanship’ that failed to raise any evidence of ‘genuine bias’—David granted it with little fanfare, citing Delaware’s judicial ethics code. Her initial order said the case would be randomly reassigned, but a subsequent docket entry indicated it landed with McCormick.”
• “The Steamfitters Local 449 Pension Fund is represented by Friedlander & Gorris PA, Robbins Geller Rudman & Dowd LLP, and Shobe & Shobe LLP. KKR, its founders, and other board members are represented by Richards, Layton & Finger PA and Simpson Thacher & Bartlett LLP.”
• The case is Steamfitters Local 449 Pension Fund v. Kravis, Del. Ch., No. 2024-0808, 5/4/26.

“Judge declares ‘conflict of interest’ in defense teams ahead of Amber Spradlin murder trial” —

• “The judge presiding over the Amber Spradlin case has asked two of the attorneys involved in the defense to clear up a conflict of interest concern ahead of the upcoming murder trial.”
• “On Wednesday, Judge Eddy Coleman filed an order, addressing Randy O’Neal, one of the attorneys for MK McKinney, and Whitney O’Neal, the attorney for Josh Mullins. They are both attorneys for the same law firm, O’Neal Law Office, and have represented their respective clients since the early days of the case. Since the couple got married in 2025, their relationship has never been a public topic of discussion as a conflict of interest in the courtroom.”
• “However, after Mullins’ attorney filed a motion in support of a continuance in the trial, while McKinney’s team has maintained its demands for a speedy trial, Judge Coleman is asking for clarification about the possible conflict to the defendants moving forward.”
• “‘Upon receipt of any information reasonably suggesting that what is best for one client may not be best for another, counsel shall explain its significance to the defendant and disclose it to the court, and shall withdraw as counsel for one client or the other unless (a)each such client who is a defendant in the proceeding executes a written waiver setting forth the circumstances and reiterating the client’s desire for continued representation by, the same counsel and(b) such waiver is entered in the record of the proceeding,’ said the order.”
• “Coleman said the fact that the O’Neals represent the same firm and opposite opinions in the case is grounds for them to be removed from the case, unless their clients object.”
• “‘Mullins has taken the position that a continuance would be best for him while Defendant Michael K. McKinney, III has repeatedly objected to continuance and reiterated his demand for speedy trial,’ said the order. ‘Thus, as members of the same law firm, Randall O’Neal and Whitney O’Neal represent two co-defendants with a clear conflict of interest requiring the counsel to explain the significance to the defendants and withdraw their representation unless an executed waiver from each defendant is filed with the Court.'”
• “The order is expected to be discussed Monday at the next pretrial conference, during which several other motions will also be addressed.”

David Kluft asks: “Can I sue my own client if I have an advanced waiver?” —

• “The OR bar opined on the following scenario: a law firm wanted to represent Client X in a dispute with its own Client Y. Client Y had separate counsel for the dispute, and the firm’s representation of client Y was completely unrelated to the subject matter of the dispute. Both Client X and Client Y had signed ‘advanced conflict waivers.'”
• “The OR bar gave a qualified yes to this arrangement, so long as the requirements of Rule 1.7(b) are met and the waivers are enforceable because they are specific enough to have identified in advance this type of conflict.”
• “(Ed. Note: The opinion is correct as far as it goes but punts on what happens next, e.g., how do you cross your own client on the stand when you have confidential information that may go to their credibility and that you can’t use? Good luck trying to convince a judge it’s all cool because the client you are now tearing apart signed a boiler plate form letter 10 years ago. Not a very useful opinion).”
• Opinion: here.

“How Six Big Law Firms Lost Confidential M&A Data to a Global Insider Trading Scheme” —

• “Over the course of a decade, three Big Law attorneys accessed confidential M&A data from six Am Law 100 firms on nearly 30 transactions for the purpose of selling the information to friends and family members who could trade on it, say federal prosecutors and SEC officials in court papers unsealed Wednesday.”
• “The documents outline the sheer scope of a plan that involved six Big Law firms. In some cases, the attorneys were able to access material non-public information for matters on which they weren’t staffed.”
• “Together, the three ex-Big Law attorneys allegedly stole non-public information from their former employers, including Wachtell Lipton Rosen & Katz, Latham & Watkins, Goodwin Procter, Sidley Austin, Weil Gotshal & Manges, and Willkie Farr & Gallagher.”
  • “The lawyers include Nicolo Nourafchan, whom the DOJ accused of co-leading the scheme alongside Robert Yadgarov. Nourafchan worked as a corporate associate at Cleary Gottlieb Steen & Hamilton after graduating from Yale Law School in 2011, before moving to Sidley Austin in 2013.”
  • “Nourafchan left Sidley for a year-long stint as in-house counsel at a film production company in 2018 and then arrived at Latham & Watkins in 2019. Nourafchan was terminated by Latham in August 2020, according to an unsealed indictment, and went to work for Goodwin Procter in 2021. Goodwin terminated Nourafchan in September 2023, per the indictment.”
  • “Gabriel Gershowitz graduated from Columbia Law School and in 2010, joined Weil, Gotshal & Manges, where he worked until his 2019 move to DLA Piper. Gershowitz then joined Willkie Farr & Gallagher in 2021 and worked there until 2025, when he became a cooperating witness for the U.S. Attorney’s Office for the District of Massachusetts.”
  • “A third lawyer, addressed as ‘co-conspirator 2,’ worked at Wachtell Lipton Rosen & Katz from 2013 to 2022, at which point he joined an investment bank.”
• “Nourafchan was the most prolific thief of non-public information, the DOJ and SEC documents indicate, having misappropriated confidential M&A data in 11 matters at Goodwin, five matters at Latham and two at Sidley.”
• “At Goodwin, Nourafchan was able to view confidential information in nine matters on which he was not staffed by accessing the firm’s ‘computer servers,’ the SEC complaint stated.”
• “He was similarly not staffed on four of the five matters in which he accessed non-public information while at Latham, but was still able to access this information, including ‘a draft merger agreement, diligence review tracker, timeline, and signing checklist,’ per the SEC.”
• “The DOJ and SEC documents provided incomplete or nonexistent information on whether Nourafchan, Gershowitz or co-conspirator 2 were staffed on matters in which they accessed and shared non-public information at the four other firms.”
• “In an email, a spokesperson for Wachtell said the second co-conspirator left the firm four years ago and noted that there are no allegations of wrongdoing against the firm. ‘Wachtell Lipton has cooperated fully with the U.S. Attorney’s office and will continue to do so,’ the spokesperson said.”
• “A Latham spokesperson referred Law.com to an earlier statement, in which the firm noted that Nourafchan had left the firm five years ago and said the alleged conduct would ‘reflect a serious violation of our robust policies and procedures.'”
• “Representatives of the four other firms did not immediately respond to questions about how their non-public information was accessed and how they would prevent misuse of confidential client data in the future.”
  “Gershowitz declined to comment through his attorney, Scott Morvillo. An attorney for Nourafchan, Eric Rosen, did not immediately
• “The ‘tipping scheme,’ as the SEC called it, included layers of middlemen who handed off material non-public information from the three corporate attorneys in order to avoid detection, although the DOJ indicated that some of the co-defendants traded on information they had been instructed not to trade on by other members of the scheme.”
• “The scheme targeted long positions on companies whose stocks were expected to rise in value after public deal announcements, which a network of traders were able to get ahead of, thanks to the deal lawyers’ insider information.”
• “The second co-conspirator accessed and shared non-public data for eight deals while at Wachtell, with the most recent deal being Occidental Petroleum’s 2019 acquisition of Anadarko Petroleum.”
• “While at Weil, Gershowitz also accessed and provided non-public information to Nourafchan on the Anadarko deal, in which Weil represented investment banks and Wachtell represented Anadarko. Gershowitz was staffed on the deal, the SEC stated in its complaint.”
• “Gershowitz also shared non-public information with Nourafchan and Yadgarov on a planned 2019 combination of a specialty packaging business owned by Ardagh Group with Exal Corporation, in which Weil advised a controlling Exal shareholder.”
• “Then, while at Willkie in 2024, Gershowitz was staffed on Sixth Street’s acquisition of global insurer Enstar Group Limited, in which Willkie represented Sixth Street. Gershowitz drafted a document titled ‘Project Elk-Reinsurance Diligence Call Agenda Items,’ in reference to the project’s codename, before sharing non-public information with Yadgarov in May 2024.”
• “Gershowitz also shared information on the deal with Nourafchan while the two were in Gershowitz’s apartment in July 2024. Co-defendant Joseph Suskind made $630,000 in illicit profit on the subsequent trade.”
• “The alleged perpetrators attempted to conceal their activities using codenames, with tips referred to as ‘airline flights’ and ‘learning,’ referring to the act of trading information.”
• “A total of 30 men were charged in Wednesday’s unsealed indictments, with charges including securities fraud, conspiracy to commit securities fraud, money laundering conspiracy and obstruction of justice, among others. The SEC’s complaint alleged violations of the Securities Exchange Act of 1934 against 21 men. Nourafchan and co-conspirator 2 were each charged and sued by the DOJ and SEC, respectively.”

See more details and government filings: “Thirty Individuals Charged in Global Insider Trading Scheme Netting Tens of Millions in Illicit Profits.“

“Data Center Referendum Committee loses attorney due to conflict, retains another firm” —

• “The committee challenging Frederick County’s new data center zone through a referendum had to obtain new counsel last week after its attorney discovered a conflict of interest.”
• “Paul Flynn of the Flynn & Clarke law firm in Frederick formally recused himself on April 24 from defending the Frederick County Data Center Referendum Committee in three legal challenges that are attempting to block the referendum from appearing on the general election ballot in November.”
• “Flynn told the committee in a written statement that he discovered on April 21 that he is currently representing ‘another arm of’ a parent company behind one of the petitioners that is challenging the referendum in Frederick County Circuit Court. “
• “He wrote to the referendum committee that he and Dan Loftus, counsel for the Frederick County Board of Elections, met with opposing counsel on a Zoom call on April 21. One of the opposing counsel, whom he was meeting for the first time, ‘announced that he represents what is apparently the parent company of the one that filed the petition,’ Flynn wrote. ‘I suspect he did that intentionally to make the connection for me.'”
  His statement did not indicate the law firm or the attorney who made the announcement.”
• “Flynn wrote that he is currently representing a branch of that parent company and that he has ‘represented that group of companies for many years in multiple other matters.'”
• “In a public statement regarding the issue on Friday, the referendum committee wrote that they received the news of Flynn’s recusal with ‘shock and dismay.'”
• ‘These events left us scrambling to find new representation,’ the committee’s statement reads. ‘The feeling of embarking on a major legal defense … suddenly without an attorney, is hard to describe.'”

“The NC elections board hired a lawyer who was also suing it” —

• “State elections director Sam Hayes hired one of North Carolina Republicans’ go-to lawyers to defend the state Board of Elections in a lawsuit this year, even though that lawyer was representing clients with active lawsuits against the board in four other cases in state and federal court. “
• “Phil Strach represents Republican legislators, the Republican National Committee and the state Republican party in redistricting and election cases.”
• “As Hayes sought to hire Strach, Strach asked Hayes to sign a waiver acknowledging that his firm was representing board adversaries in other cases.”
• “‘Your consent signifies a waiver of any and all conflicts on behalf of other Firm clients which may exist in present unrelated matters or could arise in future unrelated matters due to this representation,’ Strach’s January 30 letter said. ‘You agree to not use our representation in the New Engagement as a ground for seeking our disqualification in such matters,’ Strach’s letter said. “
• “In an email Friday, the board’s director of external affairs, Jason Tyson, said there aren’t many lawyers in the state ‘who know election law to the extent required to handle these cases. We knew Mr. Strach would provide us the representation needed for this case.'”
• “The state board in January denied requests to open early voting sites for the primary at UNC-Greensboro, NC A&T State University, and Western Carolina University. Hayes hired Strach to represent the state board as college Democrats’ groups and students sued. A federal judge declined to force the campuses to open early voting sites.”
• “Democrats on the state elections board said they did not know in advance about the waiver and sought Monday to try to keep another from being signed without their input.”
• “The state board agreed Monday to an Anson Board of Elections’ request for legal assistance in a dispute with the Anson County Board of Commissioners. The state Attorney General’s office advised the board to use someone other than state lawyers, state Board Secretary Stacy ‘Four’ Eggers IV, said. “
• “Board member Siobhan Millen, a Democrat, tried to add a stipulation that each board member would need to sign the conflict of interest waiver if the lawyer Hayes chooses is representing other clients in cases against the board”
• “‘I think that’s a personal right,’ she said. ‘No one else can waive that for me.'”
• “The board rejected that request along party lines. Eggers said lawyers representing board members do so in their official capacity, not as individuals.”
  “The board approved hiring a lawyer for the Anson elections board with a 4-1 vote, with Democrat Jeff Carmon opposed. In an interview after the meeting, Carmon said he didn’t think Strach should have represented the board at the same time he was suing it.”
• “‘We can sign that waiver, knowing there’s a conflict,’ Carmon said in an interview. ‘We’d like an opportunity to address that conflict rather than have it be arbitrarily waived.'”
• “The North Carolina Bar Association conflict of interest rule says that lawyers must have written consent if they are defending clients in one case while opposing them in a different case. Lawyers must also believe they ‘will be able to provide competent and diligent representation to each affected client.'”
• “In the four lawsuits Strach mentioned in his waiver letter, he was representing the Republican National Committee, the NC GOP, individual voters, or members of the Justice For All Party. “

“Conflict-of-interest lawsuit surrounds ‘financially distressed’ medical clinic” —

• “The attorney for a Waterloo medical clinic is being sued by other Iowa healthcare providers for alleged conflicts of interest in his legal work. The lawsuit centers on representatives and affiliates of Cedar Valley Medical Specialists, a multispecialty medical clinic located in Waterloo that, according to one of its lawyers, is currently in financial distress.”
• “Three of CVMS’ affiliates — Waterloo’s Digestive Health Center, a gastroenterological ambulatory surgery center; P & H, a company that functions as CVMS’ landlord, and Dr. Ravindra Mallavarapu, who has worked at CVMS since 2002 and is also the majority owner of both Digestive Health Center and P & H — filed suit last week against Michael D. Schwartz and the Schwartz Law Firm of Oakdale, Minnesota.”
• “Court records indicate Schwartz has represented CVMS for 25 years, and it’s that representation that’s at issue in the lawsuit, which was filed in U.S. District Court for the Northern District of Iowa.”
• “While significant portions of the lawsuit and related filings are either redacted from public view or sealed entirely by order of the court, the case appears to involve not only alleged conflicts of interest by Schwartz, but also financial issues at CVMS.”
• “Weinhardt then informed the court that his three clients are currently in the process ‘of separating themselves from CVMS, and it’s going to take some time for them to work their way out of that arrangement.'”
• “He said the plaintiffs and the defendants have agreed on the language for a temporary restraining order that, if approved by the court, would prevent Schwartz from representing Cedar Valley Medical Specialists as long as there are any pending legal disputes between the clinic and the plaintiffs.”
  “In addition, Weinhardt said, the proposed order would prevent Schwartz from representing the clinic in any actions against Farmers’ State Bank, which he described as one of CVMS’ creditors.”
• “Weinhardt said that last week the bank reached an agreement with the plaintiffs ‘about matters between them.’ Although he didn’t elaborate, he did say the interests of the plaintiffs and the bank ‘are now aligned … We believe, therefore, that for Mr. Schwartz and his law firm to represent CVMS against Farmers’ State Bank would result in them taking actions that are detrimental to our clients’ interests.'”
• “The lawsuit seeks a temporary restraining order, as well as preliminary and permanent injunctions, barring Schwartz and his firm from continuing to represent CVMS in any matters that include the plaintiffs as potential adversaries.”
• “The lawsuit alleges that until he was asked to resign on March 5, 2026, Schwartz was a member of Digestive Health Center’s management board, and had, in the past, represented the center, P & H and Mallavarapu as their attorney — even in matters related to their contracts with CVMS, another longtime Schwartz client.”
• “As one example of the alleged conflicts of interest that arose from these roles, the lawsuit claims that last year Digestive Health Center sought to decrease the fees it paid to CVMS for certain services.”
• “Schwartz allegedly advised Mallavarapu, head of the center, to write a letter to CVMS, and even provided instructions on the letter’s contents. Then, in his role as legal counsel for CVMS, Schwartz allegedly attended a CVMS board meeting during which members agreed to a reduction in the fees charged to Digestive Health Center.”
• “‘Mr. Schwartz represented both sides in those negotiations without obtaining conflict of interest waivers,’ the lawsuit claims. ‘After the plaintiffs [information redacted from public view], they repeatedly demanded that the defendants withdraw from representing CVMS… The defendants refused to withdraw. In mid-April 2026, the Defendants suddenly withdrew from representing CVMS altogether, only to, on April 27, 2026, reengage with CVMS.'”
• “Schwartz said little during Monday’s court hearing, except that ‘obviously, we would disagree with the allegations in the complaint. There has been no confidential information shared with us, and there has been no breach of duties, et cetera.'”
• “At the conclusion of Monday’s hearing, Chief Judge Williams indicated he will issue the agreed-upon temporary restraining order, but told all of the parties he had ‘grave concerns’ as to whether he could retain jurisdiction over the case given the fact that federal rules require that such a case involve $75,000 or more that is in controversy.”