Risk Update

Ironic Ethics Risk — Am Law 100 Conflicts Counsel (Former) Insider Trading Sanction, LeClairRyan Redux

SEC Sanctions Ex-Cozen O’Connor Conflict Counsel for Insider Trading”

  • “A former Cozen O’Connor lawyer has agreed to pay more than $20,000 to settle charges by the nation’s top securities enforcer that he misappropriated client information to enrich his personal earnings, while serving as the Am Law 100 firm’s conflicts counsel.”
  • “Bala Cynwyd-based trial lawyer William Gericke, 60, was barred from practicing as an attorney before the Securities and Exchange Commission, according to an administrative proceeding filed Nov. 19 by the SEC.”
  • “According to the SEC, Gericke purchased 1,000 shares of stock in Cozen O’Connor client Liberty Property Trust in 2019 after obtaining ‘material nonpublic information’ regarding an impending merger between LPT and another real estate investment trust, Prologis. Gericke allegedly sold all the stock after the trading price ballooned in the days following the merger’s announcement.”
  • “Gericke practiced at Cozen O’Connor from 1997 until August of this year, when he went to work at Dugan, Brinkmann, Maginnis and Pace in Bala Cynwyd, Pennsylvania. Gerald Dugan, the firm’s chairman, declined to comment.”
  • “He has also spoken about legal ethics in other settings. As late as June 10, 2021, Gericke could be seen as a panelist leading a continuing legal education webinar on “Key Ethical Considerations for Lawyers Acting As Local Counsel,” hosted by The Knowledge Group.
  • “‘The actions that were alleged by the SEC against Mr. Gericke violated law as well as the firm’s policies and procedures that all employees are obligated to follow,’ [Cozen] firm leaders said in an email statement. ‘When we became aware of Mr. Gericke’s activity, we took prompt and appropriate action, including cooperating with the SEC. We are glad that this matter has been resolved and that the behavior of the former employee resulted in no harm to our client.'”

(Interesting risk question in that Mr. Gericke still lists a Cozen affiliation in his LinkedIn presence. I’m sure learned minds out there may have comment about the rules or standards regarding such things. And I do wonder what consideration and attention, if any, firms pay to these details. Though, at least one person was curious enough to check…)

Ex-LeClairRyan general counsel gets prison time, while firm insurer agrees to pay $10M to bankruptcy trustee” —

  • “The former general counsel of the defunct law firm LeClairRyan was sentenced to 44 months in prison in Richmond, Virginia, on Monday for lying to the U.S. Trustee Program while trying to thwart an investigation into his embezzlement of more than $4 million.”
    “Disbarred Richmond, Virginia, lawyer Bruce Matson, 64, was sentenced following his guilty plea to obstructing an official proceeding, report Law360 and the Richmond Times-Dispatch.”
  • “Matson misappropriated about $800,000 between 2015 and 2018 while serving as the court-appointed trustee in the bankruptcy of LandAmerica Financial Group Inc., according to a press release by the U.S. attorney for the Eastern District of Virginia. He also manipulated the budget for the post-bankruptcy wind-down to allow himself to pay $3.2 million in bonuses to himself and others, prosecutors say.”
  • “The sentencing happened days after LeClairRyan’s management liability insurer, the Columbia Casualty Co., agreed during a settlement conference to pay $9.475 million to settle claims by the bankruptcy trustee covered by the policy, as well as $525,000 to settle claim expenses.”
  • “The settlement leaves outstanding ‘garden variety’ bankruptcy claims against the defendants and claims against legal services provider UnitedLex, the article reports.”

UnitedLex still faces $128M lawsuit from LeClairRyan trustee” —

  • “In 2018, Richmond-based LeClairRyan struck a deal to outsource about 300 of its support workers through a partnership with enterprise legal services provider UnitedLex, which created ULX Partners LLC. The workers were intended to perform back office support tasks for LeClairRyan and other law firms, with LeClairRyan holding a 1% stake in the venture. At the time of the firm’s failure, LeClairRyan still owed UnitedLex more than $8 million related to the venture.”
  • “Federal Judge Kevin R. Huennekens of the U.S. Bankruptcy Court for the Eastern District of Virginia ruled that an unauthorized practice of law allegation — specifically that a non-lawyer had been given control of LeClair Ryan — and a misappropriation of funds allegation — that client funds were mismanaged by firm leaders and UnitedLex employees— supported statutory and common law civil conspiracy claims. Huennekens ruled that other allegations in the suit, including converting the business from a professional corporation to a professional limited liability company, were not illegal on their own.”