As we have previously written, multiple times, there are few, if any, Ponzi schemes which do not involve an attorney at some level or another. The Philadelphia-based law firm, Astor Weiss Kaplan & Mandel, has recently been named as a defendant in a class action claim asserting Astor Weiss should have known one of its clients was engaged in a Ponzi scheme. The proposed class consists of investors who purchased securities issued by Mantria Corporation.
In 2009, the SEC accused Mantria Corp., which is based in Bala Cynwyd, Pennsylvania, and its principles of raising $122 million from more than 300 investors in multiple fraudulent securities offerings (the Ponzi scheme has been described as a $54 million scheme). in 2011, summary judgment was granted in favor of the SEC, by District Judge Christine M. Arguello, whose opinion specifically states the company was engaged in a Ponzi scheme. Among the most interesting allegations from the SEC litigation, was that Mantria used millions of dollars to build non-revenue-generating infrastructure, including a “biochar” plant built in Tennessee which never generated any revenue.
The lawsuit filed in the Court of Common Pleas Philadelphia County, is substantially similar to a prior complaint filed in the Colorado District Court, which was dismissed due to a lack of personal jurisdiction. The lawsuit alleges Astor Weiss served Mantria as “special securities counsel,” and prepared many of the allegedly misleading securities offerings. The complaint also alleges Astor Weiss served as an escrow agent for the sale of the fraudulent securities. The complaint alleges an attorney at Astor Weiss approved securities offerings predicting a high rate of return, despite knowing the biochar facility was non-operational.
Attorneys should view any investment promising high rates of return with a skeptical eye. Attorneys frequently end up being stung by Ponzi schemes, even if unwitting dupes themselves. Ponzi schemes frequently engender professional liability claims. Malpractice avoidance best practices involve taking care to identify potential Ponzi schemes described to attorneys whether by acquaintances, family members, or clients.