The law firm of Holland & Knight is going to pay $25 million in order to settle a lawsuit regarding its involvement with Arthur Nadel, the Ponzi schemer from Sarasota. The settlement was announced on Tuesday and it will provide money to investors who lost over $162 million in the scheme from Nadel. The investors in the scheme will receive $18.2 million and the law firm of Johnson Pope Bokor Ruppel and Burns will receive the rest. The firm was hired for the case on a contingency basis, according to the Herald-Tribune.
“This may be less than some were hoping for, but is still a significant win for the investors,” said attorney Morgan Bentley. Bentley is from Sarasota and represented one of the victims of Nadel. Burton Wiand, the receiver for Nadel, has now collected $53 million for the receivership with the settlement.
A lawsuit was filed against the firm three years ago claiming that it knew of the activities by Scoop Management hedge funds that were operated by Nadel. The lawsuit said that the firm either missed or ignored signs that would have exposed the scheme from Nadel.
“We began to narrow the gap and finally reached an agreement,” Wiand said.
The law firm did not admit guilt when announcing the settlement and continues to maintain its innocence. “The settlement represents a compromise by the firm that reflects its consideration of various factors, including the substantial costs and investment of firm resources required to continue the litigation involving the funds,” firm general counsel Michael Chapman said.
A trial was scheduled to start in October in Sarasota Circuit Court. Wiand was confident that the investors would have won. “It’s clear Holland & Knight disputed the allegations, but after proceeding with litigation for about three years, I think the handwriting was on the wall,” he said. The settlement has to be approved by U.S. District Judge Richard Lazzara. All objections or protests against the settlement have to be filed by October 1.
“Holland and Knight failed to discover that Nadel had been operating a fraudulent investment program, even when a cursory examination and review of his activity would have revealed his illegal activities,” the lawsuit claimed.
In May, close to 350 investors were issued checks totaling $26 million from the first distribution of funds that the receivership acquired. That total represented just 20 percent of the investors’ approved claims. Nadel passed away at the age of 79 in April while serving his 14-year prison sentence in North Carolina.