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Summary: Defrauded investors have joined in a class action lawsuit against a Bismarck North Dakota law firm, acting as escrow agents for a housing project.
The oil-rich area of North Dakota has seen substantial growth over the last ten years. The discovery of Parshall Oil Field in 2006 helped the development of nearby areas. Over 100 investors from several countries believed they were investing money for a housing development to be built in the Bakken region. That housing development has never been built.
The Ponzi scheme by North Dakota Developments LLC milked investors for $62 million. The investors have also filed a complaint against the law firm Pearce & Durick, which served as the escrow agent for the developers. They claim the firm committed legal malpractice by failing to notify the investors that the investment was in unlawful securities.
The U.S. Securities and Exchange Commission filed a complaint in May against the owners of the development company, Daniel J. Hogan and Robert L. Gavin. The civil complaint accuses them of defrauding investors by seeking support for housing projects since 2012 in the oilfields of North Dakota. The projects have never been finished. A total of 980 investors from 66 countries have invested in their developments. The owners apparently used the money to make high payments to sales agents and other projects unrelated to the housing developments.
Now a class action lawsuit against the firm has developed. Investors say they were required to pay the law firm in order to review documents forming the attorney-client privilege. Pearce & Durick were then obligated to warn the investors of the potential fraud but they didn’t. According to one of the lawyers representing the investors, Alan Rosca, there were several red flags and outright violations that the firm had to have known about.
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The firm says they had no idea the developers were misusing the investments and says they did not represent the investors, making that fact clear when purchase agreements were signed by the investors.
Photo: insideenergy.org
