Summary: Holland & Knight will settle a malpractice suit alleging that two of their partners in Miami helped an investor defraud his partner.
Holland & Knight was being sued for $14 million in a malpractice case claiming two of their Miami partners took part in helping an investor defraud his partner. The Miami-based Am Law 100 firm has agreed to pay $5 million to settle the suit.
The settlement agreement is now pending approval from U.S. Bankruptcy Judge Robert A. Mark during a hearing set for September 26. Under the terms of the settlement, Holland & Knight is not admitting to any wrongdoing and denies the allegations. The parties will dismiss their claims and counterclaims per the settlement agreement.
The settlement deal will set an end to the claims that Holland & Knight helped their client Jorge Arevalo hide $1 million from Lumber Liquidators founder Tom Sullivan when they were closing on the purchase of the posh One Bal Harbour hotel-condo tower several years ago in 2009. The investment in the real estate did not go as Sullivan and Arevalo had planned. Sullivan paid the $17 million to buy the tower in a Delaware bankruptcy case. Documents indicate that Sullivan was to recoup his original investment before either of them earned a return on the tower.
However, Arevalo apparently made a deal of his own with the broker handling the purchase. He promised future business in exchange for $1 million which the broker gave to Arevalo without Sullivan’s knowledge.
Holland & Knight represented Arevalo but they also represented the company the two investors formed to make the transaction, Elcom Hotel & Spa LLC. Once the investment turned south, Sullivan and a bankruptcy trustee appointed to the matter drew a conclusion that Holland & Knight’s attorneys Mark Aronson and Jorge Hernandez-Torano helped Arevalo conceal the money. An amended complaint filed in 2016 claims that the attorneys knew about the side deal but did not inform their other client, Mr. Sullivan, about it. Sullivan accuses the attorneys of falsifying a U.S. Department of Housing and Urban Development document to further hide the deal. The firm later transferred $1 million to Arevalo from their trust account.
Arevalo’s former counsel Joseph DeMaria, a Fox Rothschild litigator, helped Arevalo get the settlement, in which he will waive privilege and testify against Holland & Knight. He will pay a $400,000 judgment and a $1 million payment for the court to extinguish if he succeeds in collecting over $1 million in his lawsuit against Holland & Knight.
Other lawsuits were brought by unit owners at the tower for mismanagement. Their lawsuit led to the hire of forensic accountants, who were the ones to uncover the side deal. Akerman attorney Michael Goldberg was appointed as the liquidating trustee over the Elcom company and property. He then filed the lawsuit against Holland & Knight and its two attorneys.
Should Holland & Knight have asked either Arevalo or Elcom to find different legal counsel because there was likely to be a conflict of interest? Tell us your thoughts in the comments below.
To learn more about Holland & Knight, read these articles:
- Holland & Knight to Pay $25 Million Settlement in Arthur Nadel Ponzi Scheme Case
- Holland and Knight Open Office in Mexico City
- Holland & Knight Changes Their Policies to Attract More Women
Photo: newyorklawjournal.com