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$100
Million NY Malpractice Claim By Nate Raymond A federal judge yesterday largely denied a motion to dismiss a $100 million malpractice case against Greenberg Traurig stemming from its patent work for an electronics manufacturing client. The bench ruling by Southern District Judge George Daniels cleared the way for discovery to begin in Leviton Manufacturing Co. Inc.'s suit against the firm. Leviton sued Greenberg and three of its former partners in September after a District of Maryland magistrate judge found that Leviton, while represented by Greenberg, had committed "inequitable conduct" before the U.S. Patent and Trademark Office and had committed discovery abuses in subsequent litigation. Greenberg argued that some of Leviton's claims should be dismissed because they fell outside the three-year malpractice statute of limitations, as some of the allegations dated to 1999. Leviton countered that the firm's work on the patents was part of a "continuous representation" and, as a result, falls within the statute. Judge Daniels called the issue a fact question and denied the motion without prejudice. Greenberg also had argued that since Leviton was appealing the Maryland court's decision, Leviton had not yet sustained any damages and might not at all if the ruling is overturned. Judge Daniels disagreed, saying Leviton had already been damaged by having to put up a bond while awaiting a decision by the U.S. Court of Appeals for the Federal Circuit. "I find that these issues are ripe for determination," the judge said. Meanwhile, he dismissed claims by Leviton for wrongful billing as duplicative of the malpractice claims. The case is Leviton Manufacturing Co. Inc. v. Greenberg Traurig, 09cv8083. Fax Could
Be Stake Through By John Pacenti MIAMI -- An attorney for banking regulators pointed to a fax Tuesday that could prove crucial in determining whether attorney Carlos Loumiet purposely tried to protect corrupt executives at the defunct Hamilton Bank. The fax from Hamilton Bank to West Merchant Bank of London discussed the dumping of a downgraded Russian loan and the purchase of a junk Hong Kong loan at above-market prices. Special Counsel Lee Strauss, in opening statements of a civil proceeding that could bar Loumiet from representing banks, said the attorney split pages of the fax to make the transactions look separate in two reports he was producing for the Hamilton auditors. The cover sheet of the fax was also discarded. Loumiet, who led the legal team from Greenberg Traurig dealing with the bank's outside auditor, is on trial in a case brought by the Office of the Comptroller of the Currency that started Tuesday in Miami before Administrative Law Judge Ann Z. Cook. Auditors at Deloitte & Touche raised questions about the international loan swap handled by the same brokers. Greenberg Traurig, which represented Hamilton as outside counsel, was hired to do an independent investigation of the transactions. Strauss has charged Loumiet -- who exclusively represents banks -- with conflict of interest, as well as suppressing evidence and causing general harm to the bank. The auditors wanted to know if Hamilton officials had illegally swapped newly downgraded Russian loans for junk Latin American and Asian debt at above-market prices to hide a $3.1 million loss. The Office of the Comptroller of the Currency, which shut down the Miami bank in 2002, is seeking a $250,000 fine and wants to bar Loumiet from representing any federally insured financial institution. He represented the bank while with Greenberg Traurig and is now a partner at Hunton & Williams. "This recklessness is not from a newly minted attorney caught in a rookie mistake," OCC special counsel Lee Strauss told the judge. "He is a sophisticated, experienced attorney." Loumiet seemed to take the proceedings calmly. He wore a pinstripe suit and talked with Strauss about the winless Miami Dolphins during a break. His attorney, Alan Greer, claimed Loumiet is being made a scapegoat for poor OCC oversight. "This isn't even 20-20 hindsight. It's 20-10," Greer of Richman Greer told the judge. Loumiet is expected to testify in his defense. Strauss claimed Loumiet and his Greenberg Traurig team, including fellow partner Robert Grossman, were negligent in reviewing documents about Hamilton's policy on international loans. Greer countered that negligence isn't enough to ban the veteran attorney from banking work -- that the government will have to prove malfeasance. The OCC attorney pointed to the fax as the most telling sign of intentional wrongdoing. The Sept. 21, 2000, fax transmission shows Hamilton Bank general counsel J. Reid Bingham confirming an adjusted price trade of a Moscow loan for Hong Kong debt with a West Merchant Bank of London official, Strauss said. Adjusted price trades are illegal transactions designed to hide losses from auditors and regulators. Loumiet purposely got rid of the fax's cover page, Strauss claimed, dramatically ripping off a page in front of the judge. Auditors were able to put together the two pieces of the puzzle when they noticed the identical fax heading and later had the bank restate its financial statement. Strauss called the two reports generated by Greenberg Traurig "worse than worthless" because they protected the felons running Hamilton. Loumiet's assertion that Hamilton always paid full price for its securities and loans was false because a paper trail showed officials paid close attention to market prices, Strauss said. "All he had to do was look at them to see the bank officers were selling him a bill of goods," he said. When Loumiet told auditors Hamilton always purchased assets at full price, not at market value, the bank's attorney was talking about loans not securities, Greer said. He said the OCC is parsing out sentences in the two reports, saying it is clear when the reports are read as a whole that the information on the Hong Kong transaction was from the same fax. Trading of emerging market debt in the late 1990s was fairly new, and even the OCC policy was to purchase debt as loans with underwriting rather than as securities, he said. That applied to the Hong Kong and Latin American debt purchases after the Russian loans were sold. Greenberg Traurig, which was paid $240,000 for the reports, received $1.6 million in fees from Hamilton in 2001 and 2002. Bank CEO Eduardo Masferrer collected a $1.8 million bonus. Greer said in his opening statements that OCC investigators had the same documents as Loumiet and were just as fooled by the bankers at the time. Greer repeated previous statements that the hearing is a "professional death penalty case" with huge implications for attorneys who work with financial institutions.The Hamilton failure cost taxpayers $127 million. Masferrer was convicted of 16 counts of fraud and sentenced to 30 years in federal prison. Two other bank officials pleaded to securities fraud and received two-year sentences. Greenberg Traurig and Grossman paid a combined $925,000 in penalties to settle OCC allegations. Neither the firm nor Grossman admitted any wrongdoing. Loumiet refused to deal. Was Lawyer's Conduct Reckless in Hamilton Bank Scandal? By Jane Bussey A prominent banking lawyer -- fighting for his professional life in a high-profile court case -- went on trial Tuesday on charges his ''reckless misconduct'' resulted in a report that concealed bank-fraud crimes. The charges against Carlos Loumiet stem from a report he did while at his former law firm -- Greenberg Traurig, which was investigating problematic foreign loan swaps at the now-shuttered Hamilton Bank. Regulators, charging he concealed crimes of former Hamilton Bank officers in the report, are seeking a civil penalty of $250,000 and want to have the lawyer barred from offering legal services to financial institutions. ''This is a professional death sentence,'' Loumiet's attorney, Alan Greer, said in opening arguments. He noted that Loumiet now works in the banking practice at the Hunton & Williams law firm. Greer also said the case is likely to set the standard for whether lawyers will be held responsible for investigations into corporate wrongdoing they work on. But attorneys for the Office of the Comptroller of the Currency, which lodged the charges against Loumiet for his 2000 and 2001 reports, insisted that U.S. rules already make lawyers liable for such reports. ''This case is about the reckless misconduct of Carlos Loumiet,'' said Lee M. Straus, special counsel at the OCC. Straus charged that the reports overseen by Loumiet ''whitewashed'' what happened at the bank and that the attorney repeated his mistakes in a second report after the OCC raised red flags about the first one. Hamilton's History The case being heard by Treasury Department Administrative Law Judge Ann Z. Cook in a Miami court has the feel of a postmortem on Hamilton Bank, which was seized in 2002. The once high-flying trade finance bank became locked in a bitter and drawn-out legal battle with the OCC and three of its officers went to prison. At the height of the clash, Greenberg Traurig was hired to probe the sale of Russian loans to determine if they were illegal swaps intended to hide losses at the bank. The reports authored by Loumiet and another Greenberg attorney said there was no evidence that the transactions were illegal. Courtroom Drama Holding up a three-page fax that Hamilton Bank received detailing how the Russian loan sales were connected to other securities purchases -- deals that later were proven to be illegal -- Straus tore the sheets apart to illustrate how Loumiet had intentionally separated the bank memo to mislead regulators. But Greer insisted that no one knew that any crime had been committed when Loumiet did the reports and that bank officers lied to him as well as to the regulators. He also noted that the banking attorney became involved after the investigation started, spending less than 10 hours on the investigation over a period of two months. Greenberg Traurig has already settled the case with regulators -- agreeing to pay $8.5 million in penalties without admitting fault. But Loumiet, insisting he did nothing wrong, opted to go to trial. Under administrative law rules, the trial will last about 2 ½ weeks and then recess before closing arguments are heard in November. The law judge's ruling is expected next year.
http://www.miamiherald.com/business/v-print/story/266171.html By Jane Bussey So far the toll from the Russian loan swap fraud at Hamilton Bank has been three top bankers sentenced to prison and a fine of almost $8 million paid by law firm Greenberg Traurig stemming from its misleading investigation of the transactions. Now local attorney Carlos Loumiet faces charges by the Office of the Comptroller of the Currency that he ''harmed the bank by concealing the crimes'' of the three bankers. His trial before Treasury Department Administrative Law Judge Ann Z. Cook begins today. Loumiet, a well-known banking attorney now at Hunton & Williams, insists he did nothing wrong while employed by Greenberg Traurig when he was among the firm's attorneys who cleared the bank officers after probing the Russian loan swaps, which were later determined to be illegal. The OCC is seeking a $250,000 penalty and an order barring Loumiet from representing federally insured financial institutions. ''This case is much larger than Loumiet,'' said his attorney Alan Greer. ``As far as I know, no lawyer has ever been charged for doing something like this. It is going to set a standard for all lawyers in the future.'' The case stems from a dispute over Hamilton Bank's disposal of $22 million in Russian loans in 1998 after a devaluation of the ruble. Bank officers denied to regulators they were trying to avoid writing down loan losses when they swapped the loans for Latin American bonds at inflated prices. Greenberg Traurig was hired by the bank's audit committee in 2000 to investigate the transactions, and turned in a report that said nothing was improper. The dispute escalated, and banking authorities shut down Hamilton Bank in 2002. In 2006, three officers were sentenced to prison for the illegal transactions, including two who pleaded guilty. Former Hamilton Chairman Eduardo A. Masferrer has appealed his conviction and 30-year sentence -- believed to be the longest sentence ever for modern corporate fraud. Greer said that back in 2000, neither the OCC nor the bank's auditors, Deloitte & Touche, concluded that the transactions were illegal or that the three officers were lying. ''Assuming that these three individuals lied to the OCC, they lied to Deloitte & Touche, and they lied to Greenberg,'' Greer said. ``They want Carlos Loumiet to be blamed. That is just not fair.'' Greenberg Traurig settled with federal authorities. While the firm agreed to pay a fine, it did not admit liability. Loumiet also acted as Hamilton Bank's attorney when the bank filed a complaint against the OCC, alleging that its actions stemmed from anti-Hispanic bias. The complaint raised the stakes in the battle between regulators and the bank just before the institution was closed. ''He got in the OCC's face, and he's now paying for it,'' Greer said. OCC officials would not comment on the case.
http://www.miamiherald.com/business/story/264938.html By Daniel Ostrovsky Federal banking regulators are accusing former Greenberg Traurig shareholder Carlos Loumiet of making false statements, suppressing evidence and violating conflict of interest rules in connection with his work for the now-defunct Hamilton Bank. Hamilton was taken over by federal regulators who uncovered a multimillion dollar fraud that led to convictions of the banks' top three executives. In a Nov. 6 notice of charges, the U.S. Office of the Comptroller of the Currency announced that it is seeking to impose a $250,000 fine against Loumiet and to bar him from representing banks and other insured depository institutions. "Respondent Loumiet harmed the Bank by concealing the crimes of the Bank's chairman and CEO ... its president ... and its CFO ... whom Respondent Loumiet and his former law firm, Greenberg Traurig LLP ... represented while they purported to represent the Bank," the OCC charges. "The officers orchestrated unlawful transactions in order to hide the Bank's losses resulting from the Russian debt crisis of 1998." The OCC charges that Loumiet "protected the officers [of Hamilton Bank] by making materially false and misleading assertions, and by suppressing material evidence." The OCC focuses on two investigatory reports by Loumiet and Greenberg Traurig shareholder Robert Grossman. The OCC contends that as a result of the favorable reports, Hamilton executives "steered additional business to Greenberg and Respondent Loumiet. Greenberg collected $1.16 million of fees from [Hamilton Bank] during 2001-02, and [Loumiet] received a share of these fees." Loumiet, now a partner in Hunton & Williams' Miami office, is fighting the charges, which he contends are "devoid of merit," "vindictive" and "unfair." Instead, he blames Hamilton's external auditor, the bank's regulatory and litigation counsel, and the OCC itself for the failure to detect the bank's problems earlier. "These sweeping allegations of criminal conduct, if made outside the protection of legal process and by anyone other than the U.S. Government, would be slander, per se," states Loumiet's sharply worded Nov. 27 answer to the OCC's complaint. He is represented by a Washington, D.C.-based team of lawyers from Venable. In an interview Friday, Loumiet's lawyer, William D. Coston, also blamed the bank's officers saying that "they fooled the bank regulators, they fooled the bank accountants and they fooled the law firm." Coston, of Venable in Washington, D.C., said the OCC should not be allowed to use hindsight to question the conclusions in reports complied by his client. Last week, the Daily Business Review reported that Greenberg Traurig and Greenberg shareholder Robert L. Grossman recently agreed to pay $925,000 in fines to settle OCC allegations related to their legal work for Hamilton Bank, which collapsed in one of Miami's biggest bank frauds. Loumiet worked with Grossman on the Hamilton matter. Loumiet, who spent 19 years at Greenberg and became a principal shareholder, headed that firm's international and banking practices for 10 years. That included 2000 and 2001, when the law firm was hired to compile two reports for the Hamilton Bank audit committees. He joined Hunton & Williams in 2001 and is currently a partner in the firm's business practice group, where he focuses on international business and banking. In a statement on the consent agreements involving Greenberg Traurig and Grossman as well as the charges against Loumiet, a Greenberg spokeswoman said the firm "respectfully disagreed with the OCC's assessment of the facts." She said the consent orders resolved the charges against Greenberg "in a manner satisfactory to the OCC, and without further expense or distraction to the firm." The Greenberg spokeswoman also said there are no pending criminal investigations involving Greenberg. The U.S. Attorney's Office does not comment on possible criminal investigations. Walfrido "Wally" Martinez, the firm-wide managing partner of Richmond, Va.-based Hunton, issued a brief written statement that "these proceedings will not adversely impact our clients." He added that Hunton & Williams "is not a party to these administrative proceedings" against Loumiet. But if a partner at a law firm is accused of misconduct, the law firm's reputation can be hurt, even if the partner committed the wrongful acts while working for a different firm, said Joseph E. Ankus of Ankus Consulting Inc., a legal recruiting firm based in Weston. "Let's face it, people see what they want to see and hear what they want to hear," he said. Hunton & Williams may be affected if the OCC gets its way and Loumiet is unable to represent banks. In general, if a partner gets barred from representing some clients, "by definition it will have an impact on that attorney's bottom line and that would flow over to firm profitability," Ankus said. Miami-based forensic accountant Stanley Foodman, who has worked with banks and federal agencies, said last week it is uncommon for federal banking regulators to discipline lawyers and law firms. But he said legal professionals fall under OCC jurisdiction when they provide counsel to banks. A spokeswoman for The Florida Bar said Loumiet had no public discipline history and no complaints closed in the past 12 months. Won More Bank Business Greenberg Traurig was retained in 2000 by the boards of directors and audit committees of Hamilton Bank and its holding company to investigate purported "loan swaps" in 1998 and determine whether the bank's officers -- including chairman and chief executive Eduardo Masferrer, president Juan Carlos Bernace and chief financial officer John Jacobs -- had lied to or misled the bank's external auditors, according to the notice of charges. The two reports for Hamilton Bank, which Loumiet co-authored with Grossman in November 2000 and March 2001, concluded that the bank did not attempt to conceal financial losses by engaging in an "adjusted price trade" in 1998. That was when it sold off risky Russian loans at a value that was substantially higher than the market price, and nearly simultaneously purchased equally risky Latin American loans at a face value that was also above the market price. The purported loan swap, which was not properly disclosed and helped conceal the bank's financial woes, resulted in the 2002 failure of the bank. Three of its top officers, including Masferrer, were later convicted. Masferrer was found guilty of federal fraud charges in May and sentenced to 30 years in prison. The takeover of Hamilton cost the FDIC $127 million, according to the OCC. But the Greenberg Traurig reports for the bank's boards and audit committees had concluded that the three bank officers had not done anything wrong. The OCC says that Loumiet and Greenberg Traurig placed the interests of Hamilton Bank below the interests of their other clients -- the bank's officers. The notice of charges also cites several conflicts of interest that allegedly caused Loumiet to breach his fiduciary duty to the bank, engage in unsound practices in putting together the reports and break at least two rules of the Florida Rules of Professional Conduct that relate to conflict of interest. One alleged conflict of interest was Greenberg's and Loumiet's representation of Masferrer, Bernace and Jacobs in an OCC enforcement action and a class action lawsuit brought by shareholders. Both of those actions centered on the loan swaps. Regulators also point to Grossman's representation of the bank between 1998 and 2000 in relation to Hamilton's Securities and Exchange Commission filings. The OCC said those filings "did not disclose the adjusted price trades, or the losses that the Bank's officers sought to conceal through the adjusted price trades." While compiling the two reports, Loumiet "had an incentive not to conclude that the Bank had engaged in adjusted price trades, which would expose the material inaccuracy of the SEC filings," the notice of charges alleges. Greenberg and Loumiet, regulators allege, failed to erect a "firewall" to separate the law firm's interest in defending Masferrer and Jacobs in the federal class action suit from the firm's inquiry as to whether the two officers had lied to the bank's auditors, which was undertaken on behalf of the bank. Coston, Loumiet's lawyer, said Grossman, not his client, was Greenberg's principal relationship lawyer with Hamilton Bank and that his client's judgment was not clouded by promises of future business or a relationship with the bank's officers. He also said the OCC was informed that Greenberg Traurig had been Hamilton's counsel before the law firm drafted either of the reports in question. No Evidence of Fraud? Before submitting its second report in 2001, the OCC states in its charges against Loumiet that Greenberg Traurig had a letter from Hamilton Bank "confirming the adjusted price trades" -- some of which were made through an intermediary of London-based West Merchant Bank. It also had portions of testimony of a West Merchant employee "who had participated in the adjusted price trades" that was furnished by the OCC along with six "red flags." Still, Greenberg Traurig's March 14, 2001 report concluded that "when viewed in totality, the 'evidence' available to us is not convincing that Hamilton Bank intentionally engaged with [WMB] in a disguised 'swap' or 'exchange' in connection with the sale of Russian loans and purchase of Latin American assets, nor is such 'evidence' convincing that management at Hamilton Bank intentionally misled [its external auditors or the bank's audit committee] (or has demonstrated a lack of integrity) about these matters." In October and November, Greenberg Traurig and Grossman, while admitting no wrongdoing, agreed to consent orders, or settlements, of $750,000 and $175,000, respectively. "They settled so that they could resolve the matter without any further expense or distraction to the firm, and that's the judgment that Greenberg had to make for its own partners," Coston said. "But this matter is more than a distraction for Mr. Loumiet -- it's a direct assault on his sterling character and he ... will litigate aggressively and prove that the charges have no merit." The OCC's action is the latest embarrassment for Greenberg Traurig, the former home of convicted Washington lobbyist Jack Abramoff. The firm has settled with several of Abramoff's former clients, but still faces a $32 million suit filed by the Coushattas Tribe in Louisiana. Both Loumiet and the OCC have filed various motions, and a hearing is scheduled for October 2007 before an administrative law judge in Miami. Loumiet's answer takes shots at the OCC. It cites a report compiled by the Office of Inspector General of the Department of the Treasury that it says was critical of OCC's oversight of Hamilton Bank between 1992 and 1997. Loumiet's answer states: "The OCC, having failed in its own regulatory duties, now looks to make Mr. Loumiet a scapegoat."
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A Feast
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