Page 1 of 3 1 2 3 LastLast
Results 1 to 10 of 26
  1. #1
    Join Date
    Dec 2014
    Location
    NY
    Posts
    14

    Default Co-Op, Capper Volstead Act, and Possible Sec Violations

    My question involves malpractice in the state of: Co-Op was formed in CO, Lawyer is based in UT. Victims are in several other states.

    Brief Backstory:
    I met an individual who was selling a product, that was going to be considered a security by the SEC. His lawyer formed a Co-Op, because they said, "Under Capper Volstead Act of 1922, Co-Ops can raise money through the sales of their products directly to their members and be exempt from the Securities Act of 1933." The purchase agreement said those of us purchasing the product would automatically become member's of the Co-Op. After speaking with his lawyer, who told me the individual's plan would work out, I wired the money to the lawyer's client trust, who sent it to the Co-Ops' bank account. The lawyer had also told me in an email, that the Co-Op had a board and members.

    The Problem:
    Turned out the Co-Op; had no board, had no members, had no corporate governance, no bylaws, no fiscal oversight, it had nothing. Was only formed in name. Those of us who made purchases, also couldn't be automatically added. We needed to apply. Biggest issue, the individual ran it like an LLC and wasted all of the money (I'd say fraud, but's he is judgement proof because he already has some large jugdements against him).

    Why Legal Malpractice?

    I'm looking for expert advice here, on whether I have a legal malpractice case against the Lawyer (so his liability insurance can cover all of our losses). Hopefully I said enough above?

    Some key points / questions:
    • When I made the purchase, I was not a member of the Co-Op, and have never been a member of the Co-Op. So, I believe, them selling me a security while I am not a member of the Co-Op (and many other people) is an SEC violation.
    • The product however never actually got made, so I don't know if that would nullify the SEC Violation? Or just the act of selling something that would become a security, is enough?
    • The money was first sent to the lawyer's client trust, and as the lawyer of the Co-Op, he was the attorney representing my investment in the Co-Op.
    • I believe it can be proven, he knew the individual was not going to spend the money on the product and use it for other purposes (another attorney is witness to that, but has a conflict of interest).
    • He released the money to the Co-Op with that knowledge and knowing only the individual had access to the bank account.
    • The individual then wasted the money (could be argued defrauded the Co-Op). The individual claimed or thought he was running the Co-Op.
    • The mailing address on the Co-Op's bank account, was the lawyer's office, and paperless statements hadn't been set up.
    • With the Co-Op having no board or anything what so ever, wouldn't the lawyer be the only one with agency to spend the Co-Ops money?

    Conclusion:
    So, any input would be greatly appreciated. I had been trying to find a lawyer for a fraud case, but wasn't getting anywhere. So I'm hopeful, focusing on the Lawyer, the SEC violations he committed, and not protecting the investment could, be a strong enough case for a law firm to take on and hopefully win? Or any other thoughts / inputs, that would be helpful in how to present this to a lawfirm. (And there is a ton more to this lol)

  2. #2
    Join Date
    Mar 2013
    Posts
    17,780

    Default Re: Co-Op, Capper Volstead Act, and Possible Sec Violations

    How much money did you get scammed out of?

  3. #3
    Join Date
    Sep 2010
    Posts
    19,599

    Default Re: Co-Op, Capper Volstead Act, and Possible Sec Violations

    Understand, YOU have no claims against the attorney. He had no duty to you.

    If you think there was some violation of the law or fraud in the act that the client perpetrated, you need to make your case against the client. If the lawyer acted improperly toward the client, that will come out in course.

  4. #4
    Join Date
    Jan 2006
    Posts
    38,867

    Default Re: Co-Op, Capper Volstead Act, and Possible Sec Violations

    Quote Quoting flyingron
    View Post
    Understand, YOU have no claims against the attorney. He had no duty to you.

    If you think there was some violation of the law or fraud in the act that the client perpetrated, you need to make your case against the client. If the lawyer acted improperly toward the client, that will come out in course.
    dependimg on the situation the op might have a claim against the attorney. It wouldn’t be based on an attorney client relationship but if the attorney was complicit in what appears to be fraud, the attorney would be a proper defendant as well as the other individual. Given the other individual is pretty much judgment proof, the attorney may be the ops only chance of recovering any money. It does appear the attorney misrepresented the investment situation. The attorney appears to be in a position to know the representations were in fact false. That could be enough to tie the attorney in being complicit in the fraud.

  5. #5
    Join Date
    Oct 2014
    Posts
    7,836

    Default Re: Co-Op, Capper Volstead Act, and Possible Sec Violations

    Quote Quoting Mr B
    View Post
    So, any input would be greatly appreciated. I had been trying to find a lawyer for a fraud case, but wasn't getting anywhere. So I'm hopeful, focusing on the Lawyer, the SEC violations he committed, and not protecting the investment could, be a strong enough case for a law firm to take on and hopefully win? Or any other thoughts / inputs, that would be helpful in how to present this to a lawfirm. (And there is a ton more to this lol)
    You would not have a malpractice claim against the lawyer. Malpractice is a claim a client of a lawyer brings against the lawyer for negligence in representing the client. You were not a client of the lawyer and therefore there was no malpractice with respect to you.

    I agree with jk that if you could prove the lawyer knowingly participated in a fraud perpetrated by the client you would have recourse against the lawyer for that. But bear in mind that the lawyer's malpractice insurance coverage won't cover that.

    Without knowing that this "product" was I cannot say if the sale of it might be subject to regulation by the federal securities acts. But the problem here is that the lawyer was not the seller or promoter of the alleged security. And I'm going to guess that the lawyer did not furnish to you any written opinion that the sale would be exempt from the securities laws. You also have the problem that if the Co-op would have done what the lawyer said it would, the fact that the client didn't follow through to run it like he should is not the fault of the lawyer. The lawyer cannot make his client do anything. All these things together will make bringing a claim against the lawyer under federal securities law a real challenge.

  6. #6
    Join Date
    Dec 2014
    Location
    NY
    Posts
    14

    Default Re: Co-Op, Capper Volstead Act, and Possible Sec Violations

    Quote Quoting adjusterjack
    View Post
    How much money did you get scammed out of?
    For me, $128k. For everyone total that I know of; $442k. Number grows to $620k if you include money promised for work done.

    Quote Quoting flyingron
    View Post
    Understand, YOU have no claims against the attorney. He had no duty to you.

    If you think there was some violation of the law or fraud in the act that the client perpetrated, you need to make your case against the client. If the lawyer acted improperly toward the client, that will come out in course.
    From what I wrote above, didn't the lawyer violate SEC law?

    I think he did have a duty to me. I invested in the Co-Op he created and was the lawyer for. He represented that I was going to be added as a member of the Co-Op for that investment. So, he represented that he was going to have a duty to me, as the lawyer of the Co-Op I was becoming a member of for the money I sent to his client trust account. Or disagree? Or he misrepresented that he'd have a duty to me and my investment.

    He also told me in email (yay for proof!) that the Co-Op had a board and members (this was after I sent the money though).

    Quote Quoting jk
    View Post
    dependimg on the situation the op might have a claim against the attorney. It wouldn’t be based on an attorney client relationship but if the attorney was complicit in what appears to be fraud, the attorney would be a proper defendant as well as the other individual. Given the other individual is pretty much judgment proof, the attorney may be the ops only chance of recovering any money. It does appear the attorney misrepresented the investment situation. The attorney appears to be in a position to know the representations were in fact false. That could be enough to tie the attorney in being complicit in the fraud.
    Yeah, I really feel the lawyer was complicit. My hope is the SEC violation would just make the case much stronger (if there was one?). Plus after the fraud was discovered, the lawyer tried to cover it up, preaching to us to have patience and he hoped we'd get paid back. By this time, the lawyer knew the FBI had a file open on his client and he had a past of fraudulent behavior. He even went as far to tell us that, on his law firm's legal letter head to have patience. Another lawyer who became involved later, immediately resigned when she found out.

    But I'm just trying to focus on the SEC part and if he did have a duty to me part for this post, I didn't want to make it too complex.

  7. #7
    Join Date
    Mar 2013
    Posts
    17,780

    Default Re: Co-Op, Capper Volstead Act, and Possible Sec Violations

    Quote Quoting Mr B
    View Post

    But I'm just trying to focus on the SEC part and if he did have a duty to me part for this post, I didn't want to make it too complex.
    Well, have you reported this to the SEC?

    How about to whatever state agency regulates attorneys in Utah?

  8. #8
    Join Date
    Oct 2006
    Posts
    16,085

    Default Re: Co-Op, Capper Volstead Act, and Possible Sec Violations

    Quote Quoting adjusterjack
    View Post
    Well, have you reported this to the SEC?

    How about to whatever state agency regulates attorneys in Utah?
    You mean the Utah BAR Association?

  9. #9
    Join Date
    Oct 2014
    Posts
    7,836

    Default Re: Co-Op, Capper Volstead Act, and Possible Sec Violations

    Quote Quoting llworking
    View Post
    You mean the Utah BAR Association?
    Not the Bar Association. The Utah State Bar, and specifically the Office of Professional Conduct.

  10. #10
    Join Date
    Nov 2013
    Posts
    6,810

    Default Re: Co-Op, Capper Volstead Act, and Possible Sec Violations

    Quote Quoting Taxing Matters
    View Post

    I agree with jk that if you could prove the lawyer knowingly participated in a fraud perpetrated by the client you would have recourse against the lawyer for that.

    Without knowing that this "product" was I cannot say if the sale of it might be subject to regulation by the federal securities acts. But the problem here is that the lawyer was not the seller or promoter of the alleged security. And I'm going to guess that the lawyer did not furnish to you any written opinion that the sale would be exempt from the securities laws. You also have the problem that if the Co-op would have done what the lawyer said it would, the fact that the client didn't follow through to run it like he should is not the fault of the lawyer. The lawyer cannot make his client do anything. All these things together will make bringing a claim against the lawyer under federal securities law a real challenge.
    I also agree with jk.

    After reading some of the laws in Colorado on forming a Co-op and the case law involving Co-ops, I have to ask how the attorney is not complicit in perpetrating this fraud. I agree that there is no malpractice cause of action but surely conversion and civil theft.

    The attorney forms the LLC and registers it as a Co-op but doesn't follow through and create all the other agreements and governing documents but accepts investor money and diverts it to a bank account that is registered to his address on behalf of his client.

    Would you do that and say you were just following your client's instructions? I think not.

    1. Sponsored Links
       

Page 1 of 3 1 2 3 LastLast

Similar Threads

  1. Other Violations: Are Off-Highway Vehicles Violations Traffic Violations
    By Nick481 in forum Moving Violations, Parking and Traffic Tickets
    Replies: 2
    Last Post: 08-06-2013, 06:18 PM
  2. Speeding Tickets: Serious CDL Violations
    By robione in forum Moving Violations, Parking and Traffic Tickets
    Replies: 1
    Last Post: 07-11-2012, 10:35 PM
  3. Probation and Parole: New Law Violations
    By chaos5 in forum Probation, Parole and Incarceration
    Replies: 1
    Last Post: 04-28-2010, 08:08 AM
  4. Consumer Law Issues: Privacy Violations. Are They Law Violations
    By Michale32086 in forum Consumer Law
    Replies: 4
    Last Post: 09-08-2009, 06:54 AM
 
 
Sponsored Links

Legal Help, Information and Resources