The firm's client was accused of operating a US$ 122 million Ponzi scheme
Texas-based law firm Locke Lord has agreed to pay US$ 12.5 million to settle claims related to its former client, Heartland Group Ventures, which was accused of operating a US$ 122 million Ponzi scheme.
Reuters reported that U.S. district judge Reed O'Connor approved the settlement, concluding a significant chapter in the ongoing legal proceedings surrounding the alleged fraud.
The settlement resolves allegations that Locke Lord allowed Heartland Group Ventures, an oil and gas company, to engage in fraudulent activities. The U.S. Securities and Exchange Commission (SEC) charged Heartland and its affiliates in December 2021, claiming they had taken US$ 122 million from 700 U.S. investors under the guise of funding oil and gas projects. Instead, much of the money was used to pay off other investors and for other unrelated purposes.
The court-appointed receiver for Heartland, Deborah Williamson of Dykema Gossett, indicated in court documents last month that there were "potentially viable claims" against Locke Lord on behalf of Heartland's investors. Williamson alleged that Locke Lord knew or should have known that Heartland and its affiliates were improperly violating securities laws and using investor funds. She asserted that the law firm negligently advised Heartland to maintain the status quo, allowing fraudulent activities to continue.
Locke Lord, while agreeing to the settlement, denied all allegations of wrongdoing. The firm also disagreed with the SEC's characterization of Heartland's activities as a Ponzi scheme. In a motion to approve the settlement, Williamson argued that if Locke Lord had provided proper legal guidance, Heartland would have ceased raising new funds and avoided various damages, including illegal or improper out-of-pocket payments.
The SEC's actions against Heartland and its affiliates continue, with preliminary injunctions already agreed upon by the defendants. In 2022, four Heartland principals named in the SEC's complaint settled with the agency.
As part of the resolution, Locke Lord's payment will contribute to compensating the defrauded investors and addressing the financial fallout from the scheme.
