Tuesday, January 17, 2017

Burger King Sting Draws Misconduct Charges

An attorney who entered into a deferred prosecution agreement has been charged with ethics  violations by the Illinois Administrator.

The alleged course of conduct

1. Starting in or about 2009, and at all further times alleged in this complaint, Respondent worked as an attorney and sports agent at Bryant Legal Group in Chicago.

2. Sometime in 2013, Respondent met Joseph Vaccaro ("Vaccaro"), a financial advisor who worked with professional athletes, and the two men began discussing the possibility of working together on an investment deal.

3. In approximately May 2014, Vaccaro, Respondent and a confidential Federal Bureau of Investigation ("FBI") informant ("the informant") had started discussing ways that they could make money by deceiving their professional athlete clients in an investment deal involving the purchase of 13 Burger King franchises in Virginia. In June 2014, the FBI directed the informant to meet with and secretly record conversations the informant had with Vaccaro and Respondent.

4. On or about June 5, 2014, Respondent flew from Chicago to California and met with Vaccaro and the informant to further discuss working together to fraudulently obtain funds from professional athletes. During this conversation, Vaccaro and Respondent told the informant that they were working on a deal that involved purchasing 13 Burger King franchises and related real estate for $16 million, with an expected total return of 17% on the investment. Respondent, Vaccaro and the informant agreed that Respondent would represent Vaccaro, Respondent’s and the informant’s interests in the deal by handling legal work related to the purchase of the franchises, including completing the due diligence process (reviewing leases, deeds, surveys and corporate and financial records of the franchises), acting as escrowee for the investment and discussing the terms of the investment with potential investors.

5. Throughout the remainer of June 2014, Respondent, Vaccaro, and the informant participated in phone calls, which were recorded by the informant, in which they discussed the details of the investment scheme, including requesting that the informant raise $20 million from investors to purchase the Burger King franchises, in exchange for which the investors would receive 50% ownership in the franchises and related property. Respondent, Vaccaro, and the informant discussed their plan to misrepresent the true purchase price of the Burger King franchises as $37 million to potential investors, rather than tell investors the actual price of $16 million, so as to keep the four million dollar difference between the investment amount of $20 million and the actual purchase price of $16 million for themselves, without the investors’ knowledge. They further discussed that Vaccaro, Respondent, and the informant, without the investors’ knowledge, would receive the remaining 50% ownership of the Burger King franchises without contributing any money to the deal, and would set up LLCs to hide their ownership.

6. On July 22, 2014, Respondent and the informant met at a restaurant in Chicago to further discuss the Burger King franchise deal. At this meeting, Respondent told the informant that the informant should not tell investors the true purchase price of $16 million, or that Respondent, Vaccaro, and the informant would be taking "four million off the top." Respondent further told the informant that the informant should not tell investors that Respondent, Vaccaro and the informant had any ownership interest in the franchises, but rather that he should tell them falsely that a group of ten investors in New York owned the other 50% interest in the franchises.

7. On September 15, 2014, FBI agent Marc Pennebaker ("Pennebaker") contacted Vaccaro by telephone. Pennebaker pretended to be "Mark Baker," a financial advisor for several clients who each wanted to invest two million dollars in the Burger King deal. During the recorded call, Vaccaro told Pennebaker that the purchase price for the Burger King franchises was approximately $37 million, and suggested that Pennebaker contact Respondent for further details.

8. On September 19, 2014, Pennebaker (posing again as Mark Baker) contacted Respondent by phone. During the recorded call, Respondent told Pennebaker that he had negotiated the purchase price of the 13 Burger King franchises from $46 million down to $37 million.

9. Respondent’s statement to Pennebaker about the purported purchase price of the franchises, as described in paragraph eight, above, was false, because the price Vaccaro had negotiated for the Burger King franchises was $16 million, not $46 million or $37 million.

10. At the time Respondent made the statement about the franchises’ value, described in paragraph eight, above, he knew it was false, because he knew that the actual purchase price for the franchises was $16 million.

11. During his September 19, 2014 call with Pennebaker, Respondent told Pennebaker that Vaccaro was raising funds from another investment group who would own the other 50% of the franchises and contribute the remaining $17 million to the deal.

12. Respondent’s statement to Pennebaker about the other 50% ownership in the franchises and those investors’ investment in the deal, as described in paragraph 11, above, was false because Respondent was planning to share in the four million dollars he, Vaccaro and the informant would obtain by deceiving the investors about the franchises’ actual purchase price; Respondent would share the remaining 50% ownership with Vaccaro and the informant; and they would not be investing $17 million (or any amount) in exchange for that interest.

13. Respondent knew, at the time he made the statement about the other 50% ownership in the franchises and those investors’ investment in the deal, as described in paragraph 11, above, that it was false, because he knew that he was planning to share the remaining 50% ownership with Vaccaro and the informant, and they would not be investing $17 million (or any amount) in exchange for that ownership.

14. During his September 19, 2014 call with Pennebaker, Respondent told Pennebaker that that Respondent would hold the investors’ funds in his IOLTA account at the closing of the deal, and that Respondent had no interest in the deal because of his role in handling the legal aspects of the deal and his desire to avoid any conflict of interest.

15. Respondent’s statement to Pennebaker that he had no interest in the deal, described in paragraph 14, above, was false because Respondent planned to share in the four million dollars he, Vaccaro and the informant expected to obtain by deceiving the investors about the purchase price, he planned to share in the remaining 50% ownership with Vaccaro and the informant, and that group was not investing $17 million (or any amount) in exchange for that ownership.

16. Respondent knew at the time he made the statement that he had no interest in the deal, as described in paragraph 14, above, that it was false, because Respondent knew he planned to share in the four million dollars he, Vaccaro and the informant planned to obtain by deceiving the investors about the franchises’ purchase price, he planned to share the remaining 50% ownership with Vaccaro and the informant and that group was not investing $17 million (or any amount) in exchange for that ownership.

17. On October 1, 2014, Respondent, Vaccaro, the informant, and Pennebaker participated in a meeting in San Diego, California. Pennebaker, posing as financial advisor Mark Baker, brought another FBI agent to the meeting, who posed as one of Baker’s clients purportedly looking to invest two million dollars in the Burger King deal. During the meeting, Respondent told the undercover agent, whom Respondent believed was a potential investor, that there were other investors who would be investing money and that those investors would receive the other 50% ownership interest in the franchises.

18. Respondent’s statement that there were other investors who would invest in exchange for the remaining 50% ownership, as described in paragraph 17, above, was false, because Respondent planned to share the remaining 50% ownership with Vaccaro and the informant, and they were not investing any money in exchange for that ownership interest.

19. Respondent knew at the time he made the statement described in paragraph 17, above, that it was false, because he knew he planned to share the remaining 50% ownership with Vaccaro and the informant, and they were not investing any money in exchange for that ownership interest.

20. At the conclusion of the October 1, 2014 meeting, the FBI agents arrested Respondent and Vaccaro.

The San Diego Union Tribune reported on the criminal case.

[Respondent] Porter and Joseph Vaccaro, a New York-based financial adviser to athletes and entertainers, were charged in connection with a plan to buy 13 Burger Kings in Virginia for $16 million. The plan was to raise as much as $37 million from investors and then pocket the extra cash themselves, prosecutors say. It would also give them secret part ownership in the franchises.

They tried to negotiate with a financial adviser for a potential investor, but found out later they were actually speaking with an undercover FBI agent, according to court records.

Vaccaro pleaded guilty in February to conspiracy to commit wire fraud and is set to be sentenced later this month.

(Mike Frisch)

http://lawprofessors.typepad.com/legal_profession/2017/01/an-attorney-who-entered-into-a-deferred-prosecution-agreement-has-been-charged-with-ethics-violations-by-the-illinois-adminis.html

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