Tuesday, September 12, 2017

Prometheus

A Michigan tri-county hearing panel suspended an attorney who had filed to appear on an interim basis.

The attorney was the subject of an ABA Journal article

A lawyer and his former business partner are accused of defrauding investors in a business that recruits mass-tort plaintiffs.

The Securities and Exchange Commission accused lawyer James Catipay, his former partner David Aldrich, and their company, Prometheus Law, in a complaint filed on Friday, the Recorder (sub. req.) reports. Catipay took over Prometheus in early 2015 after a dispute with Aldrich.

Catipay and Aldrich collected about $11.7 million from about 250 investors, but spent only about one-third of the amount on locating plaintiffs, the SEC alleges. The men spent much of the rest of the money on large salaries and personal expenses, according to an SEC press release.

The complaint accuses Aldrich of taking about $3.7 million of investor proceeds for pay and personal spending, including payment of his own taxes, and the purchase of a $1 million condo and high-end furnishings. The suit, filed in federal court in the Central District of California, accuses Catipay of taking about $1.87 million. He also got the deed to Aldrich’s condo after settling litigation with him.

Catipay and Aldrich told investors the investments had minimal or no risk, and would earn returns of 100 to 300 percent, the SEC says. The men promised fixed returns that varied by investment and length of repayment. When the first $120,000 of investor returns came due, the defendants used money from new investors to pay it, the suit says.

A Seattle lawyer identified in the suit as “Attorney A” had agreed to give a third of his contingency fee to Prometheus for providing plaintiffs. According to the SEC, the arrangements would enable investors, who were mostly nonlawyers, to split legal fees with the lawyer, which is generally prohibited.

So far suits have been filed on behalf of only 700 of the 2,300 potential plaintiffs. Prometheus has received less than $10,000 in attorney fees from legal settlements, the SEC says.

The Recorder was unable to reach Aldrich and Catipay for comment.

(Mike Frisch)

http://lawprofessors.typepad.com/legal_profession/2017/09/a-michigan-panel-suspended-an-attorney-on-an-interim-basis-the-attorney-was-the-subject-of-an-aba-journal-article-a-lawyer.html

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