Georgia Bankruptcy Blog

An article on Law.com, from the Fulton County Daily Report, entitled Smith Gambrell Entangled in Hedge Fund Scandal (Alleging legal missteps by law firm, bankruptcy trustee demands more than $80 million in damages), discusses the adversary proceeding of William Perkins, Ch. 11 Trustee v. Smith, Gambrell & Russell, LLP and C. Gladwyn Goins Adv. No. 08-6382 (Bankr. N.D. Ga., filed July 9, 2008).

The substance of the complaint (click here to download .pdf copy) is summarized in the article  -

IMA's bankruptcy trustee, William F. Perkins, told a federal court last month that the law firm and a former counsel from its Washington, D.C., office, C. Gladwyn Goins, represented IMA so poorly that they not only allowed the company's founder, Kirk S. Wright, to embezzle from investors long after his wrongdoing could have been discovered but also "helped Wright to continue his criminal misconduct."

Those alleged legal missteps cost the company "tens of millions" of dollars, according to the complaint, which demands that the firm and its former counsel pay more than $80 million in damages, plus attorney fees and litigation costs. ...

In a July 9 filing, the trustee for Wright's former company claimed that Goins and his one-time firm breached their representation contracts with IMA by not carrying out some of their duties as attorneys and by being professionally negligent in how they dealt with the Securities and Exchange Commission.

The trustee also said that Goins and the firm breached their fiduciary duty to IMA "by placing their own interest in securing fees and expectation of future profits from a continued relationship with the IMA Entities ahead of their professional judgment and duties."

The article provides some additional background of Wright/IMA, the allegations against the firm, and comments on the nature of the claims from other lawyers not in the case.

Randolph Evans, a partner at McKenna Long & Aldridge who heads the firm's financial institutions practice and handles legal malpractice and ethics issues, said, "There is a duty not to knowingly transmit information that you know is false. That's a clear boundary. Another clear boundary is you don't have to do the work of the investigating government entity, whether that's the SEC or someone else. In between those two boundaries, the law is less clear."

He said the government has argued, citing the Sarbanes-Oxley Act, that lawyers have an independent obligation to verify the accuracy of the information they are sending to the SEC. But, he added, "I don't think a court has gone that far yet."

It ain't over until the fat lady sings, and she's not singin' yet.

I can tell you first hand that the list of people responsilble for the I.M.A. ordeal would stretch from coast to coast if there was an actual legitimate investigation carried out. But the truth is not what they are after. They had all these documents prior to Kirks trial and didnt use them until after he was tried, convicted, and hanged. I personally was at the trial. I personally was arrested at the trial. One minute I'm sitting behind Kirk at his trial and the next minute I'm sitting next to him in a Union City Detention Center van on the way to the Union City Jail. I dont believe that the fat lady will ever sing on this one.

I guess that the lawyers were expected to be more competent than the SEC in noticing document discrepancies. This case doesn't make anyone look good.

I am a victim of Kirk Wright. I was fortunate to have taken some of my money out about two years prior to the fall of IMA but still lost some. Now I am being sued by Perkins to return my own money. How can the courts allow this? It doesnt make any sense. Now I'm being scammed all over again.

It seems that this type of fund was not a typical investment fund but a partnership of sorts, making each investor liable for the fund up to what they put in. Not all, but probably most investors had no clue as to the fine details of this type of investment. Unfortunately, the entire US financial system had become corrupt and less than honest, so a lot of people were caught unprepared for the degree of deceit and how wide the damage, not only in this fraud, but the entire financial markets.

Kirk Wright = Bernie Madoff
Gladwyn Goins = Ira Sorkin

and Fiserv = Reliance Trust

And the SEC still = the SEC

what ever happened to the money and the receiver in bankrupcty/ did the investors ever get anything back?

Is that what is meant by regulatory capture?

Maybe it's judicial capture.

Weren't the investors in this case discouraged from filing individual lawsuits so that the trustee could recover and distribute among the investors? Didn't the Supreme Court just rule that trustees don't have the right to pursue collections for the investors and that only individuals can sue? What a joke.