Fraud Claims Against Nixon Peabody Survive Dismissal

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By Che Odom

Dec. 15 — A federal judge Dec. 9 denied a motion to dismiss fraud claims against Boston-based Nixon Peabody LLP in a multimillion-dollar securities lawsuit filed by an investor who alleged he was lured into a Ponzi-like scheme by the law firm and an unlicensed broker.

Judge David Hurd of the U.S. District Court for the Northern District of New York rejected Nixon Peabody's argument that the plaintiff, Andrew Goldberg, put the defendants at a disadvantage by taking too long to amend his complaint, originally filed in April.

Hurd denied the motion to dismiss without prejudice, so the firm may be able to file it again on the amended complaint.

Nixon Peabody told Bloomberg BNA in an e-mail Dec. 15 that allegations the firm conspired to defraud investors “have no merit.”

“We continue to cooperate fully with the government's investigation in this matter,” the firm said.

Another Suit Filed

Goldberg and another plaintiff—investor William McEssy, who filed a separate action Dec. 9—alleged the law firm and a group of investment funds led by Gregory W. Gray raised nearly $20 million by misleading at least 140 investors throughout the U.S. and abroad. The plaintiffs alleged that the law firm and Gray hid the fact that Gray had been sanctioned by the Financial Industry Regulatory Authority and the New York Stock Exchange and lost his license years earlier.According to the complaints, Archipel Capital LLC, BIM Management LP and other related entities failed to maintain separate bank accounts and commingled funds between themselves “as they wished.” The complaints also asserted that Nixon Peabody, as legal adviser to Gray, made wholesale misrepresentations that prevented investors from “knowing the real truth about the investments” and about Gray.

The Securities and Exchange Commission has an ongoing action against Gray over the alleged Ponzi scheme in the U.S. District Court for the Southern District of New York (40 DER EE-18, 3/2/15).