SEC turns attention to lawyers in financial fraud investigations
Friday, November 13, 2009
According to a report this week in the Daily Journal, attorneys at Nixon Peabody LLC in Los Angeles have cited attorney-client privilege in resisting the subpoena.
“It is odd the SEC subpoenaed a law firm,” said plaintiffs’ attorney Tim Blood of the San Diego firm Coughlin Stoia Geller Rudman & Robbins LLP. “Presumably most of the information the firm had would be protected by the attorney-client privilege, and anything that was not would be available elsewhere. The reason for the subpoena may have something to do with the suspected conduct of the firm, but presumably there is a reason having nothing to do with lawyer misconduct.”
That would seem to be supported by Rebecca U. Cho’s report in the Journal:
The precise nature of the SEC’s probe is unclear. The court filing says the agency is seeking information about individuals or entities at NewPoint who may have “engaged in a fraudulent scheme in connection with the offer and sale of debentures issued by NewPoint.”
SEC attorney John McCoy told the Journal the subpoenas don’t necessarily mean either Nixon Peabody or Tamman is a target of the investigation. “We issue subpoenas to whoever may have relevant information,” he said.
On the company’s website, NewPoint founder John Farahi describes the company as “a one-stop super center that allows individuals and business owners to easily coordinate all their financial activities.”
NewPoint has units that trade stocks and bonds, set up retirement plans, offer mortgage banking as well as consumer banking services such as checking accounts and FDIC-insured certificates of deposit, sell insurance and real estate, provide accounting services and offer financial and estate planning.
Cho writes law firms are becoming a target in financial investigations:
As regulators pursue financial misdeeds more aggressively in the wake of the market meltdown and ensuing public pressure, law firms may be coming under more scrutiny. With firms at the center of corporate deal-making and privy to all manner of non-public information, regulators may be applying a level of scrutiny historically reserved for financiers and company officers.
Within the past year, federal prosecutors have charged three lawyers with insider trading. And the SEC has charged a former Nixon Peabody attorney with using information about a client’s pending merger to personally profit.
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