Summary: How attorneys who rip off their law firm and clients are dealt with.
- Don’t fool yourself; lawyers can be as dirty as any other in white collar crime.
- But why is it this way when a lawyer already has a successful profession?
- Keep reading to find out why lawyers, despite their code to preserve justice, still step out of bounds of what’s right and wrong.
Embezzlement is a well-known white collar crime, and it’s not just corporate business types who do the dirty deed. Sometimes even attorneys can’t help but take a cookie from the cookie jar. But when they’re attorneys at Big Law firms, they have access to an even greater pool of money.
While it seems astounding that people who already make six to seven figures annually would still feel the need to steal, it happens. One reason is that attorneys living in a world of wealth feel pressure to keep up with the Joneses. That means someone who is already making $400,000 a year feels inadequate when they’re surrounded by millionaires. Another reason attorneys steal is that they have easy access to draw from accounts or to submit fake invoices. With the desire to covet and the skills and opportunity to do so, it’s no wonder that there are multiple cases of attorneys going to jail.
Isabelle Kirshner, a partner at 11-attorney law firm Clayman & Rosenberg told Law.com that Big Law attorneys can hide their indiscretions in a way that lawyers at smaller firms cannot.
“Most smaller firms are not dealing with massive multidistrict litigation where you have the opportunity to hide an extra half-million in dollars in fees to a vendor,” Kirshner said. “My clients would notice if I put half a million in fees to a vendor.”
While Big Law attorneys may get away with stealing for possibly years, it is noted that they always get caught, as evidenced by the six major cases listed below.
1. Keila Ravelo
Keila Ravelo was a partner at Willkie Farr & Gallagher, and before that, she was a partner at Hunton & Williams. The Columbia University Law School graduate had a long career in Big Law, so it was shocking in 2018 when she pled guilty to embezzling from the two law firms where she had made it to the top.
Ravelo’s scheme lasted from 2012 to 2017. The Big Law partner had created dummy businesses that she would invoice in order to keep the money for herself. In that period of time, she had taken almost $8 million. According to Law.com, Ravelo used the money to fund a lavish lifestyle with her and her husband.
In late 2017, Ravelo pled guilty in Newark, New Jersey to two counts of her nine-count indictment. She pled guilty to one count of conspiracy to commit wire fraud and one count of tax evasion in a plea deal to drop the other charges.
Ravelo was sentenced on March 5, 2018. When she pled in 2017, she agreed to sell her assets in order to make restitution. She was first arrested in 2014 with her now-estranged husband, Melvin Feliz, who pled guilty in 2015 for his part in the scheme.
After her plea hearing, Ravelo took responsibility for the embezzlement, but she blamed her husband for luring her into a life of crime.
“Ms. Ravelo chose to plead guilty because she felt it was important for her two college-aged sons and family to understand that she has accepted full responsibility for her conduct—the failure to expose her husband’s fraud upon the law firms where she worked and her client MasterCard when she became aware of it in 2012. Instead, and under intense emotional pressure to keep silent, she wrongfully covered up his fraud, and by doing so, allowed it to continue. It has taken her time to come to grips with the reality of her conduct, and after three long years of living with this nightmare and having lost everything, looks forward to putting this behind her,” Ravelo’s statement from her attorney said.
2. Marc Dreier
Dreier LLP, a New York law firm with 250 attorneys, filed for bankruptcy in 2008 in the wake of the firm’s founder’s arrest. Marc Dreir, the firm’s sole equity partner, was arrested that year for allegedly convincing two hedge funds to give him over $100 million under false pretenses. He told them that he had discount notes from a New York developer, and in his indictment, prosecutors claim that he had lost the investors over $400 million.
But that wasn’t his only crime. Drier, a Harvard Law graduate, was also indicted for embezzling client funds and for selling a fake promissory note.
In July of 2009, Drier was found guilty of creating an elaborate fraud scheme that stole from the hedge funds and other investors. He was sentenced to 20 years in prison, according to the New York Times. Prosecutors had wanted him to receive over a 100 years in prison, similar to the sentence of famed Ponzi scheme operator Bernie Madoff, but the judge in the case said it was unfair to compare the two men’s crimes. While Drier took $400 million, Madoff lost billions.
“Mr. Dreier is not going to get much sympathy from this court,” Judge Jeff Rakoff said. “But he is not Mr. Madoff from any analysis, and that’s why I can’t understand why the government is asking for 145 years.”
Drier’s giant fraud scheme as well as the shuttering of his law firm is what he is most remembered for, but he also embezzled over $46 million from his clients. During his trial, he expressed his remorse to his victims, and said his thievery began in 2002 when he first took the money owed to a client from a settlement. His scheme lasted four years and unraveled because of the financial crisis.
With the amount of money taken, he allegedly funded a lavish lifestyle which included an apartment on the Upper East Side of Manhattan, an $18 million yacht, and homes in the Hamptons. Prosecutors noted that before his life of crime, he had earned $400,000 a year, but that amount made him feel inadequate compared to his high-status friends, he had revealed.
“I recall only that I was desperate for some measure of the success that I felt had eluded me,” Drier said in court. “I lost my perspective and my moral grounding, and really, in a sense, I just lost my mind.”
3. Douglas Arntsen
Attorney Douglas Arntsen was only 34 when he pled guilty to embezzling almost $10 million from his clients from Crowell & Moring. The young corporate law attorney took the stolen dough and spent it at strip cubs and expensive restaurants, according to JD Journal.
In 2011, the Manhattan district attorney’s office informed Crowell & Moring, which has around 500 attorneys, that Arntsen was a person of interest in a criminal investigation. In response, the attorney jetted away to Hong Kong. He later returned and was eventually convicted in 2012 of first-degree grand larceny and one count of first-degree scheme to defraud.
The attorney worked at Crowell & Moring since 2007. He was caught when one of his clients, Regal Real Estate, noticed money missing from their escrow account. They then followed Arntsen one day while he was visiting several Manhattan banks, which held their account money.
Arnsten was stripped of his New York law license in 2013.
4. Michael Scott Margulies
In 2010, Michael Scott Margulies, a former partner at Lindquist & Vennum, pled guilty for allegedly embezzling $2 million from his clients and the firm. He was fired the year before in March after the theft came to light and he was already disbarred.
Margulies stole from his clients by creating a fake business, and he would bill his clients using the business or send forged checks to it on their behalf. The scheme began in 1994 and lasted for almost two decades.
The Big Law firm, which later merged with Ballard Spahr, grew suspicious of Margulies when he double-billed a client and then postponed paying them back. This led to an investigation, which found that he had been filing false expense reports to pay for a mansion he owned in St. Paul, Minnesota.
5. Navin Kumar Aggarwal
K&L Gates attorney Navin Kumar Aggarwal’s gambling addiction was so bad that he allegedly embezzled millions from the law firm and lost it in bad bets. In 2012, K&L Gates sued a Hong-Kong based casino to try to get back the money he had stolen.
Aggarwal was a corporate partner at the Big Law firm’s office in Hong Kong, and he was charged with six counts of theft and forgery months after he resigned. In his resignation letter to partner David Tang, he acknowledged the seriousness of his crime, according to JD Journal.
“Dear David, I am really sorry about everything. I am not sure if it’s possible but I really hope the firm survives all this caused by me. I know the gravity of the crime committed. I can’t live with this,” Aggarwal wrote. “I am very sorry that you and others have to face all this and clear the mess. The money that I stole was used to pay my gambling losses that I have accumulated over the years. I was using one ‘escrow’ to cover the other. I don’t know what the devil got into me. Sorry.”
In 2013, Aggarwal pled guilty to fraud and money laundering and was sentenced to 12 years in jail in Hong Kong. The K&L Gates partner earned $1 million a year, according to ABA Journal, but that wasn’t enough to satisfy his gambling debts so he began embezzling. His record-breaking scheme stole $8.5 billion Hong Kong dollars over the course of four years, and he lost millions from his clients. K&L Gates was forced to pick up the tab that Aggarwal created and deal with any resulting litigation.
Aggarwal was able to steal the money by convincing 92 potential investors into depositing money with K&L Gates, which he had access to. Once the money was with the law firm, he accessed it by forging signatures or giving his staff authority to transfer it into a dormant client’s account. From there, Aggarwal spent millions at Chinese casinos and gave money to his family in India.
6-7. Gary and Maureen Fairchild
Gary Fairchild was once the managing partner of Winston & Strawn in Chicago, and that position afforded him a lavish lifestyle. But that six-figure salary wasn’t enough, apparently, because he still felt the need to embezzle about $750,000 over the span of a decade, according to the Chicago Tribune.
In 1994, Fairchild pled guilty to embezzling money from Winston & Strawn and its clients to cover personal and family expenses, which included family air travel, maid services, the rental of a condominium, and his children’s dental bills. To steal the money, he falsified expense vouchers. When asked to explain why the already rich man felt the need to steal, he said it was simply “greed.”
Winston & Strawn, one of the nation’s oldest law firms, said they were “saddened” by Fairchild’s fraud, which began in 1985 and lasted almost a decade. In 1992, he filed a joint income with his wife in the amount of $829,205, but he admitted that he had hidden $204,000 that he had stolen that year alone.
Fairchild’s wife, Maureen Fairchild, was also accused of embezzling from her firm, Chapman & Cutler, where she was an income partner. Prosecutors said that she inflated bills to Winston & Strawn in order to pocket the excess. Additionally, she allegedly overcharged a client by over a million dollars.
Maureen Fairchild was disbarred, and the couple eventually divorced. In 2011, Maureen attempted to get her law license reinstated. She said that she had rehabilitated herself and provided several witnesses to attest to her character. However, the State Bar wasn’t willing to let the thieving attorney get near clients again, and her application was denied, according to ABA Journal.
“To allow petitioner to be reinstated at this time would deprecate the seriousness of her misconduct and significantly devalue the importance of restoring the confidence of the public in the legal profession, and in the administration of justice,” the Illinois Attorney Registration and Disciplinary Commission stated.
The Fairchild’s were caught when Chapman & Cutler noticed Maureen was hired by Winston & Strawn to collect a client debt. Her firm noticed that the bill was inflated so they contacted Winston & Strawn, who performed an investigation. After discovering the embezzlement, the firm contacted law enforcement. Together, the couple stole almost $2 million.
If anything is demonstrated by the seven examples above, it’s that attorneys can also suffer lapses of character. Sure, all of us realize the severity of these and other charges relating to embezzlement, corporate stealing and misappropriations, which invariably fans the flames of critics who believe the majority of barristers in the world are corrupt. However, and as importantly, this article reveals that attorneys, yet again, have characteristics that reveal flaws that for better or worse, proves they are human.
Now, if only these negatives can be transformed into positives in which all attorneys were found to be decent, competent and fair, the rap attorneys receive would not be as negative.
But that’s not the case. The case is these attorneys ripped off clients and their law firms. Fortunately, they represent a very small amount of the dishonesty that plagues the legal world.
While it is difficult for one to put their trust into the legal world, it’s good to know there are only a few bad seeds throughout the entire legal professional crop, and that a client’s chances of having one of these dishonest attorneys attached to their legal endeavors, is slim to none.
No, this doesn’t make it any easier to trust a lawyer, or the legal practice. But it at least should reassure present and future clients that the profession of law is not corrupt – there are attorneys who look after the best interest of their clients. And of those who don’t, and instead would rather rip off their clients and law firms, as the seven examples show, they won’t be long for their attorney careers.
Photos (in order of appearance)
- Keila Ravelo https://www.law.com/newyorklawjournal/sites/newyorklawjournal/2017/11/20/ex-big-law-partner-pleads-guilty-to-wire-fraud-evasion-charges/
- Marc Dreier http://nymag.com/news/features/55863/
- Douglas Arntsen http://www.nydailynews.com/news/crime/lawyer-lam-douglas-arnsten-lands-back-new-york-court-7-million-embezzlement-charges-article-1.1009626
- Michael Scott Margulies https://fraudtalk.blogspot.com/2010/05/
- Navin Kumar Aggarwal: https://hk.news.appledaily.com/local/daily/article/20170628/20071126
For more information, look into these articles: