[Post updated] Lawyers are not held in high regard by many people. That is unfortunate since 99% of them do great work. Most lawyers get themselves in trouble when they get in over their heads and fail to seek help. Unfortunately a few are simply corrupt. The U.S. Securities and Exchange Commission charged one Minnesota lawyer with helping to mastermind a $21,000,000 Ponzi scheme.
This week the SEC charged Minnesota lawyer Todd Duckson and two real estate promoters in a massive fraud. According to the feds, the promoters raised approximately $74 million from hundreds of investors between 2004 and August 2009. The stated purpose of the investment was to make real estate loans to a single borrower. What they failed to tell investors, however, was that the borrower defaulted in 2008.
If that isn’t bad enough, after the borrower defaulted, attorney Duckson took over management of the fund. Prior to that date, Duckson acted as counsel to the fund. Did Duckson and his partners disclose the default to investors? According to the SEC, no. Instead, they continued to raise another $21 million. By this point, the funds from the new investors were simply being used to pay existing investors. A classic Ponzi scheme.
Investment fund managers have a duty to disclose all relevant facts – good and bad – to investors. Concealing the default of the fund’s sole business partner and claiming fictitious income is illegal. When a licensed professional gets involved in that conduct it is both fraud and professional malpractice.
Lawyers, CPA’s and investment advisors have high ethical standards that they are required to maintain. If the SEC is right, Duckson violated those obligations.
Duckson didn’t go quietly into the night. He exercised his right to a jury trial and after a 5 week trial in 2013, a jury found that he and his co-defendants had violated federal securities laws. Duckson was ordered to personally pay over $3 million in restitution. He was never criminally charged.
The Minnesota Supreme Court also took action against Duckson. Following the jury trial verdict, a Minnesota bar disciplinary panel recommended Duckson’s law license be indefinitely suspended with the right to seek reinstatement after just 30 months. The Supreme Court rejected that recommendation.
The court found that Duckson violated ethics rules prohibiting a lawyer from knowingly making a false statement of fact or law while representing a client and prohibiting a lawyer from engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation). According to the court, “Based on the scope of respondent’s [Duckson] fraudulent conduct, the fact that it occurred within the practice of law, the harm that it caused, and respondent’s financial benefit from it, we conclude that the parties’ recommended disposition is insufficient to protect the public and the judicial system and to deter future misconduct. As a result, we reject the parties’ recommended suspension and conclude that an appropriate disposition is an indefinite suspension with no right to petition for reinstatement for 5 years.
Although we believe that a five year suspension is still too light, the court noted that Duckson cooperated in the court’s disciplinary investigation and admitted his guilt. His acceptance of responsibility is probably what saved him from permanent disbarment.
Where is Duckson today? According to his LinkedIn page, after giving up his law and CPA licenses, he ran a hedge fund! He lists his experience as “experienced entrepreneur and former fund manager, business lawyer and CPA.”
Attorney Brian Mahany and the fraud recovery lawyers at Mahany Law get money back for victims of fraud. Whether it is a Ponzi scheme, professional malpractice or some other type of fraud, we work hard to make our victims whole and to punish the offenders.
Successful fraud recovery requires skilled lawyers, investigators and professionals. Our team brings years of legal and law enforcement experience to every case. We are a national boutique firm that entertains cases anywhere in the United States. For more information, contact us online, by email or by phone at 202-800-9791. All inquiries are protected by the attorney – client privilege and kept strictly confidential.
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