XYBR Securities Lawyer Charged With Fraud - DOJ
Tuesday, May 27, 2008 8:19:03 AM (GMT-07:00)
Provided by: Dow Jones
(Adds comment from Baker & McKenzie, additional details of the allegations beginning in sixth paragraph.)
By Chad Bray
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--A New York securities lawyer has been charged with the alleged theft of about $1.3 million from a corporate client's escrow account, federal prosecutors said Tuesday.
Martin E. Weisberg, a one-time New York partner of Chicago-based law firm Baker & McKenzie, has been charged with money laundering and 10 counts of wire fraud, according to an indictment made public Tuesday.
Barry Slotnick, Weisberg's lawyer, said his client intends to plead not guilty to the charges at an arraignment hearing before a federal magistrate judge in Brooklyn later Tuesday.
"These monies were a loan and he paid back the loan," Slotnick said.
Weisberg, a former director of Xybernaut Corp., was charged last year in an alleged kickback scheme involving PIPEs, or private investments in public equity, transactions by Xybernaut and Ramp Corp. between 2001 and 2005. Weisberg has pleaded not guilty to those charges and that case is pending.
Weisberg, who joined Baker & McKenzie in 2005, resigned from the firm in October shortly after the previous indictment, said Joe Linklater, a Baker & McKenzie partner.
"These charges appear to relate to evidence uncovered in the course of the firm's internal investigation and turned over to the U.S. Attorney's Office by the firm after Weisberg resigned," Linklater said. "Weisberg concealed the escrow account from the firm and did not have firm permission to act as escrow agent."
Weisberg was a partner at now defunct law firm Jenkens & Gilchrist during the period the alleged kickback scheme took place. In April 2005, he became a partner at Troutman Sanders, but resigned from the firm a month later, according to the law firm.
In the latest indictment, prosecutors have alleged that Weisberg caused about $1.3 million to be wired out of a client's escrow account between August 2006 and October 2007, which had about $30 million on deposit.
Prosecutors alleged that Weisberg falsely informed the client that the $30 million would be placed in either a non-interest-bearing bank account or a so-called interest-on-lawyer account, according to the indictment.
Under New York law, any interest earned in an IOLA account held in New York is to be remitted to an IOLA fund maintained for the purpose of providing legal assistance to low-income persons, according to the indictment.
The government alleged that Weisberg secretly caused the $30 million to be deposited into a non-IOLA interest-bearing account with an annual interest rate of about 4.75%. The account allegedly earned some $1.6 million in interest, according to the indictment.
Weisberg allegedly used the funds for his own benefit and transferred the money into other accounts, including accounts held in his name and the name of his wife, the government said.
Weisberg allegedly concealed the theft by telling the corporate client that the bank didn't produce monthly account statements and sending letters to the client with false account balances, prosecutors said.
The criminal investigation is being handled by the U.S. Attorney's Office in Brooklyn and the Federal Bureau of Investigation.
-By Chad Bray, Dow Jones Newswires; 212-227-2017; chad.bray@dowjones.com
(Amir Efrati of The Wall Street Journal contributed to this report.)
(END) Dow Jones Newswires
05-27-08 1119ET
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