Shook, Hardy & Bacon will pay $5 million to settle a bankruptcy lawsuit brought on behalf of the victims of a grocery trading scam run by infamous University of Miami athletic booster Nevin Shapiro.
Trustee Joel Tabas filed a 92-page negligence lawsuit against the Kansas City, Missouri-based law firm in January, alleging the law firm facilitated Shapiro’s scam, which collapsed in 2010, and describing illegal gambling and parties attended by prostitutes.
The lawsuit sought more than $50 million in damages and stated Shook Hardy tobacco litigator Marc Levinson, a childhood friend of Shapiro’s, advised him on his business dealings and “aided and abetted” the Ponzi scheme.
The lawsuit also claimed Ponzi money was used to buy the sports agency Axcess Sports & Entertainment in 2003 with advice from the law firm. Levinson, who is no longer with the law firm, said in a deposition he did little or nothing to research state law on the sports agency purchase.
Tabas, a partner at Tabas, Freedman, Soloff, Brown & Rigali in Miami, disclosed the proposed settlement in a court filing Friday. Shook Hardy denies any wrongdoing under the terms of the agreement.
Tabas said the settlement was reached to avoid further expenses pursuing a lawsuit against the 500-attorney litigation firm with plenty of resources.
“In view of the cost of trying this matter to conclusion and the risks associated with trial, the trustee believes that the settlement as described in the settlement agreement is in the best interest of the estates, debtors’ creditors and all parties in interest,” Tabas said in a motion seeking settlement approval.
The law firm’s chief marketing officer Chris Carter reiterated Monday that Shook Hardy denies any and all liability.
“To avoid further expense and protracted litigation we entered into a settlement agreement, which must be approved by the court,” he said. “If approved, the settlement agreement will conclude this matter.”
U.S. Bankruptcy Judge Laurel Isicoff has scheduled a hearing Oct. 21 to consider the settlement.
The Shook Hardy lawsuit focused on whether Levinson thought there was anything inappropriate in Shapiro’s behavior.
In a deposition, Freedman asked Levinson if he was concerned that Shapiro was feeding UM players, taking them out on the boat, providing them prostitutes and other perks.
Levinson replied: “I am not familiar with the NCAA rules and regulations. That is not my expertise.”
Shapiro ran a $930 million Ponzi scheme through his wholesale grocery business Capitol Investments USA Inc.
For Tabas and his firm, the settlement is the last major hurdle in the bankruptcy case. With the Shook settlement, the firm has recovered more than $41 million.
Attorney Gary Freedman, a partner at Tabas’ firm who represented him as trustee, said he hopes all of the money will be distributed by year-end.
The firm “had no idea what to think when we got into this almost four years ago,” he said. “It’s been a long four years, a lot of hard work and sleepless nights.”
The court approved a 33 percent contingency fee for Tabas Freedman, which amounts to about $13.5 million.
Shapiro, who is serving a 20-year prison sentence, made national headlines when admitted showering gifts on UM football and basketball players in violation of National Collegiate Athletic Association rules.
UM self-imposed a postseason ban for the last two football seasons with an NCAA investigation pending. For months, the NCAA reportedly has been near the end of its scandal-plagued investigation into Shapiro’s accusations.
Read more from the daily business review below and also the recent article in the Miami Herald.