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The former chairman of the tax practice at Greenberg Traurig has resigned from the bar for taking over $1.2 million in kickbacks on tax shelters he recommended to wealthy clients. The incident is the latest ethical embarrassment for 1,600-lawyer Greenberg Traurig. Though largely not itself accused of wrongdoing, the Miami-based firm has recently dealt with the scandal surrounding lobbyist Jack Abramoff and has also seen some partners accused of self-dealing and other questionable conduct. Between 1999 and 2002, Jay I. Gordon steered a number of clients, including real estate tycoon and Metropolitan Transportation Authority Chairman Peter S. Kalikow, to tax shelter sponsors who in turn directly paid Mr. Gordon more than $675,000 in “referral fees.” Under state disciplinary rule DR 5-107(A)(2), a lawyer may accept such fees only with the consent of his or her client. Mr. Gordon, 49, admitted in his affidavit of resignation from the bar that he had informed neither his client nor his firm of the referral fees. He also asked one tax shelter sponsor to deposit another $600,000 referral fee in a firm retainer account. He then proceeded to convert the money into firm revenue by billing 1,120 fictitious hours. The $526,530 “fee collection credit” he received for the fake billings were considered in his compensation at the firm. A partner at Greenberg Traurig since 1996, Mr. Gordon disclosed his misconduct to the firm after he was informed in June 2004 that Mr. Kalikow intended to seek compensation from both the tax shelter sponsor and the firm for losses Mr. Kalikow suffered in the course of his participation. Following an internal investigation, Mr. Gordon and the firm informed the First Department’s Disciplinary Committee of the misconduct in September 2004. Mr. Gordon took a leave of absence the following month and withdrew from the partnership in November 2004. His resignation from the bar was approved last week by the Appellate Division, First Department, which ordered him stricken from the roll of attorneys. Such resignations are usually offered by lawyers when they face almost certain disbarment. Aside from Mr. Kalikow, clients Mr. Gordon steered to shelters included: Manhattan developers Leonard and Matthew Adell; former telecommunications executive Rick Aversano and former vitamin manufacturers Ronald and Leslie Leff. The firm and Mr. Gordon transferred all of the money they received in referral fees to the clients whose interests were affected by the payments. The tax shelter sponsors were Fortrend International, Bank One and Distressed Assets Corp. The $600,000 referral fee placed in Greenberg Traurig’s retainer account was paid by Distressed Assets, to which Mr. Gordon referred the Leffs. Mr. Gordon also wrote an opinion letter stating that the use of Distressed Asset’s tax shelter would be accepted by the Internal Revenue Service. The firm billed the Leffs $300,000 for its work on the tax shelter transaction. Firm spokeswoman Jill Perry said the firm would not comment on the details of the matter, including the status of the legal fees, in order to protect client confidences. Frederick Hafetz of Hafetz & Necheles, who represented Mr. Gordon before the disciplinary committee, said that other than the involvement of tax shelters, the case bore no resemblance to recent high-profile tax-shelter-abuse cases involving accounting firm KPMG and law firms Sidley Austin and Jenkens & Gilchrist. Mr. Hafetz declined further comment. A 1981 graduate of Boston University School of Law, Mr. Gordon was a partner at the now-defunct Dreyer & Traub before joining Greenberg Traurig. In 2003, he was named as a co-defendant in a government civil suit charging prominent art dealer Larry Gagosian of evading taxes on the sales of famous paintings. That suit was settled under confidential terms in the summer of 2004. Firm Statement In a statement, Ms. Perry said yesterday the firm took legal ethics issues seriously, conducting regular ethics training and due diligence on new hires. “In any case where wrongdoing is suspected, whether through our formal program or otherwise, we take action to discover the facts and respond appropriately and decisively,” she said. “Our track record on this is very clear. We acted on each issue based on the specific facts at hand and are proud of the manner in which we did so.” Greenberg Traurig has been no stranger to scandal lately thanks to Mr. Abramoff, who joined the firm in 2000 to help build a strong Washington, D.C.-based lobbying practice. He was later found to have defrauded clients, particularly American Indian tribes, of tens of millions of dollars. He pleaded guilty to criminal fraud charges earlier this year and is to report to federal prison today to begin serving a nearly 6-year sentence. He also is awaiting sentencing for corrupting government officials and their staff members. The firm, which fired Mr. Abramoff soon after his conduct came to light in 2004, has received praise from legislators, including Senator John McCain, R-Ariz., for its cooperation with congressional investigations into Mr. Abramoff. This summer, Robert S. Grossman, a former partner in Greenberg Traurig’s Philadelphia office, was disbarred in New York, following his conviction the previous year on federal charges that he lied in a 1996 Virginia bankruptcy proceeding to cover up his diversion of over $100,000 to a personal account. Though a Greenberg Traurig partner at the time of his conviction and disbarment, the conduct at issue took place years before he joined the firm. Partners at the firm also have recently faced allegations of questionable conduct in a pair of civil cases. The Appellate Divison, First Department, recently described as “disquieting” the effort by the wife of Greenberg Traurig intellectual property chair Arnold Jacobs to have her husband appointed a co-trustee of family trust (NYLJ, Aug. 7). The originally appointed co-trustee, whom Mr. Jacobs would have replaced, claimed the couple sought to disinherit the trust’s other beneficiary. “We can perceive of no view of Jacob’s appointment . . . that would . . . fulfill the obligation of a trustee to avoid placing himself in a position where not even the appearance of a conflict with his duty to the trust should exist,” Justice Eugene Nardelli (See Profile) wrote for a unanimous panel in the case. Greenberg Traurig had also billed the estate $130,000, an amount that had also been challenged as excessive. Greenberg Traurig’s Ms. Perry said yesterday the matter had been settled and described it as a “typical family dispute.” Last month, the firm and veteran Miami partner Juan Loumiet were named in a legal malpractice and breach of fiduciary duty lawsuit charging that Mr. Loumiet arranged a usurious loan to benefit family members. Hotel operator Georges Zaczac is accusing Mr. Loumiet of encouraging him to take a $4.5 million loan, largely provided by members of Mr. Loumiet’s family, carrying an interest rate of 40 percent. Mr. Zaczac also claims Mr. Loumiet got him to use a real estate brokerage which ultimately received almost $600,000 in commissions without informing him that Mr. Loumiet’s son worked at the brokerage. Ms. Perry yesterday said Mr. Zaczac had made “an unsubstantiated allegation against a shareholder with a 35-year unblemished reputation who we stand behind.” Anthony Lin can be reached at [email protected]

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