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A former equity partner of Fort Lauderdale, Fla.-based Atlas Pearlman turned up the heat on his two former law partners Wednesday by adding racketeering and theft claims to his lawsuit, alleging the partners stole and misappropriated law firm assets over eight years. The amended complaint charges that attorneys Jan Douglas Atlas and Charles B. Pearlman diverted law firm funds “with the specific criminal intent to steal and embezzle.” In the amended complaint filed in Broward Circuit Court, Elliot P. Borkson added the claims of state Racketeer Influenced and Corrupt Organizations Act violations, civil theft, civil remedies for criminal practices and legal malpractice to his lawsuit against Atlas and Pearlman. He also added three defendants to the lawsuit, including James M. Schneider, a former partner at Atlas Pearlman who now practices at Miami-based Adorno & Yoss. In the suit, which originally was filed June 28, Borkson alleges that from 1993 to July 2001, Atlas and Pearlman engaged in a scheme to secretly divert to themselves assets that should have been spread among the firm’s four shareholders. He claims that assets were diverted through the use of “off-balance sheet” maneuvers. In addition, he claims, assets were hidden through the filing of false or misleading corporate federal and state tax returns, and by providing false statements to lenders and to the firm’s partners. Ira Marcus, a Fort Lauderdale solo practitioner who is representing Borkson, said Wednesday that the claim for damages is in the range of “several million dollars.” Borkson is also being represented by Jesse H. Diner, a partner at Atkinson, Diner, Stone, Mankuta & Ploucha in Hollywood, Fla. Borkson could not be reached for comment, nor could any of the defendants in the lawsuit. Richard D. McIntosh, a partner at Adorno & Yoss in Fort Lauderdale who is representing Atlas and Pearlman, criticized the lawsuit, although he said Wednesday he had not seen the amended complaint. “This type of litigation is unfortunately all too common in law firms when one partner leaves and says that he did not get all of the money he was entitled to get under the partnership agreement,” McIntosh said. Atlas and Pearlman currently are partners at Adorno & Yoss, which merged with their Fort Lauderdale firm in April. Atlas Pearlman, founded in 1975, had a high-flying corporate business during the technology stock boom. It often accepted stock instead of cash for legal services, Marcus said. But the economic downturn prompted Atlas Pearlman to look for a merger partner. When the merger between Atlas Pearlman and Adorno & Yoss was announced in April, Adorno & Yoss Chairman Henry N. Adorno said, “This is a fantastic combination of talent, geographical coverage and client base for both of our firms.” Calls to Adorno, who has been deposed in the case, were not returned by deadline. In addition to Schneider, Borkson also added as defendants accountant Edward Hirschberg, and the Fort Lauderdale accounting firm London Witte & Co. Hirschberg, a managing partner at the accounting firm, and London Witte formerly handled Atlas Pearlman’s accounting. According to Marcus, Schneider was a nonequity partner at Atlas Pearlman for many years. In June 1993, Borkson joined Atlas Pearlman, where he was an equity partner along with Atlas, Pearlman and Michael L. Trop. In July 2001, Borkson, now a solo practitioner in Fort Lauderdale, left to start his own firm because, he said, he was unhappy at Atlas Pearlman. Borkson claims in the amended complaint that four years after Atlas and Pearlman allegedly began diverting assets, the two lawyers joined forces with Schneider to carry out their fraudulent scheme. In 1997, Borkson claims, the three lawyers created a shadow partnership, called Atlas Partners, to which they illicitly transferred law firm assets. “Beginning in the year 1993, Atlas and Pearlman designed an intricate, sophisticated, fraudulent scheme for the purpose of misappropriating, diverting, embezzling and stealing client generated stock from the plaintiff and concealing the said misappropriation,” according to the amended complaint. “In January of 1997, the co-conspirators, Atlas and Pearlman, were joined by the defendant, Schneider.” As evidence of his claims, the amended complaint includes a letter from Pearlman to Adorno which discusses monies that were kept off of Atlas Pearlman’s books from 1999 to 2001. “In each of 1999 and 2000, the total amount of the cash sales (which did not run through the firm’s P&L) was in excess of $1.25 million per year. In 2001, the amount was approximately $400,000,” according to the letter dated April 2, 2002, less than a month before the firms merged. According to Marcus, Hirschberg and his accounting firm, London Witte & Co., were included because they prepared the law firm’s financial documents and therefore must have known about the lawyers’ alleged scheme. “Edward Hirschberg should have said, ‘I’m not going to participate in this fraud or I have to disclose,’” Marcus said. “He did not do either.” Broward Circuit Judge Leroy H. Moe is presiding in the case.

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