Thank you for sharing!

Your article was successfully shared with the contacts you provided.
A white-shoe New York City law firm is the latest player to get stuck in the muck of infamous Maggot Mile on U.S. 1 in South Florida’s Boca Raton. The trustee of a bankrupt Boca Raton telecommunications company has filed a legal malpractice lawsuit against Proskauer Rose, the giant corporate law firm, claiming that the firm’s negligence led to the company’s bankruptcy. Robert J. Kafin, Proskauer’s New York-based managing partner, said the suit is without merit. He said his firm raised concerns at the time about the company’s handling of its assets. The suit, filed last week by trustee Marika Tolz in U.S. Bankruptcy Court in Fort Lauderdale, alleges that the law firm negligently ignored the misconduct of Fuzion Wireless Communications’ then-chief executive Gary Boyce while representing the company. Tolz contends that Fuzion went into bankruptcy due to Boyce’s misappropriation of more than $30 million. Tolz seeks $30 million in compensatory and $90 million in punitive damages. In June 2000, the company hired Proskauer, which has an office in Boca Raton, to provide general corporate representation and assist in private and public placement of its securities, according to the lawsuit. According to the suit, in June 2000, Fuzion directors Larry Schone and Walter Mortimer requested a company board meeting to discuss questionable financial transactions by Fuzion. Instead, the two directors were summarily removed from the board. Days after their removal, the two men sent a letter to the board asserting that millions had been transferred from Fuzion to a company personally controlled by Boyce. “We have not been provided any information explaining the transfers of company funds,” Schone and Mortimer wrote in the letter, which lists several questionable transfers of money. Yet, according to the lawsuit, under Proskauer’s direction the company determined that the former directors’ assertions had “no supporting factual basis” and were “clearly erroneous.” The suit claims Proskauer made no investigation but only discussed the allegations with Boyce, who was the person accused of the illicit transfers. The suit names David Sloan, a partner in Proskauer’s New York office, and Donald E. “Rocky” Thompson, a partner in the Boca Raton office, as the attorneys primarily responsible for the Fuzion legal work. Neither Sloan nor Thompson returned calls for comment. The suit alleges that a year after the two former directors wrote their whistleblower letter, the officers of Fuzion became aware of the company’s perilous financial position. An emergency meeting of the board of directors was called in September 2001, at which time Boyce was fired. But, according to the suit, it was too late. “By the time Fuzion’s board of directors learned that the comments in the whistle-blower letter were not merely a reaction by defrocked former employees who were not happy with the company because they were discharged,” the complaint reads, “virtually all of the money was gone.” “As a result of Proskauer’s failure to determine and advise Fuzion’s board of directors of the validity of the comments in the whistle-blower letter, Boyce was able to remain in a position of control and to loot Fuzion of over $30,000,000.” According to the lawsuit, Fuzion was started in 1999. It raised more than $50 million from investors in less than two years. But by December 2001, Fuzion, which deployed and operated regional wireless networks in the United States, Canada and Panama, had fallen on such hard times that it filed for Chapter 11 protection in U.S. Bankruptcy Court in the Southern District of Florida. There are more than $30 million in claims by the creditors in the bankruptcy, said Mara Beth Sommers, who represents Tolz in the lawsuit. Fuzion remains in bankruptcy but has been transferred to a Chapter 7 bankruptcy and is being liquidated. U.S. Bankruptcy Judge Raymond B. Ray of Fort Lauderdale is presiding. On March 7, Judge Ray approved a settlement agreement under which Zurich American Insurance Co. will pay $1.8 million to settle claims for alleged errors and omissions by the former officers and directors of Fuzion. Proskauer’s Kafin said his firm was hired by Fuzion as special counsel for the limited purpose of handling Fuzion’s planned initial public stock offering. That IPO never took place. “One of the reasons it never occurred is that we identified some issues about what was done with the company’s cash,” Kafin said. “The issues were not resolved and we stopped being their lawyer.” Kafin said that his law firm failed to get Fuzion to provide information about the ownership and use of its cash assets. He said he did not recall when the firm formally ended its representation of Fuzion. Founded in 1875, Proskauer employs more than 590 attorneys in five U.S. offices and in Paris. Ranked 45th nationally in the most recent Am Law 100 survey, the law firm reported $331 million in revenues. The firm opened its Boca Raton office in 1977. Tolz, who did not return calls for comment, has retained Sommers, a name partner with Bales & Sommers in Miami, to pursue the lawsuit. “The allegation in most of these cases is that the lawyers failed to detect fraud,” Sommers said. “In this case the lawyers actually received written notice of the fraud but completely discounted it.” Since the financial scandals erupted at Enron and other companies in 2001, critics have chided attorneys representing such companies for willfully ignoring or even collaborating in corporate wrongdoing. They contend that law firms have failed to carefully scrutinize the financial dealings of clients for fear of losing the business. Last year, Congress passed the most sweeping corporate reform legislation in nearly 70 years, the Sarbanes-Oxley Act. It includes a provision placing new responsibilities on attorneys to report corporate misconduct to management and, if necessary, to the company’s board of directors. That provision, � 307 of Sarbanes-Oxley, requires that violations be reported up the corporate chain of command. Regulations implementing the law have been approved by the Securities and Exchange Commission. According to Sommers, the SEC has launched an investigation into Boyce’s tenure at the helm of Fuzion. Glenn Gordon, deputy regional director of the SEC’s Miami office, said the agency will not confirm or deny whether there is an investigation. According to Tolz’s suit, Boyce used ill-gotten gains to purchase a Gulfstream III jet. In addition, he allegedly spent and lost more than $15 million on day trading. Sommers said Boyce still has a home in Boca Raton. He could not be located for comment.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.