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Holland & Knight – Scoop Real Estate – Art Nadel kept N.Y. disbarment a secret

In 1 on January 23, 2009 at 1:30 pm

Missing investor Art Nadel kept N.Y. disbarment a secret
Susan Taylor Martin, Times Senior Correspondent
In Print: Wednesday, January 21, 2009
 
To pay off loan sharks, New York attorney Arthur G. Nadel violated a
basic tenet of legal ethics — he dipped into an escrow account and
took $50,000 that did not belong to him.
 
That was in the late 1970s, and Art Nadel was subsequently disbarred
for “dishonesty, fraud, deceit and misrepresentation.”
 
But in 2004 — by which time Nadel was living in Sarasota — he never
disclosed his legal disgrace to investors in his Scoop Real Estate
Limited Partnership. Thus, many were blindsided last week when the
75-year-old Nadel vanished, along with an estimated $350-million
managed by him and his companies.
 
Had prospective investors known of Nadel’s past, they might have been
far more wary about entrusting their money to a man who promised
unusually high, steady returns even as the stock market tanked. And
should Nadel ever turn up, he, his partners and even Holland & Knight,
the law firm for Scoop Real Estate, could be held liable by investors
claiming they were misled about Nadel’s background.
 
“Absolutely,” Lizabeth Moody, former dean of Stetson University
College of Law, said when asked if Nadel’s disbarment for fraud and
dishonesty should have been disclosed. “You have to decide if this is
something a reasonable investor would consider in making a decision,
and in my estimation it certainly is.”
 
In a case strikingly similar to that of Bernard Madoff — accused of
bilking clients out of $50-billion in history’s biggest Ponzi scheme —
dozens of investors and non-profit groups been left wondering how
$350-million managed by Nadel could seemingly evaporate overnight.
 
Among the biggest losers are the YMCA of Sarasota, whose $1.2-million
endowment was wiped out, and Mace International, the maker of defense
sprays, which lost $2.2-million.
 
Using cell phone records, investigators reportedly have traced Nadel
to the New Orleans suburb of Slidell, days after his Subaru turned up
at the Sarasota airport. The Sarasota County Sheriff’s Office said
Tuesday that Nadel disappeared voluntarily and that it is closing its
investigation into his whereabouts.
 
In recent years, Nadel has been an admired figure in Sarasota,
generously donating to churches, youth groups and arts organizations.
Few, if any, knew of his aborted legal career in New York.
 
According to records obtained by the St. Petersburg Times, Nadel in
1978 represented CCN Realty Corp. and its president, Richard Sanchez,
in the sale of CCN property to a hospital. After the two parties
entered into a contract, Nadel put the hospital’s $50,000 deposit into
an escrow account.
 
The deal fell through, and in May, 1980, the hospital asked for its
money back. But Nadel was unable to return it because all but $152 had
been spent “in connection with loan-shark transactions and related
events and circumstances with his client (Sanchez),” New York Supreme
Court records show. “(Nadel) further stated that he shared in the
problems and concerns of Sanchez.”
 
In early 1981, Nadel made full restitution, and a disciplinary
committee said it was “not totally clear” whether Nadel himself was
directly involved with loan sharks.
 
“Nonetheless, it may be fairly stated that (Nadel) acted with a
misplaced allegiance to his client, Sanchez, and in dereliction of his
duty to the hospital in removing the monies from the escrow account
and paying them to the ‘loan sharks,’ ” the committee said. For
“professional misconduct of such a serious nature,” Nadel was
disbarred on March 11, 1982.
 
In 2004, Nadel began soliciting investors for his Scoop Real Estate
Limited Partnership, which planned to buy income-producing residential
and commercial properties. A “private placement memorandum” given to
prospective investors included biographical data about Nadel, noting
that he had a law degree from New York University.
 
The memorandum says nothing about Nadel’s disbarment.
 
Private placements “are basically an attempt to avoid securities laws”
governing publicly traded companies, says Moody of Stetson Law School.
But they are still subject to federal antifraud rules that require
disclosure of any “material” fact that might affect a person’s
decision to invest.
 
Scoop’s private placement memorandum lists Holland & Knight, one of
Florida’s top law firms, as its general counsel. Whether the firm
could be held liable for Nadel’s failure to mention his disbarment 22
years before “is kind of hard to say,” especially if Nadel didn’t
volunteer the information and lawyers didn’t ask, Moody says.
 
“If they know something or learn something, they have to disclose it
as part of their ethics,” she says. “But if they didn’t know it, I
can’t believe it would have come up unless there was some reason to
look into it.”
 
A representative of Holland & Knight said, “We are reviewing our
records and have no comment at this time.”
 
Hugh Culverhouse Jr., an attorney who has spoken with several Scoop
Real Estate investors, says Nadel’s charitable activities apparently
kept people from looking too closely at his background.
 
“You’ve got to really do some bad things to be totally disbarred,”
Culverhouse says. “But nobody did any research.”
 
Susan Taylor Martin can be contacted at susan@sptimes.com.
 
http://www.tampabay.com/news/publicsafety/crime/article969185.ece

Posted via email from HKLaw Investigation

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