SAN DIEGO — A prominent Chicago law firm has agreed to pay $7 million to settle a lawsuit brought by former investors of the fraudulent J. David & Co., sources close to the case confirmed Tuesday.
Abramson & Fox, one of the law firms that represented J. David, has an agreement--signed by most of the parties on Tuesday--with attorneys representing the former investors, the sources said. The settlement is expected to be approved by a San Diego Superior Court judge in the next few weeks.
Tod Beebe, a Los Angeles lawyer representing Abramson & Fox, would not confirm, however, that there was a pending settlement and said no final agreement "has been signed yet."
The Chicago law firm was accused in the lawsuits of aiding and abetting J. David (Jerry) Dominelli in his scheme to defraud about 1,500 clients who invested upwards of $200 million. Actual losses reached $82 million, and Dominelli, who was supposed to be trading investor funds in the foreign currency markets, last year was sentenced to 20 years in federal prison.
A federal grand jury in San Diego is still investigating other J. David principals, according to sources close to the case.
Several other legal and accounting firms were also sued, including the nationally prominent Rogers & Wells law firm, J. David's lead outside legal counsel, and the Laventhol & Horwath accountancy firm.
Rogers & Wells earlier this year agreed to pay former J. David investors $40 million to settle their claims. The settlement is the largest ever made by a U.S. law firm. The suit against Laventhol & Horwath is now being tried in San Diego Superior Court.
Meanwhile, the Securities and Exchange Commission is reportedly continuing its inquiry into Rogers & Wells' role at J. David.
SEC investigators are trying to determine whether there is sufficient evidence to begin a formal disciplinary action against the law firm, the National Law Journal reported in its July 21 edition.
Ronald E. Brackett, Rogers & Wells' supervising partner in New York, said Tuesday that his firm is "cooperating fully" with the SEC's "informal inquiry into the J. David matter."
The firm believes that the "inquiry will confirm that no one at Rogers & Wells was involved in any impropriety," he said.
SEC officials in Los Angeles would neither confirm nor deny an investigation of Rogers & Wells.