Johnson & Bell Shareholders, Joseph R. Marconi and Victor J. Pioli, successfully defended a Chicago law firm and one of its partners against fraud and breach of fiduciary duty charges related to an investment scam. The trial in DuPage County was one of the first conducted in Illinois since the COVID-19 pandemic halted most live judicial proceedings in the state.
The case stemmed from a failed $5.75 million investment by a wealthy businessman into a tech startup which claimed to have an executed and enforceable contract with a multinational technology company to generate code that was potentially worth hundreds of millions of dollars. Our clients (the law firm and one of its partners) represented the startup in the investment deal and had also represented the wealthy businessman in other unrelated deals. The investment deal eventually closed and the $5.75 million was transmitted to the startup’s founders. The investor later became suspicious of the deal when deadlines with the multinational technology company were not met pursuant to the terms of the contract.
It was eventually discovered that there was, in fact, no deal with the technology company and that one of the startup’s founders concocted the contract out of whole cloth and then absconded overseas after receiving his share of the $5.75 million investment from the wealthy businessman. The businessman then sued the law firm and lawyer who represented the startup in the investment deal as well as the remaining founder of the startup (who was also an attorney “of counsel” at the law firm) for fraud and breach of fiduciary duty. The businessman claimed that the defendants had breached their duties to him as a client and violated Rule of Professional Conduct 1.8 which generally prohibits business dealings with a client. He also claimed that the law firm and lawyer made statements to induce him to invest which were made knowing they were false or with reckless disregard for their truth thereby constituting fraud.
After a week-long trial (conducted the last week of July) which included witnesses testifying remotely due to the pandemic and numerous safety measures employed at the live proceedings, the court rendered its ruling which entered judgment in favor of the law firm and the lawyer on both the fraud and breach of fiduciary duty counts.