“SBM issues ethics opinion on reverse contingent fee agreements” —

• “The State Bar of Michigan’s Standing Committee on Professional Ethics recently issued a new ethics opinion regarding reverse contingent fee arrangements, in which the attorney’s compensation is calculated based on the amount by which the client’s liability is reduced. “
• “Under such an agreement, the lawyer and client agree that the lawyer will receive a percentage of the amount saved by the client. For example, if a tax authority asserts that a client owes $1 million, and the lawyer negotiates a settlement for $400,000, the savings to the client is $600,000. If the fee agreement calls for a one-third reverse contingent fee, the lawyer would be entitled to $200,000. “
• “Reverse contingent fee agreements are typically used in civil defense matters, tax controversies, debt resolution or other situations where a client must pay a sum of money rather than recover one. “
• “Opinion RI-394 outlines the conditions that must be met for a reverse contingent fee arrangement to be considered ethically permissible. Based on RI-394, an appropriate reverse contingent fee must include:
  • A written fee agreement, specifying the method of calculation;
  • Full disclosure and informed consent;
  • A reasonably-assessed baseline;
  • A fee that is not clearly excessive when agreed to, charged, or collected; and
    Written disclosure of the method of calculation at the conclusion of the matter.
• “The full opinion, which references MRPC 1.5, ABA Formal Opinion 93-373, and DC Bar Ethics Opinion 347, elaborates on each one of these conditions. Read the full opinion here.”

“‘Red flags’: Randazzo hid $4.3M at heart of FirstEnergy trial, attorney says” —

• “Sam Randazzo kept people in the dark about a $4.3 million payment at the center of the bribery trial of two former FirstEnergy executives, a former colleague testified on Tuesday. Columbus energy attorney Matt Pritchard said he wasn’t aware of it for some six years, even though he and Randazzo worked together for years representing the same client. And when he eventually saw documentation of the agreements and payments, Pritchard said it was riddled with ‘red flags.’”
• “The genesis and meaning of the $4.3 million payment are crucial in the trial of former FirstEnergy CEO Chuck Jones and top lobbyist Michael Dowling, who are accused of bribing Randazzo shortly before he was appointed chairman of the Public Utilities Commission of Ohio. “
• “Prosecutors say Jones and Dowling rushed in late 2018 to pay the $4.3 million as a bribe after learning Randazzo would be appointed to the PUCO, which regulates how much utilities like FirstEnergy can make. Randazzo, who died by suicide in 2024, helped push for the scandal-ridden House Bill 6 — a nuclear energy bailout — and regulatory rulings, together, worth more than $1 billion to FirstEnergy, prosecutors say.”
• “Defense attorneys say the payment was a legal settlement meant for Randazzo and Pritchard’s clients. They also said Jones and Dowling wanted to pay out the contract early to get the expenses off FirstEnergy’s books after a particularly successful 2018.”
• “Pritchard said he worked with Randazzo at law firm McNees, Wallace & Nurick since 2011. He helped Randazzo represent IEU-Ohio, a trade group made up of businesses that use large amounts of energy. The attorneys on behalf of IEU-Ohio fought against high prices and large surcharges levied by utilities, including FirstEnergy.”
• “In 2015, Randazzo and Pritchard negotiated a multi-million dollar settlement with FirstEnergy, agreeing they wouldn’t oppose a FirstEnergy surcharge to customers from 2016 to 2019. Pritchard helped work on that settlement.”
• “He said he was ‘confused’ years later when presented with a document that said Randazzo negotiated a $4.3 million settlement extension later in 2015 that called for more pay outs from 2020 to 2024. Pritchard said he learned of the extension after Randazzo’s attorney, Roger Sugarman, asked Pritchard to sign an affidavit about the settlement. Pritchard refused.”
• “Pritchard also said Randazzo kept him and others at the law firm in the dark about a $2.1 million consulting agreement he inked in 2013 with a FirstEnergy subsidiary. He said that was against the law firm’s policy because it presented a conflict of interest.”
• “‘I would only be able to represent one party in a given matter,’ Pritchard said.”
• “Defense attorneys have argued that Randazzo was a thief who stole from his clients, including the $4.3 million settlement.”
• “On cross-examination by Jones’ attorney Jeremy Dunnaback, Pritchard said he became aware that Randazzo stole from other settlements, including those that had more conventional documentation.”

“Alston & Bird Accused of ‘Essential’ Role in Crypto Ponzi Scheme” —

• “Alston & Bird is being sued by investors in Florida who say they were duped into contributing to an alleged $328 million cryptocurrency Ponzi scheme over business relationship contracts drafted by the international law firm.”
• “The purposed class action complaint, filed in the US District Court for the Southern District of Florida, claims that ‘Alston & Bird architected the legal framework through which investor funds and retirement funds were solicited, pooled, transferred, and deployed’ into Goliath Ventures.”
• “Lawsuits have been pouring into Florida state and federal courts from investors claiming to have been fooled by Goliath’s CEO Christopher Alexander Delgado, who’s been charged with wire fraud and money laundering. This week a state court appointed a receiver to protect the investors’ funds.”
• “According to federal prosecutors, Delgado started a legitimate cryptocurrency liquidity business, which uses investor funds to allow for transfer of different crypto assets in a private pool and earns profits from transaction fees. However, most of the funds were never invested in the pool, and millions were allegedly spent on Delgado’s private purchases and real estate.”
• “Thursday’s complaint alleges that Alston & Bird prepared an opinion letter assuring investors that the liquidity pool wouldn’t constitute a security, which would allow Delgado to raise capital from investors and channel that cash through joint venture agreements without triggering regulatory scrutiny and obligations under securities laws.”
• “But this was incorrect advice, and none of the lawyers working on this matter are licensed in Florida, the complaint said.”
• “This triggered ‘a duty owed by Alston & Bird to the partners or joint venturers in the joint venture it created and represented, and then facilitate securities fraud and other misconduct on behalf of one partner against the rest,’ the complaint said.”
• “The firm didn’t immediately respond to a request for comment.”