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Noble v Greenberg Traurig and Wells Fargo

Investors recover $80 million in investment losses in real estate investment fraud abetted by defendant’s lawyers and Wells Fargo.

For many years, a group of investment managers urged consumers to invest in real estate partnerships, including RE Loans, that they represented were fully secured with a guaranteed high rate of return and full liquidity – the interests could be cashed in at any time. In 2007, the principals of RE Loans were advised that they had violated federal and state securities laws, and that the violations precluded them from raising any additional investor funds. This put RE Loans into a severe cash crisis and exposed the principals to ruinous liability.

RE Loans turned to law firm Greenberg Traurig for help. What ensued was a plan to convert the investors’ secured ownership interests into much riskier promissory notes. To keep RE Loans afloat, they also (1) negotiated with Wells Fargo for a line of credit that was superior to the security interests of the investors, and (2) set up a new real estate company, Mortgage Fund 2008 (“MF08,” to attract additional investors. Unbeknownst to those investors, and contrary to what they were told, MF 08 did not invest in new real estate loans but instead funneled the investors’ money to RE Loans. Unfortunately, even those efforts were not enough to enable RE Loans to survive, and the company went bankrupt. The investors lost everything – $700 million – and due to their bankruptcies, none of the principals had any assets to satisfy their claims.

After years of hard-fought litigation, Chavez & Gertler and co-counsel, including Bonnett, Fairbourn, Friedman & Balint, negotiated a settlement in which Greenberg Traurig agreed to pay $70 million, and Wells Fargo agreed to pay $10 million, to settle the investors’ claims. The settlement checks were mailed in April 2016, and a supplemental distribution was made in October, 2016. As stated in Plaintiffs’ motion for approval of the settlement, “an $80 settlement fund extracted from a law firm and bank that were secondary actors in the alleged fraudulent scheme, achieved in the face of daunting defenses, is an extraordinarily favorable result.”