More Snell & Wilmer lawsuit news

We reported earlier that Snell & Wilmer and the partner in charge of the Las Vegas office have been named in a lawsuit alleging they participated in a $98 million fraudulent scheme and filing claims of legal malpractice, breach of contract, breach of fiduciary duty and other civil matters.

Counsel for Snell & Wilmer and Byrne denied the allegations, claiming the lawsuit is a legal tactic to pressure the firm and Byrne into settling unsupported claims. (In Business Las Vegas)

However, the reporting on the suit has not fully laid out the extreme nature of the allegations. The Complaint, filed in federal court, states:

• the suit is bigger than reported--involving a class of 133 plaintiffs


• Snell & Wilmer [allegedly] represented the [alleged] raider of the Southwest Exchange trust ("SWX"), Donald K. McGhan, in his purchase of SWX at the same time that Snell & Wilmer represented SWX


• Patrick Byrne and Snell & Wilmer represented Mr. McGhan (the alleged raider of the trust) and several of his entities whose interests were adverse to SWX while the firm still represented SWX


• Byrne [allegedly] loaned money to McGhan (while he was a client), which was needed because McGhan had [allegedly] looted all of the money from the SWX trust


• Snell & Wilmer [allegedly] knew McGhan was using SWX trust money to purchase another company through another corporate entity owned by McGhan


• Snell & Wilmer's [alleged] failure to advise McGhan of Nevada law led to the commingling of client trust money in bank accounts, which [allegedly] made it easier for McGhan to loot the money


• Byrne and his investment partners [allegedly] loaned McGhan the money for him to purchase then Snell & Wilmer client SWX


• Byrne [allegedly] knew that McGhan was purchasing SWX to take the trust monies and use them to purchase another European corporation


• In 2004, Bryne [allegedly] personally made a loan to McGhan of $1.3 million through a corporate entity owned by Byrne in exchange for a fee, a trip on McGhan's jet and the grant of shares in one of McGhan's corporate entitites


• Byrne's [alleged] loans "artificially prolonged SWX's existence while it was insolvent to SWX's detriment . . ."


• Later, in 2005, while Snell & Wilmer still represented SWX--now owned by McGhan--Byrne [allegedly] loaned McGhan another $2 million through another corporate entity owned by Byrne at a 150% annual percentage rate and in exchange for another trip on McGhan's jet

I know, I know . . . questionable corporate investment schemes are not the sexiest thing in the world. But if you patiently read the Complaint, the Class Action suit is alleging that a partner at Snell & Wilmer aided in the collapse of one of their clients, SWX, through financial and legal assistance given to the [alleged] raider of the SWX trust.

A Complaint is a Complaint is a Complaint, but if there's even a shred of truth to these allegations, it could spell serious trouble for Byrne and Snell & Wilmer.