Catching a Big One
The idea of indoor fish farms never really worked for Galveston big shot Robert Moody; the company he invested in to produce the surefire idea was pretty much a sham. But the luck of the already rich -- and a Galveston jury -- has given Moody the chance to share in a Moby Dick of a civil verdict.
Whether he ever collects any of it is another matter.
Still, Moody gained a jury award of almost $75 million against the promoters of the Pennsylvania fish farm and their law firm, New York's Greenberg Traurig. The firm is one of the nation's largest, and its Miami office played a key role in representing George W. Bush in the Florida vote-counting fiasco.
After a six-week trial, a jury in state court found that the law firm helped New York businessman Jack Summers falsely give the impression that the fish-farm company he was promoting was about to have a successful initial public offering of stock. Summers was banned by the Securities and Exchange Commission from selling private securities 20 years ago.
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Shortly after the December 4 verdict, trial Judge Wayne Mallia of the 405th District Court reduced the award to $55 million by cutting some redundancy in the jury's verdict.
Even the lower figure represents quite a return on a "failed" investment: Moody and three other investors put less than $1 million into Integrated Food Technologies Corp., the now-bankrupt company Summers was pushing.
Mallia's judgment includes $14.3 million in actual damages and $40.7 million in punitives, with more than half of the punitives being assessed against Greenberg Traurig. (Summers and other defendants never bothered to show up at trial.)
Plaintiffs' attorney Valorie Davenport says she's thrilled that the jury believed there was more to the case than "rich people fighting over money."
"Legal ethics have to be something that people have a right to expect rather to be surprised at," she says. "And we can't, as lawyers, be afraid to stand up to our fellow compatriots."
For its part, Greenberg Traurig says it's confident the award will be overturned on appeal. "We were very surprised and disappointed by the jury's verdict," said firm president and CEO Cesar Alvarez in a prepared statement. "The plaintiffs' investments in IFT of some $760,000 were made purely in private transactions between the plaintiffs and the company, without any involvement or knowledge of Greenberg Traurig."
The firm never solicited investors on behalf of the fish farm, the statement said. In trial, lawyers argued that the firm's attorneys did not even know Moody, a businessman from Galveston's most prominent family.
But according to Denise Wells Novotny, Davenport's co-counsel, there was evidence that the firm had been aware that the SEC had banned Summers from selling securities.
"They still supported him in his effort to solicit investors and get his IPO out," she says. "They act like they didn't know Bobby Moody, but according to our reading of the statute they didn't have to -- they just had to know there were investors out there that would be harmed by their failure to disclose information."
The jury found the that firm violated the Texas Securities Act, committed common-law fraud and breached fiduciary duty.
Robert Kirshenberg, a partner in Greenberg Traurig, was also an investor in IFT and stood to benefit greatly from Moody's involvement, Davenport says. He was able to get out of the case, however, because she couldn't prove his activities for the company had occurred in Texas.
Kirshenberg also issued a prepared statement after the verdict. "I continue to believe these allegations are totally without merit," he said. Moody made the decision to invest "with the assistance of his own counsel within days of inspecting [IFT's] facilities and never spoke with Greenberg Traurig or received any documents of any kind from Greenberg Traurig," Kirshenberg added.
Davenport says the comments from the defendants merely show that they still don't get it. "They don't see why they lost because they were doing what they do all the time; they didn't have any idea that practicing by loophole is wrong. But when you show what they did to regular people like those on the jury, they can see it."
Mallia still has to consider postjudgment motions from both sides, with the defendants seeking to have the award stricken and the plaintiffs looking to restore the cut $20 million. Either way, the case will be appealed; there's been little in the way of settlement talks.
And the fish farm, says Novotny, is still there, operating under new management.
"It's a pretty cool thing," she says. "It wouldn't be hard to get all excited about it after you saw it and want to invest some money in it."
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