How can a corporate attorney convicted and imprisoned for participating in a multibillion-dollar securities fraud scheme subsequently obtain a motion to dismiss in a Section 10(b) securities fraud class action based on the very same conduct? This is the question sending seismic shockwaves through the corporate and securities bars after the 2nd U.S. Circuit Court of Appeals’ April 27 decision in Pacific Investment Management Co. v. Mayer Brown LLP .
From its inception, the legal saga of Joseph P. Collins has functioned well outside the norm. Collins was a Mayer Brown partner who served for many years as principal outside counsel to Refco Inc., a securities firm that plummeted into bankruptcy after its ailing financial condition, masked through a series of fraudulent transactions, was made public. In their class action complaint, plaintiffs claimed that Refco was plagued by a staggering amount of uncollectable receivables, which it concealed through dubious related-party transfers and “round trip” loan transactions, the latter of which Collins and his firm negotiated, drafted and explained to potential third-party participants.
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