The Securities and Exchange Commission sued two law firms yesterday in unrelated cases that indicate a stepped-up SEC effort to monitor the practices of the legal profession.
In an unusual statement, the SEC emphasized "its concern with respect to the use of nonpublic information by partners, associates and employes of law firms."
The commission went on to say that the federal securities laws, "as well as the high ethical standards required of those engaged in the practice of law, mandate that the confidentiality of nonpublic information be preserved."
One case involves Lerner, David, Littenberg & Samuel, a Westfield, N.J., law firm that was charged with using patent information related to the development of laser technology by Refac Technology Development Corp.
Members of the law firm used information obtained from the Patent Office to purchase 500 shares of stock in Refac when the information had not been made public. The lawyers also shared the information with associates who also purchased stock, the SEC said.
Partners and associates of the firm agreed to return profits totaling $62,812 from the stock purchases. In addition, other defendants in the case agreed to pay about $29,000 in profits from the transaction.
The second case involves Irving Cohen, a New York promoter of tax shelters, and Weiss, Rosenthal & Schwartzman, a New York law firm that prepared partnership documents misrepresenting the investment plans, the SEC said.
The commission said the scheme defrauded investors out of nearly $8 million worth of unregistered securities. Those securities involved a series of southeastern coal mines, particularly in Kentucky.
The law firm was accused of failing to investigate the nature of the offering. Further, the SEC said the firm provided an income tax opinion in connection with the securities that was based on the same false material.
In signing the content agreements in the two independent cases, the law firms and various associates did not admit or deny their guilt.