Rogers & Wells, a major New York law firm, has agreed to a $40 million settlement of 330 lawsuits charging the firm with partial responsibility for investors' losses in the collapse of the J. David Dominelli financial empire, according to a report to be published in Monday's edition of the National Law Journal.
The settlement, which would be the largest by a law firm over its representation of a client, was negotiated by Rogers & Wells partner William P. Rogers, a former secretary of state and head of the presidential commission investigating the explosion of the space shuttle Challenger, the Law Journal said.
The payment would be covered by the firm's insurance policy.
Rogers & Wells declined to confirm or deny the report. "We're not saying anything about it," a law firm spokesman said. The lawsuits against Rogers & Wells were brought by defrauded investors to recover more than $100 million lost to Dominelli's J. David & Co., a San Diego brokerage house that collapsed in February 1984.
Dominelli admitted running a classic "Ponzi" scheme in which funds from new investments are used to pay off old investors. He pleaded guilty to three counts of fraud and one count of income tax evasion and was sentenced last year to 20 years in prison.
The suits against Rogers & Wells alleged that the firm helped Dominelli perpetuate his scam by continuing to represent him and his companies long after law firm partners suspected that he was engaging in illegal activities.
The litigation has been a source of controversy and division at the 115-year-old firm. The Law Journal said the settlement was approved overwhelmingly in a recent vote by the firm's 75 partners.
While poring through documents in preparation for trial, lawyers for the investors discovered a series of potentially devastating statements relating to Rogers & Wells' representation of J. David. One note by Don Augustine, of counsel to Rogers & Wells in San Diego said, "Ponzi scheme. Love to have the business, but want to sleep at night," the Law Journal said.