Biglaw Firm Hit With Record Fine For Failure To Prevent Partner's 'Dubious' Scheme

Don't mess with legal ethics.

They are not messing around with legal ethics on the other side of the pond. In the U.K., the Solicitors Disciplinary Tribunal (SDT) recently announced a record-breaking fine against the Biglaw firm of Locke Lord, assessing them £500,000 ($656,000) for failure to stop the “dubious” investment scheme of a London-based partner.

The issue began in 2012, when Jonathan Denton was hired by the firm, shortly after they’d opened their London office. Only a few months later he incorporated two companies, Ikaya — for which Denton was sole director — and Slonne — which operated an “investment scheme offering very high yields” — which then turned around and hired Locke Lord as its lawyer, with Denton as the client partner.

In retrospect, the Biglaw outfit acknowledged this created “a certain mixing” of Denton’s roles as director of Ikaya and as law firm partner. As Law.com reports, the SDT judgment lays out the questionable transfers of funds that followed:

The judgment states that Denton and Locke Lord advised Ikaya “in relation to seven investment trusts during the retainer” between September 2012 and June 2015, during which time Denton billed a total of 1,424.9 hours, delivering invoices from the firm to Ikaya totaling £532,045 ($697,298), $657,194 and €286,902 ($334,628). Approximately £21 million ($27.5 million) was paid into the firm’s client account by investors during that period.

Despite Denton’s efforts to assure those putting money into the scheme that their capital would be safe, and that he could achieve monthly returns of 6 percent, the judgment states that “there did not appear to be any verifiable returns to investors.”

By 2013, Locke Lord received an inquiry about investors’ money from the FBI and another, separate one from the Metropolitan Police Service. In 2014, the firm was receiving complaints from investors and the firm’s compliance officer for legal practice raised some concerns about the arrangement. But it wasn’t until 2015 when the firm received yet another complaint from North Yorkshire Police that Denton was fired — though he was given the courtesy of three-months notice. In October of 2015 — after he’d formally left the firm — Denton was arrested in the Birmingham airport.

The fine meted out by the SDT is double the previous record fine. Locke Lord says they’ve now made substantial “changes and improvements” to their controls and systems to assess and catch conflicts of interest. After this mess, I’d certainly hope so.


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headshotKathryn Rubino is an editor at Above the Law. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).

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