Cases & Investigations

Walco Investments, Inc. v. Thenen

COURT: United States District Court for the Southern District of Florida

Berger Montague, as a member of the plaintiffs’ steering committee, obtained settlements of $141 million for investors Walco; 947 F. Supp. 491 (S.D. Fla. 1996)).

Plaintiffs invested in funding entities that were formed “exclusively” for the purpose of investing in an organization perpetrating the Ponzi scheme. While the court allowed plaintiffs to proceed with direct claims, the court “disagree[d]” that prior case law created a Ponzi scheme exception to standing and stressed “the importance of the in pari delcto relationship between the funding entities and the defendants.

Importantly, the court held: “[w]here a business entity exists solely as a fund raising conduit for another enterprise, and both the fund raising entity and the primary corporation are culpable participants in a scheme to defraud the investors, the investors have standing to raise direct claims against all participants in the fraud.”

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