Indian American lawyer to plead guilty to $2 mn fraud
An Indian-American lawyer has agreed to plead guilty to two felony charges relating to a scheme where he took more than $2 million awarded in a class action suit and lost it all on the stock market.world Updated: Oct 03, 2009 12:31 IST
An Indian-American lawyer has agreed to plead guilty to two felony charges relating to a scheme where he took more than $2 million awarded in a class action suit and lost it all on the stock market.
A criminal information filed in the US District Court in Los Angeles charges Sandeep Baweja, 39, with one count of wire fraud and one count of obstruction of justice, the Federal Bureau of Investigation (FBI) said Friday.
Prosecutors filed a plea agreement in which Baweja agreed to plead guilty to the two charges which carry a statutory maximum penalty of 30 years in federal prison. Baweja was the sole proprietor of Baweja Law Group (BLG), which was based in Los Angeles until August 2008 when BLG relocated to Irvine.
According to court documents, Baweja filed a class action on behalf of current and former real estate agents of ZipRealty, Inc. in May 2007. The complaint alleged that ZipRealty denied class members certain sales commissions, refused to reimburse business expenses, and made unlawful wage deductions.
In the fall of 2007, Baweja reached a settlement with ZipRealty in which the company agreed to pay $3.55 million to compensate class members and to pay for attorney's fees and other costs.
On March 10, 2008, United States District Judge S. James Otero finalised the judgment in the case, which prompted ZipRealty to pay the $3.55 million settlement, a quarter of which went to attorney's fees for Baweja and his co-counsel.
Baweja's share of the attorney's fees was $660,000. The balance of the settlement - approximately $2,525,000 - was to be paid to approximately 800 class member claimants on a pro rata basis.
After the settlement money was deposited into a bank account that Baweja controlled on behalf of the class, Baweja set up his own online stock brokerage account and began transferring most of the settlement proceeds into that trading account.
Although he had no experience as a trader in the stock market, Baweja used the misappropriated funds to day trade securities on margin. By December 2008, the value of Baweja's stock account had shrunk to approximately $55,000, meaning that Baweja had lost virtually all of the settlement money that he had held in trust for his clients.