Virage Capital infused tens of millions into lawyers who have needed to hire lawyers of their own
The SEC and FBI have reportedly been involved in the life of one of the lawyers, Tim Howard, and the USAO in the life of another, Tom Girardi. A third lawyer, John M. Pierce, is accused of threatening to kill his ex-wife, and has faced accusations of severe financial malfeasance at his law firm.
Virage Capital Management is a litigation funding company that has hundreds of millions of dollars under management. The funder provides capital to law firms to pursue litigation in exchange for a right to be repaid with proceeds from favorable lawsuit results. Virage, however, has bet on some lame litigation horses; the funder has reportedly provided just under $100 million in capital to the respective firms of three lawyers who have failed to live up to their ends of the bargain. Exacerbating matters, the Securities & Exchange Commission (SEC), United States Attorneys’ Office (USAO) and reportedly the Federal Bureau of Investigation (FBI) have surfaced with respect to the dealings of two of the lawyers. Perhaps unsurprisingly, each of these Virage-backed lawyers has ended up hiring lawyers of their own.
A brief snapshot is eye-opening:
- One lawyer funded by Virage — Tim Howard — was charged with fraud by the SEC, is reportedly under FBI investigation, and is the subject of proceedings calling for his disbarment.
- Another lawyer funded by Virage — Thomas Girardi — was the target of a USAO motion in federal court this week to unseal records related to Girardi’s apparently problematic financial dealings.
- A third lawyer funded by Virage — John M. Pierce — ran a firm that has a reported over $70 million debt, has been sued at least 10 times this year, and about whom a long-time former firm attorney believes will be subject of a criminal investigation.
Pierce’s firm was reportedly funded approximately $65 million in capital over just one year, April 2019 — April 2020. The sequence of events involving Rudy Giuliani and the timing of a “$21 million loan commitment” made by Virage during the course of that year is of particular interest.
- October 16, 2019. Rudy Giuliani says “we need some money,” in a voice message to an NBC reporter he pocket-dialed.
- November 6, 2019. Giuliani tweets that he has hired Pierce Bainbridge for his issues related to the Ukraine fiasco.
- November 14, 2019. Virage agrees to a “$21 million loan commitment” to Pierce Bainbridge.
The $21 million commitment was made in the face of numerous severe red flags. The firm then suffered a “dramatic disintegration” in the months subsequent to Giuliani coming aboard, and Virage said the firm defaulted on its massive debt. The situation is the subject of a heavily sourced “Money Mystery,” involving Virage Capital, Pierce Bainbridge and spin-off firm Hecht Partners LLP.
Virage Capital Management
Virage Capital Management, based in Houston, Texas, was founded in 2013. Edward Ondarza has referred to himself as the company’s “Founder and Portfolio Manager,” his current LinkedIn says, “Managing Director.” Ondarza previously worked for Enron and has spoken of his work there in “building the core financial derivative market” and developing an “online platform to trade our financial derivatives.”
During a 2015 conference, the Virage founder described the company’s business as “focused on direct lending to fund litigation expenses that provides an uncorrelated, low volume return to investors. The idea was born from the need of attorneys to access the capital markets following the banking crisis in 2008–09 and the resulting banking regulations that restricted capital to both private and commercial borrowers that historically relied on access to credit through traditional banking relationships.”
J.P. Morgan was reportedly a Virage seed investor, and during the same 2015 conference, Ondarza said: “Virage has a strategic relationship with JP Morgan Alternative Asset Management and we currently manage approximately $260mm of institutional capital.” (Additional related notes of interest are included in an “Addendum” to this article.)
The company’s assets under management have since reportedly risen to at least $665.2 million.
Virage appears to have several related entities, one of which is tied to an address at Ugland House in the Cayman Islands. Ugland House has been described as “the registered office address for 40,000 entities, including many major investment funds, international joint ventures and capital market issuers.”
In addition to financially backing law firms, Virage issues/sells securities to undisclosed investors. For example, according to SEC filings:
- In March 2019, Virage sold $73,800,000 in securities to 8 undisclosed investors.
- In September 2019, Virage sold $282,878,489 in securities to 20 undisclosed investors.
- In September 2020, Virage sold $380,498,149 worth of securities to 30 undisclosed investors.
The Troubling Trio of Virage Funded Attorneys
Virage Capital’s “Code of Ethics” includes a “Due Diligence Process” which states: “Virage abides by a high standard of care and work ethic. Through its due diligence process, Virage often renders information and discussions borrowers find useful in making their own business decisions.”
One wonders what type of diligence was undertaken before providing capital to this trio of lawyers totaling almost $100 million.
Attorney Tim Howard
Tim Howard reportedly received approximately $16 million in capital from Virage. The Tallahassee, Florida lawyer was later charged with fraud by the Securities & Exchange Commission (SEC), reported to be under investigation by the Federal Bureau of Investigation (FBI) and is the subject of an ongoing trial calling for his disbarment.
The SEC matter recently resolved with a $385,000 fine, and as a condition of the settlement, among other items, Howard was “suspended from appearing or practicing before the Commission as an attorney.”
According to Law360, Virage loaned Howard $7 million at the end of 2016. A broker who arranged the deal, according to the article, said Howard spent most of the loan on a “series of madcap business ventures like a tech startup and movie production company.”
The broker is quoted as saying: “He blew through the money. It was staggering.”
Howard has hired legal representation to deal with his issues.
Attorney Thomas Girardi
Girardi owes Virage approximately $9 million, according to a recent court filing by another lender. The filing also says that around October 2020 Virage was approached by “Girardi for substantial additional funding which Virage was willing to provide, subject to Girardi’s agreeing to relinquish financial control, which Girardi was unwilling to do.” Girardi appears to have been in financial duress at the time, the alleged insistence of Virage to take over financial control is of heightened interest.
The United States Attorneys’ Office (USAO) has Girardi on its radar. As reported in Law360 this week, federal prosecutors filed a motion to gain access to sealed documents apparently related to Girardi and his firm allegedly misappropriating at least $2 million in clients’ settlement funds.
In related proceedings, Girardi received a colorful rebuke from United States District Court Judge Thomas Durkin.
“This isn’t that difficult: You learned in law school, we all did, in Ethics 101, that when you get money that belongs to a client you put it in an escrow fund and you don’t touch it. No matter what your personal financial situation is, no matter what kind of pressures you’re under, if you touch client money you’re going to be disbarred and quite possibly charged criminally.”
Girardi has hired legal representation to deal with his issues.
Attorney John M. Pierce
Yet another lawyer with serious issues — the lawyer whose firm Virage backed most heavily — John M. Pierce, also of Los Angeles, as reported in the Daily Mail, is accused of threatening to kill his Harvard Law School educated ex-wife.
As the Daily Mail title suggests, Pierce and his firm are in massive debt. In addition to a reported $65 million debt to Virage, Pierce Bainbridge and related entities have been sued this year by four cash advance lenders and several vendors of legal services in an aggregate amount exceeding $5 million.
On top of this around $70 million, two financial advisory companies — who say they helped Pierce Bainbridge secure the massive Virage funding — recently received a $3.5 million arbitration award against the law firm.
Finances have not been the only problem, a slew of troubling issues with lawyers and individuals who’ve been in the Pierce Bainbridge orbit over the years are covered in an article titled: “Gangland Tactics or Aggressive Lawyering?”
As for Virage, after reportedly committing $28.5 million to Pierce Bainbridge in April 2019, as noted, the funder made an additional “$21 million loan commitment” in November. This was done in the face of severe red flags and with Pierce Bainbridge’s seeming most notable litigation “accomplishment” being an uncanny ability to pursue loser lawsuits. Incredibly, at least three so-called “$50 million lawsuits,” and one-so called “$1 Billion lawsuit,” pursued by the firm have been thrown out while netting an aggregate grand total recovery of $0.00.
A cynic who watches Ozark perhaps may suggest that, providing tens of millions of dollars to John Pierce’s firm, seems as prudent from a legitimate business perspective as Marty McBird renovating the Blue Fish Lodge or taking an interest in the Lickety Splits.
Since the Virage funding, current and former Pierce Bainbridge attorneys have hired a veritable army of law firms to handle their own legal issues, including:
- Littler Mendelson PC
- Mukasey Frenchman & Sklaroff LLP
- Meister Seelig & Fein LLP
- Cohen Seglias Pallas Greenhall & Furman PC
- Bailey & Glasser LLP
- Bellew LLC
- Chapman Tripp (New Zealand)
- The Tweed Law Firm (Ireland)
The international firms were hired by ex-Pierce Bainbridge named-partner and New York Office Managing Office Partner David L. Hecht; he now runs a spin-off firm Hecht Partners LLP. Attorney Hecht has had issues with honesty, integrity, and ethics.
The story of Virage Capital and the trio of troubled lawyers backed by the funder — who have each had to hire lawyers of their own — is an interesting one. Whether the relationships are the result of bad luck, poor diligence or something else altogether remains to be seen.
This addendum includes additional information on Virage Capital, Pierce Bainbridge, J.P. Morgan and Rudy Giuliani. The information is being included simply as data points of interest.
As noted in the article, J.P. Morgan was a Virage seed investor in 2013 and according to the firm’s founder in 2015 J.P. Morgan Alternative Asset Management has a strategic relationship with the litigation funder. The current status of any Virage relationship with J.P, Morgan is unclear, however, a few surrounding points are interesting.
Venezuela and Ukraine are countries with which Giuliani was involved when he hired Pierce Bainbridge. Giuliani hired the firm for issues related to Ukraine and was legal counsel for a wealthy Venezuelan who has been accused of money laundering.
Two articles in major publications covering events contemporaneous to Giuliani signing up with the firm are of interest.
- One in the Miami Herald is titled: “Giuliani met with feds to discuss Venezuelan client in Miami money-laundering case.”
- Another in the Washington Post is titled: “A wealthy Venezuelan hosted Giuliani as he pursued Ukraine campaign. Then Giuliani lobbied the Justice Department on his behalf.”
The client is Alejandro Bettancourt. A report from the Organized Crime & Corrupt Reporting Project says “Betancourt held an account at JPMorgan Chase in the United States.” Other on-line reports claim JP Morgan was involved with Betancourt in 2013, which is the same time period the bank reportedly provided seed money to Virage.
Additional data points are of interest due to Giuliani’s reported connections to perhaps unsavory individuals in Russia and the former Soviet Union.
As general background, Burke McDavid, the Virage General Counsel, is fluent in Russian, and spent extensive time earlier in his career in Russia, while an attorney for the Akin Gump law firm. McDavid’s reported focus was investment related work.
Per Newsweek, Giuliani’s “mysterious ties” to what appear to be less than savory characters in Russia and the former Soviet Union “go back decades.”
In addition, a September 2020 article in Bloomberg titled: “Deutsche, JPMorgan Top Banks Flagged in Fraud Report: Highlights,” references “transactions handled by the world’s largest banks linked to money laundering, corruption and fraud.”
Bloomberg also reports that: “J.P. Morgan . . .processed payments for Paul Manafort, the former campaign manager for President Donald Trump, after he resigned from the campaign amid money laundering and corruption allegations from his work with a pro-Russian political party in Ukraine.”
Around on month before Giuliani hired Pierce Bainbridge, the Rolling Stone published an article about “avoiding Ukraine-related crimes” which states: “Rudy Giuliani is consulting with Paul Manafort. What could go wrong?”
In addition, Giuliani reportedly had prior business dealings with the Manafort family. In “The Myth of America’s Mayor: Will the Real Rudy Giuliani Please Stand Up?”, Greg Olear poses the question: “Why not coordinate strategy with Paul Manafort — whose family business, Manafort Brothers construction, had secured the clean-up contract for the 9/11 rubble — from his prison cell?”