Claims Against Investing Firm Pour Into Court
Approximately 250 individuals and institutions filed claims against Capital Consultants in federal court last week detailing the hundreds of millions of dollars they think they are owed by the defunct investment management firm.
The U.S. District Court clerk's office was swamped by the claims, which had to be filed by Oct 9. The court-appointed receiver now in charge of Capital Consultants estimated it will take his staff until the end of the week to total the flood of claims.
The largest single claim came not from the dozens of union pension funds and private investors hoping to recover some of their money, but from Andrew Wiederhorn and his partner, Lawrence Mendelsohn, defendants along with Jeffrey Grayson, Capital Consultants CEO, in several related civil lawsuits.
Wiederhorn and Mendelsohn filed claims stating they will go after Capital Consultants for as much as $480 million apiece should they lose those lawsuits.
"There are at least seven separate actions against Andrew Wiederhorn . . . arising out of Capital Consultants' alleged wrongdoing," Wiederhorn's lawyers stated in the document. "Wiederhorn denies all liability on all the claims that have been asserted against him. In the event he is held liable, he will seek contribution and/or indemnity against Capital Consultants."
Wiederhorn and Mendelsohn, through their former company, Wilshire Credit Corp., borrowed $160 million from Capital Consultants between 1994 and 1998. Grayson's investment firm was plunged into disarray in 1998 when Wilshire Credit failed to repay the loan.
Other defendants in the hornet's nest of Capital Consultants
litigation also filed claims.
Stoel Rives and O'Melveny & Myers, law firms that once worked for Wiederhorn and Capital Consultants, respectively, claimed they will pursue Capital Consultants for $260 million each.
Former Capital Consultants' clients claim in several lawsuits that Wiederhorn, Mendelsohn, Stoel Rives, O'Melveny & Myers and several others contributed to the losses by fraudulent or negligent dealings with Capital Consultants.
"Obviously we have different views on who's responsible for what happened," said Stephen English, a Portland lawyer representing several Portland union trust funds who lost millions. "On the theory that the best defense is a good offense, I assume that these are calculated strategies."
Grayson's wife and son also filed claims.
Susan Grayson is seeking $265,697. Barclay Grayson, former president of Capital Consultants, claims the Barclay Grayson Family Limited Liability Corporation is owed $393,805.
In an earlier report, Thomas F. Lennon, the court appointed receiver, estimated that clients lost about $355 million.
The total of the claims vastly exceeds the sum that Lennon likely will have to distribute. Attorneys close to the case estimate the sale of Capital Consultants remaining assets and money from the settlement of several civil lawsuits could raise as much as $200 million to $250 million.
Lennon estimated it will be months before he's ready to distribute those assets. In the end, it will be up to U.S. District Court Judge Garr King to rule on how and when that distribution takes place.
Jeffrey Grayson was indicted earlier this month on 22 felony counts of mail fraud, conspiracy, witness tampering, money laundering and making illegal payoffs to a union trustee.