In Big Florida Ponzi Scheme Fallout, Security National Sues Firm’s Lawyers

Finger-pointing in one of the largest Ponzi schemes to hit Florida has spilled over into the legal and insurance industries.

Security National Insurance Co. has filed suit against a Miami law firm, alleging the lawyers failed to divulge their previous involvement with the investment firm at the heart of the $155 million Biscayne Capital scheme, which collapsed in 2018 and led to the arrest of its principals in September.

In the lawsuit filed in U.S. District Court in Miami, Dallas-based Security National asks the court to declare its lawyers’ professional liability policies void and absolve it of any obligation to defend the Avila Law firm. The firm, formally known as Avila, Rodriguez Hernandez Mena & Garro LLP, based in Coral Gables, has already cost Security National more than $150,000, the insurer said.

The two insurance policies, written in 2019 for $4 million each, excluded claims “based upon or arising out of any actual or alleged dishonest, criminal, intentional, malicious or fraudulent act, error or omission or any willful violation of any statute or regulation by an Insured, if a final adjudication adverse to such insured establishes such a dishonest, criminal, intentional, malicious or fraudulent act, error or omission or willful violation,” the lawsuit complaint said.

Security National, part of the AmTrust Financial family of insurers, said in its complaint that it would not have insured the law firm and would not have renewed the policies if Avila had answered truthfully to questions in its policy application.

Avila Law has denied that it had prior knowledge of the Ponzi scheme and plans to defend the federal lawsuit.

Avila, a 22-lawyer firm founded in 2007, has specialized in banking and finance law, mergers and acquisitions, and real estate matters. The attorneys’ purported knowledge of the trouble brewing at Biscayne Capital came to light in legal actions taken against the alleged perpetrators of the Ponzi scheme.

One suit by investors in the scheme, filed in 2020, contends that Avila served as counsel to the Biscayne Group and its principals in 2014-2016. A second suit, by the liquidator overseeing the assets of Biscayne, asked for Avila’s insurance coverage information and charged that the law firm failed to inform lenders of offshore bank accounts.

The investors’ complaint argues that the Avila firmed assisted the Ponzi schemers in forming trusts to separate assets from liabilities, avoid restrictions placed by the U.S. Securities and Exchange Commission, and hide the extent of the fund’s losses.

Security National has also sued a Miami securities firm, contending that the insurer had no duty to defend the firm in the investor lawsuit because the securities firm issued notes that facilitated the Ponzi scheme.

Topics Lawsuits Florida