A Maryland judge allowed a lawsuit filed against two partners from high-powered Philadelphia law firm Fox Rothschild to move forward to the discovery phase, according to a report by the Washington Business Journal. The suit accuses the lawyers of paving the way for a real estate flipping scam that allegedly cost the plaintiffs more than $20 million.
Host Hotels & Resorts Inc. accuses Fox Rothschild partners Michael Kornacki and Mike Morris of perpetuating a scam orchestrated by Virginia real estate broker Robert Koger. According to philly.com, Koger set up shell companies, convinced Host to sell three hotel properties to those shells, then turned around and resold those properties for a $15 million profit. Host alleges that Kornacki and Morris played a critical role in setting up the paperwork to establish the shell companies.
Philly.com reports that one of the transactions was allegedly performed with the signature of a dead man. Host says that Koger set up a phony partnership to broker the 2010 sale of the Ritz-Carlton in Dearborn, Mich. The signature of the sales contract dated March 17, 2010, belongs to Terence Lloyd, a Koger information technology manager who was found dead on Feb. 3. 2010. His signature is also on the closing documents from June 3, 2010, and, the suit says, Koger flipped the property the same day for a $1.95 million profit.
Host's lawsuit against Koger resulted in the broker paying the Bethesda-based company $22.7 million, according to the Washington Business Journal. Koger's former chief operating officer Jonathan Propp pleaded guilty last year to federal conspiracy and wire fraud charges.
Fox Rothschild is represented by Philadelphia law firm Duane Morris, L.L.P.