Friday, October 2, 2009
Lawyer Admits Stealing $2 Million in Class Action Settlement Funds
By STEVEN M. ELLIS, Staff Writer
A former Los Angeles attorney now based in Irvine agreed to plead guilty to two felonies yesterday for misappropriating more than $2 million from his client trust account and losing almost all of it through day trades in the stock market.
Sandeep Baweja—whose Baweja Law Group was based in Los Angeles until he relocated to Irvine in August 2008—admitted commiting one count of wire fraud and one count of obstruction of justice in papers filed with the U.S. District Court for the Central District of California.
Baweja, 39, self-reported to the court and law enforcement authorities in December that he had lost nearly all of the money he had taken from funds awarded to employees of a company he sued in a class action.
He was named in a criminal indictment filed Wednesday in the Central District and faces a statutory maximum penalty of 30 years in federal prison. However, the U.S. Attorney’s Office in the plea agreement agreed to a downward adjustment of sentence and not to appeal if Baweja receives at least 57 months in prison.
According to court documents, Baweja filed a federal class action in the Central District on behalf of current and former real estate agents of ZipRealty Inc. in May 2007 alleging the company denied class members certain sales commissions, refused to reimburse business expenses and made unlawful wage deductions.
That fall, ZipRealty agreed to pay $3.55 million in settlement under an agreement approved by U.S. District Judge S. James Otero. The balance—after paying attorney’s fees and costs for Baweja and co-counsel—was to be paid pro rata to approximately 800 class member claimants.
However, after more than $2.5 million in settlement funds was deposited into a bank account Baweja controlled on behalf of the class, he set up his own online stock brokerage account and began transferring most of the settlement proceeds by wire.
Baweja used the misappropriated funds to day trade securities on margin, even though he had no experience as a trader in the stock market, and by December 2008 he had lost virtually all of the money held in trust.
During the course of the scheme, Baweja concealed his activity from class member claimants entitled to the money, Otero, an administrator hired to oversee processing claims, his co-counsel, and ZipRealty and its attorneys.
When ZipRealty notified Otero that claimants had begun to complain that they were not receiving their portions of the settlement and sought a case management conference, Baweja told the court he was making disbursements and ZipRealty abandoned its request.
However, Baweja failed to tell the court that only about $121,500 had been disbursed to 46 claimants, and that the delay was due primarily to lack of funds caused by his day trading activities.
Baweja referred requests for comment to his attorney, Michael J. Proctor of Caldwell Leslie & Proctor, who highlighted the fact that Baweja self-reported his actions with full knowledge of the consequences, and that he did so before authorities became aware of his improper conduct.
Proctor noted that Baweja had not walked away from the scheme with any profits, and that Baweja had used his own funds and borrowed others to pay some $575,000 in restitution so far.
Baweja was admitted to the State Bar in 1998 after attending UC Santa Barbara and Syracuse University College of Law, and he also became a member of the State Bar of Washington the following year.
He initially practiced in Washington, but relocated to Los Angeles in 2002. After working for three other firms, he founded the Baweja Law Group as sole proprietor in 2005 and practiced primarily from an office in downtown Los Angeles until his relocation to Orange County.
Proctor said his client has submitted his resignation to both bar organizations, and that he expected the California Supreme Court to take action on Baweja’s resignation within the month.
Baweja is expected to make his first court appearance later this month.
The case against Baweja was investigated by the Federal Bureau of Investigation.
Copyright 2009, Metropolitan News Company