Criminal Justice
Client accuses Willkie of conspiring to commit $735M fraud scheme
A Willkie Farr & Gallagher client has accused the law firm of aiding and abetting a $735 million fraud scheme related to a take-private deal for another one of its clients. (Photo from Shutterstock)
A Willkie Farr & Gallagher client has accused the law firm of aiding and abetting a $735 million fraud scheme related to a take-private deal for another one of its clients.
In a complaint filed in New York state court Tuesday, BRC Group Holdings said Willkie allegedly helped former Franchise Group Inc. CEO Brian Kahn hide federal investigations into earlier fraudulent conduct while assisting with a take-private deal that involved both clients.
According to Law.com, BRC Group Holdings also alleged that Willkie and Kahn worked together to hide crucial information and move the deal forward, which caused BRC Group Holdings to lose $735 million and Franchise Group to go bankrupt in 2024.
At the time of the deal, Kahn was under active investigation by the U.S. Department of Justice for committing fraud against another now-defunct company, Prophecy Asset Management, and had substantial debts related to a settlement agreement, the complaint says.
Law.com reports that Kahn pled guilty to conspiring to commit securities fraud against Prophecy Asset Management in federal court in December.
“Willkie’s misconduct is particularly egregious,” according to the complaint. “While simultaneously representing BRC as litigation counsel, Willkie prepared transaction documents for Kahn containing representations Willkie knew to be false, failed to disclose material conflicts of interest, and actively assisted Kahn in obtaining consents from the Prophecy settlement trust—all while remaining silent about these facts to its client BRC.”
In an email to Law.com, a Willkie representative said “the facts will make clear that our firm acted appropriately and with integrity at all times, consistent with our values and all ethical obligations.”
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