An Atlantic City, New Jersey, law firm is accused in a suit of taking $836,839 held in trust for a client to pay the personal expenses of a third party.
Callaghan, Thompson & Thompson and one of its principals, Brian K. Callaghan, allegedly accepted the funds on behalf of a Manasquan, New Jersey, law firm, Keating & Associates, which sought representation in connection with a deal to purchase the Revel Casino Hotel in Atlantic City, according to the suit, which was filed in Monmouth County Superior Court.
But Callaghan Thompson allegedly used most of Keating & Associates’ money to pay bills for a Cinnaminson, New Jersey, man named Carl Frederic Sealey, the suit says.
Callaghan Thompson allegedly used Keating & Associates’ money to pay criminal defense attorney fees for Sealey, expenses for his child’s second birthday party, bills from Home Depot and taxes owed by friends of Sealey, according to the suit.
Sealey pleaded guilty in the Eastern District of Pennsylvania in 2018 to running a Ponzi scheme that bilked clients out of $1.6 million, and is serving a 78-month sentence, according to court documents.
Keating & Associates brings claims for legal malpractice, breach of fiduciary duty and common-law fraud against Callaghan and his law firm.
Callaghan did not respond to a phone call requesting comment about the malpractice suit.
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It’s unclear what the alleged relationship was between Sealey and Callaghan.
Sealey was “tangentially involved as a consultant” in the sale of the Revel Casino, which is now known as the Ocean Casino Resort, said Gregory W. Vella of Collins, Vella & Casello in Manasquan, who represents Keating & Associates in the malpractice suit.
Callaghan said at a deposition in an unrelated case, where Keating & Associates principal Jeffrey Keating was present, that Sealey threatened to bring an ethics complaint against the firm if Callaghan did not make payments on his behalf, said Vella.
Callaghan’s trust ledger “is handwritten and illegible and he doesn’t even know who he wrote checks to,” Vella alleged.
Sealey “used my client’s money as his own little personal bank account,” Vella claimed.
Sealey pleaded guilty to conspiracy to commit wire fraud and wire fraud in June 2018.
According to the U.S. Attorney’s Office for the Eastern District of Pennsylvania, Sealey led investors to believe he was running a private equity investment firm that offered risk-free investments that would return 10% interest in 90 days.
Investors would wire him money and he used most of it to support an extravagant lifestyle, including a personal driver, hotel accommodations, restaurants, spa services, retail shopping and other personal expenditures, according to the U.S. Attorney’s Office.
After retaining Callaghan and his firm in 2018 in connection with his plan to buy the Revel Casino, Keating gave Callaghan $843,999 that was intended for the purchase of the Revel, the suit says. However, without Keating’s knowledge, Callaghan allegedly began using Keating’s money to pay Sealey’s expenses, the suit claims.
Callaghan and his firm, as counsel for Keating & Associates, “owed a duty of loyalty to Keating & Associates, LLC not to place their own interests, or the interest of others, ahead of Keating & Associates LLC, and to disclose all distributions from the trust account in writing and not to distribute those funds to third parties for anything other than the purpose of purchasing the Revel Casino,” the suit claims. ”The best interest of Keating & Associates, LLC were wholly disregarded by Brian K. Callaghan, Esq. and Callaghan, Thompson & Thompson.”
