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Mark Hamblett
New York Law Journal
02-21-2007

A Montana man Tuesday pleaded guilty to defrauding law firms involved in major litigation by claiming to have proof of illegal activity by opposing counsel and parties.

Michael Lair, 46, headed consumerdefense.com Inc., which held itself out as a consumer complaint investigator and researcher for large fraud cases. Tuesday, Lair admitted to defrauding attorneys and litigants of more than $311,000 in 2003 and 2006 as he pleaded guilty to four counts of wire fraud before Southern District of New York Judge John Keenan.

Under a plea agreement with Assistant U.S. Attorney Helen Cantwell, Lair is expected to be sentenced to serve somewhere between 2 years and 3 months to 2 years and 9 months in prison.

The victims of the fraud included two of Manhattan's top litigation firms, Morvillo, Abramowitz, Grand, Iason; Anello & Bohrer; and Kasowitz, Benson, Torres & Friedman.

While the guilty plea Tuesday covered the litigation involving the Morvillo and Kasowitz firms, prosecutors had been prepared to obtain a superseding information that would have charged Lair with attempting to defraud 10 other firms in litigation in New York and other parts of the country.

Tuesday, with defense attorney Leonard Joy by his side, Lair told Judge Keenan, "I agreed with a number of law firms to supply information about the parties involved in legal actions in which the law firms were involved. I charged the firms' fees knowing that I did not have and could not have obtained such information."

Name partner Robert Morvillo was representing former AIG Inc. Chairman Maurice Greenberg in a dispute with the insurance giant when he was approached by Lair in 2005 with an offer to sell sensitive information about the company and opposing counsel.

Lair then allegedly turned around and tried to sell information to the opposing counsel about illegal and unethical acts purportedly committed by the Morvillo firm, when, in fact, he had no such information.

The Morvillo firm paid Lair $75,000 on behalf of Greenberg to provide information about alleged misconduct by AIG auditor PriceWaterhouseCoopers, but Lair never provided any information.

He then approached lawyers for AIG and said he had been hired by the Morvillo firm to hack into the company's computers and obtain telephone and e-mail records -- also a fabrication, according to the government.

Following Lair's arrest in November, Michael Bowe of Kasowitz Benson said Lair contacted him in March 2006, claiming to have information on hedge fund SAC Capital, which was being sued by Bowe's client, pharmaceutical company Biovail Corp., for allegedly colluding with analysts to publish misleading reports that damaged the company's stock price.

The Kasowitz firm paid Lair less than $5,000 for travel expenses to New York but never received any information from him.

"We paid $5,000 in travel expenses for one meeting that went nowhere," Bowe said Tuesday. "We never paid any money for services or information."

Lair also tried, prosecutors said, to have SAC Capital's lawyers pay $50,000 for the "information" that the Kasowitz firm had hired him to hack into SAC's computers.

According to the complaint the FBI had already been alerted to Lair's activities and agents were monitoring his communications with SAC's lawyers.

Morvillo could not be reached for comment Tuesday.

In addition to the two named New York law firms, the information filed against Lair alleged that between 2003 and 2006 he also defrauded 10 other law firms. He allegedly received $10,000 from New York attorneys involved in trade secrets litigation; $50,000 from an attorney representing an Internet services company in litigation with hedge funds; $25,000 from an attorney weighing whether to start litigation against a software development company; and $35,000 from an attorney representing an investor against a computer software company and its outside auditors.

The other firms were not named.

Cantwell is also seeking the forfeiture of $311,000, which represents the total Lair received from the 12 firms.

Lair, who has been behind bars since his arrest in November, is scheduled to be sentenced March 21.