The suit, which named Levinson and Shook, Hardy & Bacon as defendants, asserted they knew Shapiro broke NCAA rules and Florida law by acting as an unlicensed sports agent who recruited Hurricanes players for the NFL while providing them with cash and other gifts, such as parties at his Miami Beach mansion, on his yacht and at local strip clubs. Shapiro also claimed he supplied some of the UM athletes with prostitutes.
The trustee’s complaint also asserted that in late 2006, Levinson became increasingly worried that Shapiro would be unable to repay new investors in his grocery brokerage business because he was using their money to pay off old investors. Shapiro also used millions to pay off his sport-fishing yacht, a North Carolina golf course resort deal and his mounting gambling debts, according to the bankruptcy suit.
Levinson finally asked one of Shook, Hardy & Bacon’s attorneys to determine whether Shapiro was violating securities laws.
A December 2006 memo issued by the firm concluded that Shapiro was violating the Securities and Exchange Act. But “Levinson sat on the securities memo, afraid to deliver it and tell his best friend that he could be held criminally liable for violations” of the act, according to the suit.
The following month, Levinson and other Shook, Hardy & Bacon lawyers learned that one of Shapiro’s business associates and an investor had reported his criminal conduct to the FBI. At that point, the law firm referred Shapiro to criminal defense attorneys Guy Lewis and Michael Tein, who had previously worked together at Shook, Hardy & Bacon and at the U.S. attorney’s office in Miami.
Despite that referral and the internal memo, Levinson and other lawyers at his firm continued to advise Shapiro on his issuance of millions of dollars in promissory notes to investors to save his failing business, Capitol Investments, through 2009, according to the suit.
Shook, Hardy & Bacon “tacitly agreed with Capitol’s proliferation of its Ponzi scheme and Shook, Hardy & Bacon failed to ever deter Capitol from its additional borrowings,” the suit said.
“Instead, Levinson actually encouraged Shapiro’s additional borrowings, telling Shapiro that he needed to make sure to get more funds so Capitol could stay afloat as Levinson knew that if Capitol failed, Shapiro would likely be prosecuted for securities fraud.”