Doeren Mayhew Continues to Battle Lawsuit in Alleged Ponzi Scheme

Troy, Mich.-based Doeren Mayhew and two of its directors lost a bid in court recently to dismiss a lawsuit alleging they developed the cash flow plan and issued statements to investors in a Lake Orion company’s $250 million Ponzi scheme.

U.S. District Judge Arthur Tarnow denied motions to dismiss the case on behalf of the firm, Directors Todd Fox and James O’Rilley and their wives, Joann Fox and Nancy O’Rilley

According to reports, more than 300 investors nationwide are suing DM and directors for common law fraud, negligent misrepresentation, professional negligence, civil violations of the federal Racketeer Influenced and Corrupt Organizations statute, breach of contract and unjust enrichment.

The investors allege the DM executives and their spouses performed administrative and management functions in an ongoing Ponzi scheme tied to Edward May, president of Lake Orion, Mich.-based E-M Management Co. LLC.

Earlier in the year, the SEC obtained a $37 million civil judgment against May, plus $3.8 million in interest, saying he misled people to believe they were putting money into telecommunication deals when he was actually swapping their funds in a Ponzi scheme.

Mark Crawford, MP at DM, noted that the denial is “without prejudice,” meaning that the issue can be raised again, and that he believes the judge will revisit dismissing the case after further discovery. “The lawsuit is without merit,” Crawford says. “We contend that we have absolutely nothing to do with whatever funds are still in question, and all we ever received as a firm was for preparing tax returns.”

Briefs are due in the case by mid-October, and attorneys expect to hold a discovery scheduling conference afterward.