Chargers All-Pro linebacker Dwight Freeney is back in court over a series of misguided investment moves, just weeks after the conclusion of his latest case.
Last month, Eva Weinberg, who'd quit her job at Merrill Lynch to take on Freeney as her sole investment management client, was sentenced to six months in prison and ordered to pay $2.2 million after she and her husband Michael Stern pleaded guilty to fraud in June of last year.
The duo had siphoned millions of dollars out of Freeney's Rolling Stone Los Angeles restaurant in the Hollywood area in 2010 and 2011, while Freeney was a member of the Indianapolis Colts. Stern posed as a millionaire investor named Michael Millar, promising to invest $7 million in the restaurant venture.
Now, Freeney is suing one of his lawyers, whom he alleges worked under a conflict of interest and helped hide the misdeeds of Weinberg and Stern, allowing their fraud to continue longer than it otherwise would have, costing him more than a million dollars.
Freeney accuses attorney Stephen Brauerman and the law firm Bayard P.A. of "breach of fiduciary duty, constructive fraud, civil conspiracy, aiding and abetting breach of fiduciary duty, professional negligence, and negligent infliction of emotional distress," according to a Courthouse News Service report.
In running the scam, Stern opened a Bank of America account under the name Roof Group, which was Freeney's company used for operating the restaurant. Stern also opened accounts under Freeney's name at a Citibank in Florida, eventually transferring $9 million from these accounts into the Roof Group account and funneling over $2 million of that through a sham company set up to purportedly manage the restaurant business.
Stern offered to oversee the 2010 construction of the restaurant, eventually assuming responsibility for the venture's financial operations. He mismanaged the business, failing to keep proper accounting records or file tax returns and paying the restaurant's bills late, if at all; instead he pocketed much of the money he collected.
In April 2011, Salvatore and Stacy Feli, who had originally been hired to run the restaurant, sued for breach of contract upon learning that neither Stern's $7 million investment nor a promised national expansion were forthcoming.
Fearing that the April 2011 Feli lawsuit would expose their fraud, Stern and Weinberg contacted attorney Brauerman, who was representing Freeney on another matter. The duo engaged him to defend them as well as Freeney from the Felis' lawsuit.
Weinberg established herself as the sole point of contact, and Brauerman did not directly contact Freeney or any of the other defendants in the Feli case, which included Freeney's business associate Aaron West and consulting firm Krost Baumgarten, Kniss & Guerrero. The case was billed to Freeney, even though the latter firm had insurance that should have covered legal expenses.
Freeney argues Brauerman had established a fiduciary responsibility to protect his financial interests before agreeing to take on Weinberg and Stern as defendants. Brauerman therefore should have investigated on behalf of his existing client and caught the red flags, which also included a conflict of interest between West and the pair.
Weinberg and Stern had accused West of wrongfully taking money from the restaurant — the very breach for which they would eventually admit guilt. This conflict of interest alone, Freeney's new lawyers argue, should have been enough to get Brauerman to decline to take on the new clients.
Freeney, whose career in San Diego is off to a rough start after a torn quadricep muscle, ended his first Chargers season just four games in. He now seeks additional compensatory and punitive damages from his former law firm.
The Rolling Stone restaurant venture did not fare well either: it closed in February 2013.