An investment company has filed a lawsuit against a disbarred California attorney, accusing him of operating a law firm that represents consumers in lawsuits against debt collectors that has now started diverting revenue in order to “expropriate the lion’s share of proceeds” from a “lucrative debt resolution business.”
A copy of the complaint in the case of Naz II Holding v. The Litigation Practice Group, Tony Diab, and Validation Partners can be accessed by clicking here.
Diab has been disbarred in California and Nevada for ethics violations, including diverting settlement funds that were due to a client into his own bank account, according to the complaint. Diab is now running The Litigation Practice Group, according to the complaint, having installed a “figurehead” to act as the firm’s president and secretary.
Validation Partners sought investors to finance an operation where it purchased accounts receivables from marketing affiliates used by the law firm to help identify consumers in need of representation. The affiliates assign their rights to receive those payments to Validation Partners from the law firm.
The plaintiff made two investments into the operation – $4.5 million in total. Starting last June, the law firm stopped making payments to Validation Partners, according to the complaint. The firm was still collecting funds from “tens of thousands of client accounts,” but Diab had gone “rogue” and was refusing to remit funds as required, according to the complaint.
The law firm spent $6 million in directly purchase new client accounts between last July and October, according to the complaint.
“Diab is thus on course to drain LPG of its assets,” the complaint alleges. “If Diab’s looting scheme is permitted to continue, LPG will become unable to repay VP and Plaintiff while Diab continues LPG’s debt resolution practice through another entity that has no obligations to VP or Plaintiff.”