NJ Atty Michael Kwasnik: Ponzi Scheme; Owes Client Protection Funds $36.8M, Judge Rules

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Essex County Superior Court Judge Bridget Stecher on July 6 ordered lawyer Michael Kwasnik, formerly of Kwasnik & Associates, and his father, William Kwasnik, who was not a lawyer, to pay $36.88 million

NJ Atty Michael Kwasnik:  Ponzi Scheme; Owes Client Protection Funds $36.8M, Judge Rules

A New Jersey judge has found that a Cherry Hill lawyer and his father, charged with operating a lucrative Ponzi scheme, are responsible for nearly $37 million in damages to client protection funds in New Jersey and Pennsylvania.

Essex County Superior Court Judge Bridget Stecher on July 6 ordered lawyer Michael Kwasnik, formerly of Kwasnik & Associates, and his father, William Kwasnik, who was not a lawyer, to pay $36.88 million to the New Jersey Fund for Client Protection and the Pennsylvania Lawyers Fund for Client Security, which pay claims to clients who fall victim to lawyer misdeeds.

Stecher, in reaching the $36.88 million sum, trebled the actual outlays sustained by the fund. Trebling was called for because of the allegations of fraud, misrepresentation and racketeering, the judge said.

It is not clear whether the $12.3 million already paid out by the two funds will be recovered.

“We’re aggressively moving forward to collect,” said the attorney hired by the two client protection funds, Richard Trenk, of Trenk, DiPasquale, Delle Fera & Sodono in West Orange. “We are moving to recover as much money for the funds as possible.”

Stecher awarded the New Jersey fund $25.2 million in compensation, and the Pennsylvania fund $11.67 million.

“The court finds that the plaintiffs have met their burden of proof in damages,” Stecher said.

According to Stecher’s ruling, New Jersey’s fund has paid out $8.4 million, while Pennsylvania’s fund has paid out $3.89 million.

An investigation is underway to determine if the Kwasniks have any assets that can be seized, Trenk said.

According to court papers, Michael and William Kwasnik are living in adjoining apartments in North Miami Beach. Attempts to reach them were unsuccessful.

The Kwasniks were not represented by counsel in the client funds’ litigation, Trenk said.

At one point prior, Michael Kwasnik was represented by Richard Klineburger of Klineburger & Nussey in Haddonfield. He didn’t return a call.

The younger Kwasnik has been disbarred in Pennsylvania and is suspended in New Jersey, according to court records.

A federal grand jury in February 2017 charged the Kwasniks with operating a Ponzi scheme that netted millions from clients.

The charges are still pending.

Michael Kwasnik and his father were charged with wire fraud, mail fraud and money laundering. They face up to 20 years in prison if convicted of the charges, federal prosecutors said at the time.

The indictment alleges that the Kwasniks carried out a scheme to defraud Michael Kwasnik’s clients out of their trust funds by diverting the money to various business entities they created, including Liberty State Financial Holdings Corp., Liberty State Benefits of Delaware, Liberty State Insurance Services, Oxbridge Investors Fund, OPIS Management Fund and Capital Management of Delaware.

The funds were siphoned from clients between October 2008 and November 2011, the U.S. Attorney’s Office said.

Prosecutors said the Kwasniks induced clients to establish trust accounts based on false pretenses and misrepresentations. Michael Kwasnik, the indictment charges, named himself as the clients’ beneficiary, and then transferred money and property into the accounts they had created.

About $13 million from about 40 clients was illegally diverted, according to federal prosecutors.

Michael Kwasnik already is facing numerous civil claims arising out of his alleged fraud.

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