LawFuel.com –
PREET BHARARA, the United States Attorney for the
Southern District of New York, and JOSEPH M. DEMAREST, JR., the
Assistant Director-in-Charge of the New York Field Office of the
Federal Bureau of Investigation (“FBI”), announced that FELIX
STRASHNOV was sentenced today to 63 months in prison in
connection with his participation in a fraudulent investment
scheme through which STRASHNOV and co-defendant MICHAEL AYNGORN
defrauded over 100 investors of over $2.7 million. The sentence
was imposed by United States District Judge BARBARA S. JONES. On
November 12, 2009, Judge JONES sentenced MICHAEL AYNGORN to 51
months in prison.

According to the charging documents and statements made
at court proceedings in the case:

Between November 2004 and June 2007, STRASHNOV and
AYNGORN sold unregistered securities in Empire Development Group
LLC (“EDG”) and Empire Development Group Fund I LLC (“EDGF”)
based on material misrepresentations and omissions. STRASHNOV
and AYNGORN collected over $2.7 million from more than 100
investors in EDG and EDGF. Instead of using investors’ money to
purchase real estate for the benefit of EDG and EDGF, STRASHNOV
and AYNGORN spent most of the investors’ money on STRASHNOV and
AYNGORN’s personal residences, cars, meals, gambling, and other
items for themselves and their families.

For example, STRASHNOV and AYNGORN represented to
investors that EDG and EDGF were investing in real estate.
However, in interviews and depositions with the United States
Securities and Exchange Commission (the “SEC”), STRASHNOV and
AYNGORN identified as EDG and EDGF investments only two
properties: (1) AYNGORN’s personal residence in Brooklyn, New
York, which public records show was purchased in the names of
AYNGORN and his wife in July 2005, and (2) a Fair Lawn, New
Jersey, property which was held in STRASHNOV’s name. According
to SEC personnel, STRASHNOV showed them blueprints for the Fair
Lawn, New Jersey, property that were labeled “Strashnov
Residence.”

Further, STRASHNOV and AYNGORN paid themselves and
their wives hundreds of thousands of dollars from Empire
accounts, withdrew hundreds of thousands of dollars of funds from
Empire accounts, and used Empire funds to purchase and lease
personal automobiles and other items.

On March 23, and 27, 2009, AYNGORN and STRASHNOV,
respectively, pleaded guilty to one count of conspiracy to commit
securities fraud and one count of securities fraud in connection
with the scheme.

STRASHNOV, 38, and AYNGORN, 37, are both from Brooklyn,
New York.

In addition to his prison term, Judge JONES ordered
STRASHNOV to pay $2,791,593 in restitution to the fraud victims
and to forfeit $2,791,593, reflecting the proceeds of the fraud
scheme. Judge JONES also ordered AYNGORN to pay $2,791,593 in
restitution to the fraud victims and to forfeit $2,791,593 in
connection with the fraud scheme.
Mr. BHARARA praised the work of the Federal Bureau of
Investigation and thanked the SEC for its assistance in the
investigation.
Assistant United States Attorney ANDREW L. FISH is in
charge of the prosecution.
09-401 ###

LawFuel.co.nz – Small law firms have plenty of room for improved profitability if the results of Markhams’ Legal Practitioners Performance Survey for 2009 can be extrapolated nationally.

The survey found that many firms were challenged by the downturn this year, a trend the firm expects to continue in 2010 but concluded that firms need to work on a ‘strategy for success’ to bring themselves into the range of the top firms.

The full report can be seen at: NZ Legal

The Markhams’ survey includes 21 firms, including three large firms with six or more equity partners and based upon the Auckland regional market.

Interestingly, five of the 21 firms surveyed were sole practitioners with two of them ranked among the top 10 most profitable firms, although none were ranked among the top five most profitable firms.

Key Profitability Characteristic

Among the key characteristics of the most profitable legal firm were:

• Average gross fees per partner of $1.2 million
• Partner charge out rates of $400 plus
• Staff salaries to gross fees of 30-35%
• Staff to partner ratio of 5+:1
• Overheads (excluding interest and salaries) to gross fees under 30%
• Lockup WIP and Debtors of less than 23 months.

Among the main results shown by the survey:

• Seven of the top 10 firms ranked by profitability were located in the central city
• Charge out rates are a key factor in determining profitability with an average charge out rate for partners at $441 per hour
• Staff numbers play a key role in profitability with the top five firms )(by profitability) have 10 staff per equity partner compared to the bottom five firms with an average of two staff per equity partner
• Work-type did not show any correlation with profitability

“The combination of work in progress (WIP) and debtors, which is commonl7y referred to as “Lockup” per equity partner is an important indicator of a firm’s financial efficiency,” the report says. “If a firm is not managing work flow and billing and collection effectively this is often an indication that other work process4es are not being done efficiently.”

Lockup varied from 1.32 months to 4.04 months with firms having an average of 3.17 months worth of fees tied up as debtors.

“There appears to be an inverse relationship between practice efficiency and profitability. When sorted by profitability, the top five most profitable firms have an average lock kup of 3.31 months and the bottom five firms have an average lock up of 1.84 months.”

Reducing funds tied up in lockup increase firms gross incomes by reducing funding costs and freeing up capital for investment.

In terms of salary rates, the overage average of participants showed:

• Non equity partners – $179,000
• Senior solicitors (5+ years) – $110,000
• Intermediate Solicitors – $73,000
• Graduate Solicitors – $43,000
• Legal Executives – $68,000

The survey highlighted the variance in performance among the firms surveyed with a noticeable trend towards taking on non-equity partners through internal promotion or recruitment. “In nearly all cases non equity partners on a salary/bonus structure leads to higher profitability being achiever per equit5y partner in firms.”