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Lawyers Bilk Cornell for Millions, San Francisco Jail Scammed

In an attempt to recoup millions of dollars, private prison operator Cornell Companies, Inc., has filed lawsuits against lawyers entrusted to oversee the companys funds for land deals.

Cornell, based in Huston filed the latest suit on August 26, 2005, in Houstons 333rd District Court against Locke Liddell & Sapp and David Montgomery, a partner in the firm, alleging malpractice, breach of contract, breach of fiduciary duty and fraud.

The complaint alleges the defendants gave Cornell the green light to place $13 million into an account that was supposedly an escrow account. There was no escrow agent; there was no escrow account, contends Scott Hershman, a Cornell attorney. That money was placed in the account with the intention to buy land for developing a prison in Colorado.

Cornell says $5 million was improperly taken from the account, and it incurred millions of dollars in fees, expenses, and transaction costs to pursue the missing money and finalize the land deal with another attorney.
The lawsuit comes as a surprise to Locke Liddell, who was representing Cornell on other matters when the suit was filed. They just filed this thing without any notice to us, said John McElhaney, Locke Liddells spokesman.

Cornell had problems with an escrow account in a Georgia deal. In that case, Cornell sued Longboat Global Advisors, alleging that companys Vice President, attorney Edgar J. Beaudreault, handled a construction loan transaction on behalf of Longboat, which was providing financing for the Colorado project. Once again, Cornell placed money into an escrow account that turned out to be a regular bank account.

Cornell alleged fraud, conversion, breach of contract, and other claims. In December 2004, a jury awarded Cornell almost $6.5 million in actual damages and $1.4 million in punitive damages. Hershman, however, doubts Cornell will recover because the money is gone.

The City of San Francisco has been defrauded in another way; it contracted with a company that did not have a valid contractors license to build its new 768 bed San Bruno jail. The jail is more than a year late in opening.
Not only did they not do the work they were contracted to do, they failed to inform us that they had criminal convictions against them and that they had their state license pulled, said City Attorney Dennis Herrera.
The contractor, London-based AMEC, declared the jail completed April 8, 2005, and left a week later. The Citys $125 million fraud suit contends that 10 percent of the jails locks do not work, the emergency alarms do not work, and neither does the vent system.

AMEC, however, has filed its own claim against the City: $26 million for changes and extra work the city ordered on the jail and $8 million for the delays that ensued.

While the suit ensues, the jail sits empty.; San Francisco Gate

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