Agency’s Former Counsel Held Liable in Contracting Scheme // C.A. Says Conflict-of-Interest Statute Allows Recovery of Payments to Independent Contractor
KENNETH OFGANG, of Metro News-Enterprise reports:
"The former counsel for the California Housing Finance Agency and a company in which he held an undisclosed interest must return payments made to the business under a contract with the agency, the Fourth District Court of Appeal ruled yesterday.
Div. Three affirmed a multimillion dollar judgment against ex-lawyer Robert L. McWhirk of Laguna Beach, former CHFA insurance director John Schienle, and Hanover/California Management and Accounting Center, Inc. An Orange Superior Court jury sided with the CHFA, which said the men schemed to enrich themselves at public expense by creating a company that did business with the agency while they were undisclosed principals. Following a seven-week trial, the jury found that all defendants committed fraud and negligent misrepresentation, that McWhirk and Schienle were liable for breach of fiduciary duty and conflict of interest, and that McWhirk had committed legal malpractice and breached his contract to serve as outside counsel. Jurors rejected Hanover California’s cross-complaint for breach of its contract with the agency.