Irvine attorney to plead guilty in $2 million fraud case
“Sandeep Baweja faces federal prison for misappropriating clients’ money on bad stock market bets.”
An attorney who had strong civic and community ties agreed Thursday to plead guilty to losing more than $2 million in clients’ money on bad stock market bets settlement money he never was supposed to touch.
Sandeep Baweja, 39, who turned himself in to authorities last Christmas Eve, faces a maximum penalty of 30 years in prison but realistically faces less under the sentencing guidelines, his lawyer said. Baweja will enter a plea in several weeks.
Baweja’s scheme, which torpedoed his legal career and cost him his seat on the board of trustees of the Irvine Public Schools Foundation, involved trying to enrich himself by fattening a $2.7-million award meant to go to about 800 plaintiffs in a class-action labor lawsuit.
Instead, Baweja an admitted novice at stock investments, who nevertheless decided to play the market in the midst of its 2008 summer free fall burned through all but about $54,000 of the money, leaving several plaintiffs with nothing as the holiday season approached. The average checks were supposed to be about $3,000 per person.
Baweja, who lives with his wife, a lawyer, in Irvine, was not available for comment.
“Late last year, before anyone had learned about what he’d done, Mr. Baweja stepped forward and self-reported his conduct to the court, his clients, the State Bar, and the criminal authorities,” his attorneys, Jeffrey Rutherford, of Crowell &Moring LLP, and Michael Proctor, of Caldwell, Leslie &Proctor, said in a statement. “He did this, fully understanding the consequences, because it was the right thing to do. He has agreed to plead guilty for the same reason.”
The FBI investigated the case, and the U.S. Attorney’s Office in Los Angeles is prosecuting Baweja. He was the sole proprietor of Baweja Law Group in Los Angeles until August 2008, when he relocated the practice to Irvine.
In court papers filed today, Baweja agreed to plead guilty to wire fraud and obstruction of justice both felonies.
In May 2007, Baweja won a class-action settlement on behalf of current and former real estate agents of ZipRealty Inc. who alleged they were denied certain sales commissions, weren’t reimbursed for business expenses, and had their wages unlawfully trimmed.
In March 2008, U.S. District Judge S. James Otero approved a settlement in which ZipRealty agreed to pay $3.55 million, a quarter of which went to Baweja and his co-counsel. Baweja’s share of attorney’s fees was $660,000, according to court documents.
The balance of the settlement money about $2.53 million was to be paid to members of the class-action lawsuit. That money was deposited into a bank account that Baweja controlled on behalf of the class.
Instead of keeping the money safe for disbursement to plaintiffs, Baweja opened an online brokerage account to secretly earn a profit for himself, according to court documents.
With no experience as a trader in the stock market, Baweja proceeded to engage in the high-risk strategy of trading on the margin, or borrowing money from a broker to purchase stock.
By December 2008, the value of Baweja’s stock account had shrunk to about $55,000.
He kept the scheme secret from class-action members, his co-counsel, Otero, an administrator hired to oversee processing claims, and ZipRealty and its attorneys, according to the U.S. Attorney’s Office. Using his own money and borrowing other money from relatives and friends, Baweja was able to come up with about $575,000 to pay some of the plaintiffs.
Baweja was a standout student at the Syracuse University College of Law, where he received the law dean’s excellence award, outstanding graduate award, and special service award, according to an October 2007 story in Rediff India Abroad.
He has resigned from the State Bar and no longer can practice law. Baweja is not expected to be sentenced until about January. The judge could choose a sentence from probation to 30 years, but sentencing guidelines for his crimes generally call for a total of between 57 to 71 months.
In addition to possibly going to prison, Baweja also still is on the hook for the $2 million he owes plaintiffs.
Two civil lawsuits that were filed against him have been consolidated, and the attorneys who filed those actions have replaced Baweja as the lawyer representing the members of the class whose monies he lost.
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