Update — the case has been removed to federal court, the Northern District of Illinois:
Here is the complaint in Chicago Transit Authority Retiree Health Care Trust v. Dilworth Paxon LLP (Cook County Circuit Ct.):
1. This lawsuit arises from the Defendants’ participation in, and assistance with, the issuance of $43 million in worthless bonds (the “Bonds”) to unwitting public pension funds, including RHCT. The Bonds were not part of a legitimate public finance project, but rather a criminal scheme to enrich several individuals connected to the Defendants, including well-known fraudster, John Galanis, his son, Jason Galanis (collectively, the “Galanises”), and fly-by-night tribal financiers, Steven Haynes and Raycen Raines, the latter of whom was romantically involved with the Greenberg partner representing the issuer during the transaction.
2. The fraud, which was concealed from the bondholders until May of 2016, involved the use of bond proceeds to purchase an annuity contract with a fictious offshore entity, which is unheard of in legitimate municipal finance transactions. Only a fraction of the bond proceeds were paid to the issuer, while the majority of funds were instead wired to the offshore annuity. Not surprisingly, the annuity company turned out to be fake, allowing the Galanises and their friends to steal almost $40 million in retirement funds from a variety of public pension funds, including those serving public school teachers, sanitary workers, and in RHCT’s case, retired CTA employees and their dependents.
3. The Bonds have been the subject of criminal, SEC and civil litigation in various jurisdictions throughout the country. In its wake, several individuals have pleaded or been found guilty of criminal charges, and multiple investment companies have been forced out of business.
4. None of this would have occurred without the Defendants’ assistance. As more fully alleged herein, the Defendants–national law firms with supposedly sophisticated municipal finance practices–both served as bond counsel in the transaction, assisting not only their “clients,” but several other parties in carrying out what reasonably prudent lawyers would have recognized to be an obvious financial crime.
5. In addition to preparing transaction documents and supervising the bond issuance. the Defendants authored misleading opinion letters containing statements inconsistent with facts of which they were aware, and which failed to disclose material facts that would have prevented the transaction from closing. Through their opinion letters, the Defendants gave the transaction the appearance of legitimacy necessary for the Bonds to issue. Defendants received hundreds of thousands of dollars in stolen retirement funds as payment for their assistance with the issuance.
6. Through their conduct, and in disregard of the duties they owed foreseeable victims like the bondholders, the Defendants directly and proximately caused RHCT in excess of $6,000,000 in losses, which RHCT seeks to recover in this case.
Another excerpt detailing what appears to be efforts by the tribe to stop the alleged scheme:
64. However, instead, on June 24, 2014, the OST’s Tribal Council passed a resolution stripping Raines of authority to act with respect to tribal economic development matters, including “Tribal Economic Development (TED) Bonds,” but also “any other economic development projects.” (Exhibit C, June 24, 2014 OST Resolution.) The resolution specifically noted that Raines had exerted undue influence over OST’s then-president to gain support for economic development projects.
65. Raines served as WLCC’s primary business representative and contact for the Wakpamni bond transaction. However, the tribal resolution stripping Raines of authority over tribal economic development matters was never disclosed to the bondholders or the Indenture trustee, U.S. Bank, by Greenberg or Dilworth during the transaction.