The trickiest cases, like the mystery involving insolvent software company AremisSoft, find their way to Joseph LaSala’s desk
Published in 2010 New Jersey Super Lawyers magazine on March 22, 2010
Joseph LaSala couldn’t believe what he was seeing, or to be more exact, what he wasn’t seeing. In 2002, he was court-appointed to serve as the liquidating trustee of a U.K.-based software company called AremisSoft. It was run by two flashy entrepreneurs from Cyprus, Roya Poyiadjis and Lycourgos Kyprianou. They claimed, among other things, that they had a contract to automate Bulgaria’s health care system, were running offices all over the world, employed 535 people, and had hundreds of millions of dollars in assets between the two of them. They were lying.
“There certainly wasn’t one-tenth of what they alleged to have been there,” he says. “People got hurt.”
Trouble is, by the time he got involved, Poyiadjis and Kyprianou had declared bankruptcy, sold their stocks and fled, and Cyprus didn’t have an extradition treaty with the U.S. The upshot: investors were out an estimated $400 million, with their money scattered across the globe. But that didn’t deter LaSala. He’s always liked a challenge.
Joining him was New York lawyer Hal Hirsch, chairman of global recovery at Greenberg Traurig, who had been appointed by a judge to represent the trust. “When I met LaSala, I realized he was exceptionally personable, exceptionally bright, a quick read, and ready to roll up his sleeves and go to work,” Hirsch says
And there was a lot of work to be done. “We were sitting around saying, ‘OK, the people were defrauded out of hundreds of millions of dollars. How are we going to find it, and how are we going to maximize the distribution to the shareholders?’” LaSala says.
There were several challenges. For starters, the field was crowded. The Cypriots left such a mess in their wake that no fewer than seven parties were scrambling to recover money. LaSala and Hirsch’s first order of business was forming a first-of-its-kind alliance of the U.S. groups, which included the SEC and Justice Department. Hirsch explains: “Wherever assets are located anywhere in the world, the U.S. government will work with the civil litigants so that they’re turned over to the trust. The U.S. government shares confidential information … and has brought actions [in conjunction with] the trust.”
With their partnerships in place, LaSala and Hirsch moved forward. What they found next was stunning in that it was a whole lot of nothing. Instead of the bustling offices and hundreds of employees the company had claimed, they found empty rooms and ginned-up ledgers. In order to pump up the value of their stocks, Poyiadjis and Kyprianou had fabricated what they were owed and claimed bigger contracts than they really had. And to avoid having to pay out the money they’d supposedly made, they said they’d invested the funds into new companies. Fictional new companies. It outraged LaSala. He was going to find that money even if he had to fly around the world to get it. Which he did.
“I’ve been to London several times, Cyprus several times, Vienna, Rome, Athens, Amsterdam, Washington, all on this case, meeting with different principals and different parties,” LaSala says.
It’s not like he didn’t have other clients to tend to. His litigation practice was thriving and diverse and his time sheets were never blank. But this AremisSoft case particularly intrigued him. There weren’t easy answers. That’s what he liked about it. LaSala didn’t get into law because it was easy.
He got into it as a promise to his father. His dad was a machinist, his mother a housewife who was forced to get various jobs as a hat-check girl, bridal-shop assistant and waitress when her husband was stricken with a prolonged illness. With three kids to raise in the Newark of the 1950s and 1960s, they had enough to contend with just making it through to tomorrow. Before passing away in 1969 during aortic heart-replacement surgery, LaSala’s father made a request of his son.
“I’d graduated from college when I was 20, and he was sick for a while, but he was big on education and thought I should give law school a shot,” LaSala says. “I promised I would. It wasn’t a lifelong ambition.”
After getting his diploma from Saint Peter’s College in Jersey City, he enrolled at Seton Hall University School of Law and discovered that he was made for the law. He finished up in 1972, clerked for a U.S. district judge and quickly rose up the ranks of New Jersey litigators. He thrived on complicated litigation. People really started taking notice of him when he showed that he could master tricky asbestos litigation. He took up the cases from the defense side and found it invigorating. “Generally people don’t understand the complexity of what goes into defending [asbestos cases],” he says. “We’re talking about the potential exposure people may have had, what is the disease, how did it manifest, what part of the lung is it? People generally look at it as, ‘It’s an asbestos case, there’s liability, and somebody has to pay.”
In other words, it’s not that simple. It never is. It certainly wasn’t with AremisSoft.
One of the biggest stumbling blocks in AremisSoft was convincing Austrian authorities to go after the records in Vienna. After months of dogged negotiations, the local prosecutor finally caved and sent police in riot gear busting down the doors to the banker’s office and home. They found the electronic data hidden in a closet in the home of the suspect’s daughter’s apartment.
Then in 2005 Poyiadjis came in from the cold. The fugitive CEO was tired of life on the run and wanted to return to his wife, who was living in America. He agreed to work with LaSala’s team and pay back $200 million he’d made from illegally selling his stock—much of it held in a bank on the Isle of Man, which LaSala had learned about and froze in the nick of time. Defrauded shareholders got back nearly 40 cents on the dollar—one of the largest recoveries the SEC has ever recorded.
Of course, the case isn’t over. Kyprianou is still at large in Cyprus with the case against him glacially wending its way through the courts there, and some $200 million is still unaccounted for. LaSala continues to dig.
“It’s been a completely unique experience, going from country to country looking for the money, dealing with someone who can’t be extradited,” LaSala says. “I can’t say we’ll recover another penny at this point, but we’re sure trying. Eight years later, optimism turns to hope.”