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ORLANDO-New York-based Windels, Marx, Lane & Mittendorf is the first law firm sued in the alleged $214 million mortgage-backed securities fraud pulled off by the defunct Evergreen Security Ltd. which U.S. Bankruptcy Court Trustee Bill Cuthill alleges bilked 2,203 global investors over a 10-year period.

Officials at the law firm couldn’t be reached by GlobeSt.com at publication deadline. But lawyers familiar with the case tell GlobeSt.com the firm denies any wrongdoing and is preparing a court-filed response to the charges.

Evergreen’s scheme unraveled Jan. 1, 2001 when the securities firm voluntarily filed for protection from creditors under the U.S. Bankruptcy Code. Eighty firms and individuals have been sued to date in 12 separate civil lawsuits.

The newest suit filed in Orange County Circuit Court Aug. 9 charges the law firm with negligence. The suit alleges the firm knew or should have known that one of its lawyers, James P. Conroy of New York City, was part of Evergreen’s alleged Ponzi scheme that operated undetected from Downtown offices in the Capital Plaza I office building at 201 E. Pine St.

The suit alleges the law firm knew or should have known that Conroy was counseling Evergreen owner William J. Zylka when Zylka loaned himself $27.7 million from company funds between March and June, 2000. Zylka used purported mineral rights in the United States, Canada and other countries as collateral, court testimony shows.

But Zylka never intended to repay Evergreen for the loans and Conroy knew that, the suit alleges. The suit alleges Conroy and his firm should have known that Zylka’s claims to mineral rights in several countries were false.

Zylka pleaded guilty in spring 2001 in New York State Supreme Court to three counts of grand larceny and one count each of a scheme to defraud and conspiracy. He has been in jail for over a year, awaiting sentencing.

Conroy faces similar charges. His trial in New York in July ended in a mistrial. New York District Attorney Robert Morgenthau hasn’t announced a new trial date for Conroy.

Evergreen listed assets of $3 million and liabilities of $214 million when the firm filed for Chapter 11. The $214 million represented investors’ funds that the firm couldn’t account for, Evergreen said in its bankruptcy petition.

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