DALLAS -- A federal district court jury in Houston returned a verdict this week awarding $68 million in actual damages to nine mutual funds, an investor, and six private financing corporations in a Texas jail securities fraud and conspiracy case.
In the verdict issued late Wednesday, the jury found that the Keck, Mahin & Cate law finn conspired with the Houston jail contractor H.A. Lott Inc. and Houston jail developer N-Group Securities Inc. to fraudulently market bonds to build six private jails in rural Texas.
The verdict was returned after a six-week trial in federal District Court in Houston with Judge Simeon T. Lake presiding, and was one of the largest of its kind against a law firm in a securities case, attorneys for the plaintiffs said.
Another verdict was expected to returned by the live-man and threewoman jury either late yesterday or early today when jury members consider what punitive damages might be awarded in the securities case, plaintiffs attorneys at Gibbs & Bruns in Houston said.
The damage awards stem from a lawsuit that was filed in 1992, alleging that the project developer, bond attorneys, and others connected to the financings violated federal and state securities laws when they hiled to disclose material facts to investors.
In the deals, the underwriter, Drexel Burnham Lambert, and its counsel. Former Texas Gov. Mark White, an attorney in the Houston office of Keck, Mahin & Care, worked with N-Group and its principals Patrick Graham and Michael Graham and the contractor to market the revenue bonds.
The bonds were marketed in 1989 to mutual funds and investors, and the iails were built by the early 1990s. Five of the six remained vacant and were later sold at heavy losses to bondholders.