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Law firm Kirton McConkie sued over advice exclient says led to SEC probe

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Sept 8 (Reuters) - A Louisiana investment company has sued Utah law firm Kirton McConkie and one of its partners over claims that the company relied on the lawyer's opinion letters to sell stock but wound up the target of a U.S. Securities and Exchange Commission complaint after the sale. In the lawsuit filed on Thursday in Louisiana federal court, Western Bankers Capital says it hired Kirton McConkie partner Charles Parkinson Lloyd in 2017 to assist in its sale of 26 million shares of Wyoming company Dolat Ventures. Lloyd, who the lawsuit alleges was tasked with determining whether the sale of the shares could be compliant with SEC rules, authored letters that Western Bankers said it relied on to make the transaction. A spokesperson for 150-lawyer Kirton McConkie confirmed that Lloyd is a partner at the Salt Lake City-based firm but declined to comment on pending litigation. Neither Lloyd nor an attorney for Western Bankers immediately responded to requests for comment about the lawsuit. Ultimately both Lloyd and Western Bankers faced SEC complaints over the transaction, which the SEC said involved the improper sale of unregistered securities. In 2021, Lloyd settled SEC claims that he ignored red flags in the transaction documents that signaled the sale was illegal, according to SEC documents. A separate SEC complaint accusing Western Bankers of illegally offering unregistered securities is still pending in New York federal court, records show. Western Bankers' lawsuit claims that prior to the 2017 transaction, Lloyd provided it with an opinion letter that stated the shares were "freely tradable" and could be sold on the open market without restriction. Western Bankers said it shared the letter with a broker and closed the deal, ending its communication with Lloyd. The $5.9 million transaction came under investigation by the SEC in 2018, according to court documents. In 2021, Lloyd consented to the SEC's claims and agreed to turn over the $3,150 in fees he earned from his work on the Dolat deal and pay a $40,000 civil monetary penalty, according to SEC documents. Lloyd didn't tell Western Bankers about the SEC's complaint against him, and he provided regulators with documents that were likely protected by attorney-client privilege, the lawsuit claims. The same day Lloyd reached his settlement with the SEC, the regulator filed a complaint against Western Bankers and several people involved in the Dolat transaction, claiming it was part of a fraudulent scheme to convert company debt into shares that could be sold to the public. Representatives for the SEC declined to comment on the lawsuit. The case is Western Bankers Capital Inc v. Kirton McConkie PC et al, case no. 2:23-cv-05124 in the U.S. District Court for the Eastern District of Louisiana. For Western Bankers: Andrew Kramer of Andrew L. Kramer

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