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Top Tampa lawyer Barry Cohen owes $35 million in loans

Barry Cohen is one of Tampa’s most high-profile lawyers.
Barry Cohen is one of Tampa’s most high-profile lawyers.
Published Apr. 6, 2014

TAMPA — Not much looks awry in lawyer Barry Cohen's downtown Tampa office lobby.

A coquettish statue of Lady Justice still bares her thigh at the front door to visitors, like a blindfolded starlet unexpectedly handed a sword and scale. On the walls hang framed front pages chronicling four decades of clients' not-guilty verdicts and multimillion-dollar settlements.

The decorations aptly reflect the achievements and style of Cohen, a silver-haired, silver-tongued 74-year-old known throughout Florida for his seeming inability to lose a big case. But recently disclosed legal and financial records suggest that some significant money problems lie beneath his well-buffed public image.

Documents filed late last month in federal court in Tampa, as well as court records and affidavits from New York and New Jersey, indicate Cohen owes out-of-state financial firms about $35 million.

The debts are mainly the result of high-interest loans Cohen has used for at least the past decade to fund his unusually expensive brand of high-stakes, contingent-fee litigation. One lender is suing him to recover its money.

Cohen acknowledged last week that he could have done a better job managing his firm's money in the past. The risky financial instruments that have helped float his practice were selected by his firm's business staff without his knowledge, he said.

"I got into this mess because I'm not really good at that type of stuff," Cohen said. "I'm a lawyer and not an administrator."

Signs of financial distress have dogged the Tampa Bay area's most prominent attorney before.

Some of his firm's top lawyers have departed in the last several years. In 2009, he brought on a business consultant to help put his firm's finances in order, and a beachside condo he owns fell into foreclosure for several months in 2011.

Cohen has dismissed past speculation about his money problems as the aspersions of envious competitors in the legal community. Last week he continued to downplay questions about his firm's solvency, saying he has plans to take care of the debts and expects the revenue from several large, ongoing cases to ease the money crunch over the next few years.

"It sounds big to the average person, but he's a guy who deals in big money," said Elliott Buchman, former chief financial officer at Cohen's firm. "If I told you that Donald Trump owes $18 million, nobody would think a thing about it."

Cohen nevertheless acknowledged that he wasn't pleased with his current financial straits.

"I knew it wasn't going to put me under, but I didn't like it," he said. "It was a lot of money."

'We're going to the mat'

The son of a Jewish candy store owner from Brooklyn, Cohen moved to Tampa with his family as a teenager, and got his law degree at Mercer University in Georgia. Somewhere along the way, he picked up the generic country drawl that is the informal hallmark of a certain category of great American litigators.

At an age when some contemplate retirement, Cohen is still happily tussling with government and big business. Among his current clients are relatives of Ibragim Todashev, the Chechen shot to death in Orlando by an FBI agent investigating Tamerlan Tsarnaev, the alleged mastermind of the 2013 Boston Marathon bombings.

At ease chatting with Larry King or shouting down Nancy Grace on national television, Cohen doesn't turn up his nose at routine injustices: One of his current clients is a Hernando County man suing sheriff's deputies for alleged brutality.

Cohen said the $35 million he owes hasn't cast a shadow over his practice — in fact, he claimed not to know the extent of his debts until presented with a dollar figure by a reporter.

"I know this may sound vainglorious or impolitic, but I don't really know because I don't really care," he said, while confirming that he thinks the $35 million amount is accurate.

"My assets are going to pay back these lenders, and there will be plenty of money," Cohen said. "I'm going to continue to live the way I live, and help people the way I help them, and do what I love to do, and live life and practice law."

He speaks with less relish about the woman whose legal campaign has unveiled his firm's financial difficulties: Natalie Khawam, a former employee who left his firm after alleging that she was sexually harassed by one of Cohen's business consultants.

Khawam, a minor but recurrent actor on what passes for Tampa's celebrity news scene, is the twin sister of Jill Kelley, the Bayshore Boulevard socialite whose inadvertent disclosure of David Petraeus' extramarital affair with another woman led to the former CIA director's downfall. Kelley said she was stalked by the woman later determined to be Petraeus' mistress.

On March 28, an attorney for Khawam's bankruptcy trustee asked a federal judge to put a lien on Cohen's portion of a $22.3 million settlement paid by the biotech firm Genzyme. Khawam had introduced Cohen to the whistleblowers whose complaints began the case, though she left the firm before the litigation was complete.

The motion, which asserts Khawam is due at least $450,000, stated that Cohen "is or will soon become insolvent," citing lawsuits in New Jersey federal court and New York state court describing his debts. Attached was an affidavit from Khawam asserting she had been told by a co-worker in 2009 that "Cohen's law firm was underwater."

Cohen doesn't dispute some of the bleak financial realities exposed by Khawam's legal maneuvers, but he disputes her claim on a portion of his income — to put it mildly.

"It's a bulls--- case, and I'm not resolving it. I wouldn't resolve it for 10 cents," he said. "We're going to the mat."

Khawam did not return calls for this story. Michael Beltran, the lawyer who filed the recent motion on behalf of her bankruptcy trustee, said neither he nor Khawam would comment.

Loans on legal fees fill a legitimate need

The court documents illustrate a paradox: How could a lawyer famous for his track record of lucrative courtroom wins be so deep in debt?

One answer lies in the unorthodox sources to which Cohen's firm turned for cash. In high-stakes civil litigation — where years elapse and millions in expenses can pile up between judgments or settlements — firms that work for contingent fees often have to take out loans or invest their own money.

But for at least the past decade, Cohen has been taking advantage of a funding method that other lawyers say is particularly risky: "Selling" his anticipated legal fees, at sharply discounted rates, for ready cash. While useful for paying the bills during protracted lawsuits, the arrangement can potentially be as ruinous to lawyers as high-interest payday loans.

Such financial instruments have not always been advantageous for Cohen. RD Legal Funding, a New Jersey company that is suing Cohen to recover its money, asserts that one of its transactions involved giving Cohen $3 million in 2009 to "buy" $4.2 million in legal fees he expected to receive from litigation against WellCare, a health care company whose executives committed Medicaid fraud.

And that didn't include interest. In pleadings filed in New Jersey in December, RD Legal Funding claimed Cohen now owes $6.8 million for the $3 million originally advanced to him — part of $20.8 million the company asserts is due overall.

John Morgan, a wealthy Orlando trial lawyer, said this type of transaction serves a legitimate need — banks are loath to view a potential legal settlement as loan collateral — but can be "choking" for attorneys who overextend themselves.

"You get a lot of people who settle a case, and they don't make any money. They just turn their fee over to a finance company," Morgan said.

A New York firm, Counsel Financial, has also extended Cohen a line of credit for $17 million, about $2.6 million of which has been repaid, according to an affidavit prepared for the Tampa federal case by the company's president.

Executives at Counsel Financial and RD Legal Funding did not return calls for comment.

Cohen says he is working out plans to repay both lenders, an assertion supported by legal documents. Counsel Financial president Michael Callahan stated in a Tuesday affidavit that his company and Cohen's firm "have sustained an amicable relationship since inception of the loan and together worked towards the repayment thereof."

In a letter filed with the federal court in New Jersey on March 20, an attorney for RD Legal Funding said the company had "entered into negotiations" with Cohen about the debt.

"I know that we'll end up resolving it," Cohen said. "I know that I'm living a pretty damn good life."

He said he has tobacco cases in the pipeline to pay off Counsel Financial, and his payment from a client in a Connecticut criminal case will take care of the debt to RD Legal Funding.

Beyond that, he said, he has bigger lawsuits brewing that he can't talk about, revelations of malfeasance that the Cohen brand of courtroom alchemy will transform into dollar figures with seven or more zeros.

With so much on the horizon, what's $35 million?

"It's like Monopoly money," Cohen said.

News researcher John Martin contributed to this report. Peter Jamison can be reached at pjamison@tampabay.com or (813) 226-3337. Follow him on Twitter @petejamison.

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