The Hammocks settled a lawsuit against the homeowners association’s former law firm that was accused of allowing an alleged multimillion-dollar fraud scheme at the south Miami-Dade County HOA.

Jauregui Law and principal Sabino Jauregui represented the Hammocks association starting in 2020, according to court filings. But the Coral Gables-based law firm actually worked against the HOA’s interests by pushing back against investigators’ subpoenas for financial and other association records, according to the suit the Hammocks receiver filed against Jauregui Law and Jauregui last year. The law firm also overlooked “clear conflicts of interests” by representing both the association and a former Hammocks board president in a criminal case accusing her of misappropriating HOA funds for personal expenses, the suit says.

The settlement with Jauregui Law and Jauregui marks the latest chapter in the saga of the Hammocks, the biggest HOA in South Florida. In November of 2022, police arrested four former board members over charges that they ran a fraud scheme using bogus vendors that did little to no work, and then diverted vendor payments to some of the ex-board members. Since the arrests, court-appointed receiver David Gersten has been overseeing the Hammocks’ affairs and investigating others who may have played a role in the alleged fraud.

Last year, Gersten filed four lawsuits in Miami-Dade Circuit Court on behalf of the Hammocks against several law firms and attorneys that represented the association during the time of the fraud.

The Jauregui law firm and its principal settled the case for $500,000, which will be paid by the law firm’s malpractice insurer, Florida Lawyers Mutual Insurance Company. The $500,000 amount represents the full tender of the policy limit and exceeds the $475,000 in legal fees Jauregui Law and its principal received from the association from 2019 to 2022, according to court filings.

Miami-Dade Circuit Court Judge Beatrice Butchko approved the settlement in October.

Sabino Jauregui and attorneys representing him and his firm didn’t immediately return a request for comment. The firm and its principal admitted no wrongdoing or liability under the settlement.

The Hammocks is home to 40 communities and over 6,500 residential units, consisting of single-family homes, condos and apartments. The HOA spans about 3,800 acres between Southwest 120th and 88th streets and between Southwest 147th and 162nd avenues in West Kendall. The criminally charged board members are Marglli Gallego, Myriam Rodgers, Yoleidis Lopez Garcia and Monica Isabel Ghilardi. Also charged are Gallego’s husband, Jose Gonzalez, who prosecutors say led some of the bogus vendors that did little to no work on the property, as well as Gallego’s cousin Kevin Leonardo Alzate. All have pleaded not guilty.

Although prosecutors originally outlined a $1 million-plus fraud, Gersten and a team of forensic accountants have been mining records and more recently said that the scheme was closer to $3 million.

Gersten’s suits against former Hammocks attorneys raise the question of the role and responsibility of HOAs’ legal counsel when fraud is suspected. In the four complaints Gersten filed last year against ex-Hammocks lawyers, he claims that in the very least the attorneys failed the association by unintentionally allowing the alleged fraud to take place. In the worst case scenario, attorneys may have knowingly played some sort of role in the alleged scheme.

In the Jauregui case, the law firm had a conflict of interest because it simultaneously represented the Hammocks association and Gallego in a 2021 criminal charge against her over misappropriating association funds, according to Gersten’s lawsuit.

Gallego was first arrested in 2021 on a grand theft charge alleging she misappropriated $60,000 of Hammocks funds. After the arrest, investigators started poking around and subpoenaed the HOA for its meeting minutes dating back to 2017, as well as contracts and invoices for vendors. Jauregui Law was part of a “campaign intended to delay and frustrate the investigation” by pushing back in court on the subpoenas, according to Gersten’s suit.