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New Attorney Learns the Lessons of Being a Front for Debt Relief The Hard Way

I just discovered the misfortunes of Daniel S. Rufty, an attorney in North Carolina that was brought before the North Carolina State Bar for his debt relief business.

Rufty was a brand new attorney hired to represent an out-of-state group of lawyers for their debt settlement business. Things did not end well for Rufty but it might be a good learning experience for any attorney thinking of getting involved with fronting a debt relief company.

Just saying.

Be sure to read the update where Rufty sued Jason Blust.

Here is what the Consent Order of Discipline says:

6. “Jason Blust (“Blust”) is an Illinois attorney who has started or helped start various law firms (“Blust Law Firms”) in multiple states with the goal of convincing debtors struggling to pay their bills to hire one of the Blust Law Firms to negotiate reduced payoff amounts with the debtor’s creditors.

7. The Blust Law Firms are engaged in the unauthorized practice of law and debt adjusting in multiple states.

8. Since the Blust Law Firms were all established by Blust, they largely work with the same entities and individuals: Jason Blust, Kelly Seibert, Lauren Montanile, Strategic Financial Solutions, Global Client Solutio11s, Lit Def Strategies, Tom Rogus, Patrick Wilczak, and Ryan Sasson, among others.

9. Carolina Legal Services (“CLS”) was one of the Blust Law Firms.

10. Jason Blust, Kelly Seibert, Lauren Montanile, Strategic Financial Solutions, Global Client Solutions, “Lit Def Strategies,” Tom Rogus, Patrick Wilczak, and Ryan Sasson all provided services to CLS or CLS clients at Blust’s direction and with Defendant’s Knowledge.

11. Blust started CLS, decided how CLS would operate, hired its North Carolina attorney members, and established CLS’s relationships with Kelly Seibel’t, Lauren Montanile, Strategic Financial Solutions, Global Client Solutions, “Lit Def Strategies,” Tom Rogus, Patrick Wilczak, and Ryan Sasson, among others.”

12. Blust hired Defendant to provide legal services to clients of CLS in 2018, the same year Defendant graduated from Charlotte School of Law.

13. At the time Blust hired Defendant, Defendant had limited experience in the practice of law.

14. While Blust arranged for Defendant to be the majority owner of CLS in name only, Blust arranged for 97% of the profits of CLS to be distributed to Blust and Kelly Seibert, another out-of-state attorney, as “consultant fees.”

15. Blust was in charge of the operations of CLS and regularly told Defendant what to do.

16. Thus, Defendant was working at the direction of Blust and, accordingly, was engaged in the practice of debt adjusting while employed by a debt adjuster.

Unsupervised Nonlawyers Providing Legal Services

17. The CLS website indicated: “Carolina Legal Services practices under a trade name and therefore in states where required, utilizes the services of and identifies the duly licensed lawyers in those states. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”

18. CLS advertised that it was able to provide legal services to North Carolina residents.

19. CLS sent fliers in the mail regarding CLS and the legal services CLS provided and offered to provide to North Carolina residents.

20. In its advertising and marketing communications, CLS specifically targeted North Carolina consumers who were in debt with one or more creditors.

21. CLS held out in its advertising to North Carolina consumers that it was able to help them negotiate with their creditors reduced pay-off amounts for their debts.

22. North Carolina consumers who responded to CLS’s advertising through the CLS website or via the CLS toll-free telephone line discussed their debt and legal issues with nonlawyers employed by Strategic Financial Solutions and located in offices in New York.

23. Blust, Ryan Sasson, and others at Strategic Financial Solutions were in charge of the nonlawyers at Strategic Financial Solutions in New York and regularly told them what to do and how to handle cases,

24. The nonlawyers at Strategic Financial Solutions enrolled North Carolina consumers with CLS, to be represented by Defendant, without Defendant’s involvement.

25. At the time of enrollment, and before Defendant was involved in the representation, the nonlawyers at Strategic Financial Solutions advised the North Carolina consumers to stop paying their creditors.

26. By advising Defendant’s CLS clients to stop paying their creditors, the nonlawyers at Strategic Financial Solutions provided the clients with legal advice.

27. After North Carolina consumers enrolled in the CLS program and became Defendant’s CLS clients, the nonlawyers at Strategic Financial Solutions in New York assigned a local nonlawyer notary to go to the clients’ homes, alone and unsupervised by Defendant or any other lawyer, to walk the clients through the process of signing contracts with CLS and Global Client Solutions, LLC and notarize the contracts.

28. The nonlawyer notaries also helped the clients execute an agreement that allowed CLS to automatically draft payments from the clients’ funds into CLS’s accounts.

29. During these meetings in the clients’ homes, the nonlawyer notaries answered the clients’ questions about the legal services CLS would provide.

30. Defendant did not hire these nonlawyer notaries.

31. Defendant did not determine how these nonlawyer notaries would be paid.

32. These nonlawyer notaries did not report to Defendant.

33. Defendant never spoke with nor met many of these nonlawyer notaries,

34. Once the clients enrolled in the CLS program, the nonlawyers employed by Strategic Financial Solutions in New York answered the clients’ questions throughout the clients’ relationship with CLS.

35. These nonlawyers served as Defendant’s assistants during his representation of CLS clients.

36. Defendant did not hire these nonlawyers.

37. Defendant did not determine how these nonlawyers would be paid.

38. These nonlawyers did not report to Defendant.

39. Defendant never spoke with nor met many of these nonlawyers.

40. Defendant was. not a party to the telephone calls these nonlawyers had with his clients.

41. Defendant did not review many of the communications these nonlawyers had with his clients or with others on behalf of his clients.

42. These nonlawyers worked for numerous Blust Law Firms.

43. These nonlawyers answered questions posed by Defendant’s CLS clients throughout CLS’s representation of the clients, with no involvement of Defendant, even when his CLS clients specifically asked to speak with a lawyer.

44. Defendant did not adequately supervise these nonlawyers when they answered his CLS clients’ questions about their cases, debts, or legal situations.

45. These nonlawyers provided legal advice to Defendant’s CLS clients about how to handle their legal situations, when and how to file pleadings in some cases, and when and to what extent to stop paying their bills.

46. Defendant did not adequately supervise his nonlawyer assistants when they provided legal advice to his CLS clients.

47. Defendant permitted his nonlawyer assistants to provide such legal advice to his CLS clients.

48. These nonlawyers negotiated, on behalf of most of his CLS clients, the resolution of debts that were subject to then-pending litigation.

49. Defendant did not adequately supervise his nonlawyer assistants when they negotiated the resolution of debts that were subject to then-pending litigation.

50. Defendant permitted these nonlawyers to negotiate the resolution of his CLS clients’ litigation, which is a legal service in North Carolina.

Misrepresentations to Clients

51. At Blust’s direction and with Defendant’s knowledge, Defendant’s nonlawyer assistants and, on occasion, Defendant himself claimed to his CLS clients that a lawyer would always be available to answer the clients’ questions.

52. However, a lawyer was not always available to answer the clients’ questions; in fact, lawyers were rarely available to speak with clients of CLS.

53. The statements made by these nonlawyer assistants at Blust’s direction and with Defendant’s knowledge and those made by Defendant himself to North Carolina consumers that a lawyer would always be available to answer client questions were false.

54. At Blust’s direction and with Defendant’s knowledge, Defendant’s nonlawyer assistants and, on occasion, Defendant himself claimed to clients that all legal services provided by the firm would be provided by licensed attorneys.

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55. However, the legal services provided by the firm were often not provided by licensed attorneys.

56. The statements made by these nonlawyer assistants at Blust’s direction and with Defendant’s knowledge and those made by Defendant himself to North Carolina consumers that lawyers would be and were providing all of the legal services to the clients were false.

57. At Blust’s direction and with Defendant’s knowledge, Defendant’s nonlawyer assistants and, on occasion, Defendant himself claimed to clients that attorneys at CLS would negotiate the resolution of the clients’ debts with various creditors.

58. However, nonlawyers at CLS conducted most of the negotiations, including negotiations of the resolution of debts that were the subject of then-pending litigation in North Carolina.

59. The statements made by these nonlawyer assistants at Blust’s direction and with Defendant’s knowledge and those made by Defendant himself to North Carolina consumers that lawyers would be and were negotiating the clients’ debts on behalf of the clients were false.

Entrusted Funds

60. In. order to enroll in the CLS program, all clients were required to establish automatically drafted payments into an account with Global Client Solutions, LLC, an online banking institution.

61. Global Client Solutions advertises itself as an “independent, third-party payment processor for debt settlement companies and their consumers.”

62. Global Client Solutions specializes in holding debt-settlement accounts wherein consumers’ funds are automatically deposited each month, a portion is set aside for the settlement of debts, and a portion is set aside as a fee to the debt-settlement company.

63. Nonlawyers helped Defendant’s CLS clients set up these accounts with Global Client Solutions before Defendant was involved in the representation and without Defendant’s supervision,

64. Nonlawyers determined the monthly payment amounts drafted into the clients’ Global Client Solutions accounts before Defendant was involved in the representation and without Defendant’s supervision,

65. After the clients’ funds were drafted into the clients’ Global Client Solutions accounts, CLS would regularly draft funds from those client accounts into CLS bank accounts, none of which were trust accounts and none of which were “eligible banks” pursuant to 27N.C.A.C. ID, § .1316(b).

66. With Defendant’s knowledge and at Blust’s direction and under Blust’s control, the clients’ funds that had been deposited into the CLS bank accounts were then disbursed to pay (a) Defendant, (b) the nonlawyers at Strategic Financial Solutions, (c) the nonlawyers at Lit Def Strategies, (d) filing fees on behalf of CLS clients, and (e) Blust’s own consulting fees, among others.

67. With Defendant’s knowledge and consent and at Blust’s direction, CLS paid at least some of the funds drafted from clients’ Global Clients Solutions accounts to the nonlawyers at Strategic Financial Solutions and the nonlawyers at Lit Def Strategies for providing legal services to Defendant’s CLS clients.

68. With Defendant’s knowledge and consent and at Blust’s direction, at least some of the funds there were kept in the CLS bank accounts were later paid to courts in North Carolina for filing fees on behalf of the clients.

69. Thus, a portion of the funds Defendant’s CLS clients paid to CLS were entrusted funds.

70. Defendant failed to deposit or maintain these entrusted funds in a trust account.

71. Defendant did not supervise the handling of any of the entrusted fluids paid by his clients to CLS.

72. Defendant did not maintain any of the entrusted funds paid by his clients to CLS in accordance with the requirements of Rule of Professional Conduct L15 et. seq.

Limiting His Clients’ Right to Discharge Him

73. Some of Defendant’s CLS clients paid money to CLS for legal services and wanted to quit the program or fire CLS before CLS provided any legal services but were told by nonlawyers at CLS that if they did quit, none of the fees they had paid theretofore would be refunded.

74. Some of Defendant’s CLS clients paid money to CLS for legal services but quit the program or fired CLS prior to receiving any legal services from CLS or Defendant but did not receive any refund of the entrusted funds they had paid to CLS, notwithstanding the fact that the clients had not received any legal services from CLS.

Lack of Communication

75. Defendant rarely spoke with many of his CLS clients and failed to keep them updated about the status of their cases.

76. Defendant failed to speak with many of his CLS clients to determine the goals of the representation.

77. Many of Defendant’s CLS clients regularly called the law firm’s number, which was answered by nonlawyers employed by Strategic Financial Solutions in New York who were not supervised by Defendant, and asked the nonlawyers at CLS to put them in touch with their lawyer, but the nonlawyers at CLS refused to put these clients in touch with Defendant.

78. At least some of Defendant’s CLS clients had never heard of or spoken with Defendant.

79. Many of Defendant’s CLS clients did not have Defendant’s contact information.

80. When Defendant’s CLS clients were sued by creditors for failure to pay their debts, it was Defendant’s professional obligation to provide legal representation for those clients in North Carolina courts, including filing responsive pleadings and appearing in court on their behalf.

81. However, Defendant routinely failed to communicate with his CLS clients about their ongoing litigation, their goals regarding the litigation, and how the clients wanted to proceed.

82. Due to Defendant’s total abdication of his responsibility to communicate with his CLS clients, many clients learned for the first time about Defendant’s failure to file responsive pleadings or appear in court on their behalf when they received default judgments reflecting that no one had answered the complaint or appeared in court on their behalf.

Unmeritorious Claims and Lack of Diligence

83. On the occasions when Defendant did file responsive pleadings on behalf of his clients, he included claims and assertions in the pleadings that had no basis in law or fact,

84. Defendant was alerted to the baselessness of these claims and assertions on more than one occasion but nonetheless continued to include them in pleadings.

85. Defendant failed to appear in court several times when some of his CLS clients’ cases were calendared for hearing.

86. Defendant failed to appear in arbitrations when some of his CLS clients’ cases were scheduled for arbitration,

False Statements to Grievance Committee

87. The Grievance Committee of the State Bar sent Defendant a Letter of Notice and Substance of Grievance, pursuant to 27N.C.A.C. IB, § .0107(2), informing Defendant of the grievance allegations against him and requiring his response to the allegations.

88. Defendant responded to the Letter of Notice in a signed writing on 13 January 2020.

89. In his signed response to the Letter of Notice, Defendant represented that he was supervising the nonlawyers assisting him at CLS.

90. Defendant’s representation to the Grievance Committee that he was supervising the nonlawyers assisting him at CLS was materially false.

91. In his signed response to the Letter of Notice, Defendant represented that he was always available to his CLS clients to answer questions: “The Firm’s North Carolina attorney- members are available to provide legal advice to North Carolina clients or answer questions they may have at all times.”

92. Defendant’s representation to the Grievance Committee that he was always available to his CLS clients to answer questions was materially false.

93. In his signed response to the Letter of Notice, Defendant represented that his CLS clients’ payments for future legal services and future filing fees were not entrusted funds.

94. Defendant’s representation to the Grievance Committee that his CLS clients’ payments for future legal services and future filing fees were not entrusted funds was materially false.

95. In his signed response to the Letter of Notice, Defendant represented that the nonlawyers at CLS were not providing his CLS clients with legal services.

96. Defendant’s representation to the Grievance Committee that the nonlawyers at CLS were not providing his CLS clients with legal services was materially false.

CONCLUSIONS OF LAW

1. All parties are properly before the Hearing Panel and the Panel has jurisdiction over Defendant, Daniel S, Rutty, and the subject matter of this proceeding.

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2. Defendant was properly served with the summons and complaint in this matter.

3. Defendant’s conduct, as set forth in the Findings of Fact above, constitutes grounds for discipline pursuant to N.C. Gen. Stat. § 84-28(b)(3) in that Defendant made knowing misrepresentations of facts or circumstances surrounding a complaint, allegation or charge of misconduct to the State Bar and pursuant to N.C. Gen. Stat § 84-28(b)(2) in that Defendant violated the Rules of Professional Conduct as follows:

a) By permitting nonlawyers to provide legal services to North Carolina residents, thereby aiding others in the unauthorized practice of law, which is, pursuant to N.C. Gen, Stat, § 84-8, a criminal act in North Carolina, Defendant engaged in a criminal act that reflects adversely on his fitness as a lawyer in other respects, in violation of Rule 8.4(b) and assisted another person in the unauthorized practice of law, in violation of Rule 5.5(f);

b) By falsely claiming to his CLS clients that the legal services they purchased from CLS would be provided by North Carolina attorneys when, in fact, the legal services were provided by nonlawyers, Defendant made false or misleading statements about his services in violation of Rule 7.1(a) and engaged in conduct involving dishonesty or misrepresentation, in violation of Rule 8.4(c);

c) By allowing a portion of the fees collected by CLS from North Carolina consumers to be paid to nonlawyers engaged in the unauthorized practice of law, Defendant collected an illegal or excessive fee, in violation of Rule 1.5(a);

d) By aiding CLS in debt adjusting, which is, pursuant to N.C. Gen. Stat. § 14-424, a criminal act in North Carolina, Defendant engaged in a criminal act that reflects adversely on his honesty, trustworthiness, or fitness as a lawyer in other respects, in violation of Rule 8.4(b);

e) By failing to supervise nonlawyer employees of CLS and allowing them to provide legal services and advice to clients, thereby engaging in the unauthorized practice of law, Defendant failed to take reasonable efforts to ensure that his nonlawyer assistants were acting in accordance with Defendant’s professional obligations, in violation of Rule 5.3(a);

f) By failing to communicate with his CLS clients prior to their retaining CLS or during the representation when they had questions, Defendant failed to reasonably consult with his clients about the means by which the clients’ objectives would be accomplished, in violation of Rule 1.4(a)(2), failed to keep the client informed about the status of the matter, in violation of Rule 1.4(a)(3), failed to promptly comply with reasonable requests for information, in violation of Rule 1.4(a)(4), and failed to explain a matter to the extent reasonably necessary to permit the clients to make informed decisions regarding the representation, in violation of Rule 1.4(b);

g) By making numerous materially false representations to the Grievance Committee in his response to the Letter of Notice, Defendant knowingly made false statements of material fact in a disciplinary matter, in violation of Rule 8.1(a) and engaged in conduct involving dishonesty, fraud, deceit, or misrepresentation, in violation of Rule 8.4(c);

h) By failing to appear at his CLS clients’ hearings and arbitrations and failing to file responsive pleadings on his clients’ behalf, Defendant failed to represent his clients with diligence, in violation of Rule 1.3 and engaged in conduct prejudicial to the administration of justice, in violation of Rule 8.4(d);

i) By allowing his nonlawyer assistants at CLS to tell his clients that if they withdrew from the representation the fees that they had paid to CLS for future legal services would not be refunded, Defendant attempted to limit the clients’ absolute right to discharge him, in violation of Rule 1.16(a)(3) and made misrepresentations about his fees, the services he would provide, and the clients’ rights to terminate the representation, in violation of Rule 7.1(a) and Rule 8.4(c);

j) By not supervising the handling of entrusted funds paid by his North Carolina clients to CLS, Defendant failed to adequately supervise his assistants – employees of CLS – and their handling of entrusted funds, in violation of Rule 5.3(b)

k) By failing to deposit his CLS clients’ entrusted funds into a trust account, Defendant violated Rule l,15-2(a) and (b); and

l) By failing to maintain his clients’ entrusted funds in accordance with the requirements of Rule 1.15 et. seq., Defendant failed to maintain funds as required by the Rules of Professional Conduct, in violation of Rule 1.15-2(a). Based on the foregoing Findings of Fact and Conclusions of Law and the consent of the parties, the Hearing Panel finds by clear, cogent and convincing evidence the following:

FINDINGS OF FACT REGARDING DISCIPLINE

1. Defendant made multiple misrepresentations to his clients and the State Bar.

2. Though Blust was controlling CLS and its operations, Defendant was aware of the harm being caused to his clients, but failed to take any action to end the firm’s unethical and illegal practices, thereby placing his own interests above the interests of his clients.

3. Members of the public posted complaints in various online forums about CLS’s predatory and illegal practices.

4. CLS’s predatory and illegal practices have undermined the confidence of many North Carolina consumers in the trustworthiness and honesty of lawyers.

5. Defendant’s failure to file pleadings or to appear in court on his clients’ behalf delayed and protracted the litigation of multiple cases across North Carolina, which foreseeably caused harm to the parties and the administration of justice.

6. Defendant’s failure to render basic legal services on behalf of many of his clients or to communicate with his clients about critical developments in the cases foreseeably caused significant harm to his clients and impaired the clients’ abilities to achieve the goals of the representations.

7. The clients CLS targeted and served were particularly vulnerable to scams due to their desperate financial situations.

8. By failing to respond to the Grievance Committee honestly, Defendant failed to participate in good faith in the legal profession’s self-regulation process.

9. During the grievance process, Defendant was being represented and advised by an attorney selected and paid for by Blust.

10. Once Defendant obtained independent counsel, he undertook steps to ensure that his false responses were corrected and expressed remorse for his prior false statements.

11. Defendant has no prior discipline.

12. At the time Defendant started working for CLS – and at the time of the disciplinary case against him – Defendant was inexperienced in the practice of law.

13. Defendant now acknowledges the harm he caused to his clients and the administration of justice and is remorseful for the same.

14. Defendant has completely shut down CLS and returned all files to the clients with a sincere apology for the harm he and CLS caused.

15. Defendant has agreed to cooperate with any and all investigations by any licensing, regulatory, or governmental agencies into the companies and individuals involved with CLS.

16. Of his own volition, Defendant has withdrawn one million dollars from the primary CLS bank account and deposited it into an irrevocable trust and consented to the appointment of a trustee to disburse these funds to North Carolina consumers who have been harmed by CLS.

You can read the full order, here.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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3 thoughts on “New Attorney Learns the Lessons of Being a Front for Debt Relief The Hard Way”

  1. As one of Mr. Rufty’s victims, to the tune of almost $10,000, the title of this article makes my skin crawl. He’s a self-serving predator, not a dupe who made a mistake. As for the trust fund he set up, it is being administered by a Raleigh law firm, and the victims haven’t seen a dime. We’ve been told repeatedly that there isn’t enough in the trust to fully compensate all of the victims. They continue to claim that it’s taking a long time to locate all of the victims due to bad contact information for his clients provided by Mr. Rufty. Hardly sounds like he’s cooperating or feels any remorse. People’s creditors have had no trouble finding and suing Mr. Rufty’s clients, myself included. Thankfully I’m in a program that’s doing what it’s supposed to, and they provided an attorney to settle. Others have not been so fortunate.

    We were first told to expect money from the trust fund “as late as October.” They meant October of 2021. We’re all still waiting.

    Reply
    • Still waiting as well. While I am only out around $2500, that is $2500 I paid to CLS and not towards my debts, as I was instructed to stop all payments to my accounts. The amount of interest and other fees I have incurred, as well as the overwhelming crash to my credit report due to 6 months of non-payment well total more than the $2500 I am owed. Haven’t heard a single sound since returning the questionnaire to the law firm appointed to handle the trust.

      Reply

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