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Previous Employees of United Law Group Help Start Brookstone Law

Update 4-8-2011: Brookstone Law is involved in seeking consumers to join mass joinder cases and while this article talks boldly about Brrokstone Law I’ve also published others in which I’ve praised Vito Torchia, Jr. of Brookstone Law. Anyone reading this article and wanting to know more about the reality of the players in the mass joinder space should see Vito Torchia Jr. of Brookstone Law is My Hero Today for Laying Out the Mass Joinder History. Readers should also put the mass joinder market into context by reading articles I’ve written regarding Kramer & Kaslow and Mass Litigation Alliance.

A confidential tip arrived recently that asked me to look into Brookstone Law and mentioned they had an affiliation with some people who are or were involved in other areas of debt relief. Namely Jeremy Foti and Damian Kutzner.

I knew nothing about the company so I started looking around to see what I could find.

The biggest surprise to me in my examination of Brrokstone Law was the following statements from the bankruptcy trustee involved with United Law Group that preceded Brookstone Law:

The Trustee is informed, believes and therefore alleges that Brookstone is a corporation which was merely created by the [United Law Group]’s insider and COO, Damian Kutzner. The evidence indicates Brookstone was created for, among other things, to take control of the [United Law Group]’s [debt settlement] Business along with the Deposit Fund Account and the [United Law Group]’s Revenue Stream in furtherance of a scheme to hinder, delay and defraud the [United Law Group]’s creditors.

So Let’s Look at Brookstone Law

A stop at brookstone-law.com showed me they say they specialize in business & corporate, employment, entertainment, media, art, museum, finance, intellectual property, licensing, merchandising, real estate, and consumer credit law. What intrigued me is their speciality on consumer credit law which seems to basically sell credit repair services.

On their practice areas listing they mentioned consumer credit law last but on their video vault page they mention consumer credit law and real estate law first. Interesting.

In fact the real estate and credit sections are the only ones that contain videos. I guess the other sections are not video worthy yet.

Note the graphic above shows that Brookstone Law claims to have an A+ rating with the BBB. It is in fact not an A+ but an A rating. – Source. Slipping?

Peter Bylsma with Brookstone Law confirmed that Damian Kutzner affiliated with Brookstone Law as a “software development consultant” and James Foti was with the company. A James Foti is said to be the brother of Jeremy Foti (source) who I have written about before with debt settlement company Kirkland Green.

Interestingly, a web search could find no mention of Damian Kutzner previously being involved in software development. – Source. I did however find a reference to Kutzner being involved in a possible software/lead management company between 2004 to 2006. That was disclosed in his personal bankruptcy filing.

Damien Kutzner was the COO of United Law Group (ULG) a mortgage modification and debt settlement company that went bankrupt. ULG subleased space to Kutzner’s business Serious Pimp. – Source

In the United Law Group bankruptcy filing Brookstone Law is listed as an unsecured creditor owed $377,366.52 for “services rendered on behalf of clients.” – Source

Sean Rutledge, the founder of United Law Group was disbarred in late 2009. – Source. Not surprising when Rutledge, with United Law Group, allegedly sent emails to clients that said:

“All the above services have been provided. We don’t guarantee results. If your home is sold then so be it. We do our best and that’s all the law requires. Do me a favor the next time you ‘BLAST YOUR EMAIL’S IN MY FACE.[‘] READ THE CONTRACT YOU SIGNED. IT SAYS NO GURANTEES[sic]. IF THE BANK DENIES THE LOAN MOD THEN YOU LOSE. THAT’S LIFE. NO REFUNDS. YOU KNOW THAT BECAUSE YOU AGREED TO IT.

“Have a nice day.” – Source

— AND —

“Mr . Anthony:

I don’t like you. We are done. You will get a refund minus work done. Then we are going to sue you for breach of contract. You have caused serious emotional distress to our employees. I will be filing a TRO against you tomorrow.

You are a jerk, and a very stupid man. You tell the only people that can help you that we are your enemies, then so be it. I hope you have a lot of money saved up to defend yourselfs [sic] from the upcoming litigation I am filing against you.

Never email me again you loser.” – Source

It is reported that United Law Group was raided by by federal and local agencies in March of 2010.

The U.S. Postal Inspection service led the raid on the embattled loan modification firm, along with officials from the FBI, U.S. Immigrations and Customs Enforcement, the Orange County District Attorney’s office, the Special Inspector General for the Troubled Asset Relief Program and officers from the Newport Beach and Irvine Police Departments, Postal Inspector Renee Focht said. Investigators in their affidavit for a search warrant allege that the United Law Group is a company “permeated by fraud.” Source

Damian Kutzner is listed as owner of UnitedLawGroup.us as The Lawyers Agency, 2400 Main Street, Irvine, California 92614. There is no registered company named “The Lawyers Agency” that is registered in California although Kutzer says he is the owner of such a company. – Source

Vito Torchia, Jr – United Law Group and Brookstone Law

Peter Bylsma of Brookstone Law said, “Vito Torchia, Jr. is the managing director for the law firm and sole principal.”

Vito Torchia was identified as an attorney for United Law Group in a ULG press release.

“United Law Group is actively recruiting personnel to help its clients deal with fallout from the mortgage crisis,” said Vito Torchia, attorney for United Law Group. – Source

“United Law Group, the leading litigator of cases concerning abusive banking practices, breaches of contract and violations of state and federal laws of real estate litigation services, welcomed veteran attorneys Vito Torchia, Jr. and Jerold Gardner to the firm.” – Source

Serious Pimp

Damian Kutzner is also the owner of a company called Serious Pimp, Inc. which was “created by serial entrepreneur and business mogul, Damian Kutzner.” – Source

Kutzner and Serious Pimp came up in the bankruptcy documents of United Law Group.

Immediately upon my appointment, I secured all of the premises and the identifiable books, records and assets of the Debtor.

Serious Pimp purportedly is a subtenant of [United Law Group], although Serious Pimp has never actually paid rent, and presumably received rent credits from the [United Law Group]. Damien Kutzner is involved in both ULG and Serious Pimp and his salary in ULG was approximately $28,000 a month while the attorneys at ULG were making significantly less.

As soon as I was appointed I secured the premises but gave the ostensible tenants access to the property whenever they needed by providing them with cell phone numbers of the Trustee and of his agents. I continually provided the various parties access to the property.

I did this notwithstanding the fact that that I found internal documents in which it appeared that ULG may have been paying the accounts payable of Serious Pimp and the fact that ULG may have been paying for certain items from Serious Pimp and the fact that there were interconnections in excess between the two entities such that the assets and liabilities ofthe entities may have been comingled.Source

Damian Kutzner and the FTC

Kutzner seems to have a track record of being involved with companies in trouble. The FTC filed suit against Damian Kutzner in 2002 and then again in 2007.

The information below is from the 2002 case.

The FTC alleged that defendants used spam to deceptively obtained consumers’ sensitive financial information. According to the FTC’s complaint, since approximately December 2001, the defendants used spam that purports to be from various well-known financial institutions (e.g., Radian Bank, Prudential, and Fannie Mae). The spam contains a questionnaire seeking detailed personal financial information under the guise that providing such information would help consumers find a home mortgage. The defendants also allegedly forged e-mail headers – a technique known as “spoofing,” – so that any undeliverable messages went to e-mail addresses unaffiliated with the defendants. One unaffiliated third party was swamped with more than 30,000 bounce-back and angry “do not spam me” e-mails intended for the defendants.

The FTC’s complaint alleged that the defendants deceptively represented that the sender of the spam is a specific financial institution and that the email addresses of spam recipients will, upon request, be removed from any list of addresses to which future such solicitations will be sent. The FTC alleged that defendants violated the Gramm Leach Bliley Act by using false pretexts to obtain customer information of a financial institution, including mortgage amount, rate, and type. The FTC also alleged that the defendants’ practice of “spoofing” causes consumers’ email accounts to receive unwanted email messages, without consumers’ consent or authorization was unfair. – Source

The suit named GM Funding, Global Mortgage Funding, Damian Kutzner, Universal IT Solutions, and Anthony Tamraz. – Source

Kutzner’s other companies of Inforte Financial, Global Mortgage and U.S. Escrow were named in a second FTC action against Kutzner in 2007.

End of the Line for Financial Telemarketer Who Violated Do Not Call Rules

Court Order Imposes Five-Year Ban on Telemarketing to Consumers

A financial services telemarketer who allegedly violated several requirements of the Federal Trade Commission’s Do Not Call Rule – from calling hundreds of thousands of consumers on the National Do Not Call Registry to failing to transmit accurate caller ID information – has settled the government’s charges and is banned from telemarketing to consumers for five years.

In November 2007, as part of a multi-case crackdown on Do Not Call violators, the government charged Global Mortgage Funding, Inc. (Global Mortgage) and its owner, Damian Robert Kutzner, with unlawfully calling consumers on the Do Not Call Registry in an attempt to sell financial products, including mortgages and related financing services. The complaint also charged the defendants with violating the FTC’s Do Not Call Rule by failing to transmit accurate caller ID information, failing to pay fees required to access the Registry, and abandoning calls by not connecting consumers to a representative within two seconds after they answered the phone. Following a lengthy investigation by the FTC, the lawsuit was filed and litigated by the Department of Justice on the Commission’s behalf.

The agreed-upon court order announced today bans Kutzner and anyone working with him from participating in telemarketing to consumers, and from helping others involved in telemarketing to consumers, for five years. It also permanently bars Kutzner from violating the Telemarketing Sales Rule, as well as its Do Not Call provisions, which include calling consumers on the National Do Not Call Registry, failing to provide accurate caller ID information, calling consumers who have said they do not want to be called, and abandoning calls.

The order imposes a $6 million civil penalty against Kutzner and Global Mortgage, which has been suspended due to their inability to pay. Both defendants have filed for bankruptcy. The order also imposes reporting and record-keeping provisions to help monitor Kutzner’s compliance. Finally, the order ensures that Global Mortgage will not resume its operation or benefit from its past conduct.

Both Global Mortgage and Kutzner had a previous run-in with the FTC, which sued them in 2002 for allegedly sending “spoofed” e-mails that offered mortgages and purported to be from legitimate banks. Global and Kutzner signed a consent decree in 2003 in which they agreed to pay over $60,000 to resolve that litigation and accepted a court order prohibiting them from future “spoofing” and other misrepresentations.

The Commission vote authorizing the filing of the stipulated order was 4-0. The order was filed in the U.S. District Court for the Central District of California, and it was signed by the judge and entered by the court on July 17, 2009. The order settles the United States’ charges against Global Mortgage Funding, Inc., doing business as Global Realty, Inforte Financial, and U.S. Escrow; and Damian Robert Kutzner, individually and as an officer or director of Global Mortgage Funding, Inc.

Here is the 2009 stipulated judgment Kutzner signed in this matter.

Damian Kutzner and the California Corporations Commissioner

Damian Kutzner also had a run in with the California Corporations Commissioner in 2006 over Newport Beach Escrow.

The action by the Commissioner said:

On or about August 3, 2006, the Commissioner commenced a regulatory examination of the books and records of Newport. The August 2, 2006 Escrow Trial Balance obtained at the commencement of the examination disclosed that three escrows, including the fee account, had debit balances totaling $18,557.73. Additionally, a review of the most recent trust account reconciliation dated June 30, 2006 revealed thirty-five (35) adjusting items, some dating back to September 2005, resulting in an adjusted bank balance of negative $392,134.26.

On or about October 31, 2006, Newport provided the Commissioner with a copy of the September 30, 2006 trust account reconciliation and trial balance. Demands were made for the general account bank statements and reconciliations for the months of July, August and September 2006, but were not provided. The September 30, 2006 trust account reconciliation disclosed a trust account shortage of $25,624.22 that when added to the escrows showing a positive balance for which no funds exist ($760.10), results in a trust account shortage of at least $26,384.32.

Based upon the condition of the books and records as described above, the Commissioner had been unable to determine the exact extent of the shortage in the trust account beyond the $26,384.32 found to date. The Commissioner had made demands upon Newport to cure the trust account shortage found to date, but Newport failed to cure the trust account shortage until on or about November 9, 2006.

Newport discovered the misappropriation of trust funds by Steffani on or about April 24, 2006, but never reported it to the Commissioner as required by California Financial Code section 17414(c). Instead, the Commissioner learned that trust funds had possibly been misappropriated during the course of the August 2, 2006 regulatory examination.

Pursuant to California Financial Code section 17209(g), an application for an escrow agent’s license is required to contain a completed statement of identity and questionnaire (“SIQ”) for all individual stockholders, directors, officers, trustees, managers, and other persons participating in the escrow business. Two separate SIQ’s for Kutzner were filed in connection with the Newport application. Kutzner’s SIQ’s, dated December 18, 2003 and April 8, 2004, respectively, stated that Kutzner had never been a defendant in any civil action other a divorce, condemnation or personal injury action. Kutzner executed the SIQ’s under penalty of perjury that all of the information submitted in his SIQ’s was true and correct. The issuance of the escrow agent’s license was based upon all the information submitted with the application, including Kutzner SIQ’s.

Subsequent to the August 2, 2006 regulatory examination, the Commissioner learned that Kutzner had been a defendant in an action brought by the Federal Trade Commission (“FTC”) in or about November 2002 wherein Kutzner was alleged to have engaged in numerous false and deceptive practices in violation of Section 5(a) of the FTC Act and Section 521(a) of the Gramm- Leach-Bliley Act. The civil action resulted in a Stipulated Judgment and Order for Permanent Injunction against Kutzner on or about May 5, 2003.

Accordingly, the SIQ’s submitted by Kutzner in connection with the Newport application were false as Kutzner failed to disclose the FTC action, which had resulted in a final judgment against him only months prior to the first SIQ filed with the Commissioner.Source

And now Damian Kutzner is involved again with a company, Brookstone Law, that appears to be operating in the mortgage space with it’s rumored class action law suit against the government for wrongful home loans.

That’s Not All

In 2008 a company said to have been owned by Kutzner in California was sued for unsolicited marketing by the State of Indiana.

Indiana Attorney General Steve Carter has filed a lawsuit against two companies for making illegal sales calls in the form of pre-recorded calls and by live operators to Indiana citizens whose phone numbers are registered on the state’s Do Not Call list. North Carolina Attorney General Roy Cooper has secured an order forcing an Arizona marketer to make refunds to consumers.

In Indiana, Carter’s lawsuit charges United American Technology Inc. and Damian Kutzner, doing business as and Liberty Management Inc., with using an automated dialing machine and live operators to call more than 80 phone numbers.

“We will not tolerate the privacy rights of citizens and state law being ignored,” Carter said. “There are a variety of ways to make sales pitches to people in Indiana other than their private telephone line.”

The lawsuit against Damian Kutzner, doing business as Liberty Management, Inc. based out of California, claims that from May through October of 2007, the defendant made calls to Indiana citizens to solicit the sale of debt consolidation and satellite TV service.

The state also alleges that both defendants violated Indiana’s Do Not Call law by calling consumers whose phone numbers are registered on the list. – Source

According to the complaint provided to me by the State of Indiana, Damian Kutzner was sued individually and as Liberty Management, Inc. on October 9, 2008. – Source. This is even after the second FTC action against him that was for telemarketing issues.

On January 9, 2009 Kutzner entered into a Permanent Injunction with Indiana over this matter. Since the injunction is to be applied to an entity that is legally or beneficially owned, operated or controlled by Kutzner, it could then apply to Brookstone Law as well if the allegations of control are true.

The injunction calls for a penalty of $25,000 per violation under the agreement. – Source

Kutzner Goes Bankrupt and Sues His Own Lenders

On May 15, 2008 Damian Kutzner filed for Chapter 7 bankruptcy protection. – Source. What is unusual about this case is that it is still ongoing.

His case lists claims against him by Bryan Lucs & Ken Bailey, former business partners. It also lists pending legal cases against him by Stuart Shelly, Micelle Raleigh, Puget Sound Leasing, MMA Publications, Michael Lawrence Mudrinkh, Lyon Financial Services, Union Bank of California, The Best Service Co, and United States of America. – Source

Kutzner lists his business history: Global Mortgage Funding, Inc, Hand to Hand (Appraisal and Notary), Harlem Chase, LLC (NV Real Estate Business), Inforte Financial Corp (NV Mortgage Business), Lead Management System, LLC (Software), Liberty Management Group, Inc. (Debt Business), NCN, Inc. (ACH Servicing), Newport Beach Escrow, Scripts Development, Inc. (Real Estate), Serious Pimp, Inc. (Clothing), and U.S. Escrow, Inc. – Source

Kutzner filed suit against his own mortgage lenders in 2009 and claimed they violated the Home Ownership and Equity Protection Act (HOEPA). – Source

Scripts Development, Inc. owns a 42 foot racing boat named Serious Pimp. – Source

Even More Business Troubles

Harlem Chase property in Newport Beach is listed as $5,750 delinquent in payments as of May 19, 2008. – Source.

What is interesting is that Kutzner publicly claims to have also started a company called Integrated Legal Systems, “a company that provides applications to simplify the way law firms do business.” – Source. However I can find no information about that company.

To date he has not been granted a non-vacated discharge under his 2008 bankruptcy filing.

Kutzner was also named in a lawsuit against United Law Group, Sean Rutledge, Robert Buscho, Vito Torchia, Ruel Caneda, Richard Stinstrom, Jerold Gardner, Timothy pack, Andy Epstein, Nathaniel Adams, David Johnson, Thomas Neusom, Mark Fisher, Craig hughes, Julie Smith, Corvi Urling, Judy Contino, The Bergstrum Group, Kirkland Holdings, Thomas Duffy, Rene Ruiz. – Source

Vito Torchia, Jr and Brookstone Law, Sued by Trustee. Kutzner Said to be Behind Brookstone Law

On November 16, 2010 the trustee in the United Law Group bankruptcy, sued Brookstone Law, and Vito Torchia.

The suit says that ULG utilized the services of Morgan Drexen to provide the services necessary to carry out the ULG debt settlement program. Morgan Drexen is Identified as MDI and the Debtor in this suit is United Law Group. DSP stands for debt settlement program.

28. Sometime during the time period of late December of 2009 through February of 2010, the Debtor instructed MDI to transfer all of the funds in the Debtor’s three accounts to three similar accounts at the Bank, all in the name of Brookstone rather than the Debtor. During this same time period, the Debtor concurrently instructed MDI to modify the ACH transfer data transmitted by MDI to cause the incoming monthly DSP Client payments to be credited to the Brookstone general bank account rather than the Debtor’s general bank account as in the past.

29. Prior to December 29, 2009, the Debtor had over 500 DSP Clients.

30. The Trustee is informed, believes and therefore alleges that Brookstone is a corporation which was merely created by the Debtor’s insider and COO, Damian Kutzner. The evidence indicates Brookstone was created for, among other things, to take control of the Debtor’s DSP Business along with the Deposit Fund Account and the Debtor’s Revenue Stream in furtherance of a scheme to hinder, delay and defraud the Debtor’s creditors.

31. On or about December 29, 2009, the Debtor served the DSP Clients with a letter indicating that the DSP Client’s files were being assigned by the Debtor to Brookstone (“Attempted Assigmnent”).

32. The Trustee is informed, believes and therefore alleges that on or about January or February of 2010, the Debtor instructed MDI to change the depository bank for the DSP Clients and the Debtor’ s Deposit Fund Account, from the Debtor’ s depository bank to bank accounts in the name of Brookstone.

33. The Trustee is informed, believes and therefore alleges that the Debtor transferred the Debtor’s Deposit Fund in excess of $200,000.00 by Wire transfer from the Debtor’s Deposit Fund Account to Brookstone in December of 2009 and/or January of 2010.

34. The Trustee is informed, believes and therefore alleges that the Debtor transferred control of the Debtor’s Revenue Stream to Brookstone on the same date.

35. The Trustee is informed, believes and therefore alleges that Brookstone is presently holding cash on hand generated from the DSP Clients in a significant sum in three Bank of America bank accotmts, account ntunbers 24399-72748, 1664262858, and 24391-72747. (“Deposit Ftmd Account”).

36. In this manner Brookstone effectively redirected the Debtor’s DSP Business and the Deposit Fund Account to Brookstone (“Transfer of the Deposit Fund Account”).

37. The Trustee is further informed, believes and therefore alleges that as a result of the Debtor’s instructions to MDI, given during the time period of December 2009 through February of 2010, the automatic withdrawals from the personal accounts of the DSP Clients were no longer deposited into the Debtor’s bank accounts and that these funds were thereafter deposited into Brookstone’s bank accotmts.

38. In this manner Brookstone effectively redirected the Debtor’s DSP Business and the Debtor’s Revenue Stream away from the Debtor to Brookstone (“Transfer ofthe Debtor’s Revenue Stream”).

39. Transfer of the Deposit Fund Account and the Transfer of the Debtor’s Revenue Stream are together referred to as the “Transfers”.

40. The Trustee is further informed, believes and therefore alleges that the automatic Withdrawals from the DSP Clients’ accounts continue to be deposited into the accounts of Brookstone.

41. This change in the account into which the DSP Clients’ funds were deposited was effectuated Without the written consent of the DSP Clients in violation of the Client Agreements.

42. The Trustee is unaware of any evidence indicating that the DSP Clients notified the Debtor or the Debtor’s depository bank in writing of a change to their Client Agreements so that the DSP Client’s monthly Withdrawals were to be deposited into Brookstone’s bank accounts instead of continuing to be deposited into the Debtor’s accounts.

43. The lack of a writing from the DSP Clients notifying the Debtor and the Bank that the automatic Withdrawals would not be made into the Debtor’s accounts is a breach of the DSP Clients’ Agreement for Automated Electronic Funds Transfer.

44. The Trustee is informed and believes and therefore alleges that the value of the Debtor Revenue Stream is as much as approximately $1 Million.

45. The Trustee is informed, believes and therefore alleges that Brookstone is presently holding cash on hand generated from Debtor’s DSP practice in three bank accounts located at the Bank (“Deposit Fund Account”).

46. The Trustee is informed, believes and therefore alleges that presently the Deposit Fund Account is a significant sum of cash. – Source

The following letter was sent to ULG clients by the trustee. – Source

Brookstone Law Attorneys

Brookstone Law lists the following attorneys as being affiliated with them. What struck me on the list is that I wondered if the Minnesota attorney listed, JD Hass, was actually a principal of the J Hass Group that has had a number of issues in the debt relief world.

The Minnesota Bar Association says there is no lawyer with the last name of Hass as a member. A search for last name Hass returned no listing for Hass. – Source

Alabama
Robert Kreitlein
Vann A. Spray

Arkansas
Richard E. Walden

Arizona
James Galbraith

California
Karen Hoeg
Aalok Sikand

Colorado
Valeria L. Cox

Delaware
Stamatios Stamoulis
Richard Weinblatt

Florida
Eric Rosen
Eve Boutsis

Georgia
Angela Michelle Whiddon

Iowa
Kirk E. Goettsch

Idaho
John R. Reese

Illinois
Hugh Richard Williams
Nancy Quackenbush

Indiana
Dale Krieg

Kansas
Lawrence Williamson

Kentucky
Kendra L. Rimbert

Louisiana
Helen Hsu

Massachusetts
Dirk Levinsohn
Julie Guthrie

Michigan
Rochelle Guznack

Minnesota
JD Hass

Missouri
Nancy Quackenbush

Mississippi
Tami Munsch

Montana
Blaine C. Bradshaw

New Jersey
Garrett I. Elias
Milton Bouhoutsos, Jr.
Stamatios Stamoulis
Richard Weinblatt

New Mexico
Baron Abrums

New York
Dirk Levisohn
Eric Rosen
Garretti I. Elias

Ohio
Justin Enrique Fernandez
Robert L. Raper

Oregon
James C. Loy

Pennsylvania
Eric Rosen
Glenn Romano

Tennessee
Deborah A. Randolph

Texas
Helen Hsu
Keidra J. Philips-Burrell

Utah
Luc D. Nguyen

Virgina
Jim Bowman
Shelia T. Mayers

Washington
John R. Reese

Wisconsin
Tiffany Stockinger

West Virginia
Rachelle McIntyre – Source

And There You Go

There isn’t anything more to report at the moment but my gut says there will be. Wait for it.

Update January 9, 2011

I received an email from Vito Torchia, Jr. following the publication of this article. I have invited him to submit any statement he wants in an effort to address any issue raised that may be taken out of context. As I said to him, I will be happy to publish his statement in an effort to give both sides of the story.

He has asked me to remove any allegations or innuendos which are not true. As always, I strive to publish the facts and if anything I reported is shown to not be true I will promptly remove it.

As soon as his statement arrives I will update the story here.

Update: January 17, 2011 – Vito Torchia, Jr. Responds

Mr. Rhode:

As an avid follower of your blog, I read your story entitled “Brookstone Law and Damian Kutzner. An Interesting Combination.” with some dismay. You and your blog have become important influencers. For that reason, I am very grateful to you for permitting me to respond to the story.

If I read the story correctly, you are not asserting that Brookstone Law or I have broken any law or ethical requirement. Clearly, you have not asserted that Brookstone Law or I have ever failed to competently, professionally and ethically represent our clients.

You point out Brookstone Law enjoys an “A” rating from the Better Business Bureau. Neither Brookstone Law nor any of its lawyers has ever been the subject of disciplinary action from the State Bar. I am not aware of any lawsuit ever filed against a Brookstone lawyer regarding legal services (though I believe the same is true of most of our affiliated lawyers listed in your blog, my statement relates to the firm’s lawyers in California, as opposed to lawyers in other states working on a non-exclusive basis with Brookstone.)

On the other hand, you are critical of Brookstone Law and me because of our interaction with now-defunct United Law Group (“ULG”) and Damian Kutzner.

As to ULG, you observe that I briefly worked for ULG as an attorney, that Damian Kutzner, formerly COO of ULG is now employed by Brookstone and that Brookstone acquired certain client files from ULG. You also observe that the trustee for ULG’s bankruptcy has sued Brookstone to attempt to obtain client trust accounts and clients from Brookstone.

As to Mr. Kutzner, you observe that his entrepreneurial flair may have gone too far, particularly where it resulted in his entering into a consent decree with the Federal Trade Commission (“FTC”) requiring that he stay out of telemarketing for five years.

By innuendo, you lead the reader to believe there is a “so what” to these associations. You never overtly get there. Instead, you specifically admit “There isn’t anything more to report at the moment.” But, you conclude by reporting “my gut says there will be [more to report].”

May I briefly address the associations.

Prior to founding Brookstone Law (I am its principal and managing attorney), I was hired by ULG as in-house associate counsel in the fall of 2009 and worked there for approximately four months. As in-house counsel, and thereafter, I was counsel for ULG in matters in which ULG’s activities were disputed.

It is utterly contrary to the American justice system to fault an attorney for representing an individual or entity in trouble, including an individual or entity alleged to have engaged in wrongdoing. No assertion has ever been made that I acted unprofessionally or without strict adherence to the Code of Professional Responsibility. If I am to be criticized for representing a client who has been alleged to have done something wrong, then by implication nearly all litigators and many transaction lawyers stand equally guilty.

If it matters (it should not), ULG was never found liable for any wrongdoing and more specifically, there was never an adverse finding against ULG in any matter in which I represented ULG.

To this point, your story observes that Sean Rutledge, founder of ULG, was disbarred in late 2009. I never represented Mr. Rutledge. But, even if I had done so, all Americans are entitled to a defense. That is one of the core values for which we are fighting around the world.

My point is not that ULG or Mr. Rutledge did (or did not) do that which some have accused them of doing. My point is not even that my client (ULG) was not found liable for wrongdoing in any matter in which I was involved. More simply, my point is that castigating lawyers or impugning their professionalism because they take on controversial clients is a road down which we dare not travel.

As to Brookstone’s purchase of client files from ULG – that is true. As ULG failed, I saw an opportunity to provide quality service to the clients of ULG who were about to lose representation. I lobbied ULG’s principals and Morgan Drexen, a software and support firm that was involved with ULG to acquire the files. I made a case for the savings ULG would achieve and the services that would be delivered to the clients. I succeeded to the extent Brookstone was permitted to acquire a significant number of ULG debt settlement clients. ULG’s clients were then informed of the transfer.

It is now more than a year from the time Brookstone acquired certain ULG clients and those clients were advised of that fact. To my knowledge, even now, not one Brookstone client acquired from ULG has complained about Brookstone’s services or the transfer. We have obtained good results for some of these clients and until this month, continued to seek relief for the remaining clients.

As you observed, the trustee for ULG sought a “return” to the ULG estate of the clients acquired by Brookstone as a transaction the trustee alleged occurred within the so-called preference period or for insufficient value to the ULG estate. By making his motion, the trustee implicitly lumped our clients together with desks, chairs and other assets of ULG as mere pawns to be moved around the chess table of ULG’s bankruptcy.

Not one former ULG client joined in the trustee’s motion – the immediate beneficiary of which is the trustee who could now receive fees for completing the work Brookstone has been diligently undertaking over the last year.

Applying the peculiar laws of bankruptcy, the bankruptcy court preliminarily ordered that clients we had obtained from ULG be transferred to the ULG trustee, pending a full evidentiary hearing that could end with a different result. I do not see anywhere in the Court’s decision even the slightest attack on Brookstone Law’s professionalism or service to our clients. Rather, I see a bankruptcy court interpreting quirky bankruptcy rules on preferences and value to treat human beings as property for the purported benefit of ULG’s creditors. I thought the 13th Amendment ended such treatment. It appears that I was wrong.

Your blog provides a compendium of Mr. Kutzner’s difficulties. In some instances, there are mere allegations and in one instance pertaining to Global Mortgage Funding, the FTC stipulated judgment entered into by Mr. Kutzner speaks for itself.

The issue as to Brookstone is whether there is something inherently wrong in Brookstone Law’s hiring Mr. Kutzner to assist with those matters for which he is clearly qualified: organization, software, systems and mailings.

By contrast to the notion of guilt by association with ULG, which I reject as utterly without merit, I recognize that my decision to hire Mr. Kutzner might require some thought. I carefully considered the reasons for hiring Mr. Kutzner, the parameters of his potential engagement, my belief in rehabilitation and the public relations and ethical implications of proceeding. In the end, I concluded that if Mr. Kutzner’s engagement was for limited purposes and in no way included the authority and subject matter that gave rise to his previous difficulties, Brookstone could proceed.

To be very clear: I concluded there were no ethical issues given the constraints under which Mr. Kutzner would be engaged and I concluded that I would be a very shallow person if I permitted public relations to determine who I should or should not hire.

Just as Brookstone succeeded in making clear to the bankruptcy court, let me also make very clear here: Damian Kutzner has absolutely no control or contractual authority at Brookstone Law. At its most simplistic, only an attorney can own or have a financial or control interest in a law firm. Mr. Kutzner is not an attorney (nor does he play one on TV!).

Further, Brookstone is not a telemarketer; and Mr. Kutzner certainly doesn’t manage our interaction with our clients. He has no entrepreneurial authority. Rather, he manages technical and back-room operations for our firm, which has a large number of small clients. Managing a firm with a practice such as ours requires considerably more organizational skills and software than would be required in a corporate practice with similar revenues. Mr. Kutzner is an expert at the methods, processes, procedures and software we require.

The reputation of a law firm starts and stops with the reputation of the attorney(s) behind it. Neither I nor any of the firm’s lawyers have anything for which to apologize. To the contrary, we are proud of what we have accomplished and our willingness to help middle class clients.

I am aware of the treacherous waters in which Brookstone swims. To help us stay on course and to avoid even appearances of impropriety, Brookstone recently retained a very distinguished lawyer and business executive with 30 years of acclaim and experience in corporate and legal ethics to advise us. He will soon start his work. While I do not know what he will recommend, I can assure you and our clients that he will have unimpeded access to our staff, records and accounts. I also can assure you that we intend to follow his advice.

Within the proper bounds of attorney-client confidentiality and zealous representation of our clients, we intend to meet the highest standards of ethics, professionalism, candor and transparency to our clients, other counsel and the courts.

We take these steps BEFORE anyone has ever alleged a professional lapse or breach by Brookstone Law. By being proactive, we hope to ensure that day never comes.

My thanks for the opportunity to respond to your story. I hope I have addressed your concerns and helped to provide some balance to the dialogue about Brookstone Law and my practice.

Sincerely,
Vito Torchia, Jr.

My Response

Mr Torchia brings up some good points in his response worth pondering. He says that people should not be found guilty first and are entitled to due process. I agree. I also agree that the defenders of people with chaste reputations can be an admirable pursuit. And I agree people deserve a vigorous defense, and Kutzner got one in Mr. Torchia’s response.

But this issue is not about the law, it’s about politics and public perception.

The issues surrounding the article are one of continuance or inheritance, not of facts of wrongdoing by Brookstone Law.

I learned a long time ago that in the debt relief world, consumers that use debt relief services are first cast as a disadvantaged class of consumers that need a greater degree of protection than your average consumer. Regulators look at them the same way.

Consumers who “feel” harmed by debt relief companies are rightly or wrongly, first perceived as victims, It might not be fair but that’s the way it works.

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So I applaud Mr. Torchia’s defense of Damian Kutzner but I’m not sure I get it. If consumers are viewed as a disadvantaged class of consumers then why even associate or continues to let an individual with such a public track record of issues be anywhere near the debt relief services, in front of or behind the scenes?

Torchia makes the statement that Kutzner is not an attorney but the general public may not come to that conclusion when the Linkedin profile of Kutzner says he is the owner of The Lawyers Agency and attended University of San Diego School of Law. – Source. That in itself does not mean he’s attorney but a casual person may draw such an inference of influence with an employing law firm.

Certainly Kutzner can’t be the only consultant with the skills necessary to assist Brookstone Law so why not just bring on a different consultant with a less checkered past in the debt relief world and break this chain of inheritance? That’s the point I can’t figure out and that’s what makes it appear there is more to the story. If Brookstone wants to start over and make a clean start then it made a bad political and public relations decision, not an illegal one.

This article is not a process of the court but one of the court of public opinion. Mr. Torchia’s position is “To be very clear: I concluded there were no ethical issues given the constraints under which Mr. Kutzner would be engaged and I concluded that I would be a very shallow person if I permitted public relations to determine who I should or should not hire.” So that’s where it will stand and the public will reach it’s own verdict.

Update: March 25, 2011 – Amended Complaint by Bankruptcy Court

On March 25, 2011 the bankruptcy Trustee filed an amended complaint against Brookstone Law in which the Trustee said:

  • The Trustee is informed, believes and therefore alleges that Mr. Kutzner is officially only the COO of Brookstone.
  • However, the Trustee is informed, believes and therefore alleges that in fact Mr. Kutzner has an undisclosed interest in Brookstone.
  • On or about the end of the year 2009 or the beginning of the year 2010, Brookstone entered into an employment contract with Mr. Kutzner contractually obligating Brookstone to pay Mr. Kutzner an annual salary of $390,000.
  • The Trustee is informed, believes and therefore alleges that most of the Transfers to Brookstone were then subsequently transfered by Brookstone to Mr. Torchia and Mr. Kutzner.
  • The Trustee is informed and believes and therefore alleges that Brookstone transferred most of the $471,000 of Debtor Revenue Stream, the exact amount of which will be determined at the time of trial, to Mr. Torchia and Mr. Kutzner. – Source


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