Debt Relief Industry Sued or Sanctioned

Johnson Law Group Florida Gets Permission to Make Client Payments Under Supervision

The Florida Bar had recently gone after attorney Clint Johnson of the Johnson Law Group for irregularities in his law firm trust account. In fact Attorney Johnson had his law license suspended. You can catch up by reading this article.

When I wrote that last article the court still had a freeze on all of Johnson’s trust accounts, including those of over 13,000 consumers for whom he was managing debt settlement and debt management accounts.

The Supreme Court of Florida recently held a hearing where they allowed the Johnson Law Group to begin releasing funds for debt settlement and debt management clients while the hearings regarding Johnson’s other alleged actions is ongoing.

What was surprising was the number of other company trust accounts that are under the control of Clint Johnson and were swept up in this action. The Supreme Court report below says it included the following accounts.

ESS OPS ending in 5232
ESS Trust ending in 5245
CBDC Trust ending in 5229
CBDC OPS ending in 5216
Debt Wave OPS ending in 5368
Debt Wave Trust ending in 5355
CBDC Trust 2 ending in 8521
LV OPS ending in 8576
LV Trust ending in 8589
Enlightened ending in 7145
South Carolina Refund ending in 8738

ESS = Enhanced Servicing Solutions
CBDC = Consumer Business Debt Counseling
LV = Probably the Johnson Law Group Las Vegas accounts that are still in dispute.
Enlightened = ? (If you know, post it in the comments.)

It’s the accounts of the 501(c)3 nonprofit groups, DebtWave and CBDC, that I find most alarming. Why are these accounts not under the control of the nonprofit organization themselves? Why would they be under the control of Clint Johnson?

Clint Johnson – Johnson Law Group Hearing

Although TFB has not yet filed its Complaint against Respondent, the evidence is clear that Respondent was negligent in the management of his trust accounts and non-compliant with Chapter 5 of the Rules Regulating The Florida Bar governing attorney trust accounts. Respondent essentially conceded his continuous non-compliance. At the hearing on Respondent’s motion to dissolve or amend the emergency suspension, TFB put on evidence showing that for 7 to 9 months between January 1, 2009 and November 30, 2010, trust account #4380 had apparent shortages. TFB’s Chief Auditor, Clark V. Pearson, testified that Respondent’s 4380 trust account irregularities, including shortages, have been the subject of a Florida Bar investigation since May of 2010, when TFB responded to a May 4, 2010 Overdraft Report generated by Bank of America. His audit, although incomplete, revealed numerous improper transfers between the core trust account and other accounts, including the law firm’s operating account. Due to the timing of some transfers, Mr. Pearson concluded that some funds had been misappropriated for some period of time, although any negative account balances were eventually corrected.

Without contradiction, the Respondent has testified he was unaware of the shortages and irregularities in account #4380 until July 5, 2010 when his former bookkeeper, Ms. Deanna Citron, first informed him of the Bank of America’s Overdraft Report and TFB’s resulting initiation of an investigation. Also on July 5, 2010, Ms. Cintron reportedly showed Respondent for the first time TFB’s Subpoena Duces Tecum for Deposition scheduled for July 15, 2010. Although this does not excuse Respondent’s mismanagement, it does explain it. Accordingly, TFB is likely, if not certain, to prevail on allegations of trust account non-compliance by Respondent. That’s the easy part.

The hard part is what to do about the non-compliance. This case arises in a very unusual and complicated circumstance and presents correspondingly unique and difficult problems to manage. The Respondent is the principal of the Johnson Law Group (“JLG”), a law firm in Orlando and also the principal of several debt management companies, including Debt Wave, Consumer Business Debt Counseling and Enhanced Servicing Solutions. The latter companies called “processors” assist debtors in negotiating and settling consumer debts. Debtors send money to the processors and the processors deposit this money into Trust Accounts maintained by Respondent and unquestionably subject to TFB’s regulation. The processors negotiate with creditors, like credit card companies, for reduced payoffs in exchange for lump sum payments or reduced interest rates in exchange for consistent periodic payments. Under these arrangements, the processors disburse lump sum or periodic payments from the Trust Accounts to the creditors for debt payments and to the law firm for fees and costs. In addition, the Respondent maintains a more traditional trust account for his law firm (Account ending in #4380).

The evidence presented is conflicting on whether Respondent and his firm had four or as many as ten Trust Accounts that must be maintained in compliance with Rule 5, Rules Regulating the Florida Bar (2010). No evidence was presented, however, that Respondent or his law firm claim any of the money currently on deposit in those Trust Accounts. Accordingly, the parties appear to agree that the money in the Trust Accounts in question is largely “other people’s money”, related to the debt management clients. Respondent contends that as many as 13,230 clients of the processors rely on the timely disbursement from the Respondent’s various trust accounts to their creditors.

The debt management money is often sent by the client with special instructions or conditions related to a deal negotiated by the credit management company. For instance, a client may enter into an agreement with a credit card company to pay off a $1,000 debt by paying $50/month on the first of each month for 10 consecutive months. If they do, the credit card company agrees to waive the balance of the debt and the interest. If they don’t, the deal is rescinded. These agreements are totally dependent on the timely payment of an agreed amount. Any payment of a lesser amount or any late payment, even just a day late, can result in the loss of the benefit of the negotiated deal and the forfeiture of any payments already made.

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TFB put on no evidence to refute Respondent’s assertion, and his supportive expert testimony, that the blanket freezing of his trust account(s), will financially harm and prejudice the thousands of consumer/debtor-clients of Johnson Law Group Debt whose funds are presently maintained in Respondent’s debt management division accounts, and on whose behalf The Johnson Law Group makes monthly disbursements to satisfy the terms of the credit-counseling agreements or negotiated debt-settlement terms.

Pedro J. Pizarro, CPA, testified he was retained by the Respondent in August of 2010 to be an expert consultant regarding trust account issues. Mr. Pizarro formerly worked for TFB as an auditor of trust accounts, prior to his retirement in 1994. Since 1995, Mr. Pizarro has been self-employed as an expert consultant in the area of trust account issues. Mr. Pizarro has reviewed and re-created Respondent’s trust account records for his 4380 core trust account for the relevant time period. It was his testimony that most of the apparent trust account deficit was the result of bookkeeper error in the form of incorrect duplicate charges for fees, compounded by the then-bookkeeper’s failure in some instances to make

physical deposits of personal injury settlement checks at the bank. He testified the cause of the apparent deficit was discovered during the process of re-creating Respondent’s trust account records. The duplicative charges were duly voided and the amounts were credited back to clients. While the matter was the subject of conflicting testimony, Mr. Pizarro testified to his opinion that Respondent’s 4380 trust account has been balanced and in full compliance with Rule 5 since December of 2010. Mr. Pizarro testified to his willingness, if requested, to do regular monitoring and reporting to the Court and to TFB of Respondent’s core law firm trust account in order to ensure continued compliance with Rule 5.

Steven A. Koenig, CPA, of the New York accounting firm of S.A. Koenig & Associates CPAs, P.C. also gave testimony at the hearing on Respondent’s motion to dissolve or amend the emergency suspension order. Mr. Koenig is licensed in New York and Florida. Mr. Koenig testified his firm was initially engaged in September of 2009 by the Respondent to perform a financial statement audit of Respondent’s Debt Management Division so that the Respondent would become license-eligible or maintain the business-license eligibility to conduct his credit counseling/debt settlement business in various states. When Respondent’s 4380 trust account issues with TFB arose, Koenig’s firm expanded its audit to include consideration of Rule 5 compliance as it related to the bank accounts under the Debt Management Division. Covering years 2008 and 2009, and using a national audit standard known as “Generally Accepted Auditing Standard” [“GAAS”] Mr. Koenig’s accounting firm examined the bank accounts maintained at Bank of America under The Johnson Law Group Debt Management Division. Based on the audit, it was the conclusion of S.A. Koenig & Associates that all bank accounts of the Debt Management Division appeared to be in compliance with Rule 5 of the Rules Regulating The Florida Bar; and there was no evidence of any misappropriation or commingling of debtor funds to suggest that debtors were being placed at risk by Respondent’s conduct. An audit of the 2010 activity has been started but not yet completed.

It was Mr. Koenig’s unrefuted testimony that the Respondent currently has some 13,230 consumer/debt clients through Johnson Law Group Debt and that the freezing of the debt-settlement trust accounts for The Johnson Law Group Debt Management Division would likely inflict significant financial harm on these 13,000+ individuals because the freezing of the accounts would trigger a breach of the various obligations that attend to the credit counseling programs and negotiated debt settlement agreements these many clients are already contractually obligated to with their creditors. Mr. Koenig further testified he and his firm are prepared, if requested, to perform a monthly assessment of the accounts associated with Respondent’s Debt Management Division accounts in order to provide monitoring and continued compliance with Rule 5 requirements; and to extend their audit of the debt management accounts into year 2010 in order to “mirror” the scope of The Bar’s trust account audit.

Finally, Culver Smith III, Esquire, an attorney with extensive experience in counseling and representing lawyers in connection with their ethical responsibilities, has testified to his willingness to conduct an interim ethical audit of Respondent’s law practice and essentially provide a layer of interim supervision of Respondent leading up to the final hearing.


The Florida Standards for Imposing Lawyer Sanctions identify the purpose and scope of lawyer sanctions. Standard 2.4 declares that a Temporary Emergency Suspension may be justified where “the lawyer’s continuing conduct is or is likely to cause immediate and serious injury to the client or the public”. When viewed under this standard, the existing Emergency Suspension must be modified.

The Emergency Suspension Order here was issued in response to TFB’s call for immediate action based on allegations that Respondent had “misappropriated client trust funds” (Petition, paragraph 10) and that “respondent has caused, or is likely to cause, immediate and serious harm to his clients and/or the public”. However, no evidence has been presented here that would show a reasonable risk of such conduct by the Respondent in the short term future. The un-rebutted evidence in this matter clearly shows that no money, not one penny, of the funds transferred through those Trust accounts was stolen, misappropriated or misdirected from its intended purpose. No client was harmed by the Respondent’s conduct in question.

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More importantly, as a result of the existing Emergency Suspension Order, the trust accounts have been frozen and the Respondent has not been permitted to disburse debt payments to creditors. The clients’ money is not being paid to creditors and the clients are in danger of losing the benefit of their agreement with those creditors.

The experts agree that with respect to the “core trust account”, that is the law firm’s trust account ending in #4380, that account has been in compliance with Rule 5 and without a negative balance since December, 2010. New and proper procedures have been implemented to permit the proper operation and monitoring of that account. In addition, the Respondent testified that he stopped taking debt management matters in October, 2010- so no new clients are paying in to the trust accounts and the debt management funds will be paid out over time until the trust balances are exhausted. In essence, the debt payment dilemma is self-limiting. So, the difficult issue presented by this matter is how to best protect the interests of the clients whose money is deposited in those accounts while, at the same time, assuring strict compliance with the trust account procedures and protecting the confidence of the public generally in the sanctity of TFB’s trust procedures.

At the time the Petition for Emergency Suspension was filed on March 31, 2011, TFB did not have complete records from the Respondent concerning all of the trust accounts. Accordingly, the auditor for TFB, Mr. Pearson, was not able to complete a full audit of all accounts and was required to make assumptions about the purpose and propriety of certain transfers and payments between and among the Respondents numerous trust and operating accounts.

The Respondent’s accountant and auditor, on the other hand, appeared to have reviewed a more complete set of records for the Respondent’s many accounts and were required to make fewer assumptions. Moreover, the Respondent’s accountant had a familiarity and history with the Respondent’s business structure and corresponding bank accounts that TFB did not. Accordingly, the opinions of the Respondent’s expert were, on the whole, more extensive, complete and credible.

Had the Respondent’s conduct continued unchallenged, almost certainly moneys would have been misappropriated and clients would have been harmed. Thankfully, the Respondent’s mismanagement of the trust accounts was challenged by TFB and, based largely on Respondent’s required response to that challenge and the extensive help of his financial and legal experts retained for that purpose, Respondent put his trust accounts in order.

The best interests of the clients and the public generally are not served by the Respondent’s suspension. Disbursements must be made from the various trust accounts and someone has to oversee their disbursements and, more importantly, be accountable for the proper management and handling of such disbursements.

Clearly, Respondent is in the best position to do this under proper supervision. Accordingly, the undersigned finds and recommends that the emergency suspension order of April 11, 2011 be modified as follows:

A. Respondent shall be placed on probation during the pendency of these proceedings and subject to continued and regular audits by TFB. This probation would be contingent on Respondent’s full cooperation and assistance in such audits and he shall promptly provide all records or documents required by TFB to assess Respondent’s complete and continued compliance with The Rules Regulating The Florida Bar concerning trust accounts.

B. Pedro J. Pizarro, CPA, former Bar auditor would, at Respondent’s sole cost, monitor and report monthly to TFB the status of the original Johnson Law Group core trust account (4380), the post-April 11, 2011, trust account opened to segregate all funds received in trust after April 11, 2011 “New trust holding account for JLG” (8965), as well as the status of the Johnson Law Group operating account (3608);

C. Respondent will have his Johnson Law Group Debt management division trust account(s) monitored by the New York accounting firm of S.A. Koenig & Associates CPAs, P.C., at Respondent’s sole cost, due to Koenig & Associates already-existent familiarity with the business and financial accounts of Johnson Law Group Debt management division. Florida and New York licensed CPA, Steven A. Koenig shall supply either monthly or quarterly letters to TFB —at TFB’s demand—advising that an audit of the debt management division trust accounts has been performed and providing a summary of the audit findings. The accounts are:

ESS OPS ending in 5232
ESS Trust ending in 5245
CBDC Trust ending in 5229
CBDC OPS ending in 5216
Debt Wave OPS ending in 5368
Debt Wave Trust ending in 5355
CBDC Trust 2 ending in 8521
LV OPS ending in 8576
LV Trust ending in 8589
Enlightened ending in 7145
South Carolina Refund ending in 8738

D. Attorney Culver “Skip” Smith III of Culver Smith, III, P.A. shall conduct an ethics-monitoring audit and overview evaluation of Respondent’s law firm at Respondent’s sole cost. Attorney Smith is to furnish a report of his ethics evaluation within 30 days of adoption of these recommendations and each month thereafter.

E. Respondent testified that he stopped taking debt management cases in 2010 and has been working towards resolution of those cases ever since. Respondent shall be permitted to continue resolution of current cases, however, Respondent shall not accept the representation of new clients or new cases during the pendency of these proceedings. – Source

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About the author

Steve Rhode

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.


  • I to was a client of JLG whose funds were frozen. I have been trying (with no luck at all) to get my much needed money back. Is there anyone out there that can help me?

  • Supposedly my account is still frozen as well seems like forever ago!!! I need this money any recommendations on how to get MY MONEY FROM THE FROZEN ACCOUNT????!!!!! I was a JLG client!!!

  • I am a JLG debt client and my account was frozen, and they are still frozen. It has impacted us GREATLY. The new company Consumer Attorney Services is terrible, they do not do their job at all. So does anyone know when funds will be released, or if I should pursue a civil suit against JLG for the problems they have caused???

  • Enlightened Debt Solutions out of Lake Mary. In late 2009 and early 2010 ESS took on these clients as a favor. A real headache for the company.

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