Yesterday I wrote about a court filing by the United States Trustee against Morgan Drexen, Howard Law, Figueredo & Boutsis and Rosen & Wining. In that separate case you can read about here, some similar accusations were made as made in this case.
On May 11, 2012 the United States Trustee, Donald F. Walton and United States Department of Justice trial attorney for the Office of the United States Trustee filed a court document alleging:
“The Respondents, together with other possible unknown entities, devised a business scheme to defraud and impugn the integrity of the bankruptcy system, which entails defrauding debtors and assisted persons nationwide by using an enterprise system purporting to provide debt resolution services. The enterprise system operates on a deceptive bait and switch scheme, which maximizes collections of fees from the debtor-clients and assisted persons, while not providing any beneficial service to the debtor-clients in regards to debt resolution plans. The Respondents acted in concert together with other entities wherein they failed to comply with the Bankruptcy Code and Rules and to adhere to the obligations under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, while knowingly and fraudulently entering into fee sharing arrangements for services rendered and expenses reimbursed in or in connection with a title 11 case. In the instant case, the Respondents assisted the Debtors in debt resolution activities and bankruptcy representation; entered into fee agreements with the Debtors; received payments under those agreements; and did not disclose receipt of those payments to the Court, the creditors, trustee, or the United States Trustee. The Respondents prepared a false statement for the Debtors to execute which the Respondents knew was false when it was prepared, had the Debtors execute the false statement under penalty of perjury, and then filed the false statement with the Court. The Respondents also prepared a false disclosure of compensation statement for execution by local counsel, which the Respondents knew was false when it was prepared, and then filed this with the Court.” – Source
The United States Trustee legal representative states these “Undisputed Facts” in this case.
- In or about September 2010 and prior to the instant case, the Debtor, Linda Hernandez, saw an advertisement for debt resolutions and contacted Morgan Drexen, Inc.
- The Debtor is an Assisted Person as defined under Section 101.
- Upon information and belief likely to have evidentiary support after a reasonable opportunity for further investigation or discovery, in or about September 2010, the Debtor entered into a fee agreement with Figueredo & Boutsis, P.A. for a Non-Formal (Chapter 13) Debt Resolution Program.
- Upon information and belief likely to have evidentiary support after a reasonable opportunity for further investigation or discovery, in or about September 2010, the Debtor contemporaneously entered into a fee agreement with Rosen & Wining to provide bankruptcy representation.
- Upon information and belief likely to have evidentiary support after a reasonable opportunity for further investigation or discovery, the bankruptcy fee agreement conditioned the preparation of the chapter 7 petition upon all fees having been paid in full.
- The Morgan Drexen File Number, applicable to the Respondents is 112956778 with MDIS Security Number 4676858.
- After that time, the law firm of Rosen & Wining, f/k/a Eric Rosen Law Firm withdrew $1,500.00, by ACH withdrawal from the Debtor’s Suncoast Schools Federal Credit Union regular checking account, as follows:
a. $100.00 September 27, 2010;
b. $175.00 November 8, 2010;
c. $175.00 December 7, 2010;
d. $175.00 January 7, 2011;
e. $175.00 February 7, 2011;
f. $175.00 March 7, 2011;
g. $175.00 April 7, 2011;
h. $175.00 May 7, 2011;
i. $175.00 June 7, 2011;
- The law firm of Figueredo & Boutsis withdrew $1,098.37, by ACH withdrawal from the Debtor’s Suncoast Schools Federal Credit Union regular checking account, as follows:
a. $175.00 July 7, 2011;
b. $175.00 August 7, 2011;
c. $175.00 September 7, 2011;
d. $175.00 October 7, 2011;
e. $104.00 October 28, 2011;
f. $117.37 November 7, 2011;
g. $118.00 January 9, 2012; and
h. $59.00 February 7, 2012.
- In preparation of filing of the Hernandez bankruptcy case, Morgan Drexen, supervised by Figueredo & Boutsis as well as Rosen & Winig, prepared the Debtor’s bankruptcy statements, including but not limited to the Debtor’s Statement of Financial Affairs, Statement 9.
- Statement 9 provides that the Debtor paid Figueredo & Boutsis undisclosed payment dates totaling only $1,062 from September 2010 through January 2012.
- Statement 9 also declared that the Debtor had paid no other law firm, entity, or person anything for consultation concerning debt consolidation, relief under the bankruptcy law or preparation of the petition in bankruptcy.
- On February 27, 2012, the Debtor executed her Statement of Financial Affairs under penalties of perjury, as prepared by Morgan Drexen and supervised by Figueredo & Boutsis as well as Rosen & Winig.
- Morgan Drexen as supervised by both Figueredo & Boutsis and Rosen & Wining prepared the Disclosure of Compensation of Attorney for Debtor, which was signed by Tony Turner, which disclosed that the Debtor had paid $1,144.00 directly to Tony Turner pre-petition.
- Tony Turner is local counsel for Howard Law, P.C. who employed Mr. Turner to represent Morgan Drexen clients in Florida. See Exh. 3.
- Tony Turner neither received $1,144.00 pre-petition nor was paid anything directly from the Debtor.
- Pre-petition, Tony Turner was paid from Figueredo & Boutsis for the filing of the bankruptcy case and the bankruptcy case filing fee.
- The Debtor filed for chapter 7 bankruptcy relief on February 27, 2012. – Source
- No attorney associated with the Respondents appeared at the meeting of creditors conducted on April 4, 2012. Further the documents required to be provided to the chapter 7 trustee had not been provided by the Respondents. See Exh. 5.
- No attorney associated with the Respondents appeared at the meeting of creditors conducted on April 25, 2012. See id.
- The Debtor requested Mr. Paul Moelle to appear and represent her at the meeting of creditors on April 25, 2012, which Mr. Moelle agreed to do in pro bono publico.
The United States Trustee makes the following conclusion statement in the court documents:
The Respondents devised a scheme and artifice to subvert the bankruptcy process, the integrity of the bankruptcy system, and the public perception of bankruptcy in a manner and mechanism targeted at the disadvantaged debtors, many if not all, are defined as Assisted Persons under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
The Respondents devised and implemented this business model in no less than 42 States nationwide purporting to provide debt consolidation/debt resolution services while at the same time targeting these individuals for chapter 7 bankruptcy in a means and artifice to collect excessive, unreasonable, unnecessary, and phantom expenses, together with unreasonable, unnecessary, and excessive compensation for services.
The Respondents are engaged in this nationwide business model and are operating and acting as the agents for each other with express or implied authority to further their common goal. All benefitted financially from their collective acts and omissions.
The Respondents each, jointly and severally, knowingly and willfully entered into express and/or implied agreements to establish the sharing of compensation of fees and reimbursement of expenses for services rendered in or in connection with title 11 consumer bankruptcy cases.
The United States Trustee requests that the Respondents be enjoined from providing any Bankruptcy Assistance to any individual person in Region 21 under section 526(c)(5)(A), and that this Court order the disgorgement of all fees under section 329(b), as well as, assess additional civil penalties under sections 526(c)(2)(C) and 526(c)(5)(B).