A bankruptcy trustee in Ohio has filed suit against the following parties: Lloyd Ward, Lloyd Ward & Associates, Lloyd Ward Group, Silverleaf Debt Solutions, fka Debt Relief RX USA, and Michael Miles.
This complaint is interesting because it raises this point, “Defendants deceptively disparaged bankruptcy as a viable alternative for Debtors.” That’s the first time I can recall an attorney and debt relief company being sued for disparaging a potential debt relief option in favor of one they provided. And it certainly appears to be a valid point that covers a number of past debt relief websites that said just flat out wrong things about bankruptcy, presumably in an effort to steer consumers towards higher priced debt settlement services.
The other things which is interesting about this complaint is, for me, is it demonstrates how convoluted the debt relief world has become in a short period of time.
Not long ago the parties here were playing nice with each other. But as of today Silverleaf and Lloyd Ward are in a class action suit with each other, the State Bar of Texas is suing Ward for alleged bad lawyerly things in his relationship with Silverleaf, the Lloyd Ward Group is a name that was also allegedly being used by Lloyd Regner who is being sued by his ex-felon business partner, Kevin Devoto, and oh yes, Lloyd Ward Group was hit with a $500,000 fine by the state of Connecticut which Ward said he did not plan to pay.
So here we are today with nemesis parties of Silverleaf and Ward now sucked back into a lawsuit together while they are at odds individually. We shall see if this in this suit turn out differently but in the State Bar of Texas suit against Ward it is stated, “Various lawsuits were subsequently filed against Lloyd Ward, Miles, Debt RX and Silverleaf. Lloyd Ward hired outside counsel to represent one or more parties without informing them of the lawsuit. In addition, the parties were not consulted regarding responsive pleadings that were filed including motions to dismiss.” – Source
This suit states:
Upon information and belief, the Defendant Lloyd Ward, P.C. d.b.a. Lloyd Ward & Associates, is a Texas debt adjustment company operating from an address at 12655 North Central Expressway, Suite 1000, Dallas, Texas 72543 and doing business in the State of Ohio. Defendant Lloyd Ward Group, LLC is an operating division of Lloyd Ward, P.C. (Collectively referred to as “LWA”)
Upon information and belief, the Defendant SilverLeaf Debt Solutions, LLC (“SilverLeaf”), is a Texas debt adjustment company operating from an address at 14275 Midway Road, Suite 200, Addison, Texas 75001 and doing business in the State of Ohio.
Defendants regularly engage in business in Ohio and directed at residents of Ohio and have otherwise availed themselves of the Ohio marketplace and secured the benefits of that marketplace. Such conduct included, among other things, holding themselves out as debt settlement companies providing services to Ohio residents, directing business solicitations into the State of Ohio, directed at indebted Ohio residents, seeking participation in Defendants’ debt settlement programs; contracting in Ohio with Ohio consumers for various services, including debt settlement, offering to perform and/or performing activities for Ohio residents including debt settlement functions, and/or contracting for legal services or performing legal services for Ohio consumers.
This action arises from a coordinated scheme devised by Defendants with the express intent of duping creditors and consumers into believing that the law firm, Defendant LWA, was providing debt settlement services when, in fact, non-attorney employees of Defendant SilverLeaf performed such “legal” services.
LWA is in the business of lending its name to debt settlement businesses, including Defendant SilverLeaf, to create a fiction that the services are being performed by attorneys, thereby evading consumer protections applicable to such services, including fee limitations.
LWA gave substantial assistance and encouragement to SilverLeaf in conducting unfair, deceptive, criminal, and otherwise unlawful business activities directed at Debtors by, among other things, engaging in and agreeing to engage in a “Client Services Agreement”, lending its name as a law firm to SilverLeaf’s business activities, and by otherwise agreeing to carry out the common business scheme described in this Complaint.
The services set out in the “Client Services Agreement” are recited for the purpose of creating an illusion that the debt settlement services constitute the practice of law or are being performed incidental to the practice of law.
SilverLeaf performed the debt settlement services under a false pretense that they were done under the direct supervision and control of an attorney at LWA.
Upon information and belief, attorneys at LWA do not control the method, manner, or means by which SilverLeaf performed the debt settlement and repair services for Debtors or otherwise directly supervised or controlled those activities.
On or before August 19, 2010, Debtors viewed a television commercial advertising “debt solutions.” Debtor then went to the website as advertised in that commercial and then provided some of his information. Debtor was then sent an email from a representative of LWA named Tony Giarletta in an effort to solicit Debtors’ business and to provide debt settlement services to Debtors.
Throughout the debt settlement program Defendants created the illusion that LWA was providing the debt settlement services.
At all times relevant, Defendant Silverleaf would perform the actual debt settlement services on Debtors’ behalf. Defendant SilverLeaf is not a law firm.
For these services, Debtors agreed to pay specified fees that, unknown to Debtors at the time, are criminally illegal, owing to their enormous size and accelerated timing of payment.
If meaningful positive funds eventually accumulate in the debt settlement account, Defendants may attempt settlement of a scheduled program debt. Although accounts may be settled, meaningful value to the consumer is minimal as late fees, over the limit fees, and interest continue to accumulate.
The agreement drafted by Defendants is illegal in the State of Ohio.
Defendants withdrew monthly payments in the amount of $659.83 from Debtors’ checking account over a period of several months for a total of at least $7,917.96.
Defendants knew that the debt settlement program’s fees exceeded the amount permitted by R.C. § 4710.02(B).
Defendants made various misrepresentations or non-disclosures in an effort to induce Debtors to enter into the illegal agreement, including but not limited to:
- Unsubstantiated claims of savings to Debtors. Defendants represented to Debtors that the program would save them 40%- 60% the total debt; however, Defendants do not have a record of accomplishment that supports this statement.
- Deceptive representations about the length of time necessary to complete the program. Defendants estimated Debtors would complete the program in 48 months, when in fact, results in the past have not supported such an estimate.
- Misleading or failing to adequately inform consumers that they will be subject to continued collection efforts, including lawsuits, and that their account balances will increase due to extended nonpayment under the program. Although the contract specifically indicates a creditor is still able to bring a lawsuit against Debtors, Defendants fail to disclose that this event occurs on a regular basis to Ohio consumers.
- Defendants deceptively disparaged bankruptcy as a viable alternative for Debtors.
- Defendants based savings claims not on the original account balance, but on the inflated amount due at the time of the settlement.
- Defendants failed to include its fees when it estimated the amount Debtors would save.
- Defendants represented that the majority of consumers that agree to retain Defendants complete the debt settlement program thereby becoming debt free; however, a high percentage of Ohio consumers who attempt Defendants’ debt settlement program do not in fact complete the program, and do not become debt free as a result of Defendants’ services.
- Defendants accepted money from Debtors for the purpose of settling all Debtors’ debts on the program for less than the amount owed knowing there was a substantial likelihood that they could not provide the services as promised.
- Defendants represented that the debt settlement services were to be performed by an attorney; however, the services were performed by non-attorney employees of SilverLeaf.
- Defendants represented that LWA was providing legal services when LWA does not employ an attorney who is licensed to practice law in the State of Ohio.
In an effort to induce Ohio consumers to enter into a contract with Defendants, Defendants indicated they would assist Debtors with a lawsuit in the unlikely event they were sued by one of their creditors with which Defendants have agreed to negotiate. Defendants indicated as much while specifically disclaiming any such legal assistance in its contract with Debtors.
Debtors were sued by two of their creditors. Defendants failed to provide legal services as indicated and as a result, Debtors were forced to file for bankruptcy.
Defendant SilverLeaf is not a law firm and is not licensed to practice law in the State of Ohio. Defendant LWA does not employ an attorney licensed to practice law in the State of Ohio.
Defendants provided further legal advice regarding the FDCPA and FCRA among other areas of law.
Defendants were engaged in the unauthorized practice of law.
Defendants so engaged in the unauthorized practice of law in an effort to induce Debtors to execute a contract for Defendants’ services and/or to continue the previously executed contract.
Defendants, as described above, are each a “supplier” as that term is defined in R.C. § 1345.01(C), since Defendants were engaging in the business of effecting “consumer transactions”, either directly or indirectly, by operating a debt pooling or debt adjustment service for consumers in Ohio for purposes that are primarily personal, family or household within the meaning specified in R.C. § 1345.01(A).
Defendants are each a “person” as defined by the DACA, R.C. § 4710.01(A) engaged in the act of “debt adjusting” as defined by the DACA, R.C. § 4710.01(B), and a “supplier” as defined by the OCSPA, R.C. § 1345.01(C), since Defendants were engaged in the business of debt adjusting, budget counseling, debt management, or debt pooling services, or holding oneself out, by words of similar import, as providing services to debtors in the management of their debt to a consumer in the State of Ohio for purposes that were primarily for personal, family or household use.
Debtors are “consumers” as defined by the OCSPA, R.C. § 1345.01(D) 34. Defendants conduct business in the State of Ohio even though they failed to register with the Ohio Secretary of State as required by R.C. § 1703.03.
Defendants charged and accepted fees or contributions in excess of what are reasonable fees or contributions, in violation of R.C. §§ 4710.02(A)(3), 4710.02(B)(1-3) and 4710.02(F)(1).
Upon information and belief, Defendants failed to arrange for and undergo an audit conducted by an independent, third party, certified public accountant of the person’s business and then file the audit and opinion with the consumer protections division of the attorney general in violation of R.C. §§ 4710.02(D)(1-2) and 4710.02(F)(2).
Upon information and belief, Defendants failed to obtain and maintain insurance coverage not less than $100,000.00 for employee dishonesty, forgery, and fraud in violation of R.C. §§ 4710.02(E)(1-2) and 4710.02(F)(2).
Defendants do not provide to consumers, prior to entering into contracts, a statement of rights with information including an explanation of the consumers’ rights under the Fair Credit Reporting Act, and information relating to the consumers’ rights pursuant to the Ohio Credit Services Organization Act.
Defendants’ transactions failed to include the notices, statements, and cancellation forms as defined by R.C. §§ 4710.05(A) and (B). Such failure is a violation of R.C. § 1345.02(A) of the OCSPA.
Defendants failed to make full refunds of monies paid for undelivered service, despite requests from Debtors to make full restitution of all damages.
Upon information and belief, Defendant Lloyd Ward directs the actions of LWA, and Defendant Michael Miles directs the actions of SilverLeaf.
You can read the full complaint, here.
The complaint was filed by:
Jeremiah E. Heck (0076742)
David E. Byrnes (0086975)
Luftman, Heck & Associates, LLP.
580 East Rich Street
Columbus, Ohio 43215
Phone: (614) 224-1500
Fax: (614) 224-2894
Attorneys for Lauren A. Helbling, Trustee