On July 15, 2014 a West Virginia court came down hard on the Morgan Drexen business model. You may recall that Morgan Drexen was a big player in the national debt settlement business but felt they could charge advanced fees for services since it was really lawyers delivering services and thus exempt from many laws or regulations.
According to the final order published, Morgan Drexen will have to pay $8,575,000 and Lawrence Williamson, a participating attorney not licensed to practice in West Virginia who worked with Morgan Drexen, will have to pay $1,225,000.
The 70 page court document issued today has some interesting statements in it. For example, David Walker, Morgan Drexen CFO says, “Mr. Walker testified that, to his knowledge, Morgan Drexen has never engaged in telemarketing itself or through a third party.” He later “admitted that Ms. Linville “probably did” receive telemarketing calls from “lead providers” purchased by Morgan Drexen.”
Anyone else remember all those Morgan Drexen television commercials that used to run?
The Court document goes on to say, “Upon review of the Confidential Contract and said attached documents that were sent to attorneys who signed up to work for Morgan Drexen, it is apparent that Morgan Drexen dictated and controlled attorneys’ interactions with Morgan Drexen customers. Morgan Drexen hires attorneys and then requires attorneys to pay Morgan Drexen a portion of what customers pay the attorneys as evidenced by the “confidential contracts” and the attorney fee schedule. Morgan Drexen solicits and thereafter communicates with customers. Attorneys review paperwork and “propose” changes to said paperwork with little to no interaction with customers or creditors. The bulk of Morgan Drexen’s services are not completed by lawyers or by the direction of lawyers. From this and as discussed with regard to the State’s first cause of action, it is evident that Morgan Drexen hides behind attorneys who perform or complete little to no work, exert little to no control over Morgan Drexen, and play little to no role in Morgan Drexen’s debt settlement negotiations. Moreover, Morgan Drexen does not purport to satisfy the certain “licensed attorney” exception in the W. Va. Code § 61-10-23, but in fact, Morgan Drexen adamantly claims to be a paralegal service—as discussed supra. The Court is not purporting to
regulate the practice of law. Because the Court finds that Morgan Drexen, not attorneys, performs the debt settlement services, the Court also finds that the Defendants do not satisfy the “licensed attorney” exception as contained in W. Va. Code § 61-10-23.”
While Morgan Drexen did prevail on some of the counts in the action, overall it appears the outcome was not in the favor of Morgan Drexen or Attorney Williamson.
The Court also ordered that all monies and fees paid by West Virginia residents must be refunded.
You can read the entire Court document here.
The State of West Virginia was also awarded a judgment against Morgan Drexen for all of its costs, including its reasonable attorneys’ fees.