The Consumer Financial Protection Bureau (CFPB) and Morgan Drexen / Walter Ledda have been duking it out for years. That is until the won a default judgment in their suite against Morgan Drexen. You can see all the latest permutations on this legal battle by clicking here.
Recent court documents filed are very interesting to those of us who my be debt relief nerds. While the CFPB says Walter Ledda should be responsible for the debts and obligations of Morgan Drexen, who got caught manufacturing documentation in the suit with the CFPB.
But documents say even though Walter Ledda was the chairman, ran the place, was the head honcho and had a lot of control, he is not responsible for the falsified documents his lawyer, Jeffrey Katz, and his staff prepared.
I’ll let the words from the court filing convince you how innocent Walter Ledda might be and why he should not have to pay.
“This opposition is relatively short because the supplemental points and authorities the Bureau filed added very little to what is already in play. The essence of the Bureau’s position is that Ledda was the “captain of the ship” and, therefore, should be held strictly liable for the actions of his subordinates. However, this theory of liability for terminating sanctions is not supported by the law, and the Bureau does not cite any persuasive case authority for its contentions.
At the end of this case, Ledda may well be saddled with damages awarded against Morgan Drexen, but he will have his day in court. Entering judgment against Ledda for actions of others and without a trial is not the law, nor should it be. Accordingly, the court should deny the Bureau’s motion with respect to Ledda.”
“Morgan Drexen did not dispute at the hearing that it created bankruptcy petitions which were not generated in the ordinary course of business. At the hearing on terminating sanctions, Morgan Drexen’s counsel admitted Morgan Drexen’s failure to advise the Bureau that documents produced had been created to capture information, rather than generated in the ordinary course of business, was a mistake. Jeffrey Katz (“Katz”) denied wrongful intent in failing to disclose how and why the bankruptcy petitions were created, but the court found he had a more nefarious purpose. Accordingly, the time to debate that issue is in the past and will not be revisited here.
The question the court must now address as to Ledda is whether Ledda had any reason to know Katz had done something inappropriate or inconsistent with Morgan Drexen ‘s discovery obligations in this case. If the Bureau had any evidence showing that Ledda knew there was wrongdoing, it would have produced this new evidence. However, the Bureau failed to do so and simply relies upon the evidence previously asserted. In fact, even the Bureau’s star witness, Rita Augusta (“Augusta”), did not point an accusatory finger at Ledda.”
You can read the court transcript of Augusta’s testimony here.
Ledda’s Assistance Was Purely Technical Without Any Understanding of How His In-House Lawyers Were Using the Information He Helped Them Find.
“It is undisputed Morgan Drexen was under tremendous pressure to respond to the discovery the Bureau propounded, which ultimately led to the production of over one million responsive records. During the discovery period, the potential for terminating sanctions, which the Bureau requested, was a very real threat and there is no doubt Ledda understood time was running out to get all the information Morgan Drexen was required to produce – or else.
Accordingly, it is undisputed Ledda knew Morgan Drexen was required to assemble information from diverse computer platforms and get the information into a medium where it could be produced to the Bureau before time ran out. It is also undisputed that Ledda had to provide the technical help his legal staff needed to download requested information and to approve compensation for temporary employees to complete the work. None of these undisputed facts have any tendency to show that Ledda knew, or even suspected, that Katz or anyone else was engaged in some type of deceitful activity.”
“The Bureau contends that, in his role as CEO, Ledda must have known what his legal team was doing and that he must have come to the conclusion that it was wrong and then purposely withheld that information from counsel, the Bureau, and the court. However, this is not the case. Although Ledda knew his legal team was extracting information from MDIS, he had no reason to suspect that this was improper. In fact, even Augusta, who was more involved in the nuts and bolts of the petition production, did not suspect that Katz was fabricating evidence. (Evidentiary Hrg., 70:9-11) And despite her now “whistle blower” identification, Augusta testified, point blank, that she never went to Ledda to say that Katz was trying to fabricate evidence. (Evidentiary Hrg., 71: 18-20)
With his limited involvement in discovery and his lack of legal training, Ledda could not possibly have made the determination that his legal team was acting wrongfully in producing documents. In fact, the first time Ledda learned that there were issues regarding the methodology of how documents were produced was January 2015, when the Bureau brought up their concerns regarding the petitions. (Evidentiary Hrg., 117:6-fO) It is unreasonable to assume that a person lacking legal training would possess such a detailed understanding of the rules governing discovery. Ledda had no knowledge that his legal team’s actions in responding to discovery were in any way improper, and the Bureau has presented no evidence to the contrary.”
You can read the full document, here.