Rejecting the “Everyone Does It” Defense, U.S. Circuit Court Affirms Disbarment of Bankruptcy Attorney who Submitted False Debtor Signatures and Omitted Assets from Schedules

Rejecting the “Everyone Does It” Defense, U.S. Circuit Court Affirms Disbarment of Bankruptcy Attorney who Submitted False Debtor Signatures and Omitted Assets from Schedules

A Bankruptcy Court disbarred Lawyer. The United States Trustee began the proceeding by alleging that Lawyer’s filings regularly failed to include debtors’ genuine signatures. In addition to disbarring Lawyer, a Judge also ordered him to refund fees he had collected from 18 clients. When he did not do so, the Judge  held him in contempt of court.

Lawyer appealed both the disbarment and the contempt finding to the district court. It assigned both appeals to the court’s five-member Executive Committee, which handles the court’s disciplinary proceedings. The Executive Committee affirmed the order disbarring Lawyer but dismissed the appeal from the order holding Lawyer in contempt. Unfortunately, the Executive Committee did not transfer the contempt appeal to a single judge. Yet 28 U.S.C. §158(a) entitles Lawyer to review by at least one district judge. We therefore remand the contempt appeal to the district court for assignment to, and decision by, a single judge. The disbarment issue, by contrast, is ready for decision by this court.

The bankruptcy court found that Lawyer as a matter of routine:

• Signed clients’ names to documents that the debtors must verify under penalty of perjury. See 28 U.S.C. §1746; Fed. R. Bankr. P. 1008. The signatures purported to be the debtors’ own; Lawyer did not indicate that someone else was signing for the debtors.

• Copied and reused clients’ signatures, so that they appeared to have signed documents they had not seen.

• Applied these forged or copied signatures to documents that did not reveal all of the debtors’ assets, and which the debtors would not have signed hadthey seen the documents before they were submitted to the court.

• Submitted petitions and other documents on behalf of ineligible debtors (including one Lawyer knew lives in Bulgaria rather than Illinois, where Lawyer’s multiple filings said he lives).

• Submitted documents that through statistical improbability could not have been honest. For example, in a sample of 110 of Lawyer’s cases examined by the U.S. Trustee, schedules in 106 reported that the debtor had exactly $200 in cash, and in 93 of these 106 the schedules reported exactly $600 worth of household goods and $200 worth of clothing. Lawyer testified that these numbers had been furnished by his clients without his prompting; Judge Cox found him not credible.

• Submitted documents that omitted material assets. For example, the court found that the bankruptcy papers Lawyer filed (and signed) for Mirza and Sakeena Baig omitted two pieces of real property, three motor vehicles, a bank account, a whole-life insurance policy, and a retirement account, even though the Baigs had told him about those assets. 533 B.R. at 670.

• Lied on the stand during the hearing (the judge five times wrote that Lawyer was “incredible,” once that he was “not credible,” and once that he made a “false statement”). Under oath, Lawyer denied many of the facts described above; the judge did not believe him, and documentary evidence strongly shows that Alwyer was lying to the court.

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