What is the Perfect Crime?
According to the WSJ Law Blog, "William Ross, a professor at Samford University's Cumberland School of Law in Birmingham, Ala., calls it "the perfect crime." NYU legal ethics guru Stephen Gillers says there's a "general consensus" that the practice is on the upswing. The practice? Law-firm billing fraud, and the WSJ's Nathan Koppel takes a look at the issue through the lens of a series of incidents that allegedly took place in Holland & Knight's Chicago office." Here is the full story from the WSJ (subscription required). The whistleblowing letter by the lawyer can be read here.
Certainly the length of comments would indicated that the WSJ Law Blog's story has hit a real nerve. But it is one thing for real live clients to be annoyed about bill padding when they see the invoice, but what about when they don't see the invoice because a receiver is "representing their interests" and simply passes the invoice through the Court?
I wrote about this in connection with Kirk Wright and the receiver and legal fees, but now I want to turn my attention to that wonderful scheme,12DailyPro. Here is the interim report from the receiver.
What are the highlights of this report?
- The scheme apparently involved over $500 million. (Can you spell "money laundering"?)
- Charis Johnson only took a salary of $100,000 and did not benefit appreciably from the fraud.
- One person made over a $1 million; the vast majority lost money.
- The receiver has located only $6 million, in one of the Banks StormPay used.
- That Bank gave the receiver $1 million, no strings attached and $5 million to be used somehow.
Whoa, now lets slow down here. There was $6 million dollars in one Bank account, which was the result of this Bank not sending money to Stormpay, correctly anticipating a run on the Stormpay Bank via chargebacks. This Bank account had $48 million, but was reduced to $6 million by the chargebacks! People running for the fences once the ponzi was discovered by the regulators.
As far as I can tell, the receiver never challenged any of these chargebacks despite having the legal authority to do so. For this legal victory, the receiver and its legal team want $1 million, plus. I don't know if their eventual legal bill will produce value for dollar charged, but it will not be challenged in an adverserial manner in our current court system. That is a serious problem, which indirectly enables fraud.
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