From Article at GetOutOfDebt.org

Transcription

1 Case :-cv-0-jls-jem Document 0 Filed 0// Page of Page ID #: Brian Hennigan, State Bar No. bhennigan@hueston.com John C. Hueston, State Bar No. jhueston@hueston.com Xinlin Li, State Bar No. 0 xli@hueston.com Lauren E. Shaw, State Bar No. 0 lshaw@hueston.com HUESTON HENNIGAN LLP 0 Newport Center Drive, Suite 00 Newport Beach, CA 0 Telephone: () -0 Facsimile: () -0 Evan C. Borges, State Bar No. 0 EBorges@GGTrialLaw.com Michael P. McMahon, State Bar No. 0 MMcMahon@GGTrialLaw.com GREENBERG GROSS LLP 0 Town Center Drive, Suite 0 Costa Mesa, CA Telephone: () -00 Facsimile: () -0 Attorneys for Chapter Trustee for Morgan Drexen, Inc. Consumer Financial Protection Bureau, vs. Plaintiff, Morgan Drexen, Inc. and Walter Ledda, individually, and as owner, officer, or manager of Morgan Drexen, Inc., Defendants. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION Case No. SACV -0 JLS (JEMx) NOTICE OF CESSATION OF ALL OPERATIONS OF MORGAN DREXEN ALREADY IN PROCESS BY CHAPTER TRUSTEE; REQUEST FOR EX PARTE HEARING - - NOTICE OF CESSATION OF ALL OPERATIONS OF MORGAN DREXEN ALREADY IN PROCESS BY CHAPTER TRUSTEE; REQUEST FOR EX PARTE HEARING 0

2 Case :-cv-0-jls-jem Document 0 Filed 0// Page of Page ID #: PLEASE TAKE NOTICE that John C. Hueston, as Chapter Trustee (the Trustee ) of bankruptcy debtor and defendant Morgan Drexen, Inc. ( Morgan Drexen ), hereby advises the Court that, prior to receipt of this Court s Order (Dkt. No. 0) on June, 0, the Trustee already had made the decision to commence the immediate cessation and shutdown of the business operations of Morgan Drexen. The Trustee provided notice of his decision to the Consumer Financial Protection Bureau and the Office of the U.S. Trustee by on June, 0, attached hereto as Exhibit A. Indeed the Trustee held a conference call with representatives from the CFPB and Office of the U.S. Trustee on June, 0 at 0:00 a.m., where the plan for cessation of all operations was detailed to the agencies. The reason for the Trustee s decision and this Notice is that, since the hearing before this Court on June, 0, additional significant issues have come to light; thus, the Trustee requests that this Court schedule an ex parte hearing in the near future to discuss the Trustee s request for further orders consistent with this Notice, the Freeze Order by this Court entered on April 0, 0 (Dkt. No. ), and the Permanent Injunction Order entered today (Dkt. No. 0). The Trustee s decision was based on additional investigation, analysis, factfinding and events that have occurred since the joint hearing before this Court and the Bankruptcy Court on June, 0. Factors that influenced the Trustee s decision included, but are not limited to, the following: Since the hearing on June, 0, the business operations of Morgan Drexen have been subjected to obstructionist tactics, interference and threats by the attorneys with whom Morgan Drexen has contracts (the Attorneys ). The actions by the Attorneys demonstrate that any form of continuing business is unmanageable and impractical, that any potential sale transaction would be unduly expensive and/or infeasible to implement, and that the Attorneys do not intend to cooperate with the Trustee unless it means selling the Morgan Drexen business to them. - - NOTICE OF CESSATION OF ALL OPERATIONS OF MORGAN DREXEN ALREADY IN PROCESS BY CHAPTER TRUSTEE; REQUEST FOR EX PARTE HEARING 0

3 Case :-cv-0-jls-jem Document 0 Filed 0// Page of Page ID #: Further, the Trustee believes that the actions of the Attorneys violate this Court s Freeze Order entered on April 0, 0 (Dkt. No. ), specifically the provisions prohibiting the selling, disbursing, or transferring of assets, and the Permanent Injunction Order entered today (Dkt. No. 0), specifically the provisions prohibiting the collection of fees from consumers and continued representations regarding debt settlement services. In addition, the Trustee is concerned that the Attorneys actions, under the false heading of allegedly protecting their clients, are designed to allow the Attorneys to further manipulate and take advantage of consumers, putting the consumers funds currently held in the trust accounts in jeopardy. The Trustee believes that substantial claims exist against the Attorneys as well as against insiders of Morgan Drexen; and the Trustee will be pursuing those claims. The Trustee further believes that the Attorneys will continue to obstruct and interfere with an orderly wind down of the business, and that as a result, the business should be closed as soon as possible to allow the Trustee to address the best interests of creditors and consumers through litigation and court orders as necessary. The Trustee previously had been informed that approximately,000 consumers were on existing debt settlement plans with Morgan Drexen. Upon further investigation, the Trustee has determined that the,000 figure included all consumers who ever had been on a debt settlement plan, as opposed to consumers on a current and active debt settlement plan. At this time, the Trustee is informed that the number of consumers on existing debt settlement plans is approximately,000, not,000. Thus, among other problems, monthly fees may have been charged to a much larger number of consumers who are not on current debt settlement plans than the Trustee previously believed. - - NOTICE OF DECISION BY CHAPTER TRUSTEE TO CEASE OPERATIONS OF MORGAN DREXEN, 0

4 Case :-cv-0-jls-jem Document 0 Filed 0// Page of Page ID #: After the joint hearing on June, 0, the Trustee has examined means to make further cuts of expense and personnel. The Trustee initiated the termination of all employees with the exception of a few key personnel, ceasing all operations and services rendered by Morgan Drexen to attorneys and consumers. Separately, the Trustee will be filing in Bankruptcy Court a motion to enforce the automatic stay and for sanctions against the Attorneys for willful violations of the automatic stay. Regardless, prior to this Court s issuance of Permanent Injunction Order, the Trustee has already concluded that the conduct of the Attorneys has shown that the Morgan Drexen business model is irretrievably broken legally and practically. The Attorneys only will respond to Court orders whether of this Court or the Bankruptcy Court and the Trustee will be requesting such orders. As background, the Trustee attaches hereto as Exhibits B and C communications from, among others, Attorneys named Vincent Howard ( Howard ) and Lawrence Williamson ( Williamson ). The Trustee has reason to believe that Howard sent an to all engagement and local counsel who receive services from Morgan Drexen, calling them to action and instructing them to immediately contact Evan Borges, counsel for the Trustee, and demand. that you have clients that are serviced by MD,. that any interference with your contracts and relationships with your clients will not be tolerated, and. that they consult with you first before canceling the services MD provides for your clients at your direction so that you can arrange for alternative services. The Trustee also has reason to believe that Howard also instructed the attorneys to contact Morgan Drexen employees David Walker and Deborah Ketsdever and. Revoke MD s authority and access to your client trust accounts.. Insist that they invoice you and you decide what bills to pay.. Demand an accounting to see if they even did the services.. And demand that they send you an electronic copy of all your clients information. As shown in Exhibit B, many of these attorneys followed Howard s instructions, resulting in a bombardment of - - NOTICE OF DECISION BY CHAPTER TRUSTEE TO CEASE OPERATIONS OF MORGAN DREXEN, 0

5 Case :-cv-0-jls-jem Document 0 Filed 0// Page of Page ID #: harassing s to counsel for the Trustee and employees of Morgan Drexen. Exhibit C contains a separate sent late last week from Williamson alleging breach of his service contracts with Morgan Drexen and demanding an accounting, among other relief. Ex. C at -. The Trustee is informed that Howard, Williamson and their law firms together purport to have attorney-client relationships with approximately 0,000 consumers. Howard and Williamson, along with the other Attorneys acting in concert with them, have made continued operations impossible. The Trustee requests that the Court set an ex parte hearing in the near future, as the Trustee intends to request additional relief and orders from this Court and the Bankruptcy Court, as appropriate. These orders, include, without limitation: Enforcement of the Freeze Order and the Permanent Injunction Order, including clarification that it freezes the consumer trust accounts pending further order of this Court; Enforcement of the automatic stay, including sanctions and damages Dated: June, 0 against the Attorneys for willful violations of the automatic stay. By: /s/ John C. Hueston John C. Hueston Chapter Trustee for Morgan Drexen, Inc. Mr. Williamson already is liable on a judgment of $,,000.00, based on civil penalties imposed by the State of West Virginia, due to findings of illegal conduct in that State by him and Morgan Drexen. State of West Virginia v. Morgan Drexen, Inc., et al., Case No. -C-, 0 (July, 0) (Final Order). - - NOTICE OF DECISION BY CHAPTER TRUSTEE TO CEASE OPERATIONS OF MORGAN DREXEN, 0