By Amy Silverman
By Olivia LaVecchia
By Monica Alonzo and Stephen Lemons
By Chris Parker
By Michael Lacey
By Weston Phippen
"Richard S. Berry shall pay . . . $172,103 within ten days. This amount represents the fees received in Chapter 13 cases in violation of this court's order entered January 24, 1997.
"The court finds Richard S. Berry in civil contempt of this court and imposes . . . a $100,000 fine to be paid in no event later than ten days from the date of this order.
"If Berry has failed to pay the fees and fine, the court will determine whether or not criminal contempt by Richard S. Berry should be certified to the United States District Court." (Emphasis his.)
It seemed Berry's day of reckoning was at hand. The deadline passed without him paying any of the fine or trustees or hundreds of debtors whom Berry's firm, People's Paralegal, illegally had overcharged.
But this is Bankruptcy Court, where Berry--a disbarred attorney and white-collar felon--apparently is allowed to ignore court orders with impunity. Representing himself, the 55-year-old Berry danced around Nielsen's questions about why he had repeatedly violated a judge's orders in recent months.
"If this were a situation where I had a pot of gold someplace, this would be another matter," Berry said. "Right now, business is quite limited."
That prompted a courtroom observer to whisper, "I'm gonna try that next time I get a traffic ticket."
Chapter 13 trustee Russell Brown implored Nielsen to refer the Berry case to District Court for criminal prosecution.
"He's paid no attention to any of this," said Brown, one of Berry's most persistent detractors.
United States Trustee Adrianne Kalyna told the judge she doubted "very seriously" whether Berry ever would remit a dime.
Berry's reply: "I never cease to amaze at her comments."
Finally, the gentlemanly Nielsen spoke from the bench.
"We have to keep things under control," he said. ". . . Now we have this horrendous problem."
The judge's solution was to act as peacemaker, as if he hadn't just been told--courteously and slickly--by an ex-con to stick it. Nielsen said nothing to Berry about the blatant disregard of his court order. Instead, he said he hoped matters could be worked out amicably for all concerned.
Kalyna, Brown and others who have been battling Berry for months declined to comment after the hearing. But their downcast expressions spoke volumes.
A New Times story ("Going for Broke," July 17) told of Dick Berry and People's Paralegal. The money-generating mill took the Valley's bankruptcy market by storm in 1996, luring more than 2,000 consumers in a relentless 18-month advertising blitz that promised cheap, quality service without attorneys.
But numerous debtors unnecessarily lost homes and cars or found their bankruptcy cases in tatters after taking the company's illegal and often-misguided advice. The state's seven bankruptcy judges have been tardy in grasping the magnitude of the People's Paralegal crisis, and slow to enact remedies.
The story disclosed that Berry's firm still was preparing bankruptcy petitions in clear violation of a May 23 order by Bankruptcy Judge Redfield T. Baum.
Berry had contracted with Tempe attorney Fred Taylor in a dubious arrangement that has caused grief for hundreds of debtors. Taylor, a sole practitioner with little experience in bankruptcy law, essentially has acted as a front for People's Paralegal, doing little more than signing paperwork for customers of People's Paralegal.
The story showed that Phoenix-area Chapter 13 debtors who use document-preparation services are about 10 times less likely to have their bankruptcy reorganization plans approved than those who retain attorneys. That failure rate has translated into unnecessary home foreclosures, auto repossessions and tax levies.
Since the story's publication, the Arizona Attorney General's Office has initiated a criminal investigation into People's Paralegal. On Monday, August 25, court records show, an AG's investigator went undercover to People's Paralegal, located at 1845 East Broadway in Tempe.
A transcript of a secretly audiotaped conversation filed by the U.S. trustee in Bankruptcy Court indicates that AG investigator Dan Bultman--posing as a potential customer--tells a receptionist he wants to get out of debt. The receptionist offers Bultman the option of People's Paralegal or Debt-Free America. (The latter is a "debt consolidation" entity opened recently by Berry and Paul Dvorscak, also a convicted white-collar felon who served prison time in 1995 for fraud.)
Bultman tells the receptionist he sees that People's Paralegal is affiliated with attorney Fred Taylor.
"I don't want a lawyer," the investigator says.
"Oh, no," she replies. "We go by People's Paralegal law offices. For bankruptcy, they need a lawyer just to represent them in court."
Bultman then meets with office salesman Hugh Marks, who explains how the operation works and provides legal advice:
"The whole thing with this is we have one attorney on staff rather than a whole office full of them . . . 90 percent of what we do here is bankruptcy so we just have the one attorney on staff. . . . He doesn't do much other than sign off [on documents]."
Arizona is one of two states--Texas is the other--that doesn't consider the unauthorized dispensing of legal advice to be a crime. But Bultman works in an AG's unit that investigates consumer fraud, which is a crime.