Debt Reckoning

In late September, New Times detailed the troubles of Phoenix attorney Ted Segal--including allegations by several former clients that Segal had defrauded them of their life savings ("The Living Lawyer Joke," September 26).

The clients, mostly frugal but financially unsophisticated working-class people, had been persuaded by Segal to "invest" their savings with him. When payments were late or checks bounced, clients say, they demanded their money back in vain.

New Times also reported that Segal had failed to list many of these unpaid client debts in a pending bankruptcy case he and his wife, Helene "Honey" Segal, filed last year in Phoenix. (Federal bankruptcy law requires a complete listing of all debts.)

On October 7, a few days after the story was published, Segal submitted to the bankruptcy court an "amended" list of $526,000 worth of additional debts--including $288,500 in client debts that had been reported by New Times the week before.

The "amended" list of debts submitted by Segal then prompted bankruptcy trustee Robert Davis to ask the court not to discharge any of Segal's debts.

"What we're trying to do is tell the judge we think there are abuses [of bankruptcy law] here," says Davis. He declines to comment on whether he has asked federal authorities to investigate those "abuses."

Segal, 61, is charged with other abuses in other courtrooms.
He has pleaded not guilty to criminal charges, including attempted arson, forgery and fraud, in pending cases in Superior Court.

And Segal's license to practice law was suspended last summer--he faces an upcoming hearing and possible disbarment before the State Bar of Arizona for allegedly defrauding clients and misappropriating their money.

Segal did not respond to a request for an interview with New Times made through Allen Bickart, the attorney defending Segal in the criminal cases. Bickart himself would not comment.

Honey Segal, in the meantime, seems anxious to separate herself from her husband's debts. And her husband. The Segals are in the process of divorcing, and Honey claims through her bankruptcy attorney Charles Sabo that she was ignorant of her husband's investment schemes.

"Honey doesn't know about these things," says Sabo, who says he was surprised when, following the New Times article, Segal filed the "amended list" of debts totaling $526,000 with the bankruptcy court.

"My job," says Sabo, "is to try and ensure Honey doesn't get stuck with debts she wasn't involved in."

If bankruptcy Judge Robert Mooreman rules that the Segals cannot discharge their debts in bankruptcy proceedings, the case will be closed. And the Segals will still owe their debts.

When the Segals filed for bankruptcy in 1995, they claimed debts of about $455,775. Ted Segal's new list ups the sum owed to almost $1 million.

The assets that trustee Davis has been able to locate, in contrast, have amounted to about $5,000.

"I can't see them [the Segals] paying 3 cents on the dollar," says Davis.
"Every time you turn over a rock, it [the debt] gets larger," says Davis.
"This gentleman had some extraordinary dealings to say the least."

No one knows that better than retired service-station worker Wes Powell, who showed up on Segal's amended creditor list in the bankruptcy case.

Powell says Segal approached him in 1991 with a deal to "invest in an East Coast building." Eventually, Powell invested his entire life savings, $85,000, with Segal. The lawyer, Powell says, promised he could have his money back whenever he demanded it.

But that's not what happened. Checks bounced. Payments were late. Finally, Powell demanded his money back in 1995, but he says Segal ignored his certified letter and stopped returning telephone calls.

Powell holds little hope of ever recovering his $85,000.
And he regrets that he failed to ask Segal for some sort of investment prospectus before he handed over his money.

"If Segal had been a regular guy," says Powell, "I would have asked him for proof [the investment was sound]."

But he thought he could trust Segal because, after all, Segal was an attorney.

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Terry Greene Sterling