The U.S. Trustee, who oversees bankruptcy court, says Berry has found a new front man in longtime friend Gary Brown, a Chandler attorney who works out of his home. Berry has admitted in court that he's been paying for TV ads to generate business for Brown.
Now bankruptcy officials want Berry held in criminal contempt.
But Berry, who last week convinced a federal judge to allow him more time to prepare for the contempt hearing, is mounting a legal offensive of his own.
On September 12, Berry and his firm, People's Paralegal--also known as People's Services--sued 10 local bankruptcy officials and attorneys, accusing them of conspiring to try to ruin him and his firm. Filed in United States District Court, the 23-page lawsuit in part claims:
"Defendants, with the purpose of preserving and protecting the business of bankruptcy attorneys in this district, restricting competition in the market, obliging consumers to pay more for bankruptcy services than was reasonable or necessary, did . . . combine, consort or conspire to put plaintiffs out of the consumer bankruptcy filing and assistance business."
That's one way of putting it.
A New Times story ("Going for Broke," July 17) told it differently. It described how numerous area debtors lost their homes and cars after taking People's Paralegal's illegal and often misguided advice. (It's against the law for document-preparation services to give legal advice.)
It also told how Arizona's federal bankruptcy judges had been slow to grasp the extent of the crisis, and even slower to enact remedies.
The Arizona Attorney General's Office started a criminal investigation into Berry's business practices after the story was published. The investigation is ongoing.
Dick Berry is a disbarred Tempe attorney and white-collar felon whose company took the bankruptcy market by storm in 1996 with a blitzkrieg of advertising. Since then, People's Paralegal has lured more than 2,000 financially troubled consumers by promising cheap, quality service--without lawyers.
The story also showed how Berry and People's Paralegal overbilled its customers by about $300,000 from late January to last May 5, when Judge T. Redfield Baum banished the firm from Arizona's bankruptcy courts. Berry was ordered to repay that amount weeks ago: He hasn't remitted a cent, without repercussion.
Even before Baum's ruling, Berry had contracted with Tempe attorney Fred Taylor to serve as his front man at bankruptcy court. Though a neophyte in bankruptcy law, Taylor almost overnight became the attorney of record for hundreds of Valley debtors. His overwhelming workload and inexperience in the bankruptcy arena led to untold legal errors and omissions on behalf of his new clients.
Taylor faces disciplinary proceedings at the State Bar of Arizona in connection with his ill-fated stint with Berry.
On August 14, chief bankruptcy judge George Nielsen Jr. fined Berry $100,000 and held him in civil contempt. Berry ignored Nielsen's deadline for paying the fine. Over the strong objections of the United States Trustee, the judge refused to sanction Berry, instead urging conciliation.
At a hearing last Friday, however, Nielsen hinted he may begin to treat Berry with more than kid gloves. During the hearing, Berry attempted to stall for time in settling his $300,000-plus debt with the court.
Representing himself, Berry asked Nielsen for a new evidentiary hearing on the merits of the case against him. The judge denied it. Berry argued that his corporation--People's Paralegal--not he personally, should be responsible for any monies owed. The judge informed Berry he was personally responsible.
Whether Berry will pay anything remains to be seen. U.S. Trustee Adrianne Kalyna--one of Berry's chief opponents--told Nielsen at a previous hearing that she doubted whether Berry will do so.
At a separate hearing on Friday, the U.S. Trustee and lawyers for the Chapter 13 bankruptcy trustees asked Judge James Marlar to hold Berry in criminal contempt.
"Berry has continued to engage in document preparation, including using attorneys to front for him," the trustees' written memorandum to Marlar alleged. "After the [Fred] Taylor front crashed and burned, Berry turned to a longtime friend and attorney, Gary C. Brown. Like Taylor, Brown did few bankruptcy cases, but is now one of the largest filers of Chapter 13 cases . . ."
Brown, the memorandum continued, runs his law business out of his home in Chandler. But, the trustees claimed, Brown's new business address is a private post-office business--across the street from Dick Berry's Tempe office.
Chapter 13 trustee Russell Brown--no relation to Gary Brown--told Marlar that Berry admitted at another recent hearing that he's paid for ads now appearing on local television stations.
The ads for "Low Cost Bankruptcy Services Law Office" display a phone number that goes to Gary Brown's home office. In response, Berry asked for an evidentiary hearing, "rather than parry and thrust here with Mr. Brown's fictions."
Berry's new quasi-associate, attorney Gary Brown, has learned about bankruptcy law in a personal way:
Bankruptcy-court records show Gary Brown personally has filed for protection under the Chapter 13 bankruptcy laws six times since 1994. The most recent filing was September 17, less than three weeks after his new ads started to appear on local television.
Each of Brown's previous five bankruptcy cases has been dismissed because he didn't file the required paperwork, or failed to pay his $160 filing fee.
Judge Marlar asked Berry if he's continuing to do legal work, in violation of three court orders which bar him from acting as a document preparer, whether as an independent contractor or an employee.
"Obviously, I can work as an employee for an attorney," Berry replied.
"Not doing bankruptcy work."
"But I'm not an employee anyway. . . . I don't give a hoot if I ever do a bankruptcy again."
At the end of the hearing, Marlar allowed Berry to buy more time on the criminal-contempt front. He told the opposing sides to submit paperwork, which means it likely will be weeks, if not longer, before the criminal-contempt case is heard.