June 18, 2007
United States Senate Committee on the Judiciary and
United States House of Representatives Committee on the Judiciary Washington, D.C.
Dear Members of Congress:
In 1993, I thought I was living the American dream. I was married for twelve years to the most decent man I had ever met. We had a beautiful two year old son. We had a thriving closely-held business, Baron’s, which afforded us a very nice lifestyle. In addition, and most satisfying, we were able to employ two hundred people providing them, and their families, with security as a result of our fifty year old well respected and established business. We had wonderful relationships with our vendors, and we took tremendous pride in the philanthropic endeavors we engaged in. I can’t begin to tell you how I felt, this girl from Brooklyn, who came from humble beginnings, to be able to help in making the dreams of so many less fortunate become a reality.
In December of that year, my life, as I knew it, would completely come apart. On the second day of that month in 1993, we discovered that we were victims of embezzlement carried out by our most trusted employee, our comptroller. An embezzlement of over $3 million. An embezzlement that slowly drained working capital. An embezzlement of monies that should have been my husband’s and mine. Subsequently, we learned that our personal and business accounting firm, Morrison, Brown, Argiz, to whom we were faithful and loyal clients for many years, had negligently failed to detect the embezzlement in a five year series of certified audits.
We were in shock. We were betrayed. We were unprotected and we were ill-advised. Betrayed by our comptroller, David Peterson, and unprotected and ill-advised by our accounting firm. To make matters worse, our accounting firm, Morrison, Brown, Argiz, tried to cover up their negligence and avoid liability, by ordering the destruction and changing of work papers in the completed audit files.
At this point in time, we did what everyone else does in situations like these, we hired attorneys to help us recover what was taken from us by our comptroller and the negligence of our accountants. We hired attorneys, Ronald C. Kopplow and Marc Cooper to represent our company, Baron’s, and our individual interests. We trusted Mr. Kopplow and Mr. Cooper to diligently and effectively recover what was lost and stolen from us. We trusted them again when, in 1997, Mr. Kopplow suggested we speak with a bankruptcy attorney. He recommended that we speak to Ms. Sonya Salkin. Ms. Salkin was not only a bankruptcy attorney but also a Chapter 7 Panel Trustee. The embezzlement certainly had an impact on Baron’s well being. However, Baron’s was capable of surviving but for litigation advice given to us by our attorneys.
The litigation advice turned a minor problem into a major catastrophe and ultimately the destruction of Baron’s by the filing of an unnecessary, deviously motivated Chapter 11. We never would have imagined that these three attorneys would place their interests ahead of their clients, and certainly we never knew that the reason bankruptcy was recommended for Baron’s was to hide the malpractice of attorneys Kopplow and Cooper; legal malpractice arising from failure to pursue an action on behalf of my husband and me within the statute of limitations. Further, we had no protection in the bankruptcy, when Salkin became Kopplow’s and Cooper’s co-conspirator. A co-conspirator who would aid and abet covering up the conflicts of interest of Kopplow and Cooper. Our beloved, vital company was being devoured.
When I became aware that something was terribly wrong, that our attorneys, along with other members of the bankruptcy bar, and an undisclosed creditor connection, were “feeding themselves from the asset laden carcass of Baron’s” and destroying us, I immediately urged special counsel and our general counsel to come clean and make full and complete disclosure to the bankruptcy court of their connections and conflicts of interest. They refused to do so.
Determined to bring the undisclosed connections to the court’s attention, I filed an Affidavit to be heard in bankruptcy court. At that hearing on my Affidavit, special counsel and general counsel and all the other professionals, stayed silent about the undisclosed connections and conflicts of interest, the “fraud on the court.” As a result, the Honorable Paul G. Hyman, Jr. signed orders and allowed fees in violation of the bankruptcy code. These fiduciaries of the bankruptcy court took millions of dollars they were not entitled to. They completed the “fraud on the court.”
The bankruptcy ended in 1999, and between that year and 2004, it, for all intents and purposes, was closed. Through personal investigation sparked by the activity of the greedy attorneys, I discovered the meaning of “fraud on the court” as to statute of limitations and a citizen’s right to redress. On March 11, 2005 I filed an Emergency Motion, Pro-Se, to Reopen Baron’s Bankruptcy. On March 17, 2005 the Honorable Paul G. Hyman, Jr. responded to my motion by ordering Baron’s bankruptcy (Case No. 97-25645-BKC-PGH) reopened for the specific purpose of determining whether “fraud on the court” occurred pursuant to Bankruptcy Rule 2014.
Quoting from Judge Hyman’s Order Denying The Attorney’s Motion for Summary Judgment and Denying Debtor’s Cross Motion for Summary Judgment (signed November 30, 2005), bottom of Page 10 continuing on Page 11:
“Another argument raised in the professionals' objections was that thesanctions motions were time barred under Fed. R. Civ. P. 60(b)3, whichprovides in relevant part: On motion and upon such terms as are just, the court may relieve a party....from a final judgment, order, or proceeding for the following reasons: (l) mistake, inadvertence, surprise or excusable neglect; (2) newly discovered evidence, which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud... misrepresentation, or other misconduct of an adverse party...or (6) any other reason justifying relief from the operation of the judgment. The Motion shall be made within a reasonable time, and for reasons (1), (2), and (3) not more than one year after the judgment...[or] order...was entered or taken.
Id. At 187. The Bankruptcy Court concluded that the disclosure obligation mandated by the Bankruptcy Code and Rules "implicates a public policy interestjustifying relief...under Rule 60(b)(6)." Id. at 188 (quoting In re Southmark Corp., 181 B.R. 291, 295 (Bankr. N.D. Tex. 1995). The Bankruptcy Court observed that it was alleged that the professionals failed to disclose conflicts of interest that would have barred their retention.
The Bankruptcy Court found that if this were true, it would constitute fraud on the court warranting relief even though more than a year had passed since the professionals were retained and their fees approved. As a result, the Bankruptcy Court found it appropriate to consider the sanctions motions. In this case, Debtor has alleged that the Attorneys failed to make appropriate disclosures under Bankruptcy Rule 2014 and 11 U.S.C. 327(a). If these allegations are true, this inadequate disclosure by the Attorneys may constitute fraud on the Court, which must be addressed. The Cross Motion does not constitute an impermissible collateral attack on the confirmation of the Plan.
The Court agrees with the eToys decision that it has jurisdiction after confirmation of the plan to consider issues relating to the Attorneys’ alleged non-disclosure that took place pre-confirmation. As a result, the Court finds that the Debtor is not barred from raising any issues of alleged non-disclosure by the Attorneys.”
What I have come to learn, as a Pro-Se advocate, is that precedent is supposed to be set by previous rulings and that those rulings are the Court’s interpretation as to how to apply the law. I also have come to learn that “fraud on the court” is a particular species of fraud that is extremely difficult to prosecute because of cronyism, fraternalism, and protectionism, that the legal community affords its members.
On January 29, 30 and 31st of this year, I participated in the Court’s evidentiary trial. I thought the Court would diligently explore the facts presented in light of its pre-trial order and its order would turn thereon. I firmly believed, upon completion of the trial, that justice would finally be served. What I did not recognize and could not comprehend was the effect that a “fraud on the court” determination would have on the bankruptcy bar in South Florida, and also the unraveling of all of the final rulings made as a result of that “fraud on the court.” Please note that Judge Hyman, who made all the rulings in the 1997 bankruptcy of Baron’s, is the same Judge who reopened the case, denied Summary Judgments and presided over the evidentiary trial. And so the same Judge who was defrauded now faced the huge burden that would be created by a “fraud on the court” ruling. In addition to that burden, I believe that because of the close knit relationships developed in the bankruptcy bar, it becomes very difficult to effect the prosecution of people who appear before you on a regular basis. Whether this is difficult is not the issue - what is just and right is! Judges must have the courage to correct wrongs that are against public policy in spite of relationships.
Perhaps, in reopening the bankruptcy, Judge Hyman opened Pandora’s Box, realized what lay inside at the evidentiary trial, and then chose to close the box rather than release the secrets. Judge Hyman was able to close the box by “re-interpreting” the disclosure rules and making his own judgment of the intentions of the parties. “Fraud on the court” should not be left to interpretation by anyone. The actions of the officers of the court must speak for themselves. Re-interpreting the rules to protect officers of the court to the detriment of the public destroys the entire judicial system.
Several damages have occurred as a result of this re-interpretation. A mid-stream change of interpretation, if you will. The first damage results from reliance on precedent established in eToys, and cited by Judge Hyman. The damages are the costs attributable to prosecuting the case through loans, in excess of $120,000.00, my husband and I made to the bereft debtor. These loans were made in contemplation of a ruling of “fraud on the court” if Judge Hyman followed his own declaration of precedent in eToys. We relied upon precedent established in eToys. The second set of damages occurred when Judge Hyman made a decision to bifurcate the case into a case of liability and a case for damages. This decision came upon the defendant attorneys’ filing of a Motion to Protect witnesses from deposition. By this action, I was prevented from discovery. Discovery that was absolutely essential to prove intentions of the perpetrators. I made no objection to the bifurcation as intent was never the issue. Clearly, on January 8, 2007, at a pre-trial hearing, the Court stated: “I’ll tell you now, the only issue is disclosure. What should have been disclosed and what was disclosed, that’s the issue before me.” We relied on the Judge’s statement at the pre-trial hearing.
What happened in our case is rampant in bankruptcy cases around the country. The Courts rely on attorneys to act with honor and trustworthiness. To tell the truth, know the law, and protect the sanctity of the process is the responsibility of these officers of the court. To allow violations of any of these tenets to obstruct justice cannot and must not be tolerated.
When the Florida business community lost Baron’s, a fifty year old company, with revenues in excess of $20 million a year, the effect was wide ranging and exponential. The fact that two hundred people were put out of work means that those two hundred people were placed in a predicament of applying for unemployment, finding new means of employment, some of the employees due to age would run into difficulty, and certainly the employees losing their health insurance and retirement funding, placed a significantly greater burden on the community. Baron’s Stores, through their leases, purchase of manufactured goods, advertising, professional services and all of the other wide ranging expense items redistributed $20 million of gross revenues. This was also lost to the community. Baron’s Stores was a successful operation and Baron’s Stores was generous to the community. It helped numerous charitable causes and participated in events through sponsorship and stewardship that multiplied the contribution many times over.
Additionally, the loss of Baron’s has effected the economy of the country. Hard working people and honest debtors sustained emotional and financial destruction, all for the benefit of a small group of greedy attorneys. In the destruction of Baron’s there was a tradeoff of over $500 million in economic benefit lost to Florida’s business community, and beyond, in exchange for $2 million in ill-gotten fees paid to attorneys who accomplished their goal by perpetrating a “fraud on the court.”
My son is now sixteen years old. He has been denied financial security that his grandparents and parents worked so hard to bequeath and provide for him. My son has been denied my undivided devotion as a mother since he was two. I have been denied a normal life forced to understand why and how things like this happen, and then working towards getting back what was taken from us so cruelly and inhumanely.
Judge Hyman’s Order was signed on April 12, 2007. Our Appeal, Case No.: 07-cv-60770-AJ, in the United States District Court for the Southern District of Florida, was filed on June 15, 2007.
My family and I have suffered financial ruin and legal abuse syndrome for more than thirteen years. As a result of my own experience, I am determined to assist in enacting legislation on behalf of my fellow Americans so that no one who lives the American dream must wake up to the nightmare of losing it all as a result of “fraud on the court.”
Meryl M. Lanson
Monday, July 2, 2007
June 18, 2007