Monday, January 7, 2008

Legal Victim Assistance Project
Telephone: (561) 488-7678
Facsimile: (561) 488-2861
Program Manager: Meryl M. Lanson

January 2, 2008

Senator Charles E. Grassley
135 Hart Senate Building
Washington, D.C. 20510


Dear Senator Grassley:

Your solid stance on Protecting Tax Dollars Against Fraud, published January 20, 2006, along with your career commitment to America’s promise that the government will be of, for, and by the people encourages us that we might turn to you. We turn to you because we are sure you recognize and agree with the premise that a private citizen can be extremely helpful to the federal government. Citizen assistance, when done voluntarily, can be an extremely valuable resource:

- By providing research at no cost to the federal government.

- By providing analysis of information at no cost to the federal government.

- By providing solutions and recommendations at no cost to the federal government.

On June 18, 2007, we submitted complete packages to every member of the Senate and House Judiciary Committee – Certified Mail, Return Receipt Requested. It was confirmed that every member received our work. In our package we told firsthand stories of FRAUD and ABUSE in the BANKRUPTCY COURT. We recommended that action be taken to prevent the genesis of all fraud and abuse in the Bankruptcy System by deterring “fraud on the court.” We identified this species of fraud as the primary reason for the loss of judicial accountability and fairness in the bankruptcy system as well as in other areas of the law.

Enclosed please find a copy of the initial correspondence. Since the submission of our initial package, through the “Legal Victim Assistance Project,” a 501(c)(3) organization, we have continued to perfect our observations and recommendations through research and hands on assistance to victims of these frauds and abuses; “victims” whose lives were permanently destroyed through a “corrupted” bankruptcy system.

It would be improper and incorrect for us to say that the entire system is corrupt; however, if there is ANY CORRUPTION, the system has failed. Citizens are relying on the bankruptcy system to reorganize and recover when financially challenged.

If one citizen is damaged by corruption of the bankruptcy system, the system has failed. We believe that any and all corruption stems from “fraud on the court” perpetrated by officers of the court. That was the theme of our initial correspondence to Congress.

The second attempt to influence change in the bankruptcy system is the Report entitled “Legal Victim Assistance Project – Report on Fraud and Abuse in Bankruptcy,” which is also enclosed with this letter. This Report discusses the failure of the U.S. Trustee Program to prevent fraud and abuse in the bankruptcy system. It also makes the accusation that the bankruptcy system is corrupted, and gives, as an example, a specific bankruptcy case, Baron’s, Case No. 97-25645-BKC-PGH, Region 21. This specific case has irrefutable evidence of “fraud on the court,” irrefutable evidence of the U.S. Trustee’s failures, and yet, after almost 10 years since the discharge, after a fraud trial, after countless notices to the U.S. Trustee, not one corrective step has been taken to recover assets fraudulently distributed.

The role of the U.S. Trustee in Bankruptcy is clear in the following excerpt:

Roberta A. DeAngelis, Acting United States Trustee for Region 3 United States Department of Justice before the Subcommittee on Commercial and Administrative Law – Committee on the Judiciary United States House of Representatives July 21, 2004

“Although only the bankruptcy court may approve employment and compensation, and although creditors and parties in interest may object to employment and compensation, the United States Trustee Program considers its authority to review these applications to be an important tool in carrying out its mission to uphold the integrity and efficiency of the bankruptcy system. Congress has prescribed a comprehensive regimen of legal standards and procedures governing the retention and compensation of professionals employed in Chapter 11 cases. Bankruptcy courts are expressly required to review and approve the employment of all professionals and the payment of all fees and expenses. The responsibility to identify non-compliance with these standards and procedures in Chapter 11 cases is a responsibility shared among the courts, the United States Trustees, and other participants in the bankruptcy system.”

As a direct result of the U.S. Trustee’s failure in the case of Baron’s, a fifty year old multi-generational family owned company, was lost. We live in an “economic world.” The unnecessary loss of Baron’s through fraud and abuse in the bankruptcy system cannot be viewed in terms of the loss to the owners of Baron’s alone – that is the tip of the iceberg. The real losses caused by FRAUD and ABUSE go further in a cascade of damages emanating from but this one case. Let’s look at an Economic Estimation of the Loss of Social Capital Damages to American Society arising from the failed reorganization of Baron’s.

- Baron’s was an S-Corporation producing taxable income to its owners and therefore Income Tax Payable of $100,000.00 per year.

Loss of 10 years Income Tax equals $1,000,000.00.

- Baron’s employed 200 workers with a payroll of $4,000,000.00 per year. The lost FICA tax employers share over the past 10 years at 7% (rounded) $280,000.00 x 10 years equals $2,800,000.00.

- Baron’s employees’ share of FICA would be mitigated by re-employment of workers; however, many workers were unable to find re-employment. Between unemployment compensation paid, and lost income tax, and lost employee share of FICA, it is estimated that the COST TO THE FEDERAL GOVERNMENT over 10 years equals $2,300,000.00.

- Baron’s paid Sales Tax to the State of Florida. Baron’s sales per year were $20,000,000.00 at 6% over 10 years equals $12,000,000.00.

- Baron’s also supported non-profit organizations through the Corporate entity or the Owners estimated at $20,000.00 per year over 10 years equals $200,000.00.



In the attached Report, reference is made to the 30,000 notices of FRAUD and ABUSE in fiscal year 2002. If 3% had a similar pattern of corruption, the loss in Social Capital would be over $18 billion for 2002 alone. The same Report that estimated the 30,000 reports was actually proud of recovering $160 million. That is an abysmal result.

We are seeking HEARINGS on this topic. We have the cases, the victims who will testify, and the research that should save significant investigative dollars. There is no topic more pertinent to the well being of the public than the issue of “FRAUD ON THE COURT.” Americans must depend on their courts to be fair, impartial and deliver honest services.

You gave birth to the anti fraud legislation describing the U.S. Department of Justice as the federal government’s best weapon against fraud. You asked for whistleblowers to come forward and expose wrongdoing. We have provided the evidence, the laws, and the path voluntarily. We have had no contact from any member of Congress. As we know your fine work, what we are handing over fits the bill. Please read all of the attached documents in light of your quote from January 20, 2006:

“In the last two decades, I have learned valuable lessons in my effort to expose financial mismanagement and outright fraud against the federal government. It takes constant vigilance by hard-nosed lawmakers, old-fashioned journalistic snooping by members of the media and courageous do-gooders working on the inside to unearth waste, fraud and abuse. I’m committed to continued work as a taxpayer watchdog in Washington.”
We are hoping that you will be the one Congress Person who will care about this issue and who will make use of the work we have done.

Very truly yours,

Meryl M. Lanson / Karin Huffer

Enclosures: With Certified Copy Only

1) June 18, 2007 Correspondence

2) Legal Victim Assistance Project – Report on Fraud and Abuse in Bankruptcy

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