UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF LOUISIANA LAKE CHARLES DIVSISION

Transcription

1 UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF LOUISIANA LAKE CHARLES DIVSISION IN RE: ) Miscellaneous Proceeding ) Henry G. Hobbs, Jr., ) No. 16- Acting United States Trustee ) for Region 5 ) Plaintiff ) ) vs. ) ) Christian D. Chesson; ) Christian D. Chesson, ) (A Professional Law ) Corporation) ) Defendants ) UNITED STATES TRUSTEE'S COMPLAINT FOR SANCTIONS AGAINST CHRISTIAN D. CHESSON AND CHRISTIAN D. CHESSON (A PROFESSIONAL LAW CORPORATION) The Acting United States Trustee for Region 5, Henry G. Hobbs, Jr., ("UST") by and through undersigned counsel, in this miscellaneous proceeding seeks findings of fact and a determination of the appropriate sanctions against Christian D. Chesson and Christian D. Chesson (A Professional Law Corporation) for systematic falsification of his bankruptcy clients required credit counseling, as well as other misconduct, and in support of which alleges: JURISDICTION 1. The Plaintiff is the Acting United States Trustee for Region The Defendants are (1) Christian D. Chesson, an attorney licensed to practice law in the #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 1 of 24

2 State of Louisiana and before the United States Bankruptcy Court for the Western District of Louisiana ( the Western District ), and (2) Christian D. Chesson (A Professional Law Corporation) a corporation under the laws of Louisiana of which Chesson is the president, treasurer and director. Christian D. Chesson (A Professional Law Corporation) may be served through Chesson as its agent at 1 Lakeshore Dr., Suite 1800, Lake Charles, LA (Chesson and his corporation are referenced together as Chesson throughout.) 3. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and Venue is proper pursuant to 28 U.S.C. 1409(a). This matter is a core proceeding pursuant to 28 U.S.C. 157(b)(2)(A). 4. The Court also has jurisdiction over this matter under its inherent authority to "control admission to its bar and to discipline attorneys who appear before it." Chambers v. NASCO Inc., 501 U.S. 32, 43 (1991). Moreover, the Court has the inherent power to determine whether it has been the victim of fraud. Id. at The United States Trustee has standing to seek relief in this matter as a party in interest in the bankruptcy cases described herein pursuant to 11 U.S.C. 105(a) and 307. The United States Trustee has standing to seek the appropriate remedies against attorneys who appear before the Court pursuant to 11 U.S.C. l05(a), and This is a miscellaneous proceeding seeking findings of fact and determination of appropriate sanctions against Chesson pursuant to 11 U.S.C. 105(a), and 526. FACTS AND BACKGROUND 7. Chesson was admitted to practice in Louisiana in He holds himself out as an experienced consumer bankruptcy attorney. 8. Chesson files both chapter 7 and chapter 13 cases, principally in the Lake Charles #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 2 of 24

3 division of the Western District. Since December 1, 2013, Chesson has filed a combined total of at least 1,325 chapter 7 and 13 cases. 9. Upon information and belief, Chesson is currently assisted in providing consumer bankruptcy assistance by one other attorney, Wade N. Kelly, and several non-attorney staff employees. 10. Chesson and his firm are debt relief agencies as defined by 11 USC 101(12A). 11. In order to be eligible for bankruptcy relief, the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act requires individuals to receive a briefing from an approved nonprofit budget and credit counseling agency ( credit counseling agency ) within 180 days prior to filing a bankruptcy petition. 11 U.S.C. 109(h). The briefing must outline the opportunities for available credit counseling and assist the individual in performing a related budget analysis. Id. 12. An individual debtor must file with his or her bankruptcy petition a certificate from a UST-approved credit counseling agency describing the services provided to the debtor in the required credit counseling briefing. ( Counseling Certificate ). 11 U.S.C. 521(b), see, e.g., Ex. A. The former Voluntary Bankruptcy Petition (Superseded December 1, 2015) had as a required attachment (Official Form 1, Exhibit D) the Individual Debtor s Statement of Compliance with Credit Counseling Requirement, which required debtors to verify they had taken a pre-filing credit counseling briefing and possessed a Counseling Certificate. Part 5 of the current Voluntary Petition for Individuals Filing for Bankruptcy (Official Form 101) requires debtors to verify that they have taken a pre-filing credit counseling briefing and received a Counseling Certificate. (Referred to below, in either the superseded or current format, as Counseling Statement. ) See, e.g, Ex. B at 1-2 (superseded format) & (current format). 13. Credit counseling agencies are reviewed and approved by the UST. 11 U.S.C. 111(b) #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 3 of 24

4 and (c). UST regulations provide that the credit counseling briefings are typically of at least 60 minutes in duration and should provide the client with a written analysis of the client s current financial condition, which analysis shall include a budget analysis, consideration of all alternatives to resolve a client s credit problems, [and] discussion of the factors that caused such financial condition. 28 C.F.R (b)(12). 14. UST regulations provide that credit counseling agencies can provide briefings in person, by phone or by the internet. If credit counseling is provided by phone or internet, the credit counseling agency must confirm the identity of the individual receiving the counseling by obtaining unique personal identifiers at registration and requiring the individual to provide the unique personal identifiers during the counseling session. 28 C.F.R (h). 15. Upon information and belief, Chesson has typically collected the cost for the credit counseling briefing from his clients pre-petition and purchased the credit counseling from a credit counseling agency on their behalf. At some point during December 2013, Chesson began purchasing credit counseling for all or almost all his consumer bankruptcy clients from Abacus Credit Counseling ( Abacus ), a California company that is an approved credit counseling agency. 16. Abacus provides credit counseling briefings over the internet through its website, It charges or has charged $25 for providing these briefings. Abacus allows prospective joint debtors to take the course together. To verify the identity of individuals taking the counseling, as mandated by UST regulation, Abacus requires individuals registering to take the counseling by internet to provide the last four digits of their social security number and to select a security question and answer. Ex. C at 5-8. The security question is chosen from a list of options in a drop-down menu, the first of which is What is your city of birth? Id. at #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 4 of 24

5 17. Abacus provides a list of disclosures to individuals registering for counseling by the internet, one of which states that the credit counseling briefing is a minute course. Id. at 11. Abacus records the time at which an individual finishes registering for credit counseling and the time at which an individual completes her counseling session, allowing the length of the counseling session to be determined in most cases. See Ex. D. The time at which the counseling session is completed is also reported in the Counseling Certificate issued by Abacus. See Ex. A. The internet briefing amounts to at least 30 separate computer screen pages, in which the individual is supposed to input his or her financial information and read the budget analysis of that information and other credit counseling material provided by Abacus. See, e.g. Ex. E. 18. After an internet counseling briefing concludes, Abacus verifies the identity of the individuals taking the counseling through a typed online chat session with an Abacus credit counselor, who asks for the last four digits of their social security number and for the answer to the security question the individual selected at registration. See Ex. F. After the identity verification, Abacus provides a Counseling Certificate for the individual. Both before the counseling briefing begins and after it concludes, Abacus requires individuals taking counseling over the internet to declare under penalty of perjury they are the ones taking the counseling and have provided all the personal and financial information for the counseling. Ex. C at Upon information and belief, starting no later than some point during or soon after December 2013 and continuing until at least June 2016, Chesson instructed or negligently allowed his employees to impersonate a substantial portion of his bankruptcy clients online and take the credit counseling briefing from Abacus without the clients participation, from the physical location of Chesson s law office. Chesson s employees then obtained false Counseling Certificates from Abacus. Chesson s employees also obtained false Counseling Statements from #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 5 of 24

6 his unaware clients by asking them to sign the Counseling Statements as part of a series of documents signed shortly before filing. The false Counseling Certificates and false Counseling Statements were filed with the Court using Chesson s ECF login. 20. Upon information and belief, Chesson instituted or negligently allowed this fraudulent practice to facilitate his firm s business model of processing large numbers of clients in as short a time as possible. Instead of taking the trouble to ensure clients actually had credit counseling, it was faster and more convenient for Chesson s employees to obtain Counseling Certificates by impersonating his clients online. 21. Upon information and belief, Chesson and his office falsified his client s credit counseling in at least the following 11 proceedings filed in the Bankruptcy Court for the Western District of Louisiana. Case Number Debtor Name Filing Date Fodrie, Karen 7/25/ Cooley, Roger 11/21/ Simon, Emma 2/24/ Williams, Charles & Terri 3/18/ Landry, Michael & Jamie 3/19/ Stansberry, Wayne & Patricia 3/31/ Jackson, Ryan & Angel 4/28/ Williams, Justin & Lesley 5/8/ Shortt, Paul & Shellie 8/5/ Brignac, Cynthia 10/23/ Vidrine, Fred 4/8/2016 The debtors in the 11 proceedings were all assisted persons as defined by 11 U.S.C. 101(3). 22. For each of the 11 proceedings, Chesson filed a Disclosure of Compensation of Attorney for the Debtor(s) Attorney that stated he had collected $25 to pay for credit counseling. For each of the 11 proceedings, Chesson filed a Counseling Certificate obtained from Abacus. Ex. A. For each of the 11 proceedings, Chesson filed a Counseling Statement in which the debtors #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 6 of 24

7 purportedly verified that they had a credit counseling briefing within 180 days prior to the filing of their bankruptcy petition and that they possessed a Counseling Certificate. Ex. B. 23. Nine of the 11 proceedings have subsequently been dismissed, and the debtors involved are now represented by a new bankruptcy attorney. In the two proceedings still pending, (Cooley, ; Fodrie ), debtors have also enrolled a new attorney and terminated Chesson s representation. Represented by their new attorneys, debtors from each case have reported to the UST that they did not take the required credit counseling prior to Chesson filing their bankruptcy and in particular that they did not have any credit counseling briefing on the internet by Abacus prior to Chesson filing their bankruptcy. Upon being shown the transcripts of the internet chat sessions in which Abacus allegedly verified their identity (Ex. F), the debtors stated they did not provide the recorded chat responses and did not take part in the chat session. Debtors who reviewed examples of Abacus counseling material (see, e.g., Ex. E) did not remember seeing the material prior to Chesson filing their bankruptcy. 24. Upon information and belief, for each of the 11 cases, Chesson s employees impersonated the debtors by registering and taking the counseling sessions online in the debtors names without the debtors involvement. Chesson employees participated in internet chat sessions with Abacus employees and falsely verified the debtors identities. 25. The impersonation of the debtors by Chesson s employees is readily apparent from the responses the debtors supposedly provided in the internet chat sessions. See Ex. F. For each of the credit counseling briefings, the debtors are recorded as choosing the same security question at registration: What is your city of birth? Even more remarkably, all the debtors are recorded as having verified their identity via internet chat by providing the same answer: Lake Charles. Id. As might be expected, some of the debtors for the 11 proceedings were in fact born #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 7 of 24

8 elsewhere. Roger Cooley was born in Portsmouth, Virginia. Emma Simon was born in Kinder, Louisiana. Patricia Stansberry was born in Ruston, Louisiana. Wallace Stansberry was born in Franklin, Louisiana. Paul Shortt was born in Sulphur, Louisiana. Fred Vidrine was born in Lafayette, Louisiana. To believe these individuals participated in the credit counseling sessions, one would need to believe they forgot where they were born. Notably, Chesson and his employees, who took actually took the counseling in the 11 cases, would not have had access the debtors actual city of birth from their bankruptcy documents, unlike other information provided during the purported credit counseling briefings, such as personal financial data and social security numbers. 26. Other records retained by Abacus support the conclusion that Chesson s office falsified credit counseling. Abacus records provide the date and time between completion of registration and completion of the purported briefings. 1 See Ex. D. As shown below, nine of the 11 purported briefings took less than 30 minutes, with the majority of these lasting 15 minutes or less, including two at less than 10 minutes, despite the sessions being designed by Abacus to last between minutes. Upon information and belief, the speed at which Chesson s employees could complete the counseling and obtain certificates was a prime impetus for the falsification of 1 The debtors for two of the 11 proceedings (Cynthia Brignac, ; Paul and Shellie Shortt, ) hired new counsel who also used Abacus for his clients credit counseling. Their new attorney instructed the debtors to take the counseling with Abacus once he found they had not actually taken it while represented by Chesson. For these debtors, Abacus recorded the counseling as being restarted, so the registration date and time is the time Chesson s office registered the clients with Abacus but the completion time retained by Abacus is the date and time the debtors completed counseling with their new attorney some months later. Ex. D at 15,17. The completion time used by this complaint for these debtors counseling sessions while represented by Chesson is the date and time on the Counseling Certificate filed for them by Chesson. Ex. A at 1, For Ms. Brignac, for whom Chesson filed a Counseling Certificate dated October 23, 2015, an Abacus employee recorded the following statement on December 9, 2015: Client stated they were not the one who took the course in October and wasn't comfortable using that certificate. Ex. D at #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 8 of 24

9 the counseling. (Abacus records for the Michael and Jamie Landry briefing and the Justin and Lesley Williams briefing show two days and five hours, respectively, between registration and completion. The UST believes these counseling sessions were halted for a time after registration, rather than counseling being continuous for those lengths of time.) Case No. Debtor Name Time between Registration and Completion of Credit Counseling Fodrie, Karen 0:09: Cooley, Roger 0:20: Simon, Emma 0:08: Williams, Charles & Terri 0:15: Landry, Michael & Jamie 1 day, 19 hrs Stansberry, Wayne & Patricia 0:19: Jackson, Ryan & Angel 0:12: Williams, Justin & Lesley 5:34: Shortt, Paul & Shellie 0:15: Brignac, Cynthia 0:11: Vidrine, Fred 0:29: After the online counseling is completed, Abacus requests that individuals provide their contact information, including an address and phone number, so that Abacus can send them a copy of the Counseling Certificate. Ex. C at 12. Abacus then has a separate field for the phone number and of the individual s attorney. Id. In 10 of the 11 cases, Abacus records show the debtors was left blank, and the phone number supplied for the debtor was Chesson s office phone number: Ex. D. The debtors surely would not have confused Chesson s phone number for their own. Instead, Chesson s employees provided the phone number after impersonating the clients during the online counseling. Furthermore, using Chesson s phone number in place of the debtors actual contact information prevented the debtors from getting any notice of the credit counseling briefing. Debtors might reasonably have been expected to have questions if they had received information from Abacus concerning a #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 9 of 24

10 credit counseling briefing they never had. (Abacus has an actual and phone number for the debtors Paul and Shellie Shortt, Ex. D at 16, but these particular debtors actually took an online counseling session with Abacus after hiring a new attorney, as discussed in the footnote to the preceding paragraph.) 28. Abacus logged an Internet Protocol address ( IP address ) for each purported briefing, all of which took place by internet. The IP address logged for all 11 of the briefings was the same: The UST believes this IP address corresponds to a device or set of devices located in Chesson s office at 1 Lakeshore Drive, Suite 1800 Lake Charles, Louisiana Abacus records for seven of the 11 purported briefings include the debtor s purported answers to a 20 question quiz on the credit counseling material provided during the session. See, e.g., Ex. E at The performances of the debtors on these quizzes are implausibly good, particularly considering the breakneck speed at which the counseling sessions were typically completed. Five of the purported briefings show no incorrect answers, one briefing shows two incorrect answers, and one briefing shows one incorrect answer. Two of the briefings for which the debtor purportedly got all 20 questions right (Fodrie and Simon) were completed in less than ten minutes, including the time to take the quiz. Upon information and belief, Abacus typically repeated the same questions and answers for every quiz given. Chesson s employees impersonated his clients in a large number of counseling sessions and undoubtedly became very familiar with the correct quiz answers. 30. Documents from client case files maintained by Chesson further establish that Chesson s office falsified credit counseling. The UST has received from Chesson the original, wet signature copies of the filed documents in ten of the 11 cases. While bankruptcy documents may be filed with electronic signatures consisting of the debtors names typed after /s/, Sections #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 10 of 24

11 VII-VIII of the Western District s Administrative Procedures require attorneys to obtain and keep the wet signature originals of the filed documents, which establish that the debtors actually signed the documents on the dates indicated. As detailed below, in seven of the ten cases for which the UST received original documents, Chesson s staff obtained the debtors wet signatures on Counseling Statements verifying that counseling was complete on dates before the purported Abacus counseling sessions actually took place, as recorded in the Counseling Certificates generated by Abacus. Upon information and belief, clients were brought in to sign a series of documents, including the Counseling Statements, but Chesson s staff then took the Abacus counseling without the client s involvement at a later date, usually right before filing. Chesson s staff then covered up the fraud by altering the dates on the filed Counseling Statements to be consistent with the dates on the Counseling Certificates. 31. Roger Cooley signed a Counseling Statement dated November 20, 2014, which states that he had completed his credit counseling and had a Counseling Certificate in his possession. Ex. G at 1-2. Chesson filed a Counseling Certificate in which Abacus reports that Mr. Cooley s counseling session was not completed until November 21, 2014, the day his case was filed. Ex. A at 4. The Counseling Statement filed by Chesson with Mr. Cooley s electronic signature is dated November 21, 2014, at variance with the wet signature copy. Ex. B at Emma Simon signed a Counseling Statement dated February 23, 2015, which states that she had competed her credit counseling and had a Counseling Certificate in her possession. Ex. G at 3-4. Chesson filed a Counseling Certificate in which Abacus reports that Ms. Simon s counseling session was not completed until February 24, 2015, the day her case was filed. Ex. A at 12. The Counseling Statement filed with Ms. Simon s electronic signature is dated February 24, 2015, at variance with the wet signature copy. Ex. B at #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 11 of 24

12 33. Charles and Terri Williams signed Counseling Statements dated March 11, 2015, which state that they had completed their credit counseling and had Counseling Certificates in their possession. Ex. G at 5-8. Chesson filed Counseling Certificates in which Abacus reports that the Williams credit counseling was not completed until March 12, Ex. A at 2-3. The Counseling Statements filed by Chesson with the Williams electronic signatures are dated March 18, 2015, the day their case was filed, at variance with the wet signature copies. Ex. B at Wayne and Patina Stansberry signed Counseling Statements dated March 30, 2015, which state that they had completed their credit counseling and had Counseling Certificates in their possession. Ex. G at Chesson filed Counseling Certificates in which Abacus reports that the Stansberrys credit counseling was not completed until March 31, 2015, the day their case was filed. Ex. A at The Counseling Statements filed by Chesson with the Stansberrys electronic signatures are dated March 31, 2015, at variance with the wet signature copies. Ex. B at Ryan and Angel Jackson signed Counseling Statements dated April 27, 2015, which state that they had completed their credit counseling and had Counseling Certificates in their possession. Ex. G at Chesson filed Counseling Certificates in which Abacus reports that the Jacksons credit counseling was not completed until April 28, 2015, the day their case was filed. Ex. A at 8-9. The Counseling Statements filed by Chesson with the Jacksons electronic signatures are dated April 28, 2015, the day their case was filed, at variance with the wet signature copies. Ex. B at Fred Vidrine signed a Counseling Statement as part of his petition, dated April 7, 2016, which states that he had completed his credit counseling and had a Counseling Certificate in his #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 12 of 24

13 possession. Ex. G at Chesson filed a Counseling Certificate in which Abacus reports that Mr. Vidrine s counseling session was not completed until April 8, 2016, the day his case was filed. Ex. A at 18. The petition filed by Chesson with Mr. Vidrine s electronic signature is dated April 8, 2016, at variance with the wet signature copy. Ex. B at Michael and Jamie Landry signed Counseling Statements dated March 16, 2015, which state that they had completed their credit counseling and had Counseling Certificates in their possession. Ex. G at Chesson filed a Counseling Certificate in which Abacus reports that the Landrys counseling session was not completed until March 19, 2015, the day their case was filed. Ex. A at The Counseling Statements filed by Chesson with the Landrys electronic signatures are dated March 19, 2015, at variance with the wet signature copies. Ex. B at However, the falsification of the Landrys counseling was somewhat careless. The ECF date and time stamp on the Counseling Statements attached to the Landrys petition show that Chesson filed the case on March 19, 2015 at 8:38 AM CST. Id. The Counseling Certificates filed by Chesson state that the Landrys credit counseling was not completed until March 19, 2015 at 6:44 AM PDT, or 8:44 AM CST, six minutes after Chesson filed the case at 8:38 AM CST. Ex. A at Thus, Chesson s office was still impersonating the Landrys in the required pre-filing counseling session at the moment Chesson filed their case. 38. After starting the investigation of the purported briefings discussed above, the UST requested that Abacus provide documents for the credit counseling sessions in 20 other randomly selected proceedings filed by Chesson between December 2013, when Chesson began using Abacus, and the end of The documents for these sessions provide grounds for believing Chesson s falsification of credit counseling was a pervasive practice, extending beyond the 11 reported cases. As shown below, 14 of the 20 randomly selected sessions shared the following #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 13 of 24

14 qualities: (1) the elapsed time between completion of registration and completion of counseling was 20 minutes or less, sometimes less than 9 minutes; (2) the security question chosen was what is your city of birth and the answer was Lake Charles ; and (3) the score on the Abacus quiz was a perfect 20 out of 20. Furthermore, the IP address logged by Abacus for each of the 14 highlighted sessions was , no address was provided for the debtor, and Chesson s office phone number is provided in place of the debtor s own phone number. Case City of Birth/ Debtor Name Filing Date Counseling Time Number Lake Charles? Quiz Score Varnado, Alvin 12/11/2013 0:12:57 N 20/ Malveaux, Elfreida 1/7/2014 1:51:48 N None Fontenot, Joseph & Kristi 2/4/2014 0:19:51 Y 20/ Singleton, Christopher 3/6/2014 0:11:47 Y 20/ Wilson, Clifton 3/31/2014 0:16:49 Y 20/ Fontenot, Joseph C. 5/13/2014 0:20:15 Y 20/ Roy, Brian 6/4/2014 Not available N 19/ Palmer, Karen 6/24/2014 0:08:55 Y 20/ Spicer, Gregory 8/26/2014 0:08:42 Y 20/ Istre, Marria 10/8/2014 0:10:42 Y 20/ Lewis, Darrick & Alichia 12/4/2014 0:13:53 Y 20/ Williamson, John 12/11/2014 0:13:49 Y 19/ Arceneaux, Latarsha 1/27/2015 0:15:02 Y 20/ Jackson, Cynthia 6/24/2015 0:44:55 Y 20/ Tagalog, Louise 7/21/2015 0:33:59 Y 20/ Perry, Tammela 8/19/2015 0:11:37 Y 20/ Stanley, Winford & Candace 9/24/2015 0:11:28 Y 20/ #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 14 of 24

15 Evans, Scottie 10/15/2015 0:15:39 Y 20/20 Richard, Ricky 11/25/2015 0:12:06 Y 20/20 Shoemake, Chance 12/17/2015 0:17:53 Y 20/ Upon information and belief, the pervasive falsification of counseling described in this complaint continued in Chesson s office until at least June 9, 2016, when the UST sent an early draft of this pleading to Chesson for his response. The UST believes therefore that Chesson s office falsified credit counseling in a substantial majority of the 1,161 chapter 7 and chapter 13 proceedings he filed between December 1, 2013 and June 9, The pervasive falsification of credit counseling is not an isolated instance of misconduct by Chesson s office. Instead, it is simply the most flagrant and widespread failing of a high volume practice devoted to processing the maximum number of clients for fees, with the minimum amount of attention and effort, at the expense of adherence to the law. Thus, in seven of the ten cases for which the UST collected original documents, Chesson did not bother to sign the contract with the client for his services. See Ex. H. In these cases, Chesson failed to execute a contract with this client and failed to provide his clients with a copy of a fully executed contract, as required by Section 528 of the Bankruptcy Code. 41. Chesson s routine practice was to file amended chapter 13 plans that were not reviewed and signed by his clients, despite Sections VII-VIII of the Western District s Administrative Procedures requiring attorneys to obtain and keep the wet signature original copies of all documents filed with an electronic signature. Chesson s practice of filing amended plans sight unseen by the debtors led to errors like Roger Cooley s first amended chapter 13 plan being identical to his original plan. See Case No at Dkt # 2 & 17. As discussed in paragraphs 30-37, Chesson s office also altered the date of filed electronic signature documents #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 15 of 24

16 from the actual wet signature dates, in order to cover up misconduct. 42. Chesson s common practice was to push clients into chapter 13 proceedings whenever possible, so that he could collect the full no look attorney fee, even for some cases in which a chapter 7 filing would have better suited the client s interests. At an initial meeting, he would frequently provide an estimated chapter 13 monthly payment that was unrealistically low. After putting a $500 payment down for filing fees, counseling fees, and a $165 portion of Chesson s no look fee, clients would eventually return to sign their petition, schedules and chapter 13 plan, to find out only at that point that their actual chapter 13 monthly payment would be significantly higher. Clients struggling to meet those higher plan payments would often have their cases dismissed after filing. 43. After chapter 13 cases were dismissed, Chesson s persistent tactic was to encourage clients to put down another $500 payment and file another chapter 13, so he could attempt to collect a second full no look attorney fee, even in instances in which he had already collected a full no look fee. Between 2013 and 2015 alone, records of the chapter 13 trustee show Chesson collected or attempted to collect two or more full no look fees from at least 72 joint or single chapter 13 debtors, including Michael and Jamie Landry and Ryan and Angel Jackson, clients in two of the 11 proceedings listed in this complaint. See Ex. I. The amounts listed only include payments through chapter 13 plans, not the retainers Chesson typically collected prior to filing. In numerous instances, clients paid a total to Chesson through their chapter 13 proceedings well in excess of a single no look fee and were dismissed from all proceedings without a discharge. See, e.g., Bennie R. & Dusti S. Breaux, Case Nos (dismissed, debtors paid $2,621 for Chesson s attorney fees through plan); (dismissed, debtors paid $2,621 for Chesson s attorney fees through plan); (dismissed, debtors paid $2, #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 16 of 24

17 for Chesson s attorney fees through plan). 44. Chesson s former clients have reported serious failures by Chesson and his office to communicate with them and answer their questions. The office practice was apparently to refuse to answer almost all inquiries by phone, instead requiring clients to make an appointment to meet with an attorney in person during office hours, despite the difficulties this caused debtors with full time jobs. Debtors sometimes had no communication from Chesson prior to major case events, such as the dismissal of their proceeding. COUNT I Violation of 11 USC 526(a)(1)- Failure to perform a promised service 45. The UST re-alleges paragraphs 1 through 44 inclusive, and incorporates them by reference. 46. Section 526(a)(1) of the Bankruptcy Code provides that a debt relief agency shall not fail to perform any service that such agency informed an assisted person or prospective person it would provide in connection with a case or proceeding under this title. 47. In each of the 11 proceedings, Chesson collected $25 from the debtors in order to purchase the required credit counseling on their behalf. Instead of facilitating credit counseling for his clients, upon information and belief, Chesson paid his clients $25 to Abacus and ordered or negligently allowed his employees to impersonate his clients online and take the credit counseling in their place. In doing so, he denied his clients a service that, by accepting their payment, he had agreed to ensure they received. 48. Furthermore, by agreeing to provide consumer bankruptcy assistance to the debtors and to file a bankruptcy petition on their behalf, in exchange for a fee, Chesson by definition agreed to commence a bankruptcy proceeding that was at minimum legally valid. Instead, in each of the #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 17 of 24

18 11 proceedings, Chesson filed bankruptcy petitions on behalf of individuals he knew or should have known were not eligible to be debtors, because they had not taken the required pre-filing counseling pursuant to 11 U.S.C. 109(h). 49. Section 526(c)(5) provides that the Court, upon finding that a debt relief agency has either intentionally violated Section 526 or engaged in a clear and consistent pattern or practice of violating the section, may enjoin the violation or impose an appropriate civil penalty. 50. Wherefore, because Chesson s violations of Section 526(a)(1) were either intentional or together constitute a clear and consistent pattern or practice of violating the section, the United States Trustee respectfully requests that the Court impose an appropriate civil penalty against Chesson. COUNT II Violation of 11 USC 526(a)(2)-Making false statements; advising assisted persons to make false statements. 51. The UST re-alleges paragraphs 1 through 50 inclusive, and incorporates them by reference. 52. Section 526(a)(2) of the Bankruptcy Code provides that a debt relief agency shall not make any statement, or counsel or advise any assisted person or prospective person to make a statement in a document filed in a case or proceeding under this title, that is untrue or misleading, or that upon the exercise of reasonable care should have been known by such agency to be untrue or misleading. 53. In each of the 11 proceedings, Chesson filed a Counseling Certificate or Certificates he obtained from Abacus that he knew or should have known were false. By using his ECF login to file the Certificates, Chesson falsely verified their truth to the Court #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 18 of 24

19 54. In each of the 11 proceedings, Chesson filed a Counseling Statement or Statements he purportedly obtained from his clients that he knew or should have known were false. By using his ECF login to file the Statements, Chesson falsely verified their truth to the Court. 55. To the extent Chesson obtained Counseling Statements with his clients original signatures, Chesson or his employees advised his clients to make statements Chesson knew or should have known were false. 56. Section 526(c)(5) provides that the Court, upon finding that a debt relief agency has either intentionally violated Section 526 or engaged in a clear and consistent pattern or practice of violating the section, may enjoin the violation or impose an appropriate civil penalty. 57. Wherefore, because Chesson s violations of Section 526(a)(2) were either intentional or together constitute a clear and consistent pattern or practice of violating the section, the United States Trustee respectfully requests that the Court impose an appropriate civil penalty against Chesson. COUNT III Violation of 11 U.S.C Failure to Execute Contracts and to Provide Clients with Copies of Executed Contracts 58. The UST re-alleges paragraphs 1 through 57 inclusive and incorporates them by reference. 59. Section 528(a)(1) provides that, not later than 5 business days after the first date on which an attorney provides bankruptcy assistance, the attorney shall execute a written contract with [an] assisted person that explains the services to be provided and the fees for those services. Section 528(a)(2) further provides that the attorney shall provide the bankruptcy client with a copy of the fully executed and completed contract #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 19 of 24

20 60. Section 526(c)(1) states that any contract for bankruptcy assistance that does not comply with the material requirements of Sections shall be void and may not be enforced by any Federal or State court or by any other person, other than the attorney s client. 61. As detailed in paragraph 40, Chesson failed to sign contracts with his clients in at least seven of the 11 proceedings. He therefore also failed to provide his clients with copies of fully executed contracts in those cases and potentially many others. 62. Wherefore, because Chesson failed to comply with material requirements of Section 528 in seven cases and potentially more, his contracts with his clients in those cases are void and he should be required to return all fees he collected pursuant to those contracts. COUNT IV Disgorgement Pursuant to 11 U.S.C The UST re-alleges paragraphs 1 through 62 inclusive, and incorporates them by reference. 64. Section 329 requires an attorney representing a debtor to file with the court a statement of the compensation paid or agreed to be paid... for services rendered or to be rendered in connection with the case. Section 330 states that a professional person may be awarded reasonable compensation for actual, necessary services In each of the 11 proceedings, Chesson filed a Disclosure of Compensation statement pursuant to Section 329 that reported he had collected $25 for credit counseling. Chesson s disclosure was misleading in each case. He in fact collected $25 not to facilitate credit counseling for his clients but to allow his employees to participate in sham counseling to obtain a Counseling Certificate for the client #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 20 of 24

21 66. In each of the 11 proceedings, Chesson knew or should have known he had filed a bankruptcy for clients who were not eligible to be debtors because they had not obtained credit counseling before filing. Any compensation Chesson received for the 11 proceedings is not reasonable, as required by Section 330, because he has not performed the most fundamental task of bankruptcy representation: filing a valid bankruptcy. 67. Wherefore, because Chesson s Disclosure of Compensation statements were misleading in violation of Section 329 and because the compensation he has received is not reasonable as required by Section 330, the United States Trustee requests that the Court order Chesson to disgorge all compensation he has received in the 11 proceedings to his former clients. COUNT V Violations of the Louisiana Rules of Professional Conduct 68. The UST re-alleges paragraphs 1 through 67 inclusive, and incorporates them by reference. 69. Pursuant to Local Rule of the District Court, attorneys practicing in the Western District are governed by the Louisiana State Bar Association Rules of Professional Conduct ( LRPC ). Local Rule , provides that a Western District judge, including a Bankruptcy Court judge, may impose as a disciplinary sanction a fine and/or a suspension from practice of up to 90 days. For suspensions longer than 90 days or for disbarment to be imposed, the judge may refer the matter to the Chief Judge. 70. LRPC 1.1 and 1.3 require attorneys to represent their clients with competence and diligence, respectively. For each of the 11 proceedings, Chesson filed bankruptcy petitions on behalf of clients he knew or should have known were not eligible to be debtors, because they had not taken the required credit counseling before filing #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 21 of 24

22 71. LRPC 1.5 provides that an attorney may not collect any unreasonable amount for fees or expenses. For each of the 11 proceedings, Chesson collected $25 to purchase credit counseling for debtors, then ordered or negligently allowed his employees to take the counseling his clients had paid to obtain. 72. LRPC 3.1 provides that an attorney may not bring a proceeding without a basis in law or fact. For each of the 11 proceedings, Chesson filed bankruptcy petitions on behalf of clients he knew or should have known were not eligible to be debtors because they had not taken the required credit counseling before filing. 73. LRPC 5.3 provides that a supervising attorney must make reasonable efforts to ensure that the conduct of his non-lawyer assistants is compatible with the professional obligations of an attorney. For each of the 11 proceedings, Chesson s employees obtained false Counseling Certificates from Abacus by impersonating the debtors in online counseling sessions. Chesson s employees also obtained the debtors signatures on false Counseling Statements. Chesson s employees also falsified the dates on documents filed with electronic signatures to cover up the credit counseling misconduct. 74. LRPC 8.4 provides that it is misconduct to engage in conduct involving dishonesty, fraud, deceit or misrepresentation. It is also misconduct to engage in conduct that is prejudicial to the administration of justice. For each of the 11 proceedings, Chesson and his employees: (1) collected money from his clients for counseling never provided; (2) impersonated his clients to obtain false Counseling Certificates from Abacus and filed those Certificates with the Court; (3) obtained false Counseling Statements from his clients and filed those Statements with Court; and (4) filed proceedings which were not legally valid, given the debtors were not eligible for bankruptcy relief. Furthermore, there is every reason to believe this conduct occurred not just in #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 22 of 24

23 the 11 proceedings but in a substantial majority of the 1,161 chapter 7 and 13 proceedings Chesson has filed between December 1, 2013 and June 9, Moreover, beyond the pervasive credit counseling fraud upon his clients and the Court, Chesson s office in numerous cases fraudulently altered the dates of documents filed with the court from the wet signature originals and also failed to obtain original, wet signatures from his clients for numerous documents filed with the clients electronic signatures. 76. Wherefore, the UST requests that the Court issue findings of fact concerning Chesson s violations of the LRPC and determine whether it should impose its own sanction, refer the matter to the Chief Judge, or order some combination of the two. COUNT VI Remedies Pursuant to 11 U.S.C The UST re-alleges paragraphs 1 through 76 inclusive, and incorporates them by reference 78. Section 105 of the Bankruptcy Code provides that a court may issue any order necessary to carry out the provisions of the Code. A court is further authorized to take any action or make any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process. A court s power pursuant to Section 105 may include suspension of an attorney from practice. See, e.g., In re Lewis, 2015 WL at *2 (4th Cir. June 9, 2015). 79. Chesson s misconduct involves systematic violations of the Bankruptcy Code s requirement that debtors receive credit counseling before filing and systematic abuse of the integrity of judicial process through submission of false Counseling Certificates and false Counseling Statements in at least 11, and likely hundreds, of proceedings #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 23 of 24

24 80. Wherefore, the UST requests that the Court take any action it finds necessary or appropriate, pursuant to its Section 105 power, to remedy Chesson s past abuses and to prevent their reoccurrence. The UST submits that, as a minimum starting point, Chesson must submit to the Court a complete list of the cases in which he has submitted false Counseling Certificates and Statements. Respectfully submitted, HENRY G. HOBBS, JR. Acting United States Trustee Region 5, Judicial Districts of Louisiana and Mississippi By: /s/ Richard H. Drew RICHARD H. DREW Trial Attorney, LA Bar No Office of the United States Trustee 300 Fannin Street, Suite 3196 Shreveport, Louisiana Telephone no. (318) Direct telephone no. (318) Facsimile no. (318) #1 File 12/20/16 Enter 12/20/16 15:41:27 Main Document Pg 24 of 24