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September 2, 2010 |
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| September 30, 2009 |
By: Jordana Mishory |
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roward Circuit Judge Ronald Rothschild approved nearly $54.7 million in claims Tuesday by people who were bilked out of their money by disbarred Coral Springs attorney Laura Hess in a debt settlement scam.
The claims were by almost 20,000 consumers who turned to Hess and a series of companies she oversaw for help managing credit card and other debts. Hess, who has been disbarred for five years, promised to cancel debts for pennies on the dollar but instead was accused of pocketing the money.
Rothschild upheld the findings by eight special masters who shuffled through almost 7,000 disputed claims. The claims approval puts receiver Daniel Stermer on schedule to pay claims before year’s end. Stermer has accumulated about $17 million, which means clients are in line for a recovery of about 27 percent of their losses.
But not all claimants will get money back. Some claims were stricken, and others were excluded because they were late.
During the hearing, two clients whose claims were rejected because of tardiness pleaded with Rothschild via telephone to reconsider.
Darla Hawley of Middleport, Ohio, said her debts mounted after her husband, Randall, suffered a series of heart attacks and lung disease. To pay off their debts, they sold their house and furniture, and lived in a camper for more than a year. She said she sent Hess $28,000.
“We trusted in Hess Kennedy,” Hawley told Rothschild. “I paid off, and called and called and called,”
She said she didn’t learn about the claims process until after a Chase Bank representative tracked them down. She recounted telling a bill collector that Hess Kennedy was taking care of their debts. The collector said the company didn’t exist anymore.
“I got sick” and immediately filed a claim, Hawley told Rothschild. That was in April. She said if she knew about the claims process, she would have “jumped right on it.” She contended the post office struggled with forwarding the family’s mail.
“This doesn’t seem fair,” Hawley told the court. “We tried to do what’s right.”
She said she is being sued for nearly $20,000 in overdue bills. If filed on time, her claim would be worth almost $16,000.
New Yorker Victorien Assi told the judge he didn’t receive anything in the mail until it was too late. He submitted a claim 11 days after the Jan. 2 deadline.
He said he believed the letter about the claims process was sent without his apartment number.
“That is not my mistake. I should not be punished,” Assi said, demanding the return of $5,000. “My kids did not receive any Christmas gifts because of that.”
Rothschild reluctantly denied both claims.
“I agree with both of you it’s not fair, but I have to weigh the individual interest against thousands of other claimants,” he said.
The judge said he was swayed by Hawley’s pleas, but it was too difficult a burden for her to prove all of her mail problems, and a delay for her would hold up the entire claims process. Hawley said she could not come to Fort Lauderdale for an evidentiary hearing.
Before hanging up, Hawley said the legal system failed her.
“I believe them when they said they sent it. They should believe me that I didn’t receive it.” Hawley said.
Rothschild will hear a final pair of objections Thursday.
Millions disappeared
Hess’ companies were put in receivership in July 2008 after the Florida attorney general sued, claiming Hess Kennedy engaged in deceptive debt settlement and debt management practices that harmed hundreds of customers.
The state tracked $20 million moving from the affiliated Hess Kennedy companies to nonclients in less than two years. Clients were told their payments would be deposited into trust accounts for payment to creditors, but no such deposits were made.
Edward Kennedy, a partner listed by Hess Kennedy in corporate records, does not appear to be a real person. He is believed to be Edward Cherry, Hess’ business partner in the debt settlement companies.
In a settlement approved by Rothschild last November, Hess was ordered to pay up to $400,000 in investigative and legal costs. She is permanently banned from the debt settlement business and agreed to a five-year disbarment.
Stermer also has negotiated settlements with three major credit card companies: Capital One, HSBC and Chase. They agreed to release nearly $150 million owed in debt and delete it from credit reports in exchange for a combined $7 million.
Stermer of Lewis B. Freeman & Partners in Plantation filed more than a dozen pieces of litigation seeking in excess of $80 million paid to third-party lead generation firms that directed consumers to Hess Kennedy companies in exchange for a fee. Most of the cases have been resolved for a total $25 million — but only $1.25 million has been collected.
Three cases are pending before Rothschild, and a fourth case is in federal court before U.S. District Judge William Zloch. Stermer said all four cases are in the discovery stage. If more money is collected, it would be paid to claimants.
The $54.7 million recovery figure comes after a nearly yearlong process.
Last October, nearly 90,000 consumers who turned to Hess Kennedy for help were contacted about the claims process. Almost 21,000 claims came in requesting nearly $104 million in lost money. The receiver allowed claimants who submitted late claims to explain their tardiness and accepted some.
The receiver reviewed all claims and adjusted nearly 13,000 of them. Half agreed to the adjustment, but 6,903 disputed the receiver’s findings.
Eight court appointed special masters heard three weeks of intense telephonic hearings. The special masters either agreed with the client, agreed with the receiver or reached a separate decision.
Many of the phone calls mirrored what Rothschild heard Tuesday. Special master Paul Eichner called many of the phone calls “heartbreaking.”
Catalina Avalos, who also served as a special master, said it was a difficult task to listen to all the cases.
“They paid money in to an organization they thought would assist them get rid of debt,” she said. “At the end of the day, they have double debt.”
The masters’ findings and agreed claims were submitted to Rothschild.
Assistant Attorney General Joseph Gentili commended the receiver and masters for taking what his office believed to be a “somewhat large case” and realizing it was in fact a “humongous” case affecting thousands nationally.
Stermer said in an interview prior to the hearing that he has worked hard to recover money for the clients.
“They’re trying to do the responsible thing of engaging the firm to assist with the problem and pay off their debt,” he said. “The problem is they went to Hess Kennedy and got put in harm’s way.”
Jordana Mishory can be reached at (954) 468-2616.
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