Chicago lawyers charged in bankruptcy fraud probe
(Crain’s) — Three Chicago lawyers and a disbarred one have been accused of bilking clients out of the equity in their homes and lying in court in a nationwide federal crackdown on bankruptcy fraud.
Norton Helton of Chicago, Edward J. Varga of Aurora and Lorie K. Westerfield of Chicago along with disbarred lawyer William Ramon Jackson of Chicago were charged in separate cases Tuesday in U.S. District Court as part of Operation Truth or Consequences.
They were among 11 defendants charged in Chicago. A total of 78 defendants were charged across the nation.
“It is important to protect the integrity of the bankruptcy system and those who use it,” David Glockner, criminal chief for the U.S. attorney’s office in Chicago, said at a news conference Wednesday.
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Messrs. Varga and Jackson and Ms. Westerfield could not be reached for comment.
Mr. Helton’s lawyer, Lewis Myers, said "we are going to plead not guilty to the charges, we are going to fight them and we think he'll be vindicated."
Messrs. Helton and Varga were accused of running sale-and-leaseback programs for financially strapped homeowners that federal authorities claim were schemes that allowed the bankruptcy lawyers to strip and keep the equity from their clients’ homes.
Mr. Helton, who was charged with bankruptcy fraud, allegedly concealed $400,000 in clients’ home sale proceeds from Bankruptcy Court while Mr. Varga, working with a woman who also was charged, allegedly defrauded clients, creditors and trustees of roughly $500,000, according to the complaint against him. Mr. Varga was charged with eight counts of bankruptcy fraud, mail fraud and falsifying documents in bankruptcy cases.
Mr. Jackson was charged with three counts of bankruptcy fraud, illegally receiving bankruptcy estate property and converting bankruptcy estate property to himself. The federal indictment against him alleges he lied to bankruptcy court regarding $28,000 in fees he was ordered to turn over to the bankruptcy trustee.
Ms. Westerfield was charged with three counts of allegedly filing false bankruptcy documents for omitting information from a client’s personal bankruptcy filing.
“Bankruptcy regulations were set up to protect individuals who find themselves in financial straits,” said Kenneth Laag, inspector in charge of the U.S. Postal Inspection Service in Chicago. “Some individuals who find themselves in that state turned to bankruptcy attorneys who milked them.”
Seven Chicago-area individuals were also charged with making false statements or concealing assets in their own personal bankruptcy case.
A fifth lawyer, from Delavan, Wis., was charged with fraud, making false statements and concealing from clients his impending suspension from practicing law.
(The Associated Press contributed to this story.)
