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Enforcement Actions Brought Against Two Consumer Bankruptcy Attorneys Involved in Schemes to Acquire their Clients’ Homes


The U.S. Trustee Program has successfully secured sanctions against consumer bankruptcy attorneys who were implicated in real estate schemes.


The U.S. Trustee Program under the Justice Department took action against two consumer bankruptcy lawyers who concealed their roles in schemes to obtain their clients' properties. In a recent development, attorney David Speckman was permanently barred from representing clients in bankruptcy cases in the Southern District of California by the Bankruptcy Court. Additionally, Speckman agreed to a $3,500 fine as part of the stipulated judgment, which settled a complaint filed by the U.S. Trustee's San Diego office.


On April 5, the Bankruptcy Court for the Northern District of Georgia made a ruling that prevents Stanley Kakol and his law firm from initiating any new bankruptcy cases in the district for a year. Additionally, the court's decision, in response to a motion for sanctions by the U.S. Trustee's Atlanta office, permanently prohibits Kakol from filing any bankruptcy case where he would receive payment from someone other than the debtor.

 

“Consumers who have fallen on hard times rely on their attorneys to help navigate the way to a fresh start,” said Director Tara Twomey of the Executive Office for U.S. Trustees. “Attorneys who abuse this trust for their own gain have no place in bankruptcy court.”

 

In the California case, Speckman concealed property transfers and other transactions related to his clients and Prado Investments LLC, a company owned by Speckman's wife. Notably, Speckman prepared agreements for two debtor clients to sell their homes to Prado without obtaining court approval during their chapter 13 bankruptcies. Furthermore, he submitted multiple deceptive documents to the court, neglecting to disclose these transfers.

 

In a different chapter 13 case, Speckman neglected to include his client's debt to Prado and neglected to acknowledge Prado as the subordinate lienholder on the debtor's residence. Within the agreement, Speckman admitted that his actions were in violation of the Bankruptcy Code, federal and local bankruptcy procedure rules, and ethical rules for attorneys in California.


 



Kakol, the Georgia-based attorney, filed two simplified chapter 13 petitions for an 80-year-old widower on behalf of CMNC Homes LLC, which covered Kakol's fees. The purpose of the petitions was to postpone a foreclosure on the homeowner's property and allow CMNC to purchase the home at a bargain price. The foreclosure was initiated after the homeowner's wife passed away, leading to a default on a reverse mortgage that was solely in the wife's name.

 

Following the dismissal of the second bankruptcy case, the debtor's family sought assistance from a legal aid attorney. This attorney facilitated the debtor's ability to stay in their home by utilizing a federal program designed for non-borrowing spouses of deceased borrowers.


The bankruptcy court, in its decision to impose filing restrictions, highlighted Kakol's past disciplinary issues related to misconduct in various cases. These included failure to disclose compensation properly, neglecting to verify debtors' signatures on bankruptcy documents, and providing inadequate representation. Additionally, the bankruptcy court initiated a separate proceeding to address around 17 similar cases where Kakol received payment from CMNC.

 

The USTP’s mission is to promote the integrity and efficiency of the bankruptcy system for the benefit of all stakeholders – debtors, creditors and the public. The USTP consists of 21 regions with 89 field offices nationwide and an Executive Office in Washington, D.C. Learn more about the USTP at www.justice.gov/ust.


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