Securities Industry Commentator by Bill Singer Esq

February 14, 2018

Georgia Prisoner Pleads Guilty to Phone Scam (DOJ Press Release)  Calhoun State Prison inmate Jay Byron Wright pled guilty to Conspiracy to Commit Wire Fraud in connection with a scheme involving a cellphone smuggled into the prison. As set forth in part in the DOJ Press Release:

[W]right and other prisoners called citizens of Oregon using a cell phone smuggled into their prison, told the Oregonians they were in contempt of court for not showing up for jury duty, and that they owed the court money.  The Oregonians could pay this money by obtaining Money Pak Green Dot cards for the specified value and providing the numbers on the cards to the callers.  The numbers gave the callers access to the value on the card, which could then be transferred onto other Green Dot cards.  At least three people in Oregon fell for this scam, and they transferred values slightly less than $1,000 to cards used by various co-conspirators in South Carolina. 

Days Late and Dollars Short For Former Oppenheimer Employee ( Blog)  Being a day late and a dollar short happens. Be that as it may, those are not exactly words to live by. In a recent FINRA arbitration, a former Oppenheimer & Co. employee is representing himself against his former firm's demands for repayment of compensation. Rule #1 for handling your own lawsuit is always be on time -- and, of course, show up in court or arbitration with clean underwear. Those first impressions are very important. In today's featured arbitration, the Respondent didn't start off on the right foot. 

Former IT Employee of Transcontinental Railroad Sentenced to Prison for Damaging Ex-Employer's Computer Network (DOJ Press Release) After a five-day federal jury trial, former Canadian Pacific Railway IT employee Christopher Victor Grupe was convicted of one count of intentional damage to a protected computer and sentenced to one year and one day in prison. As set forth in part in the DOJ Press Release:

[F]rom September 2013 until December 2015, Grupe was employed as an IT professional by Canadian Pacific Railway (CPR), a transcontinental railroad company headquartered in Alberta, Canada, with U.S. headquarters in Minneapolis. On Dec. 15, 2015, following a 12-day suspension, Grupe was notified by CPR management that he was going to be fired due to insubordination. However, at his request, Grupe was instead allowed to resign, effective that same day. In his resignation letter, Grupe indicated that he would return all company property, including his laptop, remote access device, and access badges, to the CPR office.

The evidence presented at the trial proved that on Dec. 17, 2015, before returning his laptop and remote access device, Grupe used both to gain access to the CPR computer network's core "switches" - high-powered computers through which critical data in the CPR network flowed. Once inside, Grupe strategically deleted files, removed administrative-level accounts, and changed passwords on the remaining administrative-level accounts, thereby locking CPR out of these network switches. Grupe then attempted to conceal his activity by wiping the laptop's hard drive before returning it to CPR . . .

National Consumer Bankruptcy Law Firm Sanctioned for Harming Financially Distressed Consumers and Auto Lenders (DOJ Press Release) After a four-day trial in the United States Bankruptcy Court for the Western District of Virginia, a national consumer bankruptcy law firm and its local partner attorneys were found, in part, to have systematically engaged in the unauthorized practice of law, provided inadequate representation to consumer debtor clients, and promoted and participated in a scheme to convert auto lenders' collateral and then misrepresented the nature of that scheme, Robbins v. Delafield et al., (Bankr. W.D. Va., Adv. No. 16-07024, Feb. 12, 2018), and Robbins v. Morgan et al., (Bankr. W.D. Va., Adv. No. 16-05014, Feb. 12, 2018).READ the FULL TEXT Court Memorandum Opinion

The Court sanctioned Law Solutions Chicago, doing business as "UpRight Law" (UpRight), and its principals $250,000; imposed additional sanctions of $50,000 against UpRight's managing partner Kevin Chern, and $5,000 each against UpRight's affiliated partner attorneys Darren Delafield and John C. Morgan Jr.; and ordered UpRight to disgorge all fees collected from the consumer debtors in both bankruptcy cases. The court also revoked UpRight's bankruptcy filing privileges in the Western District of Virginia for not less than five years, and those of its local partners for 12 and 18 months, respectively. The bankruptcy court also sanctioned Sperro LLC (Sperro), an Indiana towing company that did not respond to the U.S. Trustee Program's complaints, and ordered the turnover of all funds it received in connection with bankruptcy cases in the district. As set forth in part in the DOJ Press Release:

[U]pRight operates a website offering legal services to consumers in financial distress. Prospective clients contact UpRight via the Internet and are routed to UpRight's sales agents. These non-attorney "client consultants" were trained to "close" prospective clients by using high-pressure sales tactics and improperly provided legal advice to encourage them to file for bankruptcy relief. In many instances, UpRight arranged payment plans for its prospective clients to pay bankruptcy-related attorney's fees and costs over time, and refused to refund fees it collected from its clients for whom UpRight did not file a bankruptcy case. The bankruptcy court found that UpRight had "serious oversight issues" in failing to adequately supervise its salespeople to prevent their unauthorized practice of law, and that UpRight demonstrated a "focus on cash flow over professional responsibility."

Additionally, UpRight worked in concert with Sperro to implement a program through which UpRight's clients could have their bankruptcy legal fees paid through a "New Car Custody Program." The bankruptcy court described the New Car Custody Program as "a scam from the start." UpRight's salespeople and attorneys counseled bankruptcy clients to "surrender" vehicles fully encumbered by auto lenders' liens to Sperro without the lienholders' consent, and enter into an agreement obligating the clients to pay Sperro the costs of towing the vehicle, transporting it across state lines - often over a long distance - and storing it. UpRight assured its debtor clients that they would not have to pay any fees to Sperro, and in some instances advised its clients to hide their vehicles from lenders looking to repossess them until Sperro could pick up the vehicles. 

After Sperro took a vehicle, it asserted a statutory "warehouseman's lien," claiming the right to keep the vehicle until the sham towing, transportation, and storage fees were paid. Then it offered the vehicle for sale at auction, despite the auto lender's continuing security interest. Out of the sale proceeds, Sperro paid the debtor client's bankruptcy fees directly to UpRight. Sperro kept the rest of the sale proceeds. In some cases, UpRight prepared bankruptcy court filings omitting the debtor clients' transactions with Sperro. . .