Parent Advocates
Search All  
Fraud On The Court by Karin Huffer
I am a three-time breast cancer survivor. My doctor also attributes my cancer to profound stress from frustrated reliance on the Chapter 11 Bankruptcy Court to provide relief when our lending banker for a commercial project embezzled $450,000 from our loan. The stolen funds were given to our contractor in the form of cashier's checks, violating our contract and paying for nothing related to the project. The banker followed the embezzlement by refusing approval or rejection of our major tenant, creating further financial hardship as our payments to the bank were $17,000 per month.
Fraud on the Court

Submitted to members of the U.S. Senate and House Committees on the Judiciary

It is June of 2007. I watch my husband struggle with kidney failure and a tumor on his lower spine from cancer complicated by Post Traumatic Stress Disorder. These health failures are psychologically precipitated, brought on by cumulative fraud on the court that took the products of our life's work.

That same fraud leaves my oldest son with Post Traumatic Stress Disorder that ranks off the psychologist's scale due to the terrorizing tactics used by members of a federally regulated bank and its attorneys who perpetrated the fraud. He was only fourteen when those acts of fraud, in violation of the law, threatened his father's life, took away my children's trust accounts, our home, my son's friends and the innocence of childhood, never to be replaced.

My youngest son is successful in business but is tough, unyielding, and buries his heart. He is mean and determined to never again go through what he did when he was seven, or to be victimized by the court system. My sons lost the parents they knew. Parental energy was drawn into a fight for survival in our court of law while we were being neutralized by falsity and fraud.

I am a three-time breast cancer survivor. My doctor also attributes my cancer to profound stress from frustrated reliance on the Chapter 11 Bankruptcy Court to provide relief when our lending banker for a commercial project embezzled $450,000 from our loan. The stolen funds were given to our contractor in the form of cashier's checks, violating our contract and paying for nothing related to the project. The banker followed the embezzlement by refusing approval or rejection of our major tenant, creating further financial hardship as our payments to the bank were $17,000 per month.

We were ill advised by our attorney to file Chapter 11 Bankruptcy for the corporation that held our commercial project. Once we filed, the lending bank, the building contractor and their attorneys attacked us with the help of the trustee, consolidating all of our assets and then basically dividing them up among "insiders" who we now know routinely "wring out" Chapter 11's. Our entire estate was worth $5 million then. Due to real estate appreciation in Las Vegas, Nevada, our $5 million estate in 1984 — consisting of three major commercial properties, a sports bar, and a 4,000 square-foot house on one-half acre — is valued in 2007 at more than $100 million.

The fraud began in 1984. The scheme was in place when the banker and contractor embezzled and then stalled approval of the tenant. The formula goes like this:

1. Create a crisis for the business (embezzle from the construction loan, split between banker and contractor and stall approving the major tenant.) The major tenant would provide $11,000 per month of our $17,000 per month payment to the bank.

2. Our attorney violated his ethical code by advising our corporation to become ensnared in Chapter 11 Bankruptcy while conspiring with the bank's and contractor's attorneys. Once filed, the bankruptcy court was used as the tool of theft. (To this day, that attorney is in partnership with the contractor's attorney.)

3. The attorneys and main players use the bankruptcy court to consolidate the debtor's assets, taking all bank accounts, all properties, violating trusts and the corporate veil, and abusing all rules of the court and bankruptcy laws under the cover of fraud.

4. New attorneys are reluctant to involve themselves once the formula is in play. (No new attorney would touch this matter or stay on the case once they communicated with the bank's attorneys.)

5. Complicit are the trustee, trustee's attorney, and main players of the court who know how to use the formula.

6. Fraud is steadily perpetrated on the court, creating a paper record that, at first appearance, supports the takings. A closer look reveals the misinformation planted for strategic purposes.

7. The judiciary refuses to hear the issues fairly. They deny or dismiss at every appellate level so the facts can never be presented. The citizen gets no clear win or loss based upon fact and law. All records from the court are a fabricated sham of manipulated paperwork.

8. The formula also needs citizens: stooges who have assets and who believe that courts follow the law, that professionals follow ethical codes and canons, and that, but for some flaws causing injustices, the overall justice system works through perseverance. In good faith, these citizens provide the truth, hire the attorneys, pay the bills and fees, and slowly succumb to stress as they are accused, abused, and defeated by attorneys defying all ethics, laws, rules, canons, and common sense.

The subject building was under construction with a loan for $1,450,000 from the bank; $865,000 of the loan had been paid to the contractor per the contract at the time of the bankruptcy filing (not including the embezzlement.) The building had three MAI appraisals, each valuing it at more than $2,000,000 at the time of foreclosure. The bank took the building in foreclosure along with a parcel of adjoining land that was worth $100,000. They also unlawfully took $150,000 from our real estate company's bank account that had no relationship to the subject property, and our children's trust accounts. The sports bar, housed in the foreclosed building — a going, profitable business — was simply handed over to the contractor with no paperwork, for no financial consideration and with no accountability or record of transfer ever being recorded anywhere. He took the liquor and gaming licenses and put them in his name with the bank's recommendation in a letter to the city bureau granting the licenses.

The bank then sold the building to the contractor in the following manner. He offered $1,100,000 for the property. The bank turned it down. He then offered $900,000 for the property. The bank turned it down. Next he offered $700,000 which the bank accepted, financed, and loaned him $100,000 for the down payment.

The bank's attorneys appeared in the bankruptcy court, declaring that we owed a deficiency. This was a claim only. We asked for a hearing to present the evidence as to the values the bank had, in fact, been reimbursed, and as to what they were entitled by contract and law. There was no deficiency, and further, the entire job was bonded so there could be no such legitimate claim.

We were denied a deficiency hearing. The bank's attorneys committed fraud on the court by claiming the bank was a creditor when it was not. Moreover, they committed fraud on the court by holding impromptu hearings creating paperwork that entered into the record easily-disprovable fraud. These hearings were called with no more than twenty-minutes notice to us. Absurd allegations went unchallenged and we, as citizens, were laughed at, lied about, and generally treated as sport. We did not know or have access to the rules of this game. We only had the laws of the nation and rules of court.

The judge told us that the Bankruptcy Court simply doesn't have the resources to allow hearings or jury trials for debtors. So, after consulting a constitutional attorney and spending another ten years and $140,000 in attorney's fees trying to do what we believed was our duty as citizens, we filed with the Court of Claims. If the court took our properties and needed to deny our right to be heard, then our estate fell to the Court of Claims for relief. The Court of Claims refused to hear the case, as did the Supreme Court.

Anthony G. Sousa, Esq. was the United States Trustee for Region 17 covering bankruptcy administration for the Northern and Eastern districts of California and the district of Nevada. He began to look into our case. I was terrorized to the depths of my soul when Sousa reported that he could no longer do his job as he had been confronted by federal officials who forced him to sign a letter of resignation and placed him under a gag order for five years. I knew enough of history to know that the fall of any culture usually starts with compromising its courts of law.

After two decades of looking for the judicial resource where our evidence can be presented, we ask a simple question.

Where do citizens turn for due process and their right to redress?

For more than twenty years, I have studied the dynamics of justice denied and its public health consequences. I have completed research that shows the public's perceptions of the judicial system and the health danger of seeking justice in the face of rampant fraud on the court. The courts are less than useful for the citizens. The judicial system is toxic for its users. It is a public health menace, but there is some good news. The problem is easy to solve. You can and must be the ones to solve it.

Despite the pain and destruction to my family, we chose to subordinate our case to the social good. The economic, emotional, and physical devastation of business people and families such as ours must be addressed by lawmakers by forcing fraud out of our courts. IRS abuses were heard by the Congress with excellent results, and the same can be done regarding the court system. The intellectual waste and the economic burden dumped onto a community when businesses are willfully destroyed with no concern for employees, families and taxpayers, while the doors to justice are virtually slammed in the taxpayer's face, cannot be measured in loss to our nation.

I have written a book, Overcoming the Devastation of Legal Abuse Syndrome. As a licensed Marriage and Family Therapist, I have developed a treatment method for those struggling with frauds on the court and suffering from Post Traumatic Stress Disorder that I have termed "Legal Abuse Syndrome." Due to this fraud, I treat a population of walking wounded and living dead citizens who were once healthy, vibrant, productive, contributing members of their communities — until victimized by fraud on the court. Occasionally, I treat a superstar like Meryl Lanson whose strength of character, sharp intellect, moral clarity, and profound courage make her a leader in her area of expertise. Unfortunately, her expertise is fraud upon the bankruptcy court. However, when I see a citizen of her caliber step forward, I will support her efforts. I strongly urge you to do the same.

Public opinion clearly believes that the courts are too expensive, too burdensome, take too much time, and favor the wealthy and powerful. However, if fraud on the court is addressed, the rest of the issues have a chance to be resolved using the litigation process as it was intended. My research has been conducted over ten years and dovetails with research from the American Bar Association and California Protective Parents Association statistics. Litigation is a public health crisis that in any other form would be required to carry a warning label. Litigation can be hazardous to your health.

Therefore, rather than a civilized forum for solving our problems, the judicial system is clearly broken, and we have the duty to fix it. I intend to leave a legacy of insight and solution to fraud on the court. My children deserve legislation that is tough and meaningful after being denied their rightful inheritance and the clear focus of their parents, whose energies were drawn to an insidious type of greed that compromises our courts.

Some "insiders" and powerful corporations limit themselves to profit motive at any cost. However, after thorough research, I can tell you that unchecked greed in the forum for justice creates a free-for-all that can not end up well. We can work together to fix it. Then the door will open for fair hearings that will provide an immediate and civilized solution to our conflicts without fraud on the court.

In 1984, fraud destroyed the quality of my family's life. In 1997, fraud on the court destroyed Meryl Lanson's family's quality of life using the exact formula exposed by Representative Jack Brooks in the early 1990s. Investigations were held, blue ribbon committees sent around the nation at great expense. I testified before that committee. A GAO investigation was triggered. This is a formula that has been published and brought to the legislators' attention for more than twenty years.

Please join with us to effectively pass enforceable legislation that will cause fraud on the court to become an undesirable choice for those who lack character and do not abide by a professional ethical code or the laws of our nation.

Respectfully submitted,

Karin Huffer, M.S., M.F.T.

© 2003 The E-Accountability Foundation