Judge Bars Bankruptcy Filing Firms from Business; Orders Fines, Restitution

NEWARK -- A federal judge today signed a judgment permanently barring three bankruptcy filing businesses from continuing deceptive and fraudulent practices that, according to a lawsuit filed in 1998 by the U.S. Attorney's Office, victimized hundreds of low-income residents of New Jersey cities.

U.S. Attorney Faith S. Hochberg said the order issued by U.S. Bankruptcy Judge Novalyn L. Winfield allows the Government to set up a victim restitution fund.

"These businesses were nothing but document mills that tricked people into believing their financial problems could be solved overnight. Like most fraud schemes, the promises were empty and came with a price," said Hochberg.

Through the Court's Judgment as well as through other settlements, defendants will be required to pay over $250,000 in restitution and fines.

"We will attempt to reimburse as many victims as possible," Hochberg said.

Hochberg encouraged anyone victimized by the defendants to contact a hotline set up for exclusively for this case: (973) 645-2511.

The judgment is against three unincorporated businesses and four individuals. A fourth company, Atlantic County Filing Center, and three other individuals, Joseph Way, Anne Harrington and Tammy J. Lisi, entered into a consent orders earlier permanently enjoining them and requiring them to pay restitution.

The three businesses named in Judge Winfield's order:

The File Aid of New Jersey, at 1A Walnut St. in Cranford

Central Jersey Filing Center, a mail drop located at Suite A #814, Woodbridge

The Filing Center of New Jersey, a mail drop at 1977 North Olden Ave., #216, Trenton

The individual defendants are: Shaun Heussen, Eliud Chaparro, Fran Serino and Dianne L. Zmijewski. Each of these individuals were employees or owners of at least one of the business entities.

The companies and individual defendants were in the business of preparing bankruptcy petitions on behalf of people in financial distress. The defendants would typically get names and addresses of such persons legally from docket lists for landlord/tenant proceedings in the Superior Court of New Jersey, according to Assistant U.S. Attorney Michael A. Chagares.

The defendants promised that they could erase all debts and keep people facing eviction from losing their apartments for six months or longer. The defendants enticed their customers with direct-mail solicitations which Judge Winfield said were "obviously designed" to mislead recipients into believing the defendants were somehow "connected to the court system" or that the defendants were "a state agency that offers assistance to persons in difficult financial circumstances."

The first page of one such direct-mail solicitation read: "Notice has been served upon you" and "THE SUPERIOR COURT OF NEW JERSEY."

The Judge issued a 42-page decision against the defendants and today issued a judgment order setting fines and permanently barring the companies and their owners and agents from doing business. The decision and order follow a non-jury trial before Judge Winfield in January, at which fraud victims testified.

The defendant companies and individuals would usually charge $300 for their bankruptcy filing services. However, in her opinion, Judge Winfield said there was no value in what the companies did.

"It should be noted that nothing in the record demonstrates that defendants' `services' had any value whatsoever to any of their clients," the Judge wrote. "Indeed, if anything, the value of defendants' services was negative. Innocent people relied upon defendants' empty promises to their detriment."

The court found that frequently the defendants failed to disclose that what they were preparing on behalf of clients were actually bankruptcy petitions. In fact, the Court said it was "convinced that defendants' goal was to induce as many people as possible to file bankruptcy petitions, solely to maximize the fees they could collect."

On April 22, 1998, the U.S. Attorney's Office, on behalf of Patricia A. Staiano, United States Bankruptcy Trustee, filed suit against File Aid of New Jersey, Central Jersey Filing Center, the Filing Center of New Jersey and Atlantic County Filing Services, as well as the individual defendants, seeking to stop the fraudulent scheme.

On the same date, Judge Winfield issued a Temporary Restraining Order and later issued a Preliminary Injunction prohibiting the defendants' scheme from continuing, Chagares said.

Judge Winfield noted in her decision that the individual defendants, none of whom are attorneys or paralegals, frequently gave legal advice to their clients. Judge Winfield noting the existence of laws specifically designed to protect consumers from abuses by non-lawyer bankruptcy petition preparers said she referred the matter to the State of New Jersey for "appropriate action."

The Court permanently enjoined the defendants from directly or indirectly acting as bankruptcy petition preparers. Such relief, the judge said, "will prevent further injury to an unsuspecting public and alleviate the burden on the bankruptcy court system."

The case was handled by Assistant U.S. Attorney Chagares, director of the U.S. Attorney's Affirmative Civil Enforcement Unit.