Surely a bunch of people at Morgan Drexen are blaming the U.S. Government and Consumer Financial Protection Bureau (CFPB) today for the utter demise of Walter Ledda’s creation, Morgan Drexen, on Friday.
An insider told me over the weekend, “Just letting you know the court ordered Morgan Drexen’s trustee to seize operations immediately. Morgan Drexen was shut down today at noon and every employee was asked to leave immediately and escorted out.”
But if there ever was a good example of a slow moving train wreck, I think the demise of Morgan Drexen might just qualify. You see the troubles faced by Morgan Drexen have been going on for literally years. Want to read the soap opera, grab a coffee and click here.
But out of humor and patience, it seems the court did not find it remotely possible to take over Morgan Drexen and run it to an orderly shutdown. Court documents say Morgan Drexen was up to no good and need to be terminated post haste.
In a move that impacts good employees with unemployment and trusting consumers who hoped to get debt relief assistance, the actions of Morgan Drexen have led to a lot of people being harmed in one way or another.
The words and finding of the court capture the frustration, alleged facts, and hopelessness of allowing Morgan Drexen to live even for another 90 days.
- “Since the hearing on June 15, 2015, the business operations of Morgan Drexen have been subjected to obstructionist tactics, interference and threats by the attorneys with whom Morgan Drexen has contracts (the “Attorneys”). The actions by the Attorneys demonstrate that any form of continuing business is unmanageable and impractical, that any potential sale transaction would be unduly expensive and/or infeasible to implement, and that the Attorneys do not intend to cooperate with the Trustee unless it means selling the Morgan Drexen business to them.”
- “Further, the Trustee believes that the actions of the Attorneys violate this Court’s Freeze Order entered on April 30, 2015, specifically the provisions prohibiting the selling, disbursing, or transferring of assets, and the Permanent Injunction Order entered today, specifically the provisions prohibiting the collection of fees from consumers and continued representations regarding debt settlement services. In addition, the Trustee is concerned that the Attorneys’ actions, under the false heading of allegedly protecting their “clients,” are designed to allow the Attorneys to further manipulate and take advantage of consumers, putting the consumers’ funds currently held in the trust accounts in jeopardy.”
- “The Trustee believes that substantial claims exist against the Attorneys as well as against insiders of Morgan Drexen; and the Trustee will be pursuing those claims. The Trustee further believes that the Attorneys will continue to obstruct and interfere with an orderly wind down of the business, and that as a result, the business should be closed as soon as possible to allow the Trustee to address the best interests of creditors and consumers through litigation and court orders as necessary.”
- “The Trustee previously had been informed that approximately 14,000 consumers were on existing debt settlement plans with Morgan Drexen. Upon further investigation, the Trustee has determined that the 14,000 figure included all consumers who ever had been on a debt settlement plan, as opposed to consumers on a current and active debt settlement plan. At this time, the Trustee is informed that the number of consumers on existing debt settlement plans is approximately 9,000, not 14,000. Thus, among other problems, monthly fees may have been charged to a much larger number of consumers who are not on current debt settlement plans than the Trustee previously believed.”
- “After the joint hearing on June 15, 2015, the Trustee has examined means to make further cuts of expense and personnel. The Trustee initiated the termination of all employees with the exception of a few key personnel,ceasing all operations and services rendered by Morgan Drexen to attorneys and consumers.” – Source
The Trustee also had grave concerns over the actions of “Attorneys named Vincent Howard (“Howard”) and Lawrence Williamson (“Williamson”).
“The Trustee has reason to believe that Howard sent an email to all engagement and local counsel who receive services from Morgan Drexen, calling them to action and instructing them to immediately contact Evan Borges, counsel for the Trustee, and demand “1. that you have clients that are serviced by MD, 2. that any interference with your contracts and relationships with your clients will not be tolerated, and 3. that they consult with you first before canceling the services MD provides for your clients at your direction so that you can arrange for alternative services.” The Trustee also has reason to believe that Howard also instructed the attorneys to contact Morgan Drexen employees David Walker and Deborah Ketsdever and “1. Revoke MD’s authority and access to your client trust accounts. 2. Insist that they invoice you and you decide what bills to pay. 3. Demand an accounting to see if they even did the services. 4. And demand that they send you an electronic copy of all your clients information.” As shown in Exhibit B, many of these attorneys followed Howard’s instructions, resulting in a bombardment of harassing emails to counsel for the Trustee and employees of Morgan Drexen. [The attorneys mentioned in the exhibit included Richard Labarthe, Kimberly Pisinski, Tami Munsch, Robert Beckett, JD Hass, Luis Figueredo, Glenn Romano, and Rochelle Guznack.]
Exhibit C contains a separate email sent late last week from Williamson alleging breach of his service contracts with Morgan Drexen and demanding an accounting, among other relief.
The Trustee is informed that Howard, Williamson and their law firms together purport to have attorney-client relationships with approximately 10,000 consumers. Howard and Williamson, along with the other Attorneys acting in concert with them, have made continued operations impossible.”
The shutdown occurred just one day after Judge Staton said, “The Court is not convinced that any benefit to consumers would result if the Court allows Morgan Drexen to continue to charge Affected Consumers fees, when they are the very same consumers who have already paid Morgan Drexen an illegal upfront fee. Although the Chapter 11 Trustee argues that the consumers will benefit if Morgan Drexen continues to collect a fee and service the accounts for an additional 90 days or so, the Court believes that any such benefit is speculative, at most. It is more likely that no additional benefit will inure to the Affected Consumers in the course of the next few months, and the only effect will be the continued drain on their accounts, and an additional few million dollars in Morgan Drexen’s coffers. Accordingly, the Court finds that the following permanent injunction is warranted.” – Source
But maybe this isn’t over yet. A couple of people have told me Walter Ledda, the head honcho of Morgan Drexen, has already setup another company. If anyone has details on that company, I’m curious to know more and you can reach me here.
This article by Steve Rhode first appeared on Get Out of Debt and was distributed by the Personal Finance Syndication Network.