f/k/a . . . the archives

March 8, 2005

blame bar counsel for the Capoccia Scandal

Filed under: — David Giacalone @ 4:24 pm

follow-up (June 19, 2010): See today’s New York Times article, “Peddling Relief, Industry Puts Debtors in a Deeper Hole” (reg. needed) and check out our earlier posting, “Doubts over Debt Negotiation Fees” (July 21, 2008).

Update (Feb. 3, 2006): Murtha gives Capoccia 15 years for swindling clients

noloShark The federal fraud trial against disbarred and disgraced attorney Andrew Capoccia started today, March 8, 2005, in Brattleboro, Vermont. (see WNYT.com, Albany, NY, “Capoccia’s federal fraud trial begins: Accused of stealing millions from clients”) Capoccia is charged with massive fraud — for allegedly cheating his debt-reduction clients of $23 million and then conspiring to hide the booty and his other assets. His partners have already pled guilty. (Dept. of Justice webpage on Capoccia/Centers for Consumer Protection; Rutland Herald, Fraud case reveals ‘deal with the devil, Feb. 10, 2005; Vt. AG press release)

Whatever the outcome of the criminal trial, I believe that the Capoccia Scandal — the enormous harm that Capoccia’s lawyers perpetrated on their clients — could have been prevented if bar counsel had done their duty in 1997 and 1998, when Capoccia’s debt-reduction business was launched and spread across New York State. Instead of acting, they found excuse after excuse for not even investigating, leaving many thousands of clients to the wiles of Andrew Capoccia and his law partners.

Capoccia had a massive ad campaign in newspapers and on radio and tv for a couple years in Upstate New York, for his “debt-reduction” services (See, e.g., this 1999 ad (which ironically featured an image of a vicious shark), and this earlier TBED ad.). He claimed to be able to reduce your debt levels dramatically, without putting you in bankruptcy, while charging only a “small part” of the savings. The ads were aimed at people who wanted to avoid bankruptcy — and, had enough money to afford his fees. In December, 1997, as I briefly describe here, after speaking directly to Andrew Capoccia and members of his staff about his services, I tried to get bar counsel to investigate Capoccia’s practices, which were, on the face of his giant one-page ads, clearly suspicious.

My interview with Capoccia confirmed that the services were excessively priced (many thousands of dollars in advance, for eventually sending form letters to creditors, in which he hinted the client would go bankrupt without a major debt reduction; the fee was determined by an optimistically-forcasted percentage of debt-reduction savings — as much as 70% of your debt — and with the contingency fee set at 25 to 27% of such savings). Besides not involving any real lawyering, the services were also clearly harmful to clients, who were advised to immediately stop all payments of all debts, in order to put pressure on the creditors, thus ruining the credit status they were trying to salvage.

eyeChartN Despite my two formal complaints, and those of dozens of clients, and in the face of newspaper articles filled with client horror-stories, bar counsel never took action against the conduct that hurt clients, allowing Capoccia to amass tens of millions of dollars (and later hide most of it). When Capoccia was finally disbarred, it was because several courts (and credit companies) were angry at him for a flood of frivolous lawsuits. The Grievance Committee in Western NY finally said it would investigate client complaints in early 2000. However, when Buffalo/Rochester Committee heard that the Albany Committee would be looking into the judges’ complaints, they stopped their investigation on behalf of Capoccia’s clients (including mine focusing on the excessive fees), saying they would “defer” to the Albany office. They could have continued their investigation or transferred the files to Albany to consolidate the complaints.

Because the debt reduction behavior was never challenged by the Grievance Committees, Capoccia’s partners were able, at their “Law Centers for Consumer Protection,” to continue attracting and bilking clients — some say up to 20,000. My first complaints against Capoccia were made when he was claiming to have “helped hundreds of clients.”

This lawyer scandal and client catastrophe could have been avoided — minimized and stopped in its tracks — if bar counsel acted responsibly and competently when the first barrage of suspicious ads came out in 1997; or when they received detailed complaints from myself, a member in good standing of the bar; or when they were flooded with client complaints (which at first were not even accepted, but were instead referred to the State Attorney General’s office); or when newspaper and tv reports emerged about angry and injured clients. Or, or, or . . Instead, toothless and blind watchdogs did nothing, while their cousin the wolf (with main offices on Wolf Rd. in Colonie, NY) plundered the flock. There is little chance of reimbursement for the cheated clients and many may never be able to repair their bad credit.

ProfPointer While trying to get the NY Grievance Committees to take action, I was

  1. given the excuse that I was not a client, so the injury I perceived was “hypothetical,”despite their power (under 22 NYCR 806) to act on their own initiative, and to issue “caution” or “education” letters should a novel issue arise;
  2. told that bar counsel do not pay much attention to lawyer complaints, since they usually come from competitors who just want to remove competition (not relevant to my situation)
  3. told that it was “hard” to prove a fee was excessive (which can be true, but surely wasn’t here); I was also referred to ABA Formal Opinions 93-373 and 94-389 for the proposition that “reverse” contingency fees (based on savings) are permissible, but then ignored when I detailed all the requirements listed in the two Opinions that were being violated by Capoccia’s firm
  4. cautioned about an obligation to keep disciplinary complaints confidential, when I talked about going to the press with their delays, although the confidentiality rule does not apply to the complainant

Although this process has not made me bitter, it has made me far more wary and weary. I am also more aware of the futility many clients must feel when lodging complaints against a lawyer. I’m continuing to tell this story, because I have seen no indication that New York’s grievance committees (or those of other states) have improved their vigilance. (see my essay on the inadequate disciplinary system)

If our watchdogs don’t spring to action when many thousands of desperate, uninformed and unsophisticated consumers are paying millions of dollars in excessive fees (for services that actually harm them), when will they choose to act? Plainly, consumers believe, and should be able to trust, that heavily advertised lawyer services have been scrutinized and pass ethical muster. Our Attorney Grievance committees must have the procedures, policies and personnel needed to act quickly and effectively when the rights of vulnerable clients are at stake. Part of the problem is funding, but a significant part is attitude and commitment. How many sheep need to be devoured by the wolf before our watchdogs wake up? Before the watchdog starts looking like just another wolf in bureaucrat’s clothing?

eyeChart As I wrote to Chief Counsel Gerard M. LaRusso and Principal Counsel Vincent L. Scarsella, of the Buffalo, NY, Attorney Grievance office, on April 18, 2000 (more than 18 months after my formal complaint was made to their office, and 27 months after my detailed complaint to the Albany office):

At this point, I believe that the failure of our professional “watchdogs” to act in a quick and definitive manner to review Mr. Capoccia’s much-advertised debt-reduction practices and to protect the public from inappropriate conduct is the most important issue raised in this case — more important than what happens to Mr. Capoccia.

Updates:

tiny check March 9, 2005: see Albany Times Union,At trial, lawyer seen as predator or protector“; Bennington Banner, “Sinnott to take stand in former partner’s fraud trial.”

tiny check March 24, 2005: The Bennington Banner reports that Howard Sinnott, Capoccia’s former partner “teared up telling the jury he expects to be disbarred for his crimes.”

“Seeing what I’ve done, I’m not sure I have, um,” he said, pausing and looking down, “the character to practice law.” Sinnott pleaded guilty in February to two felony charges of interstate transfer of stolen funds.

(Bennington Banner, “Sinnot takes stand in fraud trial,” March 24, 2005)

tiny check March 25, 2005: In a reply to a Comment from MyShingle‘s Carolyn Elefant, I make suggestions for lawyers hoping to cash in on the new bankruptcy laws by offering debt-reduction services.

tiny check March 31, 2005: Describing the testimony of Andrew Capoccia in his own defense, the Albany Times Union reported (emphasis added):

“And Capoccia said his company, created in Colonie in 1997 and at one point with as many as 11,000 clients, would have had no problems with the authorities had he been allowed to run it correctly. ‘What was being done was perfectly legal, perfectly ethical and … sanctioned by the Ethics Committee of the state of New York,” he told the jury.”

tiny check April 5, 2005 (from a posting at f/k/a):

Burlington TV station WCAX reports this afternoon that disbarred NY lawyer Andrew Capoccia has been found guilty of all 13 charges against him in a federal fraud trial, and faces prison terms of five to 20 years on each charge.Capoccia, 62, was accused of defrauding thousands of his “debt-reduction services” clients of about $23 million.  WCAX.com, April 5, 2005; see The Albany Business Review, “Vermont Jury Finds Capoccia Guilty;” DOJ Press Release, April 5, 2005)

tiny checkLawyers’ Clients May Get Less $$$,” Bennington Banner, July 9, 2005. (Only $4 million in assets have been seized for distribution to injured clients, who are owed $25 million.)

tiny check Update (Feb. 3, 2006): Murtha gives Capoccia 15 years for swindling clients After merely slapping the wrists of two cooperating co-conspirators, U.S. District Court Judge J. Garvan Murtha sentenced disbarred lawyer Andrew J. Capoccia to 188 months imprisonment, for stealing millions of dollars from thousands of clients, through his “debt reduction” centers in New York and [under the name of Law Centers for Consumer

Protection] in Vermont. (WNYT.com, “Attorney gets over 15 years for cheating clients; “Associated Press, “Capoccia sentenced to 15 years;” Feb. 3, 2006)

scales rich poor From his bench in Rutland, Vermont, Judge Murtha said:

“This is judgment day as far as I’m concerned, Mr.Capoccia.”

. . . I’m pleased that Judge Murtha has finally given a serious sentence in this case, but I’m still angry on behalf of the unnecessarily injured clients and the unnecessary additional blot on the reputation of lawyers. Effective lawyer discipline — especially the willingness to investigate clearly excessive contingency fees* — would have saved a lot of people a lot of misery.

* What made this scheme so lucrative for Capoccia was his fee system. He said that he took “only” 25 or 27% of the amount of debt reduction achieved for the client. In actuality, he took the entire fee — usually thousands of dollars — up front, before doing anything for the client, and calculated it on the basis of clearly optimistic outcomes (predicting the ability to reduce debts by 50 to 75%). If that scheme, which clearly violated ABA Formal Ethics Opinion 93-373 (regarding “reverse” contingency fees, which are based on savings, rather than winnings), and ABA Formal Opinions 94-389, had been declared unethical, there would have been no incentive for Capoccia to continue providing his “service.”

tiny check (Feb. 3, 2006) Given the importance of the disciplinary system aspects of this case, Your Editor is pleased to see that the above post is the 1st result today in the Google search for [andrew capoccia].

update (Nov. 2007): See “Suit Accuses Court Panel Of Cover-Up” (New York Times, Nov. 1, 2007), which begins “A former lawyer for the state court system, fired in June from her job investigating lawyers charged with misconduct, has charged in a federal lawsuit that supervisors ”whitewashed” some cases for ”personal or political reasons.” Plaintiff is attorney Christine C. Anderson.

you look too robber!
dewdrops
in the grass

Issa

the mountain moon
gives the blossom thief
light

Issa, translated by David G. Lanoue

crying its cry
in vain…
the stepchild sparrow

ISSA, translated by David G. Lanoue

4 Comments

  1. Thanks for ttrying to warn those people I am one of the thousands that got bilked out of a ton of money that i didn’t have it was money my grandfather left me when he died. So now I sit with an uncollectable judgment against them that I will never get. It disturbs me to know that this could have been avoided if they had just listened to you well thanks for your efforts. Ellen

    Comment by ellen morrissey-mayo — April 15, 2007 @ 8:07 am

  2. I agree.. Thanks for this post. This really helped me… Everybody must be aware of this.. I’ll share this to other friends. Thanks

    Comment by Karen — March 17, 2008 @ 1:10 am

  3. Where is Mr. Capoccia housed now? I checked the Federal Bureau of Prisons and it says he’s not there yet there is a release date listed of 2019.

    Ed. Note: Nancy, the last information I have seen about the location of Andrew Capoccia came in an Albany Times Union article (written by Alan Wechsler) from April 2006, which stated “now known as inmate 06-00370. He’s believed to be headed for a low-security facility in western Pennsylvania.”

    Comment by Nancy — August 30, 2008 @ 6:32 am

  4. The debt settlement industry sure has their share of the good, the bad, and the ugly.

    Comment by Amy Marsh — January 9, 2009 @ 10:22 am

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