"Primary targets are unscrupulous bankruptcy petition preparers and attorneys. The primary remedies sought are fines and injunctions under 11 U.S.C. § 110 and disgorgement of fees under § 329."

Statement of Lawrence A. Friedman, Director, Executive Office For United States Trustees before the Subcommittee on Commercial and Administrative Law, Committee on the Judiciary, United States House of Representatives, Concerning the need for bankruptcy reform legislation to combat bankruptcy fraud and abuse. Presented on March 4, 2003.

(Notice that Lawrence Friedman included "unscrupulous" attorneys as his "targets," but cited a statute that applies only to non-attorneys who prepare petitions. We wonder if the Chairman, Congressman Chris Cannon, caught the deception? )

According to Former Director Lawrence Friedman's statement before the Congress, petition preparers are not alone as "primary targets." However, he does not state if any action has taken place against "unscrupulous" attorneys. That does not fit into his smoke and mirrors propaganda and we seriously doubt that members of Congress hearing his statement thought to ask if Civil Enforcement Initiatives are EVENLY applied.

An article published in The New York Times reports that in the last 7 years, United States Trustees have filed approximately 4,000 motions seeking to stop bankruptcy petition preparers or to reduce their fees. On March 4, 2003, Lawrence Friedman, Director of the Executive Office for U.S. Trustees, stated before Congress that in fiscal year 2002, he "successfully" took action under Section 110 against petition preparers in more than 1,500 cases.

Examine the figures. Four thousand motions against petition preparers have been filed in the last seven years. If U.S. Trustees were "successful" against 1,500 in one year, that means that before the year 2002, U.S. Trustees filed approximately 415 complaints against petition preparers. The complaints stepped up as bankruptcy judges legislated from the bench to impugn America's free enterprise system and violate federal anti-trust law. As case law was established, U.S. Trustees quoted from one case, to prevail in other cases.

Cases where petition preparers prevailed; cases demonstrating denial of due process of law; legislating from the bench; violation of bankruptcy court jurisdiction; and harmful retribution against debtors that refuse to bear false witness, are UNPUBLISHED decisions. One unpublished decision reveals how U.S. Trustees work behind the scenes to force petition preparers to lower their charges. They then use the figures in court as a standard to price fix what all petition preparers can charge.

In an unpublised opinion; United States Bankruptcy Court For the District of Oregon; U.S. Trustee v. Barry Taub, Adversary No. 01-6022- re Richard and Jessica Bercume, Case No. 600-66536, Bankruptcy Judge FRANK R. ALLEY, III gave the following decision:

"The $150 average is hardly surprising in light of the fact that the UST regularly advises petition preparers who charge more than $150 that it will take them Court, as it has Mr. Taub, if they persist in doing so. Several preparers operating in the Eugene Division were so advised, and virtually all but Mr. Taub agreed to reduce their fees. Taub argues that the evidence of average fees charged cannot be relied on as an indicator of a fair market value, given the UST's intervention in the market. The argument is well taken. The Court cannot rely on market data if a majority of the participants of the market have unwillingly reduced their fees to the goal set by the UST."

Since this decision is unpublished, it cannot be cited by petition preparers in their pleadings. However, the argument can be presented without citation, as it is a logical and true argument. It is contemptible to make other businesses reduce their charges to meet the standard that was reached by strong-armed price-fixing. Can you imagine this happening in a democratic, free enterprise nation? It is happening, and those perpetrating it are appointed officials in the U.S. Trustee Program -- a component of the United States Department of Justice, headed by Attorney General John Ashcroft.

We have seen letters and motions filed by debtors that allege misinformation and misleading by attorneys. We also have a transcript from one hearing where the trustee stated that the debtor took "bad advice from her legal counsel." When the debtor contacted the U.S. Trustee and the Executive Office for U.S. Trustees about the matter, they advised her to pursue civil options against her attorney who gave her "bad advice." They had no conscience that the chapter 7 trustee was taking advantage of the attorney's "bad advice."

It is not financially beneficial for trustees to enforce Civil Enforcement Initiatives against unscrupulous attorneys because the most they can do is expunge fees paid to the attorney that filed the petition. Section 110, however, allows bankruptcy judges to fine petition preparers up the ying-yang and into personal bankruptcy. Petition preparers are ordered to pay the fines to the trustee. There have been no reports of what happens to the money after it is given to the trustees. Most bankruptcy cases are closed by the time the U.S. Trustee files complaint against the petition preparer, and there are no records showing that these cases was reopened to distribute the fines to unsecured creditors.

In a case presented on this site, (Confidence Crime) the attorney for the trustee advised the debtor to sue his attorney for malpractice. In neither of these cases did the trustees practice Civil Enforcement Initiatives by filing complaints against unscrupulous attorneys.

When petition preparers are alleged to have given their customers "bad advice," U.S. Trustees allege that they have committed UPL, that is, unlicensed practice of law. They do not perceive or care what this conveys to the public -- that having a license to practice law is a license to give "bad advice" and a license to be above the law.

The judiciary has different laws; one for litigants represented by legal counsel where the case is not fixed; another for litigants represented by legal counsel when the case is fixed; and still another for pro se litigants. Section 110 demonstrates the prejudice of legislators. It is law written specifically for individuals who are not attorneys. It is a statute of discrimination. There should be one statute for anyone who prepares bankruptcy petitions.

Section 110 of the Bankruptcy Code is the "Colored Only" water fountain. So what happens when consumers take a drink from the "Colored Only" water fountain? The cloaked U.S. Trustees appear with burning crosses, and through a series of threats, force consumers to cry "rape"and turn accuser against petition preparers.

Most petition preparers, independent paralegals, and companies that provide court document preparation services, believe that the attack upon their industry by United States Trustees is to rid attorneys of competition. There is much truth to that, but it is not the total picture.

In the Northern District of Illinois, Western Division, Final Reports filed in 169 cases reveal that Chapter 7 debtors paid $203,507 in fees to attorneys preparing petitions. These are costs for preparing petitions and do not include fees for representing the debtor in court on motions or complaints.

On the average, petition preparers charge between $150 and $300 to prepare petitions. Let's consider if the 169 Chapter 7 cases had they been prepared by petition preparers instead of attorneys. Taking the average of $225 charged by petition preparers, the total would be $38,025. That would have saved consumers $165,482. The legal community, however, sees this another way; that is, it shorted them $203,507. In addition, it would have removed 169 victims from the reach of the trustees' bribes in the form of "settlements" and "compromises."

In the 169 cases we examined, the bankruptcy trustees reported total receipts in the amount of $4,844,964. Disbursements, which consist of payments made to non-debtor co-owners, realtor and auctioneer commissions, taxes, and interim compensation to attorneys for the trustee, (who in the NDIL, Western Division, are the same person as the trustee in about 99 percent of the cases), totaled $2,542,920. At the close of these cases, trustees had $2,302,044 to distribute. Of that $2,302,044, $839,634 was distributed to administrative costs, which consists of trustee compensation and trustees' attorney fees. In 21 of the 169 cases, (13 percent), unsecured creditors did not receive any distribution of assets. All the money was diverted to trustee compensation and compensation to the attorney for trustee.

We can reasonably conclude that the 21 cases demonstrating no distribution of assets to creditors were cases of trustee embezzlement, given color of official right by the bankruptcy judge. Those 21 cases, with no distribution of assets to unsecured creditors, resulted in $287,028 to trustees in compensation, and as compensation for attorney fees, which was to themselves as individuals, or to their law firm. It should be noted that these cases were administered by only 6 chapter 7 trustees. That averages to $47,838 per trustee, not including their compensation from other cases.

Considering the figures, and who is served the greatest benefit from Chapter 7 asset cases, logical people will understand why United States Trustees file fraudulent charges against honest petition preparers. Most cases of trustee embezzlement of estate funds under color and claim of official right as "compensation" are cases where debtors allege that their attorneys mislead them or gave them "bad advice."

The National Association of Bankruptcy Trustee (NABT) has heard complaints from trustees that they are not paid enough. Not surprisingly, Lawrence Friedman, current Director for the Executive Office for United States Trustees, is a former president of NABT. Setting up cases to commit extortion is a bonus offered to Chapter 7 trustees, excused, justified, and protected by Regional United States Trustees and Lawrence Friedman.

To provide even more insight into the attitude of personnel in the U.S. Trustee Program and their misuse and abuse of Section 110, they present the public as stupid, ignorant, helpless individuals who are taken advantage of by petition preparers. In an interview with the American Bankruptcy Institute, published February 2003, Lawrence Friedman stated, in reference to bankruptcy petition preparers, that "There are serious issues of consumer protection, fees and the rendering of legal advice."

Consumer protection. Attorneys proclaim in advertising that consumers can file bankruptcy and keep their house and car. They do not inform consumers that upon filing the petition, all property becomes property of the bankruptcy estate and they are only allowed exemptions. Filing bankruptcy and keeping your house and car is no guarantee. In addition, some attorneys advertise that you can wipe out "all" debt when filing bankruptcy. That is untrue and misleading, as some debts are not dischargeable.

Fees. Attorneys charge for preparing the petition and some tack on additional costs if they need to file amendments to schedules that they improperly prepared. Most petition preparers provide amendments at no additional cost if they have made an error. If the case trustee alleges wrongdoing against the debtors for things that the attorney included or omitted from the Schedules, the attorney charges additional fees to represent the debtors.

Many debtors have been convinced that paying the trustee a few thousand dollars is less expensive than the legal fees that they will have to pay to defend themselves against the trustee's fraudulent allegations.

Yes, Mr. Friedman. Fees charged by attorneys to defend debtors from dishonest trustees is a serious issue, as some trustees bet on denying debtors due process of law because debtors cannot afford legal fees.

Rendering of legal advice. If it is the perception of the Executive Office for U.S. Trustees that consumers are ignorant of Bankruptcy Law, then the same is true for consumers that use licensed attorneys. If consumers do not know whether a petition preparer is telling them right or wrong, they don't know if an attorney is telling them right or wrong, either! Petition preparers are punished by U.S. Trustees for consumer ignorance, while panel trustees punish consumers for bad legal advice given by attorneys. All in all, those appointed in the U.S. Trustee Program use ignorance for personal, financial gain.

We have heard from numerous victims of trustees' corruption from across the nation. About 95 percent assert that their attorneys advised of things, and prepared their petitions accordingly, that chapter 7 trustees later alleged as bankruptcy fraud. When informing the trustee of their attorney's advice, the attorney withdraws, and the debtors are faced with adversary complaints without legal representation. Those that can afford to obtain another attorney experience abandonment, as the attorney recommends that they pay the trustee a settlement/bribe to avoid continued and expensive litigation. Some attorneys have told their clients outright that there is no way they will prevail as the bankruptcy judges always decide in favor for the trustees. Some attorneys have admitted to their clients that they are being blackmailed, and the bankruptcy judge is part of the plan.

Some cases are planned so that the allegations raised by the trustee are true, or half-truths. Some cases demonstrate that the trustee's allegations have no basis in truth. It becomes obvious to the debtor at the Section 341 Meeting of Creditors that the trustee was informed of the very act that their attorney advised them that they could do without violating bankruptcy law. Chapter 7 trustees threaten debtors with imprisonment, or punishment of losing their exemptions, unless the debtor "voluntarily" surrenders exempt property or agrees to a cash "settlement."

Reliable sources report that absolutely no judge is nominated to the federal bankruptcy bench without paying a "fee" to the United States Senator who nominates him or her. The U.S. Senator is allowed to retain a portion of the "fee." If the person so nominated does not have the full fee, it is paid by the Chapter 7 trustees of the District and Division in which the bankruptcy judge will sit. Upon paying the "fee," the judge is nominated by the panel of federal judges in the district in which the judge is appointed. What remains of the "fee" after the U.S. Senator has taken his or her share, is submitted to the federal judges who divide the balance between themselves.

Bankruptcy judges, unlike other federal judges, ARE NOT approved and appointed by the Congress. Bankruptcy judges repay the trustees by entering orders and approving trustee compensation that give color and claim of official right to trustee extortion and/or embezzlement. The trustees pay a portion of the bounty to the Regional U.S. Trustee as "protection" money. It makes everyone blackmailable so that no party can whistleblow.

Is there proof of this? It is only by the mouth of sources, but it is credible, giving good reason to see why some bankruptcy judges betray their oath of office to uphold the law, and why Regional U.S. Trustees allow corrupt panel trustees to remain on the panel as "career" trustees.

Not all attorneys that practice bankruptcy collude with bankruptcy trustees. Some only take the most simple of Chapter 7 cases where debtors own no real estate or property otherwise. They cannot however, avoid knowing of the organized crime that operates in the bankruptcy courts and some Bar Associations. Rather, they avoid direct participation by directing debtors with complicated cases to another attorney who does collude with bankruptcy trustees.

The Bar cannot use petition preparers to setup victims for bankruptcy trustees. They cannot risk exposing the organized crime operation by enforcing their racketeering rules upon non-Bar members. The most they can offer petition preparers, to force their cooperation in collusion, is the right to conduct business. Since non-attorneys cannot provide legal advice, it would be obvious to consumers that something is very fishy when U.S. Trustees refuse to file complaints, and when bankruptcy judges dismiss complaints filed by debtors against non-attorney preparers that do violate Section 110.

The only solution for the U.S. Trustee Program is to rid themselves of all petition preparers, including the honest, ethical petition preparers. However, based on the U.S. Trustee Program's witch hunt and persecution of petition preparers, there is no such thing as an honest petition preparer. Check the data ....

Is there any petition preparer who started business in the 1990's who is still doing business? If so, have those petition preparers already fought U.S. Trustees? Were their prices fixed by U.S. Trustees or bankruptcy judges? Were they injoined from committing UPL? In other words, do they have a clean slate?

Logically, that means that the U.S. Trustee Program believes that all petition preparers are bad. Their version of bad does not always mean that petition preparers violate Section 110. Rather, there is a general attitude that petition preparers are bad for business -- the business of bankruptcy attorneys and bankruptcy trustees.