On appeal on a homestead exemption issue in this case, Judges Klein, Montali, and Brandt of the Bankruptcy Appellant Panel for the Ninth Circuit stated (in an unpublished decision), in reference to Anthony Friedman, "The unduly disputations, misleading, and inaccurate representations made to us during oral argument by the chapter 7 trustee's counsel inspire no confidence in the reliability of anything else he has filed."

Some have asked, "What do you mean when saying "embezzlement under color of official right." When it pertains to bankruptcy cases, trustees and their attorneys, it can mean:

Diverting all assets to the enrichment of the trustee and/or attorney "for cause. " The cause is justifcation that blames other parties for the time spent in the case. Cases evidence that when debtors or other parties file appeals or zealously defend themselves, the trustees interpret this as not cooperating.

Intentionally administering cases for the enrichment of the trustee and/or other attorneys in the bankruptcy arena. The case "Betrayal" demonstrates this method. To reopen a case that had been closed about 15 months, the bankruptcy trustee alleged that the debtors failed to list about $200,000 in assets. He alleged wanting to take possession of the assets for the benefit of creditors. The case ended with an attorney that works for another trustee purchasing pearls for $300 that had been appraised at $2,200. In the reopened case, the debtors hired an attorney who is also on the panel of chapter 7 trustees. The trustee received a little more than $3,000 by liquidating the assets, and diverted 100 percent to compensation for himself and his law firm.

Another method is to double-dip from assets. That is when the attorney for trustee performs the duties of trustee. As attorney for trustee he/she is paid an hourly rate for legal fees. As trustee in the same case, he/she receives the sliding-scale commission that is compensation as trustee for performing duties of trustee.

When the above conditions are evidenced, and bankruptcy judges enter order approving compensation, the court order gives color of official right to embezzlement. Another way of saying it is, the trustee and/or hired professionals cannot be accused outright of embezzlement, as a bankruptcy judge entered order approving the compensation.

The trustee, Carolyn A. Dye, hired Rein Evans & Sestanovich LLP as her attorneys. With the same law firm is attorney Byron Z. Moldo, who is also a chapter 7 trustee. It has been reported that Bryon Z. Muldo resigned from the panel of trustees after he was threatened with termination by the Executive Office For United States Trustees. Wells of Justice is attempting to verify this report. We understand from the law firm's Memorandum and Points of Authorities that Anthony A. Friedman is Carolyn A. Dye's primary attorney, with Byron Z. Moldo and David Seror acting as consultants of sorts to "discuss case strategy." Wells of Justice has received at least two other complaints from other victims in California that involve Byron Z. Moldo in his performance as a bankruptcy trustee.

On April 30, 2004, Rein Evans & Sestanovich LLP filed a First Interim Application for Attorney Fees and Expenses. It consists of 99 pages, much of which is itemization. In the itemization, we see entries for the attorney hiring and inter-acting with the realtor. Hiring professionals and liquidating property of the estate are duties of trustee.

The fee application also summarizes what the attorneys did in the case. Among their points is that they prevailed in denying the debtor a homestead exemption on her residence by taking the position that the debtor did not own the property. After the court entered order denying the debtor's homestead exemption, the trustee sold the debtor's residence as property of the bankruptcy estate.

The property sold for about $260,000. The First Interim Application requests $117,952.25 in attorney fees, and $15,809.23 in expenses, for a total of $133,761.48, or a little more than 51.4 percent of the sale price of the property. Since this is an interim billing, it can be expected that the attorney for trustee will bill for additional fees in the future. The trustee, Carolyn A. Dye, is expected to be court-awarded the sliding scale commission/compensation of $16,500 from the gross sale proceeds.

The property sold by the trustee is subject of a probate estate. A living Trust held title to the property, and the debtor was one of about seven beneficiaries in the Trust. The trustee did not distribute any of the sale proceeds to the non-debtor beneficiaries of the Trust.

The debtor and the Special Administrator for the Estate whose property the bankruptcy trustee sold, filed opposition to Rein Evans and Sestanovich's fee application. We have the opposition signed by the debtor, and understand that the bankruptcy judge referenced the Special Administrator's opposition as a "cookie-cutter" motion of the debtor's opposition.

Debtors do not have standing to oppose compensation applications. The bankruptcy judiciary has determined that once the debtor files for bankruptcy, the debtor loses standing to oppose what the trustee does with property and/or assets from liquidating the property.

Attorneys for trustees are paid legal fees for handling legal matters. Bankruptcy trustees are not to delegate their duties to hired professionals. The itemization that you can see by clicking below demonstrates that the attorney for trustee performed the duties of trustee, including hiring the realtor, obtaining appraisal on the debtor's residence, investigating the debtor, and arranging to take possession of the property.

Since the motion in opposition to the billing sets forth statute and argument, we will not repeat it here. In what can be considered an effort to work against the motions opposing the legal fees, the United States Trustee filed a motion in support of Rein Evans and Sestanovich being paid the full amount requested.