By Matt Wardman.
This post looks at the implications of the motion Phil posted earlier, which you can read in full here. This could be the biggest development of the last 6 months towards moving this mess towards a resolution.
Randy W Williams, the Trustee in Bankruptcy for the Application for the Bankruptcy of the Society of Saint Stephen the Great by J. Mark Brewer and Brewer and Pritchard PC, filed a motion requesting sanctions against both J Mark Brewer and his law company on September 4th 2008, following on from the dismissal with prejudice of the application.
What is in the Motion?
Essentially, the kitchen sink. Among other things, the motion:
- Requests that the Court enter sanctions against J. Mark Brewer and the law firm of Brewer & Pritchard, P.C. for filing this case in bad faith.
- Accuses Mr Brewer of incomplete disclosure of information to the case conference, including failure to identify a bank account while handling large sums (100s of thousands of dollars) of money.
- States that there was failure to disclose the existence of the ENC SHOP MANAGEMENT CO. entity.
- States that Mr Brewer and Brewer and Pritchard have perpetrated a “fraud on the court”:
“Mr. Brewer and his firm engaged in a concerted scheme to mislead this Court and to file a bad faith bankruptcy case. Mr. Brewer’s action in failing to disclose the true name of the Debtor and the cancellation of its contract and assignment of those rights to another closely held company of Mr. Brewer is a fraud on this Court. “Fraud on the court” is an intentional act by an officer of the Court to deflect the Court from knowing all of the facts necessary to make an appropriate judicial decision on the matter before it.”
- Identifies undisclosed conflicts of interest:
“Brewer’s failure to properly identify the Debtor, his conflicts in representing the Debtor while simultaneously being its chairman, and his position in ENC and St. Stephen the Great Registered Charity are all matters of significance that should have been disclosed, but as the docket and pleadings in this case reflect, none of these key events was disclosed. “
- Accuses Mr Brewer of violation of disciplinary rules and possibly US Law:
“Brewer violated his duty of candor to the Court as well as other provisions of the Texas Disciplinary Rules by attempting to persuade the Court to allow this case to proceed. Brewer’s actions may also violate Title 18 of the United States Code.“
- Suggests that Mr Brewer should be sent back to learn about the Ethics of Legal Practice:
“Mr. Brewer be required to complete 20 hours of continuing legal education in the area of legal ethics over the next year and file a certificate of completion with the Court.“
- Proposes that sanctions worth potentially several hundred thousand dollars be imposed on Mr Brewer and Brewer and Pritchard, P.C.
- Can be summarised in the final 2 paragraphs, which I quote in full:
14. At best, as this Court has already found, Mr. Brewer’s conduct was in bad faith. The Trustee submits as set forth herein that such bad faith also amounts to a fraud on the Court. At worst, his conduct violates § 157 of Title 18 and possibly other statutes. As an attorney and a law firm, Mr. Brewer and Brewer & Pritchard owe a duty of candor and honesty to this Court and to the bankruptcy process. The acts that are the subject of this motion violate that duty. In addition, the filing of this case in the United States where almost every creditor is located in the United Kingdom brings disrepute to the Bankruptcy Courts of the United States as they are being used as a haven for a party attempting to escape justice where it was formed and where it did business. Mr. Brewer seeks to use the designation of St. Stephen as a charity to somehow suggest that his conduct does not bear scrutiny. In fact, just the opposite should be true, any attempt by an alleged charity to escape or defer its obligations should be subject to the utmost in candor and disclosure so that no question of impropriety exists. Here, just the opposite is demonstrated by Mr. Brewer’s conduct, and he and his firm must bear responsibility for these actions and make amends to this Court, the Trustee and most significantly the bankruptcy process so that creditors, especially those in a situation like this who are looking at the system from outside U.S. borders, can see that parties who would attempt to subvert the law to escape their responsibilities will be punished.
15. Accordingly, the Trustee requests that the Court grant the Trustee’s motion, enter sanctions consistent with the foregoing and grant such other relief as is just.
What are the Implications?
I don’t know where to start here. In short, the whole thing could be blown wide open. There are implications for all aspects of the SPCK case. To mention just a few obvious points:
- Assets may in fact be available to fund compensation to those more than two dozen employees of SPCK who are have made claims in Employment Tribunals.
- The same goes for the many suppliers to the
- Monies paid to Brewer and Pritchard may potentially be recoverable if shown to not have been properly expended.
- Transfers of significant stocks of books have occurred between Bookshops under management by different entities. Were these properly accounted for?
- The motion itself may provide justification for freeholders and landlords of some of the SPCK shops to take action where previously they have held back due to continuing legal processes.
- Personal Liability may attach to the Trustees of the Society of Saint Stephen the Great for debts following this motion – dependent on the outcome.
- These statements by an official of a US Court may turn out to be material in any investigations by British regulatory bodies such as the Charity Commission.
And that is just scratching the surface.
As they say – watch this space. A PDF of this article and the motion is available here.
In the meantime, there will be a lot to talk about at the ex-Employees’ meeting today.