Bankruptcy Fraud
Chicago Bankruptcy Lawyers Charged

BY Natasha Korecki
Federal Courts Reporter
Chicago Sun Times
October 19, 2007

Feds say three Bankruptcy attorneys
Stole their clients' home equity in bankruptcy fraud scheme

Five current and former Chicago area bankruptcy lawyers have been charged with ripping off clients who faced mortgage foreclosure.

In all, 11 people were charged in the Chicago area and 78 nationwide in a series of unrelated bankruptcy fraud schemes.

Authorities said some homeowners who struggled to make mortgage payments were given a bailout offer hard to resist: Temporarily sell their homes to "investors," file for bankruptcy and improve their credit.

Homeowners were promised by their lawyers they'd get everything back. In the end, they lost out, the feds say.

"The reality is ... the homeowners are stripped of their equity in the house," said David Glockner, criminal chief in the U.S. attorney's office. "They're left holding the bag with fraudulent bankruptcy cases."

The feds accused Chicago bankruptcy lawyers Norton Helton, Edward Varga and Lori Westerfield of cheating their clients by telling them they'd be saved from foreclosure. Instead, the lawyers stole the equity in the homes.

"The bankruptcy regulations were set up to protect those individuals who find themselves in financial straits," said Ken Laag, chief postal inspector in Chicago. "They relied on these attorneys to help them; instead the attorneys milked them out of the equity in their homes."

He's a hero

Helton, 45, of Chicago, worked with Diamond Management of Chicago and advertised a "mortgage bailout" to homeowners facing foreclosure. Helton is accused of transferring the properties to investors, then filing fraudulent bankruptcy petitions for nine clients in which he allegedly didn't disclose $400,000 in proceeds.

Helton's lawyer, Lewis Myers Jr., said his client would fight the charges.

"At the end of the day, we feel that he'll be vindicated," Myers said. "To some people, he's a hero. He bailed them out. He was very successful. Many of these people, they were able to turn their lives around."

Westerfield, 41, of Chicago was charged with falsifying documents in bankruptcy cases. Westerfield is accused of buying her client's residence for $153,000 and failing to disclose the transfer. She could not be reached for comment.

The feds say the public can report bankruptcy fraud at: USTP.Bankruptcy.Fraud@us doj.gov.
nkorecki@suntimes.com

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