Justice department pursues legal document preparer
by Jonathan Partridge | Patterson Irrigator
Sep 06, 2012 | 3260 views | 0 0 comments | 10 10 recommendations | email to a friend | print
The U.S. Department of Justice is seeking to strip a Patterson business owner of her ability to prepare bankruptcy petitions based on allegations she improperly provided legal advice and fraudulently prepared documents for several people.

Judith Hotze, an attorney for the Department of Justice’s U.S. Trustee Program, filed a complaint of injunctive relief against Diane Yvanes, the owner of Diane’s Paralegal Service, on July 25.

The complaint, which alleges that Yvanes failed to pay $4,500 in fines to debtors and continued to complete petitions improperly by neglecting to sign them, was slightly amended Aug. 9, clarifying a few minor details about one of the cases mentioned in the suit. U.S. Trustee attorneys also alleged that Yvanes overcharged clients for her services in the past, though she said she has since corrected that behavior.

The latest injunction seeks to prevent Yvanes from preparing any bankruptcy documents.

Yvanes, a legal document assistant who has run her business in Patterson since 2007, has responded by saying she will likely give up preparing bankruptcy petitions. However, she disputes many of the U.S. Trustee Program’s allegations and says most of the individual cases mentioned in the federal suit have been resolved.

“To be honest, bankruptcies are not worth doing,” Yvanes said last month, citing court guidelines that bankruptcy petition preparers should charge only $125 per bankruptcy for hours of paperwork.

She said she planned to continue to prepare other legal documents.

A status conference for the case is scheduled for Oct. 3 at the U.S. Bankruptcy Court in Modesto.

Litigation ongoing

The U.S. Trustee Program’s complaint comes after U.S. Bankruptcy Court Judge Michael McManus signed a consent order Sept. 7, 2011, requiring Yvanes to cease completing Chapter 13 bankruptcy petitions and to comply with federal laws when completing petitions.

If she failed to do so, the court agreed at the time to require Yvanes to pay $16,000 to past debtors and $60,000 in fines that U.S. Trustee Program attorneys had sought during an August 2011 lawsuit against Yvanes involving eight other cases.

In a motion Aug. 29, 2011, U.S. Trustee attorney Vikas Kumar stated: “The UST avers (affirms) that Yvanes engaged in fraudulent, unfair and deceptive acts by failing to disclose anywhere in debtor’s petitions or schedules that she prepared, assisted or was paid in connection to the bankruptcy documents filed with the court.”

Officials with the U.S. Trustee Program would not comment on the federal allegations, instead forwarding some documents filed with the U.S. Bankruptcy Court’s Eastern District of California.

The U.S. Trustee Program is a branch of the U.S. Justice Department intended to promote the efficiency and protect the integrity of the federal bankruptcy system.

Its August 2011 motion alleged Yvanes charged clients $300 per petition for Chapter 7 bankruptcy cases and $1,000 each for Chapter 13 petitions, which are sometimes used when someone is in danger of losing a home to foreclosure.

In its guidelines, the Eastern District of California recommends a maximum charge of $125 for all bankruptcies.

Kumar alleged that Yvanes regularly overcharged clients for her services and that she did not disclose her identity as a bankruptcy petition preparer on clients’ documents, some of which were dismissed because she waited too long to file them.

While the U.S. Trustee Program sought $2,000 for the eight cases listed in the case and a $60,000 fine, Yvanes avoided those fees by signing the September 2011 consent order that required her to pay only $4,500 to debtors.

The U.S. Trustee Program sought a contempt order against Yvanes on Dec. 19 on the basis that she did not pay the debtors anything and did not pay related fines and damages.

McManus denied the contempt motion Jan. 30, saying the court would not require more money based on Yvanes’ failure to comply to the court’s previous payment order. He also denied a motion to prevent Yvanes from filing petitions in the future, saying that the U.S. Trustee Program had not called for that in its initial motion.

However, McManus said the plaintiff could argue in future debtors’ cases related to Yvanes that she should be prevented from preparing petitions.

The July 25 complaint that seeks to bar Yvanes from preparing bankruptcy petitions listed four new cases, involving paperwork filed between Aug. 1, 2011, and June 7, in which Yvanes allegedly failed to identify herself as the petition preparer. In some of those cases, she also allegedly provided legal advice, in violation of federal law, according to U.S. Trustee attorneys.

Clients take Yvanes to task

The federal cases follow several small-claims cases against Yvanes in Stanislaus County Superior Court, all of which allege she took clients’ money but failed to produce the legal documents they hired her to complete.

In one case, filed in Stanislaus County Superior Court in March, client Claudia Macias alleges Yvanes never completed financial documents related to Macias’ divorce. Macias asked for the return of $500 she paid, plus $250 for court fees and pain and suffering.

In another case, filed in December 2010, a Stanislaus County Superior Court judge awarded Angelina Ramos $1,705 after Ramos claimed Yvanes failed to complete paralegal work she was hired to do.

The Better Business Bureau has given Diane’s Paralegal Service an “F” rating, indicating that the business never responded to three separate consumer complaints about problems with its services between January 2011 and May 2012. A review of those three complaints indicates they all had to do with consumers alleging Yvanes failed to complete paperwork she was paid to do.

One of the three complainants, Patterson resident Colleen Dailey, said she was considering filing a suit of her own against the bankruptcy petition preparer, alleging Yvanes did not complete bankruptcy petition work for which she received $325 in July 2011.

Dailey said she cannot open a savings or checking account because of unresolved bankruptcy issues.

“She’s never ever contacted me,” Dailey said last month. “She’s never given me any of her paperwork, nothing. … My nightmare goes on.”

Case facts disputed

Yvanes took issue with most of the allegations in the U.S. Trustee Program’s suit.

She said she had resolved financial issues with most of the clients listed in the suit and said some of them did want to be paid the extra money she was ordered to pay , saying they felt she had done an adequate job. She said the forms she neglected to fill out and sign, leading to the U.S. Trustee Program’s allegations of fraud, did not prevent the bankruptcies from being accepted and processed by federal authorities.

Yvanes also denied that she had provided legal advice to clients, saying that she merely explained the differences between types of bankruptcies.

She said the only Chapter 13 bankruptcy form she completed after the September court order to cease working on those cases was one that she began before the injunction was issued, as she did not want to leave the client in the lurch.

Furthermore, she said she was unaware of the court guidelines to charge only $125 per bankruptcy, adding that she knows several legal document assistants who charge more.

“This business has not made me rich, that’s for sure,” Yvanes said.

In terms of the small-claims cases, Yvanes said most of them have been resolved.

She explained that some of the delays in her work in recent months stemmed from the fact that she took another job working for a union office in Hayward between November and March, when she said her bankruptcy work dropped off. She said she had tried to catch up on unfinished legal documents since that job ended.

Macias’ issues have since been resolved, Yvanes said, and she said she planned to complete Dailey’s paperwork within a couple of weeks. She also said she had responded to the Better Business Bureau’s complaints.

Alma Galvan, a trade practice specialist for the Better Business Bureau, said the organization had no record of a response from Yvanes regarding the three complaints against her business. However, Galvan noted that the BBB is required to close a case if a business owner fails to respond to a complaint within 24 days, saying that businesses receive a couple of reminders before that happens.

Yvanes said some of the delays in Dailey’s case resulted from Dailey not getting her materials ready right away, while others resulted from her temporary job in Hayward. She also said Dailey had been a difficult client, and Yvanes alleged Dailey verbally accosted her in the office she previously used at 100 N. El Circulo. Yvanes now works from home.

Yvanes said she intended to take care of all her clients, even as she ponders another career.

“Everyone in the end will get their paperwork or their money back,” Yvanes said.

Jonathan Partridge can be reached at 892-6187 or jonathan@pattersonirrigator.com.

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