Judge Says Ex-Rose Attorney Committed Fraud

Former Rose Law Firm lawyer Allen W. Bird II bore the brunt of the longest awaited U.S. Bankruptcy Court ruling in Arkansas’ western division.

Bringing to a close the 15-year Chapter 11 reorganization of Northwest Financial Express Inc., Judge Robert F. Fussell on June 22 issued a 235-page ruling on the Fayetteville case’s final accounting. Two appendixes to the opinion totaled another 271 pages.

In the ruling, Fussell relieved Bird as the $8.5 million bankruptcy’s trustee, questioned the credibility of his testimony and saddled the high-profile F.O.B. with more than $500,000 in attorney fees and repayments to the estate.

Fees for a bankruptcy trustee’s counsel are normally paid for by the estate. But the court found that Bird had “committed misconduct of the highest order,” and therefore was personally liable for certain expenses. Fussell also ordered Bird to return most of his own trustee fees.

Ike Scott, a partner with Wright Lindsey & Jennings of Little Rock, represented Bird and the Rose Firm.

“We were extremely disappointed,” Scott said. “We certainly disagree with the conclusions that Judge Fussell reached. It’s an extremely rare result in bankruptcy that creditors would be paid 100 cents on the dollar like they were in this case, and so we feel like [Bird] did an incredible job.”

Bird may appeal to either the bankruptcy appellate panel, comprised of judges from the Eighth Federal District, or to the U.S. District Court. Scott said no decision regarding an appeal has yet been made.

Fussell’s orders included that:

• Bird must personally pay his $330,000 legal tab to Wright Lindsey & Jennings for representing both he and the Rose Firm.

• Bird must return to the NWFX estate $199,000 in trustee fees he was previously awarded.

• The Rose Firm must repay $103,000 to the estate for improperly billed fees.

• The judge set aside a $20,000 bonus he awarded on May 24, 1993, to Bird for doing ” a good job.”

• The judge set aside a $50,000 fee enhancement paid Dec. 8, 1998, to the Rose Firm that was also awarded for good work.

The opinion followed Fussell’s November ruling that Bird and the 180-year-old Rose Firm had to repay $200,000 to the estate for improper billing.

Anatomy of a Bankruptcy

Larry Shaffer, was the sole shareholder of NWFX and its subsidiary, Gold Financial Express, in 1986 when it was forced into bankruptcy. Shaffer was represented in the bankruptcy by Hall Estill Hardwick Gable Golden & Nelson of Tulsa, Okla., and now operates National Financial Services Inc. in Springdale.

“If it wasn’t for the $150,000 we spent on legal fees to get a final accounting, no one would have known that the Rose Firm had been overpaid or that Allen committed these fraudulent acts,” Schaffer said. His total legal fees for the case approached $400,000.

Ron Clark, chief executive officer at the Rose Firm, said he was not surprised that the fee enhancement was disallowed. He said that’s a very unusual procedure in the first place.

“From the firm’s perspective,” Clark said. “We’re generally pleased with the decision. We appreciate the kind remarks Judge Fussell made in the opinion about our work, and the discouragement of fees was not unexpected given the length and complexity of this case.

“We were surprised with the court’s findings on Allen, but in regard to his role as trustee we really shouldn’t comment any further.”

Bird left the Rose Firm Sept. 1 to start his own practice in Little Rock, the same day post-trial briefs questioned his billing in the case. Bird said he struck out on his own because he’d been with the Rose firm for 25 years and wanted to practice law in a smaller firm before retiring. The firm had no further comment regarding Bird’s departure.

According to briefs submitted by the Hall Estill Law Firm of Tulsa, Bird twice during depositions said that NWFX should have never been shut down in the beginning.

During the bankruptcy, Bird issued 92,240 checks totalling $8 million in disbursement payments to creditors. Only 64,155 of those checks, or a total of $6.1 million worth, cleared the bank because many of the Fayetteville money order company’s claimants were never found.

Meanwhile, Shaffer, who has already received $250,000 from the bankruptcy estate, stands to collect what’s left of the $380,000 after Fussell’s ruling.