Bankruptcy/Loan Modification Scam Shut Down

Allison Tussey —  November 14, 2012 — Leave a comment

Gary David Tracy, 50, Ontario, California, bar number 167212, has been shut down for allowing his name and law license to be used in a scheme to defraud distressed homeowners.

His firm, known as Realty Attorney Group APC and Realty Group & Consulting LLC, gave false hope to dozens of clients whose homes were already in foreclosure. Many of the clients’ homes had already been sold. In return for thousands of dollars in fees, the firm filed shell petitions in U.S. Bankruptcy Court that only delayed the inevitable loss of the clients’ homes.

The state bar obtained a court order to assume jurisdiction over Tracy‘s law practice.

Tracy formed an illegal partnership with a convicted felon and abdicated responsibility and control of his law practice to non-attorneys, Deputy Trial Counsels Mia R. Ellis and Lara Bairamian alleged in their petition to assume jurisdiction of the practice.

In July 2012, the U.S. Bankruptcy Court for the Central District in Santa Ana sanctioned Tracy $10,000 after it found his firm was responsible for 80 bankruptcy filings, most of which did not identify the firm as the preparer of the petition.

The State Bar has identified at least nine clients who paid money to the firm and were abandoned. One woman paid the firm $12,400, including an $800 payment deducted from her account after she lost her home and was evicted. Many of the clients had never met Tracy.

The order by San Bernardino County Superior Court Judge Brian S. McCarville authorized the bar to secure the firm’s files, freeze its bank accounts and notify its clients to seek new counsel.

The State Bar of California made the announcement.

Clients who have additional questions are advised to call the State Bar at 213-765-1778.

“The clients in these situations are desperate and in financial turmoil,” the petition said. “They are vulnerable and seeking a lifeline from a legal professional that can save their home.”

The bankruptcy fraud scheme represents the newest variation of the loan modification scams emerging from the housing crisis. Since February 2009, the State Bar’s Office of Chief Trial Counsel has received thousands of complaints against attorneys regarding loan modification fraud. More than 100 attorneys have been disciplined so far, including 22 who have been disbarred.

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