A Matter of Trust
Tuesday, February 10, 2004
New York Law Journal
Long Island Weekly
Tuesday, February 10, 2004
A Matter of Trust
Suit Alleging Financial Scam Is one of Several in Country
By Leigh Jones
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MINEOLA-Last week’s $2 million punitive damages award in Nassau County Supreme Court against a man accused of bilking more than 50 Long Islanders out of millions is just one part of an alleged nationwide scam involving attorneys and financial middlemen.The award, granted by State Supreme Court Justice Edward W. McCarty III against defendant Michael C. Cammarota, stems from a civil action brought by attorney Anthony T. Ballato on behalf of his client, a 68-year-old Long Island man who lost more than $300,000 in an alleged financial planning scam. |
The lawsuit is just one of many actions across the country alleging that certain companies have engaged in the unauthorized practice of law by snaring clients with advertisements for living trusts executed by attorneys who allegedly do little more than sign the documents.
Under the alleged scheme, a Dallas Company, sometimes known as The Gentry Group or Addison Insurance Marketing, entered agreements with various attorneys to use their names in advertisements for living trusts.
When consumers responded to the ads by calling the law firms, non-attorneys working for the Dallas company were sent to their homes to discuss executing living trusts as a way to protect their estates from probate. Once consumers agreed to fund the trusts, the non-attorney would send the document to the attorneys, who are alleged to have signed them without ever meeting with the clients. Fees would flow to the Dallas company, the attorney and the non-attorney. The problem, according to plaintiffs’ attorneys, arose when those trusts were executed without the attorneys’ direct involvement in their preparation. Plaintiffs argued that unrealistic promises were made about the benefits of living trusts and that the Dallas company engaged in the unauthorized practice of law when it used the attorneys’ names for advertising but sent a non-attorney to consumers’ homes instead.
Having established a relationship with the consumers, usually elderly people, the company allegedly later would send a different agent to the home to convince them to liquidate assets and invest them in annuities held by the Dallas company. The plaintiffs allege that persuading the consumers to liquidate their assets in order to purchase the annuities was unsound financial advice that created penalties for consumers but large commissions for the agent.
The Gentry Group allegedly is affiliated with ALMS Holdings and Advanced Legal Systems, all based in Dallas. Michael McIntyre, a Dallas businessman, is alleged to own part of all of each of the companies.
The lawsuit in Nassau County Supreme Court filed by Mr. Ballato, a solo practitioner in Massapequa, names the Dallas-based company, which allegedly ran its outfit in cooperation with a Manhattan lawyer, Roger A. Giuliani, and Mr. Cammarota. Mr. Cammarota was referred to Mr. Ballato’s client, Gerald Campbell, from Mr. Giulaiani, office, Mr. Ballato claims.
In addition to Mr. Ballato’s lawsuit, attorney Hans Poppe, practicing in Louisville, KY., has filed a lawsuit seeking class action status there, which, like Mr. Ballato’s case, names the Dallas company and Mr. McIntyre, in addition to a number of insurance agents and a Kentucky attorney. His case alleges that the defendants used “systematic methods and tactics” to market, based on false and misleading information, living trusts, annuities and other financial products to unsuspecting senior citizens.
Furthermore, attorneys for Manhattan-based Pomeranz, Gottlieb & Mushkin said last week that they are preparing a lawsuit also naming as defendants the Dallas company and, as in Mr. Ballato’s case, the New York attorney, Mr. Giuliani.
Mr. Giuliani’s attorney, Peter Riegelhaupt with L’Abbate Balkan Colavita & Contini in Garden City, said that his client is “vigorously contesting” the action filed by Mr. Ballato’s client. He declined to comment further.
The Campbell Case
The situation in Mr. Ballato’s civil case has the added element of Mr. Cammarota’s involvement, Campbell v. Cammarota, 4636-03, alleges a similar attorney-no-attorney scheme, but while it also asserts that Mr. Cammarota collected money from Mr. Campbell, the suit alleges Mr. Cammarota failed to fund some of the instruments Mr. Campbell directed him to execute. The results, Mr. Ballato alleges, were financial penalties for his client and a complete loss of the principal and future interest, amounting to $325,000. (The Law Journal incorrectly reported Feb. 3 the amount Mr. Campbell allegedly lost). The lawsuit also asserts that Mr. Giuliani and The Gentry Group knew or had reason to know of the scheme.
Attorney Seth Taube, who serves as local counsel in Mr. Ballato’s action for the Dallas company known as The Gentry Group or Addison Insurance Marketing said he has “a strong case” to show that his client had no connection with Mr. Cammarota’s own statements indicated that the allegedly bogus investments were not related to The Gentry Group. Mr. Taube is an attorney with McCarter & English, based in Newark.
Mr. Cammarota was sentenced in a separate Suffolk County criminal action last week to 4 to 12 years in prison for grand larceny charges related to phony investments. Prosecutors alleged that since 1997 he had cheated more than 50 victims out of $7 million. He pleaded guilty in January to grand larceny and fraud. The criminal charges are not connected to allegations surrounding The Gentry Group.
Justice McCarty’s $2 million punitive damages award stemmed from Mr. Cammarota’s default in Mr. Campbell’s civil action and came just days prior to Mr. Cammarota’s sentencing.
Still pending in the Nassau County civil action are the claims against Mr. Giuliani and The Gentry Group, or versions of it, which has faced legal action in several jurisdictions.
A Consumer Protection Report issued by the National Association of Attorneys General in 2001 reported that the Dallas company, operating as Addison Marketing Insurance, had settled a lawsuit brought by Oregon Attorney General Hardy Myers, who charged that the sent letters to seniors offering “free” legal information. When the seniors offering responded, the Dallas company falsely represented that it had the capacity to give legal advice when it did not employ lawyers, the attorney general said.
The settlement prohibited the company from conducting business in Oregon and prohibited the defendant-attorney from practicing law. In addition, the defendants were required to pay a total of $65,000 to the Oregon Consumer Protection and Education Fund.
Mr. Taube, counsel for The Gentry Group, said that his client “does not have a significant record of sanctions.”
But Mr. Poppe, the Kentucky plaintiff’s attorney, has asserted in his client’s complaint that the company was implicated in disciplinary proceedings in Kansas and Pennsylvania as well. When asked about the actions in other states, Mr. Taube reiterated that his client “doesn’t have a long record of sanctions.”
But in another action, the Federal Trade Commission in 1997 found a company run by Mr. McIntyre, a principal of the Dallas company, to have violated the Federal Trade Commission Act in its advertised promises about the advantages of living trusts. The FTC’s order directed the company to cease and desist such advertisements.
As for Mr. Ballato’s case, which is in the discovery phase against the remaining defendants, he said he is confident that he can collect his client’s award against Mr. Cammarota, which totaled about $2.4 million. “Out of the millions he stole, he didn’t spend it all,” Mr. Ballato said.
