Jurors are told former law firm partner created sham creditor to help client shield assets
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Did a former Freeborn & Peters partner create a sham creditor to help his client shield assets in a bankruptcy? Or did he engage in a legitimate legal strategy to try to save a struggling business and help out a neighbor?
Prosecutors and the defense team for Chicago lawyer Edward Lee Filer advanced those opposing theories Friday during opening statements to jurors in a trial before U.S. District Judge Harry Leinenweber of the Northern District of Illinois, Law360 reports.
Federal prosecutors said Filer sought to protect a client’s assets by creating a sham secured creditor with a senior lien on assets sought by other creditors, according to Law360. He is charged with wire fraud, bankruptcy fraud and perjury.
Filer was hired to represent his neighbor and the neighbor’s custom woodworking business, the Barsanti Woodwork Corp., in 2013. At the time, the business owed more than $1 million to Harris Bank and had stopped making payments to union benefit funds for its workers.
According to Assistant U.S. Attorney Katie M. Durick of the Northern District of Illinois, Filer ordered the creation of a company to buy the Barsanti Woodwork Corp.’s secured debt from the bank and take control of the senior lien, Law360 reports. The Barsanti Woodwork Corp. then transferred its assets to the newly created company in a state court action. As a result, the company’s assets were shielded from the union and other creditors.
Valarie Hays of Riley Holmes Safer & Cancila had a different take on Filer’s actions, according to Law360. She said the new company had a valid lien, and there was no fraud or intent to defraud. Filer’s actions saved the business, and he helped work out payment plans that benefited other creditors, she said.
Hays said Filer’s former client is using Filer as a “get out of jail free card” in a separate case by telling lies about Filer’s work for the woodworking company.
When charges were first filed against Filer, Freeborn & Peters partner Michael Kelly told Crain’s Chicago Business that the law firm “never would have condoned or tolerated the conduct that is alleged, had we known about it.” The law firm cooperated in the investigation.