BANKRUPTCY COURT ENTERS $102 MILLION JUDGMENT AGAINST DEFENDANTS IN A MASSIVE CONSUMER FRAUD CASE
Mar 2, 2016
Montgomery, Ala. – Following a trial that took place in November 2013, the United States Bankruptcy Court for the Middle District of Alabama recently entered a $102,949,220 judgment against Defendants Timothy McCallan, Americorp, Inc., and Seton Corp. related to their role in what the Court deemed “an extraordinary case of fraud on a massive scale.” In a related order, the Court also sanctioned all three defendants an additional $999,457 for discovery abuse that took place throughout the litigation.
The scheme involved using a Montgomery law firm, Allegro Law, LLC, as a front to induce victims to sign up for debt settlement services operated by the Defendants. Victims were promised that they would be represented by an attorney who would negotiate a settlement of their debts for a fraction of what they actually owed. The Defendants instructed victims to stop making payments to their creditors and instead to make payments to Americorp and Seton. Virtually all of the money paid by the victims was siphoned off by Timothy McCallan and his companies. The victims would then default on their debts, with nothing to show for the money they paid to the Defendants. As the Court noted in its order, “the effect of McCallan’s debt settlement scheme on its victims was ‘personal economic suicide.’”
As reflected in the Court’s 55 page ruling, the years of litigation leading up to the trial were arduous, as the Defendants went to great lengths to hide their fraudulent scheme and to prevent Cunningham Bounds from unravelling it. For example, the Court observed that after months of attempts to obtain an electronic database that contained information about the amount of money stolen from victims, the Defendants finally produced the electronic equivalent of taking a paper telephone directory, shredding it, placing the pieces in a barrel, shaking it up, and then producing the pieces. In short, the format in which the Defendants produced the information rendered it completely useless.
“The victims of the Allegro Law scheme deserve to know what really happened to them, and this judgment brings it all to light,” said Lucy Tufts, one of the co-lead counsel on the case. “Timothy McCallan and his companies targeted people who were struggling financially, and, at a time when those people were most vulnerable, the Defendants mercilessly took advantage of them without any consideration for the very real consequences that it had on thousands of families. Cunningham Bounds relentlessly pursued these Defendants for as long as it took to bring them to justice. The firm’s dogged pursuit of these Defendants has been validated by this judgment, the size of which reflects the enormity of the fraud perpetrated by the Defendants.”
Cunningham Bounds’ partners Steve Olen and Lucy Tufts served as co-lead counsel for the Plaintiff.