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More on Brooklyn Candace Willy

Friday 1/24/2025

A fraud from SA to Lubbock

Willy Hit with More Criminal Charges

1/24/2025

Jailed San Antonio investment adviser Brooklynn Chandler Willy, arrested last month for allegedly obstructing a federal investigation into her business dealings, is facing 11 more criminal charges.

In a new indictment handed up Wednesday by a federal grand jury, Willy was charged with six counts of wire fraud, two counts of engaging in financial transactions involving assets obtained from illegal activities and one count of securities fraud.

She already faced three charges: obstruction of justice, aggravated identity theft and making a false statement. The new indictment adds additional counts of aggravated identity theft and making a false statement.

Mark Barrera, a lawyer representing Willy, said Thursday he was still reviewing the new charges and had not been able to confer with his client. He declined further comment.

RELATED: Brooklynn Chandler Willy’s investment advisory firm has permanently shuttered as she remains jailed

Willy has been locked up since Dec. 10, when she was arrested by FBI and IRS agents at her Stone Oak office. At a detention hearing a few days later, a judge ordered that she remain behind bars because she poses a “substantial risk for obstructing justice.”

The obstruction charge relates to the investigation that led to the newest charges against Willy. 

Since her incarceration, her Texas Financial Advisory has shuttered its offices and her regular weekend radio shows on WOAI-AM and KTSA-AM and KTSA-FM have been pulled off the air.

In November 2023, the FBI and IRS began a criminal investigation into an investor fraud scheme allegedly involving Willy and Lubbock investment company Ferrum Capital LLC. The investigation began after an October 2023 report by the San Antonio Express-News that former clients had sued Willy, her firm and others over alleged violations of state securities law, fraud and breach of fiduciary duty.

During the Dec. 12 detention hearing, an IRS agent testified that the criminal investigation involves a fraud scheme with at least 400 victims.

“Losses are in the tens of millions,” the agent said.

Willy pitched to clients what the lawsuits say were “risky” unregistered securities issued by Ferrum, which used the money to fund loans to Austin debt collection agency Collins Asset Group LLC to use for buying distressed accounts receivable, also known as bad debt. She assured her clients their investments were “safe” and profits were “guaranteed,” the suits said.

The IRS agent testified about an elderly San Antonio couple who agreed to invest $500,000 with Ferrum using Willy’s Chandler Capital Holdings as the agent to execute and deliver the contract. The two, who made the investment in 2021, are identified in the indictment as “Victim 1” and “Victim 2.”

 

Willy deposited the couple’s check with Chandler Capital but never sent any of the money to Ferrum, the agent said.

The new indictment cites four other alleged victims, all of whom live in Texas. 

A married couple, identified as “Victims 3 and 4,” were convinced by Willy to invest in a company called Cold Moon Holdings, the indictment says. Their investment was supposed to be for purchase of bad debt and “other business purposes.” The couple invested more than $2 million, but it was never used to purchase bad debt or for business loans, the indictment says.

Instead, Willy used the couple’s money to pay her associates, pay other purported investors and make “interest” payments to the pair, the indictment adds.

Willy convinced another individual, identified as “Victim 6,” to invest $600,000 in “business opportunities,” the indictment says. “Instead of being invested, Willy used this money for her benefit.”

 

During the investigation, Willy provided a document titled a “revolving line of credit agreement” and a promissory note that appeared to be signed by her and Victim 6. The indictment says they were false.

“Victim 6 never signed the false revolving line of credit agreement and false promissory note nor agreed to their terms,” the indictment adds.

Willy’s criminal trial is currently scheduled to start May 27 in U.S. District Judge Xavier Rodriguez’s  courtroom.

 

 

 

 

 

Jan 23, 2025

Patrick Danner

 

WFC Pays $1.1 M Regarding Chris Pettit

Friday 1/24/2025

Wells Fargo Bank has agreed to pay more than $1.1 million to resolve claims that it assisted jailed ex-attorney Chris Pettit in his scheme to defraud his clients of tens of millions of dollars.

Wells Fargo, the nation’s fourth-largest bank, did not admit any liability in agreeing to the settlement, which was approved Thursday by Chief U.S. Bankruptcy Judge Craig Gargotta.

“This is … less money than we wanted but also more than nothing,” Scott Lawrence, a Dallas lawyer representing bankruptcy trustee Eric Terry, told the judge in arguing for approval. “We take the creditors’ lack of objections to this as continued approval of our work on their behalf.”

he litigation that led to the settlement is unrelated to a pending case 200 Pettit clients have filed against Wells Fargo and other banks in federal court in San Antonio. In that case, the plaintiffs say the banks knowingly assisted Pettit and his law firm in breaching their fiduciary duties to the clients.

That case may be the last, best hope for Pettit’s victims to see any significant recovery. Creditors in the bankruptcies have submitted about $270 million in claims, but the recovery so far has been far less than that.

Pettit was a longtime probate, estate planning and personal injury lawyer who pleaded guilty to three counts each of wire fraud and money laundering related to the theft of millions of dollars from his clients. He is serving a 50-year prison sentence and has been ordered to pay $106.3 million in restitution to his victims, though it doesn’t appear he has any significant assets remaining.

After Pettit’s scheme became public, he filed for bankruptcy protection for himself and his firm, surrendered his law license and shut down his law offices in San Antonio.

In the trustee’s lawsuit against Wells Fargo, Terry learned that Pettit maintained several accounts at the institution — including an IOLTA account in New Mexico, even though he was never licensed to practice law in the state. Interest on lawyers trust accounts, commonly called IOLTA, are intended to be used by attorneys to hold clients’ money for safekeeping until distribution.

Terry uncovered at least $33 million of losses from the IOLTA account. He alleged about $3.5 million belonged to Pettit’s firm. That figure represented the maximum recovery the trustee could have achieved if he prevailed.

“I would hate for anybody to be confused and think that we’re settling … $33 million worth of claims for $1.125 million,” Lawrence said Thursday. “We’re settling what we view as the remaining claims against Wells Fargo, which we believe amount to about $3.5 million, again, of nonclient money that we alleged flowed through the IOLTA account.”

Gargotta, the judge, had ordered the parties to arbitrate the dispute.

“We fought hard,” Lawrence told the judge. “We litigated with what we considered very capable and well-funded adversaries. Wells Fargo is not going to run out of money to pay its lawyers anytime soon.”

 

Gargotta said one factor to consider is a need to obtain a recovery as soon as possible. 

“Many of the Pettit clients are elderly, senior citizens, and they’ve lost a substantial amount of money,” he said before approving the settlement.

After giving his approval, Gargotta heard arguments from lawyers for Texas Partners Bank — formerly the Bank of San Antonio — on its motion to dismiss the trustee’s lawsuit against it. The bank has been accused of enabling Pettit in his scheme to misappropriate money from clients. The judge didn’t immediately rule on the bank’s motion.

The judge recently tossed a lawsuit against Frost Bank. That one alleged bank fees and loan payments to Frost amounted to “fraudulent transfers.” Other claims against Frost are being arbitrated.

 

 

 

 

 

Jan 23, 2025

Patrick Danner

Senior Reporter

Patrick Danner is a business reporter for the San Antonio Express-News. He can be reached at [email protected].

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KPMG Buys Arizona Law Firm

Tuesday 1/21/2025

KPMG is poised to break through a longtime barrier and become the first Big Four accounting firm to practice law in the U.S., leveraging a novel Arizona program that allows nonlawyers to own law firms.

State approval for KPMG’s law ambitions is expected as soon as this month, a move that could usher in a sea change in two industries. KPMG says its Arizona-licensed lawyers could perform legal work for clients around the country. That could give it a leg up on its accounting rivals and send a shot across the bow to law firms, which would face new competition for work.

KPMG is taking advantage of a program in Arizona, which lifted a restriction in place in nearly every state that prohibits nonlawyers from owning a law firm. The program, in place since 2021, aimed to expand access to legal services, in large part to address a dearth of lawyers available to help with issues such as family law or immigration.

The accounting firm’s attempt to create its own law firm, KPMG Law, passed a significant hurdle when the Arizona committee that oversees the program unanimously approved the request last week. The company said it wants to offer large-scale services such as drafting and updating contracts, and reconciling legal materials in merger-and-acquisition deals.

KPMG sees this as an opportunity to streamline and expand the work it does for clients, while also allowing it to use artificial-intelligence tools to perform work that would otherwise be outsourced to a traditional law firm.

“We believe that the types of services that we’re going to bring to market, assuming we get our final permission, are very much adjacent to services that we provide today and really address that client pain point head-on,” said Christian Athanasoulas, leader of KPMG’s U.S. tax practice.

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The Arizona Supreme Court will consider final approval for KPMG Law later this month. The high court has signed off on all of the applications recommended by the committee, but occasionally has sent an application back for more questions. 

KPMG already practices law in roughly 80 countries, including the U.K. and Australia. Those businesses have grown in part through acquisitions of small and midsize law firms. The U.S. represents the largest law market in the world. 

“This is just more frosting on the cake for KPMG and the firm trying to get a big piece of the law marketplace,” said Michele DeStefano, a law professor at the University of Miami. 

KPMG is the smallest of the Big Four firms, with $38.4 billion in global revenue for fiscal 2024. Tax and legal services was its fastest-growing division for the year, growing 10% year over year to $8.7 billion globally.

It likely won’t be long before PricewaterhouseCoopers, Deloitte and Ernst & Young follow KPMG in seeking to expand their legal offerings, Big Four observers say. EY declined to comment, while PwC and Deloitte didn’t respond to requests for comment. 

“It’s highly likely that the other Big Four firms will follow suit if KPMG decides to make a serious investment of hundreds of millions of dollars in that market,” said Fiona Czerniawska, chief executive of consulting-data provider Source Global Research. 

The accounting giants, however, could face a long road in establishing thriving legal practices.

In the U.K., for example, KPMG, PwC and EY have been able to practice law since 2014, followed by Deloitte in 2018. But they are still working to gain ground, said Daniel Sutherland, partner at London-based law firm Fox Williams. The firms “have a foothold in legal advisory work, but I don’t view them as having fully realized their ambition because traditional law firms still dominate,” Sutherland said.

KPMG says it has targeted ambitions in the U.S. “We’re not envisioning being a full-service law firm as big traditional law is, but rather being a player in those handful of areas that are connected to our legacy businesses,” Athanasoulas said. 

Arizona currently has 114 active licenses for nonlawyer-owned firms. Many of them focus on large-scale personal-injury and environmental litigation and have attracted investments from hedge funds and private-equity firms. Other operations provide legal services ranging from estate planning to online counseling through platforms such as Rocket Lawyer. A handful provide the kind of legal assistance to limited-income clients that the state originally envisioned.

The idea of nonlawyers owning firms has been hotly debated for decades. Critics say lawyers have ethical obligations to their clients, and a nonlawyer owner could give priority to profit instead. 

Richard Lewis, former president of the New York State Bar Association, said KPMG’s entry in the legal marketplace would raise concerns and could lead to conflicts of interest for the accounting firm.

“It is a threat to the legal profession,” Lewis said. “They will be able to undercut and take shortcuts. They aren’t held to the same standards.” 

KPMG says that if and when its Arizona-licensed lawyers work in other jurisdictions, it plans to enter into co-counsel relationships with attorneys licensed in other states.

John Hay, an Arizona lawyer and member of the state approval committee, urged the firm to take pains to comply with ethics rules of other states. He supported the proposal. 

“This is still a country with 50 states,” he said at last week’s meeting, adding, “I’m a little concerned that because of the nature of KPMG’s practice that concept may be forgotten.”

Bruce Green, a law and ethics professor at Fordham University, said it isn’t black and white what kinds of law work KPMG’s legal operation can do outside of Arizona’s borders.

“The problem arises when the firm does work everywhere,” he said.

Write to Erin Mulvaney at [email protected] and Mark Maurer at [email protected]