The legal profession's ethics cops watched for two years while a local law firm rented its name to debt collectors, some of whom threatened to jail people or seize their homes, court records say.
Using the name "Lenahan Law Office," the collection outfit had 100 to 200 workers in offices around Buffalo. It reaped tens of millions of dollars from people around the country on the basis of poorly documented debts, court investigators found.
The collections continued while an arm of the court that is supposed to protect the public from rogue lawyers investigated a flood of complaints about the firm.
The Appellate Division of state Supreme Court in Rochester called the firm's tactics illegal in a ruling Sept. 22, and suspended partner Danielle Lenahan for two years. Her father and partner in the firm, J. Daniel Lenahan, had turned in his law license in March.
Officials of the court disciplinary unit, called the Attorney Grievance Committee, said the penalty sends a warning to other local collection lawyers.
But critics say the lengthy crackdown exposes a glacial disciplinary system that gives lawyers every break.
"I never expected them [Lenahans] to get as far as they did," said Joel Castle, president of a debt collection company in Amherst. He added that he was disappointed other agencies at federal and state levels failed to act.
"This decision did take a long time," said William N. Lund, director of Maine's office of consumer credit regulation. He complained to the Grievance Committee about the collectors' "consistent pattern of illegal behavior" in the spring of 2004.
The collection outfit took in $20 million to $30 million during a three-year period ending in September 2005, of which the Lenahans received more than $100,000, court investigators said.
The Attorney Grievance Committee in Buffalo started investigating complaints about the firm back in 2003, court records show. It issued a non-public warning letter, the mildest remedy, to J. Daniel Lenahan in February 2004.
When complaints continued to pour in, the Grievance Committee opened another investigation. That eventually led to disciplinary charges against the firm's two partners in November 2005 - 21 months after the initial warning to Lenahan, and more than two years after the initial investigation was opened.
The Grievance Committee lacked the power to come down on the firm sooner, former chief counsel David L. Edmunds Jr. said, despite indications of widespread illegal acts.
"It did not happen as soon as I would have liked it to," Edmunds said of the charge and resulting sanctions, "but ultimately we did get the right result."
Edmunds, a past president of the Erie County Bar Association, supervised the investigation of the Lenahans before going into private practice at Phillips Lytle in Buffalo in June.
High standards for proof of lawyers' wrongdoing blocked the committee from filing a disciplinary charge earlier, Edmunds said, or from suspending the Lenahans' law license on a temporary basis during the investigation.
John V. Elmore, chairman of the Grievance Committee in Buffalo, said that an investigation can rein-in wrongdoing before it is complete. Investigators were preparing to file disciplinary charges when the Lenahans withdrew their name from the collection offices in the fall of 2005.
"I think the public is protected because any time a lawyer becomes aware they're being investigated by the Attorney Grievance Committee, it's like a shock wave," Elmore said. He added that he couldn't comment on any specific case because of confidentiality rules.
The committee's warning letter back in 2004, however, failed to stop collection abuses, court records show. J. Daniel Lenahan promised to fire one abusive collector to end the committee's investigation, but the same collector was rehired and turned up as the subject of another complaint.
How committee works
An arm of the state Supreme Court's Appellate Division, the Attorney Grievance Committee is a volunteer group that investigates complaints of professional misconduct by lawyers, with the help of staff investigators and its chief counsel. The committee covering Western New York is made up of 18 lawyers and three non-lawyers, and meets in Buffalo six times a year.
If the committee finds that a complaint has merit, it files a formal charge and petitions the judges of the Appellate Division in Rochester for disciplinary action. The judges may suspend or disbar the attorney, or dismiss the committee's charge.
Edmunds said he chose to take the time to present an airtight case against the Lenahans. Otherwise, having the charges dismissed could have thrown open the door to abuses by other collection law firms.
"We certainly wanted to make sure we had all our ducks lined up in a row," he said.
Victims of the collectors came from far and wide. The investigation records summarize 65 complaints, many involving threats of jail, seizure of property or other outlawed tactics. Kimberly Tipton in Sanford, S.C., said a collector threatened her 14-year-old son that he would "put his daddy in jail if he didn't pay his bills." Michael Lash of Albuquerque, N.M., said he was told to pay debts he had already erased in bankruptcy or face $35,000 in attorney fees and costs.
Rather than prodding the Grievance Committee to act, the volume of complaints actually delayed action against the Lenahans, Edmunds said. Investigators held back from filing a formal charge about initial complaints in order to investigate newer ones, he said.
Such complaints from individuals - although numerous and consistent - usually lacked supporting evidence like tape recordings to refute the Lenahans' denials that the threatening calls took place, Edmunds said.
Other complaints with greater substantiation did come in, such as from courts and regulatory judgments against the Lenahans. Lund, Maine's consumer credit regulator, found the firm acted illegally based on consistent complaints by debtors that were supported by other witnesses. He sent his findings to Buffalo in the spring of 2004, after barring the firm from calling Maine residents.
But the Grievance Committee felt Lund's ruling lacked sufficient weight, because the Lenahans hadn't presented a defense during the hearing in Augusta, officials said. As with many civil court actions against them, the Lenahans failed to appear at the proceeding in Maine.
Sometime in 2005 the Grievance Committee grew concerned enough about the Lenahan firm's conduct to seek an emergency "interim suspension" of the Lenahans' law licenses, a rare step.
That move was delayed for some period, however, by rules that allow the accused attorney to argue against the measure, Edmunds said. By the time the suspension request was heard by the Appellate Division, the Lenahans had severed their ties to the collection business, and the request was rejected.
"They wanted to defend the case as far as they could," Edmunds said.
Richard T. Sullivan, a former chairman of the Grievance Committee in Buffalo, represented the Lenahans before the committee.
In an interview, Sullivan said he was concerned that debtors were using the disciplinary process to evade paying debts by filing complaints against his clients. Sometime in 2005, however, he recommended that the Lenahans break their arrangement with the operators of the collection offices, he said, which they did about Sept. 1 of that year.
Edmunds said that length of the investigation is the result of a process that must balance potential harm to the public with lawyers' right to defend charges of wrongdoing.
"I strongly believe attorneys have due process rights," he said. Edmunds said he plans to represent attorneys accused of wrongdoing before the committee as early as next year.
But others whose job is to look out for consumers are disappointed that abusive collectors were allowed to operate for so long under the name of New York-licensed attorneys, giving weight to their threats of legal action.
Maine residents continued to be threatened by Lenahan collectors, and by other law firms in Buffalo, while the disciplinary process ground on, Lund said. Maine's legislature went so far as to tighten laws restricting the activities of out-of-state law firms as a result of Lenahan collectors' bullying, Lund said.
"I hope," he said, "subsequent opinions on similar facts could be decided on an accelerated basis."