Houston bankruptcy attorney Calvin C. Braun has pleaded not guilty to four federal criminal charges stemming from his alleged failure to disclose a potential conflict of interest when representing a woman in a Chapter 7 bankruptcy case and her ex-husband in a Chapter 11 bankruptcy case. Both the Chapter 7 and 11 cases were filed in U.S. Bankruptcy Court for the Southern District of Texas.
A grand jury indicted Braun, a partner in Orlando & Braun, on Feb. 12 on one count of bankruptcy fraud and three counts of false bankruptcy declaration. Braun was arrested on Feb. 18, and he made his initial appearance before U.S. Magistrate Judge George C. Hanks Jr.
Braun posted a $25,000 bond, and conditions of his release prevent him from taking on new bankruptcy clients.
Kent Schaffer, who represents Braun, called the allegations in the indictment “absurd.”
“It’s absurd that—even if these things were true and they are not—it would result in a criminal indictment against a lawyer,” said Schaffer, a partner in Bires Schaffer & DeBorde in Houston.
“Lawyers frequently run into situations in bankruptcy, civil or criminal court where they can have a potential conflict of interest. When that happens, I have never seen it result in a criminal indictment,” Schaffer said.
Braun did not return a telephone message seeking comment.
As alleged in the indictment in United States v. Braun, Braun filed a Chapter 7 bankruptcy case on May 31, 2010, on behalf of the woman client, who was identified as T.M.S. in Braun’s indictment. She agreed to pay Braun $2,500 to represent her. Later, on Dec. 23, 2010, the woman’s ex-husband, known as K.C.S. in the indictment, retained Braun to file a Chapter 11 case on his behalf, and T.M.S. was listed as a creditor in her ex-husband’s documents.
The indictment alleges that, when Braun filed an application to employ attorney in the man’s Chapter 11 case on Jan. 10, 2011, Braun stated in an affidavit that he had “no conflict of interest” in representing the man. After the woman filed an objection to the application, Braun “admitted” in an amended affidavit filed on Jan. 28, 2011, that he represented the woman in her Chapter 7 but again stated that he did not represent any of the man’s creditors in the Chapter 11.
Additionally, the indictment alleges, after the woman completed a required financial-management course, Braun failed to file her certificate to “insure” she would receive her discharge from bankruptcy. As a result, her Chapter 7 case was “administratively closed” without the client receiving a discharge. Even though she paid Braun an additional $300 on Nov. 30, 2010, and $1,259 on Dec. 28, 2013, he did not reopen her case and file the certificate.
The indictment alleges that, on July 2, 2010, when Braun filed a Disclosure of Compensation of Attorney for Debtor in the Chapter 7 for the woman, he “represented he had received his full fee of $2,500″ when in fact he billed the woman for more.
If convicted, Braun faces up to five years in federal prison and a $250,000 fine.
Quincy Ollison, an assistant U.S. attorney for the Southern District of Texas who is prosecuting the criminal case, did not return a telephone message seeking comment.