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During a three-year period ending last November, a disbarred Florida lawyer and convicted cocaine dealer, with the aid of a New Jersey lawyer, managed to quietly defraud a state Superior Court trust fund out of more than $800,000. Jeffrey Fitos admitted in federal court in Camden last Thursday that he conned court officials into paying more than 100 claims from the Superior Court of New Jersey Trust Fund. The payouts were supposed to go to legitimate creditors, mostly banks, with valid claims on surplus money resulting from prior judgments. Fitos, who operated a collection company called Gulf States Resources Inc., acknowledged in court that he did not represent the creditor financial institutions and that he kept the money. Those institutions – among them American Express, The Bank of New York, Chase Manhattan Bank, Commercial Credit Corp., Hudson United Bank and Mellon Bank – had no idea Fitos was posing as their collection agent. Fitos, 54, a resident of Oviedo, Fla., and Houston, who represented himself, pleaded guilty to mail fraud and agreed to pay back the $800,000. It was Fitos’ greediness that led to his undoing. He was caught when the fund was processing a claim that already had been submitted legitimately by another New Jersey lawyer. When the fund contacted that lawyer, he notified the U.S. Attorney’s Office. Fitos retained a New Jersey lawyer to file the petitions for distribution with Chancery Divisions in many, if not all, of the state’s vicinages. The local counsel, who represented himself or herself as the attorney for the petitioning creditor, was not charged or identified in court papers or in the plea taken by U.S. District Judge Jerome Simandle. The local lawyer would receive the check from the Superior Court Trust Fund, which went directly into the lawyer’s trust fund account. The lawyer would then send the money to Fitos. The government papers say the New Jersey lawyer often took a cut, but that most of the money went to Fitos. Asked whether the unnamed New Jersey lawyer was complicit in the scheme, Assistant U.S. Attorney Michael Hammer, who prosecuted the case, said only, “The investigation is continuing.” Fitos was traveling back to Florida on Friday and could not be reached for comment. Creditors Got No Notice One reason the scheme could have gone undetected for so long is that Fitos, through his collection firm, GSR, had been operating in New Jersey legitimately from 1990 until 2001. He researched public records in eastern states for claims for which creditor banks could apply. When he matched surplus funds from a prior case, often a foreclosure action in which funds were available after the bank that held the mortgage was paid off, he would notify the creditor. The creditor, who might be owed money from the mortgagor from a second or third mortgage, a personal or home equity loan, or a dormant credit card debt, would retain GSR as its collection agent for a one-third contingency fee. The surplus money, often from sheriff’s sales and foreclosures, is held in trust until and unless it is disbursed to a creditor. But at some point in 2001, the government papers say, Fitos began having his local counsel mail in the petitions without notifying the creditor. The local counsel would also file an affidavit by Fitos stating that he or GSR was the authorized representative of the creditor. The lawyer would also file a proposed form of order. In the information to which Fitos pleaded guilty, the largest example given was a $150,000 claim in March 2003, purportedly on behalf of The Bank of New York. The petition was filed with Hudson County’s Chancery Division. The court granted the petition, but paid out only $14,663. The amounts were often smaller than the requests, apparently because the funds must come out of the surplus produced from the specific underlying judgment. Sometimes Fitos got all he sought, or even more, when interest was included. An April 2003 petition for $5,887 to the Chancery Court in Passaic County on behalf of American Express netted Fitos $6,007 about 10 weeks later. And a petition for $43,000 made to Monmouth County’ Chancery Court in October 2003 on behalf of Green Street Financial Servicing Corp. produced a check for $43,864 only 18 days later. While the petitions were filed with the local chancery courts, the checks were paid out in Trenton, where the trust fund is administered. Stephen Townsend, the clerk of the Supreme Court of New Jersey, who supervises the trust fund, could not be reached on Friday, as courts were closed for Good Friday. Winnie Comfort, spokeswoman for the Administrative Office of the Courts, said when reached at home on Friday that a comment from the court system could not be obtained because of the holiday. From Cocaine Deals to Collections Shortly after law school, Fitos began his legal career serving as an assistant state attorney from 1978 to 1980 in Ocala, Fla., where he lived. According to a 1989 story in the St. Petersburg Times, Fitos then went into private practice until about 1986, when he moved to Pennsylvania and joined the staff of the Valley Forge Military Academy. In April 1989, while still a Pennsylvania resident, he pleaded guilty in federal court in Jacksonville to conspiracy to distribute cocaine. He received a two-and-a-half-year prison sentence, according to the newspaper, which quoted federal prosecutors as saying Fitos was distributing cocaine during his six years in private practice, ending in September 1986. The prosecutors also said Fitos’ sentence was lighter than usual because he cooperated with federal and state police, including working for the FBI for several months. In 1990, he was disbarred in Florida for his drug conviction and soon after began his collection career as the owner of GSR, using his legal skills to research public documents for potential claims. One source familiar with Fitos’ operation, who did not wish to be identified, says Fitos had been operating in several eastern states, including Florida, Georgia, Virginia, Delaware, Pennsylvania and New Jersey. This source says the FBI probably will probe whether “there are any more [similar schemes] out there,” in New Jersey or elsewhere. In the plea agreement, Fitos is facing 22 to 41 months in prison, although that sentencing bracket does not take into account his criminal record, which could mean a lengthier term under sentencing guidelines.

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