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On June 18 the U.S. bankruptcy trustee in San Francisco, Linda Stanley, received a terse order from Attorney General John Ashcroft: Stanley was fired, and she had two weeks to vacate her office. “I was stunned,” says Stanley, 68, an eight-year veteran of the trustee program, a division of the U.S. Department of Justice. Many bankruptcy lawyers in the Bay Area believe that Stanley was fired because she is an outspoken Democrat. They are at least partially correct. Stanley’s abrupt departure signals the extent to which the U.S. Trustee program has become politicized, to the consternation of bankruptcy experts. Trustees administer bankruptcy cases and serve as public watchdogs while debtors and creditors hash things out. When bankruptcy lawyers suffer from conflicts of interest or submit inflated fee requests, trustees are supposed to sound the alarm. Stanley was a vigilant trustee. She was a vocal critic, for example, of the firewalls that law firms often use to try to insulate themselves from conflicts. She was also tough on fees and even designed a computerized system to help spot duplicative fee requests. Stanley’s vigor won her nationwide notice, as did her role in the high-profile Pacific Gas and Electric Co. bankruptcy, filed last year and still pending in San Francisco. “When [Stanley] thought there was a question of propriety or wrongdoing, she couldn’t be stopped. She raised a fuss,” says Elizabeth Warren, a bankruptcy professor at Harvard Law School. “I think that is what got Stanley into trouble.” Stanley is the first to agree with that theory. “I became very visible in going after big people in big cases,” she says. “I was removed because I was effective.” It’s impossible to know whether she’s right. The Justice Department and the Executive Office for Trustees, a division of Justice, declined to comment on Stanley’s firing. In July the Justice Department sent Stanley a “notification of personnel action,” citing a “change in presidential administration” as the reason she was dismissed. That admission — that electoral politics was behind the firing — is noteworthy, given the historical roots of the trustee program. In 1986, when Congress green-lighted the program, it stipulated that trustees were to serve five-year terms. This tenure was expressly designed to insulate trustees from presidential election cycles. It didn’t take long for the program to veer from its founding course. After a trustee in Kansas, Carol Thompson, won nine months’ backpay for her claim that politics was behind her 1991 firing, Attorney General Janet Reno issued an order in January 1996 declaring that trustees are “policy makers” and thereby exempt from civil service protection. Reno did not respond to a request for comment. John Dwyer, Reno’s deputy attorney general who oversaw the trustee program, confirms that Reno’s order was motivated by the Thompson incident. The goal of the order, he says, was to make the program accountable by allowing for the removal of subpar trustees, not to politicize the program. Intended or not, however, trustees say that Reno’s order officially opened the door to political firings. During Reno’s tenure, trustees add, the Justice Department removed some Republican trustees after their terms had expired. But she also reappointed some Republican trustees, notes Dwyer, now a partner with Palo Alto, Calif.’s Cooley Godward. Partisanship has become more pronounced under Attorney General Ashcroft. Early in his term, he sent all 21 trustees a memo that cited Reno’s 1996 order and let them know that their jobs were under review. Ashcroft has forced some Democrats to leave office before their terms were up. Stanley was appointed in 1994 and reappointed in 1999, with her second term due to expire in 2004. Another Democratic appointee, Barbara Stuart in Minneapolis, was forced out of office mid-term, in May. And Democratic appointee Ellen Vergos in Memphis, Tenn., has been notified that that she will be replaced mid-term; she remains in office as the Justice Department searches for a successor. Trustees must often take adversarial positions — which is difficult to do, they say, when reappointment is a constant worry. “As a political appointee, you have to always look over your shoulder,” says Marcy Tiffany, a former trustee in Los Angeles, who is now a solo practitioner. “People told me all the time, ‘Don’t offend this one, cultivate that one,’ because you have to be reappointed,” adds Donald Robiner, a former trustee in Ohio and now of counsel to Cleveland’s Belkin, Billick & Harrold. Robiner and Tiffany illustrate that the reappointment process, at least in the past, has not always followed strict party lines. Robiner was appointed by Reno in 1994 but then ousted by her in 1999. Tiffany, a Republican, was appointed in 1991 during the first Bush administration, but then Reno, crossing political lines, reappointed Tiffany in 1996. This, ironically, only serves to heighten trustees’ paranoia. Their belief: You can’t ensure longevity by merely being in the right political party; you also have to avoid making waves. Harvard Professor Warren summarizes the common perception: “A passive U.S. Trustee is more popular than an active U.S. Trustee.” Unfortunately, Stanley’s firing only reinforces this perception.

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