On March 24, San Diegan Laura Perry received a letter from Kerry Steigerwalt’s Pacific Law Center, once San Diego’s best known, most notorious, and most aggressively advertised law firm. Perry, 73, had paid $2000 to the firm to handle a Chapter 7 bankruptcy for her. She had received no service — one of thousands who allegedly paid money up front but got little or no legal help.
The Steigerwalt law firm, which went out of business last year, offered her a refund amount of $252, to be paid in installments. “The agreed amount will be paid, but [the firm] is financially unable to pay it ‘today,’” lamented the letter, which included a check for $42 signed by Steigerwalt. Perry’s attorney Gary Sehnert, who successfully handled her bankruptcy after Steigerwalt’s lawyers failed to act, advised her not to cash the check. “Once you do that, then they can argue that you agreed to the settlement,” says Sehnert, who did not charge her for any of his work.
On April 18, Perry got a second letter, fretting that the law firm’s “financial condition has worsened.” She would not get the promised April check. She also got a solicitation phone call from one Joe Rivera, representing the law firm, who wanted her to take a lowball settlement of $105. “I said that is a rip-off,” says Perry. “Every time I think of [this] it makes my blood pressure rise.” Rivera would not reply to my questions.
Pacific Law Center was founded by Larry Majors, a nonlawyer convicted felon who vamoosed from Texas after a judge called a law firm he operated “a borderline criminal enterprise,” according to a 2009 San Diego lawsuit, since dismissed. After getting into trouble running several law firms, Majors set up Pacific Law Center in 1993 with his son Austin Majors, also a nonlawyer, as executive director, according to the lawsuit. Steigerwalt, who had been with the public defender’s office for 6 years and in private practice for 18 years, took over the firm in 2008 and attached his name to the front. The firm specialized in drunk driving, personal injury, defective product, loan modification, and bankruptcy cases. Taking over the Pacific Law Center “was the worst decision of my life,” says Steigerwalt, who once again has his own firm. “It cost me millions.”
That April 18 letter to Laura Perry stated, “Vendors and creditors of [the defunct legal institution] claim the firm owes them more than $3 million.”
The sum could be larger than that. Steigerwalt hired the Chicago law office of J. Kevin Benjamin, who set up a Mission Valley office. Steigerwalt pays Benjamin $250 to take over each client who has not been provided service. Benjamin explains to the people that he is not replacing the shuttered law firm. He will take the case himself for a very low fee of, say, $395 for a Chapter 7.
Benjamin says he saw the closed law firm’s records: there were more than 6000 people who had paid some money and not received their service — a number that Steigerwalt, although conceding the firm is insolvent, says is too high. “Some had paid in full, some had not,” Benjamin says. Depending on the average amount shelled out, the money owed to nonserviced clients could exceed $3 million, he says. And that doesn’t include vendors and other creditors.
San Diego attorney Scott Harris feels sorry for “all the people that got screwed, that paid $1500 to $3000 and never got service. Lawyers at [the law firm] had retainer agreements that permitted them to get out of the liability responsibility on the cases they were handling.”
In his frequent trips to San Diego, Benjamin and an assistant handle “70 to 100 people a week who had paid and not gotten services,” he says, asserting that he is losing money on the arrangement. Initially, “people were calling every five minutes. I had to get a separate receptionist and a different line. Some were saying I was a crook. I said, ‘I don’t have your money.’” Clients thought that the up-front fees paid to Kerry Steigerwalt’s Pacific Law Center were paid to Benjamin, and that wasn’t so. He must stress to each cuckolded client that he is not taking over the Steigerwalt firm or the clients’ files. He has to begin every case anew. “This has been going on for a year, and I am debating if I will do it anymore.”
Benjamin says that investigators from the U.S. trustee’s office in San Diego, which oversees bankruptcy cases, have been looking into Steigerwalt customers who did not get served. The probers went over Benjamin’s files and interviewed one of his assistants. “They have their own investigation going of Kerry Steigerwalt,” Benjamin says. “They were asking us about Kerry and about our own operations.” Also, Benjamin says he talked briefly with an agent of the Federal Bureau of Investigation who later checked with Benjamin’s lawyer. But the subject of those inquiries was loan modifications, in which Benjamin is not involved. Steigerwalt’s firm got into the controversial loan modification business.
Steigerwalt says he is not aware of any Federal Bureau of Investigation probe. As is traditional, the agency will not confirm or deny the existence of a probe. The U.S. trustee’s office, while not confirming a formal investigation, did reveal that it has been actively involved, stating: “The U.S. Trustee’s office responded to inquiries from individuals who had concerns about their legal representation in bankruptcy cases after the closure of Kerry Steigerwalt’s Pacific Law Center.”
“Benjamin is making a grand effort to do what is right,” says Sehnert. However, “It would be really nice to have an accounting of that $3 million.” He notes that the check that Laura Perry received was from “Kerry Steigerwalt’s Pacific Law Center Client Trust Account.” Money in client trust accounts belongs to clients, not to the lawyers, who should follow strict accounting procedures, he says. However, a former member of the firm says that in this instance the money paid up front did not have to go into client trust accounts.