Saturday, June 25, 2005

Ambulance Chasing 101

Gene Burd is (or now more likely was) a lawyer who had a personal injury practice in Houston that specialized in cases involving auto accident victims -- do you see where this is going?  A press release issued by the U.S. Attorney's Office for the Southern District of Texas (here) provides the following sordid tale of a PI lawyer who matched the caricature of the classic ambulance chaser:

[Burd] pays runners to solicit accident victims and bring the potential clients to his office. He contracts with his clients to make a claim against the other driver's insurance company on their behalf and he agrees to accept 33 percent of the settlement as his fee. Burd's office then refers the client to particular chiropractic clinics for therapy. Some clinic patients are referred to Burd's law office by the clinics.

After the therapy at the clinics is completed, Burd or his office will send a demand to the insurance company. After some negotiation, Burd settles the case and a check is mailed to him from the insurance company. When the case is settled, Burd takes the insurance company's settlement check and deposits it into his attorney-client trust account. He withdraws the money by writing three checks. One check goes to the chiropractic clinic to pay for the treatment. The second check goes to the client. The third check goes to Burd as his legal fee and is deposited into his operating account.

When the chiropractic clinic receives their check from Burd they often deposit that check into a third party account instead of into their clinic's operating account. After the check is cashed in a case in which the patient was referred to the clinic by Burd, the clinic owner meets privately with Burd and returns 40-50 percent of the check to Burd in the form of a cash kickback. Burd keeps the cash and does not deposit it into his operating account. This income received by Burd is never reported on his federal income tax return. The income reported by Burd on his income tax return is only that money that he received from the trust account by check and the salary checks received by Burd from his law firm. The cash kickbacks are not reported.

Burd and the chiropractor each entered a guilty plea to making a false statement on their tax returns related to the income from this little scheme, which netted Burd approximately $686,000 in 1996 and 1997, the years at issue for the tax charge.  One wonders why a mail or wire fraud charge was not filed in the case.  (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2005/06/did_you_hear_th.html

Fraud, Prosecutions, Tax | Permalink

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