Houston lawyer pleads guilty to scamming veterans (TX)

Attorney Joe B. Phillips pleaded guilty in Houston federal district court Tuesday to charges that he and his wife jointly conspired to steal $2.3 million from 49 disabled veterans mostly from Southeast Texas and then deliberately hid their thefts by filing fake reports and a bogus income tax return in a scheme described as the largest rip-off ever reported in the U.S. Department of Veterans Affairs’ fiduciary program.

Phillips’ wife Dorothy, 72, who pleaded guilty in April, has described herself as a gambling addict in open court and previously admitted to misusing veterans’ money to fund casino trips to Louisiana, where she gambled often at both the Auberge du Lac and Delta Downs, court records show. But Joe Phillips, 73, had insisted on his innocence until Tuesday -hours after jury selection for his trial had been scheduled to begin and after his attorneys warned him in open court that his wife’s admissions to conspiracy would be damaging to his defense.

As part of his guilty plea to two of the 21 charges filed against him, Phillips admitted to transferring more than $1.36 million in veterans clients’ bank accounts directly to a joint checking account he shared with his wife between 2003 and 2007-and during the same period withdrawing about the same amount in cash, sometimes from ATMs inside casinos. And he admitted to signing false statements as a VA fiduciary and a bogus income tax return to help hide the thefts, which netted the Phillips an estimated $754,582 in illicit income that they failed to report, the government alleged in its indictment.

Phillips, who remains free on $100,000 bond, is expected to be sentenced in December. He refused comment on his plea

Judge Lee Rosenthal warned Phillips that he faced a maximum 8-year sentence; a fine of $500,000 and restitution of at least $2.3 million, based on the governments estimates of losses to veterans. But Rosenthal told Phillips that he and his wife could face an even tougher sentence because of the number of victims, the vulnerability of the veterans who were fleeced and the amount of losses. Rosenthal promised the upcoming pre-sentence investigation will include a re-examination of the veterans’ losses, which Phillips claims are less than the government reports.

In previous interviews, Phillips has repeatedly claimed he knew nothing of the thefts prior to the 2007 audit. In civil court filings, he has alleged that the VA itself was negligent for failing to protect veterans assets as required by federal law. Phillips told the Chronicle the VA only audited his records once in his more than 20 years as a VA-approved fiduciary.

The VA has never released a complete list of the amounts each individual veteran lost. Though some victims have been compensated by the federal government, others whose assets were overseen by Phillips and their families have told the Chronicle they have never been contacted at all.

Phillips, who lost his mother at age 6, paid his own way through school and obtained a law degree in 1965. He worked for the VA for several years and since the 1980s has dedicated most of his law practice to working with disabled veterans; his wife was his legal assistant. The couple reported an annual income of $100,000 to $145,000 in 2004-2007 and lived in a modest house, drove a Lexus, according to the indictment and a recently bankruptcy filing.

Beginning in the early 1980s, Phillips, a former VA employee, was approved to manage the money of as many as 50 disabled veterans at a time as both a VA-approved fiduciary and a payee under the Social Security Administration. In both roles, he received disabled veterans’ benefit checks and also managed veterans’ bank accounts and spending. In at least 28 cases, probate courts appointed him to oversee veterans’ assets and over the years he also was appointed to dispose of dead veterans’ estates.

The VA first found irregularities in his accounts in 2007 – including falsified balances, fake accounts and other oddities. Attorneys later appointed by probate judges to review 28 veterans’ accounts found evidence that errors and fraud had gone undetected for at least a decade, according to related probate court records.

Phillips has always claimed that others engineered the thefts – but as a fiduciary he oversaw accountings and signed reports that got submitted annually to both the VA and to probate courts. In 2006 and 2007 alone, Phillips allegedly signed inaccurate verifications sent to the VA that indicated he’d safely deposited $275,000 of veterans’ money in eight money market or savings accounts that did not exist and by provided inaccurate balances for two other accounts, according to specific examples detailed in the indictment.

Elgin Davis, a veteran in Livingston who acts as caregiver for his disabled veteran cousin, Nathaniel Holloman, who is one of the victims of the thefts, told the Chronicle they trusted Phillips for 20 years and told the Chronicle in a recent interview they were shocked to learn of problems in 2008 when probate judges ordered investigations. “Mr. Phillips had a good relationship with me and he communicated with me when I asked about stuff and when we disagreed, we hashed it out and he corrected it,” Davis said.

But other veterans and caregivers told the Chronicle that Phillips was often testy and stingy with money and that they’d long felt suspicious of him.

“It was hard to believe what is going on with veterans who have no defense,” said Shirley German, mother of Leland Spencer, a wheelchair-bound Houston Marine who had about $200,000 siphoned from his accounts. Though her son and other veterans have been compensated by the VA and by insurance settlements, German believes Phillips deliberately concealed thefts and wants him sent to prison.

Attribution:

Attorney pleads guilty to $2.3 million scam of disabled vets
Lise Olsen
September 4, 2012
Houston Chronicle
http://www.chron.com/news/houston-texas/article/Attorney-pleads-guilty-to-2-3-million-scam-of-3838605.php
Additional coverage:

Houston lawyer pleads guilty to scamming veterans
The Associated Press
September 4, 2012
Austin American-Statesman
http://www.statesman.com/news/texas/houston-lawyer-pleads-guilty-to-scamming-veterans-2450442.html

HOUSTON — A Houston attorney has pleaded guilty to scamming the finances of some veterans he was hired to help.

Prosecutors in Houston say 73-year-old Joe B. Phillips entered the pleas Tuesday.

Phillips was a court-appointed guardian or Department of Veterans Affairs-approved fiduciary for some veterans. Investigators didn’t immediately say how much money was involved.

Phillips pleaded guilty to conspiracy to make false statements, misappropriation by a fiduciary and signing a false income tax return. He faces up to three years in prison for tax fraud and five years on the other counts.

His wife and assistant, 72-year-old Dorothy Phillips, in April pleaded guilty to conspiracy and making a false statement on an income tax return.

Phillips says his wife gambled extensively at Louisiana casinos from 2003 to 2007.

Both await sentencing.

 

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