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The law firm of Donchess & Notinger P.C., representing business clients throughout Massachusetts and New Hampshire with expert legal counsel in the areas of financial restructuring, bankruptcy, employment law and commercial litigation, and appointed to help the trustee overseeing the bankruptcy of Financial Resources Mortgage and CL&M, stated in court filings yesterday the case has “created financial hardship for the firm.”
Per officials, both Financial Resources Mortgage and CL&MÂ perpetrated a years long, massive Ponzi scheme, and shut down last November, cash poor.
Since that time, Â Donchess & Notinger has recovered only $60,000 in loan payments from a few of the companies’ borrowers and their former law firm.
Donchess & Notinger yesterday asked the judge in the case to authorize the payment of $125,000.
The firm “has spent a lot of time working through the tangled web of transactions and transfers set up by CL&M and (Financial Resources Mortgage) to further its Ponzi scheme,” the firm’s request stated.
The circumstances surrounding the closure of Financial Resources Mortgage and CL&M are being investigated by the FBI, U.S. attorney’s office, and the SEC.
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The companies’ convoluted means of conducting business included soliciting money from investors to finance private mortgage loans, mostly in commercial construction. Many of these projects appear never to have existed. They were then promised high returns on their deposits. In many cases, they secured the investments with promissory notes or mortgages.
Steven Notinger, the trustee overseeing the case, said the companies solicited nearly $80 million from hundreds of investors over the years. Because Financial Resources Mortgage and CL&M mingled all the funds they received, and because the companies’ bank records and ledger were missing when they closed, tracing the investments has proved extremely difficult.
“Every step of the case results in protests and legal pleadings from some corner,” the firm’s filing said. “The case has been very contentious, with (Donchess & Notinger) having to fight people on all sides who the trustee believes are trying to liquidate assets . . . in violation of the bankruptcy code.”
“Some investors are fighting us tooth and nail on every point, rather than sitting down and trying to resolve the estate for the benefits of all investors,” said Jim Donchess, an attorney in the firm. “To the extent that certain investors fight us, the costs of doing this go up exponentially. If we have to fight over every trust, every asset, if we have to bring suit and go to court, it’s going to cost us a lot of money.”
