The Volokh Conspiracy
Mostly law professors | Sometimes contrarian | Often libertarian | Always independent
From the Plea Agreement filed last week in U.S. v. Elstein (C.D. Cal.):
Beginning in or around September 2014, MATTHEW CHARLES ELSTEIN ("defendant") engaged in a scheme to defraud defendant's legal clients by claiming that he filed, on the client's behalf, complaints, motions and other pleadings in court when, in fact, defendant knew no such complaints, motions and pleadings had been filed.
Defendant also claimed he had obtained favorable legal resolutions for his clients when, in fact, defendant had not obtained favorable resolutions and, in many cases, had never initiated a legal action….
Victims S.F., C.S.S., and Company A
In or around June 2015, Company A retained defendant to file a lawsuit against Company B regarding a contract dispute. S.F. and C.S.S. were the principals of Company A….
[D]efendant agreed to pursue Company A's … substantive claims against Company B by filing a federal action on their behalf in the Northern District of California. Defendant, however, never filed such a lawsuit. Instead, he misled Company A into believing he had filed such a case, and billed Company A for work he did not perform.
On July 6, 2015, defendant emailed Company A falsely stating that he filed the case against Company B in the Northern District … prior to the Fourth of July holiday. Defendant communicated several lies to Company A about why the Northern District Case could not be found on Pacer, including that the case was under seal because the United States Department of Justice … was investigating the owner of Company B.
From then on, defendant continued to make false representations to induce payment from Company A regarding the fake Northern District case. For example, on October 10, 2015, defendant told Company A that he had filed a Second Amended Complaint in the Northern District Case. In an attempt to cover for his misrepresentation, on March 16, 2018, defendant emailed C.S.S. a fraudulent second amended complaint with a ficti[ti]ous case number and forged Pacer information.
On December 22, 2015 and March 10, 2016, defendant requested a total of $6,700 for "process server costs and document costs" related to a motion for summary judgment as well as "filing and copying expenses" in the Northern District Case. On June 7, 2016, defendant, for the purpose of executing his scheme to defraud, transmitted and caused the transmission of a wire communication in interstate and foreign commerce, namely, defendant used his email account … to instruct C.S.S. to wire $3,500 to defendant for "deposition related expenses." Since the Northern District Case was fabricated by defendant, there was no motion for summary judgment, defendant did not incur filing and copying expenses, and there were no depositions or deposition related expenses. Based on defendant's representations, however, Company A wired the money to defendant's personal bank account.
In addition, defendant charged Company A for travel related to other clients/matters and had S.F. and C.S.S. travel to depositions that defendant had fabricated to carry out his scheme.
During the course of the fraudulent scheme, defendant communicated to Company A that the defendants in the Northern District Case defaulted on the suit against them and that Company A had won a $52 million judgment. According to defendant, Company A had to wait for the case to be unsealed for the judgment to be released.
On June 17, 2016, defendant emailed Company A a forged court order purportedly signed by the Honorable Richard Seeborg, United States District Court Judge for the Northern District of California. The order was titled, "Order Re: Hearing on Plaintiff's Motion for Entry of Judgment Against All Defendants." The fake order noted that it was "sealed" and contained a false case name, docket number, and Pacer markings. The order stated that, "given the complexity of the claims for relief asserted by Plaintiffs, the number of parties, and what appear to be overlapping claims of damages, the Court is required to 'conduct an accounting' and make specific factual findings in support of the judgment." The order went on to order Plaintiffs to file "a detailed accounting of all damages" by July 1, 2016.
On October 3, 2016, defendant emailed Company A a second falsified court order titled, "Interim Partial Judgment." Again, the order purported to be signed by Judge Seeborg, noted that it was "sealed," and contained a fake case number and false Pacer markings. The order stated that the "Plaintiff shall take judgement against all Defendants, jointly and severally, in the amount of $2.5 million ($2,500,000)."
Because defendant's scheme involved the Northern District Case being improperly under seal due to DOJ's supposed investigation of the owner of Company B, defendant informed Company A that it could collect money controlled by DOJ. On August 22, 2017, defendant emailed Company A two forged documents: (1) a "Process Receipt and Return" form with the United States Marshals Service ("USMS"), which defendant claimed to be necessary as part of the process to collect on the "Interim Judgment/Enforcement of Temporary Restraining Order"; and (2) a "Record of Collections" from the USMS demonstrating the USMS had collected $638,884.17 from parties in the Northern District Case.
On September 21, 2017, defendant sent Company A a fake settlement agreement between Company A and the United States Attorney's Office for the Eastern District of California (the "U.S. Attorney's Office"), with the forged signatures of the then Interim United States Attorney for the Eastern District of California and the then Acting Assistant Attorney General of DOJ's Criminal Division. Under the agreement, the government agreed (1) it would not object to the unsealing of the Northern District Case; (2) pay Company A $4 million from the "Court of Claims Recovery Fund" in settlement of all claims and potential claims by Company A; (3) cease all action which may interfere with Company A's prosecution and collection of sum in the interpleader case and the Northern District Case; and (4) disgorge all sums held by the USMS (no less than $630,000) collected as part of the sealed judgment in the Northern District Case.
Defendant continued to charge Company A for his fraudulent efforts to obtain the funds from the government. In November 2017, defendant charged Company A to prepare and file a Supreme Court petition. On December 28, 2017, defendant purported to follow up by sending a demand letter requesting the government unseal the case and pay his clients the amount due.
In January 2018, Company A reached out to the U.S. Attorney's Office to authenticate the settlement agreement and discovered that the agreement was a forgery.
Throughout the course of defendant's misrepresentations, Company A paid $234,000 in fraudulently procured legal fees and expenses.
Victims I.F. and J.F.
In or around 2012, a law firm, Firm A, filed two lawsuits in the state of Washington (the "Washington Lawsuits") against I.F., J.F., and two of their companies that provide debt settlement services (the "Debt Settlement Companies"). I.F., J.F., and the Debt Settlement Companies later hired defendant to substitute into the actions. During defendant's representation of I.F., J.F., and the Debt Settlement Companies, defendant communicated with them using wire communications, namely, phone calls and email.
On September 30, 2014, defendant sent a retainer agreement to I.F. noting that he had been formally retained by I.F., J.F., and the Debt Settlement Companies to represent them in the Washington Lawsuits. The agreement noted that I.F. needed to pay an advance of $10,000. Defendant provided I.F. with the information for defendant's personal bank account, but falsely represented that it was the trust account for his law firm.
In 2015, Defendant told I.F. that he would file a federal case against Firm A in the Western District of Washington. On April 13, 2015, defendant prepared a purported application to appear pro hac vice in United States District Court for the Western District of Washington. The caption contained the fake case name for the lawsuit that defendant represented to I.F. he would file, but never did. On April 23, 2015, defendant sent a revised retainer agreement to I.F., which they both signed.
This revised retainer agreement specifically listed the fake federal case … along with the Washington Lawsuits as the basis for the representation. It added that defendant's representation in the Washington Federal Case would not begin until I.F. paid a "further advance in the amount of $3,500 … deposited in [defendant's law firm] Client Trust Account[.]," which was actually defendant's personal bank account.
On May 15, 2015, defendant represented to I.F. that defendant filed a 24-page, 10-count complaint in the Washington Federal Case. He later provided I.F. with a fraudulent face page and the second page of the complaint. The document looked like it had been filed, but, in actuality, contained fake Pacer markings with a fraudulent case number.
Defendant also fabricated depositions in the Washington Federal Case. Specifically, he told I.F. that he noticed two depositions on September 21, 2015 and a third deposition on September 22, 2015 in Seattle, Washington. I.F. and J.F traveled to Seattle for the depositions. Because these depositions were fake, no one appeared for the deposition. Nonetheless, defendant had a court reporter present and made a formal record of the nonappearances. Defendant also billed I.F. for attending the fake depositions and his travel expenses.
When defendant changed law firms in approximately November 2015, he represented to I.F. that he was working on the Federal Case and continued to bill I.F. for work he was not doing.
On or about March 2016, defendant represented to I.F. that the defendants in the Washington Federal Case were in default of their discovery obligations and that the court ultimately would enter a default judgment. Defendant's billing entries during that time demonstrate that he was billing I.F. for work on motions for default and sanctions, when, in fact, he was not working on those motions.
On June 12, 2016, when I.F. questioned why there was an issue in locating the Washington Federal Case on Pacer, defendant emailed I.F. to tell him that (1) the case had been docketed by the district court in May 2015; (2) he had no information as to why it did not appear on Pacer; (3) the complaint was filed and contained an electronic watermark; (4) "I have done everything you instructed and as I represented"; and (5) that he would call the court the next day and speak directly to the ECF docketing clerk.
On August 8, 2016, defendant forwarded to I.F. a fake email communication between defendant and a person he claimed to be a clerk at the United States District Court for the Western District of Washington. The subject contained the fake case name and number for the Washington Federal Case. The email had a fake name and email address for the clerk. In the fake email, the clerk said that the "Court intends to grant the requests for entry of default without the need for a hearing[.]"
While defendant was misleading I.F. and the Debt Settlement Companies about the existence of the Washington Federal Case, he also misrepresented to his law firm that he was withdrawing from representation in the Washington Lawsuits. In November of 2016, defendant provided his law firm with fake emails to I.F., J.F. and the Debt Settlement Companies. In the emails, defendant noted defendant's intent to withdraw from the Washington Lawsuits and demanded that they pay outstanding court reporter fees. The emails, however, were sent to fake email addresses created by defendant. Defendant also provided his law firm with a fraudulent substitution of attorney form, purportedly filed and signed by I.F. However, I.F. had never seen the document.
By March of 2017, defendant had begun working at his third law firm since agreeing to represent I.F., J.F. and the Debt Settlement Companies.
Defendant continued to bill I.F. for work he was not actually doing on the fake Washington Federal Case well into October of 2017. On October 12, 2017, defendant emailed I.F. to inform him that the final briefing for the judgment in the Washington Federal Case was due on October 20, 2017.
In January 2018, defendant falsely represented to I.F. that he had obtained a $4,250,000 judgment in favor of I.F. and the Debt Settlement Companies in the Washington Federal Case.
Around July 2018, I.F. wanted to personally travel to Seattle to collect on this judgment. In advance of that trip, defendant handed I.F. a copy of what defendant represented to be the judgment in the Washington Federal Case. The fraudulent order contained a forged electronic signature of the Honorable James L. Robart of the United States District Court, Western District of Washington.
On July 11, 2018, I.F. traveled to the district court to collect his judgment. On that day, I.F. realized defendant's deceit. The clerk could not find the case number. A Senior Inspector from the USMS's office confirmed it looked suspicious and then checked with Judge Robart who confirmed that he had never heard of the Federal Case.
Throughout the course of defendant's misrepresentations, I.F. paid $20,354.30 in fraudulent retainer and legal fees directly into defendant's personal bank account.
Victim Company D
Company D consists of three insurance companies. In or around December 2015, Company E sued Company D in United States District Court for the Southern District of California. Shortly thereafter, Company D retained defendant to represent it. During defendant's representation of Company D, defendant communicated with Company D's representatives using wire communications, namely, phone calls and email.
During a call on December 17, 2015, with representatives of Company D, defendant discussed with representatives of Company D drafting a motion to dismiss. Defendant subsequently misled Company D about the deadline for filing the motion, his filing of the motion, and the events that were transpiring in the case.
On May 26, 2016, defendant lied to Company D in an email, conveying that the court clerk wanted to have oral argument on the motion to dismiss and that the court set a filing deadline of June 3, 2016 and a hearing date of July 11, 2016. Defendant added that he would draft the motion over the Memorial Day weekend.
Between June 2016 and August 2016, defendant and Company D exchanged numerous emails in which defendant claimed that the judge continued to move the filing deadline and the hearing date for the motion to dismiss. By email on August 16, 2016, defendant represented that the motion would be filed by the new deadline of August 18, 2016, and that plaintiffs in the case would be served personally. Later that day, defendant sent a draft of the motion to Company D. The draft was approved with changes and sent to defendant. Defendant told Company D that he would file it "ASAP." Defendant never did. Billing records demonstrate that defendant claimed to have worked on the motion to dismiss that was never filed between June 2016 and August 2016.
On February 28, 2017, a representative of Company D emailed defendant to ask if the motion to dismiss was filed in August. Defendant responded that the court had converted the motion to dismiss into a motion for summary judgment. Meanwhile, in emails on February 28, 2017 and March 1, 2017, defendant represented to a different Company D employee that he was working on a draft motion for summary judgment.
In reality, the court was not continuously moving the motion deadline, considering a motion to dismiss, or continuing the hearing on the motion. The court never converted a motion to dismiss into a motion for summary judgment. Instead, defendant missed discovery deadlines, failed to timely designate an expert on behalf of Company D, and never filed a motion to dismiss.
On November 22, 2016, Company E filed its motion for summary judgment. Defendant never told Company D about the filing. Instead, in order to have Company E agree to an extension on Company D's opposition in order to accommodate defendant's vacation in France, defendant agreed that Company D would not file a cross motion. Defendant then entered into settlement negotiations with Company E for $275,000, without receiving prior authorization from Company D to do so. Defendant billed Company D a total of $104,500.50 throughout defendant's representation of Company D.
In total, defendant's fraudulent conduct resulted in losses of at least $358,855 by his victims.