Last week, a U.S. District Court judge sentenced a Clarksburg man to 42 months in prison for mail, and for making false statements on a tax return. While running a debt settlement fraud scheme that caused the loss of $2.9 million to his more than 250 clients.
U.S. District Judge Theodore Chuang ordered Richard A. Brennan, 43, of Burdette Forest Road in Clarksburg to 42 months in prison, followed by three years of supervised release. Judge Chuang also Brennan to pay a $150,000 fine, $2.9 million in restitution to the victims of the fraud and $297,087 in restitution to the Internal Revenue Service. In addition, Judge Chuang ordered Brennan to perform 200 hours of community service.
According to his plea agreement, until January 2009, Brennan was a licensed attorney in Maryland. In late 2005 or early 2006, Brennan established the Law Offices of Richard A. Brennan to perform debt settlement services.
“Debt settlement” differs from “debt management” services, in that, in debt management, debtors continue to make payments on accounts on negotiated terms, while debt settlement involves allowing debt accounts to go delinquent and making a lump sum offer to settle the account. While debt management services – and the fees that could be charged customers – were closely regulated in Maryland, debt settlement services were not.
According to the U.S. State’s Attorney’s Office, the Maryland Attorney General’s Office and the Maryland Attorney Grievance Commission both received a high number of complaints from Brennan’s customers reporting that they were deceived by telemarketers who convinced them of the high probability of success by engaging Brennan and his debt settlement program, but who reported seeing little success in having their debts resolved. When the clients complained to Brennan’s law office, their calls frequently went unreturned, and they were typically told their payments would not be refunded as they constituted Brennan’s attorney fees.
In October 2007, Brennan agreed with the Maryland Attorney General’s Office to cease engaging in a number of business practices, including misuse and commingling of his clients’ funds. Despite this, Brennan violated the agreement by continuing to recruit new clients without making the disclosures required under the agreement with the Attorney General’s office, and by omitting any mention of his restrictions under the agreement, which included a requirement that he maintain a surety bond in order to continue to provide debt settlement services.
To evade the restrictions in the agreement and to keep new clients from researching the large numbers of complaints posted online about his practices, Brennan changed his business entity name several times in quick succession, to include doing business for a few months as the Capital Law Group, then the Frederick Law Group and later as the Metro Law Group. Brennan also instructed telemarketers working for him to deny the new entities’ relationship with Richard Brennan, according to the U.S. State’s Attorney’s Office.
In January 2009, Brennan surrendered his license to practice law by signing a joint petition with the Attorney Grievance Commission. In that document, Brennan admitted that he had used client trust money for purposes other than its intended use. In June 2009, Brennan appeared before the Circuit Court of Frederick County and acknowledged that he continued to debit funds from client bank accounts even after his surety bond had been revoked. Brennan was ordered to pay a $2.58 million money judgment in restitution to clients from whom he collected money up until October 2007. The Court also briefly jailed Brennan for contempt after he failed to provide the Attorney General’s Office a list of clients or accounting for funds as he had promised, said the U.S. State’s Attorney.
Even after losing his license to practice and this judgment, Brennan continued to attempt to defraud debt, clients. On November 6, 2009, Brennan mailed an existing Frederick Law Group client a letter under the business entity name “International Debt Solutions.” In that letter, Brennan acknowledged that Frederick Law Group’s “website and call center have been closed” “due to unforeseen circumstances” and attempted to dissociate himself with that firm by claiming that that “[Frederick Law Group] has forwarded us your information.” Brennan asked the client to fill out a new representation agreement, power of attorney, and electronic funds transfer authorization, which the victim returned by mail to an address two houses away from Brennan’s.
Brennan’s debt settlement fraud scheme caused the loss of approximately $2.9 million to his clients between October 18, 2007, and 2010, and involved more than 250 victims.
Brennan also admitted that he filed false tax returns in 2006 and 2007, underreporting his income in both years, said the U.S. State’s Attorney. For example, in 2007, Brennan reported an adjusted gross income of negative $576,273.10 when he had unreported business receipts that year of at least $9,229,802. Additionally, Brennan received a total of $5,387 in tax refunds based on his knowingly false returns submitted for 2006 and 2007. Brennan filed no tax returns for the tax year 2008, despite receiving over $6 million into business bank accounts he controlled. The total approximate tax loss to the United States is $297,087.
Further, Brennan knowingly possessed unregistered machineguns and short-barreled rifles and also engaged in the unlicensed manufacture of the machineguns. Specifically, in February 2011, a search warrant executed at Brennan’s home in Clarksburg, yielded evidence that Brennan unlawfully converted 10 semiautomatic rifles into fully automatic weapons and modified another rifle so that it had a barrel length of less than six inches. Brennan failed to register those modified weapons, as required by law.