Sunday, January 23, 2011

My Sunday Feeling

My father died when I was a senior in college. Accordingly, my law school education was financed by the Student Loan Guarantee Foundation and the United Methodist Church. When I left law school, I was in debt to the tune of about $35,000. That seemed like a lot of money to me at that time. I was able to defer it for awhile when I worked for the Legal Services Corporation. But those days ended when I got laid off by the Reagan administration and was forced to obtain a real job.

I lived in apartments for most of my young adulthood as I was determined to pay those loans off before buying a house. Besides, I didn't want my nascent credit rating to suffer by getting a judgment on me. That, and I figured I would be subject to a Higher Judgment if I stiffed the Methodists. Eventually, pay them off I did and then I bought the little house where I still live here in the People's Republic of Hillcrest.

People have different ideas about debt. When I was young, I carried a balance on my credit card because that was the only way that I could finance my then riotous lifestyle centered around women and bars which were, and are, both expensive endeavors. Suffice it say that I have calmed down considerably since those halcyon days back when I was young and had potential. I don't have any unsecured debt to speak of, I have equity in my house and I am heavily invested in a 401k and a pension. While I am by no means a wealthy man, I am comfortable and I am secure. I am extremely fortunate and I do not take my good fortune for granted which is why I donate a considerable amount of money to various charities. I have been very lucky and I believe it is my duty to try to help others who are down on theirs.

End of sermon.

Like a lot of young people, I went to law school because I didn't have anything else to do. I had thought about seminary but my ardor cooled after meeting the English rationalist David Hume while obtaining an utterly useless degree in Philosophy at Hendrix. Conversely, Vic Nixon, my retired pastor started to go to law school and wound up at Perkins. He has said on more than one occasion that he and I both wound up where we needed to be. I still don't know what Vic really means by that.

Times are different now. Law school was always kind of a scam. They let folks in fully expecting to get rid of 1/3 of the first year class after taking their tuition. But a person could take a gamble on getting a law degree back then, even if you had no idea what you were going to do. The economy, though improving, is still basically in the dumper. The New York Times recently published an article in which it questioned whether incurring a bunch of debt is worth the gamble given the fact that jobs in the legal profession are scarce. You can read it at the jump:

Strictly as a matter of economics, it can make sense to choose not to repay a debt. Indeed, a young man featured in the Times article, can't repay his loan because he doesn't have a full time job. It doesn't worry him. Until he finds employment, he can't pay. He doesn't worry because there is no use to worry. And we have all heard of folks who have just walked away from their homes because it simply did not make sense to make payments on a home that due to market conditions was worth far less than the mortgage encumbering it.

Are such people deadbeats? I don't think so. Sure, there is a moral implication at work here in that when you sign a contract you are giving your word that you will repay. But lots of companies make business decisions to default on contracts all the time. Now, if I had quit paying on my student loans when I had a perfectly good job to sustain me then I would have been a deadbeat. That's because my decision would have been based on my personal considerations and not because of economic necessity. Similarly, are folks that file bankruptcies deadbeats? A few. But 75% of them are the result of medical bills, divorce or poor business decisions. And that's the honest to God truth.

Which brings me at this point in this tedious lecture to a fairly recent phenomenon around here in these parts. Which is folks you wouldn't ordinarily consider capable of criminal acts, committing crimes solely to get them out of financial hot water with their creditors. Not to buy food or crack even. Just to get out from under debt.

There is an old saying amongst us bankruptcy lawyer types. There is always a solution to a money problem. Some are worse than others however. I get a person who steals because he is hungry. Or because that's just what he does. Some people are just crooks and know nothing else. I do not get committing a crime when you ought to save face. Or for a one shot score to come up with money for debt service. There are better solutions.

Consider the case of a lawyer named Jones. Jones was a real estate developer and title lawyer. He and his family had a big assed house out in Chenal Valley. The house was subject to two mortgages. A balloon payment of about $300,000 was coming due on one of them and Jones was having trouble coming up with the money. Now Jones was worth a lot of money on paper. But while he was asset rich, he was cash poor. And he couldn't borrow any more money on his big assed house because it wasn't worth what was owed against it.

Did Jones swallow his pride and try to reorganize his debts with a Chapter 11? No. He torched his house for the insurance, made up a cock and bull story about how intruders broke in and set the fire which nobody believed. Least of all the jury that found him guilty and for which he caught 10 years.

Or take the case of another lawyer named Lewis. While not much is known about the state of his finances, he is alleged to have sold bogus water and sewer bonds on improvement districts that did not exist to three or four banks, thereby skinning them for millions in the process. A banker friend of mine says she heard that he just printed them up himself. Which took some stones if you think about it. In any event, the whereabouts of Mr. Lewis is known only to his lawyer, although you can bet that there are numerous State and Federal law enforcement and regulatory agencies that would like to have a word with him. Don't look for him at his 7,000 square foot house in Chenal. It's abandoned.

Finally, we turn to the absolutely bizarre tale of a man named Fueget who robbed a bank in January of 2009. Fueget worked in insurance and in financial planning. The irony of the latter job description will soon become readily apparent. Anyway, you will note that I didn't leaven Feuget's offense with the word "allegedly." This is because he is claiming that he is not guilty by reason of diminished capacity (the so-called "insanity defense") due to being on the anti-depressant Zoloft and the A.D.D. drug Adderal at the time he committed the offense. According to his expert, these meds gave him delusions of being a John Dillenger type figure and compelled him to commit the offense.

The problems with this defense are obvious. In the first place, the defendant invoking the defense neccesarily concedes that he committed the act that he was charged with. Which puts the Prosecution about 2/3 of the way there. This is why, contrary to popular fiction, the "insanity defense" is rarely invoked. Really.

Mr. and Mrs. Feuget, who incidentally used to be neighbors with a friend of mine, are in a bankruptcy themselves. Which the prosecution hammered away at on cross in order to establish motive for the crime. However, according to the paper, Feuget testified that he could have stolen more money at his day job if he had been so inclined. Which is not the sort of thing that I would share with a jury. And the missus testified that, despite the bankruptcy, money was not a real problem as they were living off of her income as an R.N. Be that as it may, a review of the bankruptcy docket for their case reveals that the Chapter 13 they were in has been converted to a "no-asset" Chapter 7 case. Which certainly implies something different.

All I know about this case is what I read in the paper while the jury is weighing the actual evidence. And their opinion is the only one that matters in the case. The defense seems far fetched to me. But then again I know of a woman who evidently became a compulsive gambler while on medication for restless leg syndrome. So who knows? I just know a lot more people being treated with Zoloft than I do people that stick up banks.

But let's assume the jury doesn't buy it. Then you have 3 instances of people from basically the same upscale part of town committing criminal acts (I characterize Lewis's behavior thusly as I feel certain that he will be indicted for something ) for their personal gain during roughly the same period of time. Which I find remarkable for a little jerkwater town like Little Rock.

There is always a solution to a money problem. The young lawyer in the piece in the Times made the decision that it didn't make economic sense to try to pay back his law school loan when he didn't have a job. That ain't insurance fraud or bank fraud. It requires a special sense of entitlement to attempt to game the system just to come up with some money.

But then again some people are just deadbeats.

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