In the Adversary Proceeding pending in Federal Bankruptcy Court in Pennsylvania, against accused Ponzi schemers Dean Kennedy and Atlantic Rim Funding Corp., the Plaintiff, Land Conservancy of Elkins Park, Inc., has filed a proposed Second Amended Complaint. This new pleading charges the Escrow Agent, Texas Attorney J Mac Rust, also known as Jay Mac Rust, with Professional Negligence, more commonly known as Malpractice, and for breach of Fiduciary Duty. Frankly, the allegations are damning.
These are verbatim quotes from the Second Amended Complaint. I have included the paragraph number to aid any readers who plan on reviewing the complete document.
First, from the Malpractice Count:
119. Rust held himself out as a competent attorney well versed in transactions of the type involving the Debtor and Atlantic Rim.
120. Rust blithely assured Debtor and Debtor's counsel, as attorney and Escrow Agent, that the Deposit was "safe" and could be liquidated readily since it contained "marketable securities."
121. rust knew that the debtor was not consenting and would not consent to any portion of the Deposit or its proceeds being used to cover losses incurred by other Atlantic Rim customers.
122. Rust made the same representations as the escrow Agent holding the deposit, and again indicated that the Debtor's Deposit was safe, fully collateralized and could be returned to the Debtor immediately.
123. Rust had a duty to the debtor as an attorney, and as a third party Rust knew the Debtor was relying upon his representations...
126. Rust negligently failed to disclose real time information to the debtor relating to the value of the Deposit.
128. The Deposit was in fact not "safe". The Deposit was not protected, the securities were not marketable, and the value was substantially below that which was represented and insufficient to return the Deposit to the Debtor.
129. The Debtor also avers that Rust was negligent in his handling of the Deposit in that he negligently allowed the proceeds of the Deposit to be used to refund other Atlantic Rim customers their deposits, when Atlantic Rim failed to close their loans.''...
132. Rust was the proximate cause, or the principal contributing cause of the failure of the Debtor to recover the Deposit....
135. The Debtor has been damaged by the loss of $240,000 of the Deposit.
Next, the breach of Fiduciary Duty Count;
137. Rust acted as a fiduciary with respect to the Deposit....
139. Rust breached the Escrow Agreement by allowing the Deposit to be used to satisfy the obligations of other Atlantic Rim customers without the Debtor's affirmative consent.
140. Rust breached the Escrow Agreement by failing to disclose, in the face of an obligation to do so, material facts which would have demonstrated the Deposit was at risk.
141. The acts complained of herein constitute breaches of Rust's fiduciary duties to the debtor.
I hope someone has notified the State Bar of Texas, as well as Jay Mac Rust's Malpractice insurance carrier. This individual has knowingly facilitated a number of Atlantic Rim Funding/Dean Kennedy advance fee schemes/Ponzi schemes, and caused serious financial losses of the victims. The authorities need to determine whether he is to be permanently disbarred, arrested and convicted of fraud. I wonder if the Texas Attorney General's Office in Austin is paying attention.
*Land Conservancy of Elkins Park Inc. vs. Atlantic Rim Funding Corp et al, Case No. 12-00007 (ED PA BKCY).