Texas Attorney Pleads Guilty to Stealing $2.3 Million from Disabled Vets

Tuesday, September 4, 2012
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A 73-year-old attorney pleaded guilty in Houston federal district court Tuesday to conspiring with his wife to steal $2.3 million from 49 disabled veterans and then hiding the thefts by creating fake reports, imaginary bank accounts and filing a bogus income tax return.

As part of his guilty plea to two of 21 charges against him, Joe B. Phillips admitted to transferring more than $1.36 million from veterans clients' accounts directly to a joint checking account that he shared with his wife between 2003 and 2007.

Phillips' wife, Dorothy, a self-described gambling addict, pleaded guilty to similar charges in April. The 72-year-old admitted to misusing some veterans' money to fund casino trips to Louisiana, where she often gambled at L'Auberge du Lac and Delta Downs, court records show.

But Joe Phillips had insisted on his innocence until Tuesday - minutes before jury selection for his trial was to begin and after his attorneys warned him in open court that his wife's admissions to the couple's conspiracy had damaged his defense.

During that period, the couple withdrew a similar amount in cash, sometimes from ATMs inside casinos on gambling trips. He also acknowledged signing false accounting statements and a bogus income tax return.

Kenneth Magidson, U.S. attorney for the Southern District of Texas said he places a "high priority" on cases involving veterans. "Veterans devote their services and lives to their country and, as deserved, afforded certain benefits. We do not take it lightly when someone violates the trust of these Veterans and takes away what is rightfully theirs by such unscrupulous fraud."

Phillips, who has remained free on $100,000 bond since first being charged in 2010, is expected to be sentenced in December. He declined to comment.

Judge Lee H. Rosenthal warned Phillips that he faced a maximumeight-year sentence for the two charges; a fine of $500,000 and restitution of at least $2.3 million, based on the governments estimates of veterans' losses. But Rosenthal told Phillips that he and his wife could face an even tougher sentence because of the number of victims, their vulnerability and the amount of losses. Rosenthal promised the upcoming presentence investigation will re-examine the veterans' losses.

The VA has never released a complete list of the amounts each veteran lost, first discovered in a 2007 audit. Though some victims have since been compensated by the federal government, others whose assets were overseen by Phillips and their families have told the Houston Chronicle they have never been contacted.

Phillips, who lost his mother at age 6, paid his way through school and obtained a law degree in Houston in 1965. He worked for the VA for several years and since the 1980s has dedicated most of his law practice to working with disabled veterans, with his wife as his legal assistant. The couple reported an annual income of $100,000 to $145,000 in 2004-2007. They lived in a modest house and drove a Lexus, according to the indictment and a recently bankruptcy filing.

Beginning in the early 1980s, Phillips won approval to manage benefits and assets for as many as 50 disabled veterans at a time as both a VA fiduciary and a payee under the Social Security Administration. In both roles, he received disabled veterans' benefit checks and also managed veterans' bank accounts and spending.

In at least 28 cases, probate courts also appointed him to oversee veterans' estates, and over the years he also was appointed to dispose of dead veterans' assets.

The VA never audited Phillips prior to 2007, when auditors uncovered falsified balances, fake accounts and other oddities. Attorneys later appointed by probate judges to investigate found evidence that thefts and fraud had gone undetected for at least a decade, documents show.

Phillips has blamed the VA for poor oversight and claimed others engineered thefts - but as a fiduciary he oversaw and signed annual accountings and reports with false information. In 2006 and 2007 alone, Phillips allegedly signed reports sent to the VA that indicated he'd safely deposited $275,000 of veterans' money in eight money market or savings accounts that did not exist and provided inaccurate balances for other accounts, according to the indictment.

Source:  http://www.chron.com/default/article/Attorney-pleads-guilty-in-Houston-to-stealing-3838605.php