In the two months since mortgage banking industry law firm Butler & Hosch filed an Assignment for the Benefit of Creditors in the state of Florida, an action similar to Chapter 7 bankruptcy, serious allegations have surfaced about what led to the abrupt collapse of the firm.
Now, for the first time, Butler & Hosch’s managing partner and CEO, Bob Hosch, is speaking out about the allegations levied against him and the firm that carried his name for more than 30 years.
“The reasons Butler & Hosch and the affiliated companies failed the week of May 15th will be revealed in the lawsuits that have been filed or that will be filed in the near future,” Hosch said in a statement released exclusively to HousingWire.
“The lawsuits will provide a more accurate story of the why the companies failed by growing too fast as well as entering into the wrong relationships,” Hosch added.
Last week, HousingWire reported on a class-action lawsuit filed by former high-level employees at Butler & Hosch, who alleged that Hosch created false billing and invoices to mask the firm’s financial distress.
But that lawsuit wasn’t the only one that accused Hosch of impropriety.
Last Monday, HousingWire reported that fellow mortgage banking industry law firm Morris Schneider Wittstadt filed for Chapter 11 bankruptcy.
In Morris Schneider Wittstadt’s bankruptcy filing, the Atlanta-based law firm detailed its agreement to sell its default assets to Butler & Hosch in January.
In the bankruptcy filing, Morris Schneider Wittstadt’s managing partner, Mark Wittstadt, said that it agreed to sell its foreclosure, bankruptcy and eviction operations to Butler & Hosch, including the assumption of MSW’s lease obligations, in exchange for an unsecured promissory note of $2,072,167.24.
But, soon after the agreement was finalized, Wittstadt said that he learned of serious issues at B&H.
“Unfortunately, almost immediately after the agreement was signed, but before the transition period had ended, I learned that B&H had created false invoices for reviewing each file to be transitioned from MSW to B&H, which B&H surreptitiously used for the purposes of factoring through its secured lender to obtain loans,” Wittstadt told the court in the bankruptcy filing.
In his statement, Hosch said that he is innocent of all these allegations.
Hosch said that while Butler & Hosch was experiencing “substantial growth,” the firm had problems with integrating the default assets from MSW, as well as miscalculations from the bank and a flawed funding formula.
All of those factors came together to cause the sudden collapse of the firm, Hosch said.
Hosch said that he has been accused of abandoning his clients, but said that those charges are not true. “There was no intent to abandon any clients,” Hosch said.
Hosch’s attorney, Michael Tessitore, said that Hosch has been “working hard and quietly” for the last two months on the legal proceedings related to winding up the affairs of Butler & Hosch and its related companies.
“His goal is to help maximize the return for creditors,” Tessitore said.
Tessitore also commented on other pending litigation against Hosch involving his former employees.
“Although Mr. Hosch has not yet been served with the WARN Act lawsuit in Ft. Lauderdale, he has turned his attention to it and is aware of the serious claims being made against him,” Tessitore said. “Mr. Hosch vehemently denies the claims, intends to prove that allegations of misconduct against him are false, and is ready to defend the lawsuit.”
Hosch said that the firm’s failure was unforeseen and he is ready to defend himself against all charges.
“Please remember that the firm’s sudden failure was not foreseen in time to give notice to the staff,” Hosch said.
“The failure was not expected or planned,” Hosch continued.
“I am ready for the long process ahead in clearing my name, and absolutely plan to work in this industry once again,” Hosch concluded. “The big questions here are why law firms in the business are failing, and what can the industry do to fix it?”