Jeffrey Stern, a prominent Houston personal injury attorney has been indicted for ambulance chasing, i.e. the practice of illegally soliciting clients who may need a lawyer.
Also indicted were;
- Deborah Bradley, another attorney at his firm
- Richard Plezia, an attorney with his own firm
- Frederick Morris, case runner for Stern. His wife owned a healthcare clinic
- Lamon Ratcliff, case runner and clinic owner
- Marcus Esquivel (charged separately), case runner and owner of several advertising and consulting businesses.
Murder for hire case
Stern achieved infamy when his wife was shot in May 2010. Stern’s mistress was soon charged with conspiring to hire a hitman to kill his wife. The mistress reached a plea deal and was sentenced to 20 years. However, charges against Stern were dropped in 2012 and Stern and his wife reconciled.
The kickback scheme
The 21-count indictment alleges conspiracy, witness tampering, obstruction of justice and multiple tax violations. According to the indictment, the scheme started in 2006.
Allegedly, Stern would pay kickbacks to the case runners and clinic owners in exchange for referrals of personal injury cases to Stern’s law firm. Stern would deposit such income to personal accounts and cash the checks with check cashers. This income was not reported to the IRS. However, the payments to the case runners were disguised in the business accounts and deducted illegally on Stern’s tax returns.
Beginning in 2006, according to the indictment, Stern sought to disguise his illegal kickback payments as legitimate referral fee payments to attorneys. Stern told Morris to find a lawyer who they could use. Morris suggested Attorney 1 (not named in the indictment), who agreed to take part in the scheme. Morris would cash the checks that Stern had written, using forged endorsements. He would use part of the cash to pay his sources.
Stern also issued checks to Attorney 2 and Attorney 3 who didn’t know about the scheme.
May 2010 was a rough month for Stern. Days after his wife was shot, the IRS notified Stern he was being audited. In 2011 Stern agreed to pay the IRS $1.1 million in assessments and $341,000 in penalties.
Allegedly, Stern also started issuing false 1099s to Attorney 1 which caused the IRS to go after attorney 1. Between 2011 and 2016, according to the 1099’s, Attorney 1 was paid over $7 million. In practice, little of that went to Attorney 1. Stern ended up funneling checks of over $330,000 to the attorney to cover the taxes owed on the declared (but phony) income of Attorney 1.
Of course, Stern didn’t issue 1099s to Attorneys 2 and 3 (as they didn’t know about the scheme) for the $1.7 million of checks written to them, but cashed by Morris.
As a result of the IRS audit, for 2011 Stern funneled kickbacks ($308,000) through the company owned by Morris’ wife.
According to the indictment, the kickbacks to Plezia took place between 2006 and 2013 and amounted to $686,000. The kickbacks to Ratcliffe were funneled from Stern via his partner, Bradley, and amounted to $329,000.
In addition, Stern found out about the federal grand jury investigation in 2016 and ordered Morris not to co-operate and Esquivel to destroy records.
Reading the indictment, it appears that Attorney 1 became a co-operating witness and provided recordings of conversations with Stern that helped build the case.
If convicted, long prison term
Stern is 62 years old. If convicted, he could face up to
- 5 years in prison for conspiracy to defraud
- 3 years for filing a false tax return
- 3 years for aiding and assisting in the preparation of false tax returns
- 10 years for obstruction of justice
- 20 years for witness tampering
Morris has pled guilty and will be sentenced in February 2020.
Indictment – Stern