A bankruptcy judge in New Jersey concluded that a lawyer could be held responsible under New Jersey Consumer Fraud Act (CFA), where the lawyer aided a client in concocting a sale/lease back scam against landowners who had defaulted on their mortgages.

The deal subject of the court’s ruling related to a sale/lease back arrangement between the attorney’s client and the landowners, where the client agreed to payoff the landowners’ existing mortgages and to fund a condition of a Chapter 13 arrangement.  In order to finance the transaction with the landowner, the client obtained a mortgage on the property which had been deeded to the client.  The client failed to payoff the two mortgages and to pay money required, the Chapter 13 arrangement.  In order to aid the plan, the lawyer prepared false closing documents.  One of the defenses raised by the client and the attorney was that the CFA could not apply to the case because the landowners where sophisticated consumers. The court rejected the concept out-of-hand.

The Bankruptcy court referred the matter to the United State Attorney’s Office for criminal investigation and to the Office of Attorney Ethics.