The Boston Globe March 31, 2001, Saturday

GROUP SEEKS BANKRUPTCY FOR GOLDINGS FORMER CLIENTS, FINANCIAL PARTNERS STEP UP EFFORTS TO RECOVER MISSING FUNDS

March 31, 2001, Saturday ,THIRD EDITION

SECTION: BUSINESS; Pg. F1

By Kimberly Blanton, Globe Staff

Some former clients and financial partners of Morris Goldings are seeking to throw the prominent Boston attorney into US Bankruptcy Court to recover funds they allege were turned over to Goldings and have disappeared.

With claims against Goldings now exceeding $13 million, a petition to begin involuntary bankruptcy proceedings against the lawyer is yet another effort by former clients who stepped up efforts this week to recover their money.

Goldings' former law firm, Boston-based Mahoney Hawkes LLP, has disclosed that a client account set up by Goldings at Citizens Bank to hold client monies is empty.

Goldings is being investigated by the FBI, though no charges have been filed. (Goldings, who founded the firm, resigned in December after the allegations surfaced. Goldings' attorney, Steve Brooks, declined to comment on the allegations against his client or on the bankruptcy petition, which was filed Thursday in Bankruptcy Court in Boston.

The complex process of sorting out myriad claims against Goldings escalated with the bankruptcy action, which is an attempt to marshal the powers of the federal courts to gain access to Goldings' assets. If Goldings is placed under bankruptcy protection, a trustee would be assigned to sort out the claims. A judge must rule on whether to initiate Chapter 7 bankruptcy proceedings against Goldings. Chapter 7 of the US Bankruptcy Code is a provision for liquidating a debtor's assets to repay creditors.

"The Bankruptcy Court is going to do a fair and equitable division of whatever [personal] assets are there," said Jeffrey Roy, partner with Ravech & Roy in Boston, explaining why his client, James Trezza, and two other parties decided to file the petition.

Separately, Mahoney Hawkes, which is liable for individual partners' actions, has also proposed a plan aimed at settling all of the pending lawsuits and other claims being brought by Goldings's former clients against the firm and Goldings. A settlement would distribute money supplied by the firm and its insurer, Continental Casualty Co.

But Mahoney Hawkes's insurance policy has only $5 million in assets to pay out, and settlement talks aimed at distributing the policy's funds have been plagued by infighting. Attorneys representing five clients with pending lawsuits against the firm and Goldings - there are at least nine suits outstanding - sued again this week. This time, those five clients demanded that Continental Casualty immediately pay their claims, which amount to $7.3 million, the suit said.

But Mahoney Hawkes partner Bruce Edmands said that his law firm opposes any settlement that would give an unfair advantage to those five claimants, to the detriment of others who have filed claims. "We have been opposing any and all efforts which seek to advantage one group of claimants over any others with valid claims against the firm," Edmands said.

While the negotiations hit rough waters this week, both sides appear willing to continue talking.

If proceedings in Bankruptcy Court are initiated against Goldings, it may be difficult for clients to gain access to his personal assets: It is unclear where the missing money has gone or whether it is recoverable.

But, a bankruptcy trustee could subpoena bank and other financial records, said Owen Gallagher, whose client, Janice Indeck, also filed the petition. "The most effective method of finding funds is through a trustee in Bankruptcy Court who has a lot of powers that a state court judge doesn't have," he said.

In addition to Indeck and Trezza, the petition was also filed by Hong Kong-based Go-Best Assets Ltd., which said that it has not been able to recover more than $5 million in loans to Goldings. Trezza and Go-Best have sued Goldings and Mahoney Hawkes to recover their money.

Indeck is also preparing to file suit against the law firm in the next two weeks to recover nearly $600,000 that the Florida resident said she gave to Goldings in 1989, Gallagher said.

Kimberly Blanton can be reached by e-mail at blanton@globe.com

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