Financial Crimes: Millions in Attorney Fees Approved by Bent Federal Chief Judge for Not-So-Secret Legal Lover

Introduction: A Sordid Web of Nepotism, Deceit, and Judicial Complicity

LIT has steadfastly asserted that nepotism and cronyism within the judiciary breed an environment ripe for fraud and corruption. While the judicial branch maintains its ability to self-regulate, a glaring contradiction emerges in the wake of the unfolding scandal surrounding Chief Judge Jones. This instance serves as a resounding confirmation that the judiciary, despite its assurances, grapples with an inherent inability to control its own ethical compass.

Chief Judge Owen-Richman-Hecht’s Dubious Defense

Chief Judge Priscilla Owen-Richman-Hecht, recently wedded to Chief Judge Nathan Hecht of the Texas Supreme Court, finds herself at the center of controversy. Her assertion that District judges involved in appeals and recusal motions were unaware of Judge David Jones’s relationship with Liz Freeman rings hollow in the face of evidence to the contrary. A deep-rooted connection spanning six years, marked by the joint acquisition of 6530 Rolla St in 2017, remains conspicuous. Intriguingly, this transaction lacks the customary Deed of Trust or note in Harris County’s real property records, suggesting a transaction conducted in cash.

Sealed Scandal: A Blatant Breach of Transparency

In a disconcerting turn of events, complainant Michael Van Deelen’s email to LIT anticipated the case petition would be sealed quickly, and as it happens, unlawfully restricted without a court order. LIT acknowledges the previous lack of due process in the treatment of pro se Van Deelen but underscores the continued support Chief Judge David Jones received from his judicial colleagues, despite their apparent knowledge of the veracity of facts surrounding Jones’s relationship with Liz Freeman—a truth widely known within and outside the legal profession.

Judicial Ochlocracy and Complicity

Chief Judge Jones’s call to his judicial colleagues, even after the revelation in the anonymous letter, underscores a disturbing phenomenon akin to ochlocracy, where mob rule supersedes justice. The subsequent assignment of the case to Bankruptcy mentor Judge Marvin Isgur, and the dismissal of Van Deelen’s motion to recuse without a formal memorandum, paints a picture of a judiciary enmeshed in its own machinations.

High-Powered Machinations: A Legal Landscape at Risk

A review by LIT unveils a network of high-powered attorneys, including David Beck of Beck Redden, engaged in pursuing and defending sanctions motions. The apparent orchestration of outcomes becomes apparent, culminating in the assignment of the appeal to Judge Andrew Hanen. His scathing 39-page opinion overwhelmingly favors the court’s actions against Van Deelen while dismissing the anonymous letter as baseless. However, the revelation of Judge Hanen’s familiarity with Chief Judge David Jones’s long-term relationship with Elizabeth Coleman Freeman adds another layer to this convoluted narrative.

Impending Legal Storm: Jackson Walker’s Existential Threat

As this preliminary investigative review unfolds, the specter of impending bankruptcy looms over Jackson Walker. The rapid resignation of David Jones only intensifies the scrutiny, and LIT anticipates a deluge of lawsuits pertaining to past cases involving Jackson Walker in Bankruptcy courts—potentially extending beyond the Southern District of Texas to other districts and nationwide. The seismic repercussions of these allegations reverberate through the legal landscape, challenging the very existence of Jackson Walker.

A top US bankruptcy court judge approved an indirect fee arrangement for his live-in girlfriend that could have paid her $750 per hour in at least two recent high-profile cases, according to publicly filed court documents.

Neither disclosed their personal relationship to parties in the cases, despite US bankruptcy code requirements that advisers seeking to be paid by bankruptcy estates disclose connections to other participants in the proceedings.

David R Jones, the chief judge of the US bankruptcy court for the Southern District of Texas, resigned in the past week after he admitted to concealing a romantic relationship with a Houston bankruptcy attorney, Liz Freeman. Freeman was a longtime partner at Jackson Walker, a law firm which frequently appeared in Jones’s court and whose case billings he often signed off upon.

Freeman left Jackson Walker in late 2022 to start her own law firm.

In the bankruptcy cases of Diebold Nixdorf and Venator Materials this year, the Office of Liz Freeman was designated as a “special conflicts counsel”. In this role, she would be called upon as a third law firm if conflicts of interest prevented the companies’ main counsel and local counsel from handling a case matter.

Both companies selected Jackson Walker as their local counsel.

Client engagement letters in both cases, submitted to Judge Jones and filed on the bankruptcy docket, described Jackson Walker’s arrangement with Freeman’s firm — “subject to clearance of requisite conflict checks and disclosures in accordance with the requirements of the bankruptcy code” — in identical language.

Freeman ultimately never performed nor was paid for any work as a special conflicts counsel, according to her lawyer, Tom Kirkendall. Jones did not respond to a request for comment on his decision to approve the retention application.

Lawyers at Kirkland & Ellis, the lead bankruptcy counsel to Venator, and Jones Day, the lead bankruptcy counsel to Diebold, did not respond when asked for comment.

The Fifth Circuit Court of Appeals which oversees the bankruptcy court in South Texas, released its complaint against Jones on Friday.

Its chief judge, Priscilla Richman, stated that she had “probable cause to believe that misconduct by Judge Jones has occurred” when he had failed to publicly disclose his relationship with Freeman or recuse himself in matters where Jackson Walker was involved.

The complaint noted that “in another matter over which Judge Jones presided, it appears that Judge Jones approved a fee application submitted by The Law Offices of Liz Freeman. It does not appear that any party or any other counsel in that proceeding was apprised of Judge Jones’ relationship with Ms Freeman”.

A representative for the Fifth Circuit declined to specify the case referred to in the complaint.

Freeman spent roughly four years at Jackson Walker after six years as a clerk to Jones. The firm told the Financial Times that it had begun investigating a potential intimate relationship between Freeman and Jones in early 2021 and that immediately after launching the investigation, she was kept out of cases in front of him as a matter of policy. It declined to comment on the conclusion of the investigation.

“Our firm acted in a timely fashion once we learned of this issue, including conducting a full inquiry and consulting independent outside ethics counsel for their guidance. From the time we first learned of this allegation Ms Freeman was instructed not to work or bill on any cases before Judge Jones. We are confident that we acted responsibly,” Jackson Walker said.

A representative for Jackson Walker confirmed that it had never subsequently retained Freeman in the Diebold and Venator cases, even after Jones approved the application permitting her retention, in adherence to its 2021 policy.

It added that the engagement letter had been drafted before Jones was assigned to the respective cases. Jones, who has overseen other high-profile bankruptcies including Cineworld Group, Serta Simmons Bedding and Neiman Marcus, was only one of two judges in the Southern District of Texas venue who could have heard either of the two cases.

A complaint filed this week in federal court casts doubt over the neutrality of the judge who oversaw bankruptcy settlement talks involving Corizon, once the nation’s largest prison health care provider.

David Jones, the chief bankruptcy judge for the Southern District of Texas, and Elizabeth Freeman, his former law clerk and a successful bankruptcy attorney, have secretly been in a romantic relationship for years, according to the complaint, which was obtained by Insider.

Last year, Corizon began a controversial maneuver known as a Texas Two-Step, splitting the company into two parts, one with most of its assets, known as YesCare, and one with most of its debts, known as Tehum, which then filed for bankruptcy. The Two Step was effectively designed to protect YesCare’s assets, including public sector contracts worth more than $1 billion. According to a legal filing, Tehum director Isaac Lefkowitz said the Two Step can be used to “force plaintiffs into accepting lower settlements.”

Freeman represented YesCare Corp. in the settlement talks. And the talks were overseen by Jones.

At least 350 malpractice suits against Corizon and tens of millions of dollars in unpaid invoices are now folded into that proposed deal, which awaits approval by the creditors. It offers prisoners who were injured or died under Corizon’s care only $5,000 each.

While the complaint, submitted on Wednesday in the Southern District of Texas, is currently not available for public access on the docket, Insider obtained a copy from Michael Van Deelen, who filed the suit pro se. It alleges that Jones retaliated against him for “outing” the judge’s allegedly inappropriate relationship in a previous legal filing.

Jones was appointed in May by US Bankruptcy Judge Christopher Lopez to act as a mediator in the Tehum case, to oversee talks between the company and its largest creditors. Freeman signed off on Jones’ appointment as mediator, according to a stipulation and agreed order submitted in the bankruptcy docket. Neither Jones nor Freeman have disclosed their alleged relationship, according to Van Deelen’s complaint.

A civil complaint alleges that federal bankruptcy judge David Jones, who mediated the Tehum bankruptcy, is in a romantic relationship with Elizabeth Freeman, who represented YesCare in the bankruptcy.

Courtesy of Michael Van Deelen

Frank Ozment, who represents an Alabama prisoner, Tracy Grissom, who said she was subjected to negligent Corizon care, called the claims “very disturbing” if true.

“It’s very important that the mediator be neutral,” Ozment told Insider. “If the allegations suggest that the mediator was not neutral, then that could potentially bear a lot of weight on whether the plan is reasonable.”

Jones has denied any romantic relationship with Freeman, according to the complaint.

Jones, Freeman, and YesCare did not immediately respond to queries.

A million-dollar home

Van Deelen’s case dates back to June 2020, when he filed a shareholder suit in Texas state court against employees of engineering company McDermott International, alleging fraud and a breach of duty. Six months earlier, McDermott had declared bankruptcy. Van Deelen says he and his wife lost their entire investment.

McDermott was represented in the case by law firm Jackson Walker, one of the country’s top bankruptcy firms. Freeman clerked for Jones for six years, and she went on to become a partner at Jackson Walker, where she was one of the attorneys assigned to the McDermott bankruptcy. Van Deelen’s case was ultimately “removed” to Jones’ bankruptcy court, according to Van Deelen’s complaint.

Freeman now runs a Houston-based law office, The Law Office of Liz Freeman, that specializes in bankruptcy litigation and reorganization. Van Deelen claims Freeman left her prestigious job at Jackson Walker because “the relationship between her and Defendant Jones was made generally known.”

The document alleges that, while working the McDermott case, Freeman was Jones’ “live-in girlfriend” in a home worth more than a million dollars. Exhibits attached to the complaint show that Jones and Freeman have since June 2017 been listed as co-owners of a four-bed, two-bath, 3,800 square foot home on a leafy street in Houston that was assessed at $1.07 million.

Meanwhile, two people, “probably Freeman’s parents” moved into a $1.5 million home that Jones owns in Coldspring, an hour outside of Houston, according to another exhibit. The complaint alleges that Freeman had been living in that property since 2007, and that Jones purchased it in 2016.

Van Deelen said in the suit that he learned of the relationship after receiving an anonymous letter in March 2021, also attached as an exhibit. It describes alleged corruption that involved Jones, Jackson Walker, and Freeman “in a scheme in which corporate bankruptcy filers would hire Jackson Walker to represent them and then get favorable treatment from Defendant Jones because of his amorous relationship with Freeman.”

Matt Cavenaugh, a partner at Jackson Walker, didn’t immediately respond to a request for comment.

According to the complaint, the letter detailed the “corruption involving Judge David R. Jones” and his romantic relationship with Freeman.

“Instead of personally avoiding the McDermott bankruptcy case because of his relationship with Jackson Walker attorney Freeman,” the complaint says, Jones “assigned the case to himself.” He didn’t disclose that he had a personal relationship with Freeman, according to the complaint.

Van Deelen submitted the letter in a motion seeking to get Jones removed from his case. Judge Marvin Isgur, another bankruptcy judge in the court, later denied it.

Van Deelen said that when he filed the complaint, he also hand delivered it to Jones in the Houston courthouse. After making his way through the maze of offices, Van Deelen said he turned a corner to find Jones eating a sandwich. When the judge saw who it was, “he turned white,” Van Deelen said.

He said Jones accepted the envelope without saying a word.