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In re Johnson

United States District Court, S.D. Illinois

August 4, 2016

IN RE X'LEXUS JOHNSON, Debtor,
v.
WENDELL TAYLOR, Respondent. NANCY GARGULA, United States Trustee, Petitioner, Ch. 13 Bankruptcy Case No. 15-31025

          Nancy Gargula, Plaintiff, represented by Gerald M. Burke, Assistant U.S. Attorney, Mark D. Skaggs, USDOJ - Office of the U.S. Trustee & Russell C. Simon.

          Wendell Taylor, Defendant, Pro Se.

          X'Lexus Johnson, Debtor, Pro Se.

          MEMORANDUM AND ORDER TO SHOW CAUSE

          J. PHIL GILBERT, District Judge.

         This matter comes before the Court on the report, recommendation and certification ("Report") (Doc. 4) of Bankruptcy Judge Laura K. Grandy finding respondent Wendell Taylor violated the terms of a Consent Judgment and Injunction entered in In re Cross, Bank. Case No. 11-32217, Adv. Case No. 11-3392, (Bankr. S.D. Ill.), and subsequently violated 11 U.S.C. § 110 in a number of ways in connection with the bankruptcy proceeding of debtor X'Lexus Johnson. Judge Grandy recommended sanctions as well as findings of civil and criminal contempt. Taylor filed an objection to the Report (Doc. 10).

         This matter arose in connection with Johnson's bankruptcy after her voluntary Chapter 13 petition was dismissed for want of prosecution because she failed to submit the required documents with her petition. In considering Johnson's motion to reinstate her case, the Bankruptcy Court came to believe Taylor had prepared Johnson's petition in violation of the In re Cross Consent Judgment and Injunction, in which he agreed to a Bankruptcy Court order enjoining him permanently from acting as a bankruptcy petition preparer. The Bankruptcy Court was tipped off to Taylor's alleged involvement at an August 13, 2015, hearing on Johnson's motion to reinstate her case. At that hearing, Johnson indirectly identified Taylor as the person who prepared her petition; she said it was the same preparer who had helped her aunt prepare her petition, and Bankruptcy Court records reflect that was Taylor. The Bankruptcy Court found Johnson's testimony credible. Of course, Taylor did not receive notice of the hearing because Johnson's petition did not disclose that Taylor prepared her petition, and until the hearing, there was no indication he was connected to the case.

         The information that came to light at the August 13, 2015, hearing spurred the United States Trustee to file a motion for sanctions against Taylor and for a referral from the District Court for possible criminal prosecution (Doc. 2). The United States Trustee's motion was based in part on Taylor's apparent preparation of Johnson's bankruptcy petition. The motion was served on Taylor by mail. Judge Grandy set a hearing on that motion for October 15, 2015, and notice of that hearing was served on Taylor by mail. He failed to appear at the hearing

         After considering the United States Trustee's motion and Taylor's failure to appear at the October 15, 2015, hearing, Judge Grandy issued the Report finding Taylor had violated the Consent Judgment and Injunction in In re Cross, had independently violated various provisions in 11 U.S.C. § 110, and recommending that the Court withdraw, in part, the Bankruptcy Court reference in the instant case and in In re Cross pursuant to 28 U.S.C. § 157(d) for the limited purpose of considering criminal contempt proceedings or further civil contempt proceedings against Wendell Taylor for the foregoing violations. Judge Grandy specifically recommends:

• Granting the U.S. Trustee's motion for sanctions (Doc. 2);
• Imposing fines of $7, 500.00 pursuant to 11 U.S.C. § 110( l )(1) and (2), payable to the United States Trustee, for violations of 11 U.S.C. §§ 110(b)(1), (b)(2), (c)(1), (e)(2)(A), and (h)(2);
• Imposing a $2, 000.00 fine payable to debtor X'Lexus Johnson pursuant to 11 U.S.C. § 110(i)(1);
• Ordering that Taylor fully disgorge and forfeit the $400.00 fee that he received in this case;
• Finding that Taylor is in civil contempt of the Consent Judgment and Injunction entered by the Bankruptcy Court on March 13, 2012, in In re Cross, Bank. Case No. 11-32217, Adv. Case No. 11-3392; and
• Finding that Taylor is in criminal contempt of the Consent Judgment and Injunction entered by this Court on March 13, 2012, in In re Cross, Bank. Case No. ...

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