EVERETT – An Everett lawyer’s property is being sold off to pay millions of dollars in bankruptcy debts amid allegations that he used his law firm to engage in what another lawyer characterized as “massive” fraud.
The allegations against Barry A. Hammer, 58, are contained in a Snohomish County Superior Court lawsuit brought on behalf of an 84-year-old Mill Creek woman who had been one of Hammer’s clients.
In 1997 and 1998, the woman invested $145,000 with Hammer, assured that the loans were secured by deeds on property owned by undisclosed people, according to court papers.
In truth, Hammer owned the land. He didn’t take steps to legally recognize the woman’s claims before selling the property to others, attorney Bradley Wolf said in court papers.
The woman wasn’t advised of her rights, and Hammer ignored ethical considerations related to his client, Wolf said. Records show a pattern of similar transactions involving more than 100 people, including other Hammer clients, Wolf said.
“The massive scale on which this fraud was perpetrated, not merely upon (the woman), but also upon over 100 investors, is a false and deceptive practice in trade and commerce,” Wolf said in court papers filed in December.
Hammer’s law firm has long been a fixture in downtown Everett, with a large sign and offices on Pacific Avenue across from the County Courthouse.
The lawsuit seeks damages for fraud, breach of contract, breach of trust, malpractice negligence and violations of the consumer protection act.
Named as defendants in the case are Hammer’s law firm and his former partner, Ben Wells of Arlington.
Because he sought bankruptcy protection months ago, Hammer can’t be named in any recent civil lawsuits, said his attorney, Donald Bailey of Seattle.
Bailey said Friday that Hammer had no comment on the fraud lawsuit.
The lawsuit accuses Wells, who split with Hammer in August, with participating in improper transactions. As evidence, Wolf filed with the court copies of legal documents signed by Wells.
The lawsuit lacks the context necessary to understand what those records really show, including any representations that may have made to clients, and by whom, Wells’ attorney, Roy Umlauf of Seattle, said Friday.
Umlauf said Wells is named in the lawsuit because he was a junior partner in the law firm, not because he did anything wrong.
Wells earlier said he broke with Hammer after becoming concerned about the other lawyer’s business practices. One of his first acts was to file a complaint with the Washington State Bar Association, he said.
“The bottom line is that Ben was not aware of the alleged fraudulent schemes,” Umlauf said.
The lawsuit is separate from a proceeding in U.S. Bankruptcy Court in Seattle, where a trustee has spent months sorting out how best to divide Hammer’s assets. The lawyer in September filed bankruptcy documents acknowledging he owes about $13 million to people who either loaned him money or invested in one of his businesses, Able Mortgage and Investments Inc.
Many of the investors were people who went to Hammer’s downtown Everett law firm and hired him for advice on legal and tax matters.
The state Department of Financial Institutions has opened an investigation.
The court-appointed trustee in the bankruptcy has in recent weeks gained legal authority to begin selling Hammer holdings in Marysville, Everett and Arlington. Hammer’s largest property, a home and land at a small airport in Sultan, has yet to be sold.
Bailey said he still expects the bankruptcy will result in a substantial return to creditors.
The lawyer confirmed that Hammer has repeatedly invoked his Fifth Amendment right against self-incrimination during bankruptcy hearings.
“It is true, and I don’t think you need, can or should make anything of it,” the lawyer said.
State regulators are investigating, and Hammer’s attorneys have advised him not to answer certain questions.
“He did so reluctantly, but his attorneys instructed him that is how he should proceed,” Bailey said.
Hammer has his own lawsuit pending against Wells, alleging his former partner stole clients and files.
Reporter Scott North: 425-339-3431 or north@heraldnet.com.
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