Embattled real estate lawyer Kossoff can't shield docs in bankruptcy

Signage is seen at the United States Bankruptcy Court for the Southern District of New York in Manhattan, New York City, U.S., August 24, 2020. REUTERS/Andrew Kelly
  • Judge rules Mitchell Kossoff can't invoke Fifth Amendment against trustee
  • Kossoff also under criminal investigation

(Reuters) - A bankruptcy judge in Manhattan has again ordered real estate attorney Mitchell Kossoff, who is under criminal investigation amid accusations of mishandling client funds, to cooperate with the Chapter 7 trustee overseeing the liquidation of his law firm.

Chief U.S. Bankruptcy Judge David Jones held at a Thursday hearing that Kossoff cannot invoke his Fifth Amendment right against self-incrimination because he is turning over corporate documents from his shuttered firm, Kossoff PLLC, not personal records.

Jones rejected the argument made by Kossoff's criminal defense attorney, Walter Mack of Doar Rieck Kaley & Mack, that Kossoff and his law firm are indistinguishable.

"Those contentions fail to overcome the collective entity doctrine," Jones said. He ordered Kossoff to turn over the records requested by Al Togut, a bankruptcy attorney overseeing the estate of Kossoff PLLC as Chapter 7 trustee.

Togut praised Jones' ruling in an email, saying it "puts to rest Mr. Kossoff’s claim that his Fifth Amendment privilege relieves him of the obligation to cooperate with the trustee."

Togut said he expects Kossoff to appear at a meeting of his law firm's creditors, where Togut, as the trustee, will examine him.

Jones' ruling comes one month after he designated Kossoff as the person responsible for his real estate law firm, which was forced into bankruptcy by a group of creditors who have claimed that the firm misappropriated more than $8 million in escrow funds.

Since then, Togut, represented by attorneys from his law firm, Togut, Segal & Segal, complained that Kossoff is improperly invoking the Fifth Amendment privilege in order to shield documents, accusing him in a July 16 filing of engaging in "ransom demands and delay tactics."

Mack during the hearing argued that turning over documents or having to create them could impinge on Kossoff's Fifth Amendment rights as he faces possible criminal prosecution. He asserted that Kossoff, under his direction, could not fill out an application to receive assistance from pro bono counsel because that would require him to disclose his income.

Mack said the fight over documents will end once Kossoff pleads guilty to potential charges by the Manhattan district attorney or the district attorney's office drops the case. Mack indicated in a July 9 filing that the U.S. attorney in Brooklyn is no longer investigating Kossoff, describing the Manhattan district attorney as the "sole prosecutor criminally investigating" him.

"He wants to cooperate. It's not like we're sitting there hiding documents. We're trying to keep him alive and we’re trying to keep him in a situation where his life can go on in a reasonable semblance," Mack said during the hearing.

Mack declined to say after the hearing whether Kossoff would turn over the records the Chapter 7 trustee is seeking. "Time will tell what we do," he said in an email.

The case is In re Kossoff PLLC, U.S. Bankruptcy Court for the Southern District of New York, No. 21-10699.

For Togut: Neil Berger, Brian Shaughnessy and Minta Nester of Togut, Segal & Segal

For Kossoff: Walter Mack of Doar Rieck Kaley & Mack

Read More:

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Kossoff bankruptcy trustee warns of contentious case to come

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David Thomas reports on the business of law, including law firm strategy, hiring, mergers and litigation. He is based out of Chicago. He can be reached at d.thomas@thomsonreuters.com and on Twitter @DaveThomas5150.