Bankruptcy Trustee: Is It On-the-Job Training?

The appointment of a lawyer with no bankruptcy experience to fill the new watchdog job of U.S. trustee of the Bankruptcy Court in Los Angeles has raised questions about whether he is qualified to oversee the busiest bankruptcy court in the United States.

Davis H. von Wittenburg, 60, took up the task this month of administering 30,000 bankruptcies, awarding cases to private attorneys and cracking down on fraud and abuse in the bankruptcy court covering seven Southland counties.

Von Wittenburg is a retired criminal defense attorney, a sole practitioner who described his clientele as “the rapists, the robbers--all the goodies.” He was described by friends as thorough and gentlemanly, but his admitted lack of experience in bankruptcy law has given rise to questions about his qualifications for the $70,500-a-year post.

“It’s like putting a dentist in charge of the neurosurgeons,” remarked one bankruptcy lawyer.

“It would be a lot better to have somebody with bankruptcy experience, who knew where the bodies are buried, what to look for, what debtors do that’s stupid,” said U.S. Bankruptcy Judge William J. Lasarow.

Help From Assistants

The judge added, however, that Von Wittenburg “seems to have a good head generally” and will be helped along by several assistants.

Von Wittenburg, who described himself as a solid Republican, got his new job with the help of the Office of Presidential Personnel in the White House. The office is run by his longtime friend and tennis partner, Robert Tuttle--son of Holmes Tuttle, President Reagan’s close adviser.

Von Wittenberg said his resume was “floated” over to the Department of Justice by Tuttle’s office. But he said Tuttle did not get involved.

“I did not bother Bob,” Von Wittenburg said.

However, Tuttle said in an interview that it was he who encouraged Von Wittenburg to send him a resume and that he forwarded the resume to Justice Department officials, who hired Von Wittenburg.

“We did not assume White House involvement in (U.S. trustee) appointments except in rather rare situations,” said University of Michigan law school professor Frank R. Kennedy, a bankruptcy reform advocate who pushed for creation of the Office of the U.S. Trustee.

Kennedy said candidates for the post should have “some significant experience in commercial law or business . . . or government,” as well as good administrative skills.

In an interview, Von Wittenburg acknowledged that his recent administrative experience is “rather negligible.” He said he has no commercial or financial law background and that his knowledge of the bankruptcy field is very limited.

“I would not be deemed competent in the practice of bankruptcy at this time,” Von Wittenburg said. But he added, “I will gain knowledge as we go.”

Kennedy said of Von Wittenburg: “That’s not the kind of person one would think of as a prime candidate, but his ability and motivation . . . to learn is important. He might well overcome those limitations if he has native ability.”

The new watchdog post of U.S. trustee has now become a cornerstone of bankruptcy reform nationwide, after struggling along on a pilot basis for eight years. And in the Los Angeles Bankruptcy Court--which covers the counties of Los Angeles, Orange, San Bernardino, Riverside, Santa Barbara, San Luis Obispo and Ventura--the watchdog assignment presents a special challenge. In his new post, Von Wittenburg will administer a staff of 56 people in two offices. He will oversee by far the highest volume of bankruptcy cases in any part in the country. Last year 45,000 bankruptcies were filed here, said Thomas Stanton, executive director of the Department of Justice’s Office of the U.S. Trustee. The caseload includes 100 bankrupt companies with assets of more than $50 million.

Abundance of Big Cases

“What distinguishes Los Angeles,” Stanton said, “is not only the high volume of cases but the volume of big cases. . . . It blows your socks off.”

A complicating factor, he said, is the “flakiness of the caseload,” distinguished by the “significant number of fraudulent and fictitious cases.”

Making things even more difficult for the U.S. trustee here, Stanton added, is that the office, while it was run on a pilot basis, experienced a very high turnover of staff.

“That office, from the day I came in May of 1983 was an absolute problem, no way around it. We couldn’t keep (staff) lawyers. They were all being hired away at double and triple their (government) salaries.”

During the pilot period, the post of U.S. trustee here turned over three times and remained vacant for the last year, unlike other parts of the country, where the program has benefited from a continuity of leadership.

Candidates Are Screened

U.S. trustee candidates are screened by Stanton’s office in the Department of Justice and appointed by Atty. Gen. Edwin Meese III, with no congressional approval required. Legislation enacted last October provides for the appointment of U.S. trustees in 21 jurisdictions nationwide.

Stanton said that during the last four years, Von Wittenburg is only the second candidate for a U.S. trustee post in any part of the country who “came (by referral) directly from the White House.”

Von Wittenberg said his sponsors for the job consisted of several personal friends in the Los Angeles area, as well as a “national figure” in “a quasi-government position” in Washington. The identity of this individual could not be learned. Von Wittenburg said he would not disclose it because the individual “would not particularly enjoy seeing his name in print.”

Von Wittenburg said he decided to make a “career change” last November. He said his criminal defense work was winding down, sending him into retirement. His case appointments from Superior Court had dwindled to practically nothing, he said. Half the law firms that had referred clients to him had disbanded. And the cases he was getting--”the drunk drivings, the kids involved in drugs--all those (offenses) have literally been decriminalized and you can’t really charge fees for it.”

Offered Other Jobs

Before landing the post of U.S. trustee, Von Wittenburg said, he was offered two other jobs by Tuttle’s office, including one as head of a group on federal land use reclamation--”I suppose because of my outdoor activities they thought that would be good.” “I turned that (job offer) down,” Von Wittenburg said. “Then I turned another one down, and this time I got a call, and they said, ‘What about the office of U.S. trustee?’ And I never heard of it before. I was sort of lukewarm, or ‘luke-cool,’ on it. . . . The more I learned about it, the more I saw the distinct challenge.”

Von Wittenburg was one of about 40 candidates considered for the Los Angeles post, Stanton said. Several contenders had bankruptcy experience, including Harry Gasley, who has served for the last several years as the assistant U.S. trustee in Los Angeles. He was “seriously in the running” for the top post, Stanton said.

An experienced bankruptcy attorney who asked that his name not be used told The Times that he applied and felt he had a good shot at the job until Von Wittenburg bumped him.

‘Room for Improvement’

“I’d feel no irritation if they had picked somebody who was qualified and experienced,” said the attorney, who believes that the U.S. trustee’s operation here has “phenomenal room for improvement.”

Of Von Wittenburg, he said: “Anybody who doesn’t know what’s going on in the bankruptcy field can’t tell staff what to look for. . . . You have to know more than your employees to be effective.”

Stanton said that his pick of the bankruptcy attorneys who applied for the post was a woman from Nevada. She was his “‘No. 2 choice” behind Von Wittenburg. Her chief drawback, Stanton said, was that she was young and lacking in “the life experience” that made Von Wittenburg an attractive candidate.

Stanton praised Von Wittenburg as a man of stature and respect in the community. He said Von Wittenburg’s criminal trial experience will be helpful in upgrading the court skills of staff attorneys and in ferreting out fraud in the bankruptcy court.

Never Heard of Him

However, several prominent criminal attorneys in Los Angeles, including Barry Tarlow and Harland Braun, said that they had never heard of Von Wittenburg.

Veteran criminal attorney Max Solomon, who once represented the notorious Bugsy Siegel and Louie Dragna, said Von Wittenburg worked for him for several years in the early 1960s. They met when Von Wittenburg was in the Los Angeles city attorney’s office working on an unusual prosecution of Solomon’s gangster clients.

Solomon described von Wittenburg as “an able lawyer and a very . . . good boy” who married a local girl and went off to join exclusive country clubs. Von Wittenburg is a member of the Los Angeles Tennis Club, the Los Angeles Country Club, the Hurlingham Club of London and the Southern California Wine and Food Society.

“He has lived a marvelously laid-back life since he married,” said attorney Marcus Crahan, noting that Von Wittenburg usually practiced law only half-days.

“He is a wonderful gentleman--nice, well-mannered, upright, scrupulously honest. . . . The only strange thing about him is why he ever went into criminal law in the first place. He’s not that kind of aggressive, tigerish guy.”

Low-Profile Practice

Attorney Jack D. Scott said Von Wittenburg’s criminal practice was low-profile.

“He dealt primarily in crimes by well-off people or offspring of well-off people--the president of a company who was charged with drunk driving or who had a son who got caught with a couple of joints of marijuana.”

Both Crahan and Scott said they have worked with Von Wittenburg for many years.

The three top aides in the Office of the U.S. Trustee here agreed that their new boss will lend respectability and professionalism to the operation. Judging from his first few weeks on the job, they said Von Wittenburg seems to be personable and accessible.

The job of the U.S. trustee is to supervise the administration of three of the four different categories of bankruptcies, to appoint a panel of lawyers and other professionals to monitor certain bankruptcies, and to serve as a watchdog to prevent “fraud, dishonesty and over-reaching in the bankruptcy arena,” according to the new legislation.

Fees Are Monitored

As watchdog, the U.S. trustee monitors the fees charged by debtors’ attorneys and other professionals and watches the activities of debtors who are permitted to remain in possession of their faltering companies, according to a report of a Massachusetts consulting firm that evaluated the effectiveness of the U.S. trustee pilot program for the Department of Justice.

One bankruptcy judge told the consultants:

“Where you do not have a U.S. trustee, it is an absolute invitation to fraud. You have to have an objective and independent observer. . . . You have to have someone to monitor, review, and question the debtor in possession’s financial reports. Debtors in possession drain the assets and then let the case languish or dismiss it, and there is absolutely no controlling them.”

The consulting firm concluded that the U.S. trustee program serves a “crucial role in bankruptcy administration.” The firm recommended that the program be made a permanent part of the Department of Justice that has “the prestige to attract high quality U.S. trustees with the know-how to handle difficult matters, both in and out of court.”

Before the legislation was adopted, Congress debated whether appointments should be made by the attorney general and how long the trustees should serve.

Guidelines Needed

Sen. Howell Heflin (D-Ala.) pointed out the need for the attorney general to establish guidelines “to prevent the usage of the trustee system as a form of patronage and to prevent the spoils system, in effect, from occurring.”

The senator objected to trustees serving four-year terms paralleling the President’s because this would create “the possibility of a political patronage system.” People qualified to serve as U.S. trustee might not apply for the position if there were political overtones to it, several congressmen warned.

The final legislation rejected four-year terms in favor of five years. But observers believe the door was opened to political intrigue when a provision was included allowing the attorney general to remove a U.S. trustee at any time without cause.

Nancy Ames, a Massachusetts consultant who has watched the evolution of the U.S. trustee program, said: “As in any appointee program, there is politics that come into play. Over time, as with the institutionalization of any program, one tends to move away from reform and picking the best and the brightest to bowing to political connections.”