Regular readers of this blog may remember that I have written a number of posts about Derek Bluford, a one-time rising star on the legal tech start-up scene whose star fell after I reported in 2016 of his settlement of a lawsuit charging him with impersonating a lawyer, forging legal documents and fraudulently swindling two clients.

Derek Bluford

On Wednesday, a federal grand jury in Sacramento returned a five-count indictment against Bluford, charging him with wire fraud and money laundering.

When I first wrote about Bluford, he was slated to be featured two weeks later at a Legaltech West Coast program on legal innovation. Just 28 years old at the time, he had achieved success and won accolades as an entrepreneur, first starting California Legal Pros, a company that marketed various legal services to both consumers and lawyers. then QuickLegal, a service that provided on-demand legal advice to consumers, and then QuickLegal Practice Management, a cloud practice management platform for lawyers.

Following my report, QuickLegal shut down, but then seemed to be reincarnated in another similar startup called LawTova. After I wrote about that company (here and here), it too shut down. I then wrote about yet another startup that had ties to Bluford and QuickLegal, which has also since shut down.

This week’s indictment tracks the allegations of the civil lawsuit I reported on in 2016. The U.S. Attorney’s Office in Sacramento alleges that Bluford told a couple that he was an attorney and could represent them in a dispute with their tenant. After the couple agreed, Bluford told them that they had incurred numerous fines and court costs, as well as costs to repair their rental unit; he also told them he had negotiated a settlement agreement with the couple’s former tenant. Based on these representations, the couple paid Bluford at least $535,000. Of course, Bluford was not an attorney and there were no fines or court costs. Bluford then allegedly laundered the proceeds from his scheme, according to the indictment.

If convicted, Bluford faces a maximum statutory penalty of 20 years in prison on the wire fraud count, 10 years in prison on the money laundering counts, and a fine of $250,000, or twice the gross loss or gross gain, according to the U.S. Attorney’s Office.

See these posts for more information:

Cyrus Zal

In recent weeks, I’ve written posts about two new legal startups, LawTova and Text to Ticket, and described ties they appeared to have to another legal startup, QuickLegal, that shut down amid fraud allegations concerning its founder Derek Bluford.

(All of my posts pertaining to Bluford and QuickLegal can be found through the tag QuickLegal.)

One of the ties that I pointed out between LawTova and QuickLegal is that LawTova’s CEO is Cyrus Zal, an attorney in Folsom, Calif., who also represents both QuickLegal and Bluford and who is Bluford’s father-in-law. Another post associated Zal with Text to Ticket, noting that the press release announcing its launch included a quote from Zal.

Since those posts, I have spoken with and exchanged several emails with Zal. He indicated that he wanted to clarify certain aspects of my reporting. He provided me with written statements and we also discussed these issues by phone.

The first issue he raised was with respect to the stipulated judgment against Bluford. As I first reported on May 26, 2016, in a lawsuit filed against him by two former clients, Bluford stipulated to a judgment against him in the amount of $559,330 to settle a lawsuit charging him with impersonating a lawyer, forging legal documents and swindling two clients. About that judgment, Zal wrote:

It is true that Derek Bluford stipulated to a judgment of $599,330, but in that Stipulated Judgment, Mr. Bluford specifically denied any wrongdoing or liability in the matter. Some of the judgment has already been paid, and Mr. Bluford intends to pay the balance of the judgment. Quicklegal was only tangentially involved in that lawsuit, and your article correctly notes that those events allegedly occurred while Mr. Bluford was at another company (California Legal Pro’s), and not at Quicklegal.

For the record, my original post did note that Bluford, in stipulating to the judgment, did not admit to the allegations of the complaint. A day after my original post, I spoke with Bluford and published a follow-up post, reporting again that he denied the allegations of the complaint.

In a post here on March 28, 2017, I wrote about a startup called Text to Ticket and described it as coming from “some of the former QuickLegal crew.” As noted above, one of the associations I made between QuickLegal and Text to Ticket was Zal. But Zal denies that he was part of the QuickLegal “crew” and he denies that he has any involvement with Text to Ticket. With regard to QuickLegal, he wrote this:

Although I was nominally involved in Quicklegal, I was not actively participating in any of Quicklegal’s day-to-day running of its business, as all of my time was spent in my full time law practice. In view of the foregoing, I do not know if it is accurate to describe me as being on the Quicklegal “team” or being part of its “crew”. Being on a “team” or “crew” implies active involvement in the business, and I certainly did not have any involvement at all in running the day-to-day business of Quicklegal.

With regard to Text to Ticket, Zal wrote:

I have no involvement whatsoever with Text to Ticket in any way, shape or form. I was merely asked to give my legal opinion by the author of the piece. So it is not accurate to say in your article that: “Now, Zal and Nguyen are involved in another new startup, Text to Ticket.” I am not involved in any way with Text to Ticket. Your statement is not accurate as to me, and I do not know Mr. Nguyen, and I do not know anything about his business affairs.

On March 13, 2017, I wrote a post about the startup LawTova, with the headline, Legal Startup Appears to Shut Down After I Question Its Management. I wrote that LawTova had appeared to shut down after I began questioning its ties to QuickLegal, but I then updated that post two days later to note that the site was back online. I also noted that Zal had told me he had just become LawTova’s CEO in February 2017, even though a California state filing on Sept. 29, 2016, listed him as CEO. About this post, Zal wrote:

I wish you had called me to get my side before publishing the story. … As I mentioned at the beginning of this email, the LawTova website had technical issues that were being addressed and so it was “down”. The website is now operating. Although I was listed as CEO of LawTova in the Statement of Information filed with the Secretary of State on September 29, 2016, I was merely a “placeholder”, as there was no active CEO yet and the Statement of Information had to be filed in order to avoid penalties for late filing. Later, Brett Bunnell eventually became the actual CEO of LawTova, but when he passed the Bar and became licensed as an attorney, he obtained a position with a law firm and resigned as CEO, and that is when I actively became the CEO of LawTova last month in February.

Your article gives the impression that Quicklegal was somehow “tainted” by the unproven allegations of fraud against Mr. Bluford, when in fact the company was not involved at all in those matters. Quicklegal was recently dismissed by the plaintiffs in that lawsuit because Quicklegal had not done anything wrong.

Once again for the record, before publishing that post, I did attempt to follow-up with Zal by email — which was how he and I first communicated — but he did not respond.

As Zal notes, the plaintiffs in the fraud lawsuit against Bluford — which continues against other defendants even though Bluford settled — filed a request on Feb. 21, 2017, to dismiss QuickLegal as a defendant. The document gives no reason for the request, but a separate court filing by QuickLegal states that it agreed to a settlement payment to plaintiffs of $55,000.

More generally, Zal took issue with my suggestions that there were connections among the three startups. He wrote:

Although I appreciate that your role as a journalist is to write interesting articles that “tie together” things that seem to be related, I thought the overall impression given by your article was unfair to Quicklegal, to LawTova and to Text to Ticket, and perhaps a bit inflammatory as well. The primary “connections” in the article between Quicklegal and LawTova were me as the attorney for Quicklegal and CEO of LawTova (and Mr. Bluford’s father-in-law), and Steve Nyugen as an investor in both companies. Those are totally innocent connections, but the article’s overall innuendo was that somehow the unproven allegations of fraud against Mr. Bluford should be “applied” to me and to Mr. Nyugen, and to LawTova and to Text to Ticket — and in my view, that is unfair to all of us, and misleading. The same unfairness applies to connecting Mr. Nyugen and me to Text to Ticket — again, the article’s innuendo is that the unproven allegations of fraud against Mr. Bluford should be “applied” to me and to Mr. Nyugen, and to Text to Ticket.

Once more for the record, my post drew other connections than the two Zal mentions, but you can read it for yourself and draw your own conclusions.

One of the defendants in the original fraud lawsuit against Bluford and QuickLegal was Bank of America, where QuickLegal’s funds were on deposit. On March 15, 2017, QuickLegal — still represented by Zal — filed a cross-complaint against Bank of America alleging that it wrongfully froze QuickLegal’s bank accounts after the lawsuit was filed in April 2015. At that point, over $1 million had been invested in QuickLegal, the cross-complaint alleges, but Bank of America’s freezing of its bank accounts prevented it from operating and forced it to go out of business.

The court docket does not show that Bank of America has filed an answer to the cross-complaint.

Earlier this month, I told you about a new legal startup that has many ties to another legal startup that shut down amid fraud allegations. Now, some of the same people have launched another startup and it is already drawing interest from Silicon Valley investors.

To recap: In a series of posts here during 2016, I reported on allegations concerning the now-defunct startup QuickLegal and its CEO Derek Bluford. Most notably, Bluford had recently agreed to have a $559,330 judgment entered against him to settle a lawsuit charging him with impersonating a lawyer, forging legal documents and fraudulently swindling two clients who had sought legal help from another company he ran, California Legal Pros, which provided non-lawyer legal help. That judgment remains unsatisfied.

Two weeks ago, I reported on a new startup, LawTova, that has an uncanny number of connections to QuickLegal and Bluford. Among them were that LawTova’s CEO, Cyrus Zal, was Bluford’s and QuickLegal’s attorney and is also Bluford’s father-in-law. Another was that Steve Nguyen was shown on Angel List as an investor in LawTova. Nguyen had ties to QuickLegal and I’ve been told he was an investor in the company and a friend of Bluford.

Now, Zal and Nguyen are involved in another new startup, Text to Ticket. The concept is to enable anyone to easily report drivers who are texting while driving. The Text to Ticket app lets users record video of the violation and submit it to the company, which then reviews it and, if it meets approval, forwards it to the appropriate law enforcement authority. If Text to Ticket approves the video, it pays $5 to the person who submitted it.

The same stock image from LawTova’s homepage (left) appears in the Text to Ticket app.

Just like QuickLegal and LawTova, Text to Ticket has been accepted into the 500 Startups seed program and 500 Startups has invested $150,000 in the company in exchange for 6 percent equity. According to a Text to Ticket press release, the company has raised over $300 of its $750,000 seed round.

Also just like QuickLegal and LawTova, Text to Ticket was a participant last in the Sacramento Kings Capitalize contest for Sacramento-area startups. Text to Ticket was one of four finalists in the contest but did not win. Among those rooting for it on Twitter was Derek Bluford’s wife.

The aforementioned press release includes a quote from Zal, although it does not identify his relation to the company. The press release lists Nguyen as a founder. The media contact listed on the press release is Laura Good, who used to handle media relations for QuickLegal. The company’s Angel List page identifies its attorney as Kirill Tarasenko, the same attorney LawTova listed and was formerly a featured customer of QuickLegal.

The press release says that the CEO of Text to Ticket is Jesse Day. According to his LinkedIn profile, Day graduated from college last year in New Hampshire with a bachelor’s degree in public health and became CEO of Text to Ticket in December.

StartupSac.com recently recorded a podcast interview with Day and Nguyen about Text to Ticket.

Earlier this week, I wrote about a legal startup that appeared to shut down after I questioned its management. As of this morning, its two sites are back online, after being offline for at least a week.

You can check them out at LawTova.com and LawTovaServices.com.

Of course, this development doesn’t change the questions I raised about LawTova’s connections to QuickLegal, another startup that shut down amid fraud allegations concerning its owner. If anything, this makes those questions all the more important.

Check out my full post for more details.

[Update 3/15/17: As of this morning, LawTova’s two sites are back online, after being offline for at least a week. This development doesn’t invalidate the questions I raise below about LawTova’s connections to QuickLegal, another startup that shut down amid fraud allegations concerning its owner. If anything, this makes those questions all the more important.]

A legal startup appears to have closed its doors after I began asking about its ties to another legal startup that shut down amid fraud allegations.

Near the end of 2016, I became aware of the new startup, called LawTova. Its websites provided no information about the people behind it. But as I looked into it, it appeared to have several people involved in its management and operations who were previously involved with the management and operations of the now-defunct startup QuickLegal, which closed its doors after this blog reported allegations of fraud and other misconduct concerning its CEO.

In a series of posts here during 2016, I reported on various allegations concerning QuickLegal’s CEO Derek Bluford. Most notably, Bluford had, at the time, recently agreed to have a $559,330 judgment entered against him to settle a lawsuit charging him with impersonating a lawyer, forging legal documents and fraudulently swindling two clients who had sought legal help from another company he ran, California Legal Pros, which provided non-lawyer legal help.

At the time I reported that, in May 2016, Bluford was scheduled to be a featured speaker two weeks later at a Legaltech West Coast lightning round on legal innovation. After my report, Legaltech removed Bluford from the panel.

The former home page of the now-shuttered California Legal Pros.

Subsequently, both QuickLegal and California Legal Pros ceased operating. However, shortly after I first wrote about QuickLegal, activity began to launch LawTova, and the new company appeared to bear many ties to QuickLegal and Bluford.

The most direct tie was a corporate Statement of Information for LawTova filed with the California Secretary of State on Sept. 29, 2016. It listed as LawTova’s CEO, secretary, CFO, director and resident agent Cyrus Zal, an attorney in Folsom, Calif., just outside of Sacramento.

A testimonial from lawyer “Cyrus Z.” (The person is not Zal.)

Zal was Bluford’s attorney and is his father-in-law. He represented Bluford in several lawsuits, including the fraud matter mentioned above, and he also represented QuickLegal in its corporate affairs and in several lawsuits. The LawTova website even featured a testimonial from lawyer “Cyrus Z.”

On Feb. 27, I emailed Zal about his role with LawTova and asked about Bluford’s involvement. He replied the same day, telling me that he was, in fact, the CEO of LawTova. He said that he took over that role at the beginning of the month (contrary to the Secretary of State filing).

As for Bluford, he said, “No, Derek Bluford is not involved with LawTova, Inc.”

He further wrote: “Please be advised that I will be releasing a News Release tomorrow regarding LawTova, Inc. and I will send a copy of it to you.”

No news release came. When I checked back a few days later, Zal said the release had not yet gone out, but that “you will be the first to get it.”

Next time I checked, LawTova had disappeared from the web. The company actually had two websites, one for lawyers and one for consumers, both of which appear to have shut down. Its Facebook page also returns a Page Not Found message. Zal has not responded to my subsequent emails asking about the status of LawTova.

Ties to Bluford and QuickLegal

All of this begs the question, Was LawTova a front for Bluford to get back into the legal startup game? I cannot provide a definitive answer, but I can tell you that LawTova had uncanny ties to QuickLegal. In addition to the Zal connection, here are others I have found.

One is the striking similarity between the two businesses. Bluford started Quicklegal as a service that provided on-demand legal help to consumers. Later, he started QuickLegal Practice Management, a cloud practice management platform for lawyers. Similarly, LawTova had two separate websites, one, lawtova.com, offered a practice management platform for lawyers, and the other, lawtovaservices.com, offered legal help to consumers.

Both QuickLegal and LawTova received seed funding through 500 Startups.

Read Pam P.‘s review of LawTova on Yelp

A December 2016 Yelp review of LawTova by someone who described herself as a 70-year-old disabled woman says that LawTova is the same business that was formerly Legal Pros. California Legal Pros was Bluford’s original business and the one that gave rise to the fraud lawsuit against him mentioned at the top of this post.

Timing

Another is the timing of LawTova’s emergence. The lawtova.com domain was first registered on July 21, 2015 — by whom I can’t tell — but then updated on June 16, 2016, approximately two weeks after I first wrote about QuickLegal. The lawtovaservices.com domain was registered on Sept. 1, 2016, a few months after my post. For both domains, the registrant information is masked. It appears that LawTova’s entry on the Angel List of startups was created (or at least significantly updated) at about the same time, on Sept. 6, 2016.

The lawtova.com website appears to have been created on July 21, 2015. The lawtovaservices.com website was created on Sept. 1, 2016, the same time as the domain was registered and the Angel List entry created.

Parallel Addresses

Then there are the parallel office locations. In its September 2016 corporate filing, LawTova listed its address as Zal’s law office. On its website, it listed its address as 580 California St., 12th and 16th Floors, San Francisco. That address is the location of Regus, a company that provides temporary offices and meeting rooms. QuickLegal formerly listed its address as 555 California St., San Francisco, one block away from the Regus address and also a location for temporary offices and meeting rooms.

LawTova’s website says that it also has an office in Sacramento, although it does not list an address there. Sacramento is where QuickLegal was based and where Bluford was (and I believe still is) based.

Parallels Among Principals

Last but not least are the parallels among the principals. LawTova’s website provides no information identifying any of the principals or staff behind it. It is unusual for a company website not to have an “About Us” page identifying its founders and executives.

Fabion Stephens’ tweets suggest a connection to QuickLegal.

As of Jan. 1, 2017, LawTova’s Angel List profile named its founder as Russell Johnigan. Johnigan’s name has since been removed from the profile. Johnigan was the Sacramento-based chief operations officer for Quicklegal. His Angel List profile shows him as a graduate of Arizona Summit Law School and also shows him as following only one company on Angel List, QuickLegal.

LawTova’s Angel List profile names its chief technology officer as Fabion Stephens. Fabion Stephens formerly worked for Quicklegal, I’ve been told, although I have not been able to confirm that. Stephens’ Twitter account shows several tweets and retweets about Quicklegal and Bluford that suggest he had a connection to the company. One of the 41 people Stephens follows on Twitter is Johnigan.

LawTova’s Angel List profile names Sacramento-based Steve Nguyen as an investor. I cannot confirm whether Nguyen had a formal relationship with

Steve Nguyen frequently tweeted about QuickLegal.

Quicklegal, but his Twitter feed shows that he tweeted about Quicklegal and Bluford a number of times. During a week in 2016 when Quicklegal was participating in a startup contest run by the Sacramento Kings, Nguyen was tweeting support for the company almost every day.

LawTova’s Angel List profile lists Ron Kain as an investor. A former QuickLegal employee tells me that Kain was a close friend of Bluford and may also have been an investor in QuickLegal.

LawTova’s Angel List profile lists Brett Bunnell under “former employees” as CEO and co-founder. Bunnell’s LinkedIn page currently lists him as a co-founder of LawTova. Bunnell is a 2015 graduate of the University of Cincinnati College of Law and is licensed to practice in California. (I tried to reach Bunnell through the contact information listed on the California Bar website but received no response.)

LawTova’s angel page lists Kirill Tarasenko as attorney. In a 2016 Sacramento Bee story about QuickLegal and Bluford, Tarasenko was featured as a customer of the company. “Sacramento attorney Kirill Tarasenko runs a busy personal injury practice near Howe Avenue and Fair Oaks Boulevard in Sacramento,” the story said. “He said QuickLegal’s calendar system helps him ensure that he never forgets a court appearance or deadline.”

A story about Quicklegal in the Sacramento business publication Comstock’s also featured Tarasenko as a satisfied customer of the company. “Tarasenko says he tried cheaper software options before, but none matched Quicklegal’s bundle package that includes practice management, legal research and malpractice insurance,” the article said.

Phone Out of Service

Since at least mid-January, the phone number that was listed on the LawTova website has not been in service. In February, I spoke to a Regus receptionist at the San Francisco office that LawTova listed as its address. She confirmed that LawTova leased space there but said that no one was in the office and that she was not authorized to provide any contact information for anyone associated with the company.

In my email to Zal, I asked him about the phone line. His Feb. 27 reply said that he was in the process of converting the system so calls would be answered by a live person.

As I noted, Zal has not responded to my subsequent emails. Attempts to visit either website, lawtova.com or lawtovaservices.com, generate a message that the site cannot be reached because the connection timed out.

I have no way of confirming with certainty that LawTova has shut down. Perhaps it is going through an extensive redesign of its websites. Or perhaps it is experiencing extended technical difficulties. Maybe this post will prompt it to re-emerge.

Whatever its status, one thing seems clear: LawTova bears many ties to QuickLegal and Bluford.

Lowenthal-Complaint

Another lawsuit has been filed against QuickLegal, this one by a California attorney who says that the company failed to pay stock and wages due him for his work as QuickLegal’s general counsel in 2014.

Justin C. Lowenthal, a lawyer in Davis, Calif., filed suit this week in U.S. District Court in San Francisco asking that he be awarded 7 percent equity in QuickLegal or $280,000.


Related:


Lowenthal’s complaint says that he entered into an employment agreement in July 2014 to serve as part-time GC to Lawyers On Demand, a predecessor to QuickLegal. Because the company was a startup with limited funds, Lowenthal alleges, he accepted stock in lieu of salary. The agreement originally called for Lowenthal to receive the greater of 50,000 shares of common stock or 5 percent of all outstanding shares.

Shortly after executing the agreement, Lawyers on Demand was reconstituted as QuickLegal. On July 28, 2014, Lowenthal sent an email to Derek Bluford, QuickLegal’s CEO, asking him to confirm a conversation they’d had that his contract would be “fulfilled and honored” by QuickLegal and that his equity stake was to be increased from 5 percent to 7 percent. The same day, Bluford replied, “Confirmed!”

The term of the agreement extended only through Nov. 1, 2014. During that time, Lowenthal alleges, he devoted “significant time and effort” to QuickLegal.

In fact, Plaintiff went above and beyond the requirements of the Employment Agreement, at the expense of his other work and family responsibilities. Plaintiff frequently worked at the LAWYERS ON DEMAND, INC./QUICKLEGAL, INC. offices, where he was assigned a personal office. Plaintiff also received office keys, a Quicklegal uniform, a parking pass, and business cards bearing the title “General Counsel.”

When his employment term ended, Lowenthal says, he contacted Bluford asking that he be issued a certificate reflecting his 7 percent ownership and that “such is reflected in the ledger.” Bluford responded, the complaint says, indicating that the shares would not be transferred that that Lowenthal’s had been unsatisfactory, even though Bluford had never before raised this concern.

In September 2015, Bluford, his attorney Cyrus Zal, and others formed a new entity, QuickLegal Practice Management Inc., using the same domain name, logo, software and social media accounts, the complaint says. When Lowenthal asked again about his stock, Zal emailed:

As you may know, Quicklegal Inc. has been named as a defendant in a lawsuit and all of its bank account funds are currently frozen pending the outcome of the litigation. Your claimed 7% share in Quicklegal has very little value right now; nevertheless, Quicklegal does want to resolve your demand for a fair buy-out. There is a separate company called Quicklegal Practice Management, Inc. (‘QPMI’) that you mention in your email. As you know, your employment agreement was with Quicklegal, Inc., and QPMI was not in existence either at the time you entered into the employment agreement or at the time you had completed your services to Quicklegal, Inc. Thus QPMI is a totally separate entity from Quicklegal that did not exist at any time during your employment with Quicklegal, so you have no claim against QPMI with respect to your employment agreement with Quicklegal.

To date, Lowenthal alleges, QuickLegal has paid him nothing for his work. His complaint alleges that he is owed unpaid wages under federal and state wage-and-hour laws and that he is entitled to a 7 percent equity interest in the QuickLegal entities or $280,000, whichever is greater.

“Two fundamental principles stand at the heart of this case,” the complaint says. “First, employers must pay employees the wages they promise. Second, corporations and those who control them must treat minority shareholders fairly and honestly. Defendants — a set of related corporations and their officers, directors and majority shareholders — brazenly violated both of these principles with respect to Plaintiff Justin C. Lowenthal.”

CLPEvictions
Bluford is seated in the front row, second from left.

The case of legal startup QuickLegal and its CEO Derek Bluford keeps getting curiouser.

As I first reported in a post here two weeks ago, the CEO of this California-based startup – who was slated to be featured during a lightning round on legal innovation at Legaltech West Coast – recently agreed to have a $559,330 judgment entered against him to settle a lawsuit charging him with impersonating a lawyer, forging legal documents and fraudulently swindling two clients.

After that post appeared, Legaltech and its cosponsor of the innovation round, Stanford’s CodeX Center for Legal Informatics, rescinded Bluford’s invitation to participate in the show, which starts Monday.

Imagine my surprise, then, when just this week, Comstock’s, the Sacramento-based business publication, named QuickLegal its Startup of the Month. The piece makes no mention of Bluford’s or QuickLegal’s legal troubles, instead describing Bluford as someone who wants to “help rescue others” from legal problems.

My earlier post describes the allegations of the lawsuit in detail so I will not repeat them here. Suffice to say that the allegations tell an outrageous, almost unbelievable, story of a man who used fraud and deceit over 11 months in 2014 to take more than a half-million dollars from an unsuspecting couple who believed he was a lawyer looking out for their best interests.

The complaint alleges that Bluford pretended to be an attorney, manufactured “official” court and government documents, including court orders signed by a fictitious judge, and fabricated legal claims and court hearings, extracting more and more money from the plaintiffs at every step along the way.

The complaint alleges that much of this was done through a prior company Bluford started, California Legal Pros, which markets various legal services to both consumers and lawyers. and then also through QuickLegal, a service that provides on-demand legal advice to consumers as well as a practice management platform for lawyers.

Bluford, with whom I spoke the day after my post first appeared, adamantly denied committing any fraud and claimed that everything alleged in the complaint was done by an employee of his impersonating him. He sent me a police report that he said substantiated his version of events. But the report, while it did involve a former employee who allegedly broke into QuickLegal’s office, had nothing in it pertaining to the events described in the lawsuit or any explicit connection to those events.

Bluford told me he would arrange a follow-up call with him and his attorney to present me with further documentation. I contacted him this week about that and he said that he had requested the full police reports and case information be forwarded to me. I’ve received nothing.

The Comstock’s article said that, as of May 1, 800 attorneys had registered for QuickLegal and that the company was generating revenue of about $150,000 a month.

But Bluford, in his email to me this week, wrote, “At this time we have lost all of our clients, partnerships and revenue.” He said that this was a “true injustice,” adding, “Especially when I have personally done everything I can to help the victims of a matter in which I didn’t play a part to.”

Sorting out facts from allegations in this case is difficult. As I mentioned in a prior post, Bluford told me that the attorney for the plaintiffs in the fraud lawsuit would vouch for his version of the events. But when I contacted that attorney, he gave me only a short and somewhat cryptic statement.

“Derek has given you his account of the facts,” the attorney wrote. “I am surprised that he would identify me as someone who would back him up. I have no other comment on his contentions.”

That leaves only court records to go on and, other than the detailed allegations set out in the complaint (which includes copies of the allegedly forged and manufactured documents described in the complaint), the record is somewhat sparse.

In his answer to the complaint, Bluford gave only a general denial of all allegations without specifically addressing any of them. He also asserted various affirmative defenses, including that any losses the plaintiffs suffered were due to their own negligence.

Bluford also filed responses to plaintiffs’ requests for discovery in the case. In them, however, he declined to answer even a single question “on the grounds that his response may tend to incriminate him.” Plaintiffs served on Bluford both a request for production of documents and a set of interrogatories. In his responses to both, he consistently asserted his privilege against self-incrimination.

QuickLegal responses to discovery were equally uninformative in fleshing out the facts. It simply asserted over and over again that it had no knowledge of any of the events alleged in the complaint.

As I said in my prior post, the significance of this relates back to the fact that lawyers have an ethical duty to exercise reasonable care when selecting a product or service that relates to confidential client matters.

The allegations in this case were that Bluford not only took money fraudulently, but that he then put his businesses at risk by depositing that money in the business’s bank accounts. If a lawyer was using one of those businesses, the lawyers’ own matters stored with that company could potentially be at risk.

The bottom line for lawyers is to do your due diligence when hiring a vendor or selecting technology. Before entrusting client records to a third party, do your homework.

Yesterday I published a post about Derek Bluford, CEO and founder of QuickLegal, and his recent agreement to have a judgment of $559,330 entered against him to settle a lawsuit charging him with impersonating a lawyer, forging legal documents and fraudulently swindling two clients. Bluford had not returned my call to him before I published the post, but he did call me yesterday after the post appeared, and we were able to speak yesterday evening.

Although he was not ready to provide me with a full response, he said, he wanted to set up a call for that purpose with him and his lawyer sometime next week. I asked him if there was anything he wanted to say in the meantime.

He responded that when he first learned of the lawsuit against him, he was surprised and shocked and had known nothing of the incidents described in the complaint. Upon investigation, he said, he identified a staff member at QuickLegal who had pretended to be him and who had carried out the string of fraud and forgery.

He further said that he had turned over all of this information to the police and that this person is now being prosecuted.

I asked if he could send me any documents to confirm his version of events. He said that he would provide me with full documentation next week but would, in the interim, send a police report confirming the initial report about the employee to the police.

He did send me a police report, but I see nothing in it pertaining to the events I described in my post yesterday. The report involves allegations that a terminated employee came into the office after hours and stole items and “hacked all our personal accounts.”

So, in short, Bluford’s assertion is that he did not do any of the actions described in the complaint. Rather, a former employee pretended to be him (pretending to be a lawyer) and carried out the entire scheme.

One surprise in our conversation was that Bluford suggested that even the plaintiffs’ attorney would back him up on this. I had already heard from that attorney, Daniel F. Pyne III of Hopkins & Carley in San Jose, Calif., who had previously emailed that he is traveling this week and couldn’t speak with me until next week. Even so, I emailed him again to ask if he would confirm what Bluford said. Here is what he wrote back in reply:

Derek has given you his account of the facts. I am surprised that he would identify me as someone who would back him up. I have no other comment on his contentions.

If it was not him who committed the fraud, I asked Bluford, then why did he consent to have judgment entered against himself? He did it, he said, to protect the integrity of his company, which had been in conversations with potential investors. “The only way to resolve this was for me to be a personal guarantor of the amount owed,” he said.

As far as I can tell from my reading of the court docket, Bluford has not paid any portion of the judgment to date and attempts to execute on the judgment have not been successful. The court approved a request to add Bluford’s wife as a judgment debtor.

I have not been able to confirm any of Bluford’s contentions. None of this was mentioned in the answer that he filed in the lawsuit. I hope that he and I are able to speak next week for him to provide more details. Until then, stay tuned for further developments.

CLPEvictions
The plaintiffs hired California Legal Pros after seeing this webpage. Bluford is second from left in the front row.

[Update 5/26/16, 6:25 p.m.: I just received this update from ALM: “ALM recently learned of the developments regarding QuickLegal and can confirm that QuickLegal won’t be participating in Legaltech West Coast. ALM works with CodeX, our partner, to provide a showcase for the next generation of legal technology start-ups, without putting clients at risk.”]

In two weeks at Legaltech West Coast, Derek Bluford, CEO and founder of the California-based startup QuickLegal, will be featured during a lightning round on legal innovation. One topic not likely to come up during the panel is Bluford’s recent agreement to have a $559,330 judgment entered against him to settle a lawsuit charging him with impersonating a lawyer, forging legal documents and fraudulently swindling two clients.

On Oct. 5, 2015, Superior Court Judge Raymond M. Cadei in Sacramento, Calif., entered the stipulated judgment against Bluford in favor of the married plaintiffs who turned to Bluford and another company of his, California Legal Pros, for help evicting a tenant from a home they owned in Discovery Bay, Calif., only to be defrauded out of more than half a million dollars.


Related:


In stipulating to the judgment, Bluford stated that he “does not admit that any of the allegations set forth in the complaint are true or valid,” and that he agreed to the judgment “for the sole reason that he wishes to avoid the time, expense, uncertainty and risk of litigation in this case.”

For a man who is still a year shy of his 30th birthday, Bluford has found success as an entrepreneur, first starting California Legal Pros (CLP), a company that markets various legal services to both consumers and lawyers. then QuickLegal, a service that provides on-demand legal advice to consumers, and then most recently QuickLegal Practice Management, a cloud practice management platform for lawyers.

In 2014, Bluford was named a Techweek Los Angeles LAUNCH competition champion and was recently selected to appear on the popular ABC television show Shark Tank. (As far as I can tell, he never actually appeared on any segment that was aired.)

In a recent podcast interview, Bluford said that he sold California Legal Pros in 2014 for $425,000,  that he valued QuickLegal at $12 million, and that he recently turned down a purchase offer of roughly $14 million. He said that he had about 130 paying customers but believed he would quickly surpass Clio, the largest player in the practice-management space. He also said that he was scheduled to be on the cover of the ABA Journal in the first quarter of 2016 (he was not) and that he had entered into strategic partnerships with both RocketLawyer and LegalZoom. (I did not contact either company to confirm this, but LegalZoom reached out to me to say that it is not doing business with Bluford “and certainly has no strategic partnership with him.”)

And on June 14 at Legaltech, Bluford will be featured alongside two other legal startups in a Legal Innovation Lightning Round produced by The Stanford Center for Legal Informatics (CodeX) and the Center for Legal Innovation at Vermont Law School and judged by CodeX fellows Monica Bay and Nicole Shanahan.

Allegations of Fraud and Deceit

But the allegations of the lawsuit (read the full complaint) paint an outrageous picture of a man who freely used fraud and deceit over 11 months in 2014 to take more than a half million dollars from unsuspecting clients who believed he was a lawyer looking out for their best interests. He deposited the money he took from them into the business bank accounts of California Legal Pros and QuickLegal, the complaint says.

(It should be noted that the lawsuit against Bluford also named as defendants California Legal Pros, QuickLegal Inc., and Bank of America. Although Bluford settled, the lawsuit remains active with regard to the other defendants.)

The complaint’s allegations center on Bluford and California Legal Pros, which includes among the services it offers an eviction package for California landlords. It was after seeing advertising and a web page for this package that the plaintiffs first came to CLP.

After they telephoned CLP’s office in San Jose, the plaintiffs allege, they were emailed a packet of documents to sign and return. When they asked about representation in court, they say, they were told that CLP would appoint an attorney for them if needed.

Subsequently, Bluford contacted them and told them that he was an attorney and the managing partner of CLP, their complaint alleges. He advised them that he would be handling their case and would appear in court for them if necessary.

The complaint says that CLP did, in fact, file an eviction action against the tenant. But what followed after that is truly outrageous, if the allegations in the complaint are true. The complaint says that Bluford pretended to be an attorney, manufactured “official” court and government documents, including court orders signed by a made-up judge, and fabricated legal claims and court hearings, extracting more and more money from the plaintiffs at every step along the way. Among the plaintiffs’ allegations against Bluford:

  • He falsely represented that the tenant had filed a claim for personal injury against the plaintiffs and then took $130,000 from the plaintiffs to settle the non-existent claim.
  • He falsely represented that the county had fined plaintiffs $10,500 for a mold problem and took that money from them supposedly to pay the non-existent fine.
  • He took $25,000 from the plaintiffs to remediate the supposed mold damage to their property and then took another $26,000 for the mold repair, saying the initial $25,000 was not enough.
  • He took $244,000 from the plaintiffs plus $27,642 in “attorney fees” by forging court papers to make it look as though they owed fines to the city and county governments with regard to the mold in their property.
  • He told plaintiffs that they needed to pay him $5,000 for time he spent at a nonexistent trial, and he then informed the plaintiffs that they had lost the trial and that the court had ordered them to pay $51,750. He later told them CLP had paid the judgment and would accept just $30,000 from the plaintiffs.
  • He received another $7,200 from plaintiffs to cover the costs of filing a non-existent motion relating to insurance coverage and then another $3,237.50 for the same motion.
  • He received another $30,000 from plaintiffs for a supposed “trial deposit” paid to a court.
  • Throughout, he forged court papers and legal papers and repeatedly lied to plaintiffs.

The plaintiffs finally became suspicious when they researched the judge who had supposedly issued several of the orders against them. When they found out no such judge existed, Bluford’s scheme quickly unraveled, according to the complaint.

I attempted to speak with Bluford by leaving a message at his QuickLegal voicemail and by messaging him through Facebook but I received no response. I also emailed and telephoned Bluford’s attorney, Cyrus Zal of Folsom, Calif., and received no response. The attorney for the plaintiffs in the civil lawsuit, Daniel F. Pyne III of Hopkins & Carley in San Jose, Calif., emailed that he is traveling this week and could speak with me next week.

Allow me to emphasize that the fact that Bluford settled this case and agreed to have judgment entered against him does not mean that he admits to the allegations of the complaint.

Why Does This Matter?

To my mind, this is a cautionary tale for lawyers about using startup technology, particularly for something such as practice management that involves client information. Lawyers have an ethical duty to exercise reasonable care to protect the confidentiality and security of client information. That duty extends to selecting a technology. You need to do your due diligence and know who you are doing business with.

Here, the allegations are that Bluford not only took money fraudulently, but that he then put his businesses at risk by depositing that money in the business’s bank accounts. If a lawyer was using one of those businesses, the lawyers’ own matters stored with that company could potentially be at risk.

I am certainly not saying to avoid startups. But one factor to evaluate in selecting a company is its length of time in business and its reputation as a business. There’s an old maxim in journalism, “If your mother says she loves you, check it out.” The same holds true for the representations made by companies about their products and about themselves. It is your duty to check them out.