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Law firm never deposited $20M in insurance checks for La. storm victims

U.S. District Judge James Cain blasted MMA firm founder Zach Moseley, banning him and his associates from collecting any legal fees.

NEW ORLEANS — A federal judge has banned Texas law firm McClenny Moseley & Associates from collecting any legal fees for hundreds of pending hurricane insurance lawsuits it handled before MMA was accused of a massive fraud and blocked from operating in Louisiana.

U.S. District Judge James Cain blasted MMA founder Zach Moseley for failing to deposit more than $20 million in insurance payments made to storm victims the firm once counted as clients, saying more than 1,000 of them are still waiting for money their insurance companies issued long ago to cover storm damages.

“It's $20,042,940 in checks that have not been deposited for clients,” Cain said to Moseley at the Aug. 8 hearing, according to a court transcript. “$20 million of Louisiana residents' money is sitting -- half these checks are stale now.”

WWL-TV also reviewed a photo of insurance checks a former MMA client said were sent to her by mistake. They were made out to dozens of storm victims and totaled more than $1 million.

“It’s a nightmare,” said David Caldwell, general counsel for the Louisiana Department of Insurance. “And Judge Cain's ruling is very helpful because in order to reissue those checks and recut those checks and make sure the funds are available, the courts really have to get involved.”

Caldwell is the former head of the Louisiana Department of Justice’s Criminal Division and said the Insurance Department turned over its investigative file on MMA to the FBI. He expects criminal charges to come, eventually.

“Anyone who files a false public record saying that they represent a client when in fact they do not makes for a pretty, pretty straightforward case,” he said. “And this is pretty egregious. I don't know exactly what the feds are doing. I know that they're looking at it and it takes some time.”

As Cain continued to punish MMA in the Western District of Louisiana, the law firm’s alleged insurance fraud scheme continues to affect Hurricane Ida lawsuits that must be filed in the Eastern District federal court and in state courts across the New Orleans area by a Tuesday night deadline.

In mid-June, there were 3,000 Hurricane Ida lawsuits in the federal Eastern District Court, with about 500 filed by MMA. Chief Judge Nanette Jolivette Brown issued special rules and processes for managing cases filed on behalf of MMA’s former clients. She estimated there were around 8,000 additional Ida claims by former MMA clients that could still lead to lawsuits.

Court records show there could be 5,000 Hurricane Ida lawsuits filed by the two-year filing deadline, although the court won’t be able to determine a final number for several days because of a processing backlog.

The collapse of several insurance companies that tried to pay those former MMA clients is complicating matters further, Cain said. Eight insurance companies have folded in Louisiana since Hurricane Ida, leaving the Louisiana Insurance Guaranty Association to process those claims.

“The problem is some of these checks were issued last summer, in June and July of 2022, by some insurance companies who at that time were still solvent,” Cain said. “FedNat, who I saw on there, they went under. You didn't deposit these client's checks. Now they can't get that money. That money's gone. That company went bankrupt.”

Moseley blamed the homeowners’ mortgage companies for taking too long to endorse checks after MMA negotiated insurance settlements. But Cain wasn’t buying it, noting at least one check where he found a mortgage lender’s name had been “forged” by an MMA official to let the law firm deposit the money.

“That was a mistake by our controller,” Moseley testified.

“It’s a forgery. There was no mistake,” Cain shot back.

Cain said more than $1 million remained in MMA’s Texas trust account as of Aug. 8 and ordered it moved to a Louisiana bank. Last week, Cain went a step further, issuing an order Aug. 22 that MMA is not entitled to collect any fees or costs for any of the work it did on cases still pending in the Western District of Louisiana. That court is holding legal fees for another 200 cases totaling $3.7 million, and Cain also banned MMA from collecting any of that money.

MMA, meanwhile, appears headed for insolvency. It’s being sued by investors and vendors for upwards of $20 million, and Moseley testified on Aug. 8 that he owes a hedge fund another $40 million. Two attorneys who had been defending MMA against lawsuits in Texas withdrew earlier this month, stating in court papers that MMA hasn’t paid them for their services and told them and wouldn’t be able to pay in the future because “its financial viability (is) doubtful.”



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