Brian Loncar Finds a New Way to Profit Off His Clients
There is little doubt that Brian Loncar is a shrewd businessman. One doesn't dub oneself the "Strong Arm," create a Bat Signal-like image of a flexing appendage, and create a minor personal injury litigation empire without some measure of marketing savvy.
But Loncar is also known to blur ethical lines. For proof of that, look no further the Observer's none-too-flattering 1997 profile.
Loncar seems to have stumbled upon a new money-making strategy, as Nick and Heather Stearns recently discovered. The couple, who filed a lawsuit against Loncar last week, were injured in a car wreck on October 17, 2010 in Lubbock. They took their case to Loncar.
They expected a settlement but, in the meantime, they needed cash. At Loncar's suggestion, they turned to Settlement Advance Funding Enterprises, one of a proliferating number of outfits that extend credit to plaintiffs on the expectation of a legal settlement.
The terms of the loan were terrible. The monthly interest rate was 4.99 percent, or 60 percent per year, and there was a 28.5-percent legal fee taken off the top. They also had to agree that SAFE got first dibs on their settlement money to repay the loan.
All that was spelled out in the loan contract, and the terms are perfectly legal under state laws governing high-risk loans. What wasn't mentioned in the contract or by Loncar is that SAFE is owned, at least in part, by Loncar himself.
Loncar doesn't control the company, at least on paper. The sole manager listed on incorporation documents when the company was formed in 2007 was Kenneth Toudouze, who just so happened to be Loncar's next door neighbor in Highland Park. Later added as a governing member of the company was Fuerte Rios Funding, LLC.
It just so happened that SAFE and Fuerte Rios were incorporated on the same day, May 9, 2007, and that Toudouze was Loncar's next door neighbor in Highland Park. It probably wasn't a coincidence that the sole director of Fuerte Rios is Brian Loncar and that the LLC appears to serve no other function aside from owning SAFE.
It appears, said Ross Sears, who is representing the Stearns in their lawsuit, that Loncar owns and is profiting mightily from the loans he's encouraging his clients to take out. That might be kosher if he told clients he owned the loan company -- plenty of lawyers offer litigants loans to cover day to day expenses, though typically at less outrageous rates -- but Loncar never did. It seems that Loncar actually did the opposite, taking steps to conceal his involvement by establishing an inscrutably named LLC.
Loncar did not return a call seeking comment. Numbers listed for Toudouze and SAFE were disconnected. But Sears thinks Loncar's secretive entry into the loan business could land him in trouble with the state bar. Ethics rules vest attorneys with a fiduciary duty on behalf of his clients. It's clear, Sears said, that Loncar violated that duty.
In the Stearns' lawsuit, Sears also alleges negligence and conspiracy to commit fraud. In the end, Loncar settled the Stearns case for $1,644.77. A third of that was taken by Loncar as legal fees. Another third went to pay off medical bills. Slightly less than a third went to pay off the SAFE loan. The couple walked away with $14.55.
Update on December 5: Loncar's attorney, Larry Friedman, called with a response.
"The Loncar firm did an extraordinary job for the client," Friedman said. "The matter was resolved satisfactorily, the advance was made lawfully, and all the paperwork was properly done."
Loncar does have a one-third ownership stake in SAFE, but Friedman says he discloses this to clients. As for Sears' claim that Loncar's actions somehow violated ethics rules, he points to a pair of opinions from the Texas Commission on Professional Ethics Loncar used when establishing loan businesses. You can find them here.