The Cushingberry Follies continue

Detroit City Council president pro tem faces $24 million legal malpractice case

DETROIT – Local 4 photographer Alex Atwell and I spent the day in Lansing chasing after George Cushingberry's pending $24 million legal malpractice case.

We picked up a few new tidbits along the way.

First and foremost, Cushingberry has a court hearing in March to finally address a case filed last summer. It lingered like this for months because, to hear the attorney for Thomas Mulholland [the man who filed the case] tell it, George Cushingberry did not respond. Attorney James Higgs of Mount Pleasant told me on the phone a few weeks ago he believes Cushingberry dodged service, deliberately making himself unavailable. That is a no-no for officers of the court.

Cushingberry is an attorney and officer of the court. This comes while he is also about to lose his law license for 45 days. It starts later this month for professional misconduct in a settled case before the Michigan Attorney Disciplinary Board. Cushingberry is not likely to face sanction for that and his attorney Todd Perkins says it's not true anyway. Still, Judge James Jamo will hold a default hearing next month because Cushingberry never responded to the case and the judge is hesitating to grant a default judgment. He is asking Higgs how he came up with the $24 million number. It's complicated but the easy answer is he rolled up Mulholland's $150,000 annual income before his bankruptcy filing [made by Cushingberry in February 2010], looked forward 20 years, and wrapped up the value of the real estate Mulholland lost in his train wreck of a bankruptcy [roughly $18 million] and decided George should pay that price for causing a man worth millions on paper to be penniless and all but homeless tonight. [Mulholland is living with family after losing everything including his own home in this case.]

How did Mulholland wind up with this kind of trouble that has him suing his own attorney? Well, he had one of his properties go south on him, he couldn't afford to refinance and needed to walk away from it. He apparently had heard about Cushingberry from a friend and asked George to help him out.

George charged $275 an hour to go to work for Mulholland. But things started out rocky until finally the rock rolled over Mulholland's head. Mulholland lived in Saginaw, his properties were mostly in northeast Michigan and he had an office in Lansing. So, Cushingberry filed the first case where Lansing debtors go, to Grand Rapids Federal Court. The problem: The bankruptcy judge ruled the filing was improper and shipped the case east to Bay City bankruptcy court. Mulholland needed only to hand off one property to the bank, yet for some reason Cushingberry decided it was a better idea to file Chapter 13 business bankruptcy in one case. This allows debtors to walk away cleanly after paying what they can. This sounded like a good plan at the time, except George missed an important part of the Chapter 13 rules: the debt level caps. Secured and unsecured debt combined can't exceed $1.3 million dollars.

The Mulholland case far exceeded the caps so the bankruptcy judge in Bay City kicked the case [there were actually four of them] off the Chapter 7 Bankruptcy Court. George filed two Chapter 11 reorganization bankruptcy cases at the same time. They all ended up in Chapter 7 liquidation.

Now, there appears little doubt the $24 million number is inflated. Thomas Mulholland was a real estate developer, ran a couple of companies -- Grand Bluff Development was one -- and had properties all over northeastern Michigan: Kawkawlin, Omer, Saginaw, Bay City and a development called Grand Bluff Estates in Grand Ledge. He was also part owner in another company called Keland Investment Properties. The value of all of that property was roughly $18 million and included that amount in the claim may or may not hold up legally. But practically speaking, George Cushingberry does not have anything resembling that kind of cash. Higgs claims Cushingberry does not have malpractice insurance. So, if he was to lose this case and the judge were to dramatically reduce the judgment, George could end up in Chapter 7 himself. You get the impression that is Higgs' goal here.

Now, they felled a forest with the legal pleadings in these cases and they are complicated but one thing is quite simple: Mulholland is no choir boy. As part of the proceedings, Mulholland claims Cushingberry asserted to him that in bankruptcy he would be what's called the debtor in possession. In other words, the business owner continues to run the business while the bankruptcy process grinds ever so slowly forward. But the bankruptcy judge felt it was better to have an outside receiver take that job. Bankruptcy experts will tell you this means the judge did not trust the business owner. He also decided Mulholland would NOT be able to discharge his debt, which means he is still responsible for paying back every dime of the $18 million he was on the hook for even though the old business goes away. Still, a guy trying to finesse his way out of a little legal trouble ended up flat dead broke and so embarrassed by the case he refused to do an interview and told his attorney not to speak with Local 4 to boot. Higgs stopped taking my phone calls two weeks ago.

But let's get back to George for a minute. The legal case against him claims a number of disturbing things in addition to the missteps already outlined. Mulholland claims there were opportunities to withdraw all of the bankruptcies; opportunities Cushingberry did not take. He said "meetings of creditors have repeatedly been skipped."

"Documents in response to adversarial claims have not been filed. Plaintiff's interests have not been protected."

There are court papers showing long lines of creditors gathered to litigate the case before the bankruptcy judge only to have George Cushingberry disappear into thin air. Some of those angry lawyers wanted the judge to sanction George. He did not.

Congratulations if you have been able to stay with me so far, it can get a bit overwhelming at times carrying around all of this detail! But when you look at the laundry list of these kinds of cases where Cushingberry is in the middle of a mess -- filing frivolous paperwork for a convicted drug dealer, making egregious mistakes in the disposition of probate cases, other professional misconduct and legal malpractice -- you get the idea he does not feel so weighed down by such detail. And there are other red flags we picked up while surfing the computer and reading case files. Cushingberry had criminal election law violations charges brought by then Michigan Attorney General Mike Cox dismissed in Ingham County by a friendly judge. But a quick read of the pleadings showed George ignored official notices regarding troubles with his campaign.

One of the charges the AG's office proffered was perjury. That is very serious business, as Kwame Kilpatrick will attest. These were only charges that were eventually dismissed; still George's pattern is now unmistakable.

And then there is this: In the late 80s George had some kind of issue with the State Employees Credit Union. We did not have time to pull the case file, but one of the notable things we discovered was that George had his wages garnished for years while working as Wayne County Commissioner. The case started in 1988 and was finally resolved in 2001. This is something that needs to be revisited and will be.

The Cushingberry Follies are far from finished.

About the Author:

Rod Meloni is an Emmy Award-winning Business Editor on Local 4 News and a Certified Financial Planner™ Professional.