Washburn Law files for bankruptcy
Published 1:33 pm Wednesday, March 29, 2023
Real estate law firm faces allegations, clients have until May 8 to file claims for missing funds
TRYON–In December, the Tryon Daily Bulletin reported that officials had opened an investigation into Washburn Law, PLLC after receiving numerous complaints.
In 2022, according to Tryon Police Chief Randall Hodge, more than three million dollars was allegedly reported missing from the firm’s trust account. Legal and financial allegations surfaced after more than a dozen former clients filed complaints against the firm. In December 2022, Washburn Law shut down its offices in Tryon and Wilmington and filed for Chapter 7 bankruptcy.
Jonathan Washburn, the founder of the real estate law firm, disclosed in a Chapter 7 petition on Jan. 27 that his Tryon-based firm had a maximum of $50,000 in assets and owed $3,024,725 in total non-contingent, liquidated debts.
On March 2, a creditor’s meeting in bankruptcy court was held. According to court-appointed trustee James Angell, Washburn Law’s clients still have until May 8 to file claims in the bankruptcy case. The bankruptcy trustee urges clients to come forward and file claims for their missing funds.
Washburn said under oath that the firm’s non-attorney CEO, Jack Munsey, stole at least $6.6 million from real estate closings by diverting the money into an LLC that Munsey controls, according to court transcripts. Munsey alleges that Washburn pilfered the trust account and used the stolen money to buy a house in Wilmington and keep the law firm afloat, according to Russell McLean, a paralegal for Munsey’s attorney.
Since the FBI began its investigation, a title insurance underwriter filed suit against Washburn Law on January 31, telling a North Carolina federal court that the firm totaled up $1.25 million in claims for missing payments.
In a statement, Washburn told clients that the trust account problems “do not seem to relate to any licensed attorneys of the firm.” He added that the North Carolina State Bar would be looking into potential ethics violations involving attorneys at Washburn Law and has frozen the firm’s trust account. According to an archived version of the firm’s website, Washburn worked alongside four other lawyers.
In 2017, the state bar reprimanded Washburn for failing to regularly review his firm’s trust accounts. He has declined interview requests, and his attorneys have not responded to requests for comment.
William Janvier of Stevens Martin Vaughn & Tadych, PLLC represents Washburn. Jack Munsey is represented by Rusty McLean of McLean Law Firm P.A. Washburn Law PLLC is represented by Jason Hendren and Rebecca Redwine of Hendren Law Firm.
Chief Hodge had no further comment on the case, stating it has been turned over to the FBI and North Carolina State Bar for investigation. The FBI and North Carolina State Bar have declined to comment on the ongoing investigation.
The bankruptcy case is filed under Washburn Law, case number 23-00222-5-DMW, in the U.S. Bankruptcy Court for the Eastern District of North Carolina.