Judge orders Pettit set free from jail
Former lawyer clears himself of contempt of court charge; his release was pending
A San Antonio bankruptcy judge ordered Christopher “Chris” Pettit’s release from jail Wednesday after finding the exlawyer had cleared himself of a contempt of court charge.
Pettit, who is accused of stealing millions of dollars from his former clients, had been in jail for three months for failing to comply with a court order in his bankruptcy case. He was expected to be released Wednesday afternoon.
Pettit took the witness stand Wednesday morning to say he intends to stay with friends until he finds another place to live.
“My plans are to see my son and look for work,” Pettit said, adding that he will remain in the San Antonio area. He has a minor son who has been living here with his nanny. Before being sent to jail, Pettit had been living in a Florida mansion at Disney World.
Chief U.S. Bankruptcy Judge Craig Gargotta issued his order after Pettit agreed to surrender his $1.8 million Stone Oak home, retirement accounts valued at about $500,000 and various life insurance policies to the bankruptcy estate as part of a compromise with the Chapter 11 trustee overseeing assets.
Pettit had been held in the Karnes County Detention Facility since Sept. 8. His incarceration came after the trustee had asked the judge to hold Pettit in civil contempt for violating a court order prohibiting him from transferring or disposing of any personal property.
He filed for bankruptcy for himself and his law firm June 1 after about a dozen lawsuits were filed by his former clients alleging that he had absconded with their money. Pettit gave up his law license and closed his law office, which specialized in
estate planning and personal injury cases. Creditors have submitted claims in the bankruptcies totaling about $260 million.
The FBI has been investigating the allegations against him and representatives from the Justice Department attended Wednesday's court proceedings. Pettit's attorney told the judge he's offered to sit down with the DOJ to talk about many issues involving the case, including Pettit's claim that he had been blackmailed by former employees of his law firm.
Judge’s reservations
Gargotta expressed reservations about allowing Pettit's release, saying he was not convinced Pettit had fully complied with the court's order. But the judge said he thought Pettit has recognized “it's time to accept the consequences
of his conduct and move forward with this case. Or least that's my hope.”
“I don't know at this point in time … that there's any real benefit to keeping Mr. Pettit incarcerated any further,” Gargotta said. “I'm mindful of all the time we spent in court and all these people who came in here that it was their wish that he go to jail and that the court throw away the key. But that's not how things work.”
About a dozen of Pettit's former clients were in the courtroom.
Keeping Pettit in jail won't accomplish what the trustee is trying to do in getting his cooperation as the bankruptcy moves forward to the next phase — the investigation into possible legal claims against other parties, Gargotta said.
Trustee Eric Terry did not oppose Pettit's release from jail as part of the agreement for Pettit to surrender various assets that he could have claimed
as “exempt” from being sold for the benefit of creditors.
Missing laptop
Terry has argued that the assets were acquired with money misappropriated from Pettit's former clients. During the hearing, though, Pettit's lawyer said he made “legitimate money” that went into his home, retirement accounts and insurance policies.
“There was no armtwisting to get him to give those up,” attorney Ron Smeberg said. “Basically, he said he is ashamed, he is shocked. A lot of these people were his friends and he wanted to do what he could do to help bring money back into the estate. This was a huge step.”
Smeberg added that he believes Pettit has had a “change of heart” and will work with the trustee and creditors for the benefit of the bankruptcy estate.
Gargotta had set 17 conditions for Pettit to satisfy to be released from jail. Atop the list was turning over his business laptop to the trustee. Pettit still has not done that, testifying that he doesn't have it or know where it is. The laptop purportedly contains information the trustee wants regarding Pettit's client's and their funds.
The judge asked Danielle Rushing, a lawyer for the trustee, whether Terry has “given up” on getting the laptop.
“I wouldn't say that the trustee gave up on it,” she said. “We've heard countless stories that are continuing to change with respect to that laptop. I don't know what the true answer is for the laptop. I don't if the court, the trustee, anyone outside of Mr. Pettit will ever know what the true answer is for the business laptop.”
She added the trustee believed the settlement agreement was in the best interest of the bankruptcy estate.