A New Approach to Accountability in the Bankruptcy System

<p>It is a great honor to serve as director of the Executive Office for U.S. Trustees
(EOUST), and a particularly exciting time to be in Washington, D.C.

</p><p>When I was appointed this spring, I received a mandate from Attorney General John
Ashcroft to preserve the integrity of the bankruptcy process by ferreting out abuse
within the system. The number-one initiative of the U.S. Trustee Program (USTP)under
my leadership will be to carry out an effective program of civil enforcement.

</p><p>The Civil Enforcement Initiative represents on a national scale the same kind
of change I worked to achieve on a smaller scale as a private trustee in Detroit,
where I had administered more than 14,000 cases as a chapter 7 trustee. When
I started out as a trustee, I performed my duties in a way they hadn't been
performed before in the Eastern District of Michigan. For example, my staff and
I looked at the accuracy of schedules by going out to debtors' homes and viewing
their property. Many thought the system could not be changed and would be unreceptive
to this sort of scrutiny.

</p><p>But we did change the bar, and we improved the integrity of the bankruptcy system
in our district. As EOUST director, I want to try to achieve that kind of change
on a nationwide basis.

</p><p>This requires a concerted effort to change the way we do business here in the
USTP. One of the administration's primary goals is to make government more accountable
to its citizens by streamlining processes and focusing on results-oriented performance
standards that ensure uniformity. The attorney general is personally committed to this
goal, and has made it very clear that all component heads will be held accountable
for implementing it. That's a responsibility I take to heart.

</p><p>I have immersed myself in my new job to learn as swiftly as possible what needs
to be done to this end. I have spoken at length with employees in the EOUST and
the field offices, and with members of the bench and bar. I have quickly learned
that the USTP is filled with intelligent, enthusiastic and talented individuals, both
at the EOUST and in our offices around the country, and I am very proud to work
with them.

</p><p>From my prior contacts with the U.S. Trustee's office in Detroit, I was long
aware of the increasing work pressures brought about by the high volume of bankruptcy
filings. I decided almost immediately upon taking office that it was impossible to
ask USTP employees to handle all of the responsibilities they have been asked to handle
over the last several years and still maintain enthusiastic and motivated employees. I
recognized that, for our employees to focus on initiatives to achieve the results I
expect, their energies must be refocused and some of their duties removed.

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<big><i>All parties who are subject to our oversight...will
be held closely accountable for their actions.
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<p>We are doing this in two ways—first, by refocusing on core issues such as the
Civil Enforcement Initiative, and second, by emphasizing outcomes rather than
procedures as we carry out our duties. My aim is to reduce extraneous paperwork to
free USTP staff for more direct and active oversight responsibilities.

</p><p>For example, effective July 1, 2002, the USTP will no longer require chapter
7 trustees to file interim reports every six months. Instead, with certain
exceptions, reports will be filed annually. This action will open up a significant
number of work days for both trustee and USTP staff, and will drastically reduce the
paper that trustees generate and our offices review.

</p><p>Just as we will develop more effective methods for monitoring trustees, we will
continue to closely monitor the actions of professionals who seek employment and
compensation in bankruptcy cases. We will work to develop a national standard of
practice for professionals, taking into account the legitimate concerns of all parties.

</p><p>At the same time, we are moving forward with exciting improvements in our
information technology capabilities and reporting systems that will capture much more
accurately and transparently what happens in the bankruptcy system. All parties who are
subject to our oversight—private trustees, bankruptcy practitioners and other
professionals—will be held closely accountable for their actions. It is crucial to the
integrity of the system that information be provided accurately and honestly.

</p><p>No discussion of current issues facing the USTP would be complete without mentioning
the pending bankruptcy reform legislation. Over the past two years, the USTP has
worked very hard to prepare for the implementation of the bankruptcy reform bill,
should it become law. I am confident that if the bill passes, we have the tools
in place to carry out the new responsibilities entrusted to us. However, I am also
confident that if the legislation does not pass, we will be able to demonstrate our
responsiveness to the concerns raised by Congress. For example, all of our offices
are reviewing chapter 7 petitions for evidence of fraud and abuse. Our Brooklyn
office started doing this last October under the direction of Assistant U.S. Trustee
Diana Adams, who created a model for case review. She chose those that, among
other factors, had less than $10,000 in assets and more than $100,000
in unsecured credit card debt. From this very simple review, the Brooklyn office
identified more than 120 "no-asset" cases that warranted further investigation.

</p><p>If there is one theme that runs through these developments, it is the theme of
full disclosure and accountability—by debtors who truthfully list their assets, liabilities
and other financial information; by professionals who openly reveal their relationships
and financial arrangements; and by trustees who scrupulously attend to their fiduciary
responsibilities.

</p><p>No one group can do the job of enhancing civil enforcement and improving the
integrity of the bankruptcy system. Accomplishing this goal requires the concerted effort
of everyone involved in the bankruptcy system, including the USTP, the courts, chapter
7 trustees, chapter 13 trustees, creditors and the bankruptcy bar. It is important
to build a coalition of all of these groups to work together, to agree that the bar
needs to be raised for bankruptcy practice, and to agree upon what to focus on to
raise the bar.

</p><p>I look forward to working with all of you to bring prestige, honor and dignity
to the bankruptcy system throughout the country. I welcome your comments and
suggestions on how we can accomplish this together.

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