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FOR IMMEDIATE RELEASE ANGELA DODGE

June 29, 2010 PUBLIC AFFAIRS OFFICER

WWW.JUSTICE.GOV/USAO/TXS / (713) 567-9388

HOUSTON ATTORNEY AND WIFE CHARGED WITH MISAPPROPRIATING

FUNDS OF VETERANS, MAKING FALSE STATEMENTS AND TAX FRAUD

(HOUSTON) - A Houston attorney and his wife have been indicted for conspiring to

misappropriate more than $2 million from the accounts of military veterans, making false

statements and tax fraud, United States Attorney Jos Angel Moreno announced today

along with Special Agent in Charge John P. McDermott of the Department of Veterans

Affairs (VA) Office of Inspector General (OIG), Special Agent in Charge Robert G.

Feldt of the Social Security Administration (SSA) Office of Inspector General and

Special Agent in Charge Rodney E. Clarke of the Internal Revenue Service Criminal

Investigation Division (IRS-CID).

Joe Phillips, 71, and his wife, Dorothy Phillips, 70, both residents of Houston,

surrendered to federal authorities today. A 26-count indictment charging the couple withconspiracy, misappropriation by a fiduciary, making materially false statements to a

federal agency and tax fraud was returned by a Houston grand jury on Thursday, June 24,

2010. The charges, according to the indictment, arise from an alleged scheme to steal

more than $2 million from military veterans deemed incompetent for whom Joe Phillips

served as a legal guardian and fiduciary responsible for managing their financial affairs.

The couple appeared before U.S. Magistrate Judge Nancy Johnson this afternoon and

have been ordered released on bond pending trial of the case. In addition to the bond, the

court has further ordered that the defendants travel be restricted to the Southern District

of Texas.

Joe Phillips, a former employee of the United States Department of Veterans Affairs in

Houston, is an attorney who owns and operates a small law firm - the Law Office of Joe

Phillips in Houston. Dorothy Phillips, his wife, served as his legal assistant and office

manager. According to the indictment, Joe Phillips was either appointed by a probate

court or otherwise designated to serve as the legal guardian and fiduciary for a number of

incompetent veterans. In that role, he opened and maintained bank accounts to receive

benefit payments from the VA and the SSA to pay the ordinary and customary living

expenses of the incompetent veterans, including but not limited to rent, mortgage

payments, utilities and travel. In addition, Joe Phillips was responsible for preparing and

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submitting annual accounting statements to the VA and the SSA reconciling the benefit

payments he received for the veterans against the payments he had made on their behalf.

Joe Phillips was entitled to receive 4% of the funds from each veteran as remuneration for

his services as a court appointed fiduciary or representative pay.

Phillips and his wife are accused of stealing money from the bank accounts of veteran

clients entrusted to Joe Phillips by and through his position as their fiduciary/guardian

/representative payee by transferring funds into the Phillips personal joint bank accountsfor their personal use beginning in or about January 2003 through December 2008,

falsely and fraudulently representing to the VA the amounts of money contained in the

client bank accounts as stated in the annual accounting statements prepared by both of

them and signed by Joe Phillips beginning in 2003 through September 2007 and failing to

report hundreds of thousands of dollars in Schedule C receipts for tax years 2003 through

2007.

The charges are the result of an investigation conducted by the VA - OIG, the SSA - OIG

and IRS-CID initiated in 2008 after the thefts were discovered after a routine audit.

Other than the tax fraud charge, which carries a maximum punishment of three yearsincarceration upon conviction, all other offenses alleged in the indictment carry a

maximum punishment upon conviction of five years imprisonment and a fine not to

exceed $250,000. The Phillips may also be required to pay restitution. Joe Phillips no

longer serves as a fiduciary for any of his former military veteran clients.

This case is being prosecuted by Assistant United States Attorney Vernon Lewis.

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