Wilkins v. AmeriCorp Inc. (In re Allegro Law LLC)

MEMORANDUM DECISION

William R. Sawyer, United States Bankruptcy Judge

This Adversary Proceeding was called for trial on November 4, 2013. Plaintiff Daniel G. Hamm 1 was present in person and by counsel Steve Olen and Lucy Tufts. Neither the Defendants nor their counsel, Thomas McAlpine, appeared. For the reasons set forth below, the Court enters judgment by default in favor of Plaintiff Carly B. Wilkins and against Defendants Timothy McCallan, AmeriCorp, Inc., and Seton Corp., in the amount of $102,949,220.72. The Court will enter judgment by way of a separate document.

I. FACTS & PROCEDURAL HISTORY

A. Overview

This is an extraordinary case of fraud on a massive scale that was perpetrated by Defendant Timothy McCallan (“McCal-lan”) on thousands of victims. McCallan *682 masterminded a debt settlement scheme in which customers were enticed into handing their money to entities controlled by McCallan with a promise that their debts would be either paid or settled. Thousands of customers signed up for debt settlement services offered by McCallan and paid him more than $100,000,000. Almost none of the money was paid to creditors of the customers as promised by McCallan. Instead McCallan, and those in league with him, siphoned off the money into a vast array of companies controlled by or closely associated with him. Among these entities were McCallan’s co-defendants: Ameri-Corp, Inc. (“AmeriCorp”) and Seton Corp. (“Seton”).

McCallan used attorneys as a “front” to perpetuate his scheme and to provide it an air of legitimacy. McCallan’s scheme was most recently fronted by Keith Nelms (“Nelms”), an Alabama attorney whose license has since been suspended for his many unethical activities. 2 Allegro Financial and Allegro Law (collectively “Allegro”) were instrumentalities controlled by McCallan and fronted by Nelms as a law firm. Prior to Nelms, McCallan’s front was Laura Hess, a Florida attorney who was disbarred for actions she took while fronting a previous iteration of McCallan’s. debt settlement scheme, a law firm called Hess-Kennedy.

From the viewpoint of the customer, or victim, McCallan’s scheme began with mass media advertising—television, radio, billboards, etc.—designed to appeal to those in financial distress. The potential customer could call a toll-free number and speak with a representative who would then sign the customer up, promising him that his financial worries would be over. The representative would promise the customer that they would deal directly with his creditors, that all the customer would have to do ‘is pay his money to them instead of his creditors, and that they would take care of the rest. Instead, the customer’s money would be siphoned off under the guise of hidden fees and costs, the customer would be that much poorer, and he would default on his debts because his creditors would go unpaid. As the District Court has aptly noted, the effect of McCallan’s debt settlement scheme on its victims was “personal economic suicide[.]” McCallan v. Hamm, 2012 WL 1392960 , *1, 2012 U.S. Dist. LEXIS 56097 , *3 (M.D.Ala. Apr. 23, 2012). This adversary proceeding is an attempt by the Trustee in bankruptcy to recover the money that McCallan defrauded from these victims.

B. The Allegro Bankruptcies

Nelms originally started Allegro in 2007 as a small solo practice law firm. Chase Bank v. Nelms (In re Nelms), 2014 WL 3700511 , *3, 2014 Bankr. LEXIS 3158 , *7 (Bankr.M.D.Ala. Jul. 24, 2014). At that time, McCallan was perpetrating his debt settlement scheme through the Hess-Kennedy law firm in Florida and was introduced to Nelms through that firm. Nelms, 2014 WL 3700511 at *1-2, 2014 Bankr. LEXIS 3158 at *4-7. After the State of Florida moved against Hess-Kennedy in mid-2008, McCallan tabbed Nelms and Allegro to continue his debt settlement *683 scheme in Alabama. Nelms, 2014 WL 3700511 at *3, 2014 Bankr. LEXIS 3158 at *8.

Nelms ostensibly “hired” McCallan and his entities, AmeriCorp and Seton, to handle back-office processing for Allegro; however, McCallan was effectively running Allegro. Nelms, 2014 WL 3700511 at *3-4, 2014 Bankr. LEXIS 3158 at *8. Allegro’s marketing, form letters, and call centers were provided by McCallan’s entities, and payments from Allegro’s customers were controlled by McCallan’s entities, though the paperwork listed Nelms as the customers’ attorney. Through this setup, McCallan charged Allegro’s customers massive up-front hidden fees for merely holding their money, sent a portion of the collected fees to Nelms, and pocketed the rest.

When the State of Alabama learned of the nature of Allegro’s activities and fee structure with its clients, it placed Allegro in receivership under the control of Louis Colley (“Colley”) in July 2009. Cut off from the wellspring of his ill-gotten gains, Nelms filed Chapter 7 bankruptcy'on February 22, 2010. (Case No. 10-30430, Doc. 1). Daniel G. Hamm (“Hamm”) was appointed as the Trustee in the Nelms bankruptcy and, upon learning of the nature of Nelms’s involvement in Allegro, pulled its components (Allegro Financial and Allegro Law) into Chapter 7 bankruptcy as well. (Case Nos. 10-30630 and 10-30631). Hamm was also appointed Trustee in the Allegro bankruptcies. 3

On May 20, 2010, Colley filed a motion for administrative expenses for the payment of almost $400,000 in invoices sent by AmeriCorp and Seton. (Case No. 10-30631, Doc. 74). The Court issued a Memorandum Decision in July 2010 in which it deferred'payment, expressed its concerns about the value of the services allegedly rendered, and asked the following questions:

1. How much money was taken from Allegro clients?

2. How much of that money was taken by Nelms?

3. How much was paid to AmeriCorp, Seton and other third parties?

4. How much was paid to creditors of the Allegro clients?

(Case No. 10-30631, Doc. 105, p. 15).

To answer these questions, one must have the records of the Allegro companies. Yet, Allegro did not keep its own records and it did not own or control the data that its business activities generated. Nelms was incapable of answering these questions because he did not keep his own records. Instead, almost all of the business records of the Allegro companies were kept by AmeriCorp. Therefore, the key to understanding what happened to the money of the victims (creditors in the Allegro bankruptcies) was to get these records from AmeriCorp, which was controlled by McCallan.

As the Court will discuss below, it has taken years of litigation to learn the answers to these questions. However, a review of the Allegro claims register reveals that 5,214 claims have been filed by Allegro’s creditors for a total amount of $102,949,220.72. (Case No. 10-30631). The evidence will support a range of figures both as to the numbers of victims and the amount by which they were defrauded. The Court has heard figures as high as 30,000 victims and $160,000,000.00.. As a result of the duplicity of McCallan, Nelms, *684 and those in league with them, the true figures will never be known. The Court will limit its judgment here to the 5,214 claimants in the amount of $102,949,220.72. The undersigned, having spent five years and several thousand hours on this case, is of the view that this number of claimants and this amount of claims are reasonable. The true figures are certainly higher.

C. The Adversary Proceeding

1. Initial Pleadings, Arbitration Motions, and Appeal

In his capacity as Trustee of the Allegro bankruptcies, Hamm filed suit against McCallan, AmeriCorp, and Seton on February 15, 2011. (Doc. 1). In his amended complaint, Hamm asserted that the Defendants served as the alter ego of Allegro, and sought turnover of property of the estate (Count I), avoidance of preferential transactions (Count II), avoidance of post-petition transfers (Count III), avoidance of fraudulent transfers (Count IV), and an accounting of the fees the Defendants collected (Count V). (Doc. 6).

McCallan moved to dismiss (Docs. 28 & 29), while AmeriCorp and Seton moved to compel arbitration (Docs. 31 & 33). The Court denied both motions on July 8, 2011. (Doc. 66). AmeriCorp and Seton appealed the denial of their motion to compel arbitration and moved to stay proceedings pending appeal (Docs. 70 & 74), and McCallan likewise moved to compel arbitration (Doc. 72). The Court denied McCallan’s motion to compel arbitration and he appealed. (Docs. 98 & 104). The Court also denied AmeriCorp’s and Seton’s motions to stay proceedings and ordered the parties to commence discovery. (Doc. 99). The Court subsequently issued a report and recommendation for the benefit of the District Court, to which the Defendants objected. (Docs. 140 & 147). The District Court ultimately affirmed this Court’s denial of the Defendants’ motion to compel arbitration. McCallan v. Hamm , Case No. 2:ll-cv-784-MEF, 2012 WL 1392960 , *7, 2012 U.S. Dist. LEXIS 56097 , *22 (M.D.Ala. Apr. 23, 2012) (Docs. 194 & 195).

2. Discovery Proceedings:

The Allegro Database

a. First Discovery Order

Hamm learned early in the Allegro bankruptcy proceedings that Nelms and Allegro did not keep and maintain their own business records. He was told by Nelms, McCallan, and others that the Allegro records were kept by AmeriCorp in an electronic form on AmeriCorp’s computer servers. Hamm asked McCallan for access to the Allegro records (Docs. 7 & 8) but was refused.

The first discovery hearing in this litigation took place on August 18, 2011, where the Court first discussed production of the Allegro database. As a result of discussions had at the August 18, 2011 hearing, the Court entered its first discovery order on August 22, 2011 (“First Discovery Order”). (Doc. 103). In the First Discovery Order, the Court set out a process that was designed to give Hamm access to the electronic database kept by AmeriCorp that held all of the business records of the Allegro companies. The First Discovery Order called for two things. First, it required a meeting between technical experts for both parties to discuss production of the database and to arrive at means of getting Hamm access to the Allegro records. Second, it called for the lawyers to ' discuss the matter and then report to the Court whether the problem had been resolved. (Doc. 103).

b. Second Discovery Order

The intent of the First Discovery Order was to permit Hamm to inspect, copy or clone the database. A trustee in *685 bankruptcy has a right to look at a debt- or’s books and records. See U.S.C. § 542(e). 4 Indeed, it may be said that he has a duty to look at his debtor’s books and records. See 11 U.S.C. § 704 (a)(4). 5 As early as August 22, 2011, it was clear that the Court wanted the Defendants to provide Hamm access to the Allegro books and records, which were kept in electronic form by AmeriCorp. (Doc. 103).

In direct contravention of the First Discovery Order the Defendants refused to permit Hamm access, forcing Hamm to file his first motion to compel. (Docs. 112 & 113). The Court held an evidentiary hearing on November 14, 2011, and granted Hamm’s motion to compel the same' day (“Second Discovery Order”). (Doc. 138).

The Second Discovery Order provided, in part, that:

The Defendants shall produce the database which is the subject of these proceedings on a server which is to be made accessible to the Plaintiff. Plaintiff may access the service directly and thereby access the database upon reasonable notice. Plaintiff shall have reasonable access to the server and the data without interference from or observation by the Defendants, their agents, parties they otherwise control under contact, or otherwise. Plaintiff may clone the database, the front end application program, and any other electronically stored information, programs or application, which may be necessary for them to access, view, and work with the subject data. The database shall be produced in its original form and shall not be altered, deleted, or modified. The Defendants shall cooperate with the Plaintiff in their effort to access the database.

(Doc. 138).

On January 13, 2012, the Court awarded Hamm attorneys’ fees in the amount of $29,687.95 for the costs he incurred in filing his motion to compel. (Doc. 154). The Second Discovery Order was simple and direct: allow Hamm access to the computer servers, so that he could clone the database in order to have his own copy of the data that he could use in his efforts to administer the Nelms and Allegro bankruptcy estates.

c. Third Discovery Order, Contempt, & Arrest

On January 25, 2012, Hamm filed his first motion for sanctions, claiming that McCallan had not complied with the Second Discovery Order and had committed a host of discovery depredations. (Doc. 155). On February 14, 2012, Charles Parnell, Julian Spirer and Mark Rosenberg— the Defendants’ first team of lawyers— moved to withdraw, citing in part McCal-lan’s lack of cooperation in complying with the Second Discovery Order. (Doc. 168).

The Court held a hearing on Hamm’s first motion for sanctions on February 16, 2012 and granted it in part and denied it in part. (Doc. 177). Hamm had requested entry of default judgment as a sanction for the Defendants’ failure to comply with the Second Discovery Order. (Doc. 155). He also requested an additional $42,787.75 in attorneys’ fees. (Doc. 175). The Court denied Hamm’s request for default judgment, but it held the Defendants in contempt and again ordered them to produce *686 the requested database, as well as several additional items, in an order dated February 22, 2012 (“Third Discovery Order”). 6 (Doc. 177). More significantly, the Court ordered McCallan to appear in person at a hearing scheduled for March 5, 2012, and advised him that “[t]he Court will consider monetary sanctions, incarceration or entry of judgment by default.” (Doc. 177). The Court ordered Parnell and Spirer to use their best efforts to provide McCallan notice of the March 5, 2012 hearing. (Doc. 177).

McCallan did not appear at the March 5, 2012 hearing. The Court found McCallan in contempt of court and issued a warrant for his arrest. (Doc. 183). On March 7, 2012, the Court granted the motion to withdraw as counsel filed by Parnell, Spirer and Rosenberg. (Doc. 184).

On March 8, 2012, McCallan was stopped by police in New Jersey for speeding. The police officer checked the national NCIC database, discovered the bench warrant issued by the Court, and arrested McCallan. The following day McCallan was released from jail and was ordered to appear in this Court not later than March 14,2012. (Doc.198),

d. Defendants’ April 2012 Production

On March 14, 2012 a second team of lawyers from the firm Haskell Slaughter entered their appearance on behalf of the Defendants. 7 (Docs. 186, 187, & 191). McCallan appeared before the Court on March 14, 2014 with his new lawyers and promised to produce the Allegro database. The Court scheduled a follow-up hearing for April 9, 2012. (Doc. 188). On April 23, 2012, Thomas Mancuso (“Mancuso”) filed a lengthy “notice of compliance” in which the Defendants “assert[ed] emphatically” that they had complied with the Court’s order. (Doc. 190).

The Defendants produced data stored on a CD (compact disc) rather than allowing access as ordered by the Court in the Second Discovery Order. (Doc. 138). Since production was made by way of delivering a CD and not by providing Hamm actual access to computer servers, the Defendants’ production was facially deficient. The Defendants attempted to cover this defect by claiming (falsely as it would turn out) that the servers had been deactivated, and for that reason production by the method called for in the Second Discovery Order was not technologically possible. (Doc. 190).

e. Hamm’s Second Motion to Compel

On September 24, 2012, Hamm filed a second motion to compel in which he asserted that the data produced by the Defendants was not usable. 8 (Doc. 203).

*687 The Court ordered the parties to confer in advance of the evidentiary hearing on Hamm’s motion to compel and attempt to resolve their differences. (Doc. 207). Over the objections of Hamm’s counsel, the Defendants’ lawyers had a court reporter transcribe the meeting, providing the Court a revealing window as to how the case was proceedings. (Doc. 239, Ex, 1, pp. 3-8). At this time, the Defendants’ lawyers were claiming that the database could not be produced as called for by the Court’s Second Discovery Order, and that production would have to be made by alternate means—a claim which was later shown to be false. The following are excerpts from the October 22, 2012 conference:

MR. OLEN: Well, that’s—that’s very, very clear and very easy. What we want the defendants to do, and what y’all have not done, is to produce all of this information exactly the way it existed when the business was operating. MS. LEES: Well, you know—I mean, there are some technological impossibilities so—you’ve already said you don’t like having to go in through each individual consumer because it’s slow. So I can’t speed it up because of the technology. So how am I going to fix that part?

MR. OLEN: No. You’re mischaracteriz-ing what I just said. We want it to work the way it worked when the business was operational, and we are absolutely convinced that it worked differently than when—it worked differently when the business was operational than the manner in which you have provided it to us.

(Doc. 239, Ex. 1, pp. 28-29) (emphasis added).

This discussion went on for some time but this exchange captures the positions of the parties. Hamm’s counsel, Steve Olen, repeatedly demanded that he be given access to the database as it existed when Allegro was operating and the Defendants’ counsel, Meredith Lees (“Lees”), stated that it was technologically impossible, that production would have to be made in another manner. The problem with the alternate means was that even if the data was contained in the database, it was not accessible.

The exchange which best captures the duplicity of Defendants’ counsel is as follows:

MR. OLEN: Well, I don’t know what the word “conflate” means. But what I do know is you are correct that we want the same functionality that existed before the defendants went out of business. And where we disagree is we believe that is absolutely what we’re entitled to.

And when you say what’s our proposal, that is our proposal. And according to the testimony, y’all did in fact preserve all of this in its entirety, including its functionality. And so that’s what we’re looking for.

MR. MANCUSO: And my question, Steve, is did Lewis Colley, under the direction of the Alabama Securities Commission which filed a petition in the circuit court, what steps did Lewis Col-ley take?

Because we didn’t go out of business, Steve. We stopped operations because they were taken over by the Securities Commission.

MR. MANCUSO: And then—and then, Meredith, there’s another intervening step. What did Mr. Hamm do when he became the trustee pursuant to the Court order? What actions did he take to see whether or not that database was in the same state it was in when we *688 were running the company? What did he do? Do you have a report from Mr. Hamm?

MR. OLEN: Why are you asking that question? How is that relevant to this discussion?

MR. MANCUSO: Well, because we’ve got a number, Steve, of intervening parties who had access to the database. And we don’t know what they did.

We tried to—we tried to do this, Steve, based on—we’re three parties removed at this point in time in your lawsuit. You’ve got the securities commission, you’ve got Lewis Colley, you’ve got his accounting firm and then you’ve got Mr. Hamm taking over under the Court order.

MR. OLEN: Well, there is absolutely no evidence or any other basis for your suggestion, implication, accusation, whatever it is, that anyone ever did anything to alter the defendants’ computerized information in any way.

(Doc. 289, Ex. 1, pp. 33-36) (emphasis added).

The position taken by Defendants’ counsel, Meredith Lees and Thomas Mancuso, here was outrageous. To begin with, the Court’s Second Discovery Order required the Defendants to make their computer servers available to Hamm’s computer experts, so that he could make his own copy of the database. (Doc. 154). By that time, the Court had already conducted several hearings, as well as one full-blown eviden-tiary hearing, on the question of production and functionality of the database. The purpose of the Second Discovery Order was to stop just this sort of game-playing. Yet, Lees persisted in the false argument that production could not be made in the manner called for by the Court’s order because it was technologically impossible.

Mancuso raised their duplicity to another level when he falsely claimed that Col-ley and Hamm had obtained control of the Allegro database. But it was McCallan, acting through AmeriCorp and Seton, who controlled the database at all times, because it was McCallan who was running Allegro. Mancuso’s claim that his clients no longer controlled the database was patently false. Indeed, it was Mancuso who filed a “Notice of Compliance” five months earlier, contending that the Defendants were then in compliance with the Court’s Second Discovery Order—because they had produced a copy of the database. (Docs. 190 & 197). Nowhere in these responses did Mancuso claim the database was no longer in the control of the Defendants.

f. Database Fundamentals

To understand the problem that Hamm was having with discovery, one must understand something of AmeriCorp’s databases and of databases in general. At the evidentiary hearing conducted on February 21-22, 2013, the Court learned that AmeriCorp used Microsoft SQL Server, a relational database. “SQL” means survey query language. Large quantities of data may be stored and later accessed. The data is stored in tables that are defined by the user, and the means by which the tables relate to one another is also defined by the user. There are two primary means to accessing data in a database. First, one may write a query—a question—where the database program will access the database and arrive at an answer. Second, the user may use a “front-end application,” which is a separate program used to access the data.

i. Writing a Query

Writing a query requires knowledge of database operations and some expertise. More importantly, in order to write a *689 query one must understand how the tables relate to one another. The following exchange between Defendants’ counsel, Meredith Lees, and their database expert, Matthew Long (“Long”), at the February 21-22, 2013 evidentiary hearing is instructive:

MS. LEES: You heard—Mr. Middleton testified at length the reason he couldn’t have written SQL queries is because he didn’t understand how the defendant’s business operated. Is that—was that necessary for you? Did you have to know how the front end applications worked and how all of the table spoke to one another to be able to write the SQL queries?

MR. LONG: Well, let me be clear here. You combined a couple of things in that question. The front-end applications, no. How, the table related to one another, yes, I did need that information.

MS. LEES: How did you determine how the tables related to on another? MR. LONG: I interviewed a couple of member of the AmeriCorp previous executive team.

(Doc. 259, pp. 95-96).

The significance of this testimony is that Long had assistance from AmeriCorp personnel to obtain the information necessary to write queries. Hamm’s expert, Jeff Middleton, testified that he was not given the information necessary to write a query. Counsel for the Defendants postured that Hamm did not understand the Defendants’ business, or that his experts did not understand the database, but the Defendants’ own expert undercut that argument. Long was able to write queries to access the data because AmeriCorp personnel gave him assistance as to how the information in the various tables were related.

The following hypothetical will illustrate this point. Assume that one has a paper telephone directory with 30,000 entries— that is 30,000 names with corresponding addresses and telephone numbers. Assume further that someone takes a pair of scissors and cuts up the directory so that a reader could not tell which name went with which address or telephone number. Assume further that all of these separate tables—names, addresses, and telephone numbers—are thrown into a barrel, shaken up, and given to someone from out-of-town. In theory, the entire directory could be produced without providing any useful information.

The same is true of databases. If there are thousands of entries organized by different tables, but there is no way to relate an entry’s information in one table to its corresponding information in other tables, the entire database could be produced without providing anything usable. That is what the Defendants produced throughout the course of this litigation. Even if they produced all of the data—a doubtful assumption in this case—there was no way to relate the data, rendering it useless. In essence, the Defendants produced the barrel with all of the information in it, but no . way to relate one piece of information to another.

ii. Front-End Application

The other means of accessing a database is through a “front-end application.” A front-end application is a computer program that enables a user to access data in a database without having to write a query. An example that would be familiar to. those who work in the federal court system is the CM/ECF system. The data in a federal court’s files is maintained in a database known as “Informix.” That is, all of the information in the various clerks’ offices resides in an Informix database. The means by which users—e.g., lawyers, judges, and administrative staff—access the Informix database is by way of a front- *690 end application called “CM/ECF,” which is an internet-based application program. Most users are not, and need not be, aware that they are accessing an Informix database.

Returning to the AmeriCorp database, the point of the Court’s Second Discovery Order was to permit Hamm and his computer experts and accountants to clone or copy the front-end applications. In spite of repeated orders that the front-end applications be produced, and contrary to repeated representations from the Defendants and their counsel that they had been produced, a database with working front-end applications was not in fact produced until November 26, 2012. (Doc. 224, p. 30). The Defendants’ actions of producing data without a front-end application effectively kept Hamm and his experts in the dark as to ■ what was actually in the database.

g. The February 21-22, 2013 Sanctions Hearing

When Hamm filed his second motion to compel, on September 24, 2012, the Court initially scheduled an evidentiary hearing on Hamm’s motion for November 5, 2012. (Doc. 207). On October 29, 2012, Defendants filed an “Emergency Motion to Continue” the evidentiary hearing, complaining that Hurricane Sandy made it impossible to prepare for the hearing. (Doc. 210). The Defendants attached copies of news articles about Hurricane Sandy’s imminent landfall in the New York area, but failed to mention that the computer servers containing the Allegro database had been moved to Florida a year or more earlier. Not realizing that it had again been misled by the Defendants and their counsel, the Court rescheduled the evidentiary hearing for January 29, 2013. (Doc. 216). 9

On January 23, 2013, Hamm filed a second motion for sanctions. (Doc. 224). Thirty pages long, the motion scathingly set out the Defendants’ multitudinous discovery violations in excruciating detail. (Doc. 224). This triggered another request for delay from the Defendants, so the Court' rescheduled the evidentiary hearing for February 21, 2013. (Doc. 231).

The evidentiary hearing on Hamm’s second motion for sanctions lasted two days. (Docs. 259 & 261). Hamm called Jeffrey Middleton (“Middleton”), a computer expert, who testified that the database produced by the Defendants in April 2012 was not accessible, for the reasons already discussed, and was also incomplete based on the presence of additional documents in their November 2012 production. (Doc. 259, pp. 24-67). Middleton’s testimony was forthright and credible.

Defendant Timothy McCallan also testified on February 21, 2013. McCallan acknowledged that he was the owner and chief executive officer of AmeriCorp and Seton. (Doc. 259, p. 111). The next exchange was astounding:

MR. OLEN: Where did you move the servers to after the business closed down on March 31, 2011?

MR. McCALLAN: The servers were migrated to Florida into a center called CNI, which is a third-party hosting company.

MR. OLEN: And are they still there today?

MR. McCALLAN: Yes.

MR. OLEN: Are you aware that, until you testified right here, a few minutes *691 ago, that nobody told us that the original servers from AmeriCorp and Seton are physically located at CNI in Florida? Are you aware of that?

MR. McCALLAN: I am not aware of— no, I am not aware of that.

(Doc. 259, pp. 113, 118). Testimony by Oscar Nunez, AmeriCorp’s IT manager, was even more illuminating:

MR. OLEN: Now, in October, you just testified that in October 2011 you had all of the infrastructure in place for someone to work from home on those Ameri-Corp servers; is that right?

MR. NUNEZ: Yes.

MR. OLEN: And so the system was essentially rebuilt in Florida, right?

MR. NUNEZ: Rebuilt in Florida?

MR. OLEN: In other words, when it went to CNI, it was fully functioning and someone could have remoted into the servers and operated QPS and Cre-ditSoft [AmeriCorp’s front-end applications] just like you would if you had been in New York, right?

MR. NUNEZ: Yes.

MR. OLEN: Was the system in Florida that was fully operational ever dismantled?

MR. NUNEZ: No.

MR. OLEN: So it has worked just like that from October 2011 to at least eight months ago [June 2012], which is the last time that you had any knowledge of it, the last time you were employed there?

MR. NUNEZ: Yes.

(Doc. 259, p. 182) (bracketed matter added).

Oscar Nunez’s testimony shows that the representations made by the Defendants’ counsel, Meredith Lees and Thomas Man-cuso, were false in two respects. First, their assertion that it was impossible to provide access to the database was proven false because the servers containing the database were fully operational and were being maintained in Florida. There was no reason why the Defendants could not comply with the Court’s Second Discovery Order by providing Hamm access to the servers. Second, the Defendants’ assertion that they needed a continuance due to Hurricane Sandy was shown to be false, again because the servers were in Florida, not New York.

The Court took Hamm’s second motion for sanctions under advisement. In late June of 2013, the Defendants finally provided Hamm access to the servers (and database) in Florida. 10 The Court scheduled trial for November 4, 2013. (Doc. 253).

3. Pre-Trial Proceedings

a. The Haskell Slaughter Lawyers Withdraw

On June 6 and 7, 2013, the Defendants’ second team of lawyers moved to withdraw their appearance, citing the Defendants’ refusal to communicate with them or to pay their fees. 11 (Docs. 277, 278, 283, & 293). The Court scheduled a hearing on the motions for July 22, 2013, and ordered McCallan to appear in person. (Doc. 279).

*692 At that hearing, the following exchange occurred:

THE COURT: ... My primary concern is I want to get this case tried. It is scheduled to go to trial in November of this year. Now, whether that is going to happen or not, we will talk about in a few minutes.

I guess my number one question is where do you stand with respect to the motion to withdraw?

MR. McCALLAN: I do allow the motion to withdraw. At this time, Your Honor, I don’t have the financial resources and, with the toll that this has taken on my wife, my kids and my family, I just can’t defend this case any more.

THE COURT: Okay. Well, I mean, if that is your position, then that is fíne. I’m going to tell you right up-front I don’t believe it. I mean, I saw an awful lot of money going through this case, an awful lot of money going to AmeriCorp and other entities, you know, owned or at least believed to be controlled by you. So you are telling me you can’t afford it but, I mean, what is ... so I take it you intention is not to try and retain other counsel?

MR. McCALLAN: I am just trying to sort through, what options could be, Your Honor.

THE COURT:- Well, I mean, the lawyers you have got right now, the Haskell Slaughter lawyers, have been in for over a year now and we will get to the -matter of discovery in a minute. I 'want to make sure I understand where were are on that, but I don’t have to grant their motion, and you know, I haven’t decided that I am going to grant it yet.

One of the things I am concerned ' about is I want to get this case tried by November, if at all possible, and if you get new counsel, they almost certainly will come in and ask for additional time and ask to kick this off. So that is one problem and I am sure you have probably been counseled on all of this but the trustee is not just suing the corporations, he is suing you personally and, depending on how this all shakes out, you could end up with a very large nondischargeable liability against you.

So I don’t think you ... well, you would be taking a real risk if you just let this thing go by default. And, of course, the immediate problem is you can represent yourself, you could maybe stave off default for a while but you can’t represent corporations. Alabama law doesn’t allow that. So they are going to be in default if you haven’t got other counsel.

So, anyway, I guess for now you are telling me you are not opposing the lawyers’ motion to withdraw and you are not ... you don’t have other counsel that you are going to retain; is that correct?

MR. McCALLAN: No, sir.

(Doc. 303, pp. 4-7). Based on McCallan’s representations, the Court granted the motions to withdraw filed by the Defendants’ counsel on July 23, 2013. (Doc. 296).

b. Thomas McAlpine Appears and Attempts to Delay Proceedings

Four days after McCallan indicated to the Court that he would not retain new counsel, Mobile lawyer Thomas McAlpine (“McAlpine”) entered his appearance on behalf of the Defendants on July 26, 2013—a Friday—and moved to quash depositions that were scheduled for the following Monday, precisely as the Court had predicted. (Doc. 301). The Court was troubled with both the timing of McAl- *693 pine’s motion and the tactics he used in filing it.

McAlpine called the Court’s chambers early that Friday and spoke with the undersigned’s Judicial Assistant, inquiring about technical matters such as the Court’s CM/ECF system. Yet he waited until after 4:00 p.m. to telephone the Court—ex parte—with a false claim that 'he could not file using the Court’s CM/ ECF filing system. McAlpine represented to the Court that he had been advised by the Clerk’s office that it would take five days to be approved for a CM/ECF login, and that he needed to file his motion via facsimile. In fact, McAlpine had not even requested a CM/ECF login and did not do so until 4:40 p.m. that Friday; the Clerk’s office emailed him his CM/ECF login twenty minutes after it opened the following Monday, less than one business hour after he had requested it. In other words, McAlpine contrived his emergency to try to obstruct the proceedings. Additionally, the Court later learned that McAlpine had not contacted opposing counsel to inform them of his motion to quash.

The Defendants’ July 26 “emergency” motion was nothing more than an obstructionist tactic in a case that had seen the Defendants employ a litany of them. The Court denied the Defendants’ motion to quash, finding that it was filed in bad faith. (Doc. 300). 12

On July 29, 2013, counsel requested a telephonic hearing where McAlpine moved to change the location of a deposition scheduled for that Thursday, August 1, from Orlando, Florida to Mobile, Alabama. Again, the Court denied the Defendants’ motion, while McAlpine repeatedly interrupted the Court during its ruling. The Court reprimanded McAlpine in its subsequent written order:

The Court would further caution Attorney McAlpine about what it considers McAlpine’s rude and unprofessional behavior. The Court is aware that he is disappointed with this ruling and the Court’s Order of July 26, 2013[.] However, McAlpine’s recriminations and complaints after an adverse ruling are unacceptable. For example, the fact that McAlpine has been practicing law since 1976, or that he had to spend the whole weekend preparing for depositions, was not pertinent. McAlpine is advised that at some point rude and unprofessional behavior crosses the line and becomes contemptuous.

(Doc. 302) (parenthetical omitted).

c. Hamm’s Third Motion for Sanctions

On August 20, 2013, Hamm filed a third motion for sanctions. (Doc. 307). He asserted that he was unable to make distributions to creditors of the Aligero bankruptcy estate due to the Defendants’ stonewalling on discovery, causing those creditors to incur continual interest on the outstanding debts they owed that in Hamm’s estimate amounted to $895,968.32. 13 Hamm had also been forced *694 to post $71,000 in bonds as security for the money in the bankruptcy estate, and had incurred $32,489.63 worth of banking service fees during that time. Altogether, Hamm asked for $999,457.95 in costs incurred due to fees and the lost use of the estate funds. (Doc. 307).

The Defendants, through McAl-pine, filed a particularly vituperative response to Hamm’s motion. (Doc. 311). They asserted that Allegro should have remained under the control of the Receiver, “stated unequivocally” that Hamm breached his duties as Trustee of the Allegro bankruptcy estate by making “a number of incredibly bad business decisions[,]” and claimed that Hamm’s handling of the money was “incredibly inept[ ]” and bore “very closely to abuse of the discretion” of a Trustee. 14 (Doc. 311). They also claimed that their “duty is only to reasonably respond to discovery,” ignoring the fact that they held Allegro’s business records and persistently tried to thwart discovery. (Doc. 311).

The Court took Hamm’s third motion for sanctions under advisement. Having carefully considered Hamm’s motion and the Defendants’ response, the Court finds that the motion is well-taken and should be granted as filed. These proceedings were delayed by several years as a result of the Defendants’ well-documented obstructionist tactics. The Defendants’ intemperate criticism of Hamm’s performance as Trustee in the underlying bankruptcy eases is not well-taken. Neither McCallan nor McAlpine have any experience acting as a trustee in cases such as this and they offer no evidence in support of their opposition. Put simply, they do not know of what they speak. The Defendants’ objections are overruled and the Court will, by way of a separate document, award sanctions,

d. The Defendants’ Pre-Trial Motions

On September 30, 2013, McCallan individually moved for summary judgment, supporting his motion in part with documents not previously produced to Hamm. (Doc. 320). Hamm moved to strike those documents and opposed summary judgment. (Docs. 327 & 328).

On October 22, 2013—just thirteen days before trial—the Defendants moved for the undersigned to recuse himself. (Doc. 332). The merits of the Defendants’ motion to recuse will be discussed in greater detail below. Hamm opposed the motion to recuse, reiterating the Defendants’ discovery abuses and the impending trial. (Doc. 333). The Defendants dismissed Hamm’s response as “based upon hyper *695 bole and devoid of facts and merit.” (Doc. 337).

The Court heard both motions at a pretrial hearing on October 28, 2013, and denied both. 15 (Docs. 338 & 344). 16 The parties discussed expected witness and evidence to be offered at the trial scheduled for November 4, 2013, and McAlpine gave every indication that he would appear on behalf of the Defendants. (Doc. 344). The following colloquy occurred at the October 28 pre-trial hearing:

MR. McALPINE: Your Honor, with regard to the Chase records, I have seen them. I have not had an opportunity to go through them at length but essentially what they are trying to do with those Chase records violates Rule 400 and 401 of the Federal Rules of Evidence. They are trying to prove that Mr. McCallan and/or his companies are bad before this court in this case because of something that occurred in another case before another court or it may be in this court, I am not sure.

THE COURT: Okay. So if I am understanding Rule 400, you are saying that your are not objecting on the grounds of authenticity but you want to object on the grounds of relevance and materiality?

MR. McALPINE: That’s correct. I don’t think that we have an objection on grounds of authenticity if they are in fact as she says they are. I would reserve any objection to that until the time of trial.

With regard to McCallan being called as a witness by order of this court, we do not intend to call Mr. Timothy - McCallan as a witness. We do not believe it is necessary.

With regard to the judicial notice, there are a number of things which have come in, in these motions and these hearings from the plaintiffs which are pure hearsay and are not admissible and, therefore, we would object to those and we will be objecting to them.

(Doc. 344, pp. 44-45). The Court reiterated that it would conduct the trial on November 4,2013.

e. The Trial

The trial took place as scheduled on November 4, 2013, where the following proceedings occurred:

THE COURT: Okay. Well, good morning. Let’s take appearances. First for the plaintiff.

MR. OLEN: Steve Olen and Lucy Tufts for the plaintff, Daniel Hamm, the trustee.

THE COURT: Good morning.

MR. HAMM: Daniel Hamm, the trustee.

THE COURT: Okay. Well, I do not see anybody. Do we have anybody for the defendants?

[No response.]

THE COURT: By my watch, it is now eleven minutes past nine o’clock. This case was scheduled for 9:00 a.m. this morning. It has been scheduled for many months. We had a pretrial conference just last week. I didn’t get any indication at all from Mr. McAlpine that he didn’t intend to appear. It was dis *696 cussed that Mr. McCallan would not appear but we have him by deposition and that was not going to hinder the trial, in my view. If he didn’t want to testify live, that was his business.

We telephoned Mr. McAlpine’s office and didn’t get any information. He has not telephoned chambers. He has telephoned chambers in the past when it suited him.

So, anyway, I intend to go forward with the trial. You know, it is scheduled, so my recollection was—we had a discussion, I guess—well, Mr. McCallan is not here. You have got his deposition.

I guess the next question is who have we got that you had intended to call live and then, I guess, Mr. Olen, I want your thoughts. I mean, do you want to just proffer or do you want to actually call the witnesses? You know, I am assuming at the end of the day you are going to ask for a substantial money judgment in favor of the plaintiff. I guess I am not giving anything away. I am going to be inclined to grant that at this point.

They have already filed notice or a motion for an interlocutory appeal. We did a little research, just on the off chance that they might have been under the impression that the interlocutory appeal would somehow divest the court of jurisdiction. It does not. They have not moved for a stay. I really don’t think they can be under some sort of misimpression that there would not be a trial today.

So, needless to say, you know, I don’t know why Mr. McAlpine is not here. I am a little perturbed that, you know, if he has had some sort of difficulty, a car issue or something, that he could have called. It is the age of cell phones. It is a pretty simple matter and, like I said, we did check in with his office.

So I guess, Mr. Olen, what are your thoughts? How do you want to proceed?

MR. OLEN: Your Honor, what I would like to do, if it’s okay, is have maybe ten minutes to confer with Ms. Tufts. I am caught off-guard. I did not—

THE COURT: Well, I know you have tried a lot of eases in your life. Have you ever had this happen?

MR. OLEN: Never, never, and particularly where the opposing counsel didn’t call the court, or us, or anyone. I have never had this, and the issue for us is that I would just like a few minutes to discuss how much of the evidence ....

(Doc. 349, pp. 3-5). The Court heard evidence from witnesses called by the Plaintiff until 11:58 a.m. and then broke for lunch. (Doc. 349, pp. 7-93). The Court resumed the trial at 1:04 p.m., where the following proceedings occurred:

THE COURT: Please be seated. Mr. Olen, Ms. Tufts, I just wanted to report Cynthia Sanders, who is one of our Case Administrators—she is actually the case administrator assigned to this adversary proceeding. She received a phone call from a man who would" not identify himself who asked if we were having a trial today. She said, yes, that the trial was going on. The man then said, “Well, I filed a motion so that wasn’t supposed to happen.” She said, well, she didn’t know, that he should call chambers. She asked the man to identify himself and he did not, but she did note his telephone number on the caller ID and • it was in fact Mr. McAlpine. 17

*697 Whether he really thought—as I am sure you are aware, Mr. Olen, you saw on the 30th, last Wednesday, he filed a motion for leave to take an interlocutory appeal. I saw is the day it was filed or within a day after and as, as you are aware, I did not ask you to respond because I had no intention of considering the motion prior to the trial; and there was no motion to stay and, as of yet, I have taken no action on the motion for an interlocutory appeal.

I don’t know if this is yet more game playing on the part of the defendants or an absolutely shocking ignorance of the law and rules of procedure. Either way, we’re going forward. I thought I would report the phone call but Ms. Sanders, our case administrator, you know, said that it was going forward and invited him to call chambers, which he did not.

(Doc. 349, pp. 93-94) (footnote added). The Court continued to hear evidence from witnesses called by the Plaintiff until it adjourned at 3:03 p.m. (Doc. 349, pp. 95-157).

At the time the this case was called for trial, the Court did not know where McAl-pine was or why he was not in court. It elected to proceed, knowing that if McAl-pine had a valid reason for not being present, such as car trouble or a significant health issue, that the November 4 proceedings may have been all for naught. McAl-pine did not telephone the Court to make everyone aware that he had decided not to attend trial. Moreover, he was not in his office when the Courtroom Deputy telephoned inquiring as to McAlpine’s whereabouts. The individual who answered the telephoned claimed to not know where he was. Neither McAlpine nor any representative of the Defendants has contacted the Court at any time since the November 4, 2013 trial to explain their absence or request a further hearing. It is clear beyond all doubt that the Defendants and their counsel wilfully absented themselves from the trial.

All of this smacks of the worst kind of gamesmanship. McAlpine’s actions, leading the Court to believe that he would be present for trial and then not appearing, not advising that he would not appear, and then willfully absenting himself so as to create uncertainty, is utterly inexcusable conduct.

D. Findings of Fact

At the conclusion of the November 4, 2013 trial, the Court requested that the Plaintiff provide “Proposed Findings of Fact and Conclusions of Law.” The Plaintiff complied on December 3, 2013. (Doc. 355). The Defendants have not filed a response. The Court accepts the proposed findings of fact and conclusions of law, except to the extent inconsistent with the conclusions of law reached in this opinion. The Court attaches a copy of the proposed findings of fact and conclusions of law as Appendix B.

Notwithstanding the Court’s acceptance of the proposed findings of fact as submitted by the Plaintiff, a brief summary of the facts is appropriate here. Defendant Timothy McCallan operated a fraudulent debt management and debt settlement business. The primary vehicle through which McCal-lan operated his scheme was Defendant AmeriCorp. The “front” for the scheme— that is, the face actually shown to the public—was Allegro Finance and Allegro Law. Both of the Allegro entities were owned by Keith Nelms. Nelms was a practicing lawyer with an office on Cobbs Ford Road in Prattville, Alabama. Nelms had no experience in the debt management business and, in his testimony in several *698 proceedings 18 before this Court, Nelms made it clear that he did not have any idea how the business actually works. Indeed, the only reason McCallan used Nelms was because his previous “front,” the Hess-Kennedy law firm, had been shut down by the State of Florida.

Using a sophisticated array of advertisements and telemarketers, McCallan induced at least 5,214 individuals to sign up for his program. His victims signed up under the belief that they would be represented by an attorney, Nelms, and that he would negotiate a settlement with their creditors (usually credit card companies). McCallan instructed these individuals to stop paying on their debts directly, and induced them into transferring a portion of their income to entities controlled by him, with the promise that their debts would be taken care of. They were not. Virtually all of the money paid by Allegro customers toward the goal of debt settlement was siphoned off by McCallan and those in league with him. The Court finds that AmeriCorp, Seton, and McCallan defrauded their victims out of $102,949,220.72.

II. CONCLUSIONS OF LAW

The Court will divide its Conclusions of Law into three parts. In Part A, the Court will consider its jurisdiction and adjudicatory power. In Part B, the Court will discuss the Defendants’ motion to re-cuse the undersigned. In Part C, the Court will consider whether default judgment is appropriate.

A. Jurisdiction & Adjudicatory Power 1. Jurisdiction

A district court has original jurisdiction over “all civil proceedings arising under title 11, or arising in or related to cases under title 11.” 28 U.S.C. § 1334 (b). A district court may refer all such cases to the bankruptcy judges for the district, 28 U.S.C. § 157 (a), and the District Court for the Middle District of Alabama has done so. See General Order of Reference— Bankruptcy Matters (M.D. Apr. 25, 1985).

“ ‘Arising under’ proceedings are matters invoking a substantive right created by the Bankruptcy Code.” Continental Nat’l Bank of Miami v. Sanchez (In re Toledo), 170 F.3d 1340, 1345 (11th Cir.1999). A proceeding is “related to” a bankruptcy case when “‘the outcome of the proceeding could conceivably have an effect on the estate being administered in bankruptcy.’ ” Miller v. Kemira, Inc. (In re Lemco Gypsum, Inc.), 910 F.2d 784, 788 (11th Cir.1990) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984)). “ ‘An action is related to bankruptcy if the outcome could alter the debtor’s rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.’” Id. (quoting Pacor, 743 F.2d at 994 ).

Counts II, III, and IV (avoidance of preferences, post-petition transfers, and fraudulent transfers) of Hamm’s amended complaint invoke substantive rights created by the Bankruptcy Code and are thus “arising under” proceedings. In its decision affirming this Court’s denial of arbitration, the District Court ruled that Counts I and V (turnover and accounting) are more properly characterized as breach-of-contract claims. McCallan v. Hamm, 2012 WL 1392960 , *5, 2012 U.S. Dist. LEXIS 56907 , *15 (M.D.Ala. Apr. 23, 2012). These claims could still conceivably have an effect on the Allegro bankruptcy *699 estate and therefore are “related to” proceedings. The Court has jurisdiction under 28 U.S.C. § 1334 (b) on all five counts of Hamm’s amended complaint.

2. Adjudicatory Power

Absent consent of the parties, a bankruptcy court may not enter final judgment in non-core proceedings. 28 U.S.C. § 157 (c)(1); see also N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 71-72 , 102 S.Ct. 2858 , 73 L.Ed.2d 598 (1982). A bankruptcy court may enter final judgment in a core proceeding under 28 U.S.C. § 157 (b)(1) so long as it involves the restructuring of debtor-creditor relations and not merely the augmentation of the bankruptcy estate. Stern v. Marshall, 564 U.S. 462 , 131 S.Ct. 2594, 2614 , 180 L.Ed.2d 475 (2011); see also N. Pipeline Constr. Co., 458 U.S. at 71 , 102 S.Ct. 2858 ; Wellness Int’l Network, Ltd. v. Sharif, — U.S. -, 135 S.Ct. 1932, 1951-54 , 191 L.Ed.2d 911 (2015) (Roberts, C.J., dissenting). 19 Congress has provided a non-exhaustive list of core proceedings under 28 U.S.C. § 157 (b)(2), but “engrafted upon all of them is an overarching requirement that property of the estate under [11 U.S.C.] § 541 be involved.” Toledo, 170 F.3d at 1348 .

In its decision affirming this Court’s denial of arbitration, the District Court held that Counts I and V of Hamm’s amended complaint are non-core. McCallan, 2012 WL 1392960 at *5, 2012 U.S. Dist. LEXIS 56097 at *15. Counts II, III, and IV are nominally core proceedings under 28 U.S.C. § 157 (b)(2)(F) and (H), but under the facts of this case they merely seek augmentation of the bankruptcy estate and thus fall under the Stem exception to a bankruptcy court’s power of final adjudication over core claims.

A bankruptcy court otherwise lacking adjudicatory power may nevertheless enter a final judgment with the express or implied consent of the parties. Wellness Int’l Network, 135 S.Ct. at 1947-48 (majority opinion); 28 U.S.C. § 157 (c)(2). Such consent must “be knowing and voluntary.” Wellness Int’l Network, 135 S.Ct. at 1948 . “[T]he key inquiry is whether ‘the litigant or counsel was made aware of the need for consent and the right to refuse it, and still voluntarily appeared to try the case’ before the non-Article III adjudicator.” Id. (quoting Roell v. Withrow, 538 U.S. 580, 590 , 123 S.Ct. 1696 , 155 L.Ed.2d 775 (2003)).

Hamm consented to adjudication by this Court when he filed his complaint. AmeriCorp and Seton asserted counterclaims against Hamm (in his capacity as Trustee of the Allegro estate) for breach of contract and quantum meruit. (Doc. 32). Also, the Receiver, Louis Colley, filed an administrative claim on their behalf in the Adlegro bankruptcy for almost $400,000. (Case No. 10-30631, Doc. 74). “A creditor who files a proof of claim in a bankruptcy case submits to the bankruptcy court’s equitable” jurisdiction for determination not only of the claim itself, but also of any counterclaim or defense that must necessarily be resolved in the claims allowance process.” DePaola v. Sleepy’s, LLC (In re Prof'l Facilities Mgmt, Inc.), 61 Bankr.Ct.Dec. 203 , 2015 WL 6501231 , *4, 2015 Bankr. LEXIS 3643 , *10 (Bankr.M.D.Ala. Oct. 27, 2015); see also Katchen v. Landy, 382 U.S. 323, 330, 334-35 , 86 S.Ct. 467 , 15 L.Ed.2d 391 (1966); Stern, 131 S.Ct. at 2607-08, 2616-18 . This Court, in Profl Facilities Mgmt., extended this *700 principle to counterclaims filed by a defendant in an adversary proceeding against a Chapter 7 trustee acting in her representative capacity. See Prof'l Facilities Mgmt., 2015 WL 6501231 at *5-6, 2015 Bankr.LEXIS at *15-18. At the time they were filed, resolution of these claims and counterclaims could not be resolved without determining the merit of Hamm’s claims. Given the counterclaims filed by AmeriCorp and Seton, and the claim for administrative expenses filed by the Receiver on their behalf, the Court concludes that they have impliedly consented to adjudication by this Court. 20

McCallan filed his initial answer as to Counts II, III, and IV on July 21, 2011, and did not expressly refuse his consent to adjudication by this Court. 21 (Doc. 73). When he (and AmeriCorp and Seton) finally answered Counts I and V more than a year later, and nearly two years into the litigation, he—for the first time— demanded a jury trial and expressly refused consent to adjudication by this Court. (Doc. 206). He also subsequently moved for summary judgment on all counts, (Doc. 320), and never again raised his jury trial demand or refusal to consent to adjudication in the hearings leading up to the trial.

After the Supreme Court remanded Wellness Int’l Network to the Seventh Circuit, the Seventh Circuit determined that the defendant had waived his right to an Article III adjudicator by failing to timely raise it—a matter of five months. Wellness Int’l Network, Ltd. v. Sharif, 617 Fed.Appx. 589, 590 (7th Cir.2015). Notably, that case, like this one, also involved protracted litigation caused by a “pattern of discovery evasion” by the defendant, and resulted in an entry of default judgment by the bankruptcy court. Wellness Int’l Network, 135 S.Ct. at 1941 .

Here, McCallan and his co-Defendants waited almost two years to demand a jury trial and to refuse consent to adjudication by this Court. By that time, he had already violated at least three of this Court’s discovery orders, provoked two motions to compel by Hamm, and had been arrested as a consequence of ,the bench warrant issued by this Court. Under these facts, the Court readily concludes that McCallan’s jury trial demand and assertion of his right to an Article III adjudicator were untimely. Alternatively, McCallan (and his counsel) waived those rights by failing to subsequently reiterate them and by giving the Court (and opposing counsel) the false impression that they intended to defend this suit at a bench trial conducted by this Court. 22

In short, all of the parties have consented to final adjudication by this Court.

B. Motion to Recuse

1. The Defendants’ Asserted Grounds for Recusal

The Defendants assert recusal is mandated pursuant to 28 U.S.C. § 455 (a) and (b)(1). 23 (Doc. 332). They also attached *701 an affidavit by McCallan, asserting that he is “an objective, disinterested, lay observer,” and listing numerous examples from the Court's prior rulings and statements during hearings that purportedly demonstrate the undersigned’s bias and prejudice against the Defendants. (Doc. 332). The remarks made by the undersigned that McCallan complains of in his affidavit consist of the following:

That the Defendants “have a long history of masterminding, orchestrating and facilitation of debt settlement schemes across the United States.”

That Nelms “perpetrated] MeCallan’s established, fraudulent debt-settlement scheme” and that “[t]he product of this unholy conspiracy .. .■ was Allegro[.]” That the benefits to consumers of the “lengthy dense contracts” between them and Allegro “appear to be largely illusory.”

Questioning Ed Reed, General Counsel of the Alabama Securities Commission, why he thought it was a good idea to continue to operate Allegro and work with AmeriCorp after Allegro’s business model had been revealed.

Reporting to the District Court that “the contract between Allegro Law and ... Seton is part of a smoke screen used to conceal the true nature of the relationships among between [sic] the parties.”

Referring to the relationship between Allegro and AmeriCorp as a “Ponzi Scheme[.]”

Admitting that the undersigned “has got a very jaundiced view” of the debt settlement services offered by Allegro and AmeriCorp.

Mentioning a conversation with U.S. Senator Jeff Sessions at a cocktail party in which the undersigned stated “one of the worst things [Congress] did ... was to give, you know, these debt settlement outfits an air of legitimacy” and that debt settlement was “a horrible business, horrible idea[.]”

Questioning why the Receiver wanted to continue operating Allegro and referring to it as “a completely flawed business model from the start[.]”

Stating, in reference to McAlpine’s filing of the motion to quash McCallan’s deposition, that “bad faith would be a colossal understatement.”

Stating that the “Defendants sabotaged the [discovery] process, producing large quantities of gibberish, in an effort to obstruct the Trustee’s access to the database.”

Stating that McCallan “flouted the [Court’s] .order and went on the run, ignoring both orders to produce the database and to appear in Court.” “Impugning]” the Haskell Slaughter lawyers by stating they “continued to misrepresent and stonewall the Trustee and the Court” after McCallan got out of jail.

(Doc. 332, McCallan’s affidavit).

The Defendants cite Glassroth v. Moore, 229 F.Supp.2d 1283, 1285 (M.D.Ala.2002), for the. proposition that the Court “may not pass upon the truthfulness of the facts stated in the affidavit” and that the undersigned must recuse if the facts in the affidavit are material, stated with particularity, and would convince a reasonable person that a personal bias exists. (Doc. 332).

2. The Distinction Between 28 U.S.C. §§ 144 and 455

Before addressing the merits of the motion to recuse, it is appropriate to consider-the differences between §§ 144 and 455 of *702 Title 28 of the United States Code, both of which address recusal. The Defendants’ motion addresses both sections, failing to observe that only § 455 applies here and that § 144 does not apply to a bankruptcy judge.

Section 144 permits a party to file “a timely and sufficient affidavit that the judge before whom the matter is pending has a personal bias or prejudice either against him or in favor of any adverse party[.]” 28 U.S.C. § 144 . If a party files such an affidavit, the presiding “judge shall proceed no further therein,” and “another judge shall be assigned to hear such proceeding.” 28 U.S.C. § 144 . When a party files an affidavit under § 144, “ ‘the trial judge may not pass upon the truthfulness of the facts stated in the affidavit even when the court knows these allegations to be false.’ ” Glassroth, 229 F.Supp.2d at 1285 (quoting United States v. Alabama, 828 F.2d 1532, 1540 (11th Cir.1987)). “Instead, the judge’s inquiry is limited to determining whether the facts alleged are legally sufficient to require recusal.” Id. “For an affidavit to be legally sufficient, the party must show that ‘(1) The facts are material and stated with particularity, (2) The facts are such that, if true they would convince a reasonable person that a bias exists and (3) The facts must show the bias is personal, as opposed to judicial in nature.’ ” Id. (quoting United States v. Alabama, 828 F.2d at 1540 ). In other words, § 144 requires a judge to recuse himself upon a party’s subjective, good faith, and timely assertion that the judge harbors a personal bias or prejudice for or against a party. However, § 144 only applies to district judges, not bankruptcy judges. See Liteky v. United States, 510 U.S. 540, 548 , 114 S.Ct. 1147 , 127 L.Ed.2d 474 (1994); Seidel v. Durkin (In re Goodwin), 194 B.R. 214, 221 (9th Cir. BAP 1996).

Section 455, on the other hand, applies to bankruptcy judges under Bankruptcy Rule 5004(a), and has three distinct components. The first component, 28 U.S.C. § 455 (b)(2)-(b)(5), provides objective bases on which a judge must recuse due to his personal interest in a matter or his personal relationship with someone involved in the matter. Liteky, 510 U.S. at 548 , 114 S.Ct. 1147 . The second component, 28 U.S.C. § 455 (b)(1), provides a subjective basis for a judge to recuse due to personal bias or prejudice. Id. In other words, § 455(b)(1) “duplicate^] the grounds of recusal set forth in § 144 (‘bias or prejudice’),” but differs from § 144 in that it is applicable to all judges, it does not require the judge’s automatic recusal or his acceptance as truth of an affidavit asserting bias or prejudice, and it places the obligation to identify the existence of bias or prejudice on the judge himself. Id. The third component, 28 U.S.C. § 455 (a), is a “catchall” provision “covering both ‘interest or relationship’ and ‘bias or prejudice’ grounds, but requiring them all to be evaluated on an objective basis, so that what matters is not the reality of bias or prejudice but its appearance.” Id. (internal citation omitted, emphasis in original).

The language from Glassroth that the Defendants rely on is in regard to § 144, not § 455, and this Court is not bound by § 144. See Glassroth, 229 F.Supp.2d at 1285 ; Goodwin, 194 B.R. at 221 . “Section 455 does not require the judge to accept all allegations by the moving party as true. If a party could force recusal of a judge by factual allegations, the result would be a virtual ‘open season’ for recusal.” United States v. Greenough, 782 F.2d 1556, 1558 (11th Cir.1986). Moreover, an affidavit offered by McCallan, a Defendant, is clearly not being offered by an “objective” or “disinterested” observer, and his assertion otherwise is *703 disingenuous. In short, there is no requirement that this Court take McCallan’s factual assertions to be true or that it wear blinders as to the nature of the Allegro-AmeriCorp relationship, McCallan’s involvement with AmeriCorp, the course of this litigation, or the context in which the undersigned’s statements were made.

3. Subjective Bias or Prejudice

A judge shall “disqualify himself ... [w]here he has a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceedings!.]” 28 U.S.C. § 455 (b)(1).

The Supreme Court has made clear that the word “personal” in § 455(b)(1) does not “create a complete dichotomy between court-acquired and extrinsically acquired ,bias[.]” Liteky, 510 U.S. at 550 , 114 S.Ct. 1147 . Rather, the' terms “bias” and “prejudice” are pejorative in that they “describ[e] dispositions that are never appropriate.” Id. at 549 , 114 S.Ct. 1147 (emphasis in original), However, “[n]ot all unfavorable disposition towards an individual (or his case) is properly described by those terms.” Id. at 550 , 114 S.Ct. 1147 (emphasis in original). Rather, “[t]he words connote a favorable or unfavorable disposition or opinion that is somehow wrongful or inappropriate, either because it is undeserved, or because it rests upon knowledge that the subject ought not to possess ..,, or because it is excessive in degree____” Id. (emphasis in original).

To that end, an extrajudicial source, while the most common basis to show bias or prejudice oh the part of a judge (i.e., the extrajudicial source doctrine), is not the only basis to assert bias or prejudice. “A favorable or unfavorable predisposition can also deserve to be characterized as ‘bias’ or ‘prejudice’ because, even though it springs from the facts adduced or the events occurring at trial, it is so extreme as to display clear inability to render fair judgment.” Id. at 551 , 114 S.Ct. 1147 . This is sometimes referred to as the “pervasive bias” exception to the extrajudicial source doctrine. 24 Id.

However, the burden of proof for “pervasive bias” based on a judicial source is a demanding one. “The judge who presides at a trial may, upon completion of the evidence, be exceedingly ill disposed toward the defendant, who has been shown to be a thoroughly reprehensible person. But the judge is not thereby recusable for bias or prejudice, since his knowledge and the opinion it produced were properly and necessarily acquired in the course of the proceedings, and are indeed sometimes (as in a bench trial) necessary to completion of the judge’s task.” Id. at 550-51 , 114 S.Ct. 1147 . “Also not subject to deprecatory characterization as ‘bias’ or ‘prejudice’ are opinions held by judges as a result of what they learned in earlier'proeeedings. It has long been regarded as normal and proper for a judge to sit in the same case upon its remand, and to sit in successive trials involving the same defendant.” Id. at 551 , 114 S.Ct. 1147 .

Consequently, “judicial rulings alone almost never constitute a valid basis for a bias or partiality motion.” Id. at *704 555 , 114 S.Ct. 1147 . “Almost invariably, they are proper grounds for appeal, not for recusal.” Id. Moreover, “opinions formed by the judge on the basis of facts introduced or events occurring in the course of the current proceedings, or of prior proceedings, do not constitute a basis for a bias or partiality motion unless they display a deep-seated favoritism or antagonism that would make fair judgment impossible.” Id. (emphasis added). “[Judicial remarks during the course of a trial that are critical or disapproving of, or even hostile to, counsel, the parties, or their cases, ordinarily do not support a bias or partiality challenge. They may do so if they reveal an opinion that derives from an extrajudicial source; and they will do so if they reveal such a high degree of favoritism or antagonism as to make fair judgment impossible.” Id. (emphasis in original). “Not establishing bias or partiality, however, are expressions of impatience, dissatisfaction, annoyance, and even anger, that are within the bounds of what imperfect men and women ... sometimes display. A judge’s ordinary efforts at courtroom administration—even a stern and short-tempered judge’s ordinary efforts at courtroom administration—remain immune.” Id. at 555-56 , 114 S.Ct. 1147 (emphasis in original).

An example of a judicial remark evidencing a deep-seated antagonism that rendered fair judgment impossible was present in Berger v. United States, in which the district judge stated, during a World War I era criminal espionage trial of German-Americans: Berger v. United States, 255 U.S. 22, 28 , 41 S.Ct. 230 , 65 L.Ed. 481 (1921); see also Liteky, 510 U.S. 540, 555 , 114 S.Ct. 1147 (citing this language in Berger as an example of recusable judicial language).

If anybody has said anything worse about the Germans than I have I would like to know so I can use it .... One must have a very judicial mind, indeed, not to be prejudiced against the German Americans in this country. Their hearts are reeking with disloyalty.

All of the remarks the Defendants cite as examples of the undersigned’s bias or prejudice took place in judicial orders, judicial opinions, and judicial hearings; ie., there is no extrajudicial source. While strong, the undersigned’s language does not demonstrate any pervasive or deep-seated bias within the meaning of Liteky . Regarding the Allegro business model and its relationship with AmeriCorp, it is important to note that the undersigned presided over the Allegro bankruptcy. The Court was inundated with letters and phone calls from angry Allegro clients who were victimized by its business practices. By advising its clients to pay Allegro and to stop paying their debts, Allegro doomed its clients to what the District Court aptly described as “personal economic suieide[.]” McCallan, 2012 WL 1392960 at *1, 2012 U.S. Dist. LEXIS.56097 at *3. Allegro’s practice of charging its clients massive front-loaded fees for providing (in most cases) no services was both unethical and fraudulent.

The Receiver filed an administrative expense claim in the Allegro bankruptcy on behalf of AmeriCorp and Seton. In the course of administering the Allegro bankruptcy it soon became apparent that most of the money flowing into Allegro was being siphoned off to AmeriCorp, and that AmeriCorp was doing the legwork of communicating with Allegro’s clients and negotiating settlement of then- debts. The undersigned was not required to turn a blind eye to the fact that McCallan and Ameri-Corp had a similar arrangement with a Florida law firm, Hess-Kennedy, and that Hess-Kennedy’s clients had likewise been defrauded. Faced with such a business, *705 the Court had every right—if not also a duty—to investigate it, criticize its practices, and question the Receiver why he wished to continue operating it.

“‘Impartiality is not gullibility. Disinterestedness does not mean child-like innocence. If the judge did not form judgments of the actors in those court-house dramas called trials, he could never render decisions.’ ” Liteky, 510 U.S. at 551 , 114 S.Ct. 1147 (quoting In re J.P. Linahan, Inc., 138 F.2d 650, 654 (2d Cir.1943)).

With regard to McCallan, the other Defendants, and their lawyers, all of the complained-of language refers to what McCallan and his lawyers have done, not to any inherent personal characteristics they have (unlike the language in Berger). According to Hamm’s complaint, which the Court had to accept as true in ruling on the motions to dismiss and to compel arbitration, McCallan acted as the principal of AmeriCorp and Seton and masterminded both the Hess-Kennedy and Allegro schemes. If true, McCallan defrauded thousands of people out of millions of dollars. Criticism of such conduct would not be “undeserved” or “excessive in degree.” See Liteky, 510 U.S. at 550 , 114 S.Ct. 1147 .

Moreover, McCallan’s conduct in this litigation was abusive and contemptuous. He ignored Hamm’s initial discovery request of records necessary to administer the Allegro bankruptcy estate. When the Court ordered him to turn over the records, he withheld many computer files and turned over many others that were unreadable. When the Court ordered him to turn over readable and usable files, he ignored that order, forcing the Court to hold him in contempt and to issue a warrant for his arrest. Even after being arrested, McCallan still abused the discovery process and disobeyed the Court’s order by sending Hamm millions of files lacking front-end applications to make them readable, or the internal connections to show which piece of information applied to which client. He also continued to withhold key information. In doing so, he and his lawyers lied to the Court about the location and operability of AmeriCorp’s servers. He ultimately dragged out discovery for more than two years with his stalling tactics, wasting countless resources and hours of the Court’s time, Hamm’s time, and even his own lawyers’ time.

Finally, McCallan has a history in this litigation of breaking off communication with his lawyers and not paying them when he gets in trouble with the Court over his litigation conduct, or when his lawyers demand payment for the services they have rendered. McCallan had already done this to two sets of lawyers when McAlpine first appeared on his behalf. McAlpine then inauspiciously introduced himself to the Court by means of an improper ex parte communication and a falsehood, all for the purpose of filing an eleventh-hour motion that, given the history of this litigation, was blatantly sought in bad faith. McAlpine’s demeanor and conduct toward the Court since then has been unprofessional, rude, and deliberately provocative. Finally, despite having ample warning of the trial date, neither McCallan nor McAlpine, nor any other representative of the Defendant, bothered to appear at trial or gave any notice or indication that they would not appear.

Liteky instructs that a court’s efforts at ordinary courtroom administration are not grounds for recusal. Id. at 556 , 114 S.Ct. 1147 . Although the Court’s efforts at administering this case have gone far beyond ordinary, they have been necessitated by the Defendants’ unwarranted and persistent conduct. “ ‘We cannot assume that judges are so irascible and sensitive that they cannot fairly and impartially deal with resistance to their au *706 thority or with highly charged arguments about the soundness of their decisions.’” In re Evergreen Sec., Ltd., 570 F.3d 1257, 1279 (11th Cir.2009) (quoting Ungar v. Sarafite, 376 U.S. 575, 583 , 84 S.Ct. 841 , 11 L.Ed.2d 921 (1964)). “Requiring recusal for all disruptive, recalcitrant and disagreeable commentary would undermine the judiciary.” Id. (citing Mayberry v. Pennsylvania, 400 U.S. 455, 463 , 91 S.Ct. 499 , 27 L.Ed.2d 532 (1971)). Likewise, “[m]ere friction between the court and counsel ... is not enough to demonstrate ‘pervasive bias.’ ” Gwynn v. Walker (In re Walker), 532 F.3d 1304, 1311 (11th Cir.2008) (internal quotation marks omitted). “It is improper for a lawyer or litigant ... to create the ground on which he seeks the recusal of the judge assigned to his case. That is arrant judge-shopping.” Sullivan v. Conway, 157 F.3d 1092, 1096 (7th Cir.1998). “ ‘A judge cannot be driven out of a case.’ ” Evergreen Sec., 570 F.3d at 1279 (quoting Mayberry, 400 U.S. at 463 , 91 S.Ct. 499 ). In short, the Defendants have not proven that the Court has any “pervasive bias” or “prejudice” against them that would require the Court’s recusal under 11 U.S.C. § 455 (b)(1).

4. Objective Reason to Question Impartiality

“Any justice, judge, or magistrate judge of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.” 25 28 U.S.C. § 455 (a).

“Under § 455, the standard is whether an objective, fully informed lay observer would entertain significant doubt about the judge’s impartiality,” Christo v. Padgett, 223 F.3d 1324, 1333 (11th Cir. 2000); see also Mantiply v. Home (In re Home), 630 Fed.Appx. 908, 910-11 , 2015 WL 6500754 , *2, 2015 U.S.App. LEXIS 18742, *5 (11th Cir. Oct. 28, 2015) (unpublished). “ ‘The inquiry of whether a judge’s impartiality might reasonably be .questioned under § 455(a) is an objective standard designed to promote the public’s confidence in the impartiality and integrity of the judicial process.’ ” Evergreen Sec., Ltd., 570 F.3d at 1263 (quoting Davis v. Jones, 506 F.3d 1325 , 1332 n.12 (11th Cir.2007)). “Thus, the court looks to ‘the perspective of a reasonable observer who is informed of all the surrounding facts and circumstances.’ ” Id. (quoting Cheney v. U.S. Dist. Court for the Dist. of Columbia, 541 U.S. 913, 924 , 124 S.Ct. 1391 , 158 L.Ed.2d 225 (2004)) (emphasis in original).

“There are twin, and sometimes competing, policies that bear on the application of the § 455(a) standard. The first is that courts must not only be, but must seem to be, free of bias or prejudice. Thus the situation is viewed through the eyes of the objective person. A second policy is that a judge, having been assigned to a case, should not recuse himself on unsupported, irrational, or highly tenuous speculation. If this occurred the price of maintaining the purity of the appearance of justice would the power of litigants or third parties to exercise a veto over the assignment of judges.” Greenough, 782 F.2d at 1558 . “[R]eady recusal benefits the judge who steps aside, and the litigant who sought this outcome, but it may injure the judge who must take over the case and the litigant aggrieved by the substitution. Until Congress decides that the costs of *707 recusal on demand are worth bearing, judges must evaluate each motion to decide whether under objective standards the judge’s impartiality might reasonably be questioned.” N.Y. City Housing Dev. Corp. v. Hart, 796 F.2d 976, 981 (7th Cir.1986) (emphasis in original).

The Supreme Court held in Liteky that the extrajudicial source factor applies to § 455(a), see 510 U.S. at 554 , 114 S.Ct. 1147 , and, as noted above, all of the bases the’Defendants assert as grounds for recu-sal are remarks made in the course of judicial proceedings—either this adversary proceeding or the Allegro bankruptcy. Thus, the Defendants’ recusal motion cannot succeed under § . 455(a) unless the undersigned’s remarks would display a deep-seated favoritism or antagonism that would lead an objective, fully informed lay observer to question the Court’s impartiality.

A lay observer who was fully informed of the nature of the Allegro business model, the ruinous effect Allegro had on its clients, Allegro’s relationship with Ameri-Corp and McCallan, and McCallan’s (and his lawyers’) conduct in this litigation would not reasonably question the Court’s impartiality based on the remarks the Defendants complain of. A lay observer with even a modest understanding of finance and credit would conclude that Allegro’s activities with AmeriCorp and McCallan were predatory and fraudulent. Moreover, a fully informed lay observer would not reasonably expect a court to disregard a litigant’s or lawyer’s misbehavior in front of it, or ignore when a litigant violates its orders or intentionally provokes it. All of the statements the Defendants complain of have been made by the Court in response to what either Allegro or the Defendants have done in conducting their businesses and this litigation. That is not a sufficient reason to question the Court’s impartiality.

C. Default Judgment

Bankruptcy Rule 7055 incorporates Rule 55 of the Federal Rules of Civil Procedure. “When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party’s default.” FED. R. CIV. P. 55(a). “If the plaintiffs claim is for a sum certain or a sum that can be made certain by computation, the clerk—on the plaintiffs request, with an affidavit showing the amount due—must enter judgment for that amount and costs against a defendant who has been defaulted for not appearing and who is neither a minor nor an incompetent person.” FED. R. CIV. P. 55(b)(1).

“It is well established that the district court has the authority to dismiss or to enter default judgment, depending on which party is at fault, for failure to prosecute with reasonable diligence or to comply with its orders or rules of procedure.” Flaksa v. Little River Marine Constr. Co., 389 F.2d 885, 887 (5th Cir.1968). 26 “[T]he power is one inherent in the interest of the orderly administration of justice. It may be exercised sua sponte under proper circumstances.” Id. (internal quotation marks and footnote omitted). However, “[dismissal of an action with prejudice and entry of judgment by default are drastic remedies which should be used only in extreme situations, as the court has a wide range of lesser sanctions.” Id. at 887-88 (internal footnotes omitted). Entry of default judgment “is only appropriate where there has been a clear record of delay or *708 contumacious conduct.” E.F. Hutton & Co., Inc. v. Moffatt, 460 F.2d 284, 285 (5th Cir.1972).

“The failure to appear at a duly-scheduled trial after months of preparation by the parties and by the trial court is a serious offense for which the entry of a default is appropriate.” Gulf Coast Fans, Inc. v. Midwest Elecs. Imps., Inc., 740 F.2d 1499 , 1512 (11th Cir.1984). Default has been entered and affirmed for less. In McGrady v. D'Andrea Elec., Inc., 434 F.2d 1000 (5th Cir.1970), the defendant corporation filed as its purported answer a letter from its president denying the allegations of the complaint. McGrady, 434 F.2d at 1001. When the defendant failed to appear at a pre-trial conference it had received notice of, the district court entered default, denied the defendant’s motion to set aside the default, and later entered final judgment in favor of the plaintiff. Id. The Fifth Circuit affirmed, and “deem[ed] it unnecessary to decide whether [the defendant's purported ‘answer’ was adequate,” because the defendant’s failure to appear at the pre-trial conference “disclose[d] sufficient evidence of [the defendant's delay and failure to comply with court rules to justify the entry of a default” under Rule 55. Id.

“Put differently, even assuming a defendant has appeared and answered, the court still has the authority to order an entry of default when there is sufficient evidence of defendant’s dilatory tactics or failure to comply with court orders and the rules of procedure.” Liberty Mut. Ins. Co. v. Fleet Force, Inc., 2013 WL 3357167 , *9, 2013 U.S. Dist. LEXIS 91716 , *28 (N.D.Ala. Jul. 1, 2013) (emphasis in original). The record in this case is replete with such conduct. Although the Defendants filed motions to compel arbitration (Docs. 31 & 72) and answers and affirmative defenses (Docs. 32, 73, & 206), and McCallan individually filed a motion to dismiss (Doc. 28) and a motion for summary judgment (Doc. 320), the Defendants also engaged in two years of abusive and stonewalling conduct during discovery and failed to appear at trial. They have also flouted the Court’s orders, including a failure to pay prior sanctions the Court has imposed on them (Doc. 154).

An entry of default in this case would not be at odds with Bass v. Hoagland. In Bass, the Fifth Circuit stated that Rule 55(a)

does not require that to escape default the defendant must not only file a sufficient answer to the merits, but must also have a lawyer or be present in court when the case is called for a trial. The words ‘otherwise defend’ refer to attacks on the service, or motions to dismiss, or for better particulars, and the like, which may prevent default without presently pleading to the merits. When Bass by his attorney filed a denial of the plaintiffs case neither the clerk nor the judge could enter a default against him. The burden of proof was put on the plaintiff in any trial. When neither Bass nor his attorney appeared at the trial, no default was generated; the case was not confessed. The plaintiff might proceed, but he would have to prove his case.

Bass v. Hoagland, 172 F.2d 205, 210 (5th Cir.1949). Taken out of context, this language suggests that the Defendants did not subject themselves to default by failing to appear at trial. However, the Fifth Circuit later clarified its Bass holding:

In Bass the plaintiff sued to enforce a default judgment obtained in another federal court. In the original trial court the defendant appeared, answered, and requested a jury trial. Defense counsel then withdrew. On the day of trial defendant was not present. The trial judge treated the defendant in default *709 because of the earlier withdrawal of his counsel and entered judgment for the plaintiff in the precise amount requested in his complaint, without a jury trial and apparently without taking any evidence. Defendant was not aware of the trial date, was given no notice prior to the entry of default judgment, and was fraudulently not informed of the judgment until more than two years after it was entered. The court held that the combination of these, errors resulted in a denial of due process.

Fehlhaber v. Fehlhaber, 681 F.2d 1015, 1027 (5th Cir. Unit B 1982)(emphasis added) 27 ; see also id. n. 15 (rejecting a reading of Bass that mere denial of a jury trial was the basis for its holding); Liberty Mut. Ins. Co., 2013 WL 3357167 at *7, 2013 U.S. Dist. LEXIS at *21-22 (adopting the Fehlhaber court’s reading of Bass).

Fehlhaber makes clear that default judgment was improper in Bass because the defendant had not received actual notice of the tidal date, not because the defendant’s earlier answer denying the claims excused his failure to appear at trial. The former rationale implicated the defendant’s due process rights, while the latter rationale did not.

The Fifth Circuit’s decision in Seven Elves, Inc. v. Eskenazi is in much the same vein. In Seven Elves, Eskenazi and two other defendants were represented by the same attorney until Eskenazi fired him. Seven Elves, Inc. v. Eskenazi 635 F.2d 396, 398-99 (5th Cir. Unit A Jan. 1981). The attorney assumed that Eskenazi was acting as the agent of the other two defendants and did not inform them of his termination, and neither did Eskenazi. Id. at 399 . When the attorney moved to withdraw from the case, the district court ordered him to personally appear and to mail notice to the other defendants; the attorney did not appear and was not relieved as counsel of record, and his mailings to the other defendants were sent to the wrong address and not returned. Id. When the case was called for trial, neither the attorney nor any of the defendants appeared; the court entered judgment against them, and denied the other defendants’ motion to set it aside after they learned of the judgment a year later. Id.

The Fifth Circuit reversed and, although it did not expressly determine that the district court’s ruling was a default judgment, noted that “under Bass, a default judgment entered upon the failure of the appellants or their attorney to appear at trial might well be found to have been erroneously entered as a matter of law under Fed.R.Civ.P. 55,” Id. at 400 n. 2, Nevertheless, the holding in Seven Elves turned on the lack of actual notice afforded the other defendants due to the failure of Eskenazi and their attorney to inform them of what was happening, not on the idea that default is improper for a defendant’s mere failure to appear at trial. As the Fifth Circuit explained:

The absence of a fair opportunity [for the other defendants] to present their claim or defense is likewise clearly demonstrated. The [other defendants] did not appear at the proceeding below. Their absence resulted from the confluence of a number of unusual circumstances: they were informed by their attorney that no action would be required of them unless and until he contacted them; he subsequently “withdrew” from the case without being relieved as attorney of record or inform *710 ing the appellants of his withdrawal; he determined he would not appear at trial without informing the [other defendants] of that decision; and although 'notice of trial was forwarded to the [other defendants], they did not in fact receive it.

Id. at 403 .

Unlike Bass and' Seven Elves, there are no due process concerns here because the Defendants had actual notice of the trial. The trial date was scheduled nine months in advance, and McCallan and his attorneys at that time would have received electronic notice of it through CM/ECF. Moreover, the Court personally informed McCallan at a July hearing of the November trial date, and reminded McAlpine of the trial date when it denied the motion to recuse. Neither the Defendants nor McAlpine have ever offered any explanation of why they failed to appear, nor have they requested a new trial. Moreover, they have not responded to Hamm’s proposed findings of fact and conclusions of law.

This case is also distinguishable from Gulf Coast Fans. In that case, the Eleventh Circuit reversed the district court’s denial of the defendant’s Rule 60(b) motion to vacate a default judgment in which the defendant did not appear at trial. Gulf Coast Fans, 740 F.2d at 1512. Although the Eleventh Circuit noted that the defendant’s “erratic behavior” and failure to appear at trial would have normally warranted an entry of default, it was concerned that such a ruling would be incongruous with a jury’s finding in a related case that the plaintiff had breached the same contract that was at issue in the defendant’s case. 28 Id.

Admittedly, Hamm in this case is nominally a representative of Allegro, and Allegro was a complicit tool in McCallan’s fraudulent debt settlement scheme. However, a ruling in favor of Hamm will not benefit Allegro, but rather Allegro’s credi tors—ie., its victims. There is no internal inconsistency within this case or external inconsistency with the related Nelms case 29 that would result from an entry of default in Hamm’s favor.

Default judgment under Rule 55 is appropriate in this case. Although Fifth and Eleventh Circuit precedent limits the applicable scope of Rule 55, that precedent is distinguishable from this case because it revolved around lack of due process due to lack of actual notice, or because it was inconsistent with factual findings from a related proceeding, none of which is present here. There is nothing inadvertent about the Defendants’ conduct in litigating this case or in their refusal to appear at trial. The Defendants had their day in court, and must shoulder the consequences of their decision not to exercise it.

III. CONCLUSION

The Plaintiff offered a mountain of evidence in support of his claim that the *711 Defendants defrauded a large number of individuals. After almost three years of protracted and often spiteful litigation, the Defendants refused to show up at the trial. The Court will, by way of a separate document, enter judgment in favor of Plaintiff Carly Wilkins, and against Defendants Timothy McCallan, AmeriCorp, Inc., and Seton Corp., in the amount of $102,949,220.72.

APPENDIX A

UNITED STATES BANKRUPTCY COURT

MIDDLE DISTRICT OF ALABAMA

In re KEITH A. NELMS, Debtor

CHASE BANK USA, NA and JP MORGAN CHASE BANK NA, Plaintiff v. KEITH A. NELMS, Defendant

Case No. 10-30430-WRS Chapter 7

Adv. Pro. No. 10-3042-WRS

MEMORANDUM

This case came before the Court for trial on April 28, 2014. The Plaintiff, Chase Bank, seeks a determination that the debt is excepted from the bankruptcy discharge of Keith Nelms pursuant to 11 U.S.C. § 523 . For the reasons set forth below, judgment is entered in favor of the Plaintiff.

I. FINDINGS OF FACT

A. History of this Adversary Proceeding

On February 22, 2010, Keith Anderson Nelms filed a voluntary Chapter 7 petition with this Court, initiating Case No. 10-30430. At the time of his filing, Nelms was the sole owner and operator of Allegro Law, LLC, and Allegro Financial Services, LLC, operating out of Prattville, Alabama. Through his Allegro entities, Nelms purported to offer legal and financial services targeted at consumers in search of debt relief, through debt settlement and debt management schemes. Chase Bank filed a proof of claim for $39 million. (Case No. 10-30430, Claim 2-1).

On June 1, 2010, Chase bank initiated this adversary proceeding by way of a complaint alleging nondischargeability of debt owed to it by Nelms pursuant to 11 § U.S.C. 523. Chase Bank alleged four claims for relief, seeking that their debt be excepted to discharge under § 523(a)(2)(A) for fraud, § 523(a)(4) for fraud in a fiduciary capacity, § 523(a)(4) for embezzlement, and § 523(a)(6) for willful and malicious injury. Chase pled facts alleging that Nelms, through Allegro Law, LLC, operated a fraudulent debt settlement scheme under which he discouraged consumers from paying monthly minimums to Chase on the promise that he would negotiate a reduction in the debt or settle the debt in full. In exchange, Chase alleged, Nelms collected millions of dollars in fees, and made no attempts to actually settle or pay the consumers’ debts. As a result, Chase customers “faced increased interest rates, late fees, further damage to their credit ratings, and additional and increased collection activities by their creditors.” (Adversary Proc. No. 10-3042, Doc 1). Chase alleged that, as a result of Nelms’s fraudulent scheme, “Chase cardmembers responsible for more than 5000 accounts have ceased making payments on at least $39 million in credit card balances owed to Chase.” Id. The case came before the Court for trial on April 28,2014.

B. Hess-Kennedy as Pre-Cursor

In 2007, a Florida law firm known as Hess-Kennedy began running a debt settlement scheme in the state of Florida. *712 Operating under several names, Hess-Kennedy undertook the business of promising consumers legitimate debt relief. Debt settlement, in a nutshell, is premised on the idea that a consumer in debt signs on with a company which promises to negotiate with the creditor to settle the debt for less than the balance owed. The Hess-Kennedy scheme, like most debt settlement outfits, operated under the basic premise that consumers in debt would, instead of making monthly payments to their creditors, make monthly lump sum payments to Hess-Kennedy. Hess-Kennedy, in exchange, would attempt to make debt settlement arrangements with the creditors, and then, out of the money sent to them by the consumer, Commence payments to the creditor at the newly reduced amount. For their troubles, Hess-Kennedy would collect its fees from the consumers’ lump sum payment.

In order to make this scheme work, Hess-Kennedy encouraged the consumers not to pay their debts, but to instead dispute the billings under the Fair Credit Billing Act, 15 U.S.C. §§ 1666 et seq., and Hess-Kennedy would send legal form letters advising the creditor that they were performing a financial evaluation of the consumer’s account. These form letters bore the letterhead of either Hess-Kennedy or one of their related entities, such as Campos Chartered Law Firm or Consumer Protection Law Center. The letters were often signed by Jeffrey Campos, an attorney affiliated with Hess-Kennedy. The accounting, clerical work, mailings and the like were handled by a back-office processor, Americorp, Inc., which was headed by Timothy McCallan. Chase proved at trial that between 2007 and April 2008, they received approximately 8,000 such letters from Hess-Kennedy related outfits.

In mid-2008, Hess-Kennedy ran afoul of the Florida Attorney General’s Office, who brought legal action alleging an “unscrupulous scheme to divert funds” from consumers and to instead “divert[] millions of dollars to themselves and a coterie of family and associates who were not creditors of consumers.” See Office of the Attorney General v. Laura Hess, Esquire, et al., No. 08-007686-08, at p. 15-16 (Cir. Ct. Broward County, Fla. Jul. 17, 2008). On July 18, 2008, the circuit court of Broward County, Florida appointed a receiver to take over Hess-Kennedy, and Hess-Kennedy was permanently enjoined from operating its scheme on November 25, 2008. This ended Hess-Kennedy’s debt settlement activities. Representatives of Americorp approached Nelms in 2008, with the proposition that he take over the function previously handled by Hess-Kennedy. Thus, the Allegro entities were born.

C. Allegro Law, LLC

1. Nelms Continues the Hess-Kennedy Operation

Prior to opening Allegro Law, Nelms was familiar with and involved in the workings of Hess-Kennedy. At trial, Nelms detailed his initial introduction to debt settlement programs and Hess-Kennedy, recalling working with one of Hess-Kennedy’s principals, Edward Cherry (also known at one time as Edward Kennedy), several years prior to Allegro taking over in 2008. Nelms was approached by Cherry to build an attorney network for Hess-Kennedy, and testified that he was paid approximately $15,000 for the service, a service that he says he was hired to do several times. Nelms’s involvement with Hess-Kennedy became so entwined that upon Hess-Kennedy’s assignment into the Florida receivership, the receiver running Hess-Kennedy hired Nelms to represent the entity.

*713 Through his involvement with Hess-Kennedy, Nelms testified to being'introduced to Americorp and its CEO Timothy McCallan. While publishing a series of websites that Nelms described as for consumer attorneys, Nelms became acquainted with another debt management operator, Joel Carlsen, who later introduced Nelms to McCallan. While McCallan and Americorp were initially too busy with Hess-Kennedy to work with Nelms’s Allegro outfit, that dynamic changed when the Florida Attorney General put Hess-Kennedy out of business. Nelms testified at trial that he did some internet research on McCallan, learning of McCallan’s previous operations of AmeriDebt and Debt-Works, both debt relief scams, and but that “nothing scared me too much.” 1 ■

On April 80, 2007, Allegro Law was incorporated as a law firm, Nélms was the sole owner and operator of Allegro Law, and at trial he testified that he was the sole attorney working for Allegro and that he approved every settlement that came through the enterprise. Nelms testified that Allegro Law had at least 15,000 clients, though he thought the number perhaps exceeded 19,000, with each client having an average of five creditors.

In beginning the operation of Allegro Law, Nelms testified that he employed the same personnel and debt settlement tactics as Hess-Kennedy. Nelms admitted to using the identical Hess-Kennedy marketers, back-office processors, phone call center, and the same form letters. The marketers used by Hess-Kennedy simply switched to marketing for Allegro, with one marketer stating that upon switching to Allegro, “the flow kept going. Like nothing changed.” Tr. 101:10-21. Nelms hired McCallan and Americorp to handle the back-office processing for Allegro. This included processing of the form letters, manning the call centers, and all the accounting for thousands of customer payments, essentially handling the servicing of all client accounts. 2 Nelms paid a set-up fee and monthly fee per client of Allegro to Americorp, fees derived out of the Allegro customers’ monthly payments. The very strategies and tactics employed by Hess-Kennedy to purport to settle debts were used by Nelms and Allegro. Nelms directed the customers to stop paying Chase, to instead pay him the money as their attorney, and then collected substantial amounts of money in fees from those consumer payments.

One of the more telling pieces of evidence shown at trial to prove Nelms’s continuation of the Hess-Kennedy debt settlement scheme were the form letters sent to Chase throughout 2007 and 2008. The letters essentially track the progression of the scheme originally operated as Hess-Kennedy under Campos to one operated as Allegro Law under Nelms. The letters sent beginning in late 2007 through early 2008 aré headed under a variety of Hess-Kennedy related outfits: Hess-Kennedy *714 Chartered, December 31, 2007; Campos Chartered Law Firm, January 7, 2008; Consumer Protection Law Center, February 26, 2008. Each of these letters are signed by Jeffrey Campos and contain identical language:

The firm represents the above listed named consumer in regards to the referenced account. The above consumer is in the process of receiving a financial evaluation and is enrolled in a bankruptcy prevention service.

During the next 60-90 days, our counselors will be reviewing the consumers 3 personal financial statements, including the above referenced account. In addition, we will be archiving and preparing a summary of all collection activities of any original creditor, third party collection agent or collection attorney.

We ask that your representatives not contact our client but instead direct any and all correspondence to our firm. Contacting a consumer, which is known to be represented by a law firm, can be classified as a deceptive trade practice. Your failure to abide by this request will result in our pursuing all legal and equitable remedies available under state and federal law.

Please direct any and all future-correspondence to our attention, including the address and facsimile number of the division to which you would prefer all correspondence and information directed.

Tr. Ex. 3.

Beginning in April 2008, following Hess-Kennedy’s initial legal troubles with the state of Florida, Chase Bank began receiving more form letters disputing debts and purporting to settle the debts; letters identical to those received from Hess-Kennedy, only now under the letterhead of Allegro Law. While these letters were initially signed still by Jeffrey Campos, they soon began, in May 2008, appearing with the signature of Keith Anderson Nelms. During Allegro’s period of operation, roughly May 2008 thorough May 2009, Chase tracked 5,453 such letters as having come from Allegro. As a collections manager for Chase testified, “as Hess-Kennedy was ramping down, Allegro started ramping up.” Tr. Transcript 34:12-18.

2. Nelms, through Allegro Law, makes fraudulent representations to Chase Customers

The Court heard testimony from three former Allegro customers who had credit accounts with Chase. Each testified as to their involvement with Allegro, the tactics used to ensnare them in the debt scheme, and the destructive results the Allegro experience had on each of their lives. The experiences were largely similar, and each Allegro customer the Court heard from exited the program in remarkably worse financial, and often even personal, shape than when they entered into business with Nelms and Allegro. The Court found that their testimonies were credible and compelling, and offered a telling insight into the scheme Nelms ran under the name Allegro Law.

Darlene Richardson, a hospital employee from Philadelphia, Pennsylvania, testified to becoming involved with Allegro Law after hearing a radio advertisement purporting to be lawyers that could fix her credit. Richardson called Allegro, and was told that she would pay in a fixed monthly amount to Allegro, who would *715 then go to each creditor to obtain settlements for her at lower rates. At the time, Richardson owed $26,000 in debt, approximately $5,000 of that owed to Chase Bank, and entered her entire debt load into the Allegro program. Richardson made payments of $457 monthly, and stayed with Allegro from March 2008 through June 2009, where she was instructed Richardson to stop paying her creditors. During her enrollment with Allegro, Richardson testified to noticing no difference with her creditors, who were still calling in attempts to collect the debts.

Overall, during her fifteen-month involvement with Allegro, Richardson paid in approximately $6,000. Allegro settled one debt for her for around $500. Richardson testified that in November 2008, she received a letter from Chase Bank offering to settle the debt directly with her, outside of the Allegro program. She recalled that the offer from Chase was to settle the debt one of two ways, either through an immediate payment of $503.72, or through two payments of $453.35. Believing Allegro was working on her behalf to achieve these settlements, she forwarded the letter to Allegro, wanting the account to be settled with money she had paid into the program. At this point, having paid $457 per month since March 2008 would have meant Richardson had paid roughly $3,000 into her Allegro account. Upon receipt of the settlement offer from Chase, Allegro informed Richardson that there was not enough money in her escrow account, informing her, “that money, of course, has to be—go to them first to be paid before any creditors could be paid off.” Darlene Richardson Dep. Transcript 19:7-10. Richardson was unable to settle the debt with Chase.

Israel Rubinfeld, a small business owner from New Jersey, also entered the Allegro Law program in 2008, after hearing a radio advertisement promising to settle debts. At the time, Rubinfeld had nearly $33,000 in debt, owing around $2,500 to Chase Bank. Rubinfeld explained his dealings with Allegro:

Okay. So I called them up and I said, you know, I’m looking to settle my debt, what can you do. And they said, how much do you owe. So I said, I—you know, I quickly accumulated in my mind how many credit cards, how much I owed, and I gave them a rough figure. I can’t remember, but it could be in the range of 30-33,000. So they made a quick calculation and told me, okay we could do it for $600 a month for 37 months and you’ll be done. We’ll clear your, you know, debt * # *

They said they will settle for a certain amount. Basically they accumulate money to a escrow account, and then they take that money after a certain amount of time, let’s say they accumulate $5,000, and this is just a rough number, they go then and settle one card. Then after a while, after a few more months, they accumulated more money, they settle the next card. And so forth and so forth until they settled all the cards.

Israel Rubinfeld Dep. Transcript 11:5-24—12:1-5. Rubinfeld stated that he continued to pay Allegro through the end of 2009, and that he did not pay his creditors, upon the advice of Allegro. Throughout his involved with Allegro, Rubinfeld paid them $6,442. Only $660.90 was accrued in his escrow account, and none of Rubin-feld’s debts were settled.

The court also heard testimony from Melinda Lawley, a retired schoolteacher from Chelsea, Alabama. Ms. Lawley testified to becoming aware of Allegro Law in 2008 through a television advertisement, *716 promising to negotiate with creditors for lower debt loads. Lawley then had a series of conversations with Allegro representatives in which these promises were repeated, that her debts could negotiated down to half, and that by paying through Allegro the rest could be paid. Upon belief that-Allegro was a law firm with attorneys qualified to do this, she entered her entire debt load, nearly $20,000, into the Allegro program, including close to $10,000 with a Chase credit card account. After entering the program, Lawley began to realize that she had been fooled. Her credit score began to drop and creditor calls continued because her bills were not being paid. The pressure from creditors became so intense that one threatened to sue. Upon being informed of this potential lawsuit, Lawley called Allegro, who she believed to be attorneys acting on her half, and was informed “that they were not attorneys and they could not stop it if they proceeded further .... ” Tr. Transcript 83:9-25.

Ultimately, from April 2008 through May 2009, Lawley paid $5,170 into Allegro Law. Tr. Ex. 9. Allegro’s records show that only $80.70 was on hand in her escrow account to be used for settlements. Put another way, after a year of paying into Allegro Law in hopes to pay off debt, only $80.70 did not go towards Nelms and Allegro in the form of fees. None of Law-ley’s debts were settled, and no money was paid to her creditors. Before entering the Allegro program, Lawley testified she and her husband had a credit score close to 700. After her involvement with Allegro, it fell to around 500.

Allegro Law charged their customers a fee comprised of 16% percent of the client’s total debt load. The fee was designed to be front-loaded; that is, as monthly payments arrived, the money was first applied to pay the 16% fee before any money was placed into the client’s escrow account to pay off debts. In addition, Allegro charged a $25 initial fee, and an administrative fee each month. For example, Ms. Lawley’s account showed a recurring monthly charge of $59.99 marked as “Monthly Set Up Fees.” Tr. Ex. 9. Of this administrative monthly fee, Nelms collected $6.00 per customer. He also collected a portion of the 16% front-loaded fee. Each customer testified to being unaware of the extent of the fee structure, and that the front-loaded nature of the fee was never explained to them by Allegro representatives. Ms. Lawley testified:

they never once told me that we’re not paying this until all of your money is in and we’re not paying a penny on your debt. So I started calling around to my debtors to find out what is being paid. There was nothing being paid. So I called back again to find out why are you not paying my bills like you promised and they started explaining, well, we have to get all of your money first.

Tr. Transcript 78:15-25. Nelms reported an income of $50,000 in 2007, which skyrocketed to $200,000 in 2008, the year he did business as Allegro.

After consideration of the accounts told by these customers, a pattern of misrepresentations is clear: Nelms, through Allegro, consistently misrepresented that Allegro Law would settle consumer debts. Nelms induced participation in the programs through misrepresentations that Allegro was a law firm. Further, Nelms misrepresented Allegro’s fee structure.

3. Chase Bank Refuses to Settle With Allegro Customers

Allegro’s very promise to settle any consumer debts with Chase was itself a misrepresentation as Chase had a standing policy of not negotiating settlements with Allegro Law. Over the life of Allegro Law, *717 Nelms and Allegro purported to represent at least 5, 453 Chase account holders, at least 20 percent of Allegro’s overall business. Chase had a policy of not negotiating with Hess-Kennedy, and continued the policy with the appearance of Allegro Law. Nelms himself was aware of Chase’s policy as early as August 2008, yet he continued, through Allegro, to collect money from Chase account holders in exchange for promises to settle their Chase debt. Nelms testified that he first learned that Chase would not settle accounts with Allegro in August 2008, when Chase rejected an attempt to settle debt for 1, 300 Chase customers when it was apparent the customers had hired Allegro. Nelms testified that he then received a cease and desist letter from Chase in September 2008, which he understood to mean, “Chase was not going to deal with Allegro directly.” Tr. Transcript 142:5-143:1. Nelms then testified about attending a meeting with Chase lawyers in New York in November 2008, where he admitted he was told Chase would not negotiate settlements with Allegro Law. Nelms also testified to receiving a follow-up letter to the same effect in February 2009, in which Chase again told him they would not negotiate with Allegro. Nelms testified, “The language of the letter is very clear.” Tr. Transcript 146:7.

Despite the repeated communications from Chase, Allegro continued to represent to consumers that- they could settle Chase debts. Each of the Allegro customers that the Court heard testimony from were Chase cardholders to whom Allegro had represented the ability to settle Chase debts. None of them were informed that Allegro could not settle with Chase, and Allegro continued to collect monthly fees and payments from them under the guise of attempting to settle the debts. Ms, Richardson was promised her $5,000 debt to Chase could be settled through Allegro. Richardson was an Allegro customer for 15 months beginning in March 2008, and was never informed by Allegro of the Chase policy, otherwise, she testified, she would not have enrolled in the program. The same was true for Mr. Rubinfeld, who owed $2,500 to Chase, and was never informed during his 16 months in the program of the Chase policy. Again, Ms. Lawley, who owed $10,000 to Chase, was. promised this debt would be settled and in her year with Allegro was never informed that it could not be done. When asked why he continued to promise existing Chase customers that he could settle their debts, Nelms stated, “I didn’t have a reason to tell customers I couldn’t settle debts with Chase.” Tr. Transcript 146:12-18.

- Nelms’s' continued representation of Chase customers, despite- awareness of the Chase policy, led to alarming delinquency rates among Allegro-affected Chase account holders. Melanie Cerminara, Chase’s operations manager in collections at the time of Allegro’s activity, testified that, based on Chase’s records; seventy-four percent of the Chase customers associated with Allegro were either current or in early stages- of delinquency. 4 Cermi-nara stated that in 2008, of all Chase accounts, approximately four to four-and-a-half percent of delinquent accounts would go into charge-off status; that is, debts that had been delinquent long enough that Chase wrote them off the books as non *718 collectable. For Chase customers dealing through Allegro, the charge-off status was “[v]irtually 100 percent.” Tr. Transcript 37:12-17. Further, Cerminara testified that as of May 21, 2009, only 58 of the Allegro-affected Chase accounts had been settled. ■ Even more alarming, of the 58 accounts settled, Chase’s records show that 30 of the accounts were settled directly by the consumer themselves. Of the remaining 28, it is unclear if Allegro had any involvement. Allegro promised to represent at least 5,453 Chase customers in settling debt, and only 28 accounts had potential involvement from Allegro. Giving Allegro the benefit of the doubt, of the cases in which they were involved, they settled less than half of one percent of them.

4. Allegro Law Prosecuted by the State of Alabama; Nelms Disciplined by the Alabama State Bar

In 2009, Nelms ran into trouble with the State of Alabama. The Alabama Attorney General’s Office began its prosecution of Nelms and Allegro after receiving several consumer complaints in March and May of 2009 of customers who had been ensnared by the debt settlement scheme. The Alabama State Bar also became involved in the matter, and on June 25, 2009, entered an Order On Conditional Guilty Plea, under which Nelms pled guilty for violating numerous ethics rules. In the Plea, Nelms admitted to holding himself and Allegro out as legal service providers in debt management and debt settlement, and also admitted to collecting fees prior to the performance of services and without those fees being earned. The Alabama Bar suspended Nelms from practicing law for 'three years, and he was ordered to cease and desist from providing any legal services through Allegro Law. On June 30, 2009, the State of Alabama filed a complaint against Nelms in Autauga County Circuit Court seeking a temporary restraining order, which was granted on July 9, 2009. On the same date, the state court appointed Louis Colley as receiver to oversee Allegro. On February 11, 2010, the state court issued a permanent injunction and permanently appointed Colley as receiver. Allegro Law filed a Chapter 7 petition for bankruptcy on March, 12, 2010. (Case No. 10-30631).

II. CONCLUSIONS OP LAW

Chase seeks to have the debt owed to it by Nelms excepted from his bankruptcy discharge. Chase alleges that Nelms incurred the debt through fraud, making it nondisehargeable pursuant to 11 U.S.C. § 523 (a)(2)(A). Chase also alleges that Nelms committed the fraud and embezzlement while in a fiduciary capacity, making the debt nondisehargeable pursuant to 11 U.S.C. § 523 (a)(4). Finally, Chase also seeks an exception to discharge under 11 U.S.C. § 523 (a)(6) for willful and malicious injury by Nelms. The Court finds that Chase has proven its case under § 523(a)(2)(A), showing that Nelms perpetrated a massive fraud on thousands of Chase cardholders and diverted millions of dollars due to Chase. While there is a failure tó show a sufficient fiduciary relationship under § 523(a)(4), and the Court finds a discussion of § 523(a)(6) unnecessary, the § 523(a)(2)(A) fraud claim provides ample basis for an exception to Nelms’s discharge

A. Actions Challenging Dischargeability

Section 523 provides for exceptions to certain debts from a debtor’s discharge. At issue in this case is a debt that Chase alleges should be nondisehargeable due to false pretense, false representation, and fraud. The court strictly construes excep *719 tions to discharge in favor of the debtor, St. Lament v. Ambrose (In re St. Laurent), 991 F.2d 672, 680 (11th Cir.1993), and the plaintiff seeking the exception to discharge bears the burden of proof, Fed. R. Bankr. P. 4005; see also Grogan v. Garner, 498 U.S. 279, 285 , 111 S.Ct. 654, 658 , 112 L.Ed.2d 755 (1991) (holding that preponderance of the evidence is the proper burden of proof in nondischargeability proceedings); and In re Bullock, 317 B.R. 885, 889 (Bankr.M.D.Ala.2004).

B. The Fraud Committed by Nelms’s Agents is Imputed to Nelms

When a creditor can prove the debtor’s agent committed fraud, the nondischargeability of the debt incurred through that fraud may be imputed to the debtor. Strang v. Bradner, 114 U.S. 555, 561 , 5 S.Ct. 1038 , 29 L.Ed. 248 (1885). After Strang , the majority of courts have followed the Supreme Court’s holding to mean that an innocent debtor’s liability for an agent’s wrongdoing is nondischargeable under § 523(a)(2)(A). Indeed under this Circuit’s precedent it is recognized that, “[a] debt may be excepted from discharge when the debtor personally commits actual, positive fraud, and also when such actual fraud is imputed to the debtor under agency principles.” Hoffend v. Villa (In re Villa), 261 F.3d 1148 , 1151 (11th Cir.2001) (though choosing not to extend the imputation of fraud to § 20(a) of the Securities Exchange Act) (citing Strang). The bankruptcy courts of this district have followed suit, recognizing the imputation of an agent’s fraud to the principal for nondischargeability purposes in a commercial or business context. See In re Gordon, 293 B.R. 817, 822 (Bankr.M.D.Ga.2003) (collecting cases).

Proving fraud liability for a principal through the actions of one’s agent for purposes of § 523 nondischargeability has taken the form of two tests. The majority of courts have taken the approach that “an innocent debtor’s liability for her agent’s wrongdoing is nondischargeable under § 523(a)(2) regardless of the debtor’s knowledge or participation.” In re Heinz, 501 B.R. 746, 761 (Bankr.N.D.Ala.2013) (citing Carroll v. Quinlivan (In re Quinli-van), 434 F.3d 314 (5th Cir.2005)). This test presents the idea that “the culpability of the indebted partner is irrelevant,” even when “the partner is innocent of wrongdoing, and had no knowledge or reason to know of the fraud____” Quinlivan, 434 F.3d at 319 . Applied to the present case, if Americorp employees, acting as agents for Nelms, committed fraud in incurring the debt to Chase, then Nelms’s debt to Chase is not dischargeable under § 523(a)(2)(A). Under this test, the mere presence of an agency relationship combined with fraud by the agent is all that the court examines.

Other courts have required more than the simple presence of an agency relationship to impute an agent’s fraud onto the principal. These courts, in the minority, have turned to a “ ‘reckless standard, requiring that the debtor knew or should have known of the agent’s fraud in order to impute intent.’ ” Heinz, 501 B.R. at 762 (citing Treadwell v. Glenstone Lodge (In re Treadwell), 637 F.3d 855 (8th Cir.2011). While not requiring active participation by the debtor-principal in the fraud, the debt- or-principal “cannot be held innocent for the fraud of his agent if, had he paid minimal attention, he would have been alerted to the fraud.” Matter of Walker, 726 F.2d 452, 454 (8th Cir.1984) (citing In re Savarese, 209 F. 830 (2d Cir.1913) and David v. Annapolis Banking & Trust Co., 209 F.2d 343, 344 (4th Cir.1953)).

Courts within our Circuit have contemplated whether the Circuit would apply the majority or the reckless standard ap *720 proach. . See Heinz, 501 B.R. at 762-765 (choosing the majority view); and Gordon, 293 B.R. at 823 (applying the higher burden of the reckless indifference standard). This stems from the perceived less than full embrace given to the majority approach in Villa. However, for purposes of this case, this Court need not mine Villa for the Circuit’s intent on this issue because under either standard Nelms’s culpability for fraud can be imputed from the blatant fraud committed by his agents. Nelms is not the truly innocent debtor envisioned in the majority test, and evidence at trial established that he had the knowledge of his agents’ fraud necessary to meet the reckless standard test.

The facts proven at trial show that Nelms was certainly aware of the fraud being perpetrated by Americorp in them dealings with Allegro customers. He testified to working very hard to hire the former marketers of the Hess-Kennedy fraud once that operation was ended. Nelms was clearly aware of the fraud being perpetrated by Hess-Kennedy; he, in fact, participated in the fraud himself as an agent of Hess-Kennedy. Further, there is no real dispute as to whether Americorp and its employees operated as agents for Nelms. Americorp and its marketers were hired by Nelms to induce customers into signing up for Allegro, and to act on Nelms’s behalf. He hired Americorp with full knowledge of how they had executed fraud for Hess-Kennedy, and it was clear from his testimony at trial that the experience in debt settlement fraud that Ameri-eorp possessed was valued by Nelms in his pursuit of them and in his rote use of their letters that he sent verbatim to Chase. Nelms testified that he had been interested in working with Americorp to accomplish his own business purposes when he saw how effective they had been at executing the Hess-Kennedy scheme. Once Hess-Kennedy collapsed, he quickly hired Americorp to effectuate the same fraud for his operation. Nelms testified at trial to being aware of the misrepresentations Am-ericorp marketers were making on behalf of Allegro Law. Under the majority test, which imputes the fraud of an agent regardless of the debtor-principal’s knowledge, the fraud committed by Americorp employees is imputed to Nelms. Under the minority reckless standard test, because he did actually know of the fraud being committed, the fraud committed by Americorp employees is imputed to Nelms. Through the vehicle of Allegro Law, and the services of Americorp, Nelms committed a massive fraud on thousands of Chase cardholders.

C. Through Allegro, Nelms Committed Fraud and Proximately Caused Harm to Chase, Rendering the Debt Nondischargeable Pursuant to § 523(a)(2)(A)

Debts incurred as a result of fraud are excepted . from discharge under § 523(a)(2)(A), which provides, in part:

(a) A discharge under section 727 ... does not discharge an individual debtor from any debt—

(2) for money, property, services ... to the extent obtained, by—

(A) false pretenses, a false representation or actual fraud, other than a statement respecting a debtor’s or an insider’s financial condition,

11 U.S.C. § 523 (a)(2)(A). “Courts have generally interpreted § 523(a)(2)(A) to require the traditional elements of common law fraud.” Sec. and Exch. Comm’n v. Bilzerian (In re Bilzerian), 153 F.3d 1278 , 1282 (11th Cir.1998). Accordingly, there are four elements of a fraud claim that the plaintiff must prove by a preponderance of the evidence:

*721 (1) The debtor made a false representation of a past or current material fact;

(2) With the intent to deceive the creditor;

(3) The creditor justifiably relied upon the representation; [and]

(4) The creditor sustained loss as a proximate result of the representation.

Id. at 1281. Section 523(a)(2)(A) captures the Code’s competing purpose with giving the debtor a fresh start. That is, while we generally assume the bankruptcy code’s protections to be aimed at providing a fresh start for the debtor, § 523(a)(2)(A)’s purpose is to protect the victim of fraud, see Cohen v. de la Cruz, 523 U.S. 213, 223 , 118 S.Ct. 1212 , 140 L.Ed.2d 341 (1998); see also Grogan, 498 U.S. at 286-287 , 111 S.Ct. 654 (explaining the limits on Congress’s policy of a fresh start for a debtor, under the Code, confining “the opportunity for a completely unencumbered new beginning to the honest but unfortunate debt- or.”) (citations omitted).

1. Nelms and Allegro Made False Representations of Material Facts With the Intent to Deceive, Upon Which Chase Cardholders Relied

The misrepresentations of material facts made by Nelms and Allegro to Chase cardholders are vast and have been well documented in Section 1(B)(3), supra, of this Memorandum. For purposes of thoroughness, however, it is worth noting that virtually each piece of the Allegro operation functioned on the customer being misinformed and kept in the dark as to what they were paying for and how their debts were being handled. The most basic promise of Allegro made to customers, that Nelms and Allegro could and would settle the customers’ debt, was a blatant misrepresentation. Each Allegro customer from which the Court heard testimony was promised that all of their debts would be settled; this was their primary motivation for entering and paying into the Allegro scheme. Allegro did not fulfill this promise, and the evidence at trial showed that Nelms and Allegro had no intention of settling debts and did not in fact settle customer debts. Nelms and Allegro misrepresented their ability to settle debts with Chase, despite awareness that Chase had a policy of not settling with Allegro. Nelms and Allegro misrepresented their status as a law firm and ability to provide legal services to customers. Further, Nelms and Allegro misrepresented the fee structure of the program, and never informed customers that of their monthly payments, large portions, if not all, would instead go to massive fees to Nelms, Allegro, and Americorp.

Allegro promised to pay off Chase cardholder debts through settlements with the intent to deceive Chase cardholders. Had Chase cardholders known these debts could not be negotiated through Allegro, they would not have paid into the scheme. Indeed, each Allegro-affected Chase customer that provided testimony at trial said they would never have paid into Allegro if they had known their Chase debts could not be settled. Nelms’s fee structure made it functionally impossible to settle debts, and he misrepresented the fees in order to deceive customers to continue paying into the scheme so he could collect massive fees without paying off any of their debts. Each of the Allegro customers that testified at trial told that they would never have signed onto the Allegro scheme had they been told the truth about the fee structure. In short, Nelms’s deception through Allegro and Americorp purposely induced Chase cardholders into a fraudulent scheme designed to make himself rich.

*722

2. Nelms’s Fraud Proximately Caused Financial Harm to Chase, and Chase has Proven Damages of $9,797,229.52.

The damages incurred by Chase as a result of Nelms’s fraud were well documented at trial. Susan Coniglio, Chase’s business operations director overseeing collections, performed a damages estimate that sought to capture the more nuanced damage Chase incurred from the Allegro scheme, rather than simply the base dollar amount of debt not paid by Allegro-affected cardholders. The total debt owed to Chase by the 5,453 Allegro-affected cardholders is in the neighborhood of $38 million. Chase readily admits, however, that it would be unreasonable to assume every cardholder would have paid every dollar they owed to Chase had they not become involved with Allegro. The more accurate approach, and the one presented by Conig-lio, is one that seeks to put a dollar amount on the total that Chase reasonably could have expected to have been paid absent the Allegro fraud.

The first step in Coniglio’s process is adjusting the accounts downward to get a more realistic view of which customers may have paid. This means taking off any customer who was in the later stages of delinquency and was not likely to pay (1,197 customers), any customer with whom Chase settled as of December 2012 (649 customers) 5 , customers who abandoned Allegro and paid on their own (278 customers), and two fraud accounts. This leaves 3,327 customers for a charge-off balance of $25.9 million. Again, though, this number was adjusted downward by Coniglio to be more accurate. Specifically, she wanted to use the balance from the time when Chase received the Allegro letter rather than the balance at the point of charge-off, at which point the account would have accrued fees and interest. This removes about $3.4 million in fees for a balance of $22,534,096.

Coniglio’s next step was to determine the actual likely payment stream from those 3,327 customers by looking for population of Chase customers who were similar to the Chase customers in the Allegero seheme-essentially a blend of customers looking to self-cure and those already in collection. 6 This group made sense as an analogue to Allegro-affected customers because Allegro customers were account holders who were delinquent but yet able to pay over some funds; in other words, but for Allegro, many Allegro customers likely had the funds to make some minimum monthly payment to Chase. Coniglio then did a payment stream analysis of this group out over a 210-day period to determine what percentage of their balance did this similarly situated group pay over a seven-month period. 7 The average payment rate from this grouping was 43 percent. Taking 43 percent of the balance at the time Chase received Allegro letters, *723 $22,534,096.00, produces a balance of $9,979,229.52. 8

The evidence and testimony at trial showed that Nelms and Allegro proximately caused this damage to Chase. It was largely undisputed at trial that the basic operation of Allegro was premised on the fact that the creditor would pay money into Allegro rather than to their creditors. In fact, it was shown that Allegro discouraged their customers from paying creditors like Chase as a matter of basic policy. In that sense, Allegro collected money from Chase cardholders that otherwise could have been paid over to Chase directly. Nelms and Allegro misled their customers into thinking this money would be paid to Chase, while failing to inform the customers that Chase’s internal policy would not allow settlements with Allegro. Therefore, money otherwise due to Chase was diverted by Nelms and Allegro into a fraudulent scheme, and was instead used by Nelms and Allegro for millions of dollars of profit.

D. Chase’s Allegation of Defalcation Pursuant to § 523(a)(4) Fails for Lack of a Fiduciary Relationship with Nelms

Section 523(a)(4) provides that a debtor cannot discharge a debt incurred through “fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.” 11 U.S.C § 524(a)(4). A debt is nondis-chargeable based on defalcation if the creditor proves three elements: (1) the debtor stood in a fiduciary relationship with the creditor; (2) the fiduciary relationship existed prior to the creation of the debt; and (3) the debt resulted from an act of defalcation. Quaif v. Johnson, 4 F.3d 950, 953-55 (11th Cir.1993). The creditor seeking to except the debt on grounds of § 523(a)(4) bears the burden of proving “the existence of an express or technical trust and not merely the existence and breach of a fiduciary duty.” In re Lucas, 477 B.R. 236, 242 (Bankr.M.D.Ala.2012). Once a fiduciary relationship in the context of a trust is established, the creditor must show a defalcation by the debtor. The Supreme Court has recently examined § 523(a)(4) to discern the meaning of defalcation, finding it to require an intentional wrong, or when “actual knowledge of wrongdoing is lacking, — if the fiduciary consciously disregards (or is willfully blind to) a substantial and unjustifiable risk that his conduct will turn out to violate a fiduciary duty.” Bullock v. BankChampaign, N.A., — U.S.-, 133 S.Ct. 1754, 1759 , 185 L.Ed.2d 922 (2013).

Chase seeks to establish a fiduciary relationship with Nelms with which to base nondischargeability upon the fact that Allegro had its customers authorize limited powers of attorney. There are two problems with Chase’s approach. First, the power of attorney does not create the fiduciary duty necessary to give rise to an action under § 523(a)(4). “ ‘As a rule, the general fiduciary duty created by a power of attorney gives rise to an agency relationship, but does not give rise to the fiduciary capacity required by section 523(a)(4).’ ” In re Scott, 481 B.R. 119, 190 (Bankr.N.D.Ala.2012) (quoting Pioneer Bank & Trust v. Cameron (In re Cameron), 2008 WL 5169513 (Bankr.D.S.D. Oct. 17, 2008)). Further, even if it could be shown that some elevated level of fiduciary duty existed giving rise to a nondischargeability action, that fiduciary duty would extend only to Nelms and Allegro and the *724 Chase cardholders. It would not establish a fiduciary duty between Nelms and Chase.. Without being in a fiduciary relationship with Chase, Nelms could not commit a defalcation against them. Accordingly, Chase has failed to prove this count of the complaint, and the nondischargeability of Nelms’s debt to Chase cannot rest on § 523(a)(4). 9

E. Nelms’s Motion to Dismiss Based on Statute of Limitations is Without Merit

On the eve of the trial, Nelms filed a motion to dismiss alleging that Chase’s complaint should be dismissed based on the grounds that Chase’s complaint was barred by the statute of limitations under 11 U,S.C. § 727(e). (Doc. 128). Nelms’s motion is without merit for two reasons. First, Chase timely filed its complaint. Second, Nelms waived his statute of limitations argument because he failed to raise it as an affirmative defense in his answer.

Nelms filed his Chapter 7 petition on February 22, 2010, and notice of commencement of the case was given to parties in interest, as well as notice of meeting of creditors, which was scheduled for March 31, 2010. (10-30430, Doc. 5). The deadline to file actions pursuant to 11 U.S.C. § 523 (c), was June 1, 2010. Id., see also, Rule 4007(c), Fed. R. Bankr. P. Chase timely filed its complaint on June 1, 2010. (Doc, 1).

Nelms filed his answer on June 29, 2010. (Doc. 10), While he denied a number of the allegations of the complaint and raises several defenses, he did not raise the statute of limitations, or the bar of Rule 4007(c), in his answer.. Rule 8(c), Fed. R. Civ. P., states that “[i]n responding to a pleading, a party must affirmatively state any avoidance or affirmative defense, including: ,.. statute of limitations.” (Made applicable to these proceedings pursuant to Rule 7008, Fed. R. Bankr. P.). As Nelms failed to plead the statute of limitations in his answer, he has waived it. Id.; Day v. Liberty National Life Ins. Co., 122 F.3d 1012, 1015 (11th Cir.1997).

Nelms was granted a discharge by this Court on January 23, 2012. (10-30430, Doc. 107). It is important to note that all Chase seeks here is a declaration from this Court, that Nelms’s debt to it Chase excepted from that discharge under § 523(a)(2). That is, Chase is not opposing the grant of a discharge to Nelms pursuant to 11 U.S.C. § 727 . If Nelms did not receive a discharge pursuant to 11 U.S.C. § 727 , it would not be necessary to determine whether Chase’s debt was excepted from it. The entry of a discharge in favor of a debtor is a necessary precondition for the efficacy of an exception, rather than—as Nelms alleges—a bar.

Nelms also argues that Chase should have prosecuted its dischargeability action in the context of a civil action in the Eastern District of New York in 2002. See Chase Bank, USA v. Allegro Law, LLC, et. al, Case No. 08-CV-4039. This Court has jurisdiction to hear this action pursuant to 28 U.S.C. § 1334 (b). Nelms cites no authority for the proposition that the action should have been prosecuted in the Eastern District of New York rather than here, and this Court is aware of none. Moreover, it appears that the only court in which venue would have been proper is this Court. 28 U.S.C. § 1409 (a).

*725

F. Nelms’s Motion to Recuse is Without Merit

Four days prior to the start of trial, Nelms filed a Motion to Recuse. (Doc. 124). Nelms contends that the Bankruptcy Judge was biased against him because he wrote a letter to the Alabama State Bar opposing the reinstatement of Nelms’s law license. Before addressing the merits of Nelms’s claim, a brief review of the context in which this letter was written would be informative.

On June 25, 2009, the Alabama State Bar suspended Nelms’s law license, for a period of three years, for his unethical conduct in connection with the Allegro debt settlement scheme. (Pl.Ex. 13). After serving his suspension, Nelms petitioned the State Bar to reinstate his law license. Dianne Gray, an Investigator for the State Bar sent a copy of Nelms’s petition to the Bankruptcy Judge with a request for comments. 10 The October 17, 2013 letter, a copy of which is attached to Nelms’s motion, is the Bankruptcy Judge’s response. The October 17 letter is five pages long and addresses three material false statements made by Nelms in detail. The salient point is that Nelms filed a petition for reinstatement with the Bar which contained false statements relating to his bankruptcy filing or to this Adversary Proceeding. The Court will attach copies of four items: (1) Nelms’s Petition for Reinstatement; (2) the Bankruptcy Judge’s Letter of October 17, 2013; (3) the Alabama State Bar’s Conditional Order on Guilty Plead, dated June 25, 2009 (suspending Nelms’ law license for three years); and (4) the Judgement of the Circuit Court of Autauga County, Alabama, dated February 11, 2010, in Alabama v. Allegro Law, LLC, CV-09-125 (finding that Nelms has perpetrated a fraud on the Allegro customers, among other things).

Nelms alleges that the October 17 letter shows that there is an appearance of impropriety or bias and, for that reason, the undersigned should recuse, citing Ex Parte Rollins, 495 So.2d 636 (1986). In Rollins, the Alabama Supreme Court granted a writ of mandamus, requiring a trial judge to recuse from a case where the judge had “intense negative feelings” against one of the lawyers. It should first be noted that the “intense negative feelings” arose from prior dealings between the lawyer in question and the trial judge, issues that had forced the trial judge to recuse himself in two prior matters. The judge made a complaint against the lawyer with the bar, however, the bar did not sanction the lawyer.

Nelms misreads the decision in Rollins. It is not a blanket rule that a trial judge must always recuse if he has made a bar complaint against any lawyer, or party, in a case. The judge’s bar complaint in Rollins was a symptom of the “intense negative feelings,” bourne out of extrajudicial animus, and not the bar complaint itself that triggered the need to recuse. The October 17 letter written by the undersigned Bankruptcy Judge was not a formal bar complaint, but instead was in response to a request for information from the bar, based on evidence heard by the Bankrupt *726 cy Judge over a period of four years and not the product of any extrajudicial bias of intense negative feelings. To hold that a judge in such a situation must chose between speaking out as to what he knows-based on numerous motions, evidentiary hearings as well as a judgment from the Circuit Court of Autauga County, Alabama-and recuse from a large, complicated case in which he has invested four years, or keep silent and allow a party to make false statements and mislead another tribunal is a dilemma the law does not place on a trial judge.

Recusal is governed by 28 U.S.C. § 455 (a) which states that “any justice, judge, or magistrate judge of the United States shall disqualify himself in any proceeding in which his impartiality might reasonable be questioned.” Ginsberg. v. Evergreen Security, Ltd., (In re Evergreen Security, Ltd.), 570 F.3d 1257, 1263 (11th Cir.2009). “Opinions formed by the judge on the basis of facts introduced or events occurring in the course of the current proceedings, or of prior proceedings, do not constitute a basis for a bias or partiality motion unless they display a deep-seated favoritism or antagonism that would make fair judgment impossible. Thus, judicial remarks during the course of a trial that are critical or disapproving of, or even hostile to, counsel, the parties, or their cases, ordinarily do not support a bias or partiality challenge.” Liteky v. United States, 510 U.S. 540, 555 , 114 S.Ct. 1147, 1157 , 127 L.Ed.2d 474 (1994); see also,, Mantiply v. Home, 2014 WL 1370151 (S.D.Ala. April 8, 2014). The facts which came to the attention of the undersigned Bankruptcy Judge, which underlie the October 17 letter to the State Bar, all came to his attention through the course of the Allegro and Nelms bankruptcy cases and related Adversary Proceedings. Nelms does not allege any extrajudicial source for the matters he complains of. Nelms’s claim of bias is without merit.

CONCLUSION

Chase has provided a thorough account of the massive fraud committed by Nelms through Allegro Law on thousands of Chase account holders. Through misleading advertisements and' fraudulent promises to solve debt problems for consumers, Nelms orchestrated a scheme that induced thousands to halt payments to their creditors and instead divert the money to him. Millions of dollars otherwise due to Chase were instead collected by Nelms and his agents in the form of costly fees, causing alarming financial harm to consumers in the process. The Court heard ample testimony of the reliance consumers placed on Nelms’s misrepresentations, and of the damage caused to Chase as a result. Accordingly, judgment is due to be entered in favor of Plaintiff Chase Bank, and the debt of $9,979,229.52 owed by Nelms is excepted from discharge pursuant to 11 U.S.C. § 523 (a)(2)(A). A separate order to this effect will be entered.

Done this 24th day of July, 2014.

/s/ William R. Sawyer

United States Bankruptcy Judge

c: Clark R. Hammond, Attorney for Plaintiffs

John D. Norris, Attorney for Defendant

APPENDIX B

UNITED STATES BANKRUPTCY COURT FOR THE

MIDDLE DISTRICT OF ALABAMA IN RE: ALLEGRO LAW, LLC, Debtor. DANIEL G. HAMM, as Trustee for Debtors Allegro Law, LLC and Allegro Financial Services, LLC, Plaintiff, vs. *727 AMERICORP, INC.; SETON, CORP.; TIMOTHY McCALLAN, and THE ACHIEVABLE, INC., Defendants.

Case No. 10-30631-WRS

Chapter 7

Adv. No. 11-03007

PLAINTIFF’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW

I. Introduction

The Defendants collected, held, and purportedly processed $127,370,765.89 in payments received from Allegro customers by Allegro Law. (PX 88, Tab DM2 (“Receipts”) and PX 89, Tab DSl/part 2 (“Total Payments Received”)). Since the February 22, 2010 filing of the Chapter 7 Voluntary Petition for Keith Nelms, (Case No. 10-30430, Doc. No. 1) 1 and the March 12, 2010 filing of the Chapter 7 Voluntary Petition for Allegro Law, LLC and Allegro Financial Services, LLC, 2 (Case No. 10-30631, Doc. No. 1), this Court has been seeking a clear and cogent explanation as to what happened to all of that money. Despite more than a half dozen Orders, 3 evidentiary hearings, over- 300 PACER filings, and a full trial on the merits, Defendants have steadfastly refused to provide the answer to that question. Instead, the Defendants have acted with complete and total contempt for this Court, the bankruptcy process, and the tens of thousands of Allegro customers who have been waiting since February 2010 for a resolution of their claims. In order to fully understand the unprecedented scope of the Defendants’ wrongful conduct—both with respect to the merits of this case and how they have conducted themselves throughout the course of this litigation—it is necessary to start at the very beginning.

II. Allegro Law Replaces Previous Scams Associated With The Defendants, Including Hess Kennedy and Consumer Protection Law Center

Allegro Law was simply another iteration of the same scam that Defendants have been perpetrating for years. Defendants processed and mailed the same letters on behalf of Allegro Law that they did for Hess Kennedy, Consumer Protection Law Center, and Campos Chartered Law Firm. (PX 128). Defendant Americorp’s customer service representatives answered the phone on behalf of Allegro, Hess Kennedy, Campos Chartered Law Firm, and Consumer Protection Law Center all in the same day. (PX 336C; Transcript, page 77, lines 5-6). When one entity was shut down by regulators, the Defendants *728 simply moved the scam—and many of its victims—to another.

In an email dated February 23, 2008, Defendant Timothy McCallan and a man named Joel Carlsen exchanged correspondence evidencing their plans to abandon Hess Kennedy and Consumer Protection Law Center and carry on with Allegro:

Carlsen: “[W]e have to come from the perspective that we see both HK [Hess Kennedy] and CPLC [Consumer Protection Law Center] go down. What would we do?”

McCallan: “Nelms is on tap. I have already reached out to him this morning advising him to get ready and asking him for all the details on the legal entities he has ready to go that we can use.”

Carlsen: “I can have the network attorneys sign contracts linking them to Nelms entity should take 30 days. We move forward with our plans of separate contracts for each attorney, tasking out, etc. We take the 30 companies you have on tap and get them under Nelms asap. (Neil can help here). We get your people trained on HK techniques asap to learn aggressive settlement techniques and legal arguments. We use this experience with our Nelms operation. This way if in the future Camp[os] has challenges, we can roll directly into Nelms. Now big question. IF, CPLC or Camp has challenges in the future, and we are ordered to stop, which in theory could freeze Ameri-corp operations, does it make sense to set up Nelms using processing under a completely different name, roof? Meaning not process CPLC and HK under the same roof as Nelms so if something occurred, Nelms would not be implicated?

We should do this quietly as it could be seen as a “jump ship” move by Ed [Kennedy] at a time of pressure and could be misread.

(PX 337B-2). In a letter dated March 21, 2008, Defendant Timothy McCallan made the transition to Allegro official when he wrote:

... Consumer Protection Law Center recently informed us that they will not be accepting any new clients starting Thursday March 27,2008.

On a positive front, we are nonetheless proud to announce that Allegro Law, LLC, a consumer advocacy law firm based in Alabama, has decided to use Americorp/Seton as their sole payment processing agent for their debt management and debt settlement clients .... This new relationship is effective on Thursday [sic] March 26, 2008.

(PX 125). Many Allegro customers indicated in correspondence with the customer service department that they were formerly customers of Hess Kennedy. (PX .201 and PX 351). 3

*729 III. A Full Accounting From the Defendants Is Sought From The Very Beginning

After the Allegro Law debt elimination program 4 had been in operation for a little over a year, the Autauga County Circuit Court issued a Temporary Restraining Order on July 9, 2009 and appointed Louis Colley as Receiver of the assets of Allegro Law and Allegro Financial. A final judgment was entered by the Circuit Court oh February 11, 2010, leaving Mr. Colley in place as the Receiver. (Case No. 10-30631, Doc. No. 8, Exhibit A).

During the Receivership—and while they were still being paid large sums of money by the Receiver—Defendants purportedly continued to perform their “back office processing” work. Indeed, Defendants were elated that they were going to continue to make money despite Allegro’s Receivership. An email from Vanessa Vinicombe, Americorp’s Chief Financial Officer, to Defendant Tim McCallan and others, dated days after the initial appointment of the Allegro Receiver, stated:

Tim has asked me to share with you some good news that we have received as he promised you an update. “We are beginning to see the light.’ We have been in contact with the [Receiver and they have provided us with the new bank accounts which are located in Alabama. We are currently working with Vaneo Processing to change the banking information to the new accounts. We are anticipating that we will be submitting EFT files for both DS [debt settlement] and DM [debt management] within the next 24-48 hours. Payments and Disbursements are diligently working to produce deposits for all of the manual checks that we have stored since July 1, 2009. This is Great News. We will let you know when we have more. Stay focused and Believe.

(PX 108; email dated July 16, 2009) (unconventional capitalization in original).

On July 6, 2010, while the Defendants’ businesses remained operational, this Court entered an Order on the Receiver’s Motion for Allowance of An Administrative Expense Claim Pursuant to 11 U.S.C. 503(B)(3)(E) and 543(C), which sought payments from the bankruptcy estate for “services” provided by Defendants Americorp, Seton, and The Achievable. (PX 1). In that July 2010 Order, the Court made clear that it would not approve administrative claims for the Defendants until answers to some fundamental questions were provided:

The Court’s second concern is as to the value of the services rendered. The court will require evidence as to precisely what was done and who did what prior to any fees being awarded. Also of considerable interest is the overall disposition of funds flowing through the Allegro accounts. The following questions remain to be answered:

1. How much money was taken from Allegro clients?

2. How much of that money was taken by Nelms?

3. • How much was paid to Americorp,

Seton, and other third parties?

4. How much was paid to creditors of the Allegro clients?

The Court has made inquiry from the Trustee as to whether the amounts owed to the 15,000 Allegro clients can be determined. To date, no accounting has been provided, or shown to exist, *730 which would enable the Court to determine how much is owed. Until this is made clear, the Court will not approve administrative claims in payment of fees to those who were in control of the money and who should be able to answer these questions.

(PX 4) (emphasis added). More than three years have passed since this Court entered that Order.

IV. The Defendants Have Consciously and Deliberately Done Everything In Their Power To Thwart Every Effort Made By the Plaintiff To Obtain Critical Information About The Money Flowing Through The Allegro Law Program

A. The Plaintiff Sought Information From The Defendants Before Filing This Adversary Proceeding

On September 23, 2010, the Trustee wrote a letter to Americorp’s attorneys requesting much of the same information that the Court requested in its July 6, 2010 Order:

Please understand that we are seeking this information for all current and former Allegro customers from about April 2008 through the termination of the business.

1. For all Debt Management and Debt Management clients: A listing that includes name, address, account number and all debits and credits into that particular account. This report should summarize the information at the conclusion of each customer’s account.

2. For all Debt Settlement clients: A listing that includes all customer account numbers along with the client name, address, account number, and each customer’s escrow balance.

3. The most recent statement issued to all active Allegro debt settlement and debt management customers.

4. A summary of all payments made to all third parties from Allegro funds from April 2008 through the end of business operations.

5. We understand that Mr. John Fend-ley was allowed to access Allegro’s customer’s account data housed within the AmeriCorp/Seton system. We would be seeking to have ‘inquiry only’ access to this same electronic data ...

(PX 5).

On September 27, 2010, the Trustee wrote a letter to Americorp’s attorneys requesting that the Defendants preserve all evidence related to the underlying bankruptcy:

As you are aware, we are in the process of obtaining certain information/data from Americorp. . The information in their New York office is vital to this case and we need to be assured that it will remain available. Due to the nature of this information, I am requesting your assurance that Americorp will have a securely protective data “back-up” to guard against any loss of this information from any potential problems and that i[t] will be available to us at a later date. Please discuss this with personnel at Americorp and let me know what you find out.

(PX 6). Thus, long before the Defendants ceased operations, they were fully aware of how critical their data was to cases that were currently pending before this Court and they were fully aware of this Court’s demand for that data.

*731 B. Defendants Refuse to Completely Or Honestly Answer Written Discovery Requests

On February 15, 2011, Plaintiff filed the Complaint in this case (11-8007, Doc. No. 1). Plaintiff filed an Amended Complaint on March 2, 2011 (PX 7). Defendant Timothy McCallan, CEO and owner of both Americorp and Seton, testified at a February 2013 evidentiary hearing that when he was served with the Complaint in this matter, he read it. (PX 346, page 111, line 25; page 112, lines 1-2). He further testified:

Q: And so you knew when you were served with the complaint that it had a specific request in it that said the trustee was requesting what they called turnover, namely that the defendants turn over any and all records whether electronic or hard copy relating to certain aspects of the debt programs or all aspects of the debt programs that the corporate defendants had run, correct?

A: Yes.

(PX 346, page 112, lines 3-10).

On March 10, 2011, Defendants Ameri-corp, Inc., Seton, Corp., and Timothy McCallan were served with Plaintiffs First Request for Production and Plaintiffs First Interrogatories (PX 8, PX 9, and PX 10). Among the many discovery requests included in those pleadings was Request for Production No. 11, which asked for all documents relating to:

a. The entire files on each customer.

b. Any payments made by each customer.

c. Any fees assessed to each customer.

d. The identity of each customer’s creditors.

e. Any communications sent to or received from the creditors of each customer.

f. The outcome or result of the debt elimination program as to each customer.

Clearly, Request No. 11 was designed to obtain documents that answered the fundamental questions that were at the heart of the underlying bankruptcy proceeding as well as this adversary proceeding:

a. How much money was received from each customer?

b. How much money did each customer pay to each Defendant for fees or other charges?

c. How much money did each customer pay to Allegro Law, Keith Nelms or any other third party for fees or other charges?

d. How much money was paid to each creditor of each customer?

e. How much money was being held for each customer when the Defendants last provided services relating to that customer?

Only three weeks after they were served with these discovery requests, both Ameri-corp and Seton ceased operations. (PX 35, Affidavit of Timothy McCallan, at ¶ 7).

C. Defendants Do Not Disclose the Existence of Either Database

On May 5, 2011, Defendants responded to Plaintiffs First Request for Production and Plaintiffs First Interrogatories. (PX 15, PX 16, and PX 74). At the beginning of their Request for Production, Defendants stated that the “... [f]iles being made available via DVDs are provided, with limited exceptions, in the form in which those files have been maintained among the Defendants’ business records.” (PX 16) (emphasis added). This was the first—but certainly not the last— *732 time that the Defendants made misrepresentations in this case.

In Defendants’ first response to Request No. 11, they produced 2 folders of documents, one named “All Active Clients” and one named “All Inactive Clients,” and stated that additional documents “may be found in other DVD folders,” which Defendants did not identify. (PX 16). The contents of those folders were introduced into evidence at the trial as PX 17, PX 18, PX 19, and PX 20. A brief review of the 4 spreadsheets produced in those 2 folders demonstrates that those spreadsheets did not come anywhere close to containing all of the information asked for in Request for Production No. 11.

On June 16, 2011, at a hearing conducted by this Court, the Defendants described their May 2011 document production as follows:

We received discovery from the plaintiff, from the trustee.... In response to that request, we turned over, Your Honor, all of our records. We didn’t discriminate. We didn’t parse out which question required what information. We did, if you will excuse the term, we did a data dump. We gave them and structured it by file so they could identify what information we had provided, every single piece of information that we have, which is extensive, about each of the individual clients of Allegro Law, how much they paid in, how much they received, what was disbursed on their behalf. And this was produced about a month ago — [F]rankly there isn’t any additional information.

These [Americorp and Seton] are two companies with extensive history in providing back-office services. They have very good records. We have turned over all of those records —

(PX 26, Transcript of June 16, 2011 Hearing, page 20, lines 2-19; page 21, lines 13-16). This was untrue. The Defendants later turned over at least 800,000 additional documents, a huge second database that contained information relating to thousands of additional customers, and a variety of Excel spreadsheets, none of which were included in the May 2011 production. (PX 346, Transcript of February 21, 2013 Hearing, page 35, lines 23-25; page 36, lines 1-5). Moreover, less than 4 months before trial and after the entry of more than half a dozen Court Orders, Defendants re

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