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Lyda Ness Garcia Accused of Fraudulently Cashing Three Checks

Local attorney Lyda Ness Garcia, who is running for the 383rd Family Court bench, has been accused of improperly cashing her client’s checks. In July, Lyda Ness Garcia beat Lucila Flores in the Democratic Party primaries. She now faces Republican candidate Phyllis Martinez Gonzalez on November 3. This is not the first elected position that Ness Garcia has sought.

She has previously run for the 388th District Court, City Council District 1 and State Representative, District 77. She lost all three races.

The Allegation

Jennifer Caballero shared three checks made out to her that were cashed by Lyda Ness Garcia.

Copies of Checks Provided By Jennifer Caballero

The checks were tendered to Jennifer Caballero. They were cashed by Lyda Ness Garcia. For Ness Garcia to cash a check made out to another individual she must have in her possession a power of attorney or authority to endorse the check on the behalf of the recipient.

Check Endorsement

Of the three checks shared with the El Paso Politics by Jennifer Caballero, only one has the back of the check where the endorsement is made visible. The endorsement on the $5,000 check shows that it was deposited into the Wells Fargo Bank account belonging to the “Law Offices of Lyda Ness-Garcia PC”.

It is generally accepted that a check must be endorsed by the individual or entity that it is made out to. A third-party, in this case Lyda Ness Garcia, can deposit into their account a check made out to someone else provided that the check is endorsed on the back by the person the check is issued to, in this case – Jennifer Caballero.

There is no federal or state law that requires an endorsement of a check before it can be deposited. Banks, however, often require the endorsement to protect themselves against liability.

The Wells Fargo Account Agreement does not require an endorsement for Wells Fargo to accept a check on behalf of a customer. Wells Fargo adds that they “may endorse” the check for the client. [Wells Fargo Deposit Account Agreement, July 24, 2019]

The $5,000 check does not appear to have a Caballero endorsement. It only has the Lyda Ness Garcia legal firm endorsement on it.

Checks Cashed

Caballero told the El Paso Politics that she has not provided Ness Garcia a power of attorney nor the authority to endorse checks on her behalf.

According to Caballero, Lyda Ness Garcia has refused to explain why she cashed the checks.

As of the publication date, Jennifer Caballero has not yet received her funds nor has Lyda Ness Garcia explained to her under what authority she cashed the checks, according to Caballero.

Caballero added that the legal refund check ($5,000) was in the former attorney’s file picked up by Ness Garcia’s office. It was intended as a refund to Jennifer Caballero from her previous attorney. [Jennifer Caballero, email correspondence with author, September 19, 2020]

Attorneys Required To Keep Trust Account

The State Bar of Texas published A Lawyer’s Guide to Client Trust Accounts on April 15, 2014. According to the guide, the Texas Disciplinary Rules of Professional Conduct requires attorneys to keep their clients’ funds “separate from the lawyer’s own funds by depositing the funds into a trust account.” The guide requires that attorneys deposit money into the trust account “whether the funds belong in whole or in part to clients or third persons.” [emphasis in original] The guide provides examples of types of funds that must be deposited into the separate account, as well as examples of funds that “must not” be deposited into a trust account.

The “must not” examples include fully earned fees, reimbursement for cost advances, and lawyer’s personal or business transactions. The guide also admonishes lawyers against commingling funds. [State Bar of Texas, “A Lawyer’s Guide to Client Trust Accounts,” April 15, 2014]

All other checks should be deposited in the trust account by the attorney.

The Issues With The Checks

Only one of the checks provided to El Paso Politics includes the endorsement portion of the check. The $5,000 check shows that it was deposited into an account titled “Law Offices of Lyda Ness-Garcia PC”. The State Bar guide states that the lawyer’s trust account “should be titled in the lawyer’s or law firm’s name with the words, ‘Client Trust Account’, ‘IOLTA Account’, ‘Client Escrow Account’, or ‘Lawyer’s Name as Custodian for Client’s Name’.”

The $5,000 check made out to Jennifer Caballero does not have the “trust account” designations in the endorsement portion of the check.

This brings up two issues with how the checks to Jennifer Caballero were handled by Lyda Ness Garcia.

The first issue about the $5,000 check made out to Jennifer Caballero is whether it was a fee due to Lyda Ness Garcia. The check memo states that the check is for “Refund Attorney’s Fees” and is assumed to be from Jennifer Caballeros’ previous lawyer. As noted on the check, the check was intended as a refund to Caballero. As such it cannot be assumed that it was a fee payment to Ness Garcia.

However, regardless of the intended purpose of the check, it was tendered to Jennifer Caballero and thus it requires the endorsement of Caballero, which it does not have.

This is the second issue on the $5,000 check – the endorsement. It is missing the endorsement of Jennifer Caballero which means that Lyda Ness Garcia must have in her possession a power of attorney from Jennifer Caballero or an authority to endorse. Caballero stated to El Paso Politics that she did not sign a power of attorney nor give Lyda Ness Garcia the authority to endorse. [Jennifer Caballero, email correspondence with author, September 19, 2020]

The El Paso Politics asked Lyda Ness Garcia on a follow up email on Sunday, February 20, 2020 at about 6:00 a.m. whether the deposited checks were deposited into a trust account or into her firm’s business account. We also asked Ness Garcia whether she had either a power of attorney or an authority to endorse.

Lyda Ness Garcia provided an initial response to our original email to her. Readers can read it at the bottom of this article.

At approximately 4:52 p.m., El Paso time, Lyda Ness Garcia responded to our query about whether she deposited the checks into her trust account and if she had authority to endorse the checks. This is the response she sent:

“As much as I would like to respond to your questions and refute these allegations, I am required to decline. The questions you pose to me still violate the attorney client privilege. This privilege does not permit me to excise and choose bits of information to disclose. This includes our financial agreements/contracts. Privilege serves the societal interest of the effective administration of justice. I hold myself to a high ethical standard and l look forward to serving my community.”

Lyda Ness Response to Questions About Trust Account

Ness Garcia also included a PDF 120-page Texas Disciplinary Rules of Professional Conduct booklet stating that it explains the limitations imposed by her by the client-attorney privilege rules.

This is not the first time Lyda Ness Garcia faces issues on how she handles her finances.

Lyda Ness Garcia Previous Financial Problems

On February 17, 2020, the El Paso Times published a candidate profile on Lyda Ness Garcia. In the profile, Ness Garcia was asked if she had ever had a “civil judgement” against her. She responded, “yes”. Another question asked if Ness Garcia had “ever been in arrears on local, state, or federal taxes.”

Her answer was also “yes” to that question.

The Times’ profile questionnaire asked her to explain her answers.

In her explanation, Lyda Ness Garcia wrote, “like many who come through family Court [sic], I experienced a series of financial hardships that came with the collapse of my marriage and mounting medical costs due to an unexpected cancer diagnosis.” She added, “those matters have been successfully resolved and are well behind me and I am stronger for it and I believe a more empathetic attorney because I understand the uncertainties and stress that we experience as parents at the end of a marriage.” [El Paso Times Online Archives, February 17, 2020, accessed on September 19, 2020]

On June 9, 2011, the El Paso Inc. published an article stating the IRS filed a “fifth tax lien” against Ness Garcia. She was challenging Ann Morgan Lilly for her city council seat in district 1 in 2011.

According to an unsigned KVIA report published on May 5, 2011, “an anonymous person” had left an envelope outside of Ann Morgan Lilly’s door that contained notices of federal tax liens filed by the IRS against Lyda Ness Garcia.

The KVIA report states that “Garcia, at one point in 2005, owed the Internal Revenue Service more than $104,000.” In the KVIA report, Ness Garcia places the blame for the IRS tax liens on an accountant she had hired to handle her tax returns.

According to four tax liens filed by the Internal Revenue Service (IRS) against Lyda Ness Garcia in 2008, 2009 and 2011, Ness Garcia owed the IRS $206,586.03 in federal taxes for 2004, 2005, 2006, 2007 and 2008.

The federal liens show that for tax period ending on December 31, 2006, Ness Garcia owed $55,374.81 in federal taxes. [Notice of Federal Tax Lien Form 668, filed December 5, 2008]

For the tax period ending on December 31, 2007, Ness Garcia owed an additional $30,847.52 in federal taxes. [Notice of Federal Tax Lien Form 668, filed June 5, 2009]

Another federal tax lien filed against Lyda Ness Garcia on March 12, 2008 shows Ness Garcia as delinquent on her federal taxes for 2004 and 2005 for a total of $104,322.82. [Notice of Federal Tax Lien Form 668, filed March 12, 2008]

Lyda Ness Garcia was also delinquent on her 2008 taxes. A federal tax lien filed against her in 2011 shows that Ness Garcia owed the IRS $16,040.88 for 2008. [Notice of Federal Tax Lien Form 668, filed April 8, 2011]

All the federal tax lines were for taxes owed on her 1040 tax returns.

Additionally, in 2010, two judgements were filed against Lyda Ness Garcia for unpaid bills.

The first one filed on March 17, 2010 ordered Ness Garcia to pay AT&T $20,153.90. [Abstract of Judgement, 20100019805, El Paso County, March 24, 2010]

The second one was filed on July 14, 2010. It ordered Lyda Ness Garcia to pay $15,412.64 to Rasberry & Associates, Inc. [Abstract of Judgement, 20100049762, El Paso County, July 19, 2010]

In 2012, the Texas Attorney General filed suit against Lyda Ness Garcia in Travis County, 250th Judicial District for the garnishment of wages to settle a debt to Wells Fargo. [Cause no: D-1-GV-11-000356] Ness Garcia owed over $4,000 to Wells Fargo.

Texas Ethics Commission Investigation

On April 21, 2010, the Texas Ethics Commission held a preliminary review hearing to consider sworn complaint SC-2803116. The complaint alleged that Lyda Ness Garcia “accepted political contributions from a corporation and made political expenditures from corporate contributions.” The complaint also alleged that Ness Garcia “accepted political contributions in excess of the judicial contribution limits.”

The allegations are about her race in 2008 for the 388th Judicial District primary election.

According to the Texas Ethics Commission complaint, in her February 2008, 8-day report, Lyda Ness Garcia reported about $8,600 in total contributions and about $4,640 in expenditures with “zero political contributions maintained as of the last day of the reporting period.”

The ethics complaint adds that Lyda Ness Garcia “exceeded the contribution limits when she accepted three $2,500 political contributions, one from David Bingham, one from Bingham Investments, Inc., and another from EP Four Amigos, L.P.” Bingham is the registered agent for both companies, according to the complaint’s findings.

The Texas Ethics Commission found that Lyda Ness Garcia accepted a corporate contribution in violation of Texas Election Code.

The Texas Ethics Commission imposed a “$1,000 civil penalty” against Ness Garcia and ordered her to refund Bingham Investments, Inc. $2,500 in campaign contributions.

Bankruptcy

On December 5, 2012, Lyda Ness Garcia filed Chapter 7 bankruptcy in federal court. [12-32314-hcm]

In the voluntary bankruptcy filing, Ness Garcia listed $256,060.00 in assets and $877,192.00 in liabilities.

Among the creditors she owed, Ness Garcia listed the IRS with a balance of $286,319.

In her February 2020 candidate profile for the El Paso Times, Ness Garcia wrote that the cause of her financial hardships was the end of her marriage and “mounting medical costs” due to an unexpected cancer diagnosis.”

The 2012 bankruptcy lists just under $7,000 in medical bills for what appears to be household members plus another $2,965 due to Las Palmas Medical Center for what appears to be for one of her children.

However, the bankruptcy filings show that Ness Garcia owed $195,724 of which $94,386 is listed under a collection agency, for student loans.

A Chapter 7 filing is for debtors “who do not have the ability to pay their existing debts,” according to the bankruptcy filing.

Response From Lyda Ness Gacia

The El Paso Politics sent an email asking for comment from Lyda Ness Garcia at her campaign email and via her profile in the State Bar of Texas website asking for comment on the checks cashed by her on Saturday, September 19, 2020 at about 10:55 am. We asked that she respond by the end of the day.

The El Paso Politics received the following response from Lyda Ness Garcia:

“I would hope that one would question the veracity of an allegation that is only being raised 3 1/2 years after the conclusion of my representation and a month before the election. Attorney-client privilege precludes me from responding to the allegations in any manner despite the fact they have no merit. I understand how frustrating this can be, but my ethical mandates forbid me from disclosing communications or documents I obtained during representation, even if they directly disprove her claims.

Notwithstanding, I unequivocally deny improperly taking funds from any client at any time. I have always acted honestly and with integrity in my practice and will continue to do so as an attorney and from the bench.”

Statement by Lyda Ness Garcia

Ness Garcia asked that we publish her full statement “in its entirety”. [Lyda Ness Garcia, email correspondence with author, September 19, 2020]

Jennifer Caballero wrote to us that she has filed a grievance against Lyda Ness Garcia. The grievance is pending. [Jennifer Caballero, email correspondence with author, September 19, 2020]

Categories: News

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2 replies »

  1. If you are a Democrat, please UNDERVOTE Lyda Ness Garcia. Excessive debt can make a person susceptible to bribes and family courts are breeding grounds for corruption. Instead vote for Phyllis Martinez Gonzalez.

    Like

  2. I hope you run a story on Phyllis Martinez Gonzalez and her support for Trump. If she’s so interested in “families” on the Texas-Mexico border, then she should disavow Trump’s family separation policies. I doubt she will.

    Like

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