“Both of Mr. Pettit’s personal and corporate schedules are inaccurate, as he grossly understated his liabilities, including the amounts of money misappropriated from existing clients,” said Martin Seidler, a San Antonio lawyer representing creditors who submitted more than $800,000 in claims by a Wednesday deadline.

The San Antonio Express-News reviewed the claims filed in both Pettit’s personal and law firm’s bankruptcy cases but couldn’t determine their validity. Obvious duplicates and an $8 million claim apparently filed in error were omitted in calculating the total value.

“The exact amount of claims is difficult, if not impossible, to ascertain because (Pettit) intentionally failed to keep or concealed his client records,” Seidler said.

In addition, not everyone allegedly defrauded has submitted a claim. For example, the Express-News earlier reported on two people Pettit represented in personal injury cases who missed last week’s deadline. Both live in Mexico.

Eric Terry, the Chapter 11 trustee, said in an email Monday that he and the professionals he’s working with are still evaluating the claims, adding that it’s premature to take a position on the amount or validity of the claims.

Bankruptcy rules provide a process for evaluating and objecting to claims, including those filed late, Terry said. He will need to analyze any late claim to make a determination if an objection is warranted.

More than 50 of the claims were for amounts exceeding $1 million.

Pettit on June 1 sought protection from creditors by filing Chapter 11 for himself and his now-defunct law firm as he faced numerous allegations that he’d stolen millions of dollars from clients. He has not been charged, but the FBI has been investigating the allegations.

Pettit surrendered his law license and closed his offices. He has been in jail on a contempt of court charge in U.S. Bankruptcy Court in San Antonio for a little more than a month. He currently is not represented by counsel.

ednesday’s deadline brought a flurry of claims, including the largest — $55 million — which was submitted by an elderly San Antonio couple.

Pettit had represented James and Carol Armstrong since 2009, preparing their estate plan, preparing and filing tax returns, probating wills for family members and handling other legal matters.

He convinced the couple to allow him to manage and invest money on their behalf, providing periodic “accounting” of such funds in letters outlining investments he’d purportedly made, according to a summary attached to their claim.

Some of the investments don’t appear to exist.

For instance, Pettit told the Armstrongs in an August 2020 letter that he had invested $100,000 in bonds issued by the “Hudson County NJ MPT Authority,” paying 8.63 percent interest.

A spokesman for Hudson County, N.J., said he’d never heard of such a bond issue when contacted in June regarding investments Pettit purportedly made for another client.

“The only ‘Authority’ Hudson County operates is the Hudson County Improvement Authority (HCIA), which has never been referenced in any way as the ‘MPT,’” spokesman James Kennelly said in a June email. “We do not operate any agency with the initials MPT.”

Another $100,000 investment was allegedly also in bonds, also paying 8.63 percent interest, issued by the “VA Housing Settlement Auth.” A search on the website of Electronic Municipal Market Access, a repository of information on municipal securities, did not turn up anything with that name. A spokeswoman for Virginia Housing, a state agency that helps residents obtain affordable housing, said she didn’t know what it was.

Some stocks Pettit said he invested in on behalf of the Armstrongs don’t appear to have been trading at the time of his August 2020 letter.

Pettit told the Armstrongs they held 110,000 shares in AMPW. The Securities and Exchange Commission had revoked securities for the company that traded under that ticker symbol — American Power Corp. — in 2016 for failing to submit periodic filings to the agency.

Pettit also said the couple held 40,000 shares in SWVI. That was the symbol for Swingplane Ventures Inc., but its securities were revoked in June 2019 because its filings also were delinquent.

Why Pettit was purportedly investing in risky penny stocks on behalf of the couple, who were both in their 70s when they received the letter, couldn’t be determined.

Waco attorney David C. Alford, who represents the Armstrongs, said the claim he submitted on their behalf was based on information Pettit provided them.

“We’re seeking files from the … trustee,” Alford said.

He said he could not discuss how much money the Armstrongs gave Pettit to manage and invest. They understood that they had $30 million in stocks, $15 million in bonds and $10 million in money market accounts with Pettit, according to their claim summary.

“They’re normal, everyday folks that trusted Mr. Pettit to help them through legal issues over the years,” Alford said.

Asset sales

Terry, the trustee, is moving to sell assets, which include real estate and vehicles. Some of the money generated by the sales is expected to compensate creditors.

Pettit’s bankruptcy filings listed assets valued at $43.5 million, also significantly less than the amount of claims submitted.

A San Antonio creditor who asked not to be identified submitted a claim for almost $500,000. She doesn’t have any expectations she’ll get her money back through the bankruptcy.

On ExpressNews.com: Some of the real estate Chris Pettit transferred ahead of bankruptcy will be returned under deal

“The only thing I think I will get I filed with the State Bar,” she said. It was a client security fund that compensates those whose money was stolen by their attorney. The amount of compensation is capped at $40,000, however.

“That will be more money than I’ll get from this bankruptcy,” the creditor said.

The fund, which has more than $3 million in its coffers, has about 400 pending applications, and as many as 35 of those relate to Pettit, said Claire Reynolds, the bar’s public affairs counsel. The committee that reviews and votes on applications is made up of volunteers who serve on the bar’s board of directors.

“It’s definitely enough to cover everyone at this point, even assuming everyone is eligible,” Reynolds said. Not all of the 400 who have applied are eligible or are going to get all the money they asked for, she said.

Seidler, the attorney who represents creditors, isn’t optimistic that creditors will get back much from the bankruptcy.

“The anticipated recovery may well be just pennies on the dollar,” he said.

pdanner@express-news.net