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Bankruptcy Fraud in Washington State?

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By Lorne Dey
Investigative Reporter

James O'Hagan
James O'Hagan and Son

Pacific County, WA - When the creek that provided water to James O’Hagan’s cranberry farm was reportedly illegally diverted by county officials in 1994, O’Hagan could not have known that the act would eventually lead to an alleged bankruptcy fraud scheme that would involve several state and federal judges, at least two federal trustees, and a number of private attorneys.

Although there are currently no statistics on the prevalence of bankruptcy fraud, the crime generally takes four basic forms:

1. A debtor will conceal or attempt to conceal assets to avoid losing them.

2. A debtor will intentionally provide false or incomplete information concerning their assets.

3. A debtor will file multiple times using either false or real information in more than one state.

4. The debtor will use bribery to coerce a court-appointed trustee.

In the alleged bankruptcy fraud scheme involving James O’Hagan, all four methods were reportedly used and with the help of the individuals listed at the end of this article.

As a result of the “illegal diversion” of Deer Creek, O’Hagan sued those involved, which included county officials and his neighbor, Kenyon Kelly, now deceased, who was also complicit as his farm benefitted from the diversion. However, prior to trial, all the county officials were suspiciously dismissed from the suit and O’Hagan was left with Kelly as the sole defendant.

In 2000, O’Hagan won his suit against Kelley along with a judgment for $213,014.37 plus damages that at the time would have been calculated to be an additional $900,000.00. Kelley allegedly began working with his attorneys to devise a way to keep from paying the judgment, which led to the concealment and diversion of his assets prior to filing for bankruptcy protection.

When Kelley first attempted to hide his considerable assets in bankruptcy court [when this first attempt failed he allegedly tried three more times with different judges], Federal Bankruptcy Judge Paul B. Snyder denied it on all counts and went on record to say that Kelley “… was a debtor engaged in a substantial farming operation who, immediately prior to filing bankruptcy and after the entry of an adverse judgment, worked with consultants and attorneys to judgment-proof his estate so that creditors [O’Hagan] could get little or no benefit from his assets.” These assets amounted to approximately $700,000.00. Judge Snyder went on to identify Kelley to be an “absconding debtor,” a ruling that was mysteriously ignored by subsequent bankruptcy judges.

According to O’Hagan there are two readily identifiable amounts of Kelly’s money that were in the hands of attorney Gregory Ursich and Trustee Russell Garrett – one for $97,327.57 and another for $150,000.00. The whereabouts of neither amount has been satisfactorily accounted for, but the latter amount appears to have made it back to Kenyon Kelly, but was never reported to the bankruptcy court.

In 2011, after over 11 years of obfuscations by Kelley, other state and federal judges, and court-appointed trustees, Judge McCauley made this subsequent conclusion of law: “When I ordered this property [belonging to Kelley] sold and then there was a lot of delay for – to my mind, unknown reasons. Still, nothing seems to get done down there… whatever efforts that have been made at farming down there I think is not in good faith to truly farm that land, it’s to avoid paying the debt to Mr. O’Hagan.”

According to O’Hagan, “What both Judge Snyder and Judge McCauley have exposed is an ongoing, blatant bankruptcy fraud scheme involving multiple public and private individuals that demands an official investigation!”

Jenny Durkan
U.S. Attorney for the Western District of
Washington State, Jenny Durkan

In March, 2013, U.S. Attorney for the Western District of Washington State, Jenny Durkan, was notified by the US~Observer as to the facts and allegations in O’Hagan’s case, but at the time of this writing, neither O’Hagan nor the US~Observer have heard back from Ms. Durkan or her office.

In recent developments, Pacific County Sheriff Scott Johnson and Pacific County Prosecutor Mark McClain may finally be taking O’Hagan’s evidence and allegations seriously and we at the US~Observer hope that appropriate actions and investigations will soon be forthcoming. WA State Reps Brian Blake and Dean Takko have also been made aware of the issues regarding O’Hagan’s cranberry farm and the allegations dealt with in this article. However, Ms. Durkan is the highest level official in Washington State to investigate and prosecute this case and we at the US~Observer want her to know that we will not accept no action or participation from her or her office in this matter, but will continue to expose her inaction should she continue to ignore O’Hagan’s allegations.

It is O’Hagan’s contention that the individuals implicated by Judge Snyder are attorneys: Gregory Ursich, George Benson, and Thomas Linde, along with consultants: Carsten von Borstel of Fields Unlimited and David Poor of Northwest Farm Credit Services. Also, according to O’Hagan, Pacific County Judge Michael Sullivan, Federal Bankruptcy Judge Philip H. Brandt, and Federal Bankruptcy Judge Brain D. Lynch are also involved in covering up the fraud scheme, as are U.S. Bankruptcy Court trustees, Russell Garrett and Brian Budsberg.

O’Hagan stated in a recent interview, “It appears Carsten von Borstel turned bankruptcy fraud into big business. The bankruptcy trustees and attorneys enjoy the business opportunities and financial gains the bankruptcy fraud schemes provide to them, whereas Carsten filed his own bankruptcy fraud scheme in Oregon to avoid his involvement in defrauding me.”

Anyone who has information about these individuals that could help Mr. O’Hagan and expose this alleged corruption is encouraged to contact Lorne Dey at 720-231-2038 or by email to

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