Houston Ripoffs of Disabled Vets Went Undetected for More Than a Decade

Sometimes when she watched her son standing outside his personal care home, Wylma Barnett thought the disabled ex-Marine looked homeless clad in his worn and raggedy clothes, though he had plenty of money in the bank.

The picture seemed wrong, she thought, for a man who had served his country and whose ample assets for the last 20 years were entrusted to a Houston attorney by the Department of Veterans Affairs.

Instead, next month, Joe B. Phillips, 72, and his wife Dorothy, 71, are expected to stand trial for conspiracy to commit fraud and theft in a Houston federal court. They are accused of embezzling more than $2 million from at least 28 disabled veterans, including Barnett's son, and allegedly carrying out the biggest rip-off ever uncovered in a VA program responsible for about $3.1 billion in disabled veterans' assets nationwide.

But according to court records reviewed by the Houston Chronicle and interviews with those who investigated the thefts, local veterans lost even more money and the fraud persisted longer than authorities initially reported. Evidence of possible exploitation in Phillips' own public accountings and actions were overlooked for years.

"All they would have had to do was ask," Barnett said, referring to the government's lack of scrutiny. "Ask anybody who had been assigned to Phillips."

More than two dozen veterans and insurance companies have since filed civil lawsuits against Joe Phillips, who continues to practice law four years after a VA auditor first found evidence of embezzlement.

A VA audit first found problems with Phillips' accounts in late 2007.

Bernard Hebinck, a retired U.S. Air Force colonel and attorney who also serves as a VA fiduciary in Houston, said it was the first formal audit by the VA of fiduciary records in this area in about a decade. He and his partner, Kevin Alter, subsequently sued Phillips on behalf of 20 veterans and obtained 18 settlements so far.

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Houston Ripoffs of Disabled Vets Went Undetected for More Than a Decade