Attorney John Murrin would say he's living proof of the old saying, No good deed goes unpunished.

Murrin, a longtime Twin Cities attorney and founder of "DIAL L-A-W-Y-E-R-S," found himself forced into bankruptcy last week, a surprisingly harsh turn of events for a guy who helped the FBI expose a complex mortgage fraud conspiracy.

"I'm a lawyer with 35 years of experience of conducting one of the most successful law firms in the state, serving the public," said Murrin, who's now living in Seal Beach, Calif. "I got the shaft."

Murrin sank $600,000 into Avidigm Capital before deciding it was a bad deal.

His single-minded pursuit of his money and damages produced a flurry of lawsuits and numerous defendants. He cooperated with the FBI, resulting in the convictions of several fraudsters -- including an attorney and some real estate professionals.

Along the way, Murrin recovered more than his original investment, plus a judgment of $1.76 million that he's unlikely to collect.

But the courts haven't looked kindly on Murrin's lengthy pleadings and his exhaustive use of the courts even after he'd been made whole. A Hennepin County judge responded by dismissing a number of defendants and sanctioning Murrin and his wife, ordering them to pay them nearly $500,000. Murrin balked, and some of his former targets sought to force him into bankruptcy to collect.

Last week, after mulling the issue for a year, U.S. Bankruptcy Judge Gregory Kishel issued a harshly worded order granting their motion. He noted that Murrin should have availed himself of an independent attorney who could have reined him in.

Robert Smith, a Minneapolis lawyer who helped drive Murrin into involuntary bankruptcy, agrees that Murrin was onto something in his lawsuits. But Smith said that Murrin simply went too far when he sued Smith's client, Glen Smogoleski of Willmar, Minn., and several others who he says were not responsible for the alleged scheme.

"Murrin could never see the forest for the trees; he sued anybody and everybody," Smith said. "He deserves everything he gets."

Murrin's predicament began in 2004, when he and his wife invested in Avidigm Capital Group Inc., a Twin Cities firm that speculated in real estate through "foreclosure prevention" activities and traded in distressed properties.

The Murrins and the FBI allege in court documents that Avidigm and its related entities turned out to be engaged in a fraudulent equity-skimming scheme. The investigation, which is ongoing, has resulted in convictions of the company's CEO; a real estate lawyer and title company owner, and a real estate professional.

More charges expected

Jim Hoffman, a Hastings entrepreneur who allegedly ran the company behind the scenes, has been indicted along with his wife, Teresa. And additional charges are expected against the couple and perhaps others later this month.

Murrin, representing himself, filed a series of lawsuits in an attempt to get his money back. Along the way, he recovered $707,000 from settlements.

Murrin sees his lawsuits as both a personal quest and a public service.

"I expose a Ponzi scheme, I've turned over and worked with the FBI to find all kinds of hidden money, I'm probably single-handedly responsible for the Hoffmans being indicted," Murrin said.

But the courts have complained about Murrin's take-no-prisoners strategy and his unrelenting filings. U.S. District Judge Patrick Schiltz described his tactics in one case as "peine forte et dure -- a method of torture by which heavier and heavier weights are placed on the chest of a defendant until the defendant either confesses or suffocates."

In June 2008, Hennepin County District Judge Denise Reilly dismissed a number of defendants from a suit brought by Murrin. Six months later, she issued a 73-page memorandum ordering Murrin and his wife to pay the defendants nearly $500,000 in attorneys' fees and costs.

Reilly wrote that Murrin presented no evidence implicating a number of the defendants he sued. And besides, she said, he'd already collected more in settlements from other defendants than he'd invested.

Murrin unsuccessfully appealed the sanctions order.

"I feel very strongly that I stood up for what was right. I went against the bad guys. The judges didn't see the issues and I got on their bad side and they're punishing me over the top, and unnecessarily," Murrin said. "I'm like the whistleblower that they don't want to acknowledge, and I think I'm getting blackballed now by the judiciary."

After some of his former targets learned that he'd transferred $385,000 to his elderly mother, they filed a motion in November 2009 seeking to force him into Chapter 7 bankruptcy so they could collect.

U.S. Bankruptcy Judge Gregory Kishel presided over a two-day trial in December 2010 and took the matter under advisement. He issued a searing, 35-page order on Wednesday, granting their motion to impose a receivership.

Despite the fact that the government has successfully brought charges against some of the people and entities sued by Murrin, Kishel cited Reilly's order in which she found that he "simply never mustered a recitation of on-point facts to make out a plausible claim for fraud" involving the individual defendants she dismissed from the case. "Nor was he able to point to any evidence of their participation as individuals in the huge 'scheme' that his vague theory of liability envisioned," Kishel wrote. "Ultimately, far too much of his asserted right to root around in discovery was based on a shallow and conclusory theory of 'conspiracy' among nearly four dozen named defendants, and nothing more."

Kishel noted that Murrin should have availed himself of an independent attorney.

Smith agreed. "He just can't stop himself," he said of Murrin. "What do they say about a lawyer who represents himself?" Smith said, leaving off the rest of the adage -- that he has a fool for a client. "That's what he was!"

Dan Browning • 612-673-4493