Diana Carey’s talents range from tracking down fraud to tickling the ivories
Published in 2017 Washington Super Lawyers magazine
on June 9, 2017
Updated on January 25, 2021
In 2012, Darren Berg stood before a federal judge in Seattle and admitted to defrauding investors out of more than $100 million in a Ponzi scheme that spanned nearly a decade. He had promised rich investment returns but squandered tens of millions on extravagant homes, yachts, private jets and a fleet of luxury charter buses.
Berg was ultimately hauled off for an 18-year prison term. In the meantime, the daunting task of cleaning up his insolvent financial house was left to the bankruptcy court—and especially to one Diana Carey, a former librarian and amateur harpsichordist who also happens to be among the region’s most respected bankruptcy lawyers.
Carey found herself serving as de facto CEO of Berg’s collapsed finances. She oversaw the sale of the mansions, yachts and jets. She managed his charter bus companies and eventually negotiated their sales. The objective: at least partially compensate his many creditors and investors.
Berg’s may be her best-known case, but it wasn’t a typical one. Most bankruptcy cases do not have villains, she says. They involve honest individuals or companies that stumble into dire financial straits and need legal help to get back on their feet.
“Bankruptcy is a very stressful thing for people to go through,” Carey says. “The law exists to help them reorganize their finances and get out of their misery. That means I spend a lot of time serving as a counselor, allowing them to vent, and advising them how to handle the experience.”
Small in stature with an easy manner, Carey has worked over the past 30 years on an astounding 800 matters, including about 400 bankruptcy cases—most of them under Chapter 11, which protects companies from creditors while they reorganize their debts.
“Diana is the grand dame of bankruptcy court,” says Virginia Burdette, a Seattle bankruptcy attorney who works frequently with Carey. “She’s been a real trailblazer.”
Karen Overstreet, a recently retired federal bankruptcy judge who presided over many of Carey’s cases, adds, “In addition to being smart, she’s a personal, down-to-earth person.”
Burdette recalls one time when Carey was sitting in court, waiting for her case to be called. The judge interrupted proceedings to question a family standing at the back of the courtroom with a baby. The unfortunate family was there because they were behind on their rent and the landlord was trying to evict them—just days before Christmas. Dismayed, Carey stood up and volunteered her services to the family. A day later, she had collected some $2,500 in contributions from fellow lawyers and negotiated an extension with the landlord.
“People would call me and say, ‘I didn’t have the nerve to volunteer. Thank you. Here’s $500,’” she says.
The family’s home was saved.
Carey’s journey to success followed a long and unconventional career path. She had an itinerant childhood, moving with her parents from Michigan to Virginia to Montana to North Dakota, before her father’s job with Boeing led them to Seattle.
The beginning of her career was mobile, too. She started college at Whitman in Walla Walla, then moved to the University of Washington to pursue a teaching certificate. When it came time for student teaching, she reached a realization. “That was a bad fit,” she says with a chuckle.
On advice from a career counselor, she shifted to library science, then worked four years at the Seattle Public Library. Then she moved to Boeing’s library, where she was promoted to head of graphics. In the early ’80s, while on leave from Boeing, Carey found herself back with a career counselor.
“You like research,” the counselor noted. “You could go to law school.”
Lawyer friends warned that her age and gender would work against her. But she applied to the UW School of Law anyway. Three years later, at age 42, she went to work at historic downtown Seattle firm Karr Tuttle Campbell, where she was introduced to business and bankruptcy law.
“Not all firms were enamored of hiring a woman in her 40s,” Carey recalls. “But KTC was one of the very first to have a woman partner—Muriel Maurer—and I liked that about them.”
From the outset, Carey’s portfolio included bankruptcy law. “Our firm was general counsel to Peoples Bank, and there were numerous matters that included loan workouts or bankruptcy issues,” she recalls. “I had excellent mentoring in the basics of a business practice, such as drafting bylaws and articles of incorporation, but most importantly, how to counsel and work with clients.”
Two years later, she was asked to take over the bankruptcy group at KTC. “Who is in the group?” she asked. “You are,” she was told.
Of Carey’s hundreds of bankruptcy cases, a few stand out in her mind.
In 2010, QL2 Software, a Seattle company that helped airlines and other firms come up with competitive pricing and product data, filed for Chapter 11 protection. “They simply ran out of funds and needed time for recapitalization,” Carey says. Instead of liquidating the troubled company, she put together a plan to reorganize it, then found a buyer. “The plan resulted in payment in full to creditors and a return to shareholders—a rarity in the bankruptcy world.”
Financial guru Wade Cook got lots of attention in the 1980s and ’90s for claiming he could help investors double their money every few months. In 2002, his company filed for bankruptcy, and Cook was convicted and imprisoned for income tax evasion. Carey served as court-appointed trustee in the corporate bankruptcy, with the task of liquidating the company—including its potentially valuable database of clients. “The challenge was that he had 80,000 people in his database,” Carey recalls. “How do you protect their privacy as you sell the database? In bankruptcy, you mostly see people who fail because they are poor managers. But others, like Cook, fail because they have a bad business model.”
In 2012, the state assumed control of Tukwila-based Hartman Escrow, which collapsed after an employee used escrow funds to pay her gambling debts. Carey represented the court-appointed receiver, ultimately paying a substantial portion back to its creditors. It was another case in which Carey’s skills minimized the consequences of a corporate bankruptcy, says Eric Orse, whose company specializes in crisis management surrounding bankruptcies.
“Diana is even-keeled, which is a crucial quality,” Orse says. “She’s a good attorney, but she also has a good business sense. The first three months of a bankruptcy can be like drinking out of a fire hose.” Extended legal fees can drain what’s left of a bankrupt client’s funds, leaving less for creditors. “She understands that, if you can arrive at a meeting of the minds sooner than later, you benefit everybody.”
Overstreet agrees. Bankruptcy law, she says, “is about working out a deal, a compromise that benefits as many parties as possible: ‘Here are the assets that are available; how can we allocate them fairly?’ Diana Carey is a dealmaker.”
What makes her so effective at what she does? Carey’s colleagues offer a couple of suggestions. First, she became a lawyer much later than most, so she has viewed life through different lenses. And, second, she’s a woman.
“Bankruptcy law used to have the reputation of being an old boys’ club,” Overstreet says. “As a general rule, I think women tend to be more collaborative problem-solvers.”
Carey’s personal heroes include former bankruptcy professor U.S. Sen. Elizabeth Warren. “I’ve followed her for years,” Carey says. “She was very involved in legislation regarding changes in the bankruptcy code. She’s a fighter for working-class families and a champion of financial transparency.”
Carey shares her mission. And she remains active in the community as well as the office. Recently, she was preparing to work on receivership cases involving a casino, a mill and a network of adult family homes. She also serves on the boards of KING-FM, University of Washington Friends of the Libraries and Seattle Chamber Music Society.
“It’s important to be involved,” she says. “With your practice, with the Bar, with nonprofits—whatever you do. Get outside yourself.”
Chapter 11, Opus 12
Getting from bankruptcy to Bach isn’t as hard as it sounds; Diana Carey negotiates the transition almost daily. She enjoys playing her own piano and harpsichord, but her more significant impact is as enthusiastic patron.
Carey’s work with the Seattle Chamber Music Society, which sponsors concerts at Benaroya Hall and other venues, goes back more than 30 years. She has served on the society’s board, and as board president. And she frequently hosts concerts and other events at her home.
“At some point, I fell in love with Bach’s Brandenburg Concertos,” she says. “And that was that.”
Connie Cooper, the society’s executive director, wonders where the organization would be without Carey.
“Diana can accomplish more in 24 hours than anyone I know,” she says. “That may involve society business, or it may involve entertaining 30 or 40 people at her home. Either way, she appreciates all the little pieces involved in any project, and knows how to make things happen.”