Mr. K, a real estate broker and investor, had obtained a $300,000 civil judgment against a local “businessman/pilot” who we will refer to as Ronnie. Mr. K’s attorneys had made no progress in locating assets to satisfy the judgment so he contacted us to manage the enforcement process for him. We immediately began conducting financial forensic research to locate assets that could be executed upon toward satisfying the significant judgment. We searched the records of the County Clerk and Recorder in the county where Ronnie lived. We found that he owned a lovely mountain home, but it was encumbered by a $500,000 first Deed of Trust and a second Deed of Trust for $1 million. We also checked the state Department of Motor Vehicles and found that he owned no vehicles in his name.
It was time to get the shovel out and start digging. We first ordered an O&E (ownership & encumbrance) report from a title company we work with. Next, we ran a vehicle search by address as well as several other searches we reserve for “special debtors.” Here’s what we found:
The first Deed of Trust was to a local bank. We had retained the former Bankruptcy Trustee as the new attorney for our client. Ronnie had apparently heard that we were on his trail, so he filed a Chapter 7 Bankruptcy. We had the attorney issue a subpoena for copies of the last six payment instruments on the mortgage plus copies of Ronnie’s mortgage application, his tax returns, and his financial statements that he gave to the bank to support his mortgage loan application. We also issued a garnishment for funds in all bank accounts in his name at the bank.
From the production of the subpoenaed items, we learned: He worked for a company known as “Blackrock Corp.,” an Isle of Man corporation earning $100,000 per year. His house payments were from the Blackrock Corp. account at that same bank and he signed the checks. The return address printed on the checks was his home address. We also found a check that he signed on the Blackrock Corp. account for several thousand dollars which was made payable to the local GM dealer. The DMV search via a private database showed Blackrock Corp owned a new GM SUV. The O&E report reflected the $1 million second Deed of Trust for Blackrock Corp., an Isle of Man entity using Ronnie as its US business address.
A subpoena to the bank for credits and debits for the last 24 months, a copy of the signature card, and wiring instructions revealed he was the only signatory on the account. He was also the only person authorized to send wire transfers from the account. The wire transfer documentation revealed that over the last 24 months, Ronnie had wired just over $500,000 to an Isle of Man bank. A subpoena to the local GM dealer for the “deal package” revealed that Ronnie had traded in his personal car, titled to him, as down payment for the new GM SUV owned by Blackrock Corp.
Knowing that Ronnie was licensed to fly a multi-engine plane, I checked with the local county airport near Ronnie’s home and confirmed that he flew a twin-engine Cessna, owned by Blackrock Corp., and hangered at that airport. An FAA title search confirmed both his license and the ownership of the plane.
It was time to close the loop, so I contacted the Registry of Companies (established in 1865) in the Isle of Man and obtained certified copies of the entire Blackrock Corp. file.
At the hearing before the Federal Bankruptcy Judge, Ronnie gave sworn testimony thathis only association with Blackrock Corp. was as their pilot paid on salary. He said they left a company car for him to drive so he could pick up the Blackrock executives at the International Airport when they came to the US on business. He would them fly them wherever they needed to go in the company plane. He could not explain the nature of the business of Blackrock nor why they were not registered to do business anywhere in the US. In fact, since they had several new executives at Blackrock, Ronnie could not provide the names of any of them to the judge.
I was then called to testify under oath. I identified certain evidence which was entered in the case such as the subpoenaed mortgage payment checks, his financial statements and tax returns, the “deal package” from the GM Dealer containing the trade-in information on Ronnie’s personal car and Blackrock’s new GM SUV. We then showed the court that Ronnie had transferred over $500,000 out of the US in the last 24 months. Blackrock checks signed by Ronnie for groceries, clothes, maid service, yard work, etc. were all entered into evidence.
Our attorney entered the certified corporate records from the Isle of Man into evidence and I testified that I had obtained them and they reflected that Ronnie was the incorporator and only officer of the corporation. The judge ruled that Ronnie owned and controlled Blackrock Corp.; it was his alter ego and he had caused the funds to be removed from the jurisdiction of the court. The judge then ordered Ronnie to repatriate the funds to the jurisdiction of the court within 10 days or be found in contempt of court – which would result in him being placed in jail for failure to comply with the court order.
Within a week, my client received $250,000 in certified funds and a note for $50,000 due in full one year later. This was approved by the court and the case was dismissed contingent upon the $50,000 being paid timely.
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