Memorandum of Decision Re: Fake Trusts

DO NOT PUBLISH This case disposition has no value as precedent and is not intended for publication. Any publication, either in print or electronically, is contrary to the intent and wishes of the court.
In re JAMES and BRENDA FINITZ,                                                 No. 94-10526      Debtors. ___________________________/ JULLE LEWICKI,      Plaintiff,     v.                                                                                                A.P. No. 94-1251 JAMES and BRENDA FINITZ,      Defendants. ______________________________/
Memorandum of Decision
     In June of 1992, the state court issued a statement of decision awarding plaintiff Julle Lewicki damages of more than $1 million against debtors and defendants James and Brenda Finitz. Within a few days of the decision, the Finitzes created several fake trusts and other entities for the purpose of hiding their assets from Lewicki. They filed a Chapter 7 petition March 7, 1994. By this adversary proceeding, Lewicki seeks to deny the Finitzes their discharge pursuant to section 727(a)(2) of the Bankruptcy Code.      On June 10, 1992, the Finitzes created the Finitz Business Trust. Their daughter was the trustee; they were the only beneficiaries. The Finitzes used the bank account of this "trust" as their personal account, and transferred money to it regularly to keep Lewicki from attaching the funds. Transfers to this account included $12,500.00 on March 27, 1993, $6,500.00 on May 6, 1993, $2,500.00 on June 9, 1993, and $4,500.00 on July 8, 1993.      On June 11, 1992, the Finitzes created the Finitz Grandchildren's Trust. They supposedly transferred their Mercedez Benz automobile to this trust, although they retained possession and control of the vehicle.      Other trusts created by the Finitzes at the same time included the Finitz Children's Trust, the Brenda Lynne Finitz Irrevocable Living Trust, the James Richard Finitz Irrevocable Living Trust and the Finitz Charitable Remainder Unitrust. Numerous assets were transferred to these trusts. All of the trusts were set up and used with the intent to hinder Lewicki in her attempts to collect her judgment.      Aside from unconvincing excuses for the transfers to the trusts, the Finitzes' only defense is that the transfers took place more than one year before the bankruptcy. The court rejects this defense for two reasons. First, the Finitzes used the trusts pursuant to a plan of continuing concealment of their assets while retaining the benefits of ownership. See In re Oliver, 819 F.2d 550 (5th Cir. 1987). Second, the Finitzes transferred more than $25,000.00 in cash to the Finitz Business Trust during the year before bankruptcy. These transfers alone, even without all of the rest, would be enough to deny a discharge to the Finitzes.      The Finitzes also seem to argue that the transfers were not concealed because the Finitzes disclosed them when they were examined as to their financial affairs. The court sees no merit to this argument as a defense. The court has found that the Finitzes set up phony trusts and transferred their assets to them with the intent to conceal the assets from Lewicki and hinder her attempts to enforce her judgment, and that these actions continued to take place during the year prior to bankruptcy. These findings are all that section 727(a)(2) requires for denial of discharge. It is not a defense that after doing the wrongful acts the Finitzes later confessed to them.      For the foregoing reasons, the Finitzes shall not receive a discharge. Lewicki shall recover her costs of suit.      This memorandum constitutes the court's findings and conclusions pursuant to FRCP 52(a) and FRBP 7052. Counsel for plaintiff shall submit an appropriate form of judgment forthwith.
Dated: August 28, 1995                                                                                                   _______________________                                                                                                                                                    Alan Jaroslovsky                                                                                                                                                    U.S. Bankruptcy