By Benjamin Clarke
The foreign representative of a long-time bankrupt businessman accused of concealing his assets and smuggling a US$30 million yacht into Brazil has filed Chapter 15 recognition proceedings in Miami.
On 8 November, Fernando Correia of Rio de Janeiro-based Carlos Magno Nery & Meiros filed a petition in the US Bankruptcy Court for the Southern District of Florida, asking the court to recognise the Brazilian involuntary liquidations of copper manufacturer SAM Indústrias, its parent company Boulder Participações, and Boulder’s majority shareholder Daniel Birmann.
Birmann and the two companies have been in insolvency proceedings for over a decade, after SAM defaulted on 40.1 million reais (US$14.5 million) worth of debentures back in December 2004.
Back then a Rio court issued a bankruptcy order against SAM under the Brazilian Bankruptcy Law after it also closed down its principal place of business.
Private pension fund Braslight, which held the defaulted notes, filed a petition for the involuntary liquidation of SAM and asked the court to extend the order to Boulder and Birmann – as the ultimate beneficial owner of the companies.
The Brazilian court found that SAM’s main assets were 135 million reais (US$36.05 million) worth of loans to Boulder, and made the requested order in February 2008.
The court said that Birmann had caused SAM’s collapse by transferring all of its available funds to Boulder and leaving it without sufficient liquid assets to pay creditors. Boulder then used the funds to make additional intercompany loans to Brazilian bank Banco Arbi, which is owned by Birmann’s family.
Braslight was made the judicial administrator by the court, but last year Head Judge Maria Ruckerreplaced the pension fund with Carlos Magno, noting the proceedings had “not had an actual solution for several years”.
As well as the bankruptcy proceedings, the Brazilian Securities Exchange Commission (CVM) also launched an action against Birmann.
According to a declaration filed by Correia in the US court, the CVM found that the loans extended to Banco Arbi were contracted under much more favourable conditions than those offered by the market and concluded that Birmann’s actions were an “abuse of control”.
It imposed a fine of 234 million reais (US464.88 million) on Birmann – “the largest fine ever imposed to an individual by the CVM” according to Correia.
“During the bankruptcy proceedings, Daniel Birmann was required to disclose of his assets to the Brazilian court, which he has failed to do,” Correia says. “Instead, it appears that he has fraudulently transferred assets to his family members in order to avoid enforcement of the bankruptcy order and to conceal his assets from creditors.
Brazil’s department of revenue discovered a further attempt to hide assets in 2012, when it seized a yacht called “Big Aron” in the city of Salvador. The yacht was registered in the name of Isle of Man-incorporated company Tango Bravo, which had applied for a tax-free admission on the grounds it was a non-resident.
But the authorities suspected that Brazilian resident Birmann was the actual owner and concluded that with Tango Bravo he had “smuggled” the yacht into the country.
The name “Big Aron” caught the attention of the authorities because Birmann’s father was named “Aron Birmann” and, upon further analysis, the department of revenue learned that Birmann and his family were consistently registered as guests on trips in Brazil and elsewhere.
After conducting investigations, the CVM found that Tango Bravo was held by another entity in the Cayman Islands, which in turn was held by a Panama-incorporated entity with a single shareholder: Birmann’s mother.
With a value of 60 million reais (US$30.1 million), the CVM sought to levy on the yacht and use the proceeds to pay off the fine it had imposed on Birmann. A federal judge in Rio, Judge Fatima Sequeira made such a seizure order in 2015.
But the following year, the department of revenue discovered furniture and appliances had been “stolen” from the yacht and transported to a Banco Arbi address.
Public prosecutors were informed, and a criminal lawsuit for embezzlement and misappropriation was filed against Birmann last year.
With counsel from Gregory Grossman of Sequor Law, Correia filed the Chapter 15 proceedings in Miami “in furtherance of a worldwide pursuit of assets” to satisfy unpaid claims.
Birmann has a Florida driver’s licence listing an address in Florida, Correia says, and the debtors’ have assets located in the United States.
Judge Robert Mark has listed the matter for a hearing on 4 December.
In the United States Bankruptcy Court for the Southern District of Florida, Miami Division
In re SAM Industrias S.A.; Boulder Participacoes LTDA; and Daniel Benasayag Birmann
• Judge Robert Mark
Counsel to the foreign representative
• Sequor Law
Foreign representative to SAM Industrias, Boulder Participacoes and Daniel Birmann
• Carlos Magno Nery & Meiros
Partner Fernando Correia in Rio de Janeiro
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“Corruption is like an acid eating away the steel understructure of society,” said Edward H. Davis Jr. of Sequor Law, Miami, who’s made it his mission to pursue corrupt politicians and Ponzi-schemers hiding money, boats, sports cars and exotic pets around the globe.”
By Raychel Lean
Ask Miami asset recovery lawyer Edward H. Davis Jr. where in the world he hasn’t been, and he’ll have to pause for a moment to think.
Israel — Davis hasn’t gone there yet. But by next week it’ll be the 81st country he’s visited, edging him one step closer to a spot in the Travelers’ Century Club.
“You have to prove you’ve been to 100 countries to join,” Davis said. “I’m on my way.”
Lucky for Davis, founding shareholder of Sequor Law, fraudsters don’t just leave stolen money in their backyard. They scatter it all over the globe, using it to buy outlandish collectibles, unconventional modes of transport and exotic pets.
As a representative of fraud victims, it’s Davis’ job to seize those assets, sell them and return as much as possible to the client.
“We’ve repossessed some very, very beautiful sports cars, yachts and airplanes. We’ve recovered land, houses, hotels,” Davis said. “One time we got a guy’s prized dog and prized parrot, and were able to sell them back to him for money to give to the victims.”
Davis once recovered a Jean-Michel Basquiat painting, bought with money a fraudster had stolen from a Brazilian bank. He represented the liquidator in the case and sold the piece by the renowned painter for $13 million.
“I hate to say this, but it looked like a 5-year- old drew it,” Davis said.” The fraudster paid $1.2 million for it, so we actually made money on that particular piece.”
Davis also seized a Serge Poliakoff painting that once belonged to Edemar Cid Ferreira, former president of Brazilian bank Banco Santos, who was charged with money laundering.
Offshore jurisdictions and remote islands are particularly popular hiding place for fraudsters, who “try to use places that are hard to get to and hard to find,” according to Davis.
Mauritius, Guernsey, Dominica, the British Virgin Islands, Trinidad and Tobago, the Dutch and French sides of Saint Martin — all regular haunts.
Davis has also been to Finland twice, but only to the airport, so it doesn’t count toward his 100-country goal.
“I’m very strict about that,” he said.
Early in his career, Davis represented a defrauded Guatemalan family business in a case spanning 10 jurisdictions.
“I grew up dreaming about going to these places, and when you get there you still pinch yourself a little bit,” said Davis, who grew up in a tiny farm town near Buffalo, New York, where he said dairy cows outnumbered humans.
Though it’s tough spending up to 100 nights away from home every year, the attorney says he still hasn’t gotten over the novelty.
“I’ve been to Slovenia, Dubai, Hong Kong, India. I get to learn about other cultures, hear their language, eat their food, understand how they live,” Davis said. “And when you really get down to it, most people are pretty much the same. But instead of focusing on that 90 percent of stuff we all agree on, we tend to focus on the 10 percent that we disagree on.”
The way Davis sees it, corruption is “the No. 1 thing that we have to fight in the world.”
“Lack of medical care, lack of adequate clean water, food and housing can be stopped if we get rid of corruption,” he said. “It should be a human right to live in a society free from corruption, and it’s not.”
On a daily basis, Davis encounters people who’ve lost everything “but the lint in their pocket,” so funding litigation can be a big problem.
Third-party litigation funders have emerged in the last few years to help pay for asset recovery. But before then, Davis said, many cases languished and fraudsters went unpunished.
Never a Pang of Guilt
These criminals are almost always men — often “amazingly intelligent and charming” businessmen or politicians who, according to Davis, are “almost like computers,” unable to process emotion ”the way most normal human beings do.”
“They can smile at you, tell you they love you, then steal your money and walk away, and never feel a pang of doubt, a pang of guilt. Nothing,” Davis said. “What’s really tragic is that most of them are so smart that they could actually do really well if they applied themselves.”
At the beginning of every case, Davis and his team write two words on a white board — “We win.”
“We ask every client, ‘What do you define as a win?’ Then we design a strategy to get to that point,” he said.
Davis served as co-general counsel to the liquidators of Stanford International Bank in a case against Allen Stanford, the second most notorious Ponzi- schemer in history — after Bernie Madoff. He found many of Stanford’s victims were seniors, forced to return to work after losing their retirement.
While sending perpetrators to jail provides a sense of justice, Davis admits this does nothing to restore what victims have lost.
“Corruption is like an acid eating away the steel understructure of society,” he said. “If you let it get out of hand, and you don’t fight it and don’t get the money back, then eventually that acid will eat through the under-structure, the metal skeleton, and the whole society collapses.”
Davis calls himself an “accidental lawyer,” having switched tracks from marine biology on a whim and taken the LSAT without studying. But since then, he’s developed an unwavering mission statement.
“What I think we’re doing is restoring hope and trying to do our little part to help society work,” he said. “So much of what we have is based on trust, and the minute that people say they can’t trust, you’re done. We’re trying to counteract that.”
Edward H. Davis Jr.
Born: March 1962, Buffalo, New York
Spouse: Kateri Davis
Children: Ashley, Alissa and Jaclyn Davis
Education: University of Miami, J.D., 1987; University of Miami, B.A., 1984
Experience: Founding shareholder, Sequor Law, 2017-present; founding shareholder, Astigarraga Davis, 2000-2017; founding shareholder, Davis, Devine, Goodman & Wells, 1998-1999; associate and partner, Steel Hector & Davis 1992-1998; law clerk and associate, Paul Landy Beiley & Harper, 1987- 1992.
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