Tyneside jeweller failed to disclose US assets, joint trustees say

A Florida court has recognised a British jeweller’s bankruptcy after his joint trustees Grant Thornton found he had lied about his US property portfolio before an English court.

In an order on 15 November Judge Catherine McEwen, at the US Bankruptcy Court for the Middle District of Florida, granted emergency relief to Grant Thornton partner Nicholas Wood and director Colin Diss, who were appointed as joint trustees of Darren McCormick in May this year.

McCormick is a jewellery distributor based in Newcastle-upon-Tyne, a city in the UK’s north-east England region. He is the director and shareholder of locally incorporated company Darren McCormick Jewellery.

Hong Kong-based watch company Zero Time Product Design International filed for a petition for McCormick’s bankruptcy in December 2018, after he failed to pay a debt he owed to them. McCormick failed to appear at the bankruptcy hearing and in April 2019 District Judge Michelle Temple, in the County Court of Newcastle-upon-Tyne, declared him bankrupt. The court appointed Diss and Wood the following month.

In their petition before the Florida court the trustees said McCormick had transferred £83,000 (US$107,000) from two UK pension funds to his US bank account in Florida in January.

In a signed declaration before the Newcastle court in July, McCormick said the withdrawals from the pension funds were, “to fund a dental cosmetic treatment and cell injection therapy” he had been receiving in the US and denied owning property in the US.

But an investigation by the joint trustees found that he in fact owns a property in Rockwood, Tennessee, and had recently owned two in St Petersburg, Florida. One of the properties McCormick had owned in Florida, which he claimed he sold for US$236,000, had in fact been sold for US$255,000. It found he had sold the second to DMJ Trading, a Florida company he owned, for US$10. Diss told the court the third property was valued at US$349,600.

The joint trustees deduced that McCormick had lied about his US property assets to thwart their ability to realise his US assets.

Based on these findings the joint trustees said “we know that the Debtor’s sworn declaration, stating that he owned no property in the United States, is false”.

In March, after McCormick learned that bankruptcy proceedings were pending against him, he transferred ownership of his primary residence in Newcastle to his ex-wife, although he continued to live in the property rent-free with her permission.

McCormick then transferred £14,000 (US$18,000) from his US bank account to another one of his creditors American Express. Diss told the court he had later transferred his controlling interest in two companies to a third party “for no apparent consideration”.

He said that following Chapter 15 recognition he expected to be able to identify additional assets belonging to McCormick in the US.

 

In the US Bankruptcy Court Middle District of Florida Tampa Division

In Darren Bernard McCormick [Case 8:19-bk-10768-CPM]

Counsel to Foreign Representative

  • Sequor Law

Shareholder Leyza F. Blanco in Miami

Joint trustees and foreign representatives

  • Grant Thornton

Director of asset and recovery team Colin Diss and partner Nicholas Wood in London

County Court at Newcastle Upon Tyne

Between Zero Time Product Design International and Darren Bernard McCormick.

  • District Judge Michelle Temple

To view the original article, click here.

Miami Chapter 15 for jailed Taiwanese-British IT executive

The joint trustees of Ji-Chuen Jason Tsai, a “thoroughly dishonest” bankrupt Taiwanese-British businessman, have applied for Chapter 15 recognition to track his real estate assets in the US.

On 11 November Tsai’s joint trustees, Begbies Traynor partners Nicholas Reed and Julie Palmerfiled two  Chapter 15 petitions before the US Bankruptcy Court for the Southern District of Florida – one under his own name and another under the name of Changtel Solutions UK (Changtel), his former company.

Leyza F. Blanco, a shareholder at Sequor Law in Miami, is acting for the joint trustees.

Fraud and freezing

The UK’s tax authority, HMRC, sought Changtel’s winding-up in 2013 after challenging its VAT returns and alleging a shortfall of £15.5 million (US$20 million). It accused Changtel, a company which distributed computer hardware and software within the UK and ostensibly exported goods to the rest of the European Union, of carousel fraud over the shortfall.

Although the English High Court initially rejected the winding-up petition, the Court of Appeal eventually found that Changtel had “misled” a tax tribunal and judge into thinking that it was solvent “when in fact it had been running down its business since mid-2013”. A tribunal later determined that a fabricated scheme for VAT evasion had been established within the company.

The High Court then appointed Reed and Palmer as joint liquidators over Changtel in June 2015. Later, in May 2019, Reed was appointed as Changtel’s bank trustee along with fellow Begbies Traynor partner Joanne Wright.

The liquidators’ investigations determined that Tsai committed fraud of an approximate value of £38 million (US$49 million). The English High Court found that Tsai had used “cheque fraud” to extract funds from Changtel – fabricating cheques made out to his sister from a fake Taiwanese supplier, and signed by Tsai himself, to the amount of £3.5 million (US$4.5 million).

Tsai’s own bankruptcy came in 2018, after he was jailed for 18 months for contempt of court after breaching a freezing order, and failed to pay a consequential interim payment order.

In a July 2017 ruling, Mrs Justice Vivien Rose in the English High Court found Tsai guilty of 30 out of an alleged 52 breaches of the freezing order.

The court found that, although Tsai’s UK passport had been confiscated under the freezing order, he kept hold of a Taiwanese passport which he used to travel to Taiwan.  There he arranged for his wife to move £8.6 million (US$11 million) from a DBS bank account in Singapore to a Taipei Fubon bank account in Hong Kong.

In delivering her verdict, Mrs Justice Rose described Tsai as a “thoroughly dishonest witness”, and issued with him with the interim payment order. He was adjudged bankrupt in May 2018 after failing to pay the order.

Asset recovery

In their Chapter 15 application the liquidators said they had discovered several real estate assets in the United States – including five in Las Vegas and one in Los Angeles – that might beneficially belong to either Tsai or Changtel through local companies. They also found evidence that funds had been misappropriated from Changtel and transferred to US bank accounts in the names of Tsai and other family members.

They told the Miami court they are attempting to recover £9.95 million (US$ 12.2 million) in post-liquidation payments Changtel made to Entanet International, another Tsai company, to which all Changtel business was transferred prior to liquidation.

The liquidators said Tsai’s international assets had been unearthed after a litany of contradictory disclosures of assets on his part. Although in his initial February 2017 disclosure Tsai claimed to have under £1 million (US$1.3 million) he admitted to further assets the further month after retaining counsel from London firm Brett Wilson.

But in May that year, after terminating that firm in favour of Neil Davies & Partners, he retracted his previous disclosure, which he said he had admitted to on the basis of erroneous advice from Brett Wilson. “In doing so,” the liquidators said, “Tsai inadvertently waived privilege in his communications with Brett Wilson”, which showed his disclosures had not in fact been based on erroneous advice.

As well as the Las Vegas and Los Angeles properties, the liquidators said the English court had found Tsai to hold misappropriated funds in Hong Kong and Singaporean accounts as well as owning three properties in the UK city of Birmingham and one in Telford, Shropshire under his sister’s name.

 

In the US Bankruptcy Court for the Southern District of Miami

In re Changtel Solutions UK Limited

In re Ji-Chuen Jason Tsai [Case 19-25250]

Foreign Representative

  • Sequor Law

Shareholder Leyza F. Blanco in Miami

In the High Court of Justice (Chancery Division)

Between Julie Anne Palmer and Nicholas Edward Reed (Joint liquidators of Chantgel Solutions UK Limited (in liquidation)) and Ji-Chuen Jason Tsai

  • Mrs Justice Vivien Rose

Joint liquidators of Changtel

  • Begbies Traynor

Regional managing partner Julie Palmer in Salisbury and Nicholas Reed in Leeds

Counsel to the joint liquidators

  • Stephen Robins of counsel, South Square Chambers

Instructed by:

  • Walker Morris

Counsel to Ji-Chuen Jason Tsai

  • Andrew Young of counsel

Instructed by:

  • Neil Davies & Partners

To view the original article, click here.

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