Miami Lawyer Wins $22M Judgment for Venezuelan Company Over Civil Theft

Edward H. Davis Jr. of Sequor Law argued that Miami businessman Luis Wolkowiez stole $8.6 million from Venezuelan finance company All Factoring, and the court agreed.

 

By Raychel Lean

Edward H. Davis Jr. of Sequor Law in Miami landed a $22 million judgment for a South American finance company after the court found that Venezuelan businessman Luis Wolkowiez had wrongly taken money from it — allegedly to settle a debt a Miami resident owed him.

But Miami-Dade Circuit Judge Pedro P. Echarte didn’t buy that explanation, branding Wolkowiez’s actions civil theft.

The international fraud case arrived in Miami-Dade Circuit Court in April 2013, with All Factoring de Venezuela, a finance company that helps businesses with cash flow problems, reporting a monetary predicament of its own.

The company lawyered up after losing 130 million Venezuelan bolivars to Wolkowiez and his company, Inversiones 01590 C.A. in December 2012. According to Davis, that loss equaled about $8.6 million at the time, but as of Jan. 7, it was worth only $2.30 because of skyrocketing inflation in Venezuela.

The case involved a short-term loan agreement between All Factoring and Miami resident Jorge Reyes, a broker for Atmosphere Fund.

All Factoring sells invoices from manufacturing companies and other businesses to outside parties, helping clients get quick cash to pay bills
and profiting from the difference. Under its deal with Reyes, All Factoring sent more than 234 million bolivars to a bank account for which Wolkowiez was custodian. The money was supposed to have remained in that account for less than 30 days, before it was returned in the currency of All Factoring’s choosing — dollars — to the tune of $15.5 million.

Both parties canceled the contract, realizing that it would take longer than 30 days to repay, and agreed to a refund.

‘That’s Insane’

Wolkowiez, as custodian, gave back about $6.9 million but kept the remaining $8.6 million because Reyes, a broker, allegedly owed him money from another deal.

It was an argument that Davis found hard to grasp.

“Just because some other guy owes you money, you can’t take some total stranger’s money and pay yourself back,” Davis said. “That’s insane.”

Davis wasn’t alone in his confusion, as the court found that Wolkowiez’s testimony was “not at all credible,” meaning Reyes may never have even owed him any money. Reyes was not to blame, according to the judgment, having only repeated what Wolkowiez had told him — not knowing it was a false promise.

Reyes, who appeared pro se, and Wolkowiez’s lawyer, Coral Gables attorney Robert M. Miller, did not respond to requests for comment before deadline.

The loss hit All Factoring hard, according to the judgment — causing it to lose credibility, lay off employees and fail to pay certain clients, one of whom committed suicide after losing money.

The original complaint alleged unjust enrichment, conversion, civil theft and fraudulent misrepresentation, and made claims against several more defendants that were eventually dismissed or sent into bankruptcy court.

The case landed in Miami because it involved several Miami residents, including Reyes and Wolkowiez, who handled all the negotiations from Miami.

There was one defendant who got away, according to Davis — Colombian broker Ricardo Ripepi.

“We sued him but we couldn’t find him,” Davis said.

Tracking down defendants was the toughest part of the litigation for Davis, who said it took two years of trying before serving one defendant at an airport in Spain. Gathering evidence from Latin American countries also meant extra time and money spent translating videos, phone calls and documents.

Davis has asked for more than $1.4 million in attorney fees and costs, and the defense has until Friday to oppose before the court will rule.

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8 Florida Cases to Watch in 2019

At the top of 2019, which Florida cases have lawyers checking dockets with bated breath? Here’s a look at eight cases that have gripped local litigators. Where…

By Raychel Lean

At the top of 2019, which Florida cases have lawyers checking dockets with bated breath? Here’s a look at eight cases that have gripped local litigators.

Where can a Florida-based company sue its out-of-state employees?

Miami business litigator Eric Ostroff, partner at Meland Russin & Budwick, has his eye on Citrix Systems Inc. v. Matthew Ware et al. Chief Broward Circuit Judge Jack Tuter will soon hold a hearing on the case, which tackles the question of personal jurisdiction when it comes to remote employees.

In 2017, Fort Lauderdale-based tech company Citrix Systems Inc. sued seven former employees who worked from North Carolina when they left to work for a competitor. The suit accused the staff of misappropriating trade secrets and breaching a contract that included a covenant not to compete. But the employees argue Florida doesn’t have jurisdiction over them.

Do foreign governments take precedence over state courts?

Former Florida Supreme Court Justice Raoul Cantero is among a group of Miami lawyers challenging a Third DCA ruling they say could result in Florida courts having to submit to totalitarian regimes.

The Ecuadorean government sued two brothers in Miami for allegedly embezzling about $662 million from Filanbanco, the bank where they were administrators. The suit — Republic of Ecuador v. Roberto Isaias Dassum and William Isaias Dassum — was initially dismissed for lack of standing and expired statute of limitations, but the appeals court reversed the move.

International litigator Arnoldo B. Lacayo of Sequor Law, Miami, said the case is a crucial one for international practitioners, as it asks whether acts in another sovereign state are valid in Florida’s courts.

Could this case reveal Bitcoin creator’s identity?

Dave Kleiman v. Craig Wright, an $11.4 million bitcoin trial will play out in Miami federal court in September, is almost certain to raise eyebrows. Kleiman’s suit accuses his Australian former business partner of committing forgery and filing false documents to take control of bitcoin. Wright has claimed to be Satoshi Nakamoto, mysterious creator of the cryptocurrency, but that claim has never been verified.

Complex litigator Daniel Maland at Kozyak, Tropin and Throckmorton is watching closely and says bitcoin transaction logs indicate that Nakamoto is one of the richest people in the world.

According to Alan Rosenberg with Markowitz Ringel Trusty + Hartog, the vast size and scope of the case could serve as a roadmap for future cryptocurrency litigation.

Will a key ADA ruling be overturned?

Juan Carlos Gil v. Winn Dixie, an Americans with Disabilities Act lawsuit pending in the Eleventh Circuit Court of Appeals, could unravel or affirm a landmark 2017 ruling that found a supermarket’s website violated blind internet users’ rights and laid the groundwork for an influx of website- accessibility lawsuits.

The court will consider Winn-Dixie’s appeal that websites are not places of public accommodation and that the supermarket is in compliance with the ADA. Commercial litigators Michael Landen of Kluger Kaplan and Jason Kellogg, partner at Levine Kellogg Lehman Schneider & Grossman, said many of their clients in the business world are waiting in suspense.

Can school shooting victims sue rifle makers?

The family of a victim of the Parkland shooting at Marjory Stoneman Douglas High School on Valentine’s Day in 2017 has sued Smith and Wesson, makers of the AR-15 semi-automatic rifle used in the attack. Miami firm Podhurst Orseck represents the plaintiff.

The court heard the defense’s motion to dismiss Jamie Guttenberg et al v. Smith and Wesson in December, and is expected to rule in a few weeks.

Has a Miami church breached its lease?

The Miami-Dade Property Appraiser has claimed Brickell’s First Presbyterian Church of Miami is violating its religious exemption status by leasing some of its grounds to a for-profit school and food trucks.

The case could have wide implications for developers and religious institutions, according to Franklin Zemel, a partner at Saul Ewing Arnstein & Lehr, who represents dozens of churches, synagogues and mosques around the country.

The Church claims it’s not leasing but merely “outsourcing” the administration of its school.

“Why is the characterization so important? Because in order to qualify for the tax exemption, there must be unity between the owner of the property and the user of the property,” Zemel said.

Will Florida courts embrace cannabis?

According to Kathi Giddings, deputy chair of Akerman’s Litigation Practice Group, cannabis is set to be a hot topic this year. Several appeals are pending in the First District Court of Appeal concerning the 2016 general election, in which Floridians voted to broaden the use of medical marijuana.

The legislature has restricted who can cultivate, process, sell and smoke medical marijuana, but the lawsuits argue otherwise. Akerman represents medical marijuana center Florigrown in one of those cases, and recently obtained an injunction against the Department of Health.

Will Florida courts side with EB-5 Investors alleging fraud?

A group of 78 Chinese investors sued Nicholas Mastroianni II, a high-profile EB-5 investment broker with ties to former Trump lawyer Michael Cohen. In a Palm Beach Court filing, the plaintiffs claimed Mastroianni cheated them out of almost $100 million in a real estate venture, but Mastroianni has rejected the suit as a “sham.”

Jeffrey Schneider, managing partner at Levine Kellogg Lehman Schneider + Grossman, who filed the suit, said the case could send a strong message to the EB-5 industry about promises made to investors.

“This case is important at a time when developers have completed their projects and are now expected to return the EB-5 money back that they ‘borrowed’ from the EB-5 investors,” Schneider said.

It’s hard to say which way the courts will rule, so observers must stay tuned for updates on these cases throughout the year.

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November 2018 Quarterly Newsletter

Foreign representative of Brazilian businessman accused of smuggling yacht files Chapter 15 in Miami

sailboat

iStock.com/mbbirdy

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”.

Fraudulent transfers

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

Partner Gregory Grossman with Nyana Miller in Miami

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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Art, Cars, Parrots and Other Spoils of Miami Fraud Lawyer Edward H. Davis

“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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The $70B loophole, or: How to turn your mansion into an offshore account

Wealthy in a financial bind increasingly turn to the homestead exemption

By Konrad Putzier

In the fall of 2016, Roger Ailes was by all accounts a very wealthy man. Fox News had just pushed him out from the company he built over allegations of sexual harassment, but paid him $40 million for his troubles. So he did what many other rich retirees before him have done: he bought a house in Florida.

Through a trust, Ailes paid $36 million in cash for a six-bedroom, 12,747- square-foot mansion in Palm Beach. In November that year, the longtime Putnam County, NY resident filed a declaration of domicile in Florida, public records show, making the new property at 6 Ocean Lane his primary home.

The declaration had its perks. Ailes was a defendant in a potentially expensive sexual-harassment lawsuit by former Fox News host Andrea Tantaros and was about to become a defendant in another, by former contributor Julie Roginsky. A judgment against him could put his assets on the line. But making the Palm Beach mansion his primary residence could insulate the house and up to half an acre of land around it from any legal claims, thanks to a handy Florida law known as the “homestead exemption.”

Ailes died in May 2017 at age 77. Fox News, also a defendant in the suits, settled Roginsky’s lawsuit in December of that year and Tantaros’ lawsuit was dismissed in May 2018. Ailes’ widow, Elizabeth Ailes, declared the Palm Beach property her homestead for tax purposes in 2017 and 2018, property records show. A spokesperson for Elizabeth did not respond to requests for comment.

Curious if someone of means is in a financial pickle? Check if they recently bought a mansion in Florida or Texas.

Paying millions for a palatial home in the Sunshine State is usually an indicator of unfettered wealth. But it could also be a warning sign that the buyer may be trying to protect money from creditors or legal claims. Florida and Texas are among the few states with a so-called unlimited homestead exemption, a law enshrined in the state constitution stipulating that your home is off limits to creditors, no matter how much it is worth or how much you owe. For people staring down big debts or potentially costly lawsuits, this creates a powerful incentive to buy the priciest property they can find in a homestead state.

Rising home prices mean more wealth is now beyond the reach of creditors. In three South Florida counties — Miami-Dade, Broward and Palm Beach — alone, the combined appraised value of all luxury homes appraised at $1 million or more whose owners claim the homestead exemption in tax filings is $69.9 billion (see chart), according to The Real Deal’s analysis of the Florida Department of Revenue’s 2018 tax roll. The true market values of these properties could be much higher.*

“If you go to a lawyer and ask ‘how do I protect my assets?,’ the first thing they say is: ‘Buy a valuable homestead,’” said Jeffrey Davis, a law professor at the University of Florida. “Some people just sort of call it estate planning.”

Funny laws

Residents of most U.S. states get a homestead exemption protecting some of their home equity from creditors. In California, for example, most people have a cap of $75,000, while in Virginia, the cap is $5,000.

Florida, Texas, Kansas, Iowa, Oklahoma and South Dakota, however, have no limit. In these states, buying an expensive property and claiming the homestead exemption has some of the perks of stashing your money in an offshore account — protection from creditors and lawsuits — without having to transfer money overseas.

“If you’re faced with losing what you have, the psychological toll it takes on you is the same whether you’re really rich or an average Joe,” said Wayne Patton, a Miami-based asset-protection attorney. “So the idea of moving somewhere where you can protect the bulk of what you have is very appealing.”

The list of the rich and famous who have taken advantage of the exemption is long, and it includes NFL legend O.J. Simpson, movie star Burt Reynolds and one of the original Miami Worldcenter developers, Marc Roberts.

Simpson had spent much of his life in California, but bought a home in Miami for $575,000 in 2000 and moved there after he lost a $33.5 million civil suit brought by the relatives of his murdered ex-wife.

“They got funny laws in this state,” Simpson told the New Yorker in 2001, explaining why he likes living in Florida.

The unlimited exemption has been around for more than a century, but its popularity is on the rise. Several offshore financial centers have increased transparency and made life harder for those looking to hide money abroad. Meanwhile, Florida’s rising property market over the past decade has made buying homes there more attractive.

In both Florida and Texas, debtors need to actually move into the property and show that they want to make it their permanent residence – by changing their voter registration, for example – to get the exemption. But they do not need to have lived in it for long. There are exceptions: those who buy a home with proceeds from criminal activity aren’t protected, and homeowners who fail to pay taxes or don’t make mortgage payments on their homestead can still see it seized.

Evading creditors isn’t the main reason people claim the homestead exemption, asset-recovery lawyers say. Making a property your homestead carries significant tax benefits.

But even if people buy a property purely and explicitly to bilk their lenders, that’s totally legal – at least in Florida.

In 2001, the state’s Supreme Court ruled that the exemption protects a property owner even if she bought the home with “the specific intent of hindering, delaying, or defrauding creditors.” The ruling has turned into a nightmare for lenders and asset-recovery lawyers nationwide. Because many debtors across the U.S. can, in theory, move to Florida at a moment’s notice and buy a house, they know that a part of their fortune equivalent to the value of a hypothetical Florida mansion can’t ever be seized by creditors. Of all of Florida’s eccentric laws, the homestead exemption is the one it sort of managed to force on the rest of the country as well.

“We’ll have a lawsuit against somebody where they will say ‘you can sue me, and might even win, but by the time you win I’m going to sell my house up here and all my other assets and I’m going to buy a house in Florida’,” said Schuyler Carroll, a New York-based asset-recovery attorney at Perkins Coie, adding that he’s been involved in dozens of cases where the exemption came up. “So we settle.”

Paupers with palaces

Tom Hicks made a fortune as a private-equity investor and a name for himself as the owner of the Texas Rangers baseball team and English soccer club Liverpool F.C. But the Dallas resident found himself in deep trouble after the financial crisis. In 2010, the Rangers filed for bankruptcy, and Hicks sold the team to pay off his creditors. In 2011, a group of former Rangers investors sued Hicks, claiming he had used the team to improperly enrich himself. JPMorgan Chase reportedly sought $35.4 million from him.

As Hicks fought for what was left of his wealth – he had also been forced to sell Liverpool F.C. – he could be fairly certain of one thing: no one could take away his palatial Dallas estate.

Hicks had bought the nearly 30,000-square-foot home at 10000 Holloway Drive in 1999 — the year his Dallas Stars hockey team won the Stanley Cup. Built by architect Maurice Fatio for Italian aristocrat Pio Crespi in the 1930s, the 25-acre property includes a library decked in walnut wood, crystal chandeliers, two guest houses, a pool and a lake. In 2013, Dallas County appraisers valued the property at $40 million. Property records show that Hicks claimed the homestead exemption on the property.

“He was pleading poverty, but everyone knew he had this absolutely phenomenal house,” recalled a source familiar with the Rangers bankruptcy. An attorney for Hicks declined to comment for this article.

Hicks can thank an earlier banking crisis for the law that shielded his mansion. In 1837, a year after Texas declared its independence from Mexico, a financial panic hit the U.S., leading to a wave of loan defaults and bank failures. The crisis would have a lasting impact on the state’s laws, according to Michael Ariens, a legal historian at St. Mary’s University.

“When Texas became a state in 1845, the idea that creditors could take the essentials of a farmer’s or workman’s way to earn a living was anathema,” Ariens said. “And there are always more debtors than creditors as voters.”

The homestead exemption eventually became a “sacrosanct” part of the constitution, according to Joe Wielebinski, a Texas-based asset-recovery attorney at Winstead PC. “Texas is a state with a history of people from other areas coming to this free, open and large state for a lot of reasons,” he said. “Whether it’s embarrassing or not, one of the reasons they came here was to avoid creditors in other states.”

In Texas, the debtor protection covers up to 10 acres in cities and up to 100 acres for an individual (200 for a family) in the countryside from creditors. In Florida, which included the exemption in its constitution in 1868, it covers just half an acre in a municipality and 160 acres outside a municipality. But as property prices in Miami and Palm Beach rose in the 1990s and early 2000s, debtors realized that they could squeeze a lot of money into half an acre.

So sue me

In late 1989, former Major League Baseball commissioner Bowie Kuhn’s Manhattan law firm went bankrupt. Weeks later, Kuhn bought a $1 million, five-bedroom home in Ponte Vedra Beach and claimed the homestead exemption.

“There is nothing inappropriate about my actions,” he told the New York Times in 1993: “People do this all the time.”

In 1996, Burt Reynolds filed for bankruptcy but kept his $2.5 million property near Palm Beach. Paul Bilzerian, a former corporate raider who went bankrupt in Florida for the second time in 2001 with $140 million in debt, got to keep his $5 million, 11-bedroom home in Tampa Bay, which included an indoor basketball court and a cinema.

Martin Kenney, a British Virgin Islands-based asset-recovery lawyer, recalls representing a hedge fund in the early 2000s. The fund had lent $20 million to a Florida doctor, who defaulted on the loan and pleaded poverty even though he owned a $7 million home near Sarasota, according to Kenney.

“We didn’t litigate over the house because we thought, ‘why do that if you’re just going to waste your time and lose?’” he said. “Like all policy choices, you end up with people that are unethical, abusing the privilege, doing things that probably the folks who created that homestead law never envisioned would happen.”

As abuse spread, the banking industry lobbied to change bankruptcy laws, facing fierce resistance from the real-estate industry and property owners in homestead states. In 1998, George W. Bush, then governor of Texas, wrote a letter to the House Judiciary Committee arguing that a “homestead cap is a clear violation of states’ rights with regard to state private property.” Current Attorney General Jeff Sessions, then a senator representing Alabama, found himself on the other side, telling the Times in 2001 that the unlimited exemption “isn’t just.”

The bankers prevailed and in 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act. It stipulated, among other changes, that those who file for bankruptcy can no longer claim the unlimited exemption unless they have lived in the property for at least 40 months.

“If a bankruptcy filing occurs today, it’s not clear that a homestead is bulletproof from all creditors’ claims,” said Wielebinski, the asset-recovery attorney. “Thirty years ago, if you put money into your homestead you were virtually immune from the claims of all creditors except for the mortgage lender and taxes. So it’s a dramatic change.”

The housing crisis further eroded the appeal of the exemption. Property prices plummeted, and there’s no point in claiming the exemption on a home that’s underwater anyway.

“Since 2008 we saw less people claiming it because there was no equity in the house,” said Michael Bakst, a Palm Beach-based attorney at Greenspoon Marder who specializes in bankruptcy and insolvency cases.

But as the Florida real estate market recovered from the crisis and the state attracted more of the world’s wealthy, so did the homestead exemption.

Marc Roberts, a former boxing promoter and one of the original developers behind the Miami Worldcenter project, claimed the homestead exemption on his $1.5 million home in Jupiter, Florida, when he filed for bankruptcy in March 2010, court records show. Roberts could not be reached for comment.

Keurig Green Mountain founder Robert Stiller reportedly paid $55 million for a mansion in Palm Beach through an LLC in January 2014 while he was still a defendant in three shareholder lawsuits against Green Mountain. He already owned a home in the same town but soon declared the new property his homestead, public records show. Although there is no indication Stiller bought the property because of the exemption, his role as a defendant meant he could potentially benefit from the law. An attorney representing Stiller did not comment.

The exemption continues to be highly effective. Gregory Grossman, a Miami- based asset-recovery attorney at Sequor Law, said he was unable to contest the exemption on behalf of creditors in more than 95 percent of the cases he was involved in.

And even the fact that your money is tied up in your home isn’t too much of a problem for those with patience.

Take Tom Hicks. While the lawsuits against him dragged on, he continued to claim the Dallas estate as his primary residence. Then, in late 2012, Hicks settled a legal dispute with the Rangers, and on January 11, 2013, a lawsuit brought by his lenders was dismissed.

Two weeks later, news broke that Hicks had put the home on the market for $135 million — at the time reportedly the most expensive residential listing in the country. He later cut the asking price to $100 million and sold it in January 2016 for a reported $58 million.

To view full article, click here.

Burford Raises $250 M in 24 Hours, Litigation Funding Rolls On

By Stephanie Russel-Kraft

Burford Capital, the world’s largest litigation finance firm, announced this week that it had raised another $250 million in a span of just 24 hours, the latest sign that litigation funding is still booming.

As Bloomberg Law reported in March, Big Law firms are increasingly gravitating toward litigation finance as the practice sheds its stigma. And yet, according to lawyers and funders in the market, the contours of that boom remain fuzzy.

“My anecdotal sense, confirmed by Burford putting more money in the market, is that it’s growing,” said Lucian Pera, commercial litigation partner at Adams and Reese who has worked with litigation funders. “How much it’s growing is very hard to say.”

The practice of litigation funding, in which third parties pay litigation fees up- front in the hopes of making a return, originated in Australia in the 1990s and only took hold in the United States in the past decade.

The practice is not without its critics, most notably the U.S. Chamber of Commerce, which argues it can lead to unnecessary litigation. Critics also question the ethics of litigation being funded by third parties that can remain anonymous.

Burford is by far the largest litigation funder. The firm, which has been publicly traded since launching in 2009, now employs over 100 people and claims a market cap of over $5.4 billion.

Growth Expected

In the first half of 2018, Burford invested $540.3 million, and the firm says it expects continued growth in coming years.

Unlike Burford and Bentham, another publicly traded litigation finance firm with a $5.6 billion portfolio, most litigation funders are not public companies, nor are they disclosed in litigation itself.

“It’s very opaque,” said Pera. “There’s no place to go to find a reliable list of funders. It’s difficult for example to find out how much money is deployed in the market. You can look at Burford and guestimate upward.”

Greg Grossman, a shareholder at Sequor Law who focuses his practice on asset recovery, estimates that 40 percent of his law firm’s revenue comes from litigation funders. And yet he says he still lacks an overview of the market.

In addition, because litigation finance is still a relatively new practice in the U.S., it still lacks standardization, according to Grossman.

“It’s not the kind of market that is transparent, so you’re comparing apples to oranges,” Grossman said.

For example, he said Burford’s documents don’t look anything like those provided by Bentham.

Calls More Frequent

Lawyers and funders who spoke with Bloomberg Law said they believe market saturation will eventually come, but it isn’t imminent. Over the past five years, a slew of smaller funders have entered the market, though none of them near the size of Burford or Bentham.

Curiam Capital, one of those new players, launched with $100 million in capital earlier this year. Managing principal Ross Wallin said the firm is on track to commit that money “quicker than we expected.”

“We have continued to receive calls from entities who are interested in the asset class and who want to be on the list the next time we want to raise capital,” Wallin told Bloomberg Law.

“Investors are looking for returns that are off the beaten track,” said Pera. “I keep hearing from people, … mostly law firms and lawyers exploring some option. They want to talk through how does it work, what are the possibilities, what are the dangers.”

Pera said these calls are becoming more frequent.

“I’m old enough to remember when mediation was not common, and now you can’t be a trial lawyer without having some clue of how it works,” he said. “I think we’ll see a time when that’s the case with litigation funding, that it’s just another tool in the toolbox. That’s what I think is coming, but it sure is not here yet.”

To view full article, click here.

IWIRC announces new board of directors

By Mohamed Dabo

The International Women’s Insolvency and Restructuring Confederation (IWIRC) has announced its newly elected and appointed incoming board of directors for 2018 – 2019.

The international networking and professional growth organization, aimed at women in the restructuring and insolvency industries, announced the names of its five-member executive board and its ten-member management committee on 17 September.

IWIRC also published the names of its new regional directors, directors at large, as well as its standing committee and vice directors.

Carrianne Basler, a managing director at AlixPartners in Chicago who was vice chair, succeeds outgoing chair Jennifer McLemoreMichelle Pickett, a partner at PricewaterhouseCoopers in Toronto, Canada, becomes the new vice chair. McLemore will remain on the board as immediate past chair.

The executive board also includes Leyza Blanco of Sequor Law in Miami as secretary, Jennifer Kimble of New York restructuring firm Prime Clerk as treasurer, and Marjorie Kaufman of Getzler Henrich in Boston as Vice Finance Director.

Appointees to the group’s management committee include Tinamarie Feil, president of the California-based BMC Group, who becomes the group’s UNCITRAL committee director. Alexandra Schnapp, a law clerk at the US Bankruptcy Court in Atlanta, is the communications director.

Eloise Fardon, a senior associate at Stephenson Harwood in Hong Kong, is now the Asia regional director. Rita Gismondi, an associate at Gianni Origoni Grippo Cappelli & Partners in Rome, is the new Europe regional director. Kelly McDonald, of Shearman & Sterling in New York, is  US regional director and Toronto-based Dentons counsel Sara-Ann Van Allen is Canada regional director.

Outgoing chair McLemore says, “The composition of the Board speaks to the depth and expertise of our membership base and we look forward to working with these talented women.”

In a phone interview, she told GRR the organisation’s focus right now is to bring the international experience to the local level—so that members who are unable to attend international conferences can still have access to those international resources.

IWIRC’s newsletter is one resource the organisation is aiming to make more accessible; for example, by using social media to give it a stronger international presence on the internet.

Founded in 1993, IWIRC is a not-for-profit organisation currently located in Asia, Europe, and North America and continues to grow. McLemore says IWIRC welcomes the development of new networks in these or new regions.

Executive Board (terms ending October 2019)

  • Carrianne Basler, AlixPartners, Chair
  • Michelle Pickett, PricewaterhouseCoopers, Vice Chair
  • Leyza Blanco, Sequor Law, Secretary
  • Jennifer Kimble, Prime Clerk, Treasurer
  • Marjorie Kaufman, Getzler Henrich & Associates, Vice Finance Director
  • Jennifer McLemore, Christian & Barton, Immediate Past Chair

Management Committee (terms ending October 2019)

  • Tinamarie Feil, BMC Group, UNCITRAL Committee Director*
  • Karen Fellowes, DLA Piper, Newsletter Director
  • Terri Freedman, Freedman Law, Program Committee Co-Director
  • Melissa Hager, Morrison & Foerster, US Networks Director
  • Evelyn Meltzer, Pepper Hamilton, Member Services Director
  • Alexandra “CC” Schnapp, U.S. Bankruptcy Court, Communications Director
  • Helen Sevenoaks, CMS Cameron McKenna Nabarro Olswang, Europe Networks Director
  • Carren Shulman, NYU School of Law, UNCITRAL Committee Director*
  • Pooja Sinha, Global Legal Solutions (GLS Law), Asia Networks Director
  • Melaney Wagner, Goodmans, Canada Networks Director

Regional Directors (terms ending October 2019)

  • Eloise Fardon, Stephenson Harwood, Asia Regional Director
  • Rita Gismondi, Gianni, Origoni, Grippo, Cappelli & Partners, Europe Regional Director
  • Kelly McDonald, Shearman & Sterling, U.S. Regional Director
  • Sara-Ann Van Allen, Dentons, Canada Regional Director

Directors at Large (terms ending October 2019)

  • Jacqui Calderin, Agentis
  • Kelly Beaudin Conlan, Connolly Gallagher
  • Catherine D’Alton, Harney Westwood & Riegels
  • Mary Grace Diehl, former judge, U.S. Bankruptcy Court
  • Rebecca Hume, Kobre & Kim
  • Ericka Johnson, Womble Bond Dickinson
  • Nicole Stefanelli, Cullen and Dykman
  • Blanche Zelmanovich, Ernst & Young

Directors at Large (terms ending October 2020)

  • Monica Blacker, BAX Advisors
  • Kristen Siracusa Eustis, Miles & Stockbridge PC
  • Elizabeth Gunn, Virginia Office of the Attorney General
  • Rachel Lao, SSG Capital Management
  • Kerri Mumford, Landis Rath & Cobb
  • Leanne Williams, ThorntonGroutFinnigan

Standing Committee Vice-Directors (terms ending October 2019)

  • Valerie Banter-Peo, Buchalter Nemer, Vice Director of Regional Programming*
  • Aisling Dwyer, Maples and Calder, Asia Regional Vice Director*
  • Rosa Evergreen, Arnold & Porter Kaye Scholer, Vice Director of Communications and Newsletter*
  • Justine Lau, Mourant Ozannes, Asia Regional Vice Director*
  • Tina Lucas, Banner Bank, Vice Director of Budget*
  • Lauren McKelvey, Odin Feldman & Pittleman, Vice Director of Spring Programs*
  • Tara Schellhorn, Riker Danzig Scherer Hyland & Perretti, Vice Director of Fall Programs*
  • Nellwyn Voorhies, Donlin Recano, Vice Director of Communications and Social Media*
  • Blanche Zelmanovich, Ernst & Young, Vice Director of Member Services*
  • Rita Gismondi, Gianni, Origoni, Grippo, Cappelli & Partners, Europe Regional Director
  • Kelly McDonald, Shearman & Sterling, U.S. Regional Director
  • Sara-Ann Van Allen, Dentons, Canada Regional Director

Directors at Large (terms ending October 2019)

  • Jacqui Calderin, Agentis
  • Kelly Beaudin Conlan, Connolly Gallagher
  • Catherine D’Alton, Harney Westwood & Riegels
  • Mary Grace Diehl, former judge, U.S. Bankruptcy Court
  • Rebecca Hume, Kobre & Kim
  • Ericka Johnson, Womble Bond Dickinson
  • Nicole Stefanelli, Cullen and Dykman
  • Blanche Zelmanovich, Ernst & Young

Directors at Large (terms ending October 2020)

  • Monica Blacker, BAX Advisors
  • Kristen Siracusa Eustis, Miles & Stockbridge PC
  • Elizabeth Gunn, Virginia Office of the Attorney General
  • Rachel Lao, SSG Capital Management
  • Kerri Mumford, Landis Rath & Cobb
  • Leanne Williams, ThorntonGroutFinnigan

Standing Committee Vice-Directors (terms ending October 2019)

  • Valerie Banter-Peo, Buchalter Nemer, Vice Director of Regional Programming*
  • Aisling Dwyer, Maples and Calder, Asia Regional Vice Director* 
  • Blanche Zelmanovich, Ernst & Young, Vice Director of Member Services*     
  • Rosa Evergreen, Arnold & Porter Kaye Scholer, Vice Director of Communications and Newsletter*
  • Justine Lau, Mourant Ozannes, Asia Regional Vice Director*
  • Tina Lucas, Banner Bank, Vice Director of Budget*
  • Lauren McKelvey, Odin Feldman & Pittleman, Vice Director of Spring Programs*
  • Tara Schellhorn, Riker Danzig Scherer Hyland & Perretti, Vice Director of Fall Programs*
  • Nellwyn Voorhies, Donlin Recano, Vice Director of Communications and Social Media*
  • Blanche Zelmanovich, Ernst & Young, Vice Director of Member Services*

To view full article, click here.

Two Sequor Law Attorneys Named Rising Legal Stars by Latinvex

ARNOLDO LACAYO Bio Image

ARNOLDO LACAYO
Partner, Sequor Law

Arnie Lacayo, a partner at Sequor Law, focuses his international litigation practice on financial fraud and asset recovery.

He has extensive experience litigating complex disputes in state and federal courts and has represented multi-national corporations, sovereign governments, receivers, trustees and other foreign officeholders in matters pending in U.S. Courts.

Key work includes representing the judicial administrator appointed in a Brazilian bankruptcy case in one of the largest failed bank bankruptcies in Brazil’s history; acting as lead U.S. counsel for the Liquidator and has successfully pursued recognition of the Chilean insolvency proceedings and of the Liquidator as foreign representative under Chapter 15 and Brazilian Liquidator in an adversary proceeding clawback action within a Chapter 15.

Lacayo has also worked at length with the versatile 28 U.S.C. § 1782 discovery statute, including in one of the leading cases out of the Eleventh Circuit Court of Appeals.

Lacayo holds a J.D. from the University of Miami School of Law (2003) and a B.A. from the University of Notre Dame (2000).

 

 

NYANA A. MILLER Bio Image

NYANA A. MILLER
Associate, Sequor Law

Nyana Abreu Miller, an attorney at Sequor Law, focuses her practice on international asset recovery and financial fraud.

Miller has worked on cases brought under Chapter 15 of the U.S. Bankruptcy Code on behalf of foreign office holders of bankrupt Latin American companies and financial institutions where insiders misappropriated hundreds of millions of dollars’ worth of assets into or through the United States. She represents individuals, corporations, receivers and trustees in litigation to recover assets that were concealed, fraudulently transferred, or otherwise misappropriated.

Prior to joining Sequor Law, she worked on commercial, financial and real estate transactions at an international law firm. In that position, Miller represented bank syndicates in financial transactions for various purposes, including working capital, international trade and acquisitions.

She holds a J.D., University of Miami School of Law (2011) and a B.A., University of Kansas (2005).

 

August 2018 Quarterly Newsletter