4.8/5 based on 35 reviews.
4.8/5

Sudden Wealth Blog

Cases Defeating Offshore Trusts

Photo of federal courthouse in Galveston, Texas. Cases Defeating Offshore Trusts.

The following is a list of over 2 dozen court cases defeating offshore trusts. There are no cases to the contrary.

Bankruptcy Court Cases Defeating Offshore Trusts:

In re Colburn 145 B.R. 851 (Bkrpt E.D. Va. 1992). (For failing to disclose offshore trust, debtor was denied a discharge and accused of fraud).

Brown v. Higashi, (Bkrpt Ak. 1995). (Assets of offshore trust included in bankruptcy estate. The court stated that “[t]he fact that the trusts were established in Belize, a country notorious for its anti-creditor policies…indicates an intent to hinder, delay or defraud on the part of the defendants”).

In re Portnoy, 201 B.R. 685 (S.D.N.Y. Bkrpt 1996) (Because of offshore money, discharge denied and debtor accused of fraud).

In re Brooks, 217 B.R. 98 (D.Conn. Bkrpt. 1998) (Offshore trust disregarded and assets seized by US court).

Advanced Telecommunication Network, Inc. v. Allen, D.C. Docket No. 05-00770-CV-ORL-19-JA-DA (11th Cir. 2011) (Debtor funded Cook Islands trust which included duress clause and all the usual provisions; bankruptcy court found offshore trust against public policy and ordered debtor to repatriate funds; debtor claimed he had no power to comply; debtor was held in contempt and the court cited earlier cases holding that a self-created impossibility is not a defense; 11th circuit affirmed.)

U.S. Federal Government Actions Against Offshore Trusts:

FTC v. Fortuna Alliance (1997) (FTC investigated a pyramid scheme and in doing so was able to get a U.S. District Court to issue arrest warrants to Debtors, who then repatriated millions from offshore accounts in Antigua. This case is often ignored by offshore trust promoters because it was settled out of court).

SEC v. Brennan, 230 F. 3d 65 (2nd Cir. 2000) (Debtor convicted of bankruptcy fraud).

FTC v. Direct Benefits Group, LLC, 2011 WL 3654469 (M.D.Fla., Slip Copy, Aug. 19, 2011).(Court ordered all offshore funds repatriated without regard to any documents or legal structures).

Offshore Trusts Defeated in Divorce:

Riechers v. Riechers, 679 N.Y.S. 2d 333 (1998) (Offshore trust assets included in marital estate for divorce purposes).

Westrate v. Westrate (1998) (Husband accused of fraud and threatened with criminal penalties. Assets included in marital estate).

Breitenstine v. Breitenstine, 2003 WY 16, 62 P.3d 587 (Wyo. 2003) (Trust assets included in property division).

Happy woman because she defeated foreign asset protection trust in a divorce.

Debtor Jailed For Refusing to Repatriate Assets:

Person in jail for refusing to repatriate assets.

To help our clients understand what is good planning vs. bad planning, we have listed Seven Pillars of Asset Protection. The Fourth Pillar of Asset Protection is that creditors cannot force you to choose between freedom or use of your assets. So, obviously Offshore Asset Protection Trusts fail to meet this standard, as you’ll see below.

FTC v. Affordable Media, LLC, 179 F.3d 1228 (9th Cir. 1999). (Debtor jailed for refusing to repatriate assets).

SEC v. Bilzerian, 131 F. Supp. 2d 10 (D.C. 2001). (Debtor jailed for refusing to repatriate assets).

In re Lawrence, 279 F.3d 1294 (11th Cir. 2002). (Debtor jailed for over six years for refusing to repatriate assets).

BankFirst v. Legendre (2002) (Debtor jailed for contempt of court until assets were turned over five days later. See news article on the case HERE).

And here are even more cases in which the debtor was jailed for refusing to repatriate assets …

Morris v. Morris, Case Nos. 4D04-3812, 4D04-4621, 4D04-4763, aff’d Appeal No. SC05-1166 (Fla.S.Ct. April 13, 2006); Morris v. Wroble, Case No. CIV-O6-80479 (S.D. Fla.) aff’d Appeal No. 06-80452-CV-DTKH (11th Cir. Nov. 16, 2006). (Debtor jailed for contempt of court for refusing to repatriate assets).

Barbee V. Goldstein, 2006 U.S.Dist. LEXIS 82945. (Goldstein funded offshore trust over a year before filing for bankruptcy. Bankruptcy Court ordered Goldstein to repatriate funds from Cook Islands Trust. Goldstein failed to comply and was jailed for contempt. Goldstein finally agreed to terminate the trust and repatriate the assets).

Chadwick v. Green, Civ. No. 09-2134 (Del. County Ct. Com. Pl. July 10, 2009) (H. Beatty Chadwick was released after serving 14 years in jail for refusing to obey a court order to turn over $2,500,000 that a judge believed was hidden offshore. The court said that after 14 years, the contempt order “has lost its present coercive effect and that it is unlikely that the continued incarceration of Petitioner Chadwick will result in his compliance with [that order].”)

SEC v. Jamie Solow, 682 F.Supp.2d 1312 (2010). (Debtor jailed for contempt of court for refusing to repatriate assets) (case affirmed by 11th Circuit).

Debtor Paid Settlement to Avoid Jail:

Bank of America v. Weese, 277 B.R. 241 (D.Md. 2002) (Debtors paid settlement of over $12,000,000 in order to avoid incarceration).

Debtor Held In Contempt of Court & Threatened With Jail Time:

U.S. v. Plath, 2003-1 USTC 50,729 (U.S. District Court, So. Dist. Fla. 2003) (Debtor held in contempt for refusing to obey court order to disclose details about offshore accounts despite the fact that there was no fraudulent transfer).

Eulich v. U.S., (N.D.Tex. Case No. 99-CV-01842, August 18, 2004) (Debtor found in contempt, threatened with fines and jail time until assets repatriated).

FTC v. AmeriDebt, Inc., 373 F. Supp. 2d 558 (D Md. 2005) (Debtor found in contempt and threatened with jail time until assets repatriated).

SEC v. Greenberg, 2015 WL 2450500 (S.D.Fla., May 21, 2015). In May 2015 the District Court upheld a Magistrate Judge’s order holding Debtor (Greenberg) in contempt for failure to pay on a 2002 Judgment. Greenberg lived a lavish lifestyle using an Offshore Trust and several entities as his private piggy banks while claiming he had no ability to pay the judgment. Although Greenberg made a few small payments on the judgment beginning in 2010, it wasn’t enough to prove that he was unable to pay, i.e. claim an impossibility defense.

State Law Applies (Not Law of Bahamas Where Trustee Was Located):

U.S. v. Rogan, 2012 WL 1107836 (N.D.Ill. 2012) (Peter Rogan transferred assets to an offshore trust in 1996. The Bahamas Trust included all the traditional offshore trust provisions and it gave no apparent control to Peter Rogan. In November of 2002 he was sued. Judgments were entered against him in 2006. The court held that Illinois law applied instead of the laws of the Bahamas, and Rogan was ordered to turn over the assets because Illinois law does not protect the assets of a self-settled trust. Rogan has since fled the country. Rogan and the attorney who helped create the trust have been indicted for perjury for claiming that they had no control over the trust. The court held that “Notwithstanding the terms used to create the trust, Rogan and Cuppy controlled the [Trust].” They were also indicted for obstruction of justice and conspiracy to obstruct justice.)

Another Offshore Trust Defeated:

Indiana Investors, LLC v. Hammon-Whiting Medical Center, LLC No. 45D02-0807-CT-201 (Lake Superior Court, Lake County, Indiana); Indiana Investors v. Victor Fink, No. 12-CH-02253 (Circuit Court of Cook County, Illinois, Chancery Division), Victor Fink transferred assets to a Cook Islands trust provided by one of the popular asset protection providers found on the internet. That law firm claimed that the control could be shifted offshore in the event of duress. The plaintiffs were able to obtain temporary restraining orders which prevented the trustees and protectors from shifting the control to the offshore trustee (South Pac Trust International, Inc.) and the bank accounts were all frozen.

IRS Defeats Offshore Trust (Debtor Must Permanently Leave U.S. To Get Access to Trust)

The Second Pillar of Asset Protection is that creditors cannot limit how you use and enjoy your assets. This seems pretty basic. Why would you possibly “protect” your money if you can’t actually use it??? It makes no sense. Yet, this doesn’t stop people from making this stupid mistake.

US v. Grant, 2013 WL 1729380 (S.D.Fla., April 22, 2013) (Raymond Grant created two offshore trusts, one for his benefit and one for the benefit of his wife, and he funded them years before incurring substantial tax liabilities. Raymond later died and the IRS obtained a $36 million dollar judgment against Raymond’s wife Arline. The US moved to hold Arline in contempt of court for failing to repatriate funds. Initially, the court refused to do so, but later when it was proven that Arline had received funds from the trust through her children’s accounts, the court issued a permanent injunction prohibiting Arline and her children from ever receiving any benefits from the trusts.)

U.S. Court has Personal Jurisdiction Over Offshore Trust Company

Gilmore v. AsiaTrust New Zealand Ltd., 2014 WL 684377 (Cal.App.Distr. 4, Feb.21, 2014). (California court of appeals finds personal jurisdiction over AsiaTrust, an offshore trust company, and can therefore sue AsiaTrust in California, even though there was no physical connection to California.).

ABOUT THE AUTHOR

Founding attorney Paul Deloughery has been an attorney since 1998, became a Certified Family Wealth Advisor. He is also the founder of Sudden Wealth Protection Law.

SPREAD THE WORD