Zayat Bankruptcy Trustee Alleges ‘Ongoing Pattern of Delay, Obstruction, and Gamesmanship’
Through TD Thornton
Ahmed Zayat’s attempt to get out of debt of less than $ 19 million has hit another supposedly intentional legal bottleneck.
The administrator in charge now alleges that three children and the wife of the financially strapped owner and breeder of the champion Triple Crown American Pharaoh refuse to cooperate by providing documents that the trustee had summoned them to appear in an attempt to trace millions of dollars in potentially fraudulent transfers.
“[T]The trustee’s investigation reveals that the debtor and members of his family have engaged in a pattern of mixing assets and ongoing financial transactions between them, “wrote bankruptcy trustee lawyer Donald Biase in a case filed July 13 in United States Bankruptcy Court (District of New Jersey).
“In particular, the [Zayats] have made nothing but ridiculous productions in response to the subpoenas addressed to them. Worse yet, their lawyer engaged in numerous redactions of the bank statements they produced on the sole basis of their own unilateral determinations of relevance, and also simply omitted the bank statements for significant periods of time, ”continued the folder.
Ahmed Zayat’s case seeking Chapter 7 bankruptcy protection has now passed the 10-month mark and has been marked by the trustee’s multiple allegations of blocking, evasion and non-cooperation. Zayat has repeatedly denied these allegations via court documents.
The primary role of a court-appointed trustee in a bankruptcy case is to ensure that a debtor seeking federal bankruptcy protection is not hiding assets that could instead be used to pay creditors. – many of whom in Zayat’s case are thoroughbred trainers for his now wound up racing stable and various racing and blood related entities.
An objection to a bankruptcy protection plea may be filed if a trustee believes that some aspect of the required documentation is not up to par. A judge can either dismiss a case on his own or by acting on the objection of a trustee. A judge can also refuse to pay a particular debt.
If suspected fraud is discovered in a bankruptcy filing, the Federal Bureau of Investigation can investigate and the US Department of Justice can prosecute if it believes a crime has been committed.
On June 4, the trustee issued a subpoena under the 2004 rule to Zayat’s wife, Joanne Zayat, and three of their four children, Emma, Benjamin and Justin Zayat. A business entity controlled by Justin, JPZ Holdings, LLC, was also subpoenaed.
Federal Rule of Bankruptcy Procedure 2004 authorizes the trustee to investigate “the acts, conduct or property or the debts and financial condition of the debtor, or any matter which may affect the administration of the debtor’s estate, or the debtor’s right to discharge.
Specifically, the trustee wanted to see detailed information about the family’s allegedly entangled accounts with banks, credit card companies and other loan-related institutions.
The summons also wanted access to four TVG betting accounts “owned individually or jointly with, including as an additional or authorized user … any family member of the debtor … or JPZ Holding”, as well as all passwords associated with these accounts.
On June 23, the four aforementioned Zayat family members (the “Movements”) asked the court to quash the Trustee’s subpoena, alleging that “each subpoena is exceptionally large and searches for wholesale financial records and others. personal and proprietary financial information, regardless of whether it has any relationship whatsoever with the debtor or the estate.
In the memorandum of July 13 from the trustee opposing this annulment proposal, Biase argued that the request for annulment “is an exercise in play, obstruction and delay.[…]. [T]three of the Movant [Justin, JPZ Holdings and Joanne] were particularly related to the finances of the debtor and the stables of Zayat. “
The file continued: “Justin Zayat was the president of the Zayat stables and, as far as can be determined, his only source of income during the relevant period was the Zayat stables. Justin Zayat also benefited from nearly $ 1 million in transfers at a time when Debtor and Stables Zayat’s financial situation was deeply troubled. Justin Zayat’s company JPZ Holdings also received millions of dollars in payments from the debtor’s brother and creditor, Sherif Zayat.
“Joanne Zayat, the debtor’s wife, received over $ 1 million in direct transfers from Zayat Stables. She is jointly named on each major bank account used by the Debtor and is also the joint account holder with Justin Zayat.
“The accounts of Justin Zayat, Joanne Zayat and JPZ Holdings have been and continue to be used by the debtor’s brother, Sherif Zayat, to pay the $ 72,000 claimed by the debtor in monthly expenses. Joanne Zayat has also been directly involved in obtaining loans from close friends and acquaintances for the benefit of the debtor and / or the Zayat stables, and she recently repaid one of these creditors to a bank account held in name of his speech therapy company. .
“In short, if the trustee wants to understand the conduct and financial transactions of the debtor, he must necessarily obtain financial information relating to these third parties,” says the case.
The trustee further argued that the subpoenas in question “are not only fully justified, but that many of them are made necessary because the debtor himself has refused to produce the documents of a number of financial institutions with which it has accounts ”.
Biase explained the convoluted process by which Zayat, during his bankruptcy plea, even ordered the trustee to serve subpoenas on his own financial institutions, “only for the debtor’s family members to then travel to cancel these same assignments… ”.
“The trustee’s investigation also revealed a substantial number of inaccuracies and omissions in the debtor’s bankruptcy schedules which were only discovered through the issuance of subpoenas under the 2004 rule to third parties, including overestimates of unpaid debts totaling hundreds of thousands of dollars.
“It is this continuous pattern of obstructive activities, associated with the changing and highly questionable statements of the debtor in its schedules… which more than justified the issuance by the trustee of the subpoenas in question. This same continuous pattern of delay, obstruction and backlash demands that the motion be dismissed in its entirety, ”the case said.