Will Bankrupt Billionaire Escape His Spousal Support Obligations?

DSC00507 (2)American Samuel Wyly and his late brother Charles made their fortune as savvy entrepreneurs. They founded or grew a variety of successful businesses including arts and crafts stores Michael’s, University Computing Company, restaurant chain Bonanza Steakhouse, and Sterling Software. They also reputedly donated over $90 million dollars to charitable causes, including large donations to the Republican party.

Along the way some of their business activities attracted the attention of the U.S. Securities and Exchange Commission. In 2006 they were under investigation for their alleged use of potentially illegal offshore tax shelters. Grand juries in New York and Texas were tasked with investigating whether the brothers had used funds in offshore trusts to purchase $30 million dollars of art, jewellery, furniture, and other personal items for themselves.

They denied any wrongdoing and advised investigators they would invoke the fifth amendment if they were subpoenaed to testify. They were never called, a bullet dodged.

However, an insider trading investigation in 2010 did not end as well. The allegations, later proved in court, were that Samuel Wyly used insider information to buy and sell securities for an undisclosed profit of $550 million. He apparently traded public stock in companies where he and his brother served as board members, through hidden entities in other jurisdictions.

A Manhattan federal jury in May 2014 found Mr. Wyly guilty and it is expected that Mr. Wyly will have to “disgorge” or pay back $300 million dollars. His assets were also frozen.

Last month Mr. Wyly filed for Chapter 11 bankruptcy in Texas, an event that caused consternation for his ex-wife Victoria Lee Wyly, now Torie Steele, who after their 1991 divorce negotiated support payments of $500,000 per year. In his bankruptcy filings Mr. Wyly recorded monthly spending of $1 million. That has also been curtailed by bankruptcy officers.

Spousal and child support payments are not cancelled by a bankruptcy, however, a paying party’s change in income will be grounds for a variation of support. According to Ms. Steele’s lawyer, Samuel Wyly has already missed a monthly payment of just over $40,000.

There is, however, a complicating factor in respect of Ms. Steele’s support payments. To avoid the “risk and cost” of a contested spousal support hearing the parties agreed in 1993 that Mr. Wyly would act as an investment advisor for Ms. Steele, manage $5 million dollars of her funds, and guarantee her returns of $500,000 per year for her lifetime.

In 2007 Mr. Wyly went to court seeking to be released from this obligation. A judge upheld the arrangement saying Wyly “was agreeable to taking his chance with his acumen as an investor as opposed to
risk incurring any further spousal support obligations.”

The question for the bankruptcy court is whether Ms. Steele’s investment income arrangement constitutes spousal support and if it does not, where does that leave her?

I’ll be watching this case closely and report the outcome in due course.

Lawdiva aka Georgialee Lang

Divorce Fraud Leads to 17 years in Prison

GEO#1California businessman Steven Zinnel, age 50, thought he could get away with cheating his wife, his two teenage children, and the bankruptcy court, but he was wrong….boy was he wrong!

Zinnel and his wife, of Gold River, separated in 1999. By 2001 their uncoupling got even more ugly when he told his wife she would get nothing, no assets or support because he was filing for bankruptcy.

Zinnel systematically funnelled millions of dollars into the names of other persons and true to his word, filed for voluntary bankruptcy in 2005. He also laundered money through shell corporations in order to conceal his true income.

Shockingly, he did all this with the assistance of lawyer, Derian Eidson, age 50, who used her trust account, her personal account and a corporation she owned to return the funds to Zinnel after his discharge from bankruptcy.

But he didn’t stop there…Zinnel went on to initiate an FBI investigation of his ex-wife, displaying a hatred that knew no bounds and that eventually led to his own demise.

In the course of the investigation, authorities uncovered Mr. Zinnel’s bankruptcy and divorce fraud. Before U.S. District Court Judge Troy Nunley he was sentenced to 17 years and eight months in prison, fined $500,000, and ordered to disgorge the sum of $2.8 million to the state.

Judge Nunley in bankruptcy court and the 3rd District Court of Appeal in respect of his divorce matter condemned Zinnel for his narcissistic arrogance, and found that while he was articulate and charismatic he used those traits for his own selfish purposes.

Yorba Linda lawyer Ms. Eidson, was disbarred and sentenced to 10 years and one month in prison for money laundering. She was also fined $200,000. Her undoing began when she commenced an intimate relationship with Zinnel and became a victim of her own greed.

As for Mr. Zinnel, his phone call to his son when first imprisoned shows that he still doesn’t get it…he told his son that he was “railroaded” and blamed his ex- wife!

Lawdiva aka Georgialee Lang

When Mom Loses Custody

GEO CASUALNow that most North American courts are truly focusing on a child’s best interests, and not just slavishly awarding custody of young children to moms, many mothers are experiencing what dads have faced for decades. Life without Jimmy and Susie…

A case in point is the situation that American actress, Kelly Rutherford, found herself in after her two-year marriage to husband Daniel Giersch collapsed in 2009. Star of television’s Gossip Girl, Ms. Rutherford engaged in a lengthy, tortuous custody battle with the father of their two children, Hermes and Helena, who are now six and three-years old.

From the get-go it was as ugly as can be, with mean-spirited, nasty allegations tossed about for the Hollywood media to lap up. He asserted that her life was not focused on the kids, but on spa appointments, shopping excursions and her career, while she accused Giersch of dealing in drugs and weapons in South America.

Ultimately, Ms. Rutherford’s allegations backfired. Mr. Giersch, as a citizen of France, had no legal status in the United States and some media reported that his wife’s unproven complaints stymied any chance Giersch had of remaining in America after his visa was revoked.

At the end of the battle, Giersch was awarded custody of both children who now live with him in France. Ms. Rutherford was awarded access to her children with the proviso that she pay all the costs of visiting them in France. It is reported that to date she has made over 40 trips.

The financial aftermath of her court battle and access costs has led Ms. Rutherford to file for bankruptcy. Despite earning $486,000 a month from her work on Gossip Girl, she has virtually no assets and debt of more than $2 million dollars. The cancellation of Gossip Girl is another setback for the star.

And she has apparently not abandoned her quest for custody of the children. Having spent $1.5 million in legal and related fees, she is now living for free with friends in New York as she continues to battle her ex.

She recently remarked:

“Having to peel my son off my body, screaming, “Mama, save me!” when I had to give him to his father—not because he doesn’t love his dad, but because he’s too young and it was like a forced thing.”

While women have righteously sought gender equality for years, it may be that in this case Ms. Rutherford would rather have the old rules apply.

Lawdiva aka Georgialee Lang

Elder Abuse: Death By Power of Attorney

Elder abuse is a world-wide phenomenon that has only recently received the attention and research dollars that it deserves. For our senior citizens who are victims of caregivers or family members, the emotional and physical damage and financial exploitation is often hidden behind closed doors.

Such is the case in a recent elder abuse situation in Missouri that has now been exposed by authorities who have charged Kansas City lawyer, Susan Elizabeth Van Note, age 44, with first degree murder and felony forgery.

Ms. Van Note’s 67-year-old father and his long-time girlfriend, who he intended to marry, were attacked by an intruder in their Ozarks vacation home. Mr. Van Note’s girlfriend, Sharon Dickson, age 59, did not survive her gunshot wounds and died at the scene.

Mr. Van Note survived and was transported to hospital, but died four days later, after his only child, Susan, gave his medical team a durable power of health care attorney, that authorized her to determine whether or not to “pull the plug”. She decided that life support should be terminated. With the death of her father and his fiance, Susan Van Note became the beneficiary of his multi-million dollar estate.

Authorities later determined that the power of attorney was a forgery.

A September 2012 criminal indictment against Ms. Van Note says that she “knowingly caused the death of William Van Note by shooting him…either acting alone or by knowingly acting together with or aiding another or others” and used a forged power of attorney to deny him potentially life-saving treatment. No charges have yet been brought against her in respect of the death of Sharon Dickson.

Two high school friends of Ms. Van Note’s have also been charged with felony forgery and second degree murder. Desre and Stacy Dory also plead not guilty.

Not surprisingly, Ms. Van Note was removed as the executrix of her father’s will and was ordered to relinquish control of the assets in her father’s estate. She did, however, manage to post cash bail of $1 million dollars after pleading not guilty, a situation that has caused concern because Ms. Van Note filed for bankruptcy the year before her father’s death, claiming assets of $250,000 against debts of $375,000.

The obvious inference is that Ms. Van Note has already helped herself to estate assets.

Ironically, Susan Van Note practices estate law touting her “compassionate representation of clients” and expertise in end-of-life issues.

Lawdiva aka Georgialee Lang