In re Correra

• Decision Date: 21 August 2018
• Docket Number: CASE NO. 16-30728-SGJ-7
• Citation: 589 B.R. 76
• Parties: IN RE: Marc Anthony CORRERA, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Texas

589 B.R. 76

IN RE: Marc Anthony CORRERA, Debtor.

CASE NO. 16-30728-SGJ-7

United States Bankruptcy Court, N.D. Texas, Dallas Division.

Signed August 21, 2018

James Sanford Brouner, The Law Office of Mark A. Weisbart, Gregory Getty Hesse, Hunton Andrews Kurth LLP, Dallas, TX, Peter S. Partee, Sr., Hunton Andrews Kurth LLP, New York, NY, for Debtor.

Robert Yaquinto, Jr., Dallas, TX, for Trustee.

MEMORANDUM OPINION AND ORDER IN CONTESTED MATTERS ¹ INVOLVING CONCEALMENT AND DESTRUCTION OF ELECTRONICALLY STORED FINANCIAL RECORDS OF A CHAPTER 7 DEBTOR

Stacey G.C. Jernigan, United States Bankruptcy Judge

I. Introduction.

Before this Texas bankruptcy court are two, related contested matters (one against an individual Chapter 7 debtor and one against his former, long-time personal assistant), initiated by one of the debtor's alleged creditors, involving: (a) what appears to have been an intentional concealment, then destruction, of electronically stored financial records of the debtor; and (b) a request for various sanctions against each of the two individuals in connection with same. The facts are egregious. The analysis regarding what sanctions may be procedurally and legally appropriate, with regard to each of the two individuals, is somewhat complicated.

The two individuals involved are, again, a chapter 7 debtor ("Mr. Corerra" or the "Debtor") and his former personal assistant, Anita Gianardi ("Ms. Gianardi"). The Debtor describes himself as an unemployed divorced father, with no income whatsoever,² raising two sons in a 6,000 Euro-per-month apartment in Paris, France. The Debtor testified that his only form of sustenance, at this point in life, is family loans (mostly from his father).³ Previously, the Debtor was an investment professional, in some form or fashion—raising money or finding investment opportunities for hedge funds and private equity funds. In recent years, the Debtor had a net worth of several millions of dollars, doing business under the following names: L2 Capital Partners, LLC; L2 Capital Management, LLC; L2 Investment Advisors, LLC; SDN Advisors, LLC; Crosscore Management, LLC; Mergent Securities, LLC; LLMN Investments, LLC; Pitanga, LLC; and Baltimore Casino Investments, LLC. Ms. Gianardi worked closely with the Debtor and at least one of his companies, SDN Advisors, LLC, for several years prepetition (first, in an office he maintained in Santa Fe, New Mexico, and then long distance from her home in Colorado).

The Debtor filed bankruptcy in early 2016. An alleged creditor of the Debtor—the New Mexico State Investment Council (the "NMSIC"), a State of New Mexico governmental agency—has been very active in the Debtor's bankruptcy case from the very beginning. The NMSIC is highly skeptical of the Debtor's dramatic and sudden reversal of fortune.⁴ In fact, the Chapter 7 Trustee in this case—while somewhat active—has often deferred to (or simply joined with) the NMSIC in various investigatory activities, since there are no funds, at this point, in the bankruptcy estate and the NMSIC has been economically motivated to pursue all available bankruptcy tools for recovery against the Debtor.

A. Who is the NMSIC?

The NMSIC is a State of New Mexico governmental agency that is responsible for investing public trust funds for the benefit of its citizens under the New Mexico Constitution.⁵ The NMSIC has, since the year 2011, been engaged in certain "pay-to-play" litigation against the Debtor, his father, and others. The "pay-to-play" litigation has yet to go to trial (the bankruptcy court lifted the stay to allow it to proceed to trial many months ago). In the "pay-to-play" litigation, the NMSIC has alleged that the Debtor, through his father Anthony Correra—who was a close friend and political ally of former Governor of New Mexico Bill Richardson—developed business and social relationships with an individual named Gary Bland ("Bland"), who for many years served as the New Mexico State Investment Officer and as a member of the NMSIC. It is alleged that the Debtor exploited his relationship with Bland and others to obtain millions of dollars in fees from investment managers willing to pay for his influence—and his father's—in their pursuit of investments from the NMSIC in their hedge funds, private equity funds, etc.⁶ The Debtor has allegedly admitted that, during Bland's tenure, he received more than $18 million in fees, directly or indirectly, from fund managers, investment advisors and other service providers doing business with the NMSIC. Through the "pay-to-play" litigation, the NMSIC is asserting claims against the Debtor for, inter alia , aiding and abetting Bland's breach of his fiduciary duties and unjust enrichment in connection with the actions taken by the Debtor.

Early on in this bankruptcy case, the NMSIC sought authority to take a Bankruptcy Rule 2004 examination of the Debtor⁷ and his former personal assistant, Ms. Gianardi.⁸ The NMSIC also sought production of certain financial records from each of them in connection therewith. The NMSIC had questions regarding, among other things, certain financial accounts of the Debtor; transfers of funds and alleged loans from family members;⁹ and the validity of the Debtor's claimed exemptions (in particular, in certain IRAs). The bankruptcy court ordered the requested Bankruptcy Rule 2004 examinations to occur.¹⁰

B. The Computer .

During a Bankruptcy Rule 2004 examination of Ms. Gianardi on October 14, 2016,¹¹ Ms. Gianardi unexpectedly testified that she still had possession of a computer (the "Computer") on which she, for many years, had maintained a digital filing system for the Debtor (i.e., she had, for many years, scanned and archived onto the Computer's hard drive financial documents and other information relating to the Debtor's finances—then shredded the original hard copies).¹² Ms. Gianardi also testified that she had simply kept the Computer after she left the Debtor's employ (i.e., the Debtor did not really explicitly give it to her, she just kept it) and that she deleted all of the Debtor's files from the Computer when she stopped working for him (a couple of years before he filed bankruptcy) and now simply used it as her own personal computer.¹³ The NMSIC and the Chapter 7 Trustee immediately surmised that the Computer—even if files had been deleted—could be a Rosetta Stone, of sorts, in understanding the Debtor's financial maneuverings during the past several years. They wanted a forensic expert to examine the Computer's hard drive to determine if the allegedly deleted files of the Debtor could be recovered .

After more than three months of being unable to work out an informal agreement with Ms. Gianardi to provide access to the Computer (and over objections of the Debtor and Ms. Gianardi—whose attorney's fees, it was later revealed, were being paid by the income-less Debtor), the NMSIC filed a motion to compel access to the Computer to facilitate the creation of a forensic image of it, so as to possibly recover the Debtor's documents from it (the "Motion to Compel—Computer").¹⁴ The court later granted the Motion to Compel—Computer and also ordered the appointment of a neutral forensic expert to examine the Computer.¹⁵

C. Cat Pictures and Movies.

In these contested matters, the NMSIC now alleges an intentional, bad faith spoliation of evidence that is utterly eye-popping. As further described herein, the NMSIC alleges that, in December 2016—shortly after Ms. Gianardi's Bankruptcy Rule 2004 examination, and just after discussions collapsed regarding a consensual production of the Computer : (a) someone inserted multiple USB drives into the Computer,¹⁶ (b) then someone using Ms. Gianardi's login information downloaded a "wiping" tool from an internet website onto the Computer to fill unallocated space on the Computer's hard drive—filling some of the Computer's unallocated space with cat pictures and strings of numbers (thus, covering up and making irrecoverable some files that would likely have been retrievable); and (c) then someone using Ms. Gianardi's login information copied 101 movie files (which amounted to 420 gigabytes of data) onto the Computer, in a one-week period, covering most of the hard drive space on the Computer, where deleted files might have remained. The latter two actions essentially overrode the court-appointed forensic expert's ability to retrieve data that might have existed on the space .¹⁷ The court-appointed forensic expert was nevertheless able to find dozens of documents on the Computer relating to the Debtor and his father that were apparently never deleted by Ms. Gianardi and also were never produced by the Debtor or Ms. Gianardi (although they would have been responsive to the bankruptcy court's Bankruptcy Rule 2004 Orders directed at them).

The court held a hearing on June 5, 14, & 19, 2018 on: (a) a Motion for Finding of Contempt and Sanctions Against Anita Gianardi for Violation of 2004 Order and Destruction of Evidence (DE ## 264 & 265) (the "Gianardi Sanctions Motion" or "Contested Matter No. 1—Gianardi");¹⁸ and (b) a Motion Seeking Sanctions Against the Debtor for Spoliation (DE # 263) (the "Debtor Sanctions Motion" or "Contested Matter No. 2—Debtor").¹⁹ The theme of the Gianardi Sanctions Motion is that, while under an obligation to preserve evidence, Ms. Gianardi either allowed documents in her possession on the Computer to be destroyed or actively destroyed them. Similarly, the theme of the Debtor Sanctions Motion is that, while under a duty to preserve evidence, the Debtor either allowed his documents in the possession of his former assistant to be destroyed or aided in their destruction. Specifically, the Debtor failed to take the necessary steps to ensure the information was preserved and, in fact, actively opposed the Trustee's and the NMSIC's efforts to recover the deleted evidence. Because of the Debtor's failure to preserve the Computer and the information it contained, virtually all of the information...