In re Financial Federated Title & Trust Inc.
| Decision Date | 16 November 2001 |
| Docket Number | No. 99-26616-BKC-RBR.,Adversary No. 00-2465-BKC-RBR-A.,99-26616-BKC-RBR. |
| Citation | 273 B.R. 706 |
| Parties | In re FINANCIAL FEDERATED TITLE & TRUST, INC. a/ka Asset Security Corp. a/k/a Viatical Asset Recovery Corp., a/k/a Quad-B-Ltd., a/k/a American Benefits Services Inc., Debtor. John W. Kozyak, Chapter 11 Trustee, Plaintiff, v. Raphael Levy a/k/a Ray Levy, and Roseann M. Levy, Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
Arthur H. Rice, Lisa M. Schiller, Robert F. Reynolds, Rice, Robinson & Schiller, Miami, FL, Representing Trustee John W. Kozyak.
This matter came on before the Court on October 10, 2001, upon the Plaintiff, John W. Kozyak ("Kozyak"), as the Plan Administrator for the confirmed Chapter 11 Plan of Financial Federated Title & Trust, Inc. ("FinFed"), American Benefits Services, Inc. ("ABS") and their various alter egos (collectively with FinFed and ABS the "Debtor"), Motion for Summary Judgment on All Counts of Complaint (the "Summary Judgment Motion") against Defendants Raphael Levy a/k/a Ray Levy ("Ray Levy") and Roseann M. Levy ("Roseann Levy") (collectively, the "Defendants"). The Court having reviewed the Summary Judgment Motion and all exhibits attached thereto, and all affidavits in support thereof as more fully described herein, as well as Ray Levy's Memorandum in Opposition to John W. Kozyak, Plan Administrator's Motion for Summary Judgment on All Counts of Complaint (the "Ray Levy Response") (C.P.# 72) with supporting affidavits and Roseann Levy's Opposition In (sic) Motion For Summary Judgment (the "Roseann Levy Response") (C.P. # 73), the entire court file in these proceedings, having considered the argument of counsel and being otherwise fully advised in the premises, makes the following findings of fact and conclusions of law.
On or about October 5, 1999 (the "Petition Date") an involuntary petition under Chapter 11 of the Bankruptcy Code as filed against ABS.
On or about October 7, 1999 an involuntary petition under Chapter 11 of the Bankruptcy Code was filed against FinFed.
On or about December 27, 1999 this Court entered its Default Final Judgment in adversary number 99-2428-BKC-RBR-A styled Kozyak v. Asset Security Corp. which, among other things, found Asset Security Corp. ("ASC") to be the alter ego of FinFed.
The Bankruptcy Court entered an Order for Relief on or about November 16, 1999 adjudicating FinFed a Chapter 11 Debtor and on or about March 2, 2000 adjudicating ABS a Chapter 11 Debtor.
FinFed and ABS were substantively consolidated pursuant to this Court's Order Granting Substantive Consolidation of Debtor with American Benefit Services, Inc. ("ABS") dated May 17, 2000.
The Office of the United States Trustee appointed Kozyak as Trustee of FinFed on or about October 28, 1999 and the Court approved his appointment on or about November 5, 1999. By virtue of the substantive consolidation, Kozyak serves as the Chapter 11 Trustee for ABS.
On June 20, 2001 the Bankruptcy Court entered its Order Confirming Debtor's Amended Chapter 11 Plan (the "Confirmation Order") in the Debtor's main case. The Confirmation Order provides that Kozyak shall serve as the Debtor's Plan Administrator after the Effective Date and appoints Kozyak as the Plan Administrator as of the Effective Date.
From its inception through the Petition Date, FinFed and its various alter egos, by and through a vast network of companies, insurance agents and financial consultants engaged in the business of soliciting money from investors for the purported purpose of purchasing investments known as viatical settlements.1 However, the solicitation from investors was part of an elaborate Ponzi scheme to defraud, whereby investors were paid solely from funds received from other investors and not from the proceeds of viatical settlements while the principals diverted large portions of the proceeds to various other assets and individuals having nothing to do with viatical investments.
As part of the elaborate scheme, FinFed raised money from investors through various brokerage services, including but not limited to brokers employed by ABS.
Frederick Brandau ("Brandau") was the principal and person in control of FinFed.
Ray Levy was the president, sole shareholder and individual in control of ABS and its participation in the investment scheme.
Ray Levy, directly and through ABS, solicited and obtained investor funds through a network of insurance agents and financial consultants.
On or about August 30, 1999 as a result of this FBI investigation, a grand jury returned a multi-count indictment in Southern District of Florida Case No. 99-8125-CR-Hurley against FinFed, its principal, Frederick Brandau and various other individuals and entities associated with FinFed (the "Criminal Case"). The Defendants were charged with, among other things, violations of Title 18, United States Code, Sections 1956 and 1957, involving fraud and conspiracy. The indictment alleged that the defendants fraudulently obtained investor funds exceeding $115,000,000 through the sales of investments in viatical settlement policies. On May 26, 2000, a Second Superceding Indictment was issued in the Criminal Case, naming additional defendants, including ABS and its principal, Ray Levy, charging these additional defendants with mail fraud, money laundering, and conspiracy to commit both mail fraud and money laundering. On December 14, 2000 a Third Superceding Indictment was issued in the criminal case. Kozyak pled guilty on behalf of FinFed and ASC on May 30, 2000, and judgment of conviction was entered against FinFed and ASC on August 18, 2000.
On August 29, 2000, a jury found Brandau guilty of 43 of the 44 counts asserted against him in the First Superceding Indictment. On January 4, 2001, Brandau was adjudicated guilty and sentenced to fifty-five (55) years in prison.
On March 28, 2001 Ray Levy pled guilty to one count of conspiracy to commit mail fraud and one count of conspiracy to commit money laundering (Counts One (1) and Fifteen (15) of the Third Superceding Indictment)2. He was adjudicated guilty and is awaiting sentencing.
On March 29, 2001 Kozyak pled guilty on behalf of ABS to various counts arising in the Criminal Case. ABS was adjudicated guilty and sentenced on June 15, 2001.
The remaining defendants in the Criminal Case have either pled guilty, have been convicted and are awaiting sentencing.
In 1998 Levy formed an entity known as First R & R Trust ("First R & R"). It is undisputed that Levy was the person in control of First R & R as well as the person with the authority to use the funds of First R & R in the manner he saw fit. It is further undisputed that Levy formed First R & R in order to receive funds from the Debtor rather than Levy receiving such funds directly.
It is undisputed that in the four (4) years prior to the Petition Date, First R & R received a total of $7,797,952.19 which were funds raised by the Debtor in furtherance of the Ponzi scheme and fraudulently transferred from the Debtor to First R & R.3
Sometime in 1996 Levy formed an entity known as U.S. Benefits Services Trust ("U.S.Benefits"). It is undisputed that Levy was the person in control of U.S. Benefits as well as the person with authority to use the funds at his discretion. U.S. Benefits received funds directly from the Debtor.
It is undisputed that in the four (4) years prior to the Petition Date, U.S. Benefits received a total of $4,311,184.99 which were funds raised by the Debtor in furtherance of the Ponzi scheme and fraudulently transferred from the Debtor to U.S. Benefits.4
On or about September 17, 1998, the Defendants purchased real property located at 10540 El Caballo Court, Delray, Florida (the "El Caballo Property").
Jeff Paine ("Paine") was the attorney who closed the purchase on the El Caballo Property. On February 2, 2001, Paine pled guilty to conspiracy to commit mail fraud.
The funds to purchase the El Caballo Property all came from First R & R. The checks to purchase the El Caballo Property were made payable to Paine's Trust account.
The funds transferred from R & R to Paine for the purchase of the El Caballo Property totaled $1,150,000.00.
On September 17, 1998, the time of the purchase of the El Caballo Property, First R & R had a total of $1,309,521.00 in its account. Of this amount, it is undisputed that $977,521.00 are funds that can be traced directly back to the Debtor and $227,000.00 are funds which can be traced directly back to U.S. Benefits.
Of the funds present in U.S. Benefits' account on the days of the transfers to First R & R, approximately 91% of such can be directly traced to the transfers the Debtor made to U.S. Benefits.
When purchased in 1998, the El Caballo Property was titled in First R & R's name. However, on August 26, 1999, just four days prior to the grand jury's handing down of the original indictment in the Criminal Case, two transactions took place. First, First R & R transferred by warranty deed the title to the El Caballo Property to Ray and Roseann Levy individually. Second, the Defendants obtained a mortgage with Washington Mutual Bank in the amount of $700,000.00 which was collateralized by the El Caballo Property and which drained more than half of the equity in the El Caballo Property. Thus, although the El Caballo Property was purchased with funds from First R & R, the property is now owned by the Defendants named herein.
It is undisputed that the Defendants both enjoyed...
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