In re Ozey, Bankruptcy No. 93-04157-W. Adv. No. 94-0113-W
| Decision Date | 08 August 1994 |
| Docket Number | Bankruptcy No. 93-04157-W. Adv. No. 94-0113-W,94-0115-W and 94-0177-W. |
| Citation | 172 BR 83 |
| Parties | In re Erhan OZEY, Debtor. Margaret Lynn KEELING, Plaintiff, v. Erhan OZEY, Defendant. COLUMBIA DEVELOPMENT CORPORATION, Savannah Investment Company, and Lee A. Keeling, Plaintiffs, v. Erhan OZEY, Defendant. Joseph Q. ADAMS, Trustee, Plaintiff, v. Erhan OZEY, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Oklahoma |
Steven J. Adams, Tulsa, OK, for trustee.
Phyllis A. Dewitt, Tulsa, OK, for Margaret Lynn Keeling.
Steven K. Balman, Tulsa, OK, for Columbia Development Corp., Savannah Investment Co. and Lee A. Keeling.
J. Philip Adamson, Tulsa, OK, for defendant Erhan Ozey.
The above-styled adversary proceedings under 11 U.S.C. § 727(a) were consolidated for trial. Trial was held on July 11, 12, 13 and 19, 1994. At trial, the following parties and attorneys appeared: Joseph Q. Adams, Trustee, and his attorney Steven J. Adams; Margaret Keeling, plaintiff, and her attorney Phyllis A. Dewitt; Steven K. Balman, attorney for plaintiffs Lee Keeling, Columbia Development Corporation and Savannah Investment Company; and defendant Erhan Ozey and his attorney J. Philip Adamson. After trial, the matters were taken under advisement. Upon consideration of the record herein, the Court, pursuant to F.R.B.P. 7052, now finds, concludes, and orders as follows.
These actions involve matters of mixed fact and law, wherein it is sometimes difficult to separate "Findings of Fact" from "Conclusions of Law." The Court recites evidentiary facts, comments on the weight of evidence and credibility of witnesses, and determinations of mental state, in its "Findings of Fact;" and relates such matters to the appropriate statutes in its "Conclusions of Law."
Erhan Ozey ("Erhan;" "debtor") is the son of Turkish parents, namely Dundar Ozey ("Dundar") and Dundar's first wife Necla Ozey ("Necla"). Dundar was a businessman, majority stockholder and chief executive officer of a Turkish corporation known first as Ticaret and later as Ersan Makina Corporation ("Makina Corp."). Makina Corp. has produced substantial sums of money for its owner and CEO.
Erhan was raised in Turkey, but there attended an English-and-Turkish-speaking school and was bilingual in English and Turkish when he graduated from high school. In 1970, Erhan traveled to the United States for his college education, and enrolled at the University of Oklahoma. He earned two degrees, a bachelor's degree in petroleum engineering, awarded in 1972, and a master's degree in chemical engineering, awarded in 1975. During this time, he married Funda Ozey ("Funda"), herself a Turkish student at the University of Oklahoma who majored in English literature. After graduating from college, Erhan worked in the United States for Cities Service Company in the petroleum and chemical engineering fields. In 1980, Erhan left Cities Service Company and went to work for Lee Keeling and Associates Company, whose principal was Lee Keeling ("Keeling"). Erhan developed special expertise in computer programming and statistics unique to the oil industry.
In July 1983, Erhan divorced Funda. In April 1984, Erhan married Keeling's daughter Margaret ("Margaret"). From 1984 through 1991, Erhan conducted various business ventures involving Keeling and Margaret regarding oil, leather, and yachts.
Regarding oil: In 1984, Erhan and Keeling formed two new corporations, Concepts International Corp. ("Concepts I") and Concepts Development Company ("Concepts II"). Lee Keeling and Associates Company owned Concepts I, which in turn owned Concepts II. Erhan became president and chief operating officer of Concepts I and II. The Concept companies were in the business of creating and selling computer software and services. The Concept computer programs concerned oil and gas operations, and were designed to be used by speakers of English. In 1986, Keeling, Margaret and Erhan formed a third new business entity, named Atnas Resources, Inc. ("Atnas Inc."), whose business was oil and gas exploration and production. So far as appears from this record, Concepts I and II and Atnas Inc. were all inactive by the end of 1991.
Regarding leather: In 1988, the Keeling interests and the Ozey family joined forces to conduct international trade in leather goods. Erhan and his father-in-law Keeling formed a corporation called Anatolia Inc., which later changed its name to Emstar USA, and is hereinafter called "Emstar Inc." Erhan and his natural parents Dundar and Necla formed a Turkish corporation, Ersan Deri ("Deri Inc."). These entities dealt with each other according to the following pattern (whose occasional variations are not material here). Emstar Inc. would obtain money from Keeling and some of Keeling's other business entities, in particular Columbia Development Corporation ("Columbia Corp.") and Savannah Investment Company ("Savannah Co."). Emstar Inc. would advance this money to Deri Inc. Deri Inc. would use the money to buy unworked leather, and would manufacture it in Turkey into finished leather goods. Deri Inc. would then transfer the finished goods to Emstar Inc., which would market them in the United States. From 1988 through late 1991, Keeling and his affiliates Columbia Corp. and Savannah Co. advanced at least $6 million to Emstar Inc., which in turn advanced it to Deri Inc. The value of goods which Deri Inc. manufactured and shipped in return was much less — around $2.6 million less. The deficiency is said to have been caused by errors of judgment, such as making extensive purchases of pigskin which Deri Inc.'s Muslim leather-workers refused to touch. Emstar Inc. never showed a profit. It did show an account receivable due to it from Deri Inc. in the amount of $2.6 million. On June 1, 1991, Erhan executed (on Deri Inc.'s stationery) a document titled "Agreement and Waiver," which purported to convey to Necla any interests Erhan might have in property in Turkey — an act, not only of filial devotion, but of self-interest in the face of impending financial adversity. In November 1991, Keeling and his affiliates decided to cut their losses. After negotiation and compromise, these losses were set at $1 million; Emstar Inc. acknowledged its debt in that amount to Keeling, Columbia Corp. and Savannah Co.; and such debt was guaranteed by Erhan personally.
Regarding yachts: Dundar maintained one or more yachts, which he "documented i.e. titled and registered in the United States in order to avoid a 150-160% tax imposed on Turkish yachts in Turkey, ensure safer and easier travels in the Mediterranean and avoid disclosure of his sources of income to Turkey." One of these yachts, valued at $500,000 to $800,000, was named the "Ersan." In 1989, Dundar and son Erhan incorporated Ersan Resources, Inc. ("Ersan Inc.") to act as corporate owner of the yacht "Ersan." The company's original stockholders were Dundar, as minority stockholder, and Erhan's wife Margaret, as majority stockholder. The yacht was berthed in Turkey; and Margaret gave Dundar a power of attorney which effectively lodged control of the yacht in Dundar. This arrangement "was satisfactory at the time to all parties involved." But in November 1991, Dundar was hospitalized and was temporarily unable to manage his business affairs. He gave a power of attorney to his wife Necla, who used it to transfer Dundar's interest in Ersan Inc. to their son Erhan. Dundar did not approve. Neither his wife nor his son were welcome to meddle with his yacht.
In January 1992, Margaret and Erhan were divorced. The divorce decree required Erhan to make various payments in property division and for the support of Margaret and her two children by Erhan; and awarded Erhan all interest in and to Atnas Inc., Emstar Inc., and Ersan Inc.
In March 1992, Erhan as principal of Atnas Inc., Emstar Inc. and Ersan Inc. caused these entities to rent office space in the Kensington Towers, a large office building in Tulsa, Oklahoma. Atnas Inc. was inactive. Ersan Inc. held a valuable but unremunerative and unliquidated property (the yacht) whose upkeep cost money — there were berthing and maintenance expenses, and an insurance premium of $7,500 per year which Erhan paid from his personal funds (whose source will be discussed below). Emstar Inc. had been active but never profitable, and was now deeply in debt to Keeling and his affiliates. By August 1992, Emstar's business had so far declined that Erhan let go all of its employees, save himself and one Robin Hoel ("Robin"). By the end of 1992, Emstar had ceased doing any new business. Rent due on the Kensington Towers leases was paid by Erhan from his personal funds (whose source will be discussed below). Books and records for these corporations had been kept in adequate detail until about this time; but thereafter, corporate record-keeping became inadequate and uninformative.
Although his businesses were failing and his Turkish property had been conveyed to his mother, Erhan had a source of income. Late in 1991, Necla began providing Erhan with an allowance of $5,000 to $15,000 per month, with additional allowances for special purposes. According to Erhan, these cash allowances were "gifts" to the extent of $5,000 per month and "loans" to the extent greater than $5,000 per month. Erhan himself determined how the money "given" or "loaned" to him by Necla should be spent. Necla's advances to Erhan have continued from late 1991 to the present. They did not terminate, or even much diminish, when Necla and Dundar divorced late in 1992. According to Erhan himself they total more than $2.8 million.
Some of this money was used for Erhan's ordinary living expenses. Some of it was used to pay the rent on the Kensington Towers office space, and for other business purposes. In December 1992, $77,000 of it was used to make a down payment on a $277,000 home which Erhan bought at...
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