In re Santaella

• Decision Date: 23 October 2002
• Docket Number: No. 00-16366-BKC-RAM.,00-16366-BKC-RAM.
• Citation: 298 B.R. 793
• Parties: In re Juan SANTAELLA, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of Florida

298 B.R. 793

In re Juan SANTAELLA, Debtor.

No. 00-16366-BKC-RAM.

United States Bankruptcy Court, S.D. Florida, Southern Division.

October 23, 2002.

COPYRIGHT MATERIAL OMITTED

Mindy A. Mora, Bilzin Sumberg Dunn Baena Price & Axelrod, L.L.P., Miami, FL, for trustee.

Jay L. Alexander, Baker Botts, L.L.P., Washington, D.C., co-counsel for trustee.

Jeffrey T. Kucera, Ferrell Schultz Carter Zumpano & Fertel, P.A., Miami, FL, for debtor.

ORDER GRANTING TRUSTEE'S MOTION TO COMPEL DEBTOR TO SURRENDER ESTATE PROPERTY

ROBERT A. MARK, Chief Judge.

Most debtors in bankruptcy cases are honest individuals with financial problems requiring and justifying relief under the Bankruptcy Code. Unfortunately, a small percentage of debtors abuse the system by seeking relief from their debts while hiding their assets. The debtor in this case, Juan Santaella (the "Debtor"), fits squarely in this small but dishonest group. As will be evident from the findings and conclusions in this Order granting the Trustee's Motion to Compel Surrender of Estate Property (the "Surrender Motion"), this Debtor has gone to great lengths to hide his assets, failing to disclose, among other things, real estate in Venezuela, a million dollar plus bank account in Switzerland, and his ownership and control of at least two offshore corporations, both with substantial assets. Moreover, reprehensibly, if not criminally, the Debtor attempted to conceal his ownership and control of these offshore corporations by creating, and executing documents in the names of, two individuals who do not exist. The Trustee's diligent and determined investigation uncovered the fraud and the material allegations have been proven at trial. The Surrender Motion is granted.

Factual and Procedural Background

The Debtor filed a voluntary Chapter 7 petition for bankruptcy relief in this Court on July 19, 2000, describing his case as a "No Asset" bankruptcy. In his schedules, the Debtor disclosed various assets — including a home in Florida, several small bank accounts in Florida and Venezuela, and the shares of Valcorp Securities — each of which he claimed as exempt. May 8, 2002 Trial Exhibit 4 (hereafter "Exhibit__"). Shortly thereafter, at the Section 341 Meeting of Creditors, the Debtor unequivocally — and, it turns out, falsely — testified that he had included in his schedules all assets throughout the world in which he had an interest. Exhibit 102.

The Trustee sought substantial Rule 2004 discovery from the Debtor. In response to the Trustee's Rule 2004 notice in May 2001 for the disclosure of all financial accounts and all corporations in which the Debtor has held any legal or beneficial interest (Exhibit 6), the Debtor objected, claiming through his attorney that he had "already made full, complete, and repeated disclosure under oath of all assets that he, or companies in which he holds or held a controlling interest, owns or has owned during any relevant period of time." Exhibit 7. The Debtor thereafter filed a motion for protective order, asserting that his "compliance and cooperation have been exemplary", that he had "disclosed every asset in which he has a scintilla of an interest," and that there was nothing left to disclose. Docket Entry 124 at 8, 12.

In response to the Debtor's motion for protective order, the Trustee alleged — based in part on forensic handwriting analyses — that the Debtor was concealing his ownership of at least two offshore companies — Santex, N.V. ("Santex") and Jaandsons Corporation ("Jaandsons") — through use of the aliases of "Hans Bauer" and "Jan De Vries." Docket Entries 126 & 128 at 11-14 & Tab 13. During the ensuing discovery hearing before Visiting Judge Thomas Utschig, the Debtor denied those allegations, testifying under oath that "Hans Bauer" and "Jan De Vries" were not aliases and that he had never signed either name. Exhibit 117B. Thereafter, on November 2, 2001, in response to "the (latest) subpoena recently served on Mr. Santaella," the Debtor provided the Trustee with three declarations purporting to be signed by "Hans Bauer" and "Jan De Vries." Exhibit 123. These purported declarations aver that "Hans Bauer" and "Jan De Vries" had signed all documents relating to Santex and Jaandsons on which their signatures appear, and that both companies were believed to belong to the Debtor's mother. Id. The Debtor also provided an unsworn statement, purportedly signed by his mother, asserting (i) that Santex belonged to her husband Hector Santaella and, upon his death, became hers; (ii) that she created Jaandsons; (iii) that neither Santex nor Jaandsons has ever belonged to the Debtor; and (iv) that "Hans Bauer" and "Jan De Vries" are known to her, and assist her in the management of Santex and Jaandsons. Id.

In early February 2002, the Trustee sought emergency ex parte relief in a motion entitled Ex Parte Motion for Relief from Debtor's Asset Concealment and Other Misconduct (the "TRO Motion"). The TRO Motion was supported by substantial evidence that the three "Hans Bauer" and "Jan De Vries" declarations had been falsified; that the Debtor was, in fact, using the aliases of "Hans Bauer" and "Jan De Vries" to conceal assets; that the Debtor was concealing documents evidencing his financial affairs at his Valcorp Securities office; and that the Debtor had not disclosed approximately $1 million that he owned in a numbered Swiss account on the petition date, Account Number 230'086 WRI at Darier Hentsch & Cie in Switzerland (the "Swiss Account"). Based on the Trustee's showing, on February 11, 2002, the Court entered its Order Granting Ex Parte Motion for Relief From Debtor's Asset Concealment and Other Misconduct (the "Ex Parte Order") (Docket Entry 156). The Ex Parte Order authorized the Trustee to obtain access to the Debtor's business premises for the purpose of obtaining copies of documents, records and computer information. The Ex Parte Order allowed notice of such relief to be withheld from the Debtor and Debtor's counsel until access to the premises was accomplished. Finally, the Ex Parte Order set a show cause hearing as to why the debtor should not be held in civil contempt for failing to disclose assets.

Pursuant to this Court's authorization, the Trustee conducted an inspection of the Debtor's offices on February 11, 2002. Much of the evidence on which this Court now relies was obtained during that inspection. Thereafter, at the show cause hearing held on February 25, 2002, the Debtor accepted the Trustee's proffer that the Swiss Account contained at least $1,130,003 on the petition date. The Debtor and his wife granted a mortgage on their Florida homestead to secure full repayment of those funds to the estate. During the show cause hearing, the Trustee also advised the Court that documents obtained during his surprise inspection of the Debtor's offices confirmed that the Debtor owns Santex and Jaandsons, and that both of those entities possess valuable assets. To provide the Debtor an opportunity to meet the Trustee's allegations, the Court directed the Trustee to file a separate motion against the Debtor requesting that he surrender estate property.

The Court's directive at the show cause hearing prompted the March 6, 2002 filing of the Surrender Motion presently before the Court. The Surrender Motion seeks an order directing the Debtor, inter alia, to (i) surrender a Caracas, Venezuela residence by the name of Residencias Jardin Los Granados ("Residencias Jardin"); (ii) surrender ownership of Santex, Jaandsons and their holdings; (iii) provide an accounting of the financial and operational activities of all such companies from January 1, 1994 to the present; and (iv) actively support the Trustee's effort to obtain information from third parties regarding estate assets. In response to the Surrender Motion, the Debtor (i) admitted ownership of Residencias Jardin, but claimed that it was exempt because he owned it with his wife as tenants by the entireties; (ii) failed to contest any of the Trustee's factual allegations, and (iii) objected to the Trustee's use of a turnover motion, rather than an adversary proceeding, to recover estate assets from the Debtor. This Court denied the Debtor's procedural objection in its April 29, 2002 Order Overruling Procedural Objection to Motion to Compel Surrender et al., and scheduled an evidentiary hearing for May 8, 2002.

The Court conducted an evidentiary hearing on May 8, 2002 on the Surrender Motion. The Court has fully considered the evidence, including the exhibits introduced into evidence¹ and the testimony and credibility of the witnesses. The Court has also considered the arguments of counsel at trial and the arguments embodied in each side's proposed findings of fact and conclusions of law submitted after the hearing.

Summary of the Evidence

At the May 8th evidentiary hearing, in addition to several document custodians and foundational witnesses, the Trustee called five substantive witnesses:

1. The Debtor, Juan Santaella — The Debtor invoked the Fifth Amendment privilege against self-incrimination as to all of the factual issues in the Surrender Motion, and to all questions regarding his personal preparation of the documents recovered by the Trustee from his office files.

2. Linda Hart — Ms. Hart, a forensic document examiner, offered expert testimony that the purported signatures of "Hans Bauer" and "Jan De Vries" on the documents that she reviewed (except for the "Hans Bauer" and "Jan De Vries" declarations) were written by the Debtor. She testified that she reached this conclusion with "the highest level of certainty." May 8, 2002, Transcript at page 79 (hereafter "Tr. at ___"). She also testified that the purported signatures of "Hans Bauer" and "Jan De Vries" on the three notarized declarations were actually what the experts call "drawings" made by someone attempting to simulate the Debtor's "Hans Bauer" and "Jan De Vries" signatures.

3. Gonzalo Santana — Mr....