King Louie Mining, LLC v. Comu (In re Comu)

• Decision Date: 08 July 2014
• Docket Number: ADV. NO. 10-03269-SGJ,CASE NO. 09-38820-SGJ-7
• Parties: IN RE: CENGIZ J. COMU, Debtor KING LOUIE MINING, LLC, KING LOUIE ENTERPRISES, LLC, AND RONALD KATZ, Plaintiffs, v. CENGIZ J. COMU a/k/a CJ COMU, Defendant. DIANE G. REED, TRUSTEE, Intervenor, Co-Plaintiff and Third-party Plaintiff, v. CENGIZ J. COMU, Defendant, and PHYLLIS E. COMU, BERNARD D. BROWN, THE BARCLAY GROUP, INC. AND SUNSET PACIFIC, L.P., Third-Party Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Texas

IN RE: CENGIZ J. COMU, Debtor

KING LOUIE MINING, LLC,KING LOUIE ENTERPRISES, LLC, AND RONALD KATZ, Plaintiffs, v. CENGIZ J. COMU a/k/a CJ COMU, Defendant.

DIANE G. REED, TRUSTEE, Intervenor, Co-Plaintiff and Third-party Plaintiff, v. CENGIZ J. COMU, Defendant,and PHYLLIS E. COMU, BERNARD D. BROWN, THE BARCLAY GROUP, INC.AND SUNSET PACIFIC, L.P., Third-Party Defendants.

CASE NO. 09-38820-SGJ-7

ADV. NO. 10-03269-SGJ

UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

Signed: July 8, 2014

The following constitutes the ruling of the court and has the force and effect therein described.

__________

United States Bankruptcy Judge

CHAPTER 7

FINDINGS OF FACT AND CONCLUSIONS OF LAW IN SUPPORT OF JUDGMENT:

(A) REVOKING DISCHARGE OF DEBTOR, PURSUANT TO 11 U.S.C. § 727(d);

(B) DECLARING CERTAIN PROPERTY TO BE "PROPERTY OF THE ESTATE";

(C) REQUIRING TURNOVER OF CERTAIN PROPERTY TO THE TRUSTEE;

(D) AWARDING MONETARY DAMAGES TO TRUSTEE FOR THE BENEFIT OF THE

ESTATE; AND (E) SEPARATELY AWARDING REASONABLE ATTORNEY'S FEES

AND EXPENSES TO PLAINTIFFS

The above-referenced adversary proceeding ("Adversary Proceeding") was commenced by certain creditors known as King Louis Mining, LLC, King Louis Enterprises, LLC, and Ronald Katz (together, "Plaintiffs"), on September 3, 2010, against the Chapter 7 debtor Cengiz J. Comu a/k/a CJ Comu ("Debtor" or "Comu"), pursuant to which Plaintiffs have initially sought revocation of the Debtor's discharge, under Section 727(d) of the United States Code, 11 U.S.C. §§ 101, et seq. (the "Bankruptcy Code").¹ Specifically, Plaintiffs have sought an order revoking the Debtor's discharge, pursuant to Bankruptcy Code Section 727(d)(1), due to alleged "fraud of the debtor" (based on allegedly undisclosed pre-petition assets and false oaths), and also under Section 727(d)(2), due to the Debtor's alleged failure to report or deliver property of the estate.² Plaintiffs specifically have contended that Comu "procured [discharge] through a fraud upon the Court" by concealing and misrepresenting his pre-petition debts, assets and business interests,and that Comu has orchestrated a fraudulent and ongoing scheme to conceal, transfer, and dissipate property of the estate through domestic and foreign affiliates for the purpose of evading creditors.³ In addition to discharge-revocation, Plaintiffs seek "their reasonable attorney's fees [and] costs of court," as well as any additional "general relief" to which they may be entitled.⁴ Later, Diane G. Reed, the duly appointed Chapter 7 Trustee of the bankruptcy estate of Comu, Bankruptcy Case No. 09-38820-SCJ-7 (the "Bankruptcy Case"),⁵ joined in this Adversary Proceeding as Intervenor, Co-Plaintiff and Third-Party Plaintiff ("Intervenor" or "Trustee") on September 5, 2012. Trustee likewise alleged⁶ fraud and additionally asserted claims for declaratory relief, alter ego, and reverse corporate veil piercing.⁷ Trustee specifically alleged that Third-Party Defendants Barclay Group, Inc. d/b/a The Barclay Group, Inc. ("TBG") and Sunset Pacific, LP ("Sunset Pacific"), are alter egos owned or controlled by Comu, that Comu has used to hinder, delay or defraud Comu's creditors, including, in particular, the Plaintiffs.⁸ Trustee asserted that all property and assets of TBG and Sunset Pacific constitute property of the estate, pursuant to 11 U.S.C. § 541(a)(2)(A), and sought a turnover of "all property and assets" of TBG and Sunset Pacific (in addition to any assets Comu failed to previously deliver to Trustee).⁹ Trustee further sought a judgment against Comu, TBG and Sunset Pacific, jointly and severally, for the value of estate assets that have been sold or otherwise disposed of by Comu.¹⁰ A bench trial was held on March 17-21, 2014. All parties appeared, some in person and some merely through their respective representatives or counsel, and announced ready for trial, by andthrough their attorneys of record. This constitutes the court's findings of fact and conclusions of law, pursuant to Fed. R. Bankr. Proc. 7052. Any finding of fact that is more appropriately considered as a conclusion of law should be considered as such, and vice versa. Bankruptcy subject matter jurisdiction exists in this Adversary Proceeding, pursuant to 28 U.S.C. § 1334(b). The bankruptcy court has authority to exercise bankruptcy subject matter jurisdiction, pursuant to 28 U.S.C. § 157(a) and the Standing Order of Reference of Bankruptcy Cases and Proceedings (Misc. Rule No. 33), for the Northern District of Texas, dated August 3, 1984. The claims at issue in the Adversary Proceeding are statutory "core" matters, pursuant to 28 U.S.C. § 157(b)(2)(A), (E), (J) and (O), with the exception of the alter ego/veil piercing relief requested-which is actually just a remedy. Moreover, to the extent that some non-core claims are involved in this Adversary Proceeding, this court finds that resolution of such claims is inextricably intertwined with resolution of the core matter of: (a) whether the Debtor was entitled to a bankruptcy discharge, and (b) whether there should be turnover of property of the bankruptcy estate. However, in the event of an appeal, should the district court determine that this court lacked Constitutional authority to enter final judgment on all claims, this court asks the reviewing court to treat these findings of fact and conclusions of law as proposed findings of fact and conclusions of law (i.e., a report and recommendation to the district court to be considered de novo by it), and to adopt, revise, or reject, as the district court may deem appropriate, with regard to any non-core claims.

I. FINDINGS OF FACT

A. HISTORY AND CONTEXT

1. The Adversary Parties

1. Plaintiffs King Louis Enterprises, LLC ("KLM") and King Louis Mining, LLC ("KLE") are privately-held Delaware limited liability companies.¹¹ Plaintiff Ronald Katz ("Katz") owns 75% of KLM and 100% of KLE.¹² Plaintiffs are creditors in the Bankruptcy Case.

2. Comu is a Canadian citizen and permanent United States resident, originally from Turkey.¹³ Comu has represented in corporate filings for at least two foreign entities that his usual place of residence is Canada.¹⁴ Comu filed his Voluntary Petition (the "Petition") for bankruptcy relief under 11 U.S.C. § 301 on December 31, 2009 (the "Petition Date").¹⁵

3. On the Petition Date, Comu resided at 5301 Paladium Drive, Dallas, Texas, 75254 (the "Paladium Residence"), which Comu owns without debt,¹⁶ and for which Comu claims a homestead exemption.¹⁷ Comu currently resides at 14873 Oaks North Place, Addison, Texas, 75254 (the "Oaks North Residence").¹⁸

4. Comu holds himself out as an experienced investor and financial consultant who advises corporate clients and investors in a variety of securities-related transactions. Comu has held (and currently holds) numerous executive positions, including President, Chief Executive Officer ("CEO"), and Director in domestic and foreign entities doing business in a wide range ofindustries, including alternative energy and biofuel, financial services, water purification, mixed martial arts ("MMA") sporting event promotion, and commercial real estate, among others.¹⁹

5. Comu is subject to an Order of Permanent Injunction entered in a civil enforcement action brought by the Securities and Exchange Commission ("SEC"), dated November 1, 1989 (the "SEC Injunction").²⁰

6. Third-Party Defendant Phyllis Comu ("Phyllis") is Comu's wife, who resided with Comu at the Paladium Residence on the Petition Date, and currently resides with Comu at the Oaks North Residence.²¹ As of the Petition Date, Phyllis and Comu had been married for approximately ten years, during which time they have resided in Dallas.²² Phyllis is not a joint debtor in the Bankruptcy Case.²³

7. Defendants claim Phyllis owns 98% of Sunset Pacific, and that the remaining shares of Sunset Pacific are owned by Comu (1%) and his brother (1%), Gem C. Comu a/k/a Cem Comu ("Cem Comu").²⁴ Cem Comu is a Canadian citizen who resides in Burnaby, British Columbia, and has at least one address in Istanbul, Turkey.²⁵

8. Multiple addresses have been identified in Dallas, Texas for Sunset Pacific, including 18352 Dallas Parkway, Suite 136-484²⁶ (the "18352 Dallas Parkway Address"); 18208Preston Road, Suite 9314²⁷ (the "18208 Preston Address"); 14180 Dallas Parkway, Suite 508²⁸ (the "14180 Dallas Parkway Address"), 5430 LBJ Freeway, Suite 1200²⁹ (the "5430 LBJ Freeway Address"), 5735 Pineland Drive, Suite 215³⁰ (the "Pineland Address"), and 4505 Ratliff Lane³¹ (the "Ratliff Address").

9. TBG is a Texas corporation that shares or has shared offices with Sunset Pacific at the 18208 Preston Address,³² the 18352 Dallas Parkway Address,³³ and the Ratliff Address.³⁴ TBG is a privately-held financial consulting firm that, among other things, advises companies undergoing "reverse mergers"³⁵ and other corporate transactions.³⁶ Comu maintains indocuments filed with this court, and testified at trial, that the legal name of TBG is "The Barclay Group, Inc." On its company website, TBG alternatively holds itself out as "The Barclay Group, LLC."³⁷ Texas Secretary of State ("SOS") filings indicate that TBG's actual legal name is "Barclay Group, Inc."³⁸ While these inconsistencies are not immaterial, the bankruptcy court need not resolve them for the purposes of this Adversary Proceeding, because the parties, by stipulation, refer to TBG as "Barclay Group, Inc. a/k/a The Barclay Group, Inc."³⁹

10. Comu claims in testimony and court filings that he owns only a one percent (1%) ownership interest in TBG.⁴⁰ Defendants allege that the remaining 99% of TBG is owned either by Third-Party Defendant Bernard D. Brown ("Brown"), a resident of the United Kingdom ("UK"), or by Brown & Lampe PLC ("B&L"), a UK entity.⁴¹

2. Plaintiffs' Collection Efforts Triggered Bankruptcy

11. On July 20, 2006, Plaintiffs Katz, KLM and KLE commenced a New York state court action (the "New York Action") against Comu to recover...