Schwyhart Case Creates Work for 16 Lawyers.
The headcount of lawyers involved in the case has climbed to 16 since Schwyhart and his wife, Carolyn, moved from Rogers to Dallas last year and filed bankruptcy.
Alex Schwyhart, accused of having helped his father hide assets from creditors, has stepped into the case as a creditor himself with a nearly $4.9 million claim.
Alex Schwyhart's Southwest Star Capital is among a group of shadowy limited liability companies that have entered the bankruptcy case with financial claims from old debt and judgments tied to loans backed by Bill and Carolyn Schwyhart's personal guarantees.
Sprinkled among the controversial creditors are limited liability companies bearing Latin monikers such as Recipio ("to take back") and Purgo ("to cleanse"), which the bankruptcy trustee and others believe are shams.
They believe Bill Schwyhart wove these corporate veils with the aid of his son to fend off creditors like Brian Ferguson of Rogers. Ferguson and the bankruptcy trustee have leveled accusations of fraudulent transfers and false oaths against Bill and Carolyn Schwyhart.
In court filings, Ferguson claims that reasonable grounds exist for reporting the allegations to the U.S. attorney for the Northern District of Texas for potential criminal investigation into the conduct of Bill and Carolyn Schwyhart, Alex Schwyhart and anyone else who knowingly filed a false claim on their behalf.
Ferguson renewed a debt collection campaign last year against Bill Schwyhart that coincided with the couple's move to Texas. His efforts attracted an interesting cast of would-be creditors trying to stake claims.
Here is a rundown of the latest developments with the players:
Bill and Carolyn Schwyhart
Legal Representative: Seth Moore of Condon Tobin Sladek Thornton, Dallas Creditor claims against the Schwy-harts total more than $82.2 million since the couple filed Chapter 7 in Dallas 11 months ago. Bill Schwyhart's chief antagonist, Brian Ferguson, continues to raise questions of bankruptcy fraud involving the couple's veiled ownership of a 9,484-SF mansion in Rogers and more.
How could Schwyhart be directly involved in deciding where the proceeds from a 2013 settlement were sent and yet not know anything about the recipients?
The once-secret settlement encompassed the grand home, more than $9.7 million and the transfer of millions more in judgments against the Schwyharts to benevolent limited liability companies.
What's with the mystery landlord who allowed the Schwyharts to live rent-free and with utilities paid as caretakers of their former residence in the gated Pinnacle Country Club development?
Ferguson claims it's part of an elaborate scheme to hide assets from creditors, including $3.2 million in cash from the settlement.
Made public in February, the details of the settlement were shrouded by confidentiality agreements until the intervention of the U.S. trustee for the Department of Justice and the dogged collection efforts of Ferguson.
CHP LLC and Mudcat LLC, led by Brian Ferguson, Rogers
Legal Representative: Ferguson and John Leininger of Shapiro Bieging Barber Otteson, Dallas
CHP holds a claim against Schwyharts stemming from a $222,000 judgment purchased from Regions Bank of Birmingham, Alabama. Mudcat holds a claim against the Schwyharts in connection with a $326,376 judgment acquired from Chambers Bank of Danville.
Among CHP's collection efforts is discovering what happened to $3.2 million from the 2013 settlement orchestrated by Schwyhart after it left the trust account of Fayetteville attorney Stanley Bond.
Last November, in a bankruptcy procedure called a 2004 exam, Bond told Ferguson he couldn't recall for certain where the money was sent.
CHP followed that up by serving Bond with a subpoena on March 8 to produce bank statements, checks and wire transfer information related to the Schwyhart settlement money that flowed through his trust account.
Bond's response: "No such documents are found after diligent search."
"Clearly, it is within Mr. Bond's power to call the bank and ask for the documents to be produced," Ferguson said in his May 24 motion to compel. "Thus, production of the subpoenaed documents is within his control."
Ferguson asked for the name of the bank where the nearly $3.2 million flowed from so he could subpoena the information from the financial institution. Bond won't disclose it.
Southwest Star Capital LLC, led by Alex Schwyhart
Legal Representatives: Melissa Hayward of Hayward & Associates, Dallas; and Joshua Mostyn of Mostyn Prettyman, Bentonville
Southwest Star Capital filed a claim of nearly $4.9 million from a judgment purchased from General Electric Capital Corp. The judgment against Bill and Carolyn Schwyhart was purchased by their son's company on May 11, 2015.
But assignment of the judgment to Southwest Star wasn't filed of record until April 8, 2019. And the public claim was filed with the Benton County Circuit Clerk and in the Schwyhart bankruptcy case on the same day.
The tandem filings were made on behalf of Southwest Star by an attorney friend of the Schwyhart family, Joshua Mostyn. In the four years between buying the judgment and filing it in the Schwyharts' bankruptcy case, their son's company took no action to collect.
In its challenge of the Southwest Star claim, CHP noted that despite close ties to the Schwyharts and his lack of experience representing creditors in bankruptcy, "Mr. Mostyn wants this court to believe he is representing a true creditor filing a claim in the bankruptcy estate of his late mother's best friend. Such a scenario rings hollow, and the disputed claim should be heavily scrutinized by this court."
In its discovery, CHP found that Mostyn's law firm had received checks from Carolyn Schwyhart written on the HMG Investments bank account, and the Mostyn Prettyman firm's trust account has paid expenses on the 9 Clubhouse Drive mansion, allegedly owned by Pinnacle Villa and cared for by the Schwyharts.
Among the most recent payments made was a trust account check covering the home's annual property owners association fee of $2,500 on Feb. 28, 2018. Curiously, no property taxes have been paid on the house since CHP launched its collection efforts last year.
CHP LLC, through Ferguson, filed a motion for contempt on May 3 against Mostyn for refusing to comply with a subpoena for documents related to the Schwyharts.
The subpoena also covers documents related to several limited liability companies that Ferguson believes are alter egos of the Schwyharts: Recipio Investments Strategic Fund I, Pinnacle Villa and HMG Investments.
Mostyn says he can't comply with the subpoena because he owes a duty of attorney-client privilege to a client who provided funds for the house with six checks paid into the trust account of Mostyn's law firm and eight checks from the trust account paying expenses on the house.
That unidentified client, Mostyn says, is not a party to the Schwyharts' bankruptcy.
Ferguson is unpersuaded. He claims it is highly likely the Schwyharts were the ones paying these bills at 9 Clubhouse Drive and were using Mostyn as a conduit to keep their fraud under wraps.
In an April 24 email response to Ferguson, Mostyn said he was dutybound to not reveal information relating to representation of a client unless he had the client's informed consent.
"I'm unwilling to waiver on my ethics even though you threaten me with a contempt action," Mostyn wrote.
Mostyn also suggested Ferguson's collection efforts were over the line and could subject him to disciplinary action.
"You are abusing the discovery process for an improper purpose by making an allegation and then using discovery to try to find a factual basis on which to support the initial allegation. You're doing it backwards. This is what courts refer to as a fishing expedition. It is sanctionable."
Pinnacle Villa LLC, disputed owner of the 9 Clubhouse Drive home, led by Harmic Davidkhanian of London, England, a classmate of Alex Schwyhart at the London School of Economics
Legal Representatives: James Billingsley of the Polsinelli firm, Dallas; and Jeffrey Fletcher of Kutak Rock, Fayetteville
Through discovery, CHP uncovered that Carolyn Schwyhart paid Fayetteville attorney Stanley Bond to form Pinnacle Villa with a corporate American Express credit card issued to HMG Investments.
Questioned by the U.S. Trustee for the Department of Justice, the Schwyharts admitted owning and controlling HMG Investments through a web of limited liability companies. However, they also list HMG Investments as a creditor owed $490,000. Since July 2014, the couple has spent more than $600,000 that flowed into HMG's bank account from TWG Resources, controlled by Bill Schwyhart's son, Alex.
Bond, a corporate representative for Pinnacle Villa, described Alex as the property manager for the LLC. Alex Schwyhart also paid property taxes on 9 Clubhouse Drive using checks written on a TWG account.
Pinnacle Villa has "nothing to do with me or my family members," said Bill Schwyhart during the creditors meeting on Aug.14, 2018.
Trustee of the Schwyharts' bankruptcy estate, Scott Seidel of the Seidel Law Firm, Piano, Texas
Legal Representative: Seidel and James Baxter of the Baxter Law Firm, Benton
The trustee is beginning efforts to strip away Pinnacle Villa's ownership claim on the Rogers mansion and make the million-dollar property part of the Schwyhart's bankruptcy estate.
According to the trustee, the limited liability company has no bank accounts, has never filed income tax returns and is nothing more than an alter ego of its former occupants: Bill and Carolyn Schwyhart.
The Schwyharts didn't receive any compensation or credit toward debt for arranging the transfer to Pinnacle Villa of the luxurious residence valued at nearly $1.9 million, the trustee also points out.
"It just shows this wasn't a legitimate transaction and adds to the cloud of other illegal dealings here," Baxter said. "The house is really, really Bill's, and they're just trying to hide it."
Travis Story, attorney for Schwyhart Holdings LLC
Legal Representative: Daniel Tostrud and Sara Witmeyer of Cobb Martinez Woodward, Dallas
CHP is trying to question Story in a 2004 exam, and the bankruptcy trustee is trying to get Story to turn over all his records on Schwyhart Holdings.
Story has resisted both without a court order.
Recipio Investments Strategic Fund I LLC, originally owned by Alex Schwyhart and later by his former classmate, Harmic Davidkhanian
Legal representative: Kyle Unser and Jeffrey Fletcher of Kutak Rock, Fayetteville
Recipio Investments is trying to quash a subpoena from CHP to produce documents related the receipt of any money from the trust account of Stanley Bond's law firm and any subsequent transfer of that money. The subpoena is searching for the destination of $3.2 million that flowed into Bond's trust account as part of Schwyhart's 2013 settlement.
Billing invoices for Recipio legal work by Bond and credit card records for HMG Investments from four years ago indicate that Carolyn Schwyhart paid the bill.
TWG Resources LLC, led by Alex Schwyhart Sterling Management Co., led by Alex Schwyhart and Kim Steerforth, daughter of Carolyn Schwyhart
Legal representative: Melissa Hayward of Hay ward & Associates, Dallas
TWG Resources is trying to quash a subpoena by Ferguson's CHP for documents related to money flowing from the Bond Law Firm. The subpoena is linked with the search for where nearly $3.2 million went from the once-secret Schwyhart settlement.
CHP claims a $10,000 debt held by Sterling Management secured by Bill Schwyhart's pickup truck is a charade. Under questioning, Schwyhart admitted never making a payment on the loan bearing a 21% interest rate and that no demand for repayment had ever been made.
CHP also claims Sterling Management waited too long to oppose CHP's motion for a summary judgment voiding the lien on the truck.
Magistrate LLC, led by Harmic Davidkhanian
Legal Representative: Jeffrey Fletcher of Kutak Rock, Fayetteville
The claim of nearly $14.2 million against the Schwyharts is tied to six promissory notes acquired from Great Southern Bank of Springfield, Missouri, by Alex Schwyhart's former classmate, Davidkhanian.
The claim is disputed by Ferguson as a false claim by a corporate facade of Schwyhart that also is pursued beyond the statute of limitations.
Purgo Capital LLC, led by unknown Legal Representatives: Raklee Patel and Annmarie Chiarello of the Winstead firm, Dallas; and Jeffrey Fletcher of Kutak Rock, Fayetteville
Purgo holds a $14.5 million judgment that J.B. Hunt LLC landed against Schwyhart in March 2011.
An agreement to assign the judgment to Purgo was part of the once-secret 2013 settlement. The judgment wasn't assigned from J.B. Hunt LLC to Purgo Capital until April 23, 2018. Ferguson and the bankruptcy trustee have challenged the validity of Purgo's claim.
By George Waldon
Caption: Bill Schwyhart has tried to distance himself from a string of limited liability companies where he directed judgments as part of a once-secret settlement. He and his wife also profess no knowledge of the LLC that claims ownership of their former mansion, although she paid the legal tab for its formation. [AP PHOTO/BETH HALL]
Caption: Stanley Bond
Caption: Travis Story
Please Note: Illustration(s) are not available due to copyright restrictions.
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|Date:||Jun 10, 2019|
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