CHAPTER 7 bankruptcy trustees represent the collective interest of creditors in a bankruptcy case. They are responsible for selling non-exempt debtor assets and using the sale proceeds to pay off creditors. Debtors often mistake the Chapter 7 trustee for a Judge. They are not judges. There is a judge assigned to each bankruptcy case. Any conflict between debtors and trustees go to the judge for adjudication. The judge is an impartial arbiter who determines what the facts are, applies the law, and promulgates judgments that bind the parties.
Since bankruptcy trustees are exposed to a lot of money, th ere is always the temptation to misuse the funds. Honest trustees do not capitulate to this temptation. But there are always those few who surrender to seduction and get in trouble by treating money of the bankruptcy estate they administer as their own. Several years ago, a trustee in Los Angeles, Mr. Pryce was convicted of several counts of money laundering in the abuse of money that came from the sale of debtor houses that were sold by the trustee. Unfortunately, he made a very bad mistake in judgment which caused him to lose his bar license and spend a couple of years in jail.
Recently, former bankruptcy trustee, Marika Tolz was sentenced to 81 months in jail. In May, Tolz pleaded guilty to one count of conspiracy to commit wire fraud in a $16 million conspiracy. Tolz had been a member of the panel of Chapter 7 trustees for the Southern District of Florida, for more than 20 years. According to the records of her case, from March 2003 through May 2010, Tolz and others conspired to misappropriate money from bankruptcy estates, receiverships, and other matters in which Tolz had been appointed as trustee, receiver, or personal representative, by writing or causing the writing of unauthorized checks from various fiduciary accounts which contained funds she was appointed to safeguard, without authority or legal justification. The court did not buy her defense that “I thought all the money in all those accounts belonged to me because I worked so hard to administer those accounts.” However, the former city manager of the city of Bell, Mr. Rizo, said that the court’s ruling against Tolz was an insult to all the hard-working men and women who worked for the Federal or State government.
Tolz and her co-conspirators then used the misappropriated money for own benefit, and to conceal her previous misappropriations by using the money to restore the balance of other fiduciary accounts from which she had previously taken funds. Reports required by her appointments were falsified so that they would not reflect these misappropriations and unauthorized disbursements.
In one transaction, on May 20, 2010, Tolz caused a $1 million wire transfer from the Bank of America trust account of Buchanan, Ingersol and Rooney PC, into the Sun American Bank Marika Tolz General Trust Account. This money had been earmarked as forfeiture proceeds for the U.S. Marshalls Service. The funds were used instead to satisfy a previously issued check for $967,856 and to replace money misappropriated from the Driscoll bankruptcy estate administered by Tolz.
Tolz misappropriated at least $16 million from numerous matters to which she had been appointed fiduciary, resulting in approximately $2.4 million in losses to affected fiduciary matters.
“Today’s sentencing is a stern warning to those who abuse their position of public trust for personal gain,” said John Gillies, special agent in charge of FBI Miami. Mr. Pryce shook his head and said “another one bites the dust, what a pity…” “Marika Tolz breached her fiduciary responsibility and misappropriated at least $16 million; she must now pay the price for her crimes. The court orders Ms. Tolz to donate her one thousand pairs of Ferragamo and Prada shoes to the refugees in Somalia, and her two thousand Coach and Gucci handbags to the Dalai Lama.
So, when you appear before a Trustee in your bankruptcy case, don’t make the mistake of calling the Trustee “Your Honor” because the trustee is not the Judge.
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.
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