FILED

U.S. Bankruptcy Appellate Panel

of the Tenth Circuit

March 9, 2015

Blaine F. Bates

Clerk

PUBLISH

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE TENTH CIRCUIT

IN RE GEORGE DAVID GORDON,

JR.,

Debtor.

BAP No. NO-14-018

RICHARD A. WIELAND, United

States Trustee,

Plaintiff – Appellee,

Bankr. No. 11-10045

Adv. No. 11-01113

Chapter 7

v. OPINION

GEORGE DAVID GORDON, JR.,

Defendant – Appellant.

Appeal from the United States Bankruptcy Court

for the Northern District of Oklahoma

Submitted on the briefs:

*

Ron D. Brown of Brown Law Firm PC, Tulsa, Oklahoma, for Defendant –

Appellant.

Ramona D. Elliott, Deputy Director/General Counsel (P. Matthew Sutko,

Associate General Counsel, and Cameron M. Gulden, Trial Attorney, with her

on the brief) Washington, D.C., and Samuel K. Crocker, United States Trustee for

Region 20 (Katherine Vance, Assistant United States Trustee, and Paul R.

Thomas, Trial Attorney, with him on the brief), Tulsa, Oklahoma for Plaintiff –

Appellee.

Before NUGENT, KARLIN, and SOMERS, Bankruptcy Judges.

The parties did not request oral argument, and after examining the briefs

*

and appellate record, the Court has determined unanimously that oral argument

would not materially assist in the determination of this appeal. See Fed. R.

Bankr. P. 8019(b)(3). The case is therefore ordered submitted without oral

argument.

BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 1 of 33
SOMERS, Bankruptcy Judge.

Debtor George David Gordon, Jr. (“Gordon”) was formerly a practicing

securities attorney and a certified public accountant, who regularly engaged in

securities investing on behalf of himself, his wife, and his clients. He conducted

business through his solely-owned professional corporation, G. David Gordon &

Associates, P.C. (the “Professional Corporation” or the “PC”), which he had

incorporated for the purpose of providing legal services. In approximately 2004,

Gordon began conspiring with others in a sophisticated scheme to buy

inexpensive stocks, artificially inflate their value, and then sell them to others at a

substantial profit. This “pump-and-dump” conspiracy resulted in the filing of

1

numerous federal criminal charges against Gordon. In turn, the criminal

proceedings resulted in Gordon’s May 2010 securities fraud conviction and his

immediate and continuing imprisonment. The criminal court also imposed fines

and restitution, and ordered the forfeiture of much of Gordon’s property.

Seven months after his conviction and imprisonment, Gordon initiated this

Chapter 7 bankruptcy case, seeking to discharge any and all of his debts that

could be discharged under federal bankruptcy law. The bankruptcy court, after a

trial, denied Gordon a discharge pursuant to 11 U.S.C. § 727(a)(2)(A) and

(a)(4)(A), based on findings that Gordon had transferred and concealed property

2

for the purpose of defrauding his creditors, had knowingly and fraudulently made

false statements in his bankruptcy filings, and had withheld information regarding

his assets and business dealings from the bankruptcy trustee. Gordon appealed

A pump-and-dump scheme treats the investing adage, “Buy low, sell high,”

1

as a mechanism for deceit. The scheme involves “the inflation of stock prices on

the basis of false or fraudulent information (the ‘pump’), followed by the sale of

that stock to unsuspecting investors (the ‘dump’).” See Bankruptcy Court

Memorandum Decision, p.3 n. 4 in Appellant’s Appendix (“Appx”) at 955.

Unless otherwise indicated, all further statutory references in this decision

2

will be to the Bankruptcy Code, which is Title 11 of the United States Code.

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 2 of 33
that ruling to this Court.

3

I. APPELLATE JURISDICTION

This Court has jurisdiction to hear timely filed appeals from “final

judgments, orders, and decrees” of bankruptcy courts within the Tenth Circuit,

unless one of the parties elects to have the district court hear the appeal. An

4

order denying a debtor’s discharge in bankruptcy is a final order for purposes of

appeal. The bankruptcy court’s decision denying Gordon’s discharge was

5

entered on March 31, 2014, and Gordon timely filed his notice of appeal on April

13, 2014. Since neither party elected to have this appeal heard by the district

6

court, this Court is vested with appellate jurisdiction.

II. ISSUES AND STANDARDS OF REVIEW

Gordon raises three issues in this appeal:

7

1. Must a plaintiff asserting continuing fraudulent concealment

under § 727(a)(2)(A) prove that creditors were damaged as a

result of the debtor’s conduct?

This is a legal issue that is reviewed on appeal de novo. De novo review

8

At all times relevant to this appeal, Gordon was married to Amy Gordon

3

(“Mrs. Gordon”). The Gordons cohabited in the family residence until May 2010,

when Gordon was incarcerated. In November 2012, Mrs. Gordon requested relief

from stay in Gordon’s bankruptcy case in order to proceed with a divorce. That

request was granted by the bankruptcy court on December 18, 2012. Nonetheless,

Gordon testified in September 2013 that he and Mrs. Gordon remained married.

28 U.S.C. § 158(a)(1), (b)(1), and (c)(1); Fed. R. Bankr. P. 8002, 8005;

4

10th Cir. BAP L.R. 8005-1.

United States Trustee v. Garland (In re Garland), 417 B.R. 805, 810 (10th

5

Cir. BAP 2009).

Pursuant to Federal Rule of Bankruptcy Procedure 8002(a), a party seeking

6

to appeal an order must file a notice of appeal from that order within fourteen

days of its entry on the docket. FED. R. BANKR. P. 8002(a).

A fourth issue, asserting that plaintiff’s § 727(a)(3) and (5) claims were not

7

considered by the bankruptcy court and are therefore not subject to appellate

review, is uncontested and need not be addressed in this decision.

Diamond v. Vickery (In re Vickery), 488 B.R. 680, 685 (10th Cir. BAP

8

(continued...)

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 3 of 33
requires an independent determination of the issues, giving no special weight to

the bankruptcy court’s decision.

9

2. Was the evidence presented at trial by the plaintiff sufficient to

support the bankruptcy court’s denial of discharge under

§ 727(a)(2)?

“A decision whether to grant or deny a discharge is in the sound discretion

of the bankruptcy court, and a bankruptcy court’s denial of discharge is therefore

reviewed for abuse of discretion.” However, an appellant’s claim that the

10

evidence is insufficient to support the bankruptcy court’s conclusions presents an

issue of fact that is reviewed for clear error. An appellate court must consider

11

the evidence presented to the trial court in the light most favorable to the

prevailing party, especially where the fact finder was, as here, the court rather

than a jury. A finding of fact is “clearly erroneous” only “if it is without factual

12

support in the record, or if the appellate court, after reviewing all the evidence, is

left with a definite and firm conviction that a mistake has been made.” Finally,

13

the trial court’s decision need only be “permissible,” not “correct” and, if

14

(...continued)

8

2013) (interpretation of a statute’s requirements is a legal issue reviewed de

novo).

Salve Regina Coll. v. Russell, 499 U.S. 225, 238 (1991).

9

In re Garland, 417 B.R. at 810 (citation and internal quotation marks

10

omitted).

Id. (citing Farmers Co-op. Ass’n v. Strunk, 671 F.2d 391, 395 (10th

11

Cir.1982); In re BYOC Int’l, Inc., 233 B.R. 176, 1998 WL 780435 at *2 (10th Cir.

BAP 1998) (sufficiency of the evidence is reviewed under a clearly erroneous

standard, and trial court’s decision need not be “correct,” only “permissible”)).

Cowles v. Dow Keith Oil & Gas, Inc., 752 F.2d 508, 510-11 (10th Cir.

12

1985) (such findings are “presumptively correct”).

Id. at 811 (citation omitted).

13

In re BYOC Int'l Inc., 233 B.R. 176, 1998 WL 780435 at *2 (10th Cir. BAP

14

(continued...)

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 4 of 33
plausible in light of the record, is not clearly erroneous even if the reviewing

court would have made a different decision. Thus, “[w]here there are two

15

permissible views of the evidence, the factfinder’s choice between them cannot be

clearly erroneous.”

16

3. Did the bankruptcy court err by denying a discharge under

§ 727(a)(4)(A) based on misstatements and omissions in Gordon’s

bankruptcy filings?

This issue involves consideration of Gordon’s interest in marital assets

under state law, which is reviewed de novo, as well as a challenge to the

17

sufficiency of the evidence supporting the bankruptcy court’s decision to deny a

discharge, which is reviewed for clear error.

III. BACKGROUND

A. The Criminal Proceedings

In 2009, Gordon was charged in a federal court in Oklahoma with

numerous securities laws violations in which he was alleged to have participated

as a principal and co-conspirator. The charges focused on four corporate entities

whose share prices Gordon and his co-conspirators manipulated for their personal

benefit (the “pump-and-dump companies”). In order to manipulate stock prices

18

in the pump-and-dump companies, it was necessary for each company’s stock to

be publicly traded. Manipulating the share prices required circumventing various

(...continued)

14

1998).

Iverson v. Jawort (In re Iverson), 271 B.R. 213, 2001 WL 863444 at *6

15

(10th Cir. BAP July 31, 2001) (unpublished).

Anderson v. Bessemer City, N.C., 470 U.S. 564, 574 (1985).

16

Salve Regina Coll. v. Russell, 499 U.S. 225, 231 (1991) (appellate court

17

reviews determinations of state law de novo).

Additional details of the criminal charges and proceedings may be found in

18

United States v. Gordon, 710 F.3d 1124 (10th Cir. 2013), in which the Tenth

Circuit Court of Appeals affirmed Gordon’s convictions.

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 5 of 33
Securities and Exchange Commission (“SEC”) restrictions designed to prevent

just such manipulation. In 2005, several severe storms in the Gulf of Mexico had

caused serious damage in the southern United States. Wanting to use that fact to

“pump” stock prices, the conspirators targeted National Storm Management

(“National Storm”), a privately-owned Illinois roofing and siding company. They

presented the president of National Storm with various financing options for the

company, and persuaded him to take the company public.

Gordon and a co-conspirator then arranged to merge National Storm with a

publicly-traded shell company that had been incorporated in 2002 and was wholly

owned by the co-conspirator (“Shell 1”). Shell 1’s stock was deemed

19

“restricted” under SEC rules, which impose numerous restrictions on the public

trading of stocks, including detailed reporting requirements that must be met in

order to freely trade a public company’s stock. However, those restrictions do not

apply to shares that are held by non-insiders of the traded company for more than

two years. The owner of Shell 1 was clearly an insider of the company, and thus

did not qualify for this exemption, so Gordon told him to offer some of his friends

a thousand dollars each to claim they were shareholders. Gordon then prepared

false and back-dated corporate records, showing two year old transfers of shares

to those “nominees.” Gordon also prepared and issued legal opinion letters,

20

which he had an associate attorney sign, stating that the shares were freely

Such a transaction is called a “reverse merger,” in which a privately-owned

19

company acquires a publicly-traded company, thereby transforming itself into a

publicly-traded company and eliminating the need to go through the burdensome

disclosure process that is typically required prior to an initial public offering

(“IPO”) of stock.

As relevant here, a “nominee” is “2. A person designated to act in place of

20

another, usu[ually] in a very limited way.” or “3. A party who holds bare legal

title for the benefit of others or who receives and distributes funds for the benefit

of others.” BLACK’S LAW DICTIONARY, “nominee” (10th ed. 2014), obtained

from Westlaw (2015 Thomson Reuters).

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 6 of 33
tradeable because the sellers qualified for the two-year ownership exemption.

21

Once the newly-merged National Storm shares were freely tradeable, the

conspirators initiated the “pump” part of their plan by engaging in coordinated

trading of National Storm’s stocks among many nominee accounts, creating a

false impression that the stock prices were rising. Thereafter, the conspirators

22

issued massive fax and email “blasts,” predicting strong market performance by

National Storm’s stock. The blasts contained many misleading statements,

including implications that the projections themselves came from outside sources,

when they were in fact prepared by the conspirators. Once outsiders began

purchasing the stock, the conspirators took advantage of the price rise by

“dumping” the National Storm shares at inflated prices. In all, the conspirators

made more than $5 million by manipulating National Storm’s stock in this way.

Two other pump-and-dump companies that were similarly manipulated by

Gordon and his co-conspirators were Deep Rock Oil & Gas (“Deep Rock”), in

23

National Storm shares, like those of the other targeted companies, were

21

traded on “Pink Sheets,” rather than major stock exchanges. Pink Sheets are

daily, inter-dealer publications of over-the-counter (“OTC”) stocks that include

the stocks’ prices. Since Pink Sheet stocks are not traded on the major indexes,

the targeted companies were not required to file periodic reports with the SEC.

In the context of securities, “nominee account” means: “[a] brokerage

22

account in which the securities are owned by an investor but registered in the

name of the brokerage firm. • The certificate and the records of the issuing

company show the brokerage as the holder of record. But the brokerage records

show the investor as the beneficial owner of the securities in the nominee

account.” BLACK’S LAW DICTIONARY, “nominee account” under “account” (10th

ed. 2014), obtained from Westlaw (2015 Thomson Reuters). The conspirators

used nominee accounts to disguise their own ownership of the National Storm

stock, which allowed them to engage in coordinated trading of the shares among

themselves, while making it appear that many parties were trading the company’s

stock. In this way, the conspirators “primed” the stock’s price by creating the

appearance of high-volume trading of it, prior to broadcasting misleading

promotional hype about the company.

Deep Rock was the only one of the four targeted companies that was

23

already publicly traded. Thus, no reverse merger was necessary to initiate the

pump-and-dump scheme with respect to Deep Rock. However, as with the other

companies, the conspirators parked shares of Deep Rock in nominee accounts in

(continued...)

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 7 of 33
which one of the conspirators already owned the majority of non-insider shares,

and Global Beverage Company (“Global”). By manipulating Deep Rock and

Global as they had National Storm, the conspiracy made another $5 million profit

from sales of Deep Rock stock, and roughly $25 million from sales of Global

stock.

The final company included in the criminal indictment against Gordon was

International Power Group (“IPG”), a private company that Gordon reversemerged with a publicly-traded company that was controlled by a long-time friend

(“Shell 2”). Gordon instructed an assistant to his co-conspirator to prepare backdated corporate documents for Shell 2, claiming that the originals had been lost.

Again, Gordon prepared an opinion letter, stating that IPG shares were exempt

from trading restrictions based on ownership by non-insiders for at least two

years, which he had an associate attorney sign. This letter was used to cause a

24

transfer agent to issue unrestricted IPG shares, which were then gradually sold by

Richard Singer, another co-conspirator, on Gordon’s behalf. In November 2005,

Singer wire-transferred approximately $1.7 million in proceeds from IPG share

sales to pay off a construction mortgage on Gordon’s residence (the “Residence”).

Singer later prepared a false, back-dated document showing a sale of IPG stock

from Gordon to Singer for the $1.7 million, the purpose of which was to avoid the

government’s forfeiture of the Residence.

In 2004, the SEC began investigating Pink Sheet companies that had

unusual share trading and were being actively promoted, and concluded that some

of the companies had engaged in similar activities, consisting of publicly-traded

(...continued)

23

order to disguise their true ownership.

The attorney who signed the opinion letters for both National Storm and

24

IPG was Robert Bertsch, who represented another co-conspirator, New York

businessman Richard Singer.

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 8 of 33
shell companies doing reverse mergers with private companies in order to

publicly trade the private companies’ shares. Gordon was contacted by the SEC

in September 2005 because he represented some of the individuals and

companies, including National Storm and Deep Rock, that the SEC was

investigating. In the course of his conversation with the SEC, Gordon was

“Mirandized,” and then asked about the source of the National Storm and Deep

25

Rock promotions. Gordon denied any knowledge regarding the source of those

promotional campaigns.

In 2007, as the SEC investigation progressed, the federal government

placed a caveat (or warning) on, among other properties, the Residence, and

seized two of his Professional Corporation’s bank accounts. Subsequently, the

government filed a civil forfeiture action against the Residence, replacing the

caveat with a lis pendens lien. Mrs. Gordon responded to the forfeiture action,

26

claiming she owned the Residence, and the civil forfeiture proceeding was stayed

pending resolution of the criminal investigation.

In 2009, an indictment was issued that charged Gordon and his coconspirators with numerous criminal violations arising out of the alleged pumpand-dump scheme. The criminal matter proceeded to trial in a federal district

court in Oklahoma and, in early May 2010, Gordon was convicted by a jury on

nine counts of wire fraud, five counts of securities fraud, five counts of money

laundering, one count of engaging in a wire-fraud scheme, and one count of

Gordon was told that he could speak with counsel prior to answering any of

25

the SEC’s questions, and that he had the right to choose whether or not to answer

those questions. In addition, Gordon was informed that giving false answers

would potentially subject him to both civil and criminal penalties.

A lis pendens lien on title to real property is intended to prevent property

26

subject to litigation from being transferred while that litigation is pending. Under

the lis pendens doctrine, anyone who purchases property from a party to the

pending litigation takes the property subject to the result of the litigation. See 5

TIFFANY REAL PROP. § 1294 (3d ed. 2014).

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 9 of 33
obstruction of justice. He was immediately incarcerated. The district court

determined Gordon to be personally responsible for illegal gains from sales of

IPG stock in the amount of $2.7 million, as well as for the total gains of the

conspiracy from sales of the stock of National Storm, Deep Rock, and Global in

an amount exceeding $43 million. A special assessment was imposed on Gordon

in the amount of $2,300, and he was ordered to pay restitution in the amount of

approximately $6.15 million.

Based on Gordon’s criminal conviction, the district court entered three

separate criminal forfeiture orders relating to his assets: 1) The first order was

issued in September 2010, and forfeited approximately $2.75 million in assets

directly traceable to the conspiracy, which included Gordon’s interest in the

Residence (to the extent of $1.7 million that was traceable to IPG stock sales,

with the remainder of Gordon’s interest in the Residence deemed to be a

substitute asset) ; 2) the second order was issued on January 11, 2011 (four days

27

after Gordon filed his bankruptcy petition), and forfeited Gordon’s interest in

several corporations, brokerage accounts, and other real property; and 3) the final

order was issued in February 2011, and forfeited the entire Gordon Residence,

subject to a settlement with Mrs. Gordon as to her interest in that asset.

28

Substitute assets are not directly forfeitable as being traceable to, or the

27

proceeds of, a crime, and may only be forfeited in the event directly forfeitable

assets are unavailable. “An asset cannot logically be both [directly] forfeitable

and a substitute asset.” United States v. Bornfield, 145 F.3d 1123, 1139 (10th

Cir. 1998).

The SEC obtained its own judgment against Gordon, in which Gordon was

28

permanently enjoined from violating securities laws, fined civilly in the amount

of $130,000, found civilly liable in an amount exceeding $50 million, and

permanently barred from trading in penny stocks. Typically, penny stocks are

equity securities that sell for less than five dollars per share. See Amended

Judgment as to Defendant George David Gordon in Appx at 2885-89.

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 10 of 33
B. The Bankruptcy Proceedings

Gordon initially filed his Chapter 7 Petition, Schedules, and Statement of

Financial Affairs (“SOFA”) on January 7, 2011, along with an application to

proceed in forma pauperis, in which he claimed he was unable to pay the $306 fee

for filing a Chapter 7 petition. Gordon amended his filings on three separate

occasions: 1) January 18, 2011, eleven days after the initial filing; 2) June 13,

2011, four months after the creditors meeting was held pursuant to § 341(a), and

3) December 1, 2011, after the United States Trustee’s discharge complaint was

filed and Gordon had retained counsel.

Gordon filed his bankruptcy without the assistance of bankruptcy counsel,

and thus has no one to blame but himself for the inaccuracy of his bankruptcy

filings. Both his Schedules and his SOFA, which provide the basis for the case

trustee, his creditors, and the bankruptcy court to determine his debts and assets,

were rife with misstatements and omissions. In order to promote bankruptcy’s

most fundamental purposes — granting honest but unfortunate debtors a “fresh

start” while ensuring the best permissible outcome for creditors — the filing of

these documents comes with an attendant burden of full and honest disclosure.

Gordon, who was a sophisticated businessman, attorney, and CPA, surely

understood the implications of filing a bankruptcy petition. Despite this, Gordon

later attributed the pervasive inaccuracies in his Schedules to several causes that

he presumably felt were not associated with fraudulent intent, including memory

lapse, inaccessibility of records, mistake, immateriality, and unfamiliarity with

bankruptcy law. Now, he asks this Court to conclude that the voluminous

evidence presented at trial is insufficient to support the bankruptcy court’s finding

that Gordon’s proffered excuses did not overcome the badges of fraud that

permeated his prepetition and postpetition conduct.

Throughout the bankruptcy case, Gordon took the position that he had no

interest in the Residence or in several family vehicles, ownership of which he

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 11 of 33
attributed to Mrs. Gordon. Although he disclosed his ownership of the

Professional Corporation, he listed its value as $0 and did not disclose in his

bankruptcy papers any assets that he considered to be owned by the Professional

Corporation.

29

C. The Gordon Residence and Vehicles

The Gordons purchased the real property on which the Residence would

later be built in December 2000, the same year for which they reported net capital

gains of nearly $20 million on their joint tax return (the “2000 Capital Gains”).

That property was purchased without a bank loan and, pursuant to the Gordons’

instructions, it was titled in Mrs. Gordon’s name only, although the equity

received from the sale of the Gordons’ previous, jointly-owned residence was

invested in the new one. Approximately two years later, Mrs. Gordon obtained

30

a construction-loan mortgage from Commerce Bank for construction of a home on

the property. That mortgage was subsequently amended to add Gordon as a

borrower as well, and both Gordons executed the promissory note for the

construction loan. In 2003, the Gordons spent approximately $5.4 million

building the Residence, and in 2005, they paid off the construction loan with a

final payment of $1.7 million. The funds used to pay off the mortgage came from

a Gordon co-conspirator, Singer, who later prepared a false, back-dated document

showing a sale of IPG stock from Gordon to himself for the $1.7 million,

Gordon protested that he did not need to disclose the Professional

29

Corporation’s assets in his personal bankruptcy because the PC was a separate

entity. See, e.g., Telephonic Deposition of George David Gordon, Jr., Aug. 13,

2013, (“Depo, Vol 1”), p.59 in Appx at 705. However, by assigning no value to

the PC as his asset, Gordon failed to account for assets owned by the PC,

including bank accounts, accounts receivable, securities, furniture, decor, and

office equipment.

Gordon claimed that his portion of the home sale funds was used to buy

30

furniture and “probably the tennis court.” Volume II of the Telephonic Deposition

of George David Gordon, Jr., Sept. 19, 2013 (“Depo, Vol 2”), p. 273 in Appx at

919.

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 12 of 33
intending to assist Gordon’s effort to prevent forfeiture of the Residence.

31

Since the purchase and construction of the Residence, and throughout the

bankruptcy proceedings, Gordon was adamant that the Residence was solely Mrs.

Gordon’s property. Despite this, Gordon neither transferred nor disclaimed any

interest (whether marital, equitable, or other) he may have had in the Residence to

Mrs. Gordon, as he could have done under Oklahoma law. The Residence was

32

Gordon’s primary residence. Since its completion, he exercised ownership rights

with respect to it, used marital funds from the 2000 Capital Gains to pay $50,000

in 2003-2010 property taxes on it, paid many of the utility accounts for the

Residence (most of which were opened and maintained in Gordon’s name), and

generally treated it as his own. Gordon also listed the Residence as property he

owned in two personal financial statements, submitted in November 2006 and

May 2009, in order to obtain credit in his name only. Similarly, all of the

33

Because this $1.7 million payment was determined to be directly traceable

31

to Gordon’s fraudulent wire fraud scheme, that amount of the Residence’s value

was ordered forfeited by the criminal court in its first forfeiture order. Appx at

2644-48.

Gordon could have transferred any interest he had in the Residence to Mrs.

32

Gordon at any time by executing and recording a simple quitclaim deed. OKLA.

STAT. tit. 16, § 18 (1910). Also, any person entitled to take an interest in a

transferred asset, including real property, may disclaim that interest by executing

and recording a written disclaimer. OKLA. STAT. tit. 60, §§ 751-759 (1973). A

“disclaimer” is “a written instrument which declines, refuses, releases or

disclaims an interest which would otherwise be succeeded to by a beneficiary,

which instrument defines the nature and extent of the interest disclaimed thereby

and which must be signed, witnessed and acknowledged by the disclaimant in the

manner provided for deeds of real estate.” OKLA. STAT. tit. 60, § 751(3).

Moreover, “[n]o deed, mortgage, or contract affecting the homestead exempt by

law . . . shall be valid unless in writing and subscribed by both husband and wife,

if both are living and not divorced, or legally separated, except as otherwise

provided for by law.” OKLA. STAT. tit. 16, § 4 (1997). Thus, a married person

cannot individually transfer marketable title to real property in Oklahoma unless

his or her spouse either signs the instrument of transfer as a grantor, or is the

grantee. OKLA. STAT. tit. 16, Ch.1, App., Std. 7.2 (2010). This restriction is

intended to protect the “marital interest” in the parties’ homestead. OKLA. STAT.

tit. 16, Ch. 1, App., Std. 7.1 (1984).

Appx at 1670-76. Gordon listed a value for the Residence of $4.5 million

33

(continued...)

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 13 of 33
Gordon family cars (the “Vehicles”) were titled solely in Mrs. Gordon’s name,

but were treated by the Gordons as joint property. Despite the titles, each

member of the family, including Gordon, Mrs. Gordon, and their minor son, had a

vehicle that was primarily used only by him or her.

34

Mrs. Gordon was not employed during at least the ten-year period prior to

Gordon’s incarceration (May 2000 to May 2010), and it was Gordon’s legal and

accounting business, along with his investments, that paid the family’s expenses.

Beginning early in their marriage, Gordon began giving his wife shares of stock

and money to be held in her own name, but he also held property in either his own

name or the name of the Professional Corporation. This process resulted in Mrs.

Gordon’s acquisition of significant assets in her name only, which Gordon

referred to as “her money.”

Gordon filed his original Petition, pro se, on January 7, 2011. Although

35

Gordon was an attorney, a CPA, and a sophisticated securities investor, he

claimed to have no real knowledge of bankruptcy law. His brother-in-law, Finis

Cowan, who was also a non-bankruptcy attorney, assisted Gordon somewhat with

preparing his Petition and Schedules. Gordon was incarcerated during the

preparation of his bankruptcy filings, initially in Tulsa County Jail, where his

access to information was limited. When Gordon’s Petition and subsequent

(...continued)

33

in 2006 and $4.0 million in 2009. Although he listed Mrs. Gordon as the title

holder of the Residence in both financial statements, the fact that Gordon listed it

as one of his assets is strong evidence that he did not consider it to belong

entirely to his wife.

Gordon assumed the vehicle he used was sold when he was incarcerated,

34

but had no specific knowledge of a sale.

Gordon testified that he filed the Petition in order to stop the

35

commencement of a trial in a civil suit against him in Texas, which was scheduled

to begin a few days later. See Depo, Vol 1, in Appx at 710-12. According to

Gordon, after he filed, he also “hoped that [the filing] would prevent the

government from basically, you know, taking all my assets,” but that was not his

“primary intent” in filing the Petition. Id.

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 14 of 33
amendments were filed, however, he was housed at the Texarkana federal prison,

where he had better, though still restricted, access to information. In his original

Schedule A, Gordon denied having any interest in real property, and also stated

that “the federal government ha[d] erroneously obtained a forfeiture judgment

against his wife’s home.” He then listed the $1.7 million forfeiture amount as a

36

secured claim, stating that he was “unsure whether the government’s Forfeiture

Order is a secured claim for bankruptcy purposes but includes it in the interest of

full disclosure.”

The summary of Gordon’s initial Schedules listed a total of $112,000 worth

of personal property, $65,000 of which was claimed to be exempt. The personal

property list did not include any vehicles. Gordon almost immediately amended

his bankruptcy filings, on January 18, 2011, again acting pro se. He amended his

filings again on June 13, 2011, still acting pro se, and added the following note to

his statement disavowing his ownership of any interest in real property: “Further,

debtor states that the home was titled in the debtor’s wife’s name. To the extent

that the debtor could claim an equitable ownership in the home, any such interest

was taken by forfeiture in the debtor’s federal criminal law case.” Finally, in

August 2011, Ron Brown entered his appearance as counsel representing Gordon.

Mr. Brown filed a final amendment of Gordon’s filings in December 2011,

approximately a month after Richard A. Wieland, United States Trustee (“UST”),

filed an adversary proceeding against Gordon. The UST’s complaint sought the

bankruptcy court’s denial of Gordon’s discharge pursuant to, among other

provisions, § 727(a)(2)(A) and (a)(4)(A).

In September 2012, while the adversary proceeding was pending, the

Chapter 7 trustee appointed to administer Gordon’s estate, Patrick J. Malloy III

(“Trustee”), obtained the bankruptcy court’s approval of a settlement with Mrs.

Schedule A to Gordon’s 1/7/2011 Petition, in Appx at 1231.

36

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Gordon in the main bankruptcy case. As part of the settlement, the Trustee

37

agreed to release all avoidance claims the estate might have against Mrs. Gordon,

along with any interests the estate had in the Gordons’ marital assets. In return,

Mrs. Gordon paid the estate $300,000, and agreed to withdraw an objection she

had filed to a “Coordination Agreement” between the estate and the United

38

States for the handling of claims and distributions in both the criminal and

bankruptcy cases.

The adversary complaint was tried before the bankruptcy court over three

days in October 2013. The bankruptcy court issued a decision denying Gordon’s

discharge on March 31, 2014, finding that the UST had proven his case under

both § 727(a)(2) and (a)(4).

IV. DISCUSSION

The bankruptcy court denied Gordon’s discharge under two separate

provisions of § 727(a). Ordinarily, a debtor who requests a bankruptcy discharge

will be granted one. However, “[t]he expectation is that, to be entitled to

discharge, the debtor must deal fairly with creditors and with the court. This

obligation is imposed indirectly through a series of objections to discharge set out

in Code § 727(a).” Thus, § 727(a) provides a mechanism for proof of certain

39

conduct by a debtor that may result in a denial of discharge. Subsection (a)(2)

“establishes that the fair dealing necessary to qualify for a discharge includes

refraining from actions intended to injure creditors, including the transfer,

concealment or destruction of property.” This provision targets asset transfers

40

that were made within one year of the debtor’s petition filing date, but also

See Order, dated Sept. 10, 2012, in Appx at 989-91.

37

Appx at 984-87.

38

4 NORTON BANKR. L. & PRAC. 3d § 86:3 (2014).

39

Id. § 86:4.

40

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includes transfers made prior to that time that are concealed by the debtor within

one year. By its express terms, § 727(a)(2) covers only conduct that occurs

41

prior to the initiation of a bankruptcy case. In contrast, § 727(a)(4) specifically

targets false oaths made by debtors “in or in connection with the [bankruptcy]

case.” Typically, such false statements are made in the debtors’ bankruptcy

filings or in their testimony at the § 341 meeting of creditors. As such, the

conduct alleged by a plaintiff in support of a claim under § 727(a)(2) would

ordinarily be different from conduct that is alleged to support a § 727(a)(4) claim.

A. Fraud under § 727(a)(2)(A)

Evidence that a Chapter 7 debtor fraudulently transferred or concealed

property in order to deceive creditors or the bankruptcy court may result in the

denial of the debtor’s discharge under subparagraph (a)(2) of § 727, which

provides:

(a) The court shall grant the debtor a discharge, unless —

(2) the debtor, with intent to hinder, delay, or defraud a

creditor or an officer of the estate charged with custody

of property under this title, has transferred, removed,

destroyed, mutilated, or concealed —

(A) property of the debtor, within one year

before the date of the filing of the

petition.

42

In order to obtain a denial of discharge under § 727(a)(2)(A), a plaintiff must

show, by a preponderance of the evidence, that “(1) the debtor transferred,

removed, concealed, destroyed, or mutilated, (2) property of the [debtor],

(3) within one year prior to the bankruptcy filing, (4) with the intent to hinder,

See, e.g., United States Trustee v. Garland (In re Garland), 385 B.R. 280,

41

296 (Bankr. E.D. Okla. 2008) (failure to disclose property transfer more than one

year prior to bankruptcy may still justify discharge denial as a “continuing

concealment”), aff’d, 417 B.R. 805 (10th Cir. BAP 2009).

§ 727(a)(2)(A).

42

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 17 of 33
delay, or defraud a creditor.”

43

This Court has previously held that “despite an unqualified transfer of legal

title, debtors who retain beneficial use of the property and treat it as their own

continue to hold a beneficial interest that must be disclosed.” The Garland

44

decision enumerated several “badges of fraud” that are suggestive of fraudulent

intent when transferring property, including three that are applicable here:

gratuitous property transfers, the debtor’s continued use of the property after its

transfer, and transfers to family members. Concealment of assets with the intent

45

to “hinder, delay, or defraud a creditor” within one year of filing a bankruptcy

petition constitutes a violation of § 727(a)(2). In this case, Gordon’s asset

transfers to his wife occurred more than one year prior to his bankruptcy.

However, “[u]nder the ‘continuous concealment’ doctrine, a concealment will be

found to exist during the year before bankruptcy even if the initial act of

concealment took place before this one year period as long as the debtor allowed

the property to remain concealed into the critical year.” Thus:

46

In a situation involving a transfer of title coupled with

retention of the benefits of ownership, there may, indeed, be a

concealment of property. Where this is the case, however, the

concealment is present not because retention of the benefits of

ownership conceals the fact that the debtor no longer has legal title,

but rather because the transfer of title represents to the world that the

debtor has transferred away all his interest in the property while in

reality he has retained some secret interest — a secret interest of

Gullickson v. Brown (In re Brown), 108 F.3d 1290, 1293 (10th Cir. 1997).

43

This opinion actually listed “property of the estate” as item 2, but no bankruptcy

estate exists before the case is filed, so § 727(a)(2)(A) applies, as it says, to

“property of the debtor” that was transferred prepetition, not to property of the

estate, which is covered by § 727(a)(2)(B).

In re Garland, 417 B.R. at 816 (discussing a § 727(a)(4) claim).

44

Id. at 815.

45

Rosen v. Bezner, 996 F.2d 1527, 1531 (3d Cir. 1993). See also Gullickson

46

v. Brown (In re Brown), 108 F.3d 1290, 1293 (10th Cir.1997) (fraud can be

inferred from transfer of an asset’s title while continuing to exercise dominion

over it).

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which retention of the benefits of ownership may be evidence.

47

The UST asserted, among other allegations, that Gordon placed many, if

not most, of his significant assets solely in his wife’s name in order to protect

them from his own creditors, and that his continued use and possession of those

assets indicates that both Gordon and his wife considered the ownership of them

to be, at the very least, joint. When a transfer is made between parties who

between themselves act as though no transfer actually took place, while holding

out to others that the transfer was valid, both the transfer and the insistence that it

was valid may be fraudulent. Thus, the bankruptcy court found that Gordon had

retained “all of the benefits of ownership [of the Residence] — except legal

title — which he used to his full advantage when it suited him.” These facts

48

establish that the transfer of legal title to the Residence was not a valid transfer,

but was a fraudulent concealment of the property from Gordon’s creditors. In

addition, the parties’ conduct that perpetuated the ruse that the transfer was valid

constituted a concealment that continued for as long as the parties maintained the

ruse.

The UST alleged, and the bankruptcy court found, that although Gordon

maintained that certain assets belonged solely to Mrs. Gordon, he actually

retained an equitable interest in them, particularly with respect to the Residence

and the Vehicles. Gordon’s maintenance of that ruse was intended to shield those

assets from his creditors, and continued up to, and even after, the filing of his

Petition. This constitutes a “continuing concealment” subject to the reach of

§ 727(a)(2).

Rosen v. Bezner, 996 F.2d at 1532.

47

Wieland v. Gordon (In re Gordon), 509 B.R. 359, 369 (Bankr. N.D. Okla.

48

2014) (emphasis in original).

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1. Detriment to creditors

Gordon asserts that it was error for the bankruptcy court to deny his

discharge pursuant to § 727(a)(2)(A) absent proof of resulting harm to his

creditors. However, notably absent from the elements listed by the Tenth Circuit

Court of Appeals for a successful fraudulent transfer claim under this provision is

any requirement that the debtor’s creditors suffered financially as a result of the

transfer. Nonetheless, Gordon asserts that the failure to prove such a detriment

should have doomed the UST’s claim, relying principally on statements made in

Booth and Miller.

49

Neither Booth nor Miller is binding precedent on this Court, but the

problem with Gordon’s reliance on them lies in the fact that the statements he

cites are dicta. Booth simply states that a debtor’s intent with respect to a

transfer must be “more than just an intent by the debtor to prefer a creditor,” and

“must be coupled with the transfer of the debtor’s property which reduces assets

available to other creditors.” In so stating, the Booth court relied on a 1985

50

Massachusetts bankruptcy court case, then noted that, ‘[t]his distinction has been

expressly recognized in the Tenth Circuit.” However, the statement was

51

unnecessary to the issue before the court, which was whether the debtor’s

transfers of money and farm equipment to his live-in girlfriend were in payment

of valid loans made by her to him, or were converted from capital to debt in order

to defraud the debtor’s ex-wife.

Booth v. Booth (In re Booth), 70 B.R. 391 (Bankr. D. Colo. 1987); Wieland

49

v. Miller (In re Miller), 448 B.R. 551 (Bankr. N.D. Okla. 2011).

In re Booth, 70 B.R. at 395.

50

Id. (citing Rutter v. Gen. Motors Acceptance Corp., 70 F.2d 479 (10th Cir.

51

1934)). Not only was Rutter decided well before the provision at issue here was

even enacted, it was decided based on then-existing Oklahoma preference law,

which required proof of either fraudulent intent or absence of fair value. Thus,

the Rutter decision simply does not support the interpretation of it made in Booth

and Miller.

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Even more significantly, the case that Booth cites as the Tenth Circuit’s

recognition of the “reduced assets” requirement, Rutter, is not valid support for

the proposition. Rutter, a 1934 case, was decided under § 14 of the Bankruptcy

Act of 1898 and then-existing Oklahoma law. The issue in Rutter was whether a

transfer from a husband to a wife was fraudulent under an Oklahoma provision

that stated that “no transfer can be adjudged fraudulent solely on the ground that

it was not made for a valuable consideration.” The Rutter court noted that the

52

establishment of a preference, alone, is not grounds for the denial of a discharge,

saying, “[t]here is a clear and broad distinction between a preferential transfer

and a fraudulent transfer.” Quite simply, Rutter is wholly inapposite to the

53

current issue.

In both Booth and Miller, the debtors’ discharges were denied. However,

in Miller, one allegedly fraudulent transfer was excluded from consideration

because the plaintiff failed to offer evidence of the asset’s value. In eliminating

that single transfer, which did not affect the discharge denial, the court relied on

the dicta in Booth to the effect that intent must be tied to a transfer that reduces

assets available to creditors in order to satisfy the statute.

54

The Tenth Circuit stated in the Strunk decision (again, as dicta) that

“[d]etriment to a creditor need not be shown in order to establish fraudulent

concealment or a false oath barring discharge.” The nondischargeability claims

55

Rutter, 70 F.2d at 481.

52

Id. at 481-82.

53

In re Miller, 448 B.R. at 574-75 & n.76.

54

Farmers Co-op Ass’n v. Strunk, 671 F.2d 391, 396 (10th Cir. 1982)

55

(emphasis added) (this statement is dicta as to a § 727(a)(2)(A) claim because it

was made in the court’s discussion of false oath). A similarly superficial

statement rejecting a § 727(a)(2) detriment element was made in Freelife Int’l,

LLC v. Butler (In re Butler), 377 B.R. 895, 923 (Bankr. D. Utah 2006) (stating, in

a § 727(a)(4) case, that “as with § 727(a)(2) . . . no actual detriment to a creditor

(continued...)

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in Strunk included both fraudulent concealment and a false oath, based on bad

checks written by the debtor. The checks were dishonored by the debtor’s bank,

which the debtor claimed caused him to believe that the account had no funds in

it, which is what he reported in his schedules. The debtor asserted in defense that

he had tendered a check to the trustee in the amount of the funds that were in the

account on the petition date and, therefore, no harm resulted. This proffered

defense was rejected by the court, which affirmed the bankruptcy court’s denial

of discharge.

Courts in other jurisdictions have soundly rejected a detriment element

under § 727(a)(2). In particular, a Michigan bankruptcy court reasoned:

56

This court believes that the reasons that justify ignoring the

effects of debtor’s actions in nonexempt-to-exempt cases, justify

ignoring the effects of debtor’s actions in other § 727(a)(2) cases as

well. First, the statute focuses on debtor’s intent at the time of the

transfer, and not at the results of the transfer to see if the creditor has

been delayed, hindered or defrauded. Second, where Congress wants

courts to apply an effects test it says so. For example, under

§ 547(b) a transfer is voidable as a preference if, as a result of the

transfer, the creditor receives more than he would upon liquidation.

The rule is not that a transfer is voidable as a preference if the debtor

intends to prefer a creditor. Hence it is clear that the Trustee can

make his case under § 727(a)(2), regardless of whether a creditor is

actually delayed, hindered or defrauded. All that the Trustee must

prove is that the debtor intended to hinder, delay or defraud creditors

when it transferred property within a year of filing.

57

In any event, serious consideration of whether § 727(a)(2) requires proof of

a detriment to creditors is unnecessary in this case because such a detriment was

established by the Trustee’s settlement with Mrs. Gordon. That settlement, which

was based on Gordon’s marital or equitable interest in property obtained by

(...continued)

55

needs to be shown”).

See 4 BANKR. SERV. L. ED. § 39:121 (2014) (proof of harm is not required

56

element of transfer or concealment under § 727(a)(2)).

Taunt v. Wojtala (In re Wojtala), 113 B.R. 332, 336 (Bankr. E.D. Mich.

57

1990).

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Gordon but held solely in Mrs. Gordon’s name, resulted in the recovery of

$300,000 for the bankruptcy estate. Those funds would not have been available to

Gordon’s creditors had the Trustee simply accepted Gordon’s denial of any

interest in those assets.

2. Sufficiency of the evidence

Not surprisingly, this case presented the Trustee with significant challenges

with respect to gathering estate assets. Gordon outright denied ownership,

claimed not to remember details of many transactions, was evasive, and failed to

keep adequate records of his business dealings. He asserted a variety of excuses

for his omissions and misstatements, including that he was not a bankruptcy

attorney, was incarcerated and therefore unable to obtain documents, didn’t

understand marital property rights, and believed any rights he may have had to

have been forfeited. The principal basis for the bankruptcy court’s rejection of

Gordon’s defenses to the denial of discharge in this case was his lack of

credibility. The sheer number of mistakes, omissions, and denials of access to

58

Ordinarily, this Court would give the bankruptcy court great deference with

58

respect to witness credibility. See, e.g., Vaughn v. United States (In re Vaughn),

765 F.3d 1174, 1180 (10th Cir. 2014) (“Where . . . certain ‘findings are based on

determinations regarding the credibility of witnesses, Rule 52(a) [of the Federal

Rules of Civil Procedure] demands even greater deference to the trial court’s

finding[s].’” (quoting Bessemer City, 470 U.S. at 565)). See also Fed. R. Civ. P.

52(a)(6), made applicable to adversary proceedings by Fed. R. Bankr. P. 7052

(appellate court must give due regard to trial court’s opportunity to judge witness

credibility). The UST relies on this concept in his brief, despite the lack of any

such ability of the bankruptcy court to judge Gordon’s credibility at trial. Gordon

did not appear at trial, and his only testimony came from the written transcript of

a telephonic deposition that was taken not long before trial. Under these

circumstances, the bankruptcy court was in no better position to judge the

credibility of the debtor than is this Court. However, Bankruptcy Rule 9017

makes the Federal Rules of Evidence applicable to bankruptcy cases, and Federal

Rule of Evidence 609(a) provides that evidence of a criminal conviction of “any

crime regardless of the punishment . . . must be admitted [for purposes of

attacking a witness’s character for truthfulness] if the court can readily determine

that establishing the elements of the crime required proving . . . a dishonest act or

false statement.” Thus, the bankruptcy court was entitled to rely on Gordon’s

securities fraud convictions in concluding that his deposition testimony was not

credible.

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 23 of 33
documents that Gordon asserted would alone be enough to disregard his

testimony. When combined with his conviction for securities fraud, it is difficult

to deny an overwhelming aura of fraudulent intent.

The situation in the present case is remarkably similar, in some respects, to

the one presented in this Court’s 2009 Garland decision. In Garland, the debtor

59

was a semi-retired plaintiffs’ class-action lawyer who, like Gordon, claimed no

interest in the residence in which he had lived for many years prior to filing for

bankruptcy relief. Although Mr. Garland’s machinations with the title to his

residence went far beyond simply titling the property in someone else’s name, his

issues with the federal government were tax-related rather than criminal. As did

Gordon, Garland stated on his Schedule A that he had no “legal, equitable, or

future interest” in any real property, claimed the stock he owned in his

Professional Corporation was without value, and failed to list his ownership or

directorship in a number of businesses, as well as his signatory authority on

several bank accounts. Also like Gordon, Garland asserted that he was not

required to list his residence as his property because he had no ownership interest

in it. This Court rejected that contention, stating:

[I]n analogous cases, bankruptcy courts have determined that, despite

an unqualified transfer of legal title, debtors who retain beneficial use

of the property and treat it as their own continue to hold a beneficial

interest that must be disclosed. . . .

. . . .

. . . Debtor had continuous and exclusive use of the Property,

provided improvements and maintenance on the Property, and paid

the Property’s expenses, both before and after he allegedly

relinquished his ownership of it. Each and every transfer of the

Property involved Debtor’s friends or family and, in addition, Debtor

was actively involved in the formation of the corporation whose sole

purpose was to foreclose on the Property and thereby eliminate the

IRS’s tax liens. Despite these facts, Debtor did not even list the

Property as property “held” by him for another on his SOFA or his

United States Trustee v. Garland (In re Garland), 417 B.R. 805 (10th Cir.

59

BAP 2009).

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schedules . . . .

60

Like Garland, Gordon retained continuous use of the Residence and the

Vehicles, provided maintenance for them, and paid their expenses the entire time

those assets were titled in Mrs. Gordon’s name. In addition, the money with

which Mrs. Gordon purportedly purchased the Residence came partially from the

sale of the Gordons’ joint property. And the property that generated the portion

of the purchase price that was paid by Mrs. Gordon had originally been given to

her by her husband, who thereafter increased its value through his (fraudulent)

investments. Thus, the criminal court determined that $1.7 million of the money

that was used to pay off the mortgage on the Residence was directly traceable to

Gordon’s fraudulent securities scheme. Finally, Gordon also listed the Residence

as property he owned in two personal financial statements, submitted in November

2006 and May 2009, in order to obtain credit.

In Oklahoma, both real and personal property that is acquired during a

marriage is presumed to be marital property, regardless of how the title to the

property is held. Gordon’s assertion that he believed this principle only

61

applied to divorce actions belies his general knowledge of this concept. He

62

certainly knew enough about his state’s property laws to understand that even if

the Residence was titled solely in his wife’s name, he still held, at the very least, a

417 B.R. at 816-17.

60

Manhart v. Manhart, 725 P.2d 1234, 1240 (Okla. 1986) (both real and

61

personal property acquired during marriage is presumed marital property); Garrett

v. Gordon, 314 P.3d 264, 271 (Okla. Civ. App. 2013) (property acquired during

marriage is presumed to be marital property); see also OKLA. STAT. tit. 43,

§ 121(B) (1985) (“As to . . . property, whether real or personal, which has been

acquired by the parties jointly during their marriage, whether the title thereto be

in either or both of said parties, the court shall, subject to a valid antenuptial

contract in writing, make such division between the parties as may appear just and

reasonable”).

See, e.g., Depo, Vol 1, p.46, ll. 11-20 in Appx at 692.

62

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contingent marital or equitable interest that he had not validly extinguished.

63

There is ample evidence in the record that supports the bankruptcy court’s

conclusion that Gordon titled major assets solely in his wife’s name because he

wanted to keep them out of the reach of his own creditors and, given the elaborate

fraud he was perpetrating, Gordon surely understood that there were likely to be

claims made against him.

Gordon’s conduct constituted a fraud against his creditors in nearly every

sense of the word. “There is little question that if an individual transfers title of

an item but continues to exercise dominion over it, that fraud could be inferred.”

64

Knowingly placing property in his wife’s name while continuing to use the

property as his own and repeatedly asserting that the property was not his

constituted both fraud and the continuing concealment of that fraud. Thus,

Gordon had an equitable or marital interest in, at the very least, both the

Residence and the Vehicles, which he concealed by placing title to those assets in

his wife’s name. His concealment of his interests in those assets continued up to

and after the filing of his Petition through his ongoing denials of his interests, and

those denials were made with the intent to conceal his assets from his creditors

and mislead them regarding his assets. Because these facts fully satisfy the

statutory elements of a § 727(a)(2) claim, we affirm the bankruptcy court’s

judgment under that provision.

B. False Oath under § 727(a)(4)

Gordon was also denied discharge pursuant to the following provision:

(a) The court shall grant the debtor a discharge, unless —

. . .

United States Trustee v. Garland (In re Garland), 385 B.R. 280, 295

63

(Bankr. E.D. Okla. 2008) (beneficial interest in property may be found if a debtor

exercises control over property, even without legal title to it), aff'd, 417 B.R. 805

(10th Cir. BAP 2009).

Gullickson v. Brown (In re Brown), 108 F.3d 1290, 1293 (10th Cir.1997).

64

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BAP Appeal No. 14-18 Docket No. 33 Filed: 03/09/2015 Page: 26 of 33
(4) the debtor knowingly and fraudulently, in or in connection

with the case —

(A) made a false oath or account.

65

The various discharge exceptions of § 727(a) are independent, and a plaintiff need

only prove the elements of one exception by a preponderance of the evidence in

order to obtain a denial of discharge. Thus, a judgment under any § 727(a)

66

subparagraph is sufficient for a denial of discharge. Having affirmed the

bankruptcy court’s ruling based on § 727(a)(2), this Court need not consider that

court’s § 727(a)(4) ruling. Nonetheless, as the bankruptcy court considered and

ruled on both exceptions, this Court will also.

As he did with respect to the § 727(a)(2) denial of discharge, Gordon

challenges the bankruptcy court’s denial of his discharge under § 727(a)(4) on the

basis of insufficiency of the evidence. The bankruptcy court based its decision to

deny discharge under § 727(a)(4)(A) primarily on Gordon’s failure to disclose his

interest in the Residence. Gordon asserts that the bankruptcy court erred in

reaching this conclusion because he did adequately disclose the existence of the

Residence, both by the address he listed as the location of his personal property

and by his statements that although the Residence belonged solely to Mrs.

Gordon, the criminal court had erroneously forfeited any interest he might have

had in it prior to the filing of his Petition. Gordon also asserts that the criminal

67

forfeiture eliminated any interest he might otherwise have had in the Residence

and, therefore, his failure to list the Residence as an asset was the truth.

68

§ 727(a)(4)(A).

65

In re Garland, 417 B.R. at 810-11.

66

In his initial Schedule A, filed on January 7, 2011, Gordon indicated that he

67

did not own any real property, and stated also that “the federal government has

erroneously obtained a forfeiture judgment against [Gordon’s] wife’s home at

10726 S. Lakewood, Tulsa, OK.” Appx at 1231.

Only the first forfeiture order, which was entered on September 15, 2010,

68

(continued...)

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This Court may affirm on any ground that is supported by the record and,

69

without reaching the merits of Gordon’s assertion that any interest he had in the

Residence when he filed his Petition had been forfeited, we conclude that there

was ample other evidence presented to the bankruptcy court to support its ultimate

conclusion that Gordon had made prohibited false oaths. Principally, Gordon

failed to accurately disclose in his Schedules real and personal property in which

he had an interest, and also failed in his SOFA to disclose financial accounts that

he either controlled or had signatory authority over within the one-year period

prior to filing his Petition, and companies in which he was an officer or director

within the six-year period prior to filing his Petition.

70

(...continued)

68

actually predated Gordon’s filing of his Petition and Schedules. In those

Schedules, Gordon asserted that he did “not own interests in any real estate but

the federal government has erroneously obtained a forfeiture judgment against his

wife’s home.” The 2010 order forfeited Gordon’s interest in the Residence “to

the extent of $1,702,000, which is traceable proceeds to the Count 23 wire fraud

scheme,” and the remainder of the Residence as a “substitute asset.” Order for

Criminal Forfeiture Money Judgments, Preliminary Order of Forfeiture of

Property and Order for Forfeiture of Substitute Asset ¶¶ 4-5 in Appx at 2646.

With respect to Gordon’s assertion that the prepetition forfeiture eliminated any

interest he may have had in the Residence, we note that the $1.7 million forfeiture

in that order represents less than half of the Residence’s value, according to

Gordon’s own valuations. Thus, in a financial statement he submitted to

Commerce Bank in 2009, Gordon listed the value of the Residence as $4 million.

Appx at 1669-70. In addition, Gordon testified in connection with the bankruptcy

that he and Mrs. Gordon spent approximately $5.4 million on construction of the

Residence in 2003. Appx at 835, 838. Under these valuations, Gordon would

have retained, at the very least, a contingent interest in the Residence, over and

above the $1.7 million forfeiture, because the criminal court designated the

remainder of the Residence only as a “substitute asset.”

Buke, LLC, v. Eastburg (In re Eastburg), 447 B.R. 624, 632 (10th Cir. BAP

69

2011).

Schedule A requires debtors to list all of their real property, and

70

specifically directs them to include all real property in which they have “any

legal, equitable, or future interest.” In addition, married debtors are instructed to

“state whether the husband, wife, both, or the marital community own the

property by placing an ‘H,’ ‘W,’ ‘J,’ or ‘C’ in the [appropriate] column.”

Schedule B requires debtors to list all of their personal property, and specifies

various categories of property that must be listed, including stock and interests in

incorporated and unincorporated business, interests in partnerships or joint

(continued...)

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On Schedule B, Gordon indicated that he did not own any vehicles. In

response to ¶ 13 of Schedule B, which asks for “[s]tock and interests in

incorporated and unincorporated businesses,” Gordon attached a list of nine

companies, plus “[v]arious illiquid or insolvent penny stocks,” to which he

assigned a total value of $46,100. The Professional Corporation, which was listed

first, was assigned an estimated value of “-0-”. Gordon admitted many of the

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inaccuracies in his deposition, but blamed them on his memory, lack of access to

records, mistake, and misunderstanding of the law. For example, when questioned

about his failure to disclose accounts with Fidelity Investments and

tradeMONSTER, Gordon replied “I just missed it. Okay?” Likewise, with

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respect to his failure to list EffTec International stock, Gordon responded that it

was “[p]robably an oversight,” regarding an undisclosed promissory note from

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LifeStyle Innovations, he stated, “[b]ecause I had forgot about it. And LifeStyle

has nothing in it anyway,” and, finally, as to shares in SGD Holdings that were

74

not disclosed in his initial Schedules, he claimed he “thought [those] were

(...continued)

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ventures, accounts receivable, equitable or future interests not listed in Schedule

A, office equipment, furnishings and supplies, and “[o]ther personal property of

any kind not already listed.” Like Schedule A, Schedule B also directs married

debtors to disclose whether such property is held by one or the other spouse,

jointly, or by the marital community. Paragraph 18 of the SOFA requires

individual debtors to disclose “all businesses in which the debtor was an officer,

director, partner, or managing executive of a corporation . . . or in which the

debtor owned 5 percent or more of the voting or equity securities,” within the sixyear period prior to filing their bankruptcy petition.

Appx at 1235.

71

Id. at 882. Earlier in his deposition, Gordon stated that he didn’t remember

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the Fidelity account “when we had to file in a hurry.” Id. at 730. However,

Gordon signed the bankruptcy papers in November 2010 and they were held until

he later learned that a lawsuit against him was going forward. Thus, his claim

that the documents were prepared and filed “in a hurry” is inaccurate.

Id. at 883.

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Id. at 885-86.

74

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disclosed in my bankruptcy filings.”

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Gordon also testified that he “just didn’t recall having signatory authority”

on the Gordons’ household checking accounts, and that when his Petition was

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filed in January 2011, he was in jail and “didn’t have anything” in the way of

financial records with which to prepare his filings. Gordon did list Delvest, Inc.,

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of which he claimed to own 83%, in his initial Schedule B, but assigned it a value

of $30,000, even though it owned several hundred thousand dollars worth of real

property. When asked how he arrived at that valuation, Gordon stated “I don’t

recall.”

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The number of false statements made by Gordon in his bankruptcy papers is

overwhelming. It is inconceivable that he did not know he had some retained

interests in the marital assets that he gave to his wife, whether or not he believed

his interests to be valuable. It is similarly inconceivable that he would fail to

disclose his interests in marital assets because of criminal forfeiture orders that

post-dated his Petition. In any event, throughout the bankruptcy proceedings,

Gordon continued to deny that he ever had any interest in the marital assets.

When questioned about any marital interest he may have had in assets titled solely

in his wife’s name, Gordon responded, “I don’t believe I had a marital interest”

because “I’m not a divorce lawyer, but I don’t believe a marital interest even

forms until a divorce is filed . . . .” Moreover, the “most important[]” reason he

79

Id. at 884.

75

Id. at 707.

76

Id. at 786, 791-92.

77

Id. at 892. Although Gordon claimed to have later revised his valuation of

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Delvest to $230,000, that figure does not appear in any of the amended Schedules

he filed. He did, however, testify at the creditors meeting that “[t]he Delvest

assets should have been listed as $230,000, not $30,000.” Id. at 1346.

Id. at 689-90, 692.

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did not disclose an interest in the Residence was that it “was forfeited to the

government in September of 2010.” Likewise, although Gordon admitted that he

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had control of Delvest when he filed his Petition, it was only “for like, three

days.” In addition, Gordon did not disclose sales of some personally-owned

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assets because “I didn’t believe the sale of stock and brokerage accounts counted

as transfers, so I did not disclose it.”

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Finally, Gordon repeatedly asserted that he didn’t need to list any assets

owned by the Professional Corporation in his bankruptcy filings because assets

owned by a separate entity are not his personal assets. It is true, as Gordon

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contends, that he was not required to itemize the assets of his wholly-owned

Professional Corporation or of Delvest in his personal bankruptcy. However, he

was required to state values for those companies that took into account the assets

that the companies owned. Indeed, Gordon testified that he listed the corporations

that he owned, but not their assets, noting, “I just put what the value of the

corporations were.” But Gordon did not state valid values for the companies he

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owned in his filings. Rather, he assigned a zero value to the Professional

Corporation, and a value of $30,000 to his Delvest interest. Although a property

owner is considered to be competent to testify about the value of his own

property, Gordon’s value figures apparently were not based on an impartial

assessment of relevant facts.

Id. at 689-90 (referring to the criminal court’s first forfeiture order).

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Id. at 1244 (referring to the criminal court’s second forfeiture order that

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was entered 4 days after Gordon filed his Petition).

Id. at 705-06.

82

Id. at 705, 795, 826, 871.

83

Id. at 795.

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The appellate record is replete with evidence from which the bankruptcy

court could have denied Gordon’s discharge based on his false oaths. We cannot

conclude that the findings underpinning that holding were clearly erroneous. Our

review of the record reveals that Gordon made numerous false statements and

omitted much requested information in his bankruptcy filings. The bankruptcy

court did not believe, nor does this Court, that the many inaccuracies in Gordon’s

filings resulted from memory lapses, lack of legal knowledge, or mistake. Rather,

they were intentionally made in order to keep as many of Gordon’s assets out of

the hands of his creditors as possible. Gordon was a sophisticated debtor who

understood the law (of both bankruptcy and marital property) well enough to

interpret it in ways that were beneficial to him. He consciously decided to make

only a half-hearted effort to list assets in his bankruptcy filings, anticipating that

he could offer up any number of excuses for any inaccuracies that were

discovered. In particular, Gordon’s assessment of the Professional Corporation’s

value at $0 (which should have included whatever assets it had, such as stocks,

cash, accounts receivable, and furniture), based on his opinion that “after three or

four days after I filed bankruptcy, I no longer owned [the PC]” was deliberately

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misleading. Both Gordon’s conduct and his testimony exhibit a complete

disregard for the bankruptcy system, which he seems to view as simply a

mechanism by which to avoid personal responsibility. The bankruptcy system is

set up to protect “honest but unfortunate debtors,” not those who would abuse it to

further their own interests. The bankruptcy court’s conclusion that Gordon made

false oaths within the purview of § 727(a)(4)(A) is not clearly erroneous.

Id. at 722. Gordon also admitted to using nearly all of the PC’s assets to

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pay his criminal attorneys’ fees, contending that those fees had been “a business

expense.” Id. at 833.

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V. CONCLUSION

For the reasons stated herein, the bankruptcy court’s order denying

Gordon’s discharge pursuant to § 727(a)(2)(A) and (a)(4)(A) is affirmed.

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