Opinion ID: 873211
Heading Depth: 2
Heading Rank: 4

Heading: Brown’s Finances in 1993

Text: The year 1993 was a turning point in the Browns’ financial condition. The evidence may not have been accessible to others for a while, but it could not have been unknown to the Browns. Although they eventually (in 1997) reported that they owed almost $350,000 in income taxes for 1993, they did not file a timely return. And although Brown was not sued by investors until October 1994 and was not indicted for financial transgressions until December 1995, the claims and charges concerned misconduct beginning in late 1990. Tingey confirmed, perhaps inadvertently, that Brown knew he was in a precarious financial situation when he created the trust. Tingey testified that it was his understanding that Brown “wanted to create the trust in part to set up an entity that would hold some assets separate and apart from him to protect his assets from creditors.” Id. at 183 (Mem. Op. at 53) (internal quotation marks omitted). E. Brown’s Use of the Family Trust in Personal Business Ventures and Securities Fraud Brown retained significant control over the Family Trust’s affairs. Tingey testified that he consulted with Brown and relied on Brown’s knowledge of the investment industry in making decisions regarding trust assets. Brown often -6- presented Tingey with investment opportunities for the trust. Moreover, the trust was intimately intertwined with Brown’s business affairs. The Brighton Factor Dealers, which Brown said “‘was really just a facilitation of the business where I was working,’” id. at 154 (Mem. Op. at 24), was, according to Tingey, “‘a dba of the Trust,’” id. Yet Tingey’s role in the venture was limited to establishing the dba, signing some checks, reviewing the bank statements, and forwarding copies of the statements to Brown. The Family Trust also was involved with three companies for which Brown worked as an officer or manager: Wellshire Securities (Deutschland) GmbH, Wellshire Services, Inc., and Wellshire Securities, Inc. (collectively, Wellshire Securities). According to the district court, Tingey, at Brown’s direction, entered into a series of securities transactions for the Family Trust “directly related to the activities of the Wellshire securities entities.” Id. at 152 (Mem. Op. at 22). The securities or the money to acquire them all originated with Brown. The district court found: With the assent of the trustee, [Brown] made use of the [Family Trust] and its several bank and brokerage accounts to engage in financial transactions that were largely an extension of his own personal dealings and financial affairs involving the business of the Wellshire entities, and otherwise. Beginning in or about October 1994, Brown conducted the business of Brighton Factor Dealers through the [Family Trust’s] accounts in an attempt to shelter that economic activity from Brown’s mounting potential personal liability arising out of the Wellshire entities’ business. Id. at 157 (Mem. Op. at 27). -7- Brown’s activities with Wellshire Securities resulted in the abovementioned suits against him by investors and a criminal indictment charging him with securities fraud. In the criminal case the Family Trust was placed under court restrictions, which lasted until October 3, 1998, when the trust paid more than $400,000 to the government as restitution, leaving the Ski Cabin as the trust’s sole remaining asset. F. District Court Proceedings In 2007 the government filed a complaint in the United States District Court for the District of Utah to reduce the tax assessments against the Browns to judgment and to foreclose on the tax liens on the cabin. The district court ultimately granted the government’s motion for summary judgment on the claims to reduce the assessments to judgment; but it refused to grant summary judgment to foreclose on the tax liens and held a three-day bench trial in April 2011. The government’s theories were that the Family Trust held the cabin as a nominee of the Browns and that the transfer of the cabin to the Family Trust was fraudulent as to creditors. The court ruled (1) that under Utah law the Browns held the beneficial interest in the cabin because the Family Trust held legal title to the cabin for Brown’s benefit in a PMRT, and (2) that under federal law the Family Trust held legal title to the cabin as a nominee for the Browns. Accordingly, the court ruled that the government could foreclose on its lien. The court did not rule on the fraudulent-transfer theory, and it is not at issue on appeal. -8-