US Trustee v. Widmer Complaint Case No. 14-12946

Honorable Timothy W.
Dore
Chapter 7
3
UNITED STATES BANKRUPTCY COURT
4 WESTERN DISTRICT OF WASHINGTON
5
6 In Re: )
)
7 William J. Widmer, Jr. and ) Case No. 14-12946
Madeline Lopes Widmer, )
8
)
9 Debtors. )
_________________________________________ )
10 )
United States Trustee, ) Adversary No.
11 )
Plaintiff, )
12
) COMPLAINT TO DENY DEBTORS’
13 v. ) DISCHARGE
)
14 William J. Widmer, Jr. and )
Madeline Lopes Widmer, )
15 )
Defendants. )
16
)
17
18 The United States Trustee, for claims against defendants William J. Widmer, Jr. and
19 Madeline Lopes Widmer (together, the “Defendants”), asserts and alleges as follows:
20 PARTIES
21 1. The plaintiff is the United States Trustee for Region 18, which includes the
22 Western District of Washington. The United States Trustee has standing to bring this action
under 11 U.S.C. §§ 307 and 727(c)(1).
23
2. The Defendants are the debtors in the above-captioned chapter 7 bankruptcy case.
24
25
26
Office of the United States Trustee

COMPLAINT TO DENY DISCHARGE - 1 700 Stewart Street
Suite 5103
Seattle, WA 98101-1271
206-553-2000, 206-553-2566 (fax)
Case 14-01356-TWD Doc 1 Filed 09/04/14 Ent. 09/04/14 16:21:19 Pg. 1 of 12
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JURISDICTION AND VENUE
2
3. This is an adversary proceeding to deny the Defendants’ discharge, brought
3
pursuant to 11 U.S.C. §§ 727(a)(2), (a)(3), (a)(4) and (a)(5), and Rule 7001 of the Federal Rules
4 of Bankruptcy Procedure.
5 4. This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §
6 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(J).
7 5. Venue is proper pursuant to 28 U.S.C. § 1409(a).
8 FACTUAL ALLEGATIONS
9 6. On April 17, 2014 (the “Petition Date”), the Defendants filed a voluntary joint
chapter 7 petition (the “Petition”) in the Western District of Washington, case no. 14-12946 (the
10
“Chapter 7 Case”).
11
7. In conjunction with the Chapter 7 Case, the Defendants filed schedules of assets
12
and liabilities (each a “Schedule” and collectively, the “Schedules”), and a statement of financial
13
affairs (the “Initial SOFA”). The Initial SOFA was amended on June 12, 2014 (the “Amended
14
SOFA”).
15 8. Each of the Defendants signed the Petition, Schedules, Initial SOFA, and
16 Amended SOFA under penalty of perjury as being true and correct.
17 9. Nancy James is the chapter 7 trustee in the Chapter 7 Case (the “Trustee”).
18 10. Each of the Defendants attended college and was granted a 4-year college degree.
19 11. Mr. Widmer is the former CEO of Fairplay Financial Inc., a holding company
20 with several subsidiary entities that were formerly in the business of banking, providing bridge
loan financing, real estate brokerage, and retail mortgage services. As CEO, Mr. Widmer
21
managed the operations of the company and ran its debt fund, overseeing the issuance of some
22
2,600 private money loans during his time with the company. Mr. Widmer served as CEO from
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the inception of the company in June 2011 until he was terminated on or about September 16,
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2013. Fairplay Financial Inc. is currently in receivership. See Amended SOFA, No. 6(b).
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12. On May 22, 2014, the meeting of creditors was held in the Chapter 7 Case (the
2
“Creditors’ Meeting”). At the Creditors’ Meeting the Defendants testified that: they reviewed
3
and signed all of the schedules, statements, and other related bankruptcy documents (the
4 “Bankruptcy Documents”) before they were filed with the Court; the information in the
5 Bankruptcy Documents was accurate and complete; and the Bankruptcy Documents listed all of
6 their assets and debts.
7 13. The Initial SOFA filed by the Debtors disclosed two transfers made within the
8 two years preceding the commencement of the Chapter 7 Case: (a) the December 2013 sale of
9 stock and real estate to W&L Holdings, Inc., and (b) the sale of a 2009 Cobalt 276 boat to an
unknown third party. See Initial SOFA, No. 10.
10
14. At the Creditors’ Meeting, the Trustee questioned the Defendants regarding their
11
ownership of condominium unit 101, located at 2731 Boylston Avenue East, Seattle, WA 98102.
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See Schedule A. The Defendants did not mention to the Trustee that they had formerly owned a
13
second unit, condominium unit 301, at that address (“Unit 301”).
14
15. Following the Trustee’s initial questions at the Creditors’ Meeting, counsel for
15 Fairplay Funding NW, LLC, Michael White, inquired about assets transferred in the past year,
16 and specifically the transfer of Unit 301. Mr. Widmer stated that Unit 301 was transferred to
17 Ataro LLC sometime in August 2013 (the “Unit 301 Transfer”). Mr. Widmer further testified
18 that as consideration for the Unit 301 Transfer, the Defendants received forgiveness of a
19 $900,000 debt related to an alleged undocumented loan made by Ataro LLC around 2005.
20 16. Mr. Widmer stated at the Creditors’ Meeting that he paid off approximately
$1,000,000 of indebtedness secured by Unit 301 prior to the Unit 301 Transfer. Unit 301 was
21
transferred by the Defendants to Ataro LLC free and clear of all liens and encumbrances.
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17. At the time of the Unit 301 Transfer, Unit 301 had an assessed value of $550,000.
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18. The Unit 301 Transfer was not disclosed on the Initial SOFA.
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19. The transfers of approximately $1,000,000 to satisfy the indebtedness secured by
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Unit 301 were not disclosed on the Initial SOFA.
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20. Following the Creditors’ Meeting, the Defendants filed the Amended SOFA to
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disclose the Unit 301 Transfer to Ataro LLC on August 29, 2013, for forgiveness of debt as the
3
sole consideration. See Amended SOFA, no. 10. The Defendants also disclosed for the first time
4 the November 20, 2013, granting of a deed-in-lieu of foreclosure for property located at 924
5 North G Street, Tacoma, WA 98403 to Fairplay Funding NW, LLC, and updated the status of
6 the ongoing litigation listed in SOFA no. 4(a). Additional information regarding the sale of the
7 2009 Cobalt 276 boat was also added, including the purchaser’s name, broker’s name, and sale
8 price. No other amendments were made to the Initial SOFA.
9 21. On August 22, 2014, the United States Trustee conducted a Bankruptcy Rule
2004 examination of the Defendants (the “Examination”).
10
22. In conjunction with the Examination, a subpoena was issued and served that
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requested all documents (the “Document Request”) relating to each of the transfers referred to in
12
Amended SOFA no. 10, 1 including documents relating to the satisfaction of any lines of credit
13
or liens on the respective parcels of real property.
14
23. No documents were produced regarding any of the transfers referred to in
15 Amended SOFA no. 10, including the Unit 301 Transfer.
16 24. The Document Request also requested all documents relating to any indebtedness
17 of the Debtors or an Entity2 against Unit 301 incurred since 2005. The Defendants produced no
18 responsive documents.
19 25. Mr. Widmer asserted his Fifth Amendment privilege when asked at the
20 Examination about the Unit 301 Transfer. Specifically, Mr. Widmer would not explain why he
failed to disclose the Unit 301 Transfer on the Initial SOFA, what consideration he received for
21
the Unit 301 Transfer, and whether or not he transferred Unit 301 to Ataro LLC in satisfaction of
22
a debt.
23
24 1
As defined in the Document Request, “SOFA” means the Statement of Financial Affairs (as amended)
25 filed in the Case.
2
Defined in the Document Request as “any sole proprietorship, partnership, corporation, estate,
26 foundation, association, and trust in which the Debtors have or had a legal or equitable interest in and/or
over which the Debtors currently or previously exercised Control.”
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26. Ms. Widmer stated at the Examination that she did not know anything about the
2
Unit 301 Transfer.
3
27. Each of the Defendants signed the statutory warranty deed dated August 19,
4 2013, transferring their interest in Unit 301 to Ataro LLC.
5 28. Mr. Widmer testified at the Examination that, prior to the Unit 301 Transfer, he
6 transferred approximately $930,000 to IndyMac in satisfaction of IndyMac’s deed of trust on
7 Unit 301 (the “IndyMac Transfer”).
8 29. The date of the IndyMac Transfer is currently unknown, although it is believed to
9 have been within two years of the Petition Date.

30. The IndyMac Transfer was not disclosed on the Initial SOFA or Amended SOFA
10
no. 10.
11
31. Mr. Widmer asserted his Fifth Amendment privilege at the Examination
12
regarding the source of the funds used for the IndyMac Transfer.
13
32. Ms. Widmer stated at the Examination that she did not know anything regarding
14
the source of the funds used for the IndyMac Transfer.
15 33. Mr. Widmer testified at the Examination that, prior to the Unit 301 Transfer, he
16 transferred approximately $150,000 to Flagstar in satisfaction of Flagstar’s second position deed
17 of trust on Unit 301 (the “Flagstar Transfer”).
18 34. The date of the Flagstar Transfer is currently unknown, although it is believed to
19 have been within two years of the Petition Date.
20 35. The Flagstar Transfer was not disclosed on the Initial SOFA or Amended SOFA
no. 10.
21
36. Mr. Widmer asserted his Fifth Amendment privilege at the Examination
22
regarding the source of the funds used for the Flagstar Transfer.
23
37. Ms. Widmer stated at the Examination that she did not know anything regarding
24
the source of the funds used for the Flagstar Transfer.
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38. The Document Request requested all documents relating to the payment of funds
2
to Flagstar and/or IndyMac in 2012 or 2013. The Defendants produced no responsive
3
documents.
4 39. The Defendants had a relationship with one or more businesses that should have
5 been, but were not, disclosed on Schedule B, Initial SOFA no. 18, or Amended SOFA no. 18,
6 including the Defendants’ ownership interest in Champagne Point LLC.
7 40. Champagne Point LLC is a Washington corporation formed in August 2008.
8 41. The Defendants testified at the Examination that they owned 16.66 percent of the
9 shares in Champagne Point LLC.

42. According to the Washington Secretary of State’s website, Champagne Point
10
LLC is currently active.
11
43. On or about March 14, 2014, Champagne Point LLC sold property located at
12
8011 14th Avenue North West, Seattle, WA 98117 for $632,500 (“Champagne Point Transfer”).
13
44. The Defendants received gross proceeds of $17,933 from the Champagne Point
14
Transfer (the “Champagne Point Proceeds”).
15 45. The Defendants testified at the Examination that the Champagne Point Proceeds
16 were deposited in Wells Fargo account no. 9978.
17 46. The Defendants produced no documents in response to the Document Request
18 relating to Wells Fargo account no. 9978, or any other Wells Fargo account.
19 47. The Defendants produced no documents to evidence what they did with the
20 Champagne Point Proceeds.

48. The Defendants testified at the Examination that in January 2014, three months
21
before the Petition Date, they sold a 1999 Porsche 911 for $22,500 (the “Porsche Proceeds”) to
22
an unknown third party through Craigslist (the “Porsche Transfer”).
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49. The Defendants deposited the Porsche Proceeds into Union Bank account no.
24
0423 on or about January 17, 2014.
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50. The Porsche Transfer is not disclosed on either the Initial SOFA or the Amended
26 SOFA.
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51. The Defendants testified at the Examination that they purchased a Rolex watch
3
(the “Rolex”) for approximately $40,000 in or around March or April 2013.
4 52. The Defendants testified at the Examination that they gave the Rolex to the
5 receiver for Fairplay Financial Inc. in or around November 2013 (the “Rolex Transfer”).
6 53. The Rolex Transfer is not disclosed on either the Initial SOFA or the Amended
7 SOFA.
8 54. The Document Request requested statements from financial institutions from two
9 years prior to the Petition Date until the present.

55. The Defendants provided incomplete account statements for McAdams Wright
10
Ragen (“MWR”) account no. 8270, covering the period from February 1, 2012 until April 30,
11
2014. The Defendants did not provide the account statements for MWR account no. 8270 for
12
July 2013, August 2013, or August 2012.
13
56. The Defendants provided incomplete account statements for MWR account no.
14
2070, covering the period from February 1, 2012 until September 30, 2013. The Defendants did
15 not provide the account statements for MWR account no. 2070 for July 2013, August 2013, or
16 August 2012.
17 57. The Defendants provided account statements for Union Bank account 0423 for
18 only the period from January 17, 2014 to April 15, 2014.
19 58. In the year prior to the Petition Date, the Defendants withdrew, transferred, or
20 otherwise used at least $360,000 from MWR account nos. 8270 and 2070, and Union Bank
account no. 0423 (the “Missing Funds”).
21
59. On or about January 24, 2014, the Defendants made a $20,000 withdrawal from
22
Union Bank account no. 0423.
23
60. The Defendants have not yet produced documents to evidence what they did with
24
the $20,000 withdrawal.
25
61. On or about February 10, 2014, a $12,500 check written from Union Bank
26 account no. 0423 was negotiated.
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62. Although the Document Request requested copies of all checks written in any
2
amount of $5,000 or more, the Defendants have not produced a copy of the $12,500 check.
3
63. On June 30, 2013, the balance in MWR account no. 8270 was approximately
4 $118,616.
5 64. On September 30, 2013, the balance in MWR account no. 8270 was
6 approximately $13,065.
7 65. Mr. Widmer asserted his Fifth Amendment privilege when asked at the
8 Examination what he did with the $105,000, which was apparently withdrawn, transferred, or
9 otherwise used from MWR account no. 8270 between July 1, 2013, and August 31, 2013.
66. Ms. Widmer stated at the Examination that she did not know what happened to
10
the $105,000 from MWR account no. 8270.
11
67. On June 30, 2013, the balance in MWR account no. 2070 was approximately
12
$215,788.
13
68. As of June 30, 2013, the Defendants had made year-to-date withdrawals of $0
14
from MWR account no. 2070.
15 69. On September 30, 2013, the balance in MWR account no. 2070 was $0.
16 70. As of September 2013, the Defendants had made year-to-date withdrawals of
17 approximately $225,500 from MWR account no. 2070.
18 71. The Defendants testified at the Examination that the $225,500 withdrawn from
19 MWR account no. 2070 was deposited into Union Bank account no. 0423.
20 72. As of April 15, 2014, the most recent account statement the Defendants provided
for Union Bank account no. 0423, the account had a balance of $3,620.
21
73. Mr. Widmer asserted his Fifth Amendment privilege when asked at the
22
Examination what he did with the $225,500 after the funds were deposited into Union Bank
23
account no. 0423.
24
74. Ms. Widmer stated that she did not know what happened to the $225,500 after the
25
funds were deposited into Union Bank account no. 0423.
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75. The Defendants had one or more bank accounts open on the Petition Date, or that
2
were closed within one year of the Petition Date, which were not disclosed on the Schedules,
3
Initial SOFA, or Amended SOFA (the “Undisclosed Accounts”).
4 76. The Undisclosed Accounts include, without limitation: Union Bank account no.
5 0381; Hometown National Bank accounts nos. 7907, 7973, 5776, and 5784; Raymond James
6 account no. 1270; MWR account no. 0733; and U.S. Bank accounts nos. 8860 and 4826.
7 77. On April 30, 2013, the balance in Hometown National Bank account no. 7907
8 was $19,509.
9 78. The Defendants testified at the Examination that when Hometown National Bank
account no. 7907 was closed in early 2014, the account had a balance of approximately $3,000.
10
79. The Defendants have not produced documents evidencing what happened to the
11
approximately $16,500 in Hometown National Bank account no. 7907 that was apparently spent,
12
transferred, or withdrawn between April 30, 2013 and the time the account was closed (the
13
“Hometown Bank Funds”).
14
80. The Defendants listed the following accounts in Scheduled B, but provided no
15 documents to the United States Trustee in response to the Document Request: Hewlett-Packard
16 Co. pension plan, and American Funds accounts no. 6226 and 2122 (the “Undocumented
17 Accounts”).
18 FIRST CLAIM FOR RELIEF
19 11 U.S.C. § 727(a)(2)
20 (Concealment or Transfer of Assets)

81. Paragraphs 6 through 80 are incorporated.
21
82. The Defendants, with intent to hinder, delay, or defraud a creditor or the Trustee
22
transferred, removed, destroyed, or concealed, or permitted to be transferred, removed,
23
destroyed, or concealed, property of the Defendants within one year before the date of the filing
24
of the Petition. The transfers or concealments relate to, without limitation:
25
a. the Unit 301 Transfer;
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b. the IndyMac Transfer (if made within one year of the Petition Date);
2
c. the Flagstar Transfer (if made within one year of the Petition Date);
3
d. the Porsche Transfer;
4 e. the Porsche Proceeds;
5 f. the Rolex Transfer;
6 g. an Ownership interest in Champagne Point LLC
7 h. the Champagne Point Proceeds;
8 i. some or all of the Missing Funds;
9 j. the Undisclosed Accounts, and any money in them on the Petition Date;
and
10
k. some or all of the Hometown Bank Funds.
11
SECOND CLAIM FOR RELIEF
12
11 U.S.C. § 727(a)(3)
13
(Inadequate Records)
14
83. Paragraphs 6 through 80 are incorporated.
15 84. The Defendants have destroyed, or failed to keep or preserve, documents, records,
16 and papers from which the Defendants’ business transactions and financial condition might be
17 ascertained including, without limitation:
18 a. the Unit 301 Transfer;
19 b. the IndyMac Transfer;
20 c. the Flagstar Transfer;

21
e. use of the Porsche Proceeds;
22
f. use of the Champagne Point Proceeds;
23
g. use of the Missing Funds;
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h. the Undisclosed Accounts, and use of any money in them on the Petition
25
Date;
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i. use of the Hometown Bank Funds; and
2
j. the Undocumented Accounts, and any money in them on the Petition
3
Date.
4 85. The Defendants’ acts or failures to act were not justified under the circumstances
5 of the case.
6 THIRD CLAIM FOR RELIEF
7 11 U.S.C. § 727(a)(4)
8 (False Oaths or Accounts)
9 86. Paragraphs 6 through 80 are incorporated.

87. The Defendants knowingly failed to disclose material information in the
10
Schedules, Initial SOFA, and Amended SOFA including, without limitation:
11
a. the Unit 301 Transfer;
12
b. the IndyMac Transfer (if made within one year of the Petition Date);
13
c. the Flagstar Transfer (if made within one year of the Petition Date);
14
15 e. the Porsche Proceeds;
16 f. the Rolex Transfer;
17 g. an Ownership interest in Champagne Point LLC
18 h. the Champagne Point Proceeds;
19 i. the Missing Funds;
20 j. the Undisclosed Accounts, and any money in them on the Petition Date;
and
21
k. the Hometown Bank Funds.
22
88. The Defendants signed the Schedules, Initial SOFA, and Amended SOFA under
23
penalty of perjury when they knew they were materially false.
24
89. The Defendants knowingly testified falsely at the Creditors’ Meeting when they
25
testified that the Schedules, Initial SOFA, and Amended SOFA were accurate and complete.
26 90. The false oaths relate to material facts.
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91. The false oaths were made with fraudulent intent.
3
92. The false oaths were made in or in connection with the case.
4 FOURTH CLAIM FOR RELIEF
5 11 U.S.C. § 727(a)(5)
6 (Failure to Account for Loss of Assets)
7 93. Paragraphs 6 through 80 are incorporated.
8 94. The Defendants have failed to satisfactorily explain what happened to, without
9 limitation:
a. the Porsche Proceeds;
10
b. the Champagne Point Proceeds;
11
c. the Missing Funds;
12
d. any money in the Undisclosed Accounts on the Petition Date;
13
e. the Hometown Bank Funds; and
14
f. any money in the Undocumented Accounts on the Petition Date.
15 The United States Trustee prays for relief as follows:
16 A. That the Court enter a judgment denying the discharge of the Defendant pursuant
17 to 11 U.S.C. §§ 727(a)(2), (a)(3), (a)(4), and (a)(5); and
18 B. For such other and further relief as the Court deems just and equitable.
19 DATE: September 4, 2014.
20
Respectfully Submitted,
21
GAIL BREHM GEIGER
22 Acting United States Trustee for Region 18
23
/s/ Sarah R. Flynn
24 Sarah R. Flynn, NCBA #42829
Attorney for the United States Trustee
25
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US Trustee v. Widmer Complaint Case No. 14-12946

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Honorable Timothy W.

Office of the United States Trustee

Office of the United States Trustee

Office of the United States Trustee

8 price. No other amendments were made to the Initial SOFA.

9 have been within two years of the Petition Date.

19 have been within two years of the Petition Date.

Office of the United States Trustee

9 shares in Champagne Point LLC.

20 Champagne Point Proceeds.

9 years prior to the Petition Date until the present.

Office of the United States Trustee

20 (Concealment or Transfer of Assets)

Office of the United States Trustee

8 i. some or all of the Missing Funds;

19 b. the IndyMac Transfer;

20 c. the Flagstar Transfer;

Office of the United States Trustee

8 (False Oaths or Accounts)

9 86. Paragraphs 6 through 80 are incorporated.

19 i. the Missing Funds;

19 DATE: September 4, 2014.

Office of the United States Trustee

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