43 F.4th 37
2d Cir.2022Background:
- Anthony J. Gasson, a CPA and longtime financial consultant, personally guaranteed debts of prior businesses that produced judgments later acquired by Premier Capital, LLC.
- In 2001 Gasson and his wife formed Soroban, Inc.; his wife was nominal owner but Gasson ran day-to-day operations, provided services, controlled bank accounts, signed checks, and derived substantial income from Soroban.
- Premier sought collection beginning in 2011; Gasson filed Chapter 7 on September 27, 2012 and listed little personal property and $0 for his individual consulting business on schedules.
- Premier filed an adversary complaint in 2014 seeking denial of discharge under 11 U.S.C. § 727(a)(2) for concealment of assets.
- The bankruptcy court found Gasson had a beneficial interest in Soroban, concealed that interest with intent to hinder creditors, and that concealment continued into the one-year prepetition period under the continuous concealment doctrine; the district court affirmed.
- The Second Circuit affirmed the denial of discharge, adopting the continuous concealment formulation and concluding the factual findings (beneficial interest, concealment, intent, and timing) were not clearly erroneous.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Gasson had a property/beneficial interest in Soroban | Premier: Gasson exercised dominion and control and thus had a de facto ownership interest | Gasson: Wife was the nominal owner; no legal property interest | Held: Gasson had a beneficial interest under New York law (totality of control factors) |
| Whether Gasson concealed that interest with intent to hinder creditors under § 727(a)(2) | Premier: acts (submitting false responses, siphoning funds, running business through spouse) show concealment and improper intent | Gasson: conduct was innocent, hindsight reasoning, and explanations credible | Held: Bankruptcy court’s findings of concealment and intent supported by record and not clearly erroneous |
| Whether wrongful act occurred within one-year statutory period | Premier: continuous concealment — concealment that persisted into the year before filing satisfies § 727(a)(2)(A) | Gasson: initial acts predated one-year period; therefore § 727(a)(2)(A) not satisfied | Held: Adopted continuous concealment doctrine; concealment continued into the year before filing, so statutory period satisfied |
Key Cases Cited:
- Butner v. United States, 440 U.S. 48 (property interests are defined by state law)
- In re Cacioli, 463 F.3d 229 (§ 727 construed strictly for objectors and liberally for debtors but traditional review standards apply)
- Rosen v. Bezner, 996 F.2d 1527 (formulation of continuous concealment doctrine)
- In re Olivier, 819 F.2d 550 (continuous/continuing concealment recognized)
- In re Lawson, 122 F.3d 1237 (transfer before one year may support concealment if debtor retained secret benefit)
- Andrew Carothers, M.D., P.C. v. Progressive Ins. Co., 33 N.Y.3d 389 (New York factors for de facto ownership/control)
- In re Kaiser, 722 F.2d 1574 (badges of fraud include financial distress and creditor threats)