629 B.R. 539
S.D.N.Y.2021Background
- Appellant Anthony Gasson filed Chapter 7 in September 2012; Premier Capital (who purchased several judgments against Gasson) brought an adversary proceeding seeking denial of discharge under 11 U.S.C. § 727(a)(2)(A).
- Gasson’s wife formed Soroban (she was nominal owner/officer); Gasson performed virtually all consulting work, generated substantial revenue through Soroban, and did not take a regular salary.
- Soroban funds were used to pay Gasson’s personal expenses (transfers to Mrs. Gasson’s account, allowances, home improvements, loans to family, etc.), and Gasson paid his credit-card bills and other personal costs from Soroban-sourced funds.
- In pre-petition discovery and on bankruptcy schedules, Gasson understated or omitted his income, assets, and business interest; he denied ownership or income from corporations in response to subpoenas.
- The Bankruptcy Court found Gasson had an equitable (beneficial) interest in Soroban, concealed that interest, acted with intent to hinder creditors, and that the concealment was continuous into the one-year prepetition period; the District Court affirmed.
Issues
| Issue | Plaintiff's Argument (Premier) | Defendant's Argument (Gasson) | Held |
|---|---|---|---|
| Whether Gasson owned an equitable interest in Soroban | Gasson effectively owned/controlled Soroban: he ran the business, generated revenue, diverted income to family, and kept benefits | Soroban legitimately owned by wife; arrangement had bona fide reasons and Gasson lacked legal title | Court: Gasson retained beneficial interest under In re Carl factors; ownership finding affirmed |
| Whether Gasson concealed his interest in Soroban | Gasson misled creditors and omitted value/income on subpoenas and schedules; diverted receipts to wife’s account and used funds for personal benefit | Disclosures reflected misunderstanding; financial structure legitimate, not concealment | Court: concealment proven—misleading discovery responses, false schedules, and diversion to family support concealment finding |
| Whether Gasson acted with intent to hinder, delay, or defraud creditors | Intent shown by badges of fraud: inadequate consideration to family transfers, retention/use of assets, timing amid heavy liabilities, pattern of transfers | Arrangement was to protect from new debt and not to defraud; other creditors were paid | Court: circumstantial badges and misleading disclosures support intent to hinder; finding affirmed |
| Whether concealment falls within the one-year lookback (continuing concealment) | Even if initial transfers predated the year, Gasson continuously treated and benefited from Soroban’s income into the prepetition year | Predicate concealment not egregious or materially comparable to larger cases; one-year requirement not met | Court: continuing-concealment doctrine applies; transfers and ongoing withdrawals persisted into critical year; affirmed |
| Whether Premier had standing to object to discharge | Premier (purchaser of judgments) had standing to bring adversary proceeding | Gasson challenged validity of underlying state judgments (Rooker–Feldman) | Court: Premier had standing; collateral attack on state judgments barred by Rooker–Feldman |
Key Cases Cited
- In re Carl, 517 B.R. 53 (Bankr. N.D.N.Y. 2014) (multi‑factor test for debtor’s equitable ownership in insider business)
- In re Coady, 588 F.3d 1312 (11th Cir. 2009) (beneficial diversion of business receipts to family can constitute concealment)
- In re Palermo, 370 B.R. 599 (Bankr. S.D.N.Y. 2007) (applying continuing concealment where debtor continued to use transferred receivables for personal expenses)
- In re Gardner, 384 B.R. 654 (Bankr. S.D.N.Y. 2008) (concealment requires withholding information once duty to disclose arises)
- In re Klutchko, 338 B.R. 554 (Bankr. S.D.N.Y. 2005) (transfer of salary rights to family entity while retaining benefits supports denial of discharge)
- Salomon v. Kaiser (In re Kaiser), 722 F.2d 1574 (2d Cir. 1983) (use of badges of fraud to infer intent)
- Republic Credit Corp. v. Boyer (In re Boyer), [citation="328 F. App'x 711"] (2d Cir. 2009) (discussing continuing concealment doctrine)