MEMORANDUM OPINION
This matter is before the Court upon the involuntary petitions in bankruptcy filed by the United States against Caucus Distributors, Inc. (“Caucus”), Campaigner Publications, Inc. (“Campaigner”), and Fusion Energy Foundation, Inc. (“Fusion”). 1 The involuntary petitions, which request relief under Chapter 7 of the United States Bankruptcy Code (“the Code”), were filed on April 20, 1987. See 11 U.S.C. § 101 et seq. The United States based the petitions upon claims outstanding against the debtors to-talling approximately 16-million dollars. The claims consisted of contempt fines imposed upon the debtors for their failure to comply with grand jury subpoenas. The United States filed the petitions as a sole petitioning creditor and did not make reference to the total number of creditors of each debtor. 2
Upon the denial of two motions for dismissal, answers to the petitions were filed on June 25, 1987. The government then filed a motion for summary judgment in each case. After the filing of the debtors’ answers but before the Courts' disposition of the motions for summary judgment, creditors intervened in each of the petitions, bringing the number of petitioning creditors to a minimum of three in each case.
*893
On March 8, 1988, this Court issued a memorandum opinion, which clarified that the United States was the holder of a claim, which was not contingent as to liability, nor subject to a bona fide dispute.
See In re Caucus Distributors, Inc.,
A trial on the issues remaining for adjudication was held and at the close of the government’s case, counsel for the debtors moved again to dismiss the involuntary petitions. See Fed.R.Civ.P. 41(b). The Court took the debtors’ motion under advisement and completed the trial on the merits. 4 Pursuant to Federal Rule of Civil Procedure 41(b), we now consider whether this Court should dismiss these involuntary proceedings “on the ground that upon the facts and the law the plaintiff has shown no right to relief.” Id.
The first basis asserted by the debtors in support of the instant motion to dismiss is that the government should not be allowed to proceed as a matter of law in an involuntary bankruptcy proceeding against parties whom the government also is prosecuting for criminal violations in anoth.er forum. Secondly, the debtors assert that an involuntary petition filed by a sole petitioning creditor with the knowledge that a debtor has in excess of twelve creditors warrants dismissal as a matter of law. We consider these grounds in the order proposed.
PARALLEL CRIMINAL PROCEEDINGS
At the time the involuntary petitions were filed, the alleged debtors had been the subject of criminal investigations for approximately two and one-half years. 5 Accordingly, the debtors have identified the threshold issue to be “whether the Government of the United States may file an involuntary bankruptcy petition against an entity when such entity concurrently is the target of a federal prosecution or investigation.” Alleged Debtors’ Proposed Conclusions of Law, p. 1. We decline to address the issue as posed, however, in view of the fact that the eligibility of a creditor to file an involuntary bankruptcy petition is governed by the provisions of the Bankruptcy Code. See 11 U.S.C. § 303(b)(1), infra at 896; 11 U.S.C. §§ 101(9) (defining “creditor”); 101(4) (defining “claim”). It is beyond the purview of this Court, therefore, to determine that the government may never file an involuntary petition against an entity defending a parallel criminal proceeding. We shall consider, however, whether the harm alleged by the debtors from the prosecution of parallel proceedings has occurred here, and a stay or dismissal warranted on the facts of this case.
*894
The debtors base their assertion that the government’s prosecution of parallel criminal and bankruptcy cases against them is prohibited as a matter of law upon the United States Supreme Court’s ruling in
United States v. Kordel,
With respect to the discovery requests, the
Kordel
Court noted that the defendants “never asserted, let alone demonstrated that there was no authorized person who could answer the interrogatories without the possibility of compulsory self-incrimination.”
Id.
at 9,
The Supreme Court also rejected the defendants’ assertions that the government’s conduct if not violative of the Fifth Amendment nevertheless “reflected such unfairness and want of consideration for justice,” on the basis that such a ruling would “stultify enforcement of federal law[.]”
Id.
at 11,
In
Afro-Lecon, Inc. v. United States,
the Federal Circuit examined the issue left open in
Kordel.
The Federal Circuit noted that “[t]he non criminal proceeding, if not deferred might undermine the party’s Fifth Amendment privilege against self-incrimination, expand rights of criminal discovery beyond the limits of Federal Rule of Criminal Procedure 16(b), expose the basis of the defense to the prosecution in advance of criminal trial, or otherwise prejudice the case.”
At the outset, we find the instant situation clearly inapposite. We deal here not with the propriety of convictions based upon information obtained in civil proceedings, as in Kordel, nor with an attempt to prevent discovery abuses, as in Afro-Le-con. In fact, the debtors maintain not that the United States has gained an advantage in any criminal trial as a result of the filing of these petitions, but rather that the government somehow has gained an advantage in these civil proceedings by the mere existence of the criminal actions, and/or that these petitions could not be defended adequately in view of the need of the debtors’ representatives to assert the Fifth Amendment.
The debtors’ insistence that the parallel proceedings and the alleged advantage gained by the government in the instant situation is somehow violative of the debtors’ rights is unfounded. Even if we assume that there has been a transfer of information from the criminal division to the civil, the primary basis for the courts’ rulings in Kordel and Afro-Lecon, the fear that the criminal division may gain access to incriminating information by use of a more liberal discovery process in civil litigation, is not present. If the debtors believe that any cooperation between the criminal and civil division is prohibited, a contention which the debtors do not support with any authority, 8 we note that no harm has come from the interaction. The representatives of the debtors all claimed the Fifth Amendment, not one ever testified or complied with requests for discovery.
The potential for abuse may have existed when the government requested a list of creditors from the debtors under Bankruptcy Rule 1003(b), or when representatives of the debtor corporations were subpoenaed to testify at trial, but the debtors do not allege that the government obtained new information as a result of the filings.
9
In
*896
fact, if any party was hurt by the existence of- the criminal proceedings, it was the government. It received no new information aside from what it had obtained from the efforts of the criminal division. Ironically, if the government had waited until the parallel criminal proceedings had concluded, the government may have benefited from of the testimony of representatives of the alleged debtors who had invoked the Fifth Amendment, as well as the United States Supreme Court’s ruling in
Braswell v. United States,
With respect to the alleged debtors’ contention that they were unable to defend themselves adequately in the instant proceedings, we note that such an argument only has merit, if any at all, if the outcome of these cases is unfavorable to the debtors. We, therefore, decline to consider this argument as a proper element of the debtors’ motion to dismiss.
Accordingly, we find no improprieties in the prosecution of parallel criminal and civil proceedings against the alleged debtors in the instant cases, and deny the debtors’ motion to dismiss on this basis. Whether the government acted in “bad faith” by pursuing relief in this Court with a “prose-cutorial mind-set” is a different question entirely and must be examined in view of the totality of the circumstances in these cases. We, therefore, defer our examination of the issue of bad faith until we have evaluated the defenses of the alleged debtors to the instant petitions.
THREE CREDITOR REQUIREMENT
The requirements for filing an involuntary petition in bankruptcy may be found in Section 303(b) of the Bankruptcy Code which provides:
(b) An involuntary case against a person is commenced by the filing with the bankruptcy court of a petition under chapter 7 or 11 of this title—
(1) by three or more entities, each of which is either a holder of a claim against such person that is not contingent as to liability or the subject of a bona fide dispute, or an indenture trustee representing such a holder, if such claims aggregate at least $5,000 more than the value of any lien on property of the debtor securing such claims held by the holders of such claims;
(2) if there are fewer than 12 such holders, excluding any employee or insider of such person and any transferee of a transfer that is voidable under section 544, 545, 547, 548, 549, or 724(a) of this title, by one or more of such holders that hold in the aggregate at least $5,000 of such elaims[.]
11 U.S.C. §§ 303(b)(1), (b)(2). Under this section, a single creditor may file an involuntary petition “only if the debtor against whom the proceeding is commenced has fewer than twelve creditors.”
Basin Electric Power Coop. v. Midwest Processing Co.,
The extent of the government’s knowledge with respect to the number of the debtors’ creditors in the instant case is an issue which has been raised several times *897 since the filing of these petitions. This Court has denied prior motions to dismiss, however, because the evidence before the Court at the time the rulings were issued did not establish conclusively that the government had demonstrated bad faith in the act of filing. 10 This Court also permitted the intervention of other creditors over the objection of the debtors on the same basis. 11
In response to the debtors’ motion to dismiss made on the second day of trial, however, counsel for the government replied in part as follows:
We have never made a secret, Your Honor, as to the Government’s knowledge as to potential creditors. If you look, for instance, to the Motion for Appointment of Interim Trustees, we attached the Egan affidavit which debtors have continually pointed to as the evidence of our knowledge. We made no secret of that.
In the motion for treating that Motion for Appointment of Interim Trustees ex parte matter we also submit much the same information. We have acknowledged to the Court in open court. Mr. Hudson last summer made that explicit.
Your Honor has observed from the very context of our pleadings that it’s no secret and I just don’t understand how [opposing counsel] can stand here and straight face (sic) suggest that we in any way hid that point.
It is our contention that if the matters can be waived, then it was our right to file the petition and see what the debtors want to do as far as that potential defense, and then once they elected to controvert the issue, then it is our view that as a procedural affirmative defense, the affirmative predicate is to comply with 1003(d). 12
Tr. Yol. Ill, pp. 83-84. In view of the government’s clear admission that prior to April 20,1987 it knew that the debtors each had more than twelve creditors, the issue here is whether this Court should dismiss these involuntary petitions as a matter of law.
The first statutes attempting to establish a uniform system of bankruptcy did not require that a minimum number of creditors file an involuntary petition in bankruptcy under any circumstances.
13
The Bankruptcy Act of 1898, however, provided that
three
creditors were required to file an involuntary petition against a debtor having a total number of more than twelve creditors.
14
The change from earlier stat
*898
utes reflected the compromise of a “pitched battle between those [in Congress] who wanted to give the creditor an effective remedy to assure equal distribution of a bankrupt’s assets and those who were determined to protect the debtor from the harassment of ill-considered or oppressive involuntary petitions, including those by a single creditor interest.”
In re Gibraltor Amusements, Ltd.,
Since the Act of 1898, the statutory provisions applicable to the filing of involuntary proceedings have undergone various changes. The minimum requirement of three petitioning creditors to commence a petition against a debtor who has in excess of twelve creditors, however, has remained the same. 18 To better understand the significance of Section 303 of the Bankruptcy Code, we examine its historical development.
The earliest case we have found on the issue of the proper filing of an involuntary petition was decided by the District Court for the Western District of Pennsylvania in
Robinson v. Hanway
in 1879.
The Robinson court observed that under common law “no action could be sustained by a partnership firm against one of its members,” and no statute had since been passed to authorize this practice. Id. at 1012. The court concluded, therefore, that the:
original creditors’ petition is void for want of proper petitioners, and did not give the court jurisdiction of the case, and that the intervening petitions are also void for want of an original petition to give them force. It is not a case of amendment of a defective petition of which the court has jurisdiction, and when the interveners perfect the petition by additional numbers and amounts. But it is an attempt to give life to a dead petition ... The intervenors must draw their support, if at all, from the original petition; but in this case the original petition is dead, and neither supports the interveners nor itself.
Id.; see also Despres v. Galbraith,
A decision seemingly contrary to the decision in
Robinson
later was rendered by the District Court for the District of Massachusetts in
In re Romanow.
The District Court for the Northern District of Georgia subsequently reasoned in
In re Bedingfield,
[t]he court would never entertain a mere sham petition prepared originally with a view to doing this, but it would be only where a petition was brought in good faith, and some such contingency as has been referred to occurred.
Id.
It is indicated from the above referenced cases and others which have followed that courts historically have attempted to distinguish between a petition “sufficient” and “insufficient” on its face at the time of its filing, 19 and between petitioners with bona *900 fide and fraudulent motives. 20 Only with the former, in each instance, were petitioners permitted to amend the original filing to add creditors who sought intervention and cure the original defect.
Once the above rules of law emerged from the courts, parties began to focus more specifically on the mechanics of filing the involuntary petition itself.
See In re Coburn,
Despite efforts by courts to clarify the procedure for filing involuntary petitions, however, debtors and creditors alike continued to attempt to manipulate the status of claims to defeat or accomplish a proper filing.
See Moulton v. Coburn,
In
Canute S.S. Co. v. Pittsburgh & West Virginia Coal Co.,
On appeal to the Supreme Court, the opposing creditors maintained that to give a court jurisdiction over an involuntary petition it must be filed by not less than three creditors having provable claims, unless the creditors are less than twelve in number; and, where less than three of the original creditors qualify, the joinder of intervening creditors is in substance an amendment but in effect the equivalent to a new filing.
Id.
at 247-48,
The United States Supreme Court in Canute observed that the argument of the opposing creditors that the creditors who sustain the petition must in fact be the original petitioners, failed to give weight to Section 59 of the Bankruptcy Act, which allowed creditors to intervene in an involuntary petition at any time until a dismissal or an adjudication on the merits. Id. Consequently the Supreme Court concluded:
that where a petition for involuntary bankruptcy is sufficient on its face, alleging that the three petitioners are creditors holding provable claims and containing all the averments essential to its maintenance, other creditors having provable claims who intervene in the proceeding and join in the petition at any time during its pendency before an adjudication is made, after as well as before the expiration of four months from the alleged act of bankruptcy, are to be counted at the hearing in determining whether there are three petitioning creditors qualified to maintain the petition, it being immaterial in such case whether the three qualified creditors joined in the petition originally or by intervention.
Id.
at 249,
The Supreme Court’s opinion in
Canute,
while clarifying the issue of a court’s jurisdiction over an involuntary petition sufficient on its face, expressly noted that the “question, upon which the decisions show a conflict of opinion, as to the joinder of an intervening creditor in an original petition insufficient upon its face, is not here involved and is not determined.”
Id.
at 250,
The first to address the issue left open by the Supreme Court’s decision in
Canute
was the First Circuit in
Myron M. Navison Shoe Co. v. Lane Shoe Co.,
allegation of the petition as to the number of creditors (setting out the facts) was false, and was fraudulently inserted in the petition, with the purpose of circumventing the provisions of the Bankruptcy Act, and that the petitioner did not come into court with clean hands.
The petition and answer were submitted to a special master for review who concluded that prior to the filing, Navison Shoe, the alleged bankrupt, made a general assignment for the benefit of its creditors, and that on the date of the filing, the alleged bankrupt had 29 creditors who had not assented to the assignment. Id. The master noted, however, that after the petition was filed, several of the claims were purchased by Joseph Navison, beneficial owner of all of the stock of Navison Shoe Co., and his nominees, and that several individuals could not be counted as creditors in view of the nature of their claims. Id. at 456.
With respect to the petitioner’s knowledge of the debtor’s other creditors, the master observed that prior to the filing, the *902 petitioning creditor had examined the bankrupt’s books and records. Id. The master also noted that correspondence and answers to interrogatories revealed that the debtor in fact had more than twelve creditors. Id. The master, however, found that there was "no evidence that [counsel for the petitioning creditor] believed that there were this number of creditors.” Id. (emphasis supplied). The master ultimately ruled that Navison Shoe had less than twelve creditors who could qualify as petitioning creditors, and, therefore, the petition was proper and an adjudication could be made. Id. The District Court approved the master’s recommendation and ordered adjudication. Id.
On appeal, the First Circuit cited as “wholly immaterial” what the petitioning creditor’s counsel “believed,” and identified the material question “to be what the Lane Shoe Company knew, or should have known and believed, on the date it filed its petition ... having previously received the information that it had.” Id. (emphasis supplied).
At the outset of its analysis the First Circuit in Navison Shoe noted that an allegation regarding the number of an alleged bankrupt’s creditors must be verified in accordance with the number of creditors existing on the date the involuntary petition is filed. Id. at 456-57. On the facts of the Navison Shoe case there were 28 creditors, and no other creditors had intervened; therefore, the First Circuit determined the “order of adjudication was improper, unless some valid reason, disclosed by the facts found by the master require[d] a different conclusion.” Id. at 457.
The
Navison Shoe
court noted that the question posed had been addressed previously by the circuit in
Moulton v. Coburn,
The court in Navison Shoe then indicated that there was:
a further ground upon which ... the creditor’s petition should .be dismissed, and that is, that the conclusion to be drawn from the primary facts found by the master is clear — that the Lane Shoe Company, on November 10,1928, when it filed the petition, in which it alleged that the creditors of the Navison Shoe Company, Inc., were less than twelve, did so knowing that the allegation was false; or did so recklessly not caring whether the allegation, which it affirmed as of its own knowledge to be true, was true or false, and, being false, its conduct was a fraudulent attempt to confer jurisdiction upon the court, where none existed....
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... It is incredible that the petitioner did not believe the information that had been given it, or, having such information, did not suspect what it affirmed in its petition to be true was false, in which event its conduct would be fraudulent, for one cannot affirm as of his own knowledge a thing to be true, intending it to be relied upon, if he suspects it to be false, without being guilty of fraud, [citation omitted] A person who suspects his statement is false does not entertain an honest belief it is true, or is consciously and wickedly indifferent to its truth or falsity.
Thus, Navison Shoe clarified that a petition which fails to aver the total number of the debtor’s creditors, or is mistaken on this point is indeed “sufficient on its face” for the purpose of invoking the court’s jurisdiction, (assuming that it contains the averments necessary to sustain an adjudication on the merits), but that a court should not retain jurisdiction over an involuntary proceeding initiated by a single creditor who intentionally or recklessly *903 files a petition against a debtor who had more than twelve creditors.
The First Circuit’s decision in
Navison Shoe
reflects the underlying principle evident since the earliest decisions on involuntary bankruptcy petitions, which is the duty of a court to enforce compliance with the provisions of bankruptcy statutes.
Accord In re Blount,
if a single creditor files a petition with knowledge that the allegation (less than twelve creditors) is false, the petition will be dismissed as a fraudulent attempt to confer jurisdiction where none exists and intervention ‘presumably’ will be denied.
It was the First Circuit’s decision in
In re Crown Sportswear, Inc.,
which modified slightly the developing trend by discussing its ruling in terms of “bad faith,” in addition to fraud.
To the
Crown Sportswear
court, it was “obvious” that the Bankruptcy Act anticipated the situation in which sole creditors were mistaken as to the number of a debt- or’s creditors, and that the emphasis of the statute was not the “correctness of the originating petition.”
Id.
at 993. Moreover, the court found no authority indicating that a “cursory investigation amounted] to bad faith as a matter of law.”
Id.
The First Circuit distinguished its prior holding in
Navison Shoe
on the basis that the petitioning attorney in
Navi-son
was informed several times prior to the bankruptcy proceedings that there were more than thirty creditors.
Id.
at 993-94. The court in
Crown Sportswear
also acknowledged the proposition stated in
In re Crofoot Nielsen,
that a fraudulent filing will result in a dismissal, but ultimately determined that the facts before it were more analogous to those in
In re Security Motor Co.,
*904
The
Crown Sportswear
court concluded its opinion by responding to the debtor’s allegation that in making an inaccurate allegation regarding the number of the debt- or’s creditors, the petitioning creditor had violated Bankruptcy Rule 911, which required that a pleading or motion be filed in good faith.
The most recent decision directly addressing the issues attendant to a proper filing of an involuntary petition by a single creditor is the Eighth Circuit’s decision in
Basin Electric Power Coop. v. Midwest Processing Co.,
On appeal, the district court independently examined the three creditor requirement imposed under Section 303 of the Bankruptcy Code, and the allegations of bad faith.
See
Addressing the bankruptcy court’s decision to allow other creditors to join the petition, the district court stated:
Despite the liberal joinder envisioned under § 303(c), the three creditor requirement of § 303(b) would be rendered meaningless if subsequent joinder of additional parties were sufficient in all cases where fewer than three creditors originally commenced an involuntary case against a debtor who has twelve or more creditors. Section 303(c) may properly be invoked where a single petitioning creditor is unaware that a debtor has twelve or more creditors. But where, as in this case, a single'creditor commences an involuntary case despite knowledge that the debtor has twelve or more creditors, the petition is deficient and should be dismissed absent special circumstances.
Id. at 908. The district court ultimately concluded that the “bankruptcy court erred in not dismissing [the creditor’s] petition against [the debtor] for failure to meet the three creditor requirement of § 303(b).” Id.
To evaluate the allegations of bad faith, the district court considered the creditor’s subjective motives for filing, in addition to whether a reasonable person in the position of the petitioning creditor would have filed the petition. Id. at 909. The district court ultimately concluded that the bankruptcy court also erred in not dismissing the petition by reason of the petitioning creditor’s bad faith. Id. at 910.
On appeal to the Eighth Circuit, it appears that the petitioning creditor challenged only the lower court’s finding of bad faith and argued that “because the three creditor requirement is not jurisdictional and may be waived, [citations omitted], it did not act in bad faith by knowingly filing a deficient petition that omitted reference to the number of [the debtor’s creditors].”
[accepting appellant’s argument would circumvent unduly the three creditor requirement of section 303(b). The three creditor requirement is not a meaningless formality that a creditor may ignore until after filing the involuntary petition. While an involuntary petition may be cured after filing when a single creditor files in good faith believing the debtor has fewer than twelve creditors, a single creditor may not file an involuntary petition knowing the debtor has twelve or more creditors....
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... Basin Electric knew that Midwest Processing had twelve or more creditors and intentionally filed a deficient petition. Merely because the defects were subject to waiver does not excuse the intentional filing of a defective petition.
The three creditor requirement is designed to prevent use of involuntary bankruptcy proceedings by creditors as a means of harassing an honest debtor, [citations omitted]. If the three creditor requirement is to have any legal significance, it may not be knowingly circumvented with an eye to adding other creditors later on.
Id. at 486-87.
Although the district court and the court of appeals in Basin Electric did not cite an historical basis for their analyses, it is clear that their opinions are well-supported by the decisions we have reviewed above. Courts consistently have attempted to uphold the integrity of the bankruptcy statutes, and more specifically the three creditor requirement. While it has long been established that a defective petition *906 may be amended, or a particular defect waived, the intentional violation of a statute has never been ignored; for to allow such conduct would render the statute meaningless and creditors could file involuntary petitions as they did prior to 1898. We, therefore, concur with the ultimate holding of the Eighth Circuit that an involuntary petition filed by a single creditor with the knowledge that the debtor had in excess of twelve creditors must be dismissed, and adopt the approach of the district court in Basin Electric, and which analyzed the issue of the intentional filing of a deficient petition independently from the issue of bad faith.
The issue of whether a sole petitioning creditor intentionally and knowingly filed a deficient involuntary petition in bankruptcy is a limited one. If the alleged debtor establishes that the creditor knew that the debtor had in excess of twelve creditors and filed as a sole creditor nevertheless, the appropriate result is the dismissal of the involuntary petition.
24
See In re Rush,
We acknowledge that the instant situation differs slightly from those prior in which petitions were dismissed, in that the petitions at hand are indeed sufficient on their face, thereby invoking the jurisdiction of this Court, and that the government did not make a “fraudulent statement” regarding the number of the debtors’ creditors. We note, however, that it is precisely because the jurisdiction of this Court may be *907 invoked so easily, thrusting an unsuspecting debtor into the uncertain status imposed during the “gap” period of an involuntary petition, that this Court has the obligation to determine once a petition is filed whether to retain jurisdiction if the circumstances of the filing indicate a dismissal is warranted. Moreover, despite the government’s having avoided a finding of actual fraud, by making no statement regarding the number of debtors’ creditors, we find the government’s deliberate actions and omission of an allegation pertaining to the number of the debtors’ creditors to evidence the improper use of the statute and invocation of this Court’s jurisdiction. 25
In contrast to the narrow legal issue of whether a deficient petition intentionally has been filed, the issue of bad faith is factual,
see United States Fidelity & Guar. Co. v. DJF Realty & Suppliers,
It appears that the government’s strategy to “file and wait” was in part based upon the fact that a debtor may waive its right to object to a petition filed by an insufficient number of petitioning creditors.
See
Tr. Vol. II, p. 85;
In re Earl’s Tire Serv.,
Also in its defense, the government contends that pursuant to Bankruptcy Rule 1003(b), it had the right to file as a single creditor and wait for the debtors to file lists of their creditors. Bankruptcy Rule 1003(b) Provides that “[i]f the answer to an involuntary petition filed by fewer than three creditors avers the existence of 12 or more creditors, the debtor shall file with the answer a list of all its creditors[.]” Bankr.R.P. 1003(b). Rule 1003(b), however, addresses only the situation in which the sole petitioning creditor unknowingly files a deficient petition, and the debtor’s answer then reveals the existence of more than twelve creditors. Rule 1003(b) was not meant to be used as a weapon to “flush out” creditors and force the debtor to assist in the
preparation
of the involuntary petition pending against him.
See In re McDonald Trucking Co., Inc.,
The government also gave policy reasons to support its actions. First the government asserted that the debtors’ defense to the criminal proceedings has been that the debtors do not in fact owe debts to any party. The government suggested, therefore, that the debtors’ defense provided the government with a good faith basis for questioning the actual identity of the debtors’ creditors. Tr. Vol. Ill, p. 84. Secondly, the government asserted that in accordance with the Code and applicable ease law, prior to dismissal a court must allow sufficient time for other creditors to join the petition, and other creditors in fact had joined. Id., p. 85. Thirdly, government’s counsel noted, “we had a real problem as to whether word would get out what we were going to do, and we made it very clear in that motion, ex parte treatment of the interim trustee motion (sic) that it was the secrecy obligation that compelled us to come in and ask for that particular treatment, and I think that is also a proper justification for proceeding as we did.” Id. p. 86. The above policy arguments, however, go to the issue of whether the petitions were filed in bad faith, a consideration independent from whether the integrity of the three creditor provision must be upheld.
We note that some courts have cited an increased “flexibility” in the provisions of the Code pertaining to involuntary petitions,
see In re CLE Corp.,
On the basis of the foregoing, we find that the government had actual knowledge that each of the debtors had in excess of twelve creditors on the date the petitions were filed. The government’s decision to file the petitions despite that knowledge constituted an improper use of the involuntary bankruptcy statute and consequently an improper invocation of this Court’s jurisdiction; we, therefore, dismiss the involuntary petitions pending against the three named debtors. We again note that to determine whether the government acted in “bad faith” in filing these involuntary cases, we must examine the totality of the circumstances surrounding the decision to file. We, therefore, proceed at this time to examine the merits of the government’s cases against the debtors.
MONEYED, BUSINESS, OR COMMERCIAL CORPORATION
Even assuming that this Court denied the debtors’ motion to dismiss the involuntary petitions, serious questions remain with respect to the merits of the petitions themselves. First, in opposition to the government’s filings, the alleged debtors, Fusion and Caucus, claimed that they were not-for-profit corporations, and, therefore, were ineligible for relief under the Code.
27
See
11 U.S.C. § 303(a),
supra
note 3. In this Court’s opinion on the government’s motion for summary judgment, we stated that the debtors must plead and prove the issue of their eleemosynary status.
See Caucus,
In
In re Allen University,
the Fourth Circuit considered whether a university could be subject to an involuntary reorganization under chapter 10 of the Bankruptcy Act.
See
The
Allen University
court noted that the university neither issued capital stock, nor a return of capital to investors outstanding.
Implicit in the Fourth Circuit’s rulings we believe is a position expressly stated by the court in
Schuster v. Ohio Farmers’ Co-op Milk Ass’n.,
where the chief purpose of the corporation is to carry on trade or commerce in an established field, and to do this primarily for the financial benefit of those who have joined in its organization and in the conduct of its affairs, there is but little room for doubt that the corporation is a ‘business or commercial’ one within the intendment of the Bankruptcy Act.
Turning to the evidence proffered by Fusion Energy Foundation, we note that the exhibit upon which it primarily relies is its corporate charter. See Exh. Z. The charter reflects that Fusion was founded in August 5, 1975 and provides in pertinent part:
3. The purposes for which the corporation is to be formed are for scientific, educational and charitable purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code of 1954 and in this connection are:
a. To provide sustained intellectual and financial support and direction to educational and scientific activities directed to the achievement of industrial-scale fusion power, and to initiate and conduct campaigns in its own name to that end.
b. To sponsor and receive studies relevant to scientific and technical strategies for the achievement of a Manhattan Project-type crash program for the development of fusion energy on an industrial scale, and relevant to the economics of fusion-based production.
c. To disseminate the results to government and international officials and bodies, the press, and the population-at-large.
d. To establish liason (sic) with representatives of labor, farms, anti-fission and environmental groups, scientists and other professionals, and governmental and international agencies.
e. To produce, buy, distribute and lease film and related media and material on the nature and necessity of fusion power for the achievement of purposes stated above paragraphs a, b and c.
Exh. Z. In connection with its stated purposes Fusion publishes two journals entitled “Fusion” (Exh. AU), and “International Journal of Fusion Energy,” (Exh. AV).
Fusion also proffered the testimony at trial and the affidavit of Stephen 0. Dean, president of Fusion Power Associates. Tr. Vol. Ill, pp. 204-222; Exh. AF. Mr. Dean testified that he had been acquainted with Fusion since 1974, participated in two to three of its conferences, subscribed to Fusion Magazine, (Tr. Vol. Ill, pp. 208-09), and that the activities of Fusion Energy Foundation “taken as a whole ... are primarily educational in nature and that their purpose is to provide technical information to stimulate ideas to the solution of some of the major problems facing the world.” Exh. AF. Fusion also introduced letters from the Internal Revenue Service that referred to its tax exempt status. Exh. CD, CE. Finally, Fusion introduced a letter from the guardian of petitioning creditor, Charles R. Zimmerman, referring to amounts given by Zimmerman to Fusion that were deducted by Zimmerman as charitable contributions. Exh. 0; see also Orr Deposition at 44-45.
In response to the above, the government proffered the affidavit of Agent Egan *911 of the Federal Bureau of Investigation (FBI), alleging that Fusion engaged in commercial activities (Exh. 41, p. 1); an internal document indicating that Fusion produced a magazine which had a circulation of 45,000, and sold at a set price of $20 (Exh. 46); and several documents seized from a location allegedly occupied by the debtors (hereinafter “internal documents”), which revealed that Fusion used accounting methods, based upon an income, expense, and profit analysis, to manage its operations (Exhs. 45, 63, 72, 108, 118). 29 The government also challenged on cross-examination, the testimony of Mr. Dean by eliciting that he was not familiar with the financial composition of Fusion. In its post trial memorandum, the government also questioned the significance of the tax exempt status in view of the dependence of the Internal Revenue Service upon the debtor for information. Post Trial Memorandum of the Government, p. 33.
While the government has proffered the larger number of exhibits on this issue, they do not, taken individually or as a whole, outweigh the evidence proffered by Fusion. First, the affidavit of FBI Agent Egan proffered by the government was executed to support the issuance of a search warrant. While this Court determined the exhibit to be admissible, we conclude that the probative value of the agent’s affidavit with respect to the issue of the debtor’s eleemosynary status is minimal.
The government cites a number of cases in which the findings of agencies may be accepted to establish the truth of the matter asserted. Those cases, however, all involved agency personnel who drew conclusions based upon personal knowledge, factual inquiries, or hearings involving interested parties.
See Ellis v. International Playtex, Inc.,
With respect to the documents proffered by the government pertaining to the alleged debtors’ accounting procedures, we note that the information contained therein is not entirely supportive of the government’s position. For example, the government cites Exhibit 63, a document entitled “1986 Budget Requests C & E,” as proof that Fusion allots only 3% of its budget to “Travel and Seminars.” In the same document, however, it is apparent that approximately half of Fusion’s budget was allotted to “Editorial” expenses and “Basic Science Research.” Exh. 63, p. 3. We also note that the government’s Exhibit No. 108, entitled “Consolidated Profit & Loss for February 1984,” shows a net loss for Fusion.
More importantly, however, we find that evidence indicating that an organization uses the word “profit” or even reflects a “profit” is not dispositive of the issue at hand. While nonprofit organizations are not expected to benefit from the sales or services that they provide in the same way that commercial entities do, they must like any other organization monitor income and expenses. As noted in
In re United Kitchen Assoc., Inc.,
“[i]t is not a requirement that disbursements equal or exceed contributions in order to retain the status of a non-profit eorporation[.]”
Finally, while attacking the credibility of the findings of the IRS in its post trial memorandum and the testimony of Mr. Dean, the government did not proffer evidence revealing that the tax exempt status of Fusion has been revoked, nor did the government challenge Mr. Dean’s conviction that Fusion’s activities were primarily educational in nature.
Turning now to the evidence submitted by Caucus Distributors Inc. in its behalf, we note that its charter of incorporation states the purposes of Caucus to be:
To promote and encourage the political and (sic) ideas and beliefs fostered by the International Caucus of Labor Committees and other organizations advocating the same ideas and beliefs; to distribute to the general public, sell and obtain subscriptions to publications specifically dedicated to the political ideas and beliefs fostered by the International Caucus of Labor Committees and other organizations; to solicit membership for certain membership organizations associated with the publications distributed by the corporation consonant with the goals, purposes and programs of those organizations
To advertise and promote the publications distributed by the corporation;
To engage the services of writers, reporters, editors distributors, corporations, associations, partnerships and news agencies in furtherance of these purposes; To acquire, own, hold and dispose of all real and personal property necessary, convenient or incidental to accomplishing the purposes of this corporation^]
Exh. AA, 11 3. 30 The charter also stated that Caucus was “not formed for pecuniary *913 profit or financial gain, and in that (sic) no part of the assets, income or profit of the corporation is distributable to, or inures to the benefit of its members, directors or officers, or any private person except to the extent permissible under the Not-For-Profit Corporation Law.” Exh. AA, 112. Caucus further relies upon a document seized by the government which explicitly states that Caucus is a not-for-profit corporation, and refers to its production of several educational magazines. See Exh. 46.
In rebuttal, the government cites the affidavit of FBI Agent Lytle, which was prepared “in support of the government’s Motion for Appointment of Interim Trustee^]” and refers in part to alleged investments in real estate by Caucus (Exh. 39, p. 1). The government also relies upon documents similar to those used in the government’s case against Fusion containing accounting data and discussions of that data. See Exhs. 45, 46, 48, 63, 65, 72, 79. The government also proffered Exhibit 111, an internal document labelled as “attorney-client work product,” which the government maintains refutes the not-for-profit status of Caucus. 31
We have the same reservations regarding an affidavit of an FBI agent, and documents which reflect only accounting information that we expressed above and need not repeat the relevant discussions here. Rather, we address the alleged admission by Caucus on this issue, which according to the government may be found in Exhibit 111. Exhibit 111 is a memorandum from “Rich Welsh” to “Mayer Morganroth, Esq.” entitled “Accounting Issues (Report on Meeting, 7/17/85). On the last page of the exhibit, the author remarks that accountants have indicated Caucus could not qualify as an “exempt (not-for-profit) corporation” because it “market[s] subscription sales for commercial companies.” Exh. Ill, p. 11. The author of the document also observed:
Remember, that although CDI filed as not-for-profit in its NY State incorporation papers, it has not formally applied for such status with IRS, which is where it counts.
Id.
At the top of every page of the document but the first page are the words, “PRIVILEGED ATTORNEY-CLIENT WORK PRODUCT PREPARED FOR USE OF COUNSEL.” At trial, the alleged debtors objected to the admission of Exhibit No. Ill in part on the basis of its privileged nature. This Court admitted Exhibit 111 subject to the alleged debtors’ ability to establish that the information contained in the document was protected by an attorney-client privilege. Tr. Vol. Ill, p. 59. The alleged debtors now have stated in a post trial submission “[d]ue to the invocation of their Fifth Amendment rights, there is no one who can testify as to the document’s privileged status,” and have requested that the document be stricken from the record. Alleged Debtors’ Proposed Findings of Facts at 14, n. 1.
We note that the attorney-client privilege is applicable only to a client’s communication made “for the purpose of securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some legal proceeding.”
32
United States
*914
v. Jones,
We note further, however, that the admission of Exhibit 111 is in actuality of little significance. In
In re United Kitchen Assoc., Inc.,
the petitioning creditor argued that “because the debtor corporation ha[d] not filed an exemption number for status as a non-profit corporation with the Internal Revenue Service then the court should recognize the debtor corporation as a nonprofit corporation.”
Finally, proffered against both Fusion and Caucus, the government introduced numerous cease and desist orders, and an indictment issued against the debtors by state agencies that monitor the sale of securities. The government also proffered the summaries of the loans allegedly granted by creditors which the government demonstrated at trial could be cross referenced to the cease and desist order exhibits. See Exhs. 7, 15, 21, 125-127 (Fusion); 8-18, 21, 125-127 (Caucus).
We note at the outset that all of the cease and desist orders are temporary and provide that they will become permanent if no further hearing is requested. The government acknowledges that “certain of these cease and desist orders are technically denominated ‘temporary’,” but contends that the “continuing refusal of the debtors to respond to state information requests or request hearings has as a practical matter rendered them permanent.” Government’s Amended Statement of Facts ¶ 157. The government also explained that copies of the temporary orders were all that the government received when it requested copies of the agencies’ files. Tr. Vol. II, p. 59.
While a court may take judicial notice of agency findings, this Court indicated during the course of the trial that it would not consider the agency findings to be conclusive of any issue. Tr. Yol. II, pp. 57-59. The government in response to this Court’s remarks stated:
Nor do we ask, just to be clear, that this be treated as a res judicata finding or anything. The cases that we cited in the *915 memorandum merely say that those findings are extrinsic evidence to go to the point that we offered, and that’s all we suggest it’s for.
Tr. Vol. II, p. 59.
Again, the cases to which the government refers, which discuss agency findings after timely, impartial, factual inquiries are not similar the cease and desist orders at hand, which were issued on the basis of ex parte, administrative hearings most of which date back one to two years prior to the date of the filings. Moreover, even if this Court accepted the information contained in the orders and the loan summaries as true, the evidence only would establish that the debtors obtained promissory notes from individuals in various states, perhaps fraudulently or without the requisite licenses. That proposition alone is not probative of the ultimate concerns of this Court: whether the chief purpose of the alleged debtor is to engage in commercial enterprises; and, whether the money obtained by the alleged debtor was used to benefit the corporate officers personally or investors realized gain because of their ownership interest in the corporation. The government’s evidence does not shed light on either aspect of this issue.
In one of the internal documents to which the government has directed our attention in connection with the issue of the debtors’ eleemosynary status, we took note of the following excerpt:
1984 was the “Year of the Loan” in which a majority of income was comprised of loans. Infrastructure loan principal (including the first quarter of 1985) now stands somewhere around $10,000,000. About 90% of these notes come due in 1985. The attempt to change the composition of income is not only necessary from the standpoint of expanding our numbers and educating our base. It is also the case that we are
losing a large number of supporters (and some quite bitterly) who made 1984 loans in the $1000-$5000 range.
Exh. 79, p. 1. This passage is representative of many within the internal documents seized by the government, which has led this Court to conclude that the debtors strived more to expose the world to its political viewpoint than attain private monetary gain. While the government has alleged that their methods of fund raising were reprehensible, that alone does not change the debtors’ status and provide the appropriate basis for the invocation of
this
Court’s jurisdiction.
See Sweatt v. Boston, H. & E.R. Co.,
In view of the foregoing, this Court finds that the government could not proceed against the alleged debtors, Fusion and Caucus, in an involuntary bankruptcy proceeding. In so holding, we seek not to protect the promotion of a particular ideology, but to preserve the intention of the Act and now the Code to limit the application of involuntary bankruptcy proceedings to only those entities truly commercial in nature.
BONA FIDE DISPUTE
In addition to questions relating to the eligibility of the alleged debtors, this Court also had concerns regarding the status of a claim by an intervening petitioning creditor, NCNB/National Bank of Florida. By trial’s end, this Court had allowed several creditors to join in the involuntary petitions against the alleged debtors. 33 *916 The act' of intervention itself, however, does not guarantee that the creditor will be allowed to remain in the litigation. A creditor whose claim is subject to a bona fide dispute can not be counted as a petitioning creditor under section 303(b)(1) and would be dismissed. 11 U.S.C. § 303(b)(1).
NCNB/National Bank of Florida on behalf of Mr. Charles R. Zimmerman, filed a proof of claim against Fusion and Caucus in an amount in excess of 2.5 million dollars. 34 NCNB contends that between May 21, 1985 and February 17, 1986, Mr. Zimmerman made numerous loans to the debtors and upon discovering the extent of the loans and gifts, “took steps to protect his welfare.” NCNB Post Trial Brief, p. 5. Accordingly, NCNB asserts that on February 24, 1986, Mr. Zimmerman wrote to the Executive Director of Fusion requesting that Fusion refrain from contacting him or NCNB regarding future gifts or loans and that the interest on the notes “be paid promptly when due.” NCNB Exh. 50. 35 NCNB then obtained an “Order Appointing Guardian Upon Petition of Voluntary Guardian” from the Circuit Court of the Twelfth Judicial Circuit in Sarasota, Florida, dated February 28, 1986. NCNB Exh. 45. NCNB took possession and on June 25, 1986 filed an inventory of the property in its control which listed the promissory notes from Fusion and Caucus.. NCNB Exh. 46.
The alleged debtors claim, however, that also on February 24, 1986, Mr. Zimmerman forgave all outstanding loans to both Caucus and Fusion. In support of their contention, the alleged debtors cite the deposition of Mr. Anthony Orr, former Head of Personal Trust Administration for NCNB in Orlando, Florida, the deposition of Mr. Zimmerman, and correspondence between Mr. Zimmerman and the debtors. 36
In his deposition, Mr. Orr testified that a meeting took place on February 24, 1986 and the topic of forgiveness of debt arose between Mr. Zimmerman and representatives of Fusion. See Orr Deposition at 27, 29. Mr. Zimmerman’s deposition testimony taken on July 7, 1987, indicates that he recalled a meeting in February 1986, and recalled forgiving notes rather than honoring checks to Fusion which had been returned for insufficient funds. Zimmerman Deposition at 111-13; Zimmerman Deposition Exh. T (letter from Fusion to Mr. Zimmerman regarding checks returned for insufficient funds).
The debtors contend, therefore, that although NCNB was appointed as the guardian of Mr. Zimmerman’s property as the result of a voluntary guardianship proceeding, the loans in question were not property of the estate under Florida law.
See
Deposition of Mr. Orr at 53;
Bryan v. Century Nat’l Bank,
In response to the debtors’ assertion that the loans have been forgiven, NCNB notes that the actual letter allegedly signed by Zimmerman forgiving all outstanding loans is dated March 2, 1986 and the deposition of Mr. Zimmerman upon which the debtors rely was taken on July 7, 1987, both of which were subsequent to the date on which the voluntary guardianship became effective, February 28, 1986.
Applying the guidelines in
In re Lough,
cited in this Court’s opinion on the government’s motion for summary judgment, a claim may be subject to a “bona fide dispute” within the meaning of section 303 of the Bankruptcy Code, when there is a “genuine issue of a material fact that bears upon the debtor’s liability or a meritorious contention as to the applicability of the law to the facts.”
Although NCNB states in its post trial memorandum that the discrepancies between the positions of the two parties may be resolved by this Court’s determining a “very simple issue ... whether Zimmerman’s signature on [the] March 2, 1986 [forgiveness letter], or his [deposition] testimony in July,' 1987, was effective as a matter of law to ‘forgive’ th[e] loans as alleged by the debtors[,]” this Court need only ascertain the presence of a dispute. NCNB Post Trial Brief, p. 12. We also note, however, that the task of resolving the dispute would not be easy and perhaps not advisable given the existence of a state court action for rescission and money damages pending in the Circuit Court for the Twelfth Judicial Circuit for Sarasota County, Florida against the alleged debtors, involving the same subject matter. 37
Accordingly, this Court, following the analysis set out in In re Lough, finds that the claim of Charles R. Zimmerman is subject to a bona fide dispute, which disqualifies NCNB as a petitioning creditor. 38
GENERALLY NOT PAYING
Assuming that the instant petitions did not contain the aforementioned deficiencies, we find that the government has not established that the status of the debtors’ *918 financial affairs warrants the administration of their estates in bankruptcy.
Section 303(h)(1) of the Bankruptcy Code prescribes that an order of relief may be entered on an involuntary basis if “(1) the debtor is generally not paying such debt- or’s debts as such debts become due[.]” 11 U.S.C. § 303(h)(1). The burden of establishing the above standard is upon the petitioning creditor(s).
In re Win-Sum Sports, Inc.,
In examining the evidence pertaining to the debtors’ financial status, the admission of most of which was strenuously objected to by the alleged debtors, 39 this Court notes that the information contained in the documents evidences substantial nonpayment of the debtors’ debts. Most of the documents proffered by the government, however, contain information pertaining to a period of time between six months to seven years prior to the date the petitions actually were filed. 40 The only exhibits upon *919 which the government relied which pertain to 1987 were five cease and desist orders, copies of petitions filed by intervening creditors, one internal document, and two newspaper articles. 41
*920 As explained above, this Court declines to consider the information contained in the cease and desist orders as evidence of the truth of the matters asserted therein. The admission of the internal document (Exh. 44) was denied at trial on the basis that the government failed to establish its authenticity, see Tr. Vol. II, p. 87, and newspaper articles were admitted by this Court for the limited purpose of establishing what the government knew of or had read about the debtors’ creditors at the time the petitions were filed, not for the truth of the assertions made therein, see Tr. Vol. II, pp. 79-80.
The government’s Exhibit No. 48 illustrates well the problems inherent in evaluating financial data pertaining to a time much earlier than the petition date. As listed by the government, Exhibit 48 was a “Copy of an Internal Memo Re: Collapse of Field Imprest Funds/Accounting and Cash Flow Procedures,” dated September 25, 1986. The debtors concede that Exhibit 48 contained the following information concerning Caucus’ financial status:
(1) Caucus’ field office operation (which appears to be 12 offices) had monthly expenses of approximately $80,000 to $90,000 per month; those expenses were presumably being paid out of operating revenues until September 1985 when the imprest fund was created; (2) By April 1986 the central imprest fund could only fund approximately 80-95% of the budget, with the field office making up the deficit from locally created revenues; (3) By May 1986 the centralized payments declined to 50% and by September 1986 the central office stopped payments with the local field offices paying expenses directly from locally generated revenues.
Alleged Debtors’ Proposed Conclusions of Law, p. 31, 1177. The government offered no evidence establishing whether the September 1986 condition continued or was corrected.
Assuming that the admission of all of the documents proffered by the government was proper, the issue of how much weight should be afforded the exhibits in evaluating the debtors’ financial positions is problematic. The alleged debtors claim that the lack of evidence regarding their financial condition on the date the petition was filed is fatal to the government’s case. The government has responded by noting that:
[t]he evidence is unequivocal that each of the debtors had massive unpaid amounts of debt as of October, 1986_ Moreover, the only reason why the Court does not have direct testimony from the debtors on the circumstances between October, 1986 and the petition date is because the debtors invoked a blanket Fifth Amendment.... The clear weight of the evidence, the increasingly difficult cash situation the debtors found themselves in throughout 1986, the willingness of other creditors to join in these petitions, and the failure of the debtors to present any evidence to the contrary as to their payment of any debt whatsoever, certainly establish that as of the petition date, the debtors were generally not paying their debts as they become due.
Post Trial Memorandum of United States, pp. 28-29.
Certainly, courts must evaluate financial information pertaining to a period of time prior to the actual date of the petition to make its assessment of whether debts generally are being paid.
See e.g., In re Molen Drilling,
In the instant case, the government in filing the involuntary petitions under Chapter 7 seeks the liquidation of all of the debtors’ assets. This Court has no basis to grant the drastic relief requested if the
most recent information
before the Court regarding the debtors’ payment practices is dated approximately six months prior to the date the petition was filed. Absent crucial proof relating to the debtors’ financial status as of the date the petitions were filed, other factors cited by the government such as the alleged transfers of assets, the alleged schemes of intentional nonpayment, and the joining of other creditors have little relevance. We note that courts have considered other factors, or “special circumstances” unique to the debtor only in cases in which the petitioning creditor has established the minimal basis for relief, and it appears that the petitioning creditor is the
sole
creditor of the debtor. The concern of the courts in those cases is whether the failure to pay a single creditor is sufficient to warrant a finding that the debtor is
generally
not paying its debts.
See e.g., In re 7 H Land & Cattle Co.,
Perhaps the only plausible basis for speculating about the debtors’ financial condition on April 20, 1987 is the government’s request that this Court draw negative inferences on the basis of the debtors’ invocation of the Fifth Amendment.
NEGATIVE INFERENCES
As noted earlier, the alleged debtors by counsel, and by representatives of the debt- or corporations, declined to respond to discovery requests and questions posed during depositions, and also declined to testify at trial on the basis of the Fifth Amendment. 42 Accordingly, the government repeatedly has urged this Court to draw adverse inferences from the debtors’ silence.
While declining to draw adverse inferences to bolster the government’s motion for summary judgment,
Caucus,
In the instant case, the independent evidence supplied by the government suggests that the debtors had major financial difficulties from early 1984 through September 1986. Even if this Court drew the logical inference based upon the government’s evidence, that the debtors indeed did have financial difficulties during the above cited time period, this Court’s conclusion would not relate to the appropriate period of time, the date of the government’s filing, to support the contention that the debtors were generally not paying their debts when due. What the alleged debtors seem to suggest here, however, is that if the evidence reveals financial difficulty from 1984-1986, then this Court has the basis to “infer” that that evidence reflects the debtors’ financial status as of the date of the filings. While this Court is aware that the drawing of negative inferences is appropriate under certain circumstances, it is unwilling and without authority to infer beyond what the independent evidence establishes.
See In re Mart,
In view of the government’s inability to proffer direct and timely evidence pertaining to the debtors’ financial status, or “independent” evidence enabling this Court to draw “inferences” against the debtors in view of their invocation of the Fifth Amendment, we find that the government has failed to establish that the debtors generally were not paying their debts as they became due as of April 20, 1987, the date the petitions were filed.
BAD FAITH
We now come to perhaps the most important issue before this Court, and that is whether the government filed the instant involuntary petitions in bad faith. The debtors have alleged that the bad faith of the government is evident in three ways. First, they maintain that the filing of involuntary petitions as a single creditor with the knowledge that each debtor had in excess of twelve creditors, in and of itself constitutes bad faith. Second, the debtors claim that the petitions were filed for an ulterior motive. Third, the debtors assert that the government’s bad faith further is established by its failure to utilize traditional methods to collect its judgments.
*923
In response, the government contends that the filing of the involuntary petitions as a single creditor in bankruptcy court is supported by applicable bankruptcy law. More specifically, the government asserts that the authority to file as a sole petitioning creditor may be found in the Fourth Circuit’s decision in
Sun-Lite Awning Corp. v. E.J. Conklin Aviation Corp.,
We note that the allegations by the alleged debtors pertaining to the government’s bad faith constitute an affirmative defense to the maintenance of these involuntary petitions.
See Caucus,
While the concept of “good faith” is applicable to various aspects of bankruptcy law, the Code does not contain a definition of “good faith.”
See In re Laclede Cab Co.,
The signature of an attorney or a party constitutes a certificate that the attorney or party has read the document; that to the best of the attorney’s or party’s knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass, to cause delay or to increase the cost of litigation.
Bankr.R.P. 9011(a).
We examine first whether a “reasonable person in the position of the petitioning creditor would have initiated the bankruptcy proceeding.”
In re Elsub Corp.,
Again, the most recent and authoritative decision on the good faith of petitioning creditors is the Eighth Circuit’s decision in
Basin Electric Power Cooperative v. Midwest Processing Co.,
The district court concluded correctly that it is not the making of a false statement alone that constitutes bad faith, but the wrongful attempt to commence a bankruptcy proceeding. As the bankruptcy court noted in In re Rite Cap, Inc.,1 B.R. 740 , 741 (Bankr.D.R.I.1979), ‘An essential prerequisite for allowing joinder of additional creditors to cure a defective petition is that the petition was filed in good faith. If the original petition was a sham, prepared with a view of being later supported by intervention of other creditors, joinder should be denied.’
Id.
at 486. This Court finds the ruling
of
the Eighth Circuit to be controlling because of the need to uphold the integrity of the provisions of the Bankruptcy Code.
See In re Herriott,
1 Bankr.Ct.Dec. (CRR) 793, 794 (Bankr.D.Mass.1975) (“If there were no restraint a creditor might with impunity ignore the statutory scheme and avoid the difficulty and frustration in seeking two creditors willing to join with him in filing an involuntary petition.”);
accord In re Winn,
The government’s reliance upon the Fourth Circuit’s ruling in
Sun-Lite Awning Corp. v. E.J. Conklin Aviation Corp.,
is misplaced.
[w]hether a court could dismiss a petition after the intervention of other creditors on the ground that the allegation that the number of creditors was less than twelve was fraudulent, we need not here decide, as the judge did not here find fraud or even bad faith in the filing of the petition.
Id. at 347. Clearly, there was no indication in' Sunlite that the petitioning creditor “knew” or “should have known” that the debtor had in excess of twelve creditors. Consequently, the government did not have a reasonable basis for relying upon Sunlite Awning as authority to file as a single petitioning creditor in the instant cases.
The government also contended that it felt an obligation to keep the involuntary filings secret, until interim trustees were appointed, to prevent the debtors from transferring assets.
See
Tr. Vol. Ill, p. 86. This argument seems to suggest, however, that the government may file an involuntary petition as a sole creditor in instances where three petitioning creditors are required to avoid publicity of its actions. While the government believed its needs as a creditor to be unique! the treatment of the government cannot be.
Cf. In re Bellucci,
With respect to the pre-filing inquiries into the substantive aspects of the instant petitions, we note summarily that the government’s decision to file in the instant case reflected less the good faith extension of the law, than a questionable reliance upon existing law. While one court has indicated that the lack of time may justify a less than complete examination of the law on involuntary bankruptcy petitions, the government did not face an inflexible deadline in the instant cases.
See In re Turner,
Accordingly, an evaluation of the government’s filing on an objective level leads this Court to conclude that the alleged debtors have established that the government filed the petition in bad faith. It is not the filing of an involuntary petition by the United States that constitutes bad faith, as suggested by the debtors, in that we are aware of at least one instance where the government filed an involuntary petition without notoriety in
Missco Homestead Ass’n v. United States,
It is quite apparent that a determination of the subjective motivations of a petitioning creditor is a most difficult task. While in some instances courts may have the benefit of direct evidence or testimony regarding the creditor’s decision making process, it is the more usual situation that courts must surmise the petitioning creditor’s intent based upon the circumstances of the case. In this regard, one avenue of the courts has been to grant liberal discovery requests to enable a debtor to determine better what the petitioning creditor’s motivations were.
See In re Elsub,
The alleged debtors have in their post trial memoranda outlined extensively their perceptions of how the government conceived and developed the idea to file these involuntary petitions. Essentially, the debtors maintain that the government has initiated criminal investigations of organizations affiliated with Lyndon H. La-Rouche because of the government’s belief that Mr. LaRouche is a “political extremist.” 45 Accordingly, the debtors assert that the civil division of the United States Attorney’s Office derived its inspiration to file these petitions from the criminal division, and thus proceeded to file these peti *927 tions with a “prosecutorial mind-set;” 46 The debtors maintain that evidence of this mind-set is found not only in the lack of evidence to support the filing of the petitions and in the decision to ignore more traditional means of collection, but by the testimony of the officials who shared responsibility for the decision to file.
The government consistently has responded to these allegations by noting that it was not operating under the direction, or on behalf of the criminal division, and actually had three very distinct policy reasons for filing these petitions. Assistant United States Attorney, Mr. Schiller, described the reasons for filing as follows;
The three social policies, if you will, if I understand how you are using that term, that I thought would be advanced by this course of action that we took were, first of all, that the available remedies and appropriate rulings of this Court and bankruptcy rules would provide the most efficient and effective manner of collection — meaning to collect the sums due the United States given the problems that I saw. Most particularly, we were concerned about the problem of intra-cor-porate and extra-corporate transfers of assets and how to effectively recover them, and I went through the fairly detailed analysis of the law and evidentiary questions of comparing treating something as a fraudulent conveyance under the Virginia Code versus treating something as a preferential transfer under the Bankruptcy Code, and concluded that the bankruptcy alternative would be superi- or, and that was really the germ of the idea to take this route.... The second policy that I was starting to go into was .. that when the United States Attorney’s Office takes a litigative decision that it should reflect not only its effect on the U.S. Treasury in terms of amounts collected, but also whether it would have any adverse effect on citizens elsewhere ... This is ... what makes the U.S. Attorney’s Office different as a litigating party from, say a bank, or any other creditor in that we look not only to our financial interests but also to the social impact of the litigating decision. ■ In this case, it was my estimation, after I researched on the NEXUS data bank and solved the plethora of people who had been defrauded, is one term that’s used frequently.... A corollary to that would be that in my view, primarily in terms of my concentration in bankruptcy, it’s my view that the priority scheme of the Bankruptcy Code is the most equitable form of distribution on a class basis in the commercial realm, and that as a social policy this litigative decision would be to follow that priority scheme as a policy option.
The third policy that came to mind dealt with a number of lawsuits that I found also in my initial research of the NEXUS data bank. It struck me that there were large numbers, as we alleged in our initiating pleadings, large number of lawsuits and unpaid judgments, and from my experience in the A.H. Robins case, if I learned nothing else it was that bankruptcy provides a means of consolidating thousands of lawsuits in one form in an equitable fashion, and it seemed to me by electing the involuntary bankruptcy procedure we would further the policy, if you will, of judicial economy in saving the resources of both the courts and the individuals in terms of the need to pay lots of lawyers to do lots of things at expensive rates, and that was also a policy that would be advanced by electing this course.
Tr. Vol. Ill, pp. 119-22. The government further asserts that the choice to seek relief in this forum as opposed to state court, was based upon the advantage of litigating in the bankruptcy forum as cited above.
The determination of whether an involuntary petition was filed to accomplish an improper purpose, must be examined in light of the purposes of any petition in bankruptcy. The goals of bankruptcy have been described in the Report of the Com *928 mission on the Bankruptcy Laws of the United States as being threefold: “(1) equality of distribution among creditors, (2) a fresh start for debtors, and (3) economical administration.” Report of the Commission on the Bankruptcy Laws of the United States, Part I, July 1973, p. 75. The involuntary petition seeks to accomplish the same goals only at the instigation of a creditor who is fearful of losing the race against other creditors of the debtor to the state court. See “The Occasion for Involuntary Bankruptcy,” 61 Bankr.L.J. 195, 217 (1987) (“circumstances warranting involuntary bankruptcy arise from the need to protect creditors generally from the efforts of individual creditors to collect from the debtor.”); “Involuntary Petitions Under the Code,” 97 Banking L.J. 292, 295 (April 1980) (“The purpose of an involuntary petition for liquidation is to achieve an equal distribution of the debtor’s property among each class of creditors without preferential treatment.”).
Upon a review of all of the evidence, and the serious concern of the debtors that they have been targeted by the government in view of their association with a figure of allegedly “political extremist” views, we find that it is mere speculation that the government was influenced by the media, and/or the criminal division of the United States Attorney’s Office, and that the alleged debtors have not proven their theories by a preponderance of the evidence. Rather, we are impressed by the government’s primary motivation that the involuntary mechanism was the most appropriate under the circumstances. Where the government’s motivations may have been suspect to the alleged debtors, but the primary basis for filing the instant petitions was consistent with the Bankruptcy Code, it does not appear appropriate to condemn the government’s action as constituting bad faith.
See In re Turner,
With respect to the government’s alleged failure to use more traditional methods of collection, we note that it is not the use of the bankruptcy court alone in spite of the existence of alternative collection methods that converts an involuntary petition into a “bad faith” filing. A petition may be deemed to have been filed in bad faith where the petition does
not
accomplish the goals of bankruptcy and alternatives methods were available to the petitioning creditor.
In re McDonald Trucking Co.,
The Eighth Circuit in Basin intimated that a sole petitioning creditor who files with the knowledge that the alleged debtor has in excess of twelve creditors has acted in bad faith. The Basin court, however, also found the following:
The sole purpose of Basin Electric was to file a petition quickly before the letter of credit expired. The parties had a contract dispute regarding the letter of credit. Basin Electric was motivated by the desire to attain an advantageous position with regard to the letter of credit. The use of the petition by Basin Electric to affect a nonbankruptcy purpose is further evidence of bad faith.
Basin,
In determining that the bad faith of the government has not been established on the facts of this case, we do not diminish the concerns of the alleged debtors who sought vigorously to expose the allegedly improper motivations of the government throughout this litigation. We note herb that the government itself may have fostered suspicions by its choice of words, and litigative zeal. An excerpt from one of the government’s pre-trial filings is revealing:
The United States filed pursuant to the Court’s pretrial order, April 20, 1988, United States’ Exhibits 1-129 in support of its involuntary Chapter 7 bankruptcy petitions against the debtors. As a whole, the exhibits demonstrate beyond any reasonable question that the debtors have consciously and maliciously engaged in a scheme to defraud banks, merchants, suppliers, and most cruelly the elderly by incurring debt without intent to repay the indebtedness. The Court is not likely to see an involuntary case where entry of the orders for relief is more appropriate than these cases. With the debtors, the facts mandate entry of orders for relief.
Memorandum of Law in Support of Admissibility of United States’ Exhibits, Filed April 29, 1988, p. 1.
It is possible that mixed with the government’s conviction that the bankruptcy forum was the best one to address all of the alleged claims against the debtors was its sense of obligation to enforce the laws of this country. With this possibility, the question arises as to whether a bankruptcy court is a permissible forum for the government to enforce its claims and the claims of other citizens by seeking an involuntary liquidation. This question was of grave concern to the instant debtors who maintained that by considering the status of other “aggrieved creditors,” perhaps even before its own standing as a creditor, the government somehow corrupted or exploited the involuntary bankruptcy process. 47
In response, we make the following observations: First, one of the factors a court must consider when presiding over a contested involuntary petition is whether the administration of an estate in bankruptcy
*930
would be beneficial to creditors other than the petitioners. A petitioner would do well to consider this question
prior
to the filing of an involuntary petition to avoid dismissal under Section 305 of the Code, which enables a court to suspend or dismiss a petition in bankruptcy if “the interests of creditors and the debtor would be better served[.]”
48
11 U.S.C. § 305(a)(1);
see In re Fales,
Secondly, as we have stated above, although the debtors in the instant cases raised concerns regarding the ability of the government to file an involuntary petition in bankruptcy, the government is not prohibited expressly or implicitly from filing a petition as long as it qualifies as a petitioning creditor under the Code. 49 Therefore, this Court is without authority to determine that any involuntary petition filed by the United States Attorney’s Office against a debtor who is the subject of a parallel criminal proceeding is by its nature improper, or executed in “bad faith.” We suggest, therefore, that the policy considerations cited by the debtors may only be addressed by Congress.
Accordingly, this Court grants the motions of Caucus Distributors, Inc., Campaigner Publications, Inc., and Fusion Energy Foundation, Inc. to dismiss the involuntary proceedings pending against them. Upon the filing of an appropriate motion and a hearing thereon this Court will consider the alleged debtors’ request for costs and fees under 11 U.S.C. § 303(i).
An appropriate order shall enter.
Notes
. The debtors allegedly are controlled by Lyndon H. LaRouche.
. Since the imposition of the contempt fines, the First Circuit has determined that amounts assessed against the debtors after the life of the grand jury must be excluded from the aggregate fines.
See In re Grand Jury Proceedings (Caucus Distributors, Inc., et al.),
.Sections 303(a) and (h)(1) of the Bankruptcy Code provide:
§ 303. Involuntary cases
(a) An involuntary case may be commenced only under chapter 7 or 11 of this title, and only against a person, except a farmer, family farmer, or a corporation that is not a moneyed, business, or commercial corporation, that may be a debtor under the chapter under which such case is commenced.
(h) If the petition is not timely controverted, the court shall order relief against the debtor in an involuntary case under the chapter under which the petition was filed. Otherwise, after trial, the court shall order relief against the debtor in an involuntary case under the chapter under which the petition was filed, only if—
(1) the debtor is generally not paying such debtor’s debts as such debts become due unless such debts are the subject of a bona fide disputed]
11 U.S.C. §§ 303(a), (h)(1).
. The debtors renewed their motion to dismiss at the close of trial. Transcript of Trial Vol. IV, p. 156 (hereinafter "Tr. Vol. -, p. -”).
. Mr. William Weld who had been the head of the Criminal Division of the Justice Department from September 15, 1986 to March 29, 1988, testified that in late October or early November of 1984, a grand jury convened to investigate the debtors and allegations regarding their involvement in credit card fraud. Tr. Vol. IV., pp. 42-45.
. The Fifth amendment to the United States Constitution provides: "No person ... shall be compelled in any criminal case to be a witness against himself.” U.S. Const, amend. V.
. The federal rule governing the issuance of protective orders with respect to discovery matters is now Federal Rule of Civil Procedure 26(c).
. The debtors’ intimation that any and all cooperation between the criminal and civil divisions of the U.S. Attorneys' office is prohibited does not comport with the realities of federal law enforcement. The Supreme Court in
Kordel
clearly stated that "[i]t would stultify enforcement of federal law to require a governmental agency such as the FDA invariably to choose either to forgo recommendation of a criminal prosecution once it seeks civil relief, or to defer civil proceedings pending the ultimate outcome of a criminal trial.”
Kordel v. United States,
. On the date that the instant petitions were filed, April 20, 1987, the Bankruptcy Rule of Procedure titled "Joinder of Petitioner After Filing” was numbered 1003(d). Rule 1003 was amended on March 30, 1987, (effective August 1, 1987), such that 1003(d) was renumbered 1003(b). The content of the original subsection, however, remained unchanged. Any references *896 to Rule 1003(d) in testimony or in cases cited have been left unedited.
Bankruptcy Rule of Procedure 1003(b) provides:
(b) Joinder of petitioners after filing. If the answer to an involuntary petition filed by fewer than three creditors avers the existence of 12 or more creditors, the debtor shall file with the answer a list of all creditors with their addresses, a brief statement of the nature of their claims, and the amounts thereof. If it appears that there are 12 or more creditors as provided in § 303(b) of the Code, the court shall afford a reasonable opportunity for other creditors to join in the petition before a hearing is held thereon.
Bankr.R.P. 1003(b).
. See Transcript of Hearing, April 21, 1987, pp. 32-35 (Court treated motion by alleged debtors regarding irregularities in involuntary petition and challenge to jurisdiction as a motion to dismiss and determined that dismissal would not be proper at that time because of lack of information before the Court); Transcript of Hearing, June 15, 1987, p. 24 (Court denied motion to dismiss; Court did not “have any evidence that they kn[e]w there are more than 12[.]").
. On March 2, 1988, this Court granted the motions of several creditors who sought intervention as joint petitioning creditors. See Transcript of Hearing, March 2, 1988, pp. 3-5. The Court noted during the hearing that intervention "appears to be a matter of right unless bad faith is shownf.]" Transcript of Hearing on March 2, 1988, p. 4.
. See supra note 9 (noting that earlier Rule 1003(d) is the same as present rule 1003(b)).
. See Act of 1800, § 2, 2 Stat. 19, 21, ch. XIX (petition properly filed "by any one creditor, or by a greater number”), repealed, Act of December 19, 1803, 2 Stat. 248, ch. VI; Act of 1841, § 1, 5 Stat. 440, 442, ch. IX (involuntary bankruptcy proper "upon the petition by one or more of [debtor’s] creditors”), repealed, Act of March 3, 1843, 5 Stat. 614, ch. LXXXII; Act of 1867, § 39, 14 Stat. 517, 536, ch. 176 (person "shall be adjudged a bankrupt on the petition of one or more of his creditors”), repealed, Act of June 7, 1878, 20 Stat. 99, ch. 160.
.Section 59 of the Act of 1898 originally provided in pertinent part:
b. Three or more creditors who have provable claims against any person which amount in the aggregate, in excess of the value of securities held by them, if any, to five hundred dollars or over; or if all of the creditors of such person are less than twelve in number, then one of such creditors whose claim equals such amount may file a petition to have him adjudged a bankrupt.
******
d. If it be averred in the petition that the creditors of the bankrupt are less than twelve in number, and less than three creditors have joined as petitioners therein, and the answer avers the existence of a larger number of *898 creditors, there shall be filed with the answer a list under oath of all the creditors, with their addresses, and thereupon the court shall cause all such creditors to be notified of the pendency of such petition and shall delay the hearing upon such petition for a reasonable time, to the end that parties in interest shall have an opportunity to be heard; if upon such hearing it shall appear that a sufficient number have joined in such petition, or if prior to or during such hearing a sufficient number shall join therein, the case may be proceeded with, but otherwise it shall be dismissed.
Act of 1898, §§ 59(b), (d), 30 Stat. 544, 561, ch. 541.
.In
In re Gibraltor Amusements, Ltd..,
Justice Friendly reviewed the legislative history of the three creditor requirement and the debate of that time between the Eastern congressmen and the Populists.
. Section 59(f) of the Bankruptcy Act of 1898 provided:
f. Creditors other than original petitioners may at any time enter their appearance and join in the petition, or file an answer and be heard in opposition to the prayer of the petition.
Act of 1898, § 59(f), 30 Stat. 544, 562, ch. 541.
. Section 303(c) of the Bankruptcy Code provides:
(c) After the filing of a petition under this section but before the case is dismissed or relief is ordered, a creditor holding an unsecured claim that is not contingent, other than a creditor filing under subsection (b) of this section, may join in the petition with the same effect as if such joining creditor were a petitioning creditor under subsection (b) of this section.
11 U.S.C. § 303(c).
. See 11 U.S.C. § 303(b), supra text at 12-13; see also 11 U.S.C. § 303(c), supra note 17 (allowing creditors to intervene in involuntary petition); Bankr.R.P. 1003(b), supra note 9 (requiring debtors to file a list of creditors if total number of creditors is controverted, and providing an opportunity for creditors to intervene).
.
Compare In re Mackey,
.
Compare In re Mammouth Pine Lumber Co.,
. In
In re Security Motor Co.,
an alleged debtor responded to an involuntary petition filed by a single creditor by stating "that the number of its creditors was far in excess of twelve and that the petitioning creditor knew this when it filed its petition and that, therefore, the petition was filed in bad faith.”
[a] careful reading of all of [11 U.S.C.] Section 95 shows that it was contemplated by the Congress that a single qualified petitioning creditor might reasonably be mistaken in an averment that there were less than twelve creditors in order to qualify such petitioner for instituting a bankruptcy proceeding. By paragraph d [of 11 U.S.C. § 95] the answer of the alleged bankrupt might disclose a large number of creditors. In such event it was not contemplated that the petition should be dismissed but that the sole creditor might be joined by a sufficient number of other qualified creditors so as to warrant the further proceeding in bankruptcy.
Id. at 560-61 (emphasis supplied). The district court further noted that under paragraph e of *904 11 U.S.C. § 95, a number of individuals identified by the bankrupt as creditors were ineligible to be petitioning creditors, "so that it is questionable in any case but that a sole petitioning creditor would find justification in an averment that the number of creditors lawfully considered were less than twelve.” Id. at 561. In view of the absence of evidence establishing the creditor's fraud and deceit, the district court concluded that involuntary proceedings should be terminated only on the basis of evidence "which shows beyond dispute that the court's jurisdiction was willfully imposed upon.” Id.
. Bankruptcy Rule of Procedure 911, now Bankruptcy Rule 9011, tracks Federal Rule of Civil Procedure 11. See Bankr.R.P. 9011, infra at 924.
.
See In re American President Lines, Ltd.,
. We address here only the situation in which the petitioning creditor "knew” that the debtor had in excess of twelve creditors, and do not decide whether our holding would apply to a case in which the debtor established only that the sole petitioning creditor "should have known.”
. Although the government ultimately conceded that it knew that the debtors had in excess of twelve creditors, the government was less than forthright in revealing its actual knowledge.
On April 21, 1987, the day after the petitions were filed, counsel for the alleged debtors argued specifically that the government alone could not file the involuntary cases in view of the references to "numerous creditors” in the petitions. Transcript of Hearing on April 21, 1987, p. 18. In responding, counsel for the government addressed not the issue of the government's actual knowledge, but rather its right to file a petition as a single creditor, and wait for the debtors to state in their answers that they had more than twelve creditors and file a list of creditors in accordance with Bankruptcy Rule 1003(b). Id. at 42; see Bankr.R.P. 1003(b), supra note 9. The government noted that until that was done, “there [wa]s no jurisdictional argument to make.” Transcript of Hearing on April 21, 1987, p. 43.
On June 15, 1987, United States Attorney Henry Hudson testified:
[T]he Government would be less than candid with the Court if we were to mention to you that we weren’t aware or suspect (sic) that there were more than 12 creditors at the time this petition was filed.
Transcript of Hearing on June 15, 1987, p. 21. The Court at that time formed the following opinion:
[T]he Government concedes that they suspected that there were more than 12 [creditors]. I don’t have any evidence that they know there are more than 12, but certainly from their pleadings one would have to draw the inescapable conclusion that they suspect there are more than 12 creditors.
Id., p. 24.
In March of 1988, the government indicated in answers to interrogatories that it “reasonably believed the alleged debtors had other creditors[,]” and that “the documents seized in the October 1986 search do contain what appear to be numerous loan files indicating many creditors.” (Responses to Interrogatory No. 4, Interrogatory No. 5, respectively, filed March 15, 1988).
On March 23, 1988, the Court addressed in a telephone conference call between the Court and counsel what the Court believed to be an admission in the answers to the interrogatories:
COURT: In this connection, the government has admitted it, as I understand it, and they can say "No” now if they don’t, that the debtor hás more than twelve creditors.
MR. SZYBALA: Yes, your Honor, that’s been our position at the outset. We have already stated that at the first hearing.
Transcript of Hearing, March 23, 1988, p. 3. The government did not state affirmatively the extent of its knowledge to the Court until the second day of trial, May 6, 1988. Tr. Vol. Ill, pp. 83-85 (see supra p. 897).
On the basis of the above, the government's actions could be likened to a constructive fraud on the court, wherein the court may infer the fraudulent nature of the government’s conduct.
See Kitchen v. Throckmorton,
. In
In re McDonald Trucking Co., Inc.,
the petitioning creditor requested that the debtor supply the names and addresses of unsecured creditors.
. Campaigner Publications, Inc. admitted in paragraph 4 of its answer to the involuntary petition that it is a person against whom an involuntary petition may be commenced.
. In Hoile, the Fourth Circuit specifically characterized the petitioning creditors' argument that a corporation is a ‘"moneyed, business or commercial corporation' because of the money and property which it owns and the moneys which it collects and pays out in benefits[,]” as
untenable because the phrase by judicial interpretation and reenactment has acquired a meaning which limits it to corporations organized for profit, and the facts in the pending *910 case show that the debtor corporation was organized under the South Carolina statute 'for the mutual benefit of its members and their beneficiaries and not for profit.’
. On October 6, 1986, the Virginia State Police and federal agents seized approximately 1.5 million documents from a building allegedly occupied by the debtors in Leesburg, Virginia. Of the evidence seized, the government in the instant case relied upon approximately 79 documents which the government refers to as “internal documents" of the debtors, and the summary of 3,000 promissory loan files, (Exh. 127).
. We note that the Court’s copy of Alleged Debtors’ Exhibit AA was incomplete. In view of the fact that the government withdrew its objection to the admission of Exhibit AA, (Tr. Vol. *913 III, pp. 146-47), this Court has taken judicial notice of the complete exhibit, filed as Exhibit No. 2 to the "Opposition of Alleged Debtors to Motion of the United States of America for Summary Judgment” on October 20, 1987.
. In support of the proposition that the debtors are profit oriented entities, the government has proffered two exhibits that do not specifically refer to the debtors. Fusion or Caucus. See Exhs. 80, 109. The exhibits either refer to Campaigner alone, or do not refer to a specific debtor. We note that although the alleged debtors have agreed to a consolidation of their cases for the purposes of trial, the government needed to prove every element of the statute against each of the debtors independently. Consequently, while this Court determined the documents to be admissible, we have determined the probative “value of the above cited documents to be minimal.
. Federal Rule of Evidence 501 provides that privileges generally are governed by the principles of the federal common law, however, “in civil actions ... [where] State law supplies the rule of decision, the privilege of a ... person, shall be determined in accordance with State law.” Fed.R.Evid. 501. In
Commonwealth v. Edwards,
the Virginia Supreme Court stated that the burden of establishing that materials are privileged falls upon the proponent of the
*914
privilege.
. At the close of trial, the following entities constituted the list of petitioning creditors:
Caucus: (5) United States, MCI Communications, Inc., NCNB/National Bank of Florida, Continental Bank and the Commonwealth of Virginia (Department of Taxation);
Campaigner: (4) United States, Peter Gonzalez d/b/a San Souci Travel, Inc., Marc Jung, and the Commonwealth of Virginia (Department of Taxation);
Fusion: (4) United States, MCI Communications, Inc., NCNB/National Bank of Florida, *916 and the Commonwealth of Virginia (Department of Taxation).
On the first day of trial, the government informed the Court that Wilmington Trust Co. had indicated its intent to intervene but would do so only in the event that this Court determined that the petition lacked a sufficient number of petitioning creditors. Tr.Vol. I, p. 5. In response to the government, this Court observed that Wilmington Trust Co. had "not taken [a] sufficient affirmative position in order to require a ruling.” Id., p. 9.
.Of this amount, NCNB concedes that approximately half of the amount allegedly owed was given to the debtors as a gift and would not qualify as a claim under the Code. Tr.Vol. I, p. 46; NCNB Post Trial Memorandum, p. 4; see 11 U.S.C. § 303(b), supra text at 12-13 (petitioning creditor must be the “holder of a claim against such person”).
. Also in evidence is Exhibit U to the Deposition of Charles R. Zimmerman, a letter also dated February 24, 1986, addressed to NCNB/National Bank of Florida, requesting NCNB not to honor any checks written by Zimmerman payable to Fusion.
. The deposition of Mr. Anthony Orr was held on April 18, 1988. Mr. Orr was employed by NCNB from December 8, 1980 through December 8, 1987. Orr Deposition at 3.
The deposition of Charles R. Zimmerman was held on July 7, 1987. The correspondence between Mr. Zimmerman and the alleged debtors is contained in Exhibits U (letter from Zimmerman to NCNB) and V (letter from Zimmerman to Fusion) to Mr. Zimmerman’s deposition.
. See Exh. A to NCNB's Proof of Claim (Complaint filed by NCNB/National Bank of Florida against Lyndon LaRouche, Fusion Energy Foundation, Inc., Caucus Distributors, Inc., Paul Gallagher, and Rochelle Ascher on September 17, 1986, Case No. 86-4414). The complaint filed by NCNB contained seven counts: Count I — Violations by Defendants of the Solicitation of Charitable Contributions Act; Count II — Violation by Defendants of the Florida Securities and Investor Protection Act; Count III — Undue Influence and Fraud in the Inducement; Count IV — Fraud, Misrepresentation and Deceit; Count V — Conversion; Count VI — Theft; Count VII — Violation of Racketeer Influenced and Corrupt Organizations Act.
. If this Court had dismissed the United States as a petitioning creditor rather than dismiss all three petitions, the involuntary case against Fusion still would be subject to dismissal for the lack of a sufficient number of petitioning creditors in view of NCNB's disqualification.
See
11 U.S.C. § 303(b)
supra
at 896 (requiring three creditors for involuntary petition against debtor who has more than twelve creditors);
see also supra
note 33 (identifying only two petitioning creditors for Fusion in addition to NCNB and United States);
see e.g., In re Amburgey,
. In a motion in limine and during the course of the trial, the debtors raised concerns regarding the chain of custody, origin, author and accuracy of the internal documents that the government alleged were seized from the debtors' premises, see Tr.Vol. I, pp. 91-99, and objected to the admission of the internal documents on the basis that the government failed to establish authenticity and that the documents contained hearsay, (Tr.Vol. I, pp. 258-262); see supra note 29 (discussion of “internal documents”).
. The government’s evidence of the alleged debtors’ inability to pay debts is summarized in their Amended Proposed Statement of Facts, paragraphs 15 through 192. See Amended Proposed Statement of Facts, pp. 9-59, ¶¶ 15-192. Almost all of the exhibits identified by the government as pertaining to the debtors’ financial condition, reveal financial problems outside the relevant time period. See Exh. 7 (California Desist and Refrain Order, December 19, 1985); Exh. 8 (Maryland Cease and Desist Order, March 11, 1986); Exh. 9 (Alaska Cease and Desist Order, April 10, 1986); Exh. 10 (Indiana Cease and Desist Order, May 2, 1986); Exh. 11 (Washington, Temporary Order to Cease and Desist, June 6, 1986); Exh. 12 (Minnesota Cease and Desist Order, July 17, 1986); Exh. 14 (Missouri Cease and Desist Order, August 23, 1986); Exh. 19 (Indictment/Federal Grand Jury: D.Mass. Criminal No. 86-323-K, December 16, *919 1986); Exh. 20 (Indictment/State Grand Jury: N.Y., no date); Exh. 21 (Indictments/State Grand Jury: VA, no date); Exh. 22 (Ex Parte Right to Attach Order: N.D.Cal., No. C-86-5820, October 10, 1986); Exh. 33 (United Press International Report, October 26, 1986); Exh. 38 (Declaration of George A. Rily, D.N.D.Calif. C-86-5820, Filed October 10, 1986); Exh. 41 (Affidavit of F.B.I. Special Agent Richard J. Egan); Exh. 45 (Copy of Internal LaRouche organization accounting and financial procedures memo entitled "The Profitability Analysis,” no date); Exh. 48 (Copy of internal memo "Re: Collapse of Field Imprest funds/Accounting and Cash Flow Procedures,” September 25, 1986); Exh. 49 (internal memo "Re: Critical Financial Situations,” May 30, 1986); Exh. 50 (internal memo regarding unpaid loans, attempts to obtain forgiveness of debt, renegotiations of interest rates, April 30, 1986); Exh. 51 (internal memo regarding unpaid loans and attempts to obtain forgiveness of debt, May 5, 1986); Exh. 52 (internal memo regarding unpaid bank loans, May 6, 1986); Exh. 53 (internal memo regarding unpaid loans, May 9, 1986); Exh. 54 (internal memo regarding unpaid loans, threatened lawsuit, and correspondence from Victoria Bank, May 14, 1986); Exh. 55 (internal memo regarding unpaid loans and lawsuits, May 29, 1986); Exh. 56 (internal memo re payroll withholding tax arrears of Campaigner Publications, Inc., Fusion Energy Foundation, Inc., and Caucus Distributors, Inc., August 4, 1986); Exh. 57 (internal memo regarding unpaid withholding and FICA taxes for 1984, 1985, and 1986 for Caucus Distributors, Inc., Fusion Energy Foundation, Inc. and Campaigner Publications, Inc., March 12, 1986); Exh. 58 (Form letter from Caucus Distributors, Inc. to its unpaid creditors seeking forgiveness or renegotiation of its debt, May 20, 1986); Exh. 63 (1986 Third Quarter Budget Requests C & E, July 10, 1986); Exh. 66 (Charge-back and Complaint Report for week of January 10, 1986, January 14, 1986); Exh. 67 (Complaint letters from promissory note holders regarding Caucus Distributors, Inc., dating from 2/14/85 — 9/5/86); Exh. 68 (Complaint letters from promissory note holders regarding Campaigner Publications, Inc., dating from 8/12/85 — 8/11/86); Exh. 69 (Complaint letters from promissory note holders regarding Fusion Energy Foundation, Inc., dating from 1/22/86 — 7/25/86); Exh. 70 (Letter with notation at top concerning settlement of claim, April 2, 1986); Exh. 73 (internal memo re Trade Creditor Litigation, February 22, 1986); Exh. 74 ("Dead Debt” report, March 11, 1986); Exh. 75 (Form letter from Caucus Distributors, Inc. regarding trading services in lieu of paying debt, March 12, 1986); Exh. 76 (Charts of Accounts printout, no date); Exh. 78 (internal memo entitled "Tax Filing Status” for years 1976-1984, November 20, 1984); Exh. 79 (“Non Campaign Loans” memo with attachment, March 30, 1985); Exh. 81 (Infrastructure Loan Renegotiation summary, August 23, no year); Exh. 83 (Notice of IRS Levy to Fusion Energy Foundation, Inc., July 10, 1986); Exh. 86 ("Necessary Amex Refunds” memo, September 25, 1986); Exh. 87 ("Old Debt Oddities” memo, May 2, 1986); Exh. 88 (Form letter from Campaigner Publications, Inc. to its unpaid creditors seeking forgiveness or renegotiation of its debt, May 20, 1986); Exh. 89 (Infrastructure Loans memo, April 20, 1986); Exh. 90 (List of hardship cases memo, April 12, 1986); Exh. 91 (“Loan Infrastructure situation on West Coast" memo, no date); Exh. 92 ("Loan Repay ‘Special’ Candidates,” no date); Exh. 93 (March 1986 Loan Budget memo); Exh. 94 ("Finance Warfare/Loans” memo, no date); Exh. 95 (List of Loan repayment “must” cases, April 22, 1986); Exh. 96 (List of possible loan repayment cases, June 10, 1986); Exh. 97 (Loan Repay Committee memo, October 18, 1985); Exh. 98 (1985 Infrastructure loan memo); Exh. 99 (Fourth Quarter 1985 Summary Budget Proposal); Exh. 100 (Loan forgiveness campaign memo, no date); Exh. 101 (Interest rate reduction memo, September 15, 1986); Exh. 103 (Renegotiate Interest rate memo, June 25, 1986); Exh. 104 (Cease and Desist Orders memo, September 16, 1986); Exh. 105 (“Required Payments” memo, August 9, 1986); Exh. 106 (Loan Renegotiation Report, September 20, 1986); Exh. 107 (Second Quarter 1986 budget memo, May 24, 1986); Exh. Ill (Accounting issues meeting report, July 17, 1985); Exh. 112 (Fusion tax memo, December 14, 1985); Exh. 113 (memo entitled, "CDI's Relationship with MCI,” September 17, 1986); Exh. 114 (memo entitled "Explanation of Loan Transaction Report” and code list, October 1, 1986); Exh. 118 (LaRouche memo entitled "Cost Accounting Based Upon Flexible Forecast Budgets Consistent with Physical Economy,” March 29, 1986); Exh. 119 (memo to LaRouche re legal cases and promissory notes/hardship cases with attachments, May 19, 1986); Exh. 120 (Report Regarding “Payments Needed/Infrastructure Debt,” September 24, 1986); Exh. 122 (Legal Department 2nd Quarter Case Area Overview, March 3, 1986); Exh. 126 (Transaction Detail Report, dated September 30, 1986; report alleged to be a summary of debtors’ promissory note files, see Tr.Vol. Ill, p. 8; information contained in report dated from early 1980 through September 1986); Exh. 127 (Virginia State Police Summary of 3,000 promissory files; although dated April 30, 1987, the information regarding promissory note holders was summarized from documents seized on October 6, 1986).
. The only exhibits which reflected dates in 1987 were five cease and desist orders (Exh. 13 (Massachusetts Cease and Desist, April 15, *920 1987); Exh. 15 (Virginia State Corporation Commission Opinion and Order, March 4, 1987); Exh. 16 (Montana Cease and Desist Order, April 1, 1987); Exh. 17 (New Mexico Securities Division Order, August 6, 1987); Exh. 18 (Connecticut Cease and Desist Order; January 12, 1987)), copies of creditors' petitions (Exh. 23 (Copy of Creditor’s Petition, Continental Bank, September 21, 1987); Exh. 24 (Copy of Creditor’s Petition, MCI Communications, June 25, 1987); Exh. 25 (Copy of Creditor’s Petition filed by Sans Souci, July 10, 1987); Exh. 26 (Copy of Creditor’s Petition, NCNB/National Bank of Florida, July 1, 1987)), one internal document (Exh. 44 (“Morning Briefing for Thursday, March 5, 1987)), and newspaper articles (Exh. 34 (United Press International Report, March 18, 1987); Exh. 35 (Associated Press Report, March 5, 1987); Exh. 37 (Copy of Associated Press Article, March 29, 1987)).
.
See supra
note 6 (quoting Fifth amendment);
Caucus,
. Courts have considered a variety of factors in their efforts to determine whether a petitioning creditor has acted in bad faith, such as whether the petitioning creditor evidenced an intent to vex or oppress,
see e.g., In re Howard, Neilsen & Rush, Inc.,
. The earlier decisions addressing the issue of bad faith stated that the motivations of creditors were irrelevant.
See e.g., In re Automatic Typewriter & Serv. Co.,
. See Alleged Debtors’ Proposed Findings of Facts, pp. 15 n. 2; Alleged Debtors’ Proposed Conclusions of Law, pp. 11, 21; see also Tr.Vol. Ill, p. 104-09 (testimony of Assistant United States Attorney, Mr. Schiller, regarding the government's Proposed Finding of Fact 201, which referred to Lyndon LaRouche as a “political extremist.”); Amended Proposed Statement of Facts of United States, p. 59, ¶ 193 ("Each of the debtors is an affiliate of and controlled by political extremist Lyndon LaRouche.”)
. See Alleged Debtors’ Proposed Findings of Facts, pp. 15-68; Alleged Debtors’ Proposed Conclusions of Law, pp. 16-24,
. The alleged debtors argued that the United States acted improperly in considering the ability to assist aggrieved creditors in the bankruptcy forum, and in turn declining to pursue state court collection proceedings. Alleged Debtors’ Proposed Findings of Facts, pp. 54-63. The debtors specifically suggested that an ulterior motive of the government could be gleaned from the likelihood that the government’s claim in bankruptcy would be subordinated to all other claims.
Id.,
pp. 59-60. The alleged debtors suggested that the government did not file the petition “out of a desire to invoke the bankruptcy court’s jurisdiction for legitimate financial or economic motives,” but rather out of a continuing effort to "prosecute the Alleged Debtors, their affiliates, officers and directors.” Alleged Debtors’ Proposed Conclusions of Law, p. 21. The government responded generally to the alleged debtors’ contentions by noting that bankruptcy courts have "approved the role of the government” acting under the doctrine of
par-ens patriae,
Post Trial Memorandum of United States, pp. 44-45, defined by one of the cases cited by the government as the "power to intervene on behalf of another party who cannot protect his or her own rights."
Illinois v. Electrical Utils.,
. Section 305 of the Bankruptcy Code provides in part:
(a) The court, after notice and a hearing, may dismiss a case under this title, or may suspend all proceedings in a case under this title, at any time if—
(1) the interests of creditors and the debtor would be better served by such dismissal or suspension!!]
11 U.S.C. § 305(a)(1).
. Courts have determined that a petitioning creditor has acted in bad faith when it was not in fact a creditor at the time of the filing.
See In re Hunt,