Anatomy of a Scam Investigation: Chapter Five
[Wondering what's going on here? Check out the Chapter Index on this series.]
Welcome back! In Chapter One we met UST Development, Inc., aka US Telecom, and its principal David Bell, and talked about why the bogus invoices they are sending out constitute mail fraud. In Chapter Two we talked search preparation and Google search techniques. In Chapter Three we reviewed some Google search results and tried to chase down different entities. In Chapter Four I identified some signs that the Better Business Bureau and the public have caught on to the scam, and discussed what the point of this exercise might be.
That was all free. Today we spend a little money. But not much, in the grand scheme of things.
Before I get to that: please do not try to call these people or drive past their home or business or harass and torment them in any way. We're the good guys; they are the bad guys. Let's keep it that way, and concentrate on investigation, warning potential victims, providing resources to existing victims, and prodding the government to take action. However, any searches you all would like to do would be welcome — crowdsourcing is fatal to scammers. And remember, scammers are . . . anyone? anyone? That's right. Scum.
This is the longest chapter yet. Sorry about that. There's a lot to cover.
If you don't know about PACER, you are missing out. PACER allows public access to a vast array of documents filed in federal court in nearly every type of federal case. If it's a modern case, and a document is not filed under seal, you should be able to get it from PACER. Social Security Numbers and certain other information are redacted from the documents by law, but otherwise they are complete. Signing up requires a credit card, but is easy. Searching is free — and once you get the hang of some of PACER's quirks, it's also easy. Once you find them, documents cost eight cents a page to view and download, capped at $2.40 per document.
I can't emphasize enough what a great resource this is, whether you are a lawyer or just a citizen interested in what goes on in civil or criminal cases. It's particularly valuable for an informed citizen because the media trends strongly towards legal illiteracy and the internet towards exaggeration and drama, and PACER helps us separate fact from fiction and hyperbole when it comes to misleading reporting and internet drama and litigation misrepresented to fit a particular narrative. It's a shame that most states don't have a system like this — in addition to the public access, it allows for online filing (which is cheap and convenient) and is a far more reliable record of what has been filed than the haphazard hand-maintained systems of many state courts.
It's also great for investigating scammers.
You might recall that one of the Google searches for UST Development yielded a complaint asserting that David Bell had declared bankruptcy to evade a debt to an unpaid employee. That led me to PACER, where I searched for bankruptcy records for David Bell, UST Development, Inc., US Telecom, UST Dry Utilities Inc., and Branden Bell. The results provided very substantial additional information, and substantial corroboration of complaints of ongoing fraudulent behavior.
The search was considerably more complicated than a standard PACER search. That's because there were many related cases, some of which were consolidated in part or in whole, and events would start off being recorded under one case number and then continued under another. Many of the juicy bits did not pop up on the dockets for the David and Cynthia Bell Chapter 7 bankruptcy case or the UST Development, Inc. or UST Dry Utilities, Inc. bankruptcies. Rather, they showed up in what are called adversary proceedings, which are civil cases brought by third parties against the debtors. Normally a bankruptcy stays — that is, halts — outside civil cases against the debtors, which is one strong incentive for civil defendants to file bankruptcy. Filing an adversary proceeding in the debtor's bankruptcy case, or filing a motion for relief from the automatic stay on grounds supported by bankruptcy law, are two ways to collect from debtors in bankruptcy. Often adversary proceedings assert that the debt in question was procured by fraud — a debt (like a civil judgment) reflecting fraud by the debtor is not dischargable in bankruptcy. In other words, the debt's still there after the bankruptcy is completed, unlike non-fraudulent debts.
But there was a wealth of information. We'll get to it in a minute. First, some state-court preparation work.
1. Preliminary State Court Inquiry
Just as Chapter Two showed that some preliminary work makes a Google search more effective, some preliminary searches on state court web sites often makes a PACER inquiry more effective.
So. Before I checked in PACER, I checked state court records to see what sort of lawsuits and judgments might have been pending before the individuals and entities declared bankruptcy. UST Development, Inc. and UST Dry Utilities, Inc. were operating in San Bernardino County, California, so I started my search there. The San Bernardino County Superior Court has an excellent online case information system. Only a very few cases have imaged documents, but the party and case-number search functions are very robust, and it's great for tracking down both civil and criminal (ahem. be patient!) dockets.
San Bernardino County Superior Court's dockets yielded the names and numbers of many, many lawsuits. UST Development, Inc. was a defendant in numerous lawsuits, some of which we will see again in bankruptcy court. "US Telecom" was a defendant in cases in 2006; a review of the party information showed a reference to David Bell, establishing that it's the same US Telecom. UST Dry Utilities, Inc. has two pages of lawsuits against it (including the Labor Department matter referred to in an earlier chapter). David Bell and Branden Bell were both individual defendants in some of the same cases. Note that the sheer number of entries may overstate the number of cases, as they occasionally appear twice or more if there are multiple plaintiffs or multiple defendants. Note also that civil complaints are merely allegations (except for the ones that have yielded judgments against the defendants, of course).
Most of these cases don't have imaged documents available online; however, they have dockets, lists of parties and their lawyers, minutes from hearings, and other valuable information. That information tells us things like which lawyers were representing the UST Development, Inc. (and when the individuals were pro se), when they were not showing up to hearings (a typical behavior of scammers), when defaults were taken against them (ditto), and the like. If I wanted to see the complaints and other filings from these cases, I could go to the various San Bernardino courthouses (primarily Rancho Cucamonga and downtown San Bernardino) and get copies for a relatively modest amount (more than Kinkos, less than many lawyers charge clients for copying). I could also call the lawyers suing the UST Development, Inc. folks and ask for them to email me copies. They probably hate David Bell and his team and would probably be thrilled to contribute to this effort. I may yet do that. All of the information I glean goes onto the search and issue lists I described in Chapter Two.
San Bernardino's system was free. Los Angeles' system isn't. It costs $4.75 per name search, and the search engines are balky and inferior, though many of the recent civil cases have imaged documents available online. I decided to drop a few bucks. Since I didn't have case numbers, I ran a civil party name search on UST Development, Inc., UST Dry Utilities, Inc., and US Telecom. (I didn't search for David Bell, because Los Angeles' system doesn't allow me to use middle names, and there were ten pages of other David Bells.) The results: more cases against UST Development, more cases against UST Dry, and three pages of cases against US Telecom. Some of these cases will show up in bankruptcy court in PACER. Note than many of them, as in San Bernardino, are small claims matters. This is not unusual; dedicated scammers often pay no bills whatsoever. Some of these cases had documents available online. They are rather pricey — I wound up paying $8.50 for this complaint.
That complaint against UST Dry Utilities, Inc., sounds familiar, both to anyone who deals with con men and anyone who has read our first four posts about David Bell and the UST companies. In it, a local union alleges that it hired UST Dry to install hardware and software to support a "predictive dialer system," that the contract price was approximately $40,000, that UST took the full $40,000, then withdrew another approximately $20,000 from the union's account to which UST was not entitled, that UST never provided the equipment and services promised, that David Bell was involved throughout, and that David Bell engaged in classic con man lulling activity:
From November 2008 through February 2009, Defendant BELL repeatedly promised the Union that Defendant UST would return the entire amount of$59,789.16, which included $39,859.44 the Union had paid Defendant UST plus $19,929.72 which Defendant UST had unlawfully and without authorization deducted from the Union's bank account. Defendant BELL repeatedly assured the Union that the money had been wired to the Union's bank account, that it was sent by overnight mail and that BELL would provide the tracking number for such overnight mail, that the money would be available that same day, and that BELL was waiting a credit necessary before he could recompense the Union. Defendant BELL admitted that he had given the Union "false promises."
Many of you are thinking, "Jesus, I would never fall for the "the check's in the mail, we had trouble with the wire transfer, the money is coming in from our affiliate in New York, I'll get you the tracking number" routine day after day. But sociopaths are very, very good at this. You don't want to believe you've been conned, you don't want to believe you have to go hire a lawyer and file a lawsuit, you don't want to believe someone can do this to you, you want the income that this transaction promises, and often you don't want to go tell your superiors — so you keep hoping that the money is coming any day now. It can happen to you. It's happened to very smart lawyers I know. It's happened to me. And I used to put these people in jail. So don't judge the victims too harshly. When you find yourself in such a situation, you've got to focus — to convince yourself to bail out and cancel the contract, stop providing services, and file suit if necessary.
Anyway. I elected not to pay any more money for now to perform party name searches in Riverside County. Orange County allows free searches, and those searches yielded a case against UST Development and Branden Bell, and a swiftly dismissed case against UST Dry and "Cynthia LaPolice." (Recall that commenter Roger did some research and found links suggesting that some of our players might have aliases; below, we'll see documents identifying "Cynthia Lapolice" as an alias of Cynthia Bell, wife of David Bell.) [Edited to add: Ms. Bell, or someone pretending to be her, from an email account that registers as "Cynthia Lapolice" in Outlook, asserts that she does not use aliases and has "never purchased property under an assumed name."] [Further edit: Ms. Bell says that Lapolice is her maiden name.]
- I didn't pay to download these complaints, and wasn't able to look at a couple of other potential cases, because the OC web site was shitting the bed all weekend. I also checked out Ventura County and San Diego County without result, but I've never found those courts' systems to be particularly trustworthy, so I am keeping my eyes open for cases in those counties.
- Post-Holiday Deadly-Sin-of-Pride Open Thread - May 26th, 2015
- Happy To Be Here - May 21st, 2015
- How To Spot And Critique Censorship Tropes In The Media's Coverage Of Free Speech Controversies - May 19th, 2015
- Lawsplainer: The Proposed Federal Anti-SLAPP Act: What It Would Do, Why It's Important - May 18th, 2015
- Ville de Granby Takes The Lead In Protecting Endangered Official Feels - May 7th, 2015
So. Armed with some knowledge about state court cases, let's head to federal court.
2. Bankruptcy Court Inquiry Through PACER
The first step on PACER was finding the primary bankruptcy cases of our players. I printed the dockets. On PACER dockets are quite helpful — they include past and current attorneys for every party, a comprehensive list of documents filed and hearings held in the matter (subject to the complexities of related and consolidated cases, noted above), and for most cases in the last decade, provide hyperlinks to the underlying documents. Fair warning: some of the documents linked herein are large.
First: here are portions of the dockets for David and Cynthia Bell (who, according to the filing, also goes by Cynthia Lapolice, a defendant in one of the Orange County cases above), Branden Bell and his wife, UST Dry Utilities, Inc., and UST Development. Those dockets led me to a number of different documents — they are choked with requests for relief from the bankruptcy stay in an effort to recover assets, like a Porsche — and adversary cases. Here are some of the most meaningful and corroborative issues that came up.
(a) First Sealord Case
The First Sealord adversary proceeding is illuminating. Sealord is apparently in the business of issuing bonds to secure performance on development projects. See, companies and government entities paying for development projects often require the developers to post bonds so that if they go bankrupt or take off with the cash the companies and entities themselves won't be stuck paying off the subcontractors. Here, Sealord issued bonds on some of UST Development, Inc.'s projects in the Inland Empire. UST Development, David Bell, Cynthia Bell, Branden Bell, and others signed guarantees that they would indemnity Sealord (that is, back the bonds themselves.) However, Sealord alleges that (1) David and Cynthia Bell falsely stated that they had never previously declared bankruptcy, when in fact they had done so in 2002, and that Sealord would never have issued the bonds if they knew the truth, and that (2) though they were obligated to hold the payments for the development projects in trust to pay off the subcontractors and other creditors secured by the bond, they instead took the payments for themselves, causing the various subcontractors and creditors to resort to Sealord's bonds instead. Sealord notes that it has obtained judgments already and is merely trying to enforce them and establish that they are not dischargeable in bankruptcy. It appears that Sealord got its judgments when the defendants defaulted rather than responding to Sealord's prior lawsuit.
First Sealord is not finding David and Cynthia Bell to be cooperative litigants in bankruptcy court. David Bell didn't show up at hearings and didn't make discovery disclosures required by law; First Sealord was forced to move for sanctions. The Court granted the motion, sanctioning David and Cynthia Bell about $1,600, striking their answer to the Sealord Complaint, and prohibiting them from introducing any evidence in their defense (since they had failed to disclose their evidence as required by federal civil procedure.) This effectively makes it impossible for them to defend against Sealord's case on any factual issue, and will likely lead to their default. In a separate order, the Court granted Sealord's motion to compel and ordered David and Cynthia Bell to appear for depositions and imposed further monetary sanctions.
Two notes about the Sealord case. First, evading discovery obligations, failing to appear for depositions, and generally ignoring litigation requirements are all archetypical career con man behaviors. Second, though David and Cynthia Bell are represented in their primary bankruptcy filing (by the same lawyer who acts as UST Development, Inc.'s agent for service of process, the same lawyer who passed along my original email to David Bell — go figure!), they are representing themselves in the Sealord case and other adversary proceedings against them. In the business, this is regarded as a tell.
(b) The Victimized Lawyers
Why are David and Cynthia Bell not represented in the adversary matters? Well, attorneys with good sense might be very reluctant to represent them. David and Cynthia Bell's prior bankruptcy lawyers claim that they were straight-up scammed. In their adversary proceeding, that firm asserts that David Bell retained them based on a promise to provide a $25,000 retainer against which the firm would bill. But, as they say in my industry, Mr. Green never showed up. Tell me if this chain of events is starting to sound familiar:
Bell represented that he in fact had the money and was arranging a wire transfer from an individual who owed him money and that he would come into Plaintiffs office as soon as all transfers cleared.
9. Based on said representations Plaintiff continued working on behalf of the Company to ensure compliance with Bankruptcy Rules and U. S. Trustee Guidelines. Plaintiff attended a meeting with the Company's bonding company relating to bankruptcy issues which lasted in excess of 6 hours. At the conclusion of this meeting, Bell stated to [Plaintiff], that the $25,000.00 retainer was on its way, as he had managed to free up the funds. Robert Uriarte reminded Bell that a 341 (a) hearing was calendared for April 8, 20 I 0 and that it was imperative that the retainer issue be resolved prior to the hearing. Bell assured that the money was not an issue and that the retainer would be paid prior to the 341(a) hearing in Riverside.
10. On April 7, the day before the 341 (a), hearing, Robert Uriarte called Bell to inquire as to the retainer and Bell stated that for some unknown reason a wire transfer was not showing up on his personal account and that he was investigating it. He assured that Plaintiff would have a certified check at the 341(a) hearing. Based on this representation, Uriarte & Wood prepared for and appeared with Bell, on behalf of the Company.
11. On April 8, 2010, [Plaintiff] appeared with Bell at the 341(a) hearing for the Company, which was conducted at the U.s. Trustee office in Riverside. At the conclusion ofthe hearing, Bell apologized for not having a certified check, but instead tendered a personal check written on the personal account of Debtors, to Robert G. Uriarte, for $25,000.00 stating that the wire transfer issue had been resolved and that all funds would be available the following morning, and that [Plainitff] could walk into his bank after 12:00 p.m., and cash the check. Attached as Exhibit 2 is a true
and correct copy ofthe personal check, drawn on Bell's personal Cathay Bank account, delivered by Bell to [Plainitff].
12. On April 12, 2010, prior to going to the Bell's bank to cash the check, [Plaintiff] called the bank to ascertain that sufficient funds were available to cash the check. Cathay Bank stated that there were insufficient funds to cash a $25,000.00 check. Thereafter, Robert Uriarte called Bell to inquire as to the insufficient funds. Bell stated that for some unknown reason there was a tax lien which had caused a freeze on his funds. Bell stated that he had previously satisfied the lien and that he would look into the matter immediately.
13. Thereafter each and every day after April 12 through April 20, 2010, Bell stated that although the lien issue had been resolved, that the Bank was again having trouble locating the wire transfer. Finally, on April 21, 2010, [Plaintiff] appeared at the Company office in Ontario, CA and met personally with Bell regarding payment of the retainer as additional work needed to be done to stay in compliance with Bankruptcy rules and U.s. Trustee guidelines. Again Bell apologized for what he claimed was confusion at his bank and assured me again that he had made arrangement for an additional $28,000.00 to be wired to his account and that he would have available the sum of $5,000.00 available on April 22, 2010 with the hold on the additional $20,000.00 of the Retainer amount to be lifted by April 28, 2010. Bell then wrote two checks payable from the Debtors' personal accounts to Plaintiff for $5,000.00 and $20,000.00, respectively both dated April 21, 2010, with instructions that the $20,000.00 check not be cashed until April 28, 2010 or such earlier time as the bank released a hold on said check. Attached as Exhibit 3 are true and correct copies of the $5,000.00
and $20,000.00 drafts delivered by Bell to [Plaintiff].
14. [Plaintiff] appeared at Cathay Bank in Diamond Bar, CA on April 22, 2010, to negotiate the $5,000.00 Check, which was dishonored for non sufficient funds. [Plaintiff] immediately called Bell to inquire about the bogus check and was advised by Bell that the money was on deposit and that there must be some unknown hold on the account. Bell requested that [Plainitff] wait until April 28, 2010, at which time the entire $25,000.00 would be available.
15. Plaintiff advised Plaintiff [sic] that if for any reason the $25,000.00 worth of checks were not honored on April 28, 2010, that a motion to withdraw as counsel would be filed.
16. On April 28, 2010, [Plainitff] appeared at Bell's Cathay Bank branch in Arcadia, CA. The bank advised that the there were insufficient funds to cash either the $5,000.00 check or the $20,000.00 check, where upon the individual at the bank stamped the $20,000 check "NON SUFFICIENT FUNDS".
That's classic con-man lulling: the stories about wires, tax liens, money owed by friends, and promises designed to string the victim out for just a few more days. It can happen to even the best lawyers (yes, I mean me).
The Bells have defaulted, and the lawyers got a judgment against them. It doesn't sound like David and Cynthia Bell are being any more cooperative in this case. The bankruptcy court issued an Order to Show Cause, requiring Cynthia Bell to appear in court and explain why she should not be held in contempt for failing to appear at a debtor exam, which is a post-judgment deposition designed to force a debtor to answer questions about assets available to satisfy a judgment. Generally, it's not a good sign when courts issue OSCs re: contempt. The docket hasn't been updated with the result of that hearing; I will update this when it is.
(c) The Payroll Cases
My review of the state court records revealed a number of suits by payroll companies. Moreover, harkening way back to Chapters One and Three, anonymous reporters on the internet claimed that David Bell and UST engaged in fraud related to payment of salary. Moreover, they were fined by the Department of Labor over payment irregularities. So I was on the lookout for salary issues.
Boy, did I find them.
Bell and UST were the subject of multiple adversary proceedings by payroll companies claiming a pattern of fraud. Here is a complaint from a company called Blue Ocean Innovations. Blue Ocean claims the following: David Bell approached them to handle payroll for UST Development, and provided details about an account from which payroll could be drawn. Based on promises that the account would have sufficient funds, Blue Ocean issued paychecks. Blue Ocean quickly learned that the account did not, in fact, have sufficient funds. By the time they stopped payment on the payroll checks, Bell and his confederates had cashed $60,000 worth. Blue Ocean claims that this is part of a pattern:
The scam operates on the following manner: Defendant will enter into contract with a payroll services for the payroll of his company UST Development Inc. The Defendant will instruct the payroll company to transfer the funds to their personal accounts. Then, the Defendant will provide banking information to the payroll company usually an abandoned bank account which does not have sufficient fund to cover the minimum balance or if have a balance, on the same date Defendant will transfer the money to a different account when the payroll company try to impound the money. As a result, there will be no funds available to impound.
Blue Ocean — which already has a state court judgment against Bell — provides exhibits including a statement by the CEO of PrimePay, who describes David Bell and UST running the same scam on his company. In addition, as Blue Ocean points out, Schedule F of Bell's bankruptcy petition includes multiple payroll companies on their vast list of creditors.
And this part of Blue Ocean's complaint sounds familiar, doesn't it?
After stopping payment on the remaining payroll checks, Plaintiff contacted Defendant almost daily, demanding that Defendant reimburse Plaintiff for the payroll checks paid from Plaintiff's account, including those payroll checks cashed by insiders, Defendant David Bell, Branden Bell, and Darcy Woolman. Defendant David Bell has, many times, acknowledged the entire debt
to Plaintiff and has promised imminent large repayments to Plaintiff, but such payments have not been forthcoming. As of February 17,2009, Plaintiff only received a total of $9,000.00 for the amount owed.
There it is again: the con man's lulling.
Blue Ocean is not the only one. Epay is another. Epay alleges that David Bell ran the same scam on them: Epay signed up to do UST's payroll, David Bell promised to provide sufficient funds to cover the payroll. This time, according to Epay, David Bell stopped payments on the checks he issued to Epay, resulting in Epay issuing payroll checks but not being paid to do so. Epay got a judgment in state court for about $38,000 against Bell and UST. Like Blue Ocean, Epay alleges that this is an ongoing scam by UST and David Bell with multiple payroll company vicitms; Ebay attaches exhibits including a judgment obtained by yet another payroll company victim, AmCheck. (To paraphrase Auric Goldfinger, one time is happenstance, two times is coincidence, three times is enemy action, and four times is sociopathic vermin.)
And, of course, as con man convention requires, Epay offers us this:
27. Plaintiff notified Defendant that same day that there were insufficient funds in Defendant's account.
28. Defendant first informed Plaintiff that they would wire transfers the funds to InterceptEFT; however, Plaintiff never received confirmation of the wire transfer from Defendant.
29. InterceptEFT informed Plaintiff that if the funds were not received, it would either withdraw the funds already deposited in Defendant's employees' accounts, or Plaintiff could cover the funds due to InterceptEFT.
30. Later that same day, Defendant asked Plaintiff to cover the amount due to InterceptEFT, promising that Defendant would have a cashier's check available for Plaintiff the next day.
31. Under the belief that Plaintiff would receive payment the following day Plaintiff authorized the use of its own funds to cover the amount due to InterceptE from Defendant.
32. On November 3,2009, Plaintiff contacted Defendant and was told that the cashier's check would be available by 5:00 PM that day; when Plaintiff sent a representative to pick up the check, it was not available; Plaintiff called Defendant and was told it would be ready the next morning.
33. From November 4,2009 – November 6, 2009, Defendant continued to tell Plaintiff that the cashier's check would be made available the following day.
34. On November 9, 2009, Plaintiff called Defendant again and was told that Defendant was waiting on a payment by FedEx from an out of state brokerage account and was tracking the check; as soon as that payment arrived, Defendant would be able to make a cashier's check available to Plaintiff.
35. The following week, Defendant again told Plaintiff that it was waiting an tracking a large payment from a government contract, that there had been some issue with payment which Defendant was working to resolve and once they were resolved Defendant would pay Plaintiff.
36. On November 23, 2009, Plaintiff received an email from Defendant stating that it was "just waiting for the wire to show in my account;" Plaintiff called Defendant for an update and was told Defendant was working on the "wire". (A true and correct copy of e-mail messages is hereto attached as Exhibit "11").
37. On November 25, 2009, Defendant sent another email stating that it had called the bank in the morning and the wire had not been posted, but that it would soon and when it did, Defendant would notify Plaintiff so that Plaintiff could pick up the check. (See Exhibit "11".)
38. Later that day, Plaintiff again called Defendant and was told that the wire would post soon and Defendant would call Plaintiff; after not receiving any calls Plaintiff emailed Defendant notifying it that Plaintiff would pick up the check at 3:00PM that day; Defendant emailed back that its representative who could provide Plaintiff the check was out of the office.
Now, if it were just payroll companies that were being victimized, that would be one thing. But it appears that it was not. Bankruptcy records suggest that David Bell was using this scam to pay (when he paid them) multiple employees of the UST entities. Perhaps some of them were in on the scam. But at least some of them claim they were not — and claim that they were saddled with lawsuits from payroll companies and bankrupting debt as a result. Consider this brief and declaration from a former UST employee, filed in an effort to resist Epay's effort to consolidate its case against him with the case against David Bell:
2. On or around October 30, 2009, I received a direct deposit in his checking account in the amount of $5,500. The amount deposited lVas not unusual as it was my agreed upon salary as Vice President and employee of UST Development, Inc. ("UST").
3. Prior to such direct deposit, I was unaware of any agreement or discussion that UST was having with Epay, Inc. regarding the provision of advance payroll funding.
4. I was not involved in the day to day financial management of UST. I later learned, through the filing of a lawsuit against me on or around December 2,2009, that some of the money I had received as my salary in 2009 was obtained from Epay, Inc. and was not repaid to Epay, Inc. by UST in accordance with its contract with UST. I was named pcrsonally in the lawsuit. I was unable to afford legal representation and allowed a default to be taken against me. I had hoped that UST would clear up any misunderstanding with Epay, Inc. and pay the amount due back to Epay, Inc.
6. UST continued to employ me for the rest of 2009 and into 20 I 0 but only compensated me on a sporadic basis. I could no longer continue to work for next to nothing and decided to seek more gainful employment elsewhere. I resigned as a director and officer ofUST through tendering a written resignation letter on June 30, 20 I O.
7. At all times prior to my resignation, I maintained personal bank accounts separate from that of UST, did not commingle my personal funds or assets with the funds or assets of UST and generally observed all corporate formalities in connection with the business I conducted as an employee, officer, and director of UST.
8. I neither signed nor reviewed any contract with Epay, Inc. or participated in any way with any attempts to obtain advance payroll funding prior to Epay, Inc. advancing payroll funds to UST. All
contract execution and negotiations were done between Epay, Inc. and David Bell without my knowledge.
If he's telling the truth, David Bell and UST have screwed him over in a particularly vile manner.
The Corporate Bankruptcies
David and Cynthia Bell remain in bankruptcy proceedings. Branden Bell's bankruptcy proceedings have concluded for now. Both UST Development, Inc. and UST Dry Utilities, Inc. had their bankruptcies dismissed without discharging all of their debts. In the UST Dry Utilities bankruptcy, the trustee initially moved to dismiss the bankruptcy proceeding, complaining that David Bell and the corporation were refusing to disclose the location of assets. The trustee alleged:
4. At the hearing on December 7, 2009, Bell appeared and provided none of the requested documents, bank statements, bank monies, or the address for the Caterpillar equipment. Bell had failed to meet with the Trustee's adjuster and the Trustee learned that Bell was still doing business under a different corporate name. Bell claimed that it was a different kind of business, but it had the same location, telephone number and per a creditor's information, contracts for the same kind of work with the City ofRancho Cucamonga. Michael R. Schaefer, an attorney representing a creditor, RP. Wages, Inc., provided documentation showing that insiders of the Debtor took significant monies from the Debtor during 2009, even though the business ended, per the statement of affairs, on 1109. Attorney Schaefer also had the Debtor's 2007 tax return showing both a different address for the business and actual income ofthe business in 2007 at $1.7 million not $1.00. The Statement of Affairs claims the business closed in1l09 and that there were no transfers to insiders. Both the Debtor's petition, which Bell signed, and Bell's statements at the hearings were not truthful. The Trustee requested that the Debtor cooperate, provide the documents requested, turnover the assets and amend the inaccurate petition. The Trustee continued the hearing to January 15,2010 at 10:30 a.m. and stated that the bankruptcy would be dismissed if Debtor failed to comply with the Trustee's requests.
5. David Bell failed to appear at the hearing on January 15,2010. His counsel was present, but had no requested documents or funds. More than two months after the first 341 A hearing, the Trustee received none of the requested documents, tax returns, bank statements and bank funds, or amendments to the inaccurate statement ofaffairs. The Trustee did not continue the hearing and told counsel that a motion to dismiss with prejudice would be filed.
6. Per the statement of affairs, this business has existed three (3) years, yet there are over 40 pages of creditors, Debtor owes over $5 million in unsecured debt. More than 40 lawsuits have been
filed against the Debtor. Although the business closed in 1/09 per the petition, the Debtor transferred over $300,000 to insiders between October, 2008 and July, 2009. In addition, Bell did not turnover
the equipment to Caterpillar as he stated at the prior hearing. The Trustee learned after the hearing from Attorney Poniatowski that his client still did not have the equipment. Given Debtor's failure to
cooperate as required under 11 U.S.C. §521 of the bankruptcy code and false statements in its petition, the Trustee believes that this is an abusive fling under 11 U.S.C. §707, to stop litigation
while Debtor does business under a different name.
The Debtor's original petition was filled with misinformation and only after creditors provided the Trustee with depositions or documents showing that the petition had many false statements, did the Debtor finally correct some of the petition with amendments filled at the end of January, 2010, almost 4 months after filing the bankruptcy. The depositions and documents provided by the
creditors indicated that the Debtor had his business at the same premises as the new business, same telephone number and same four officers for both businesses. While David Bell claimed the two
businesses contracted for different types ofwork, the Trustee received evidence from a creditor that the new business, UST Development, Inc., received a contract from City ofRancho Cucamonga for exactly the same kind ofwork done by the Debtor. A copy ofthe contract authorization is attached herein and incorporated as Exhibit "A". Records from the creditors showed that officers received
significant amounts ofmoney after the business was closed, some as reimbursement for loans, and yet nothing was disclosed on statement of affairs. During this period oftime, neither creditors nor
workers were being paid as evidenced by numerous lawsuits.
Eventually UST Dry satisfied the trustee regarding remaining assets enough that the trustee withdrew the motion. At the end of the case, the trustee reported as follows:
Chapter 7 Trustee's Report of No Distribution: I, Patricia J Zimmermann (TR), having been appointed trustee of the estate of the above-named debtor(s), report that I have neither received any property nor paid any money on account of this estate; that I have made a diligent inquiry into the financial affairs of the debtor(s) and the location of the property belonging to the estate; and that there is no property available for distribution from the estate over and above that exempted by law. Pursuant to Fed R Bank P 5009, I hereby certify that the estate of the above-named debtor(s) has been fully administered. I request that I be discharged from any further duties as trustee. Key information about this case as reported in schedules filed by the debtor(s) or otherwise found in the case record: This case was pending for 11 months. Assets Abandoned (without deducting any secured claims): $ 305700.00, Assets Exempt: $ 0.00, Claims Scheduled: $ 5823501.03, Claims Asserted: Not Applicable, Claims scheduled to be discharged without payment (without deducting the value of collateral or debts excepted from discharge): $ 5823501.03. Filed by Trustee Patricia J Zimmermann (TR) (RE: related document(s) 24 Continuance of Meeting of Creditors Filed by Trustee Patricia J Zimmermann. 341 filed by Trustee Patricia J Zimmermann (TR)). (Zimmermann (TR), Patricia) (Entered: 09/06/2010)
The court found that UST Dry was not entitled to discharge.
By contrast, the U.S. Trustee moved to dismiss the UST Development bankruptcy because UST was not cooperating by filing reports or paying the trustee fees, and the Court granted the motion and dismissed the bankruptcy.
Chapter Five Conclusion
As you can see, state court and PACER records provide a wealth of information. They also provide a wealth of complaints and accusations that, while only allegations, corroborate things we have heard already.
In light of what I have learned through the PACER records, I have a question: has the UST Development invoice scam yielded any income? If so, where has it gone? If David and Cynthia Bell have taken it, any of it, have they reported this income stream to the bankruptcy Court? Does the trustee know about it?
Perhaps she would be interested in hearing about it. For that matter, perhaps some of the people suing David and Cynthia Bell and Brenden Bell would like to know about what they are doing, and what they've done in the past? That information might be useful — for instance, as evidence of fraudulent intent that might help prove that certain debts are non-dischargeable due to fraud.
I'm tremendously gratified with the response this series has gotten. I'm not just talking about traffic; it's the comments and emails that offer help and insights and suggestions. Several have already come in useful; some will come int play in future chapters. This will continue. As we go further, I plan to do some follow-up on issues from prior chapters, to discuss the optimal ways to report and document fraud, to discuss how a fraud prosecution against these individuals might progress, and to discuss the threats posed by this sort of inquiry and how to deal with them.
See you then.
Edited to add:
Today the docket on the attorney-victim case was updated to reflect "GRANTED" at the September 14, 2011 hearing on the OSC RE: Contempt. That was rather opaque, in my opinion, in that context. But a reliable source has informed me that the Court granted an order finding Ms. Cynthia Bell in civil contempt and will shortly issue a bench warrant causing the United States Marshals to arrest her and bring her before the Court. Note: as a rule, United States Marshals are not as beautiful as Mary McCormack and as charming as Tommy Lee Jones. Rather, they are typically as beautiful as Tommy Lee Jones and also as charming as Tommy Lee Jones. Also note: you really, really, really don't want to piss off a federal judge to the point where they issue a bench warrant to get you. Although one of my favorite stories involves a certain departed federal judge from Los Angeles who was sitting by designation in Hawaii and became irate when an attorney did not appear for a hearing and issued a bench warrant, which caused a team of U.S. Marshals to engage in a Hawaii-Five-Oh fantasy involving power boats.