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The Sky Is NOT Falling - Or Why The Crooks Went To Jail.

By Rob Lambert - Email Editor

Date : 08-March-2007

Dear Subscriber:

I have copied a brief excerpt from a longer article written by Ryan Fowler. It is interesting because he correctly analyzes the reason why some of the crooks, like the Andersons or Lawrence, correctly were locked up by the judges they were defying. These cases are often cited by Asset Protection naysayers as standing for the proposition that Asset Protection Trusts are dead; nothing could be farther from the truth. I think you will find his views interesting. Rob Lambert

Ryan writes:

“The primary advantage of offshore planning is the location and control of assets is outside the jurisdictional reach of a U.S. judge. Even if a transfer offshore is determined to be fraudulent, the judge may not have the ability to aid a creditor in retrieving those assets. However, case law has shown that if a judge believes a debtor has the power to repatriate offshore assets, notwithstanding their claims to the contrary, he will issue a repatriation order. Failure to comply with this order can (and has) landed more than one debtor in jail. [1] Furthermore, if a debtor transfers assets offshore after a creditor threat has arisen, in an egregious manner, then his ‘self-created impossibility' of being unable to repatriate assets may not be believed by a judge. In other words, the debtor has placed himself in a position where he doesn't have the power to repatriate assets, but a judge doesn't believe his claim of powerlessness, and therefore he has no choice but to spend time in jail due to civil contempt of court! [2]

A few planners have cited examples of these occurrences to mean that offshore planning will, when challenged in court, always subject one to a repatriation order and threat of civil contempt consequences for failure to comply. Case law, however, demonstrates this is simply not so. Even when assuming the offshore transfer is fraudulent, or that the plan otherwise fails, the U.S. Supreme Court notes that a finding of contempt for failing to obey a repatriation order is not always appropriate:

“In a civil contempt proceeding such as this, of course, a defendant may assert a present inability to comply with the order in question. Maggio v. Zeitz, supra, at 75-76; Oriel v. Russell, 278 U.S. 358, 366 (1929). While the court is bound by the enforcement order, it will not be blind to evidence that compliance is now factually impossible. Where compliance is impossible, neither the moving party nor the court has any reason to proceed with the civil contempt action. It is settled, however, that in raising this defense, the defendant has a burden of production.” [3] [Emphasis is mine.]

An analysis of relevant cases (such as the infamous “Anderson” case [4] ) in conjunction with the above excerpt shows that debtors who were held in contempt were not incarcerated for failing to repatriate assets; rather, their critical blunder was failing to prove their inability to repatriate assets. It is perhaps most important to note that debtors who were subsequently held in contempt, without exception, took extraordinary measures to effect a ‘self-created impossibility' to repatriate assets, which did nothing but invoke the suspicion and wrath of a judge whose orders were being flaunted. [5] ”

Thank you Ryan. I agree with your analysis and appreciate your thoughts.

When doing Asset Protection Planning it is important to get solid professional advice. You do not want to implement some shallow transparent plan without substance and a substantial business purpose. Asset Protection Planning of all types and probably Offshore Asset Protection Trusts are becoming more and more commonplace and important. It is becoming mainstream. I am glad for this.

I wish you a healthy and protected week. Next week's newsletter will be an analysis of some of the Asset Protection weaknesses of ERISA qualified plans. Your money might not be as safe as you thought.

I wish you a happy and protected week.

Rob Lambert

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[1] FTC v. Affordable Media LLC, 179 F.3d 1228 (9th Cir., 1999); In re: Lawrence, 238 B.R. 498 (Bankr. S.D. Fla. 1999), aff'd 251 B.R. 630 (S.D. Fla. 2000), aff'd 279 F. 3d 1294 (11th Cir. 2002).

[2] Ibid.

[3] U.S. v. Rylander, 460 U.S. 752 (1983).

[4] See footnote 8, above.

[5] A particularly egregious example of this is JSC Foreign Economic Assoc. Tech v. Int'l Development and Trade Services, Inc., 306 Supp. 2d 482 (S.D.N.Y., 2004).

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