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Stephan Lawrence Case.

By Rob Lambert - Email Editor

Date : 16-Aug-2007

Dear Subscriber:M

Over the years I have kept you all up to date on the seemingly never ending story of Stephan Lawrence. Most of you will remember Stephan Lawrence. He is (or was) a fancy margin trader who missed a margin call from Bear Stearns. Bear Stearns went after Lawrence for the margin call and won an arbitration judgment for slightly over $20 million dollars.

Shortly before the judgment against Lawrence was entered, he put most of his assets (a little over $6 million at the time and now possibly twice that amount) into an offshore Asset Protection Trust.

Lawrence then filed for bankruptcy. [Remember one of my hard and fast rules: Bankruptcy and Asset Protection Planning do not mix.] The bankruptcy judge ordered Lawrence to repatriate the assets he ferreted away in his ill conceived plan. After the money failed to materialize, the pissed off bankruptcy judge held several days of hearings on the issue. After the hearing, the judge essentially gave Lawrence the “scumbag of the decade award,” and made a finding that he was a liar and all around piece of garbage. I have never read a decision where a federal judge officially impugned the character (of more precisely lack of character) of a party to litigation.

The judge also made a finding of fact that Lawrence had the power to repatriate the assets AND further held that the self-created impossibility was not a excuse for failing to comply with the order to return the funds. In short, the judge did not believe Lawrence's assertion that he could not get to the funds. It just did not fly that a trust funded weeks before the judgment could not be reached by it's creator.

The judge then threw Lawrence in the clinker in an effort to coerce compliance with his order.

Recently Lawrence was released by Judge Gold who made a finding that the incarceration was not likely to have its effect of forcing compliance.

Lawrence is probably on his way to Europe or Thailand or some other wonderful vacation paradise to enjoy the fruits of his labor. The way I figure it, he made at least $1 million a year (and possibly $2 million if you assume a decent return on his money).

In my mind it was correct to hold Lawrence in contempt. He should have been thrown in the clinker. The trust was funded solely to defraud an identified creditor and had some severe structural flaws. I also do not agree with this decision to release Lawrence, although, two years ago I stated in a newsletter that I expected this release soon.

What does Lawrence teach us? First, Asset Protection Trusts do work. Second, they work for both good and bad people, and even if funded with a fraudulent conveyance. In my mind, the case also continually reminds me that the consequences of Asset Protection Planning done in a careless fashion and at the wrong time can be terrible, at least if you value your freedom.

What do I think will happen? I think Lawrence will spend some of his money and enjoy it for a while. He may even start trading again. I also think that his trust company and he will eventually let their guard down. When that happens, if Bear Stearns has decent counsel with advice from a skilled Asset Protection consultant, then Bear Stearns will glom onto the once protected funds. The probable vehicle will be a Mareva injunction.

I will continue to follow this drama. It is not over yet.

…..and please guys, do your planning in a diligent, measured, conservative manner when the financial seas are calm. Always preserve sufficient unprotected funds to pay ALL of your reasonably anticipated debts…. and, finally, avoid bankruptcy at least until your trust and planning is old and cold (this means more than 10 years in the case of bankruptcy).

Have a healthy and protected week.

Rob Lambert

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