Federal agencies are the strongest creditors and are the most likely to overcome asset protection planning. Court decisions involving federal agency collection frequently favor the creditor agency. An example is an unpublished order involving one of my clients who had been sued by the Federal Trade Commission for conducting illegal telemarketing.
The telemarketing activity was conducted by a corporation owned by the husband client. The FTC placed the corporation in a receivership. More than four years prior to the receivership order the corporation distributed millions of dollars to the debtor owners. The debtors could not account for the money; the FTC could not trace or identify specific funds; and substantial amounts of the money went in to the debtor’s homestead and to tenants by entireties accounts.
The debtors argued that the corporations transfers more than four years prior to the receivership beyond the statute of limitations for fraudulent transfers. The court disagreed, holding that in the case of a receivership the statute runs from the appointment of the receiver.
The court and FTC were not defeated by their inability to trace or identify ill-gotten telemarketing proceeds. The court imposed a constructive trust on all the debtors assets up to the amount of the FTC judgment. The trust included otherwise exempt tenants by entireties accounts. The court placed an equitable lien on the couple’s homestead property because it was purchased with money from the fraudulent telemarketing business.
The FTC convinced the federal court judge to tie up, one way or another, all of the debtor’s individual and marital assets in order to satisfy the FTC judgment. Another case where federal agency creditors plow through Florida exemptions. (20019 WL 1093023)