On Tuesday in the Bankruptcy Court for the Central District of California, three companies, Cargill, Inc., Seneca Foods Corporation, and Lawrence Foods, consolidated creditors’ actions against Bonert’s Inc, a pie company in Los Angeles County, alleging that the husband-and-wife partnership fraudulently filed for bankruptcy to avoid paying creditors following the taking of excessive expenditures from the business for personal use.
The plaintiffs claimed that the defendant’s pie company “was a shell corporation that did nothing other than serve as a conduit for (the partners) to transfer funds from Bonert’s to (themselves).” The associated complaints argued that rather than paying debts for goods and services received, the partners in the alleged pie-producing playact chose to do the following: pay out annual wages to the husband-partner of $445,212.04, pay out annual wages to the wife-partner of $171,235.40, take a family cruise for $5,560, buy personal products at the Apple Store for $2,212.91, and set up four fictitious corporations to make loans between in amounts of up to $1,785,978.
The end results, the plaintiffs averred, of the defendant’s money mismanagement were total liabilities for the company in the amount of $9,503,213 by 2014, with the partners avoiding “making capital contributions to properly capitalize Bonert’s, while manipulating Bonert’s purported indebtedness (to the defendants)…so that (the partners) could take money out of the company at will ahead of legitimate arm’s-length creditors.”
Federal law prohibits a person or business from using a bankruptcy proceeding to discharge a debt for goods or services, when said goods or services were procured by verbal or written statements rooted in fraud. In conjunction with federal law, California state law allows a plaintiff to receive compensatory damages equal to the amount of an unpaid debt for goods and services “where it is prove(n) by clear and convincing evidence” that the defendant receiving the goods and/or services did so by making “an intentional misrepresentation…or concealment of material fact…known…with the intention…of thereby depriving a person of property….”
To date, Seneca claimed a debt of $172,451.93, Cargill claimed a debt of $376,310.88, and Lawrence Foods claimed a debt of $6,218.00. All three plaintiffs seek a prohibition on the discharging of the debt in the bankruptcy proceeding, compensatory damages under California law equal to the amount of the unpaid debt plus 10% annual interest for each year the awarded damages go unpaid, attorney’s fees, and court costs.
The plaintiffs are represented by Blakeley LLP.
