Don’t Lie to the Bankruptcy Court.

Paul Hansmeier was a wealthy, but unscrupulous, attorney.  5 years ago, he was making hundreds of thousands of dollars “porn trolling,” i.e. getting courts to issue broad John Doe subpoenas to internet service providers for users suspected of downloading copyrighted pornography.  Subpoena requests are routinely granted without evidentiary hearings.  Paul would then send threatening letters to pressure the thousands of suspected users to settle by paying hundreds or thousands of dollars or risk “public exposure” in litigation, when he had no actual proof that the users were the actual downloaders. When the courts found out he was abusing the subpoena process, they sanctioned him repeatedly, totaling $576,000 as of 2014.  Paul dissolved that firm and moved on to filing ADA (Americans with Disabilities Act) claims against small, family-owned businesses with non-compliance issues such as improper signage or doors with round knobs instead of levers.  Most small businesses would settle (or authorize their insurer to do so) rather that engage in a protracted federal case. Business was lucrative, but the pesky 1/2 million dollars worth of sanctions kept following him.

With multiple courts coming after him to collect the sanctions he had been ordered to pay, Paul decided to file a chapter 13 bankruptcy.  Perhaps not coincidentally, he did so immediately before he was to turn over significant financial disclosure in response to a judge’s request. Paul made just over $10,000 worth of payments to the bankruptcy court over a 4 month period before things fell apart. The trustee found he had been less than honest in his filing and his subsequent conduct. The trustee also asked the court to change the case to a chapter 7 and sell Paul’s assets, instead of letting Paul pay the equivalent value over a 5 year period. Paul fired his attorney and filed his own response saying, “Actually, can I have the $10,000 back? I’ve got this plan to repay everybody. And the Trustee’s a crook, he buys a new Mercedes every Christmas.” The court sided with the trustee. Paul appealed.

The appellate court cited some of the findings of the bankruptcy court. It noted that Debtor had been found by a federal district court judge in the Southern District of Illinois to have exhibited “a serious and studied disregard for the orderly process of justice and a relentless willingness to lie to the court on paper and in person”; he had been found by a state court judge in Minnesota to have “intentionally given inconsistent testimony” throughout the proceedings; he had filed his bankruptcy petition to avoid disclosing financial information to the state court; he had failed to disclose numerous transfers totaling over $500,000.00 on his statement of financial affairs; he moved to a rental property and failed to amend his schedules to reflect the resulting reduction in his monthly living expenses; and “numerous courts had entered findings and conclusions that he had engaged in fraud and misrepresentations to the courts regarding his assets and his use of various entities to hide his assets” to misrepresent his financial condition.

Paul is going to lose everything (including his licence to practice law if it has not been revoked already.) Don’t lie to the court, and don’t lie or leave stuff out of your bankruptcy paperwork. Don’t think you won’t get caught. It will not end well.