ROBERT E. LITTLEFIELD, Jr., United States Bankruptcy Judge
The matter before the court is the objection to discharge filed by Creditor Keith Raniere (“Plaintiff”)…
[Toni had a lot of debts and wanted to discharge them for her and her company, National Health Network, through bankruptcy. Raniere objected to her discharge, claiming she owed him $2,000. His real motive was not to get his $2,000 back – he spent tens of thousands in legal fees to fight this – but to expose Natalie as a liar and fraud. He was probably right, but he overplayed his hand. His claims of Toni’s fraud were numerous, and went well beyond the artwork – but, for today, we will focus on the Ramon Santiago artwork that Toni may have lied about owning.
[As we shall see, Toni told at least three different stories to the court about the paintings. At first, she claimed she owned no paintings. Then, she amended this to say she owned $1,100 worth of paintings. Then, she later swore in an affidavit that the paintings were worth $500 and that she had sold them to her mother in 1998 – a year before the bankruptcy was filed.
[The Judge wrote]
In response to Schedule B… question 5, the question which asks what books, pictures, art objects, etc. a debtor owns, the Debtor [Toni Natalie] checked the box labeled “NONE.” On the amended Schedule B she filed on April 21, 2000, however, she states she owns “Paintings, Prints, Posters” worth $1,100. She later testified at one of her depositions that the $1,100 value included her son’s painting [the painting “Michael”] and posters and prints and that the frames were worth more than the actual graphics themselves.
During her depositions, Michael Rudin, Esq., the Debtor’s former bankruptcy attorney, often commented about her Schedule B amendment, particularly her belief that the artist presented the portrait to her son as a gift….. However, at trial the Debtor [Natalie] denied that she had previously testified the painting belonged to her son….. In an affidavit the Debtor signed on January 28, 2000 and later filed with the court, the Debtor stated, “All the artwork I had consisted of art worth no more than Five Hundred and 00/100 Dollars ($500.00), all of which were sold in 1998 to pay my medical expenses.” Whenever asked under oath if she ever had an appraisal of the artwork done, she answered she had not….
According to [Toni’s mother Joan] Schneier’s testimony and a promissory note dated June 30, 1998, on or around June 30, 1998, more than one year prior to filing, she [Joan] received artwork from the Debtor [Toni] after paying her approximately $10,000….. The document itself is confusing. Although it purports [via Joan and Toni’s testimony] to be Ms. Schneier’s written promise to pay the Debtor $10,000 for artwork, pictures and paintings, the Debtor [Natalie] signed the document as a guarantor.
[A guarantor signs for a loan, not a sale.]
Confusing the artwork sale matter more is a transcript of the Debtor’s [Toni] November 15, 2000 deposition. She testified she intended to sell her the artwork, then analogizes [makes a comparison of] the transaction to the second mortgage her mother had obtained on the Debtor’s house.
[This suggests Toni lied – that her mother gave her $10,000 as a second mortgage on her house and not for the paintings. This is why Natalie signed as guarantor – not as a seller of paintings. She was guaranteeing repayment of money – and this document that Joan and Toni said was the proof of the sale of her artwork to her mother – was not a receipt for the sale of paintings. It looks like fraud upon the court. Toni used the promissory note she had given to her mother – when she borrowed money against her house – to fix her faulty breast implants – to, it seems, pretend that it was for the sale of her artwork so she could conceal she still owned the artwork.
[The Judge continues:]
Later on she testified that if the payments provided for in the agreement had been made, her mother would not have had any right to the artwork because the Debtor would not have owed her any money, but then stated she did not know if the artwork was the security for the payment of her debt to her mother…..
[Toni was playing stupid here – she did not know if it was a sale or a loan – and it worked to a degree with the judge. She admitted that if she had paid back the $10,000 to her mother that her mother would not own the paintings. But when asked, she said she did not know if the artwork, as opposed to her house, was security for the payment of the $10,000.]
[Toni’s Mother Joan] Schneier testified the Debtor used the $10,000 to pay for surgery the Debtor needed to lessen the harmful physical effects resulting from a damaged silicon implant and to keep her business afloat during her recovery. She also testified she did not have sufficient room in her home initially to take possession of the artwork.
[In other words, Toni kept the paintings in her home at first because the mother – who supposedly owned them – did not have room for them.]
Prior to moving to Rochester and after her husband recovered from a heart attack, Schneier had the artwork removed from the Debtor’s residence with the help of family and friends. Once she took possession of it, she retained it.
[OK – so the mother said she had the artwork – which may have been true. She may have been keeping it for Toni, now that Raniere was challenging the bankruptcy. In other words, Toni seems to have kept the artwork until she was challenged about it in bankruptcy and then had her mom take it – and then had her mom give it back to Toni – probably because Toni owned them all along. This seems to have been a fraud on the court.
[The judge continues:]
… In his opening brief, the Plaintiff [Raniere] contends the Debtor should be denied a discharge … for knowingly and fraudulently making a false oath or account regarding the existence, ownership, possession and value of artwork [plus other reasons which we will get to in another post]… and the oil painting called “Michael.” He asserts she did not list the art as a secured debt on the bankruptcy petition so she could remove the collection from the court’s purview and purchase it back at any time.
[Raniere seems to be telling the truth for once.]
…. The Plaintiff [Raniere] also asserts the Debtor should not receive a discharge based on 11 U.S.C. § 727(a)(3) for concealing information or failing to preserve recorded information regarding her financial condition or business transactions, particularly the value of her art collection….
In her response …. the Debtor [Natalie] asserts the Plaintiff has not met his burden of proof …. According to her, she did not provide the Plaintiff with an appraisal of the artwork because she had no such appraisal, thus, she had no “recorded information.”….
She contends there is no evidence of a secret deal between her and her mother which shows she retained a legal or beneficial right to the artwork…. the Debtor sold the artwork more than a year prior to filing her petition and did not possess it when she did file.
Regarding the “Michael” painting, the Debtor asserts her amended schedule was a defensive move by her so that if she had any rights in the painting [which she claimed she did not – Santiago gave the painting to Michael so she did not own it, she said], those rights were disclosed…
…. the Plaintiff … lists 19 areas where the Debtor “misrepresents, deletes or provides directly contradicting testimony,” [but] overall he focuses on the Debtor’s transfer and concealment of her artwork…. [and two other lies which we will discuss later]
[In the end, Raniere overplayed it. And Toni outsmarted him by playing the innocent dumb, but let’s not forget “pretty” high school dropout. The judge sided with Natalie – largely because of testimony Natalie and her mother gave about how Raniere was harassing them and because Raniere overdid it – he was pursuing $2,000 and he spent much more than that in legal fees. On top of that, Toni testified she was unsophisticated, saying falsely she had only graduated 9th grade and was never in business before except to sell fruit baskets. See those lies deconstructed in Another Day, Another Lie – From Toni Natalie – This Time About Business Experience]
[The judge ruled famously against Raniere:]
The individual challenging the Debtor’s discharge is her former boyfriend [Raniere]. Although he is a creditor of the Debtor, compared to the similar creditor bodies in the two cases, his claim is very small. Moreover, unlike the more typical scenario of the Chapter 7 estate’s fiduciary objecting to a debtor’s discharge, this matter smacks of a jilted fellow’s attempt at revenge or retaliation against his former girlfriend, with many attempts at tripping her up along the way. After careful consideration of the entire record, with particular attention paid to the Plaintiff’s post trial briefs and appendices, the court concludes the Plaintiff did not meet his burden of proving, by a preponderance of the evidence, that the Debtor should not receive a discharge…..
Of course, sophisticated debtors are held to a higher level of accountability. In re Sethi, 250 B.R. 831 (Bankr.E.D.N.Y. 2000). In the instant case, however, the Debtor has a ninth grade education and, prior to her involvement with the Plaintiff, the extent of her business practice was selling fruit baskets from her home….. Although the Debtor did not provide the Plaintiff or the Trustee with an appraisal of the artwork, she did not do so because she did not have one…..
The Plaintiff asserts the Debtor did not disclose the transfer of artwork at her … [meeting with creditors]… There is no evidence the Debtor made any unusual transaction or deliberately covered her tracks, no evidence of a secret deal between her and her mother where she retained a legal or beneficial right to the artwork and no evidence her mother gave the Debtor anything but fair value for the artwork…
As for the proceeds …. the Debtor used them for her surgery and … business expenses. The Debtor’s confusion, nervous state or misunderstanding of the [questions] …. does not support a determination that a fraudulent misrepresentation occurred. … Here, the Debtor was not asked straightforward questions like “do/did you own paintings?” and “where are they now?” Rather, the series of questions asked involved broad, legally-worded queries which required the Debtor to recall “transactions” involving art and numerous other assets she allegedly owned during the six years prior to filing. The line of questioning prompted her attorney to ask clarifying questions. Given the context, especially Rudin’s interruptions and involvement, the court does not infer fraudulent intent by the Debtor…
[This was a simple case of Raniere going too far and his lawyers being too cute. They did not ask straightforward questions but, instead, tried to trip up Natalie who they knew was lying. It backfired. The judge sympathized with Natalie partly because he thought Toni – who acted nervous and played stupid – was unsophisticated and being attacked by a vengeful ex-boyfriend with a lot of money.]
[The judge continues:]
…. The Debtor did not disclose the existence of any artwork until she filed her Amended Schedule B, however, her credible testimony regarding the amendment is that she filed it to reflect the existence of the “Michael” painting, i.e., art belonging to her son. Furthermore, the Plaintiff has failed to prove, by a preponderance of the evidence, that she actually owned artwork when she filed….
…. In her affidavit she swears the artwork she sold in 1998 was only worth $500. However, Exhibit B, the promissory note between herself and her mother, and the testimony of the Debtor and her mother indicate she might have received as much as $10,000 for it.
…. the court views the promissory note as evidence that the Debtor’s mother paid approximately $9,500 too much for the artwork, in effect, gifting the Debtor that money so she could pay for her surgery. Due to the lack of any evidence in the record evidencing the various paintings and lithographs had a higher value when the Debtor transferred it to her in exchange for money for her medical and business expenses, the court does not find she lied in that affidavit….
[Again Raniere and his team of imbeciles blew it. They could have gotten evidence that the paintings were worth far more than $500, but they did not. So Toni got her discharge and got to keep her paintings too – which otherwise would have been sold to pay off her debts.]
Now for some final comments
When Toni Natalie filed for bankruptcy, she had a lot of debts.
Here is a partial list of creditors:
10 Lake Corporation
Advanta Leasing Services
American Express Centurion Bank
Fleet Leasing Corp. (Sanwa)
GE Capital Colonial Pacific Corp.
PC Information Leasing Corp.
Southeastern Leasing Equipment Corporation
Copelco Capital, Inc.
IFC Information Leasing Corp.
Preferred Capital Corporations
Note that all of these are equipment leasing companies As we shall show in a later post, they were quite likely scammed by Toni in a large-scale scheme she perpetrated by claiming she [and her brother and her mother] wanted to buy restaurant equipment – then borrowing the money from leasing companies for new equipment, then not really buying the new equipment but putting used equipment in the restaurants instead, then pocketing the cash difference, then stiffing the leasing company on the payments, and, ultimately, discharging the debts through bankruptcy. Her mother and brother also filed for bankruptcy.
How she fooled the judge that she had no business experience and was an unsophisticated little nobody who only went to 9th grade and made fruit baskets in her basement is one for the books – and one we shall explore in more detail later.
By the way, for those who say that Toni inherited the paintings after her mother’s death, which is why she has them, keep in mind that her mother died in October 2014. Toni had the paintings on her walls long before September 2014.
Indeed, it is believed she got them back from her mother right after her bankruptcy discharge in 2003. And since then, she has had them consistently.
It is funny too, in her bankruptcy, she claims the most valuable painting, “Micheal”, belongs to her son, Michael, but there it is in her house.
Michael should go over and get that painting before he moves to Florida this year. After all, Toni said under oath it was gifted to him by the painter, Ramon Santiago, himself.
That painting could be sold to help the young man get his college education.
I think it would be fair too – especially since Toni may have already gobbled up her son’s inheritance – with the aid and assistance of her close, very personal and married friend, her “angel”, Ron Von P—.
But that is a matter for another post – on how Ron Von became the executor of Toni’s stepfather’s estate and how Michael – who was supposed to be the executor – and who was supposed to have inherited money for his college tuition – got nothing.
The least Toni could do is to give her son [who she abandoned when he was 9] back the painting she claims the artist gave him when he painted it.
Finally, I think Toni and Keith are so similar that I believe they are soulmates – and if demons have souls then their soulmate would have to be the one who punishes them most.