The Cumberland Case
I. QUESTIONS PRESENTED
II. CASE BACKGROUND
IV. HEARINGS & PLEADINGS
I. QUESTIONS PRESENTED:
1. "If there are rulings of the bankruptcy court which deprive parties, like Mr. Chorney, of their fundamental rights, should there not be some requirement that parties be informed before entering into bankruptcy court and granting the bankruptcy court jurisdiction over us, that this court is [acting] like a Vice Admiralty Court with an Absolute Ruler, who need not abide by the law of the land, with the safeguards of checks and balances and separation of powers and all the guarantees of fundamental rights as listed in the Bill of Rights to the U.S. Constitution?"
2. "If the bankruptcy court makes rulings contrary to their own statutes in the bankruptcy code, what safety nets exist, or what recourse do we the people have?"
3. "If these "self regulators" in the judiciary, who have apparently opted-out of the checks and balances system, are abusing their power and not regulating themselves, who should be overseeing them and what recourse do we the people have?"
II. CASE BACKGROUND:
This Cumberland Case (C.I.C.) concerns two proceedings, one civil and one related criminal case, as well as appeals of both types of proceedings. The civil case has been ongoing for an unprecedented 17-year period in the District of Rhode Island, yet no final report has been written to end this case.
Chorney was the C.E.O. and majority shareholder in a public entity, Wescap Enterprises Limited, (Wescap). Cumberland Investment Corporation, (C.I.C.) was a wholly owned subsidiary of Wescap. Chorney was the guarantor of a 2.5 million dollar note that C.I.C. had with Eastland Bank, in R.I. The bank had physical possession of some of the assets of C.I.C., the "possessory" collateral, valued by different appraisers and the company’s auditors, Thorney, Ernst & Whinney, at over five million dollars. The "possessory" collateral for the 2.5 million dollar note consisted of 7,826 rare U.S. silver dollars, rare U.S. stamps and currency. Eastland Bank called the note and subsequently, the following events occurred:
1. On November 5, 1989, C.I.C. was petitioned by Eastland Bank and two other creditors into a Chapter 7 liquidation bankruptcy proceeding in the District of Rhode Island, Ca. No. 89-11051ANV. Management converted the bankruptcy to a Chapter 11, reorganization. The court appointed an Examiner, Michael Weingarten to evaluate the assets of C.I.C.
2. On August 17, 1990, subsequent to several contested hearings concerning the value of the assets and whether the "possessory" collateral was intact, a Chapter 11 Trustee, John F. Cullen was appointed by the court. The Chapter 11 Trustee, with court permission, removed the remaining assets from the premises of C.I.C. in Woonsocket, R.I. These assets were named the "in-house" assets and the "redemption" client assets. "Redemption" client assets were stored at the premises of C.I.C., but owned by clients of C.I.C. By court order, Chorney, an employee, was fired. The same court order fires Aubin, (a non-employee) . The Trustee then, hired the former Examiner, to assist him in the liquidation of the C.I.C. estate. Yet, statute 11 U.S.C. Section 327(f), specifically states that "The trustee may not employ a person that has served as Examiner in the case."
3. On December 12, 1990, Chorney, Chapter 11 Trustee, John F. Cullen, Eastland Bank and Gerald Aubin, a creditor on the Creditors’ Committee, through their attorneys, entered into an agreement, whereby the Trustee was authorized to borrowed money from the C.I.C. estate for ‘administrative expenses’ subject to Title 11 U.S.C. Section 364, (the 364 Agreement.) The bankruptcy case was quite contentious. Chorney and Aubin claimed the Examiner and Chapter 11 Trustee did not provide a proper accounting of the assets of C.I.C. and the use of the proceeds of the 364 Agreement. The Examiner and Trustee claimed the assets were not of high value, as claimed by Chorney, and made a criminal referral to the U.S. Trustee’s office, an adjunct to the Department of Justice.
4. On July 3, 1991, an order was entered by the bankruptcy court stating, that Chorney’s "standing is as an alleged creditor only, and whose interests as such are adequately represented by the Trustee." Both Aubin and Chorney were forbidden by court order to partake in proceedings concerning the sale of the assets. Both previously and subsequently to the July 3, 1991, court order, Chorney had claimed for several years that some of the assets, seized by the Chapter 11 Trustee on August 17, 1990, were conspicuously missing.
5. On June 18, 1992, Chorney, was ordered by the bankruptcy court to pay $200,000 to the Chapter 11 Trustee. Chorney was held in contempt of court, for allegedly concealing and destroying records, overstating the value of the company’s inventory and “the identity of clients was “wrongfully withheld on the baseless grounds of “confidentiality” even after disclosure was ordered by the court.” All this was allegedly "partial reimbursement for deliberate post-petition damage he has done to creditors."
Chorney viewed this fine as being a chilling affect "for his refusal or inability to surrender private, personal and family information about his clients as well as his right to challenge official misconduct." An appeal of this decision was denied by the District Court, and the Court of Appeals for the First Circuit. The Supreme Court of the United States did not grant Certiorari to Chorney.
6. A criminal referral from both Eastland Bank (taken over by F.D.I.C. in December 1990) and the Examiner in Bankruptcy was made and on September 16, 1992, Chorney was indicted on 1 count—18 USC 371, 10 counts—18 USC 1341 and 7 counts—18 USC 1341. After a six-week jury trial, ending on May 26, 1993, the jury came in with a mixed verdict. Chorney was acquitted of the 1 count of 18 USC 371, conspiracy to commit bank fraud, and 10 counts of mail fraud, 18 USC 1341, but found guilty of the 7 counts of bank fraud, under 18 USC 1014, namely making false statements to an F.D.I.C. insured institution.
7. Chorney and former clients of the Cumberland Investment Corporation, whose assets were seized but never recovered, repetitively have indicated to the court that assets under the custody and control of Eastland Bank, their successors, and the Examiner and trustees in bankruptcy, were missing and/or unaccounted for. Both Chorney and a former client, an interested party, named Warren Taft, whose assets were seized on August 17, 1990 but could not be located afterwards, on several occasions sought to obtain an accounting of the assets seized on August 17, 1990, and the use of funds from the 364 Agreement, without success.
8. On February 23, 1996, subsequent to exhausting various appeals of his criminal conviction, Chorney began to serve a 27-month sentence at Allenwood F.P.C. Another part of the ‘punishment’, contested by Chorney, was a restitution to the alleged victim, for the approximate sum of $600,000, based upon an alleged shortfall in the value of the assets. The government had valued the "possessory" collateral as being worth 1.2 million dollars, and the in-house inventory as being worth $700,000, thus leaving a shortfall of $600,000, the basis of Chorney’s sentence and restitution.
9. On March 6, 1997, while incarcerated, Chorney filed for a Writ of
Certiorari in case no 96-8266, Chorney vs. United States of America, which was not granted. The question presented in this writ was whether Chorney was denied his fundamental right to defend himself.
10. On December 7, 1999, the last of the assets, the "possessory" collateral was allegedly sold at public auction.
11. On March 10, 2000, Chorney was informed by Republic Credit Corporation I, that as of 12/8/99, the day following the auction sales, Republic was made the assignee of the interest of FDIC.
12. On November 16, 2001, Chorney filed a MOTION IN OBJECTION TO DISTRIBUTION FROM THE SALE OF ASSETS PRIOR TO TRUSTEE PROVIDING AN ACCOUNTING OF THE ASSETS. It had been four years since the assets were allegedly sold in this 15-year-old bankruptcy case, yet no full accounting of the assets of the estate have been provided to Chorney or any other interested party despite continuous requests for this accounting.
1. Chorney has repetitively claimed that he could not adequately defend himself in the criminal case because he could not obtain information to corroborate his theories, namely that the "possessory collateral" was not intact and that it had been tampered with, and that the "in-house" inventory had assets that were missing or unaccounted for. The information below is relevant to the attempts of Chorney to defend himself.
2. Both the Chapter 11 and 7 Trustees have consistently presented the argument to civil and criminal courts, that the "possessory" collateral was in tact. Trustees also argue that any assets missing from the "in-house" inventory or the coins belonging to the so called "redemption" clients of C.I.C., all seized and removed from premises of C.I.C. on August 17, 1990, were probably missing, prior to the seizure, while in the possession of the Chorney.
3. The Government and their trial witnesses, adopted the Trustees’ same arguments in paragraph 1 above at the criminal trial of the Chorney.
4. On July 14, 1992, pre-indictment, John Truslow, F.B.I. Special Agent, testified before the Grand Jury and confirmed that the "possessory" collateral was not intact. His testimony indicates that some 175 silver dollars were sold from the "possessory" collateral prior to the criminal trial. Assuming that Agent Truslow’s statement was true, then possibly tens or hundreds of thousands of dollars in value were sold without notice to the parties in the bankruptcy case, in violation of the accounting requirements of 11 U.S.C. Section 704(1) concerning the distribution of proceeds from this sale. (In addition, no mention was made until the year 2000, that the FBI had been holding some 183 silver dollars, which were later receipted to the FDIC in 1999. See Paragraph 11 below.)
5. Subsequent to the May 1993 criminal trial, Chorney, through his own due diligence, obtained a copy of the transcript, produced by Allied Court Reporters at the request of Eastland Bank, dated August 17, 1990, indicating that the Trustee and numerous parties in his employ were acting "in the context in both civil and criminal investigations" during the removal of assets from C.I.C. The 8/17/90 Transcript also details some of the assets removed by and under the direction of the Chapter 11 Trustee, John F. Cullen.
6. Chorney, subsequent to the criminal trial, notified Mr. Monzack; the Bankruptcy Court; Sheryl Serreze, U.S. Trustee; and the John Fitzgerald, A.U.S.T. at the Boston Regional Office in June and September of 1994, of specific assets from the "in-house" inventory, seized by the Trustee on August 17, 1990, that appeared to be missing or unaccounted for from the estate. The September 94 letters reference the Transcript dated August 17, 1990, which Chorney supplied to Mr. Monzack.
7. The missing and unaccounted for assets, in paragraph 4 above, were from the "in-house" inventory of C.I.C., which is a different inventory from the bank assets, the "possessory collateral" in paragraph 3 above. Neither the missing "in-house" assets, valued between tens and hundreds of thousands of dollars, nor the 183 silver dollars, valued between tens and hundreds of thousands of dollars, in paragraph 12 below, were available to be considered by the trial judge in the compilation of Chorney’s sentence and restitution.
8. On December 28, 1994, Chorney, and creditors Mr. Nacu, and Mr. Dunleavey, met with Jason Monzack, who was both the Chapter 7 Trustee for C.I.C. as well as the Trustee for Eastland Bank. At this meeting Mr. Monzack admitted that there was over $300,000 in assets missing from the estate of C.I.C., but in Mr. Monzack’s words, "it’s no big deal since the administrative expenses [of the C.I.C. bankruptcy] far exceed that figure."
9. Subsequent to trial, at Chorney’s request, Mr. Lutes, court appointed criminal attorney at the May 1993 trial of Chorney, requested Mr. Monzack to supply him with inventories taken by Mr. Monzack and FDIC, as referred to on page 68 of a February 15, 1996, hearing in bankruptcy court, only eight days before Chorney was seized at a bail hearing to start serving his sentence. Mr. Monzack never responded to Mr. Lutes concerning this or in subsequent communications.
10. On October 19, 1999, Chorney obtained 19 videotapes, taken at the direction of the Chapter 11 Trustee, Mr. Cullen, in the related civil bankruptcy action. The videotapes were produced to Chorney as a result of an FOIA to the Executive Office of U.S. Attorneys, concerning the removal on August 17, 1990, of the assets from C.I.C. premises by Mr. Cullen. Said videotapes show Kate Dowling, from the U.S. Trustee’s office was present there on 8/17/90. The Examiner clearly states on video that, "two to three Million Dollars" is the value of one of the truck-loads of C.I.C. assets. This 2-3 million dollar value far exceeds the value stated by government witnesses at trial. A comparison of assets in the Trustees’ motion to sell estate assets and the assets contained in the 8/17/90 transcript and the videotapes show that a significant number of assets seized by the Chapter 11 Trustee, were not sold and confirms claims made in par. 6 and 7 above.
11. On April 6, 2000 at a bankruptcy court hearing, Chorney obtained ‘newly discovered’ evidence. The alleged victim, Eastland Bank and their successor, FDIC, the Trustees in Bankruptcy and U.S. Attorney’s office all knew that the assets, which were evidence in the criminal trial, were indeed not intact as was testified to at trial.
12. On December 11, 2000, ‘newly discovered’, in response to Mr. Taft requesting an explanation into estate asset discrepancies as to why the Trustee requested permission to sell 7,491 silver dollars in the December 1999 auction sale, when the sale allegedly should have contained the "possessory" collateral of 7,816 silver dollars , valued by the government at (The ‘possessory collateral’, now contained only 7,816 rare silver dollars. Parties were noticed and with the permission of the bankruptcy court, ten coins of the original 7,826 coins were sold in 1990, for approximately $5,000 to pay for administrative expenses.) 1.2 million dollars at Chorney’s criminal trial, but actually contained over 8,000 coins, valued by Christies at less than $300,000. Trustee Monzack reluctantly supplied Mr. Taft various documents, indicating that there were 7,992 silver dollars and not 7,491 silver dollars in this sale. One of these documents was a receipt from the F.B.I. to F.D.I.C., dated 1/8/99, indicating that in addition to a ‘possessory collateral’ of 7,809 silver dollars, the collateral ‘allegedly in tact’ and held by Eastland Bank, there were 183 silver dollars receipted from the F.B.I. to be returned to F.D.I.C. No inventory of the 183 silver dollars was provided to Mr. Taft or Chorney, nor any other paperwork as to when the silver dollars were originally given to the F.B.I. However the documents now show discrepancies as to the number of silver dollars in the ‘possessory collateral’ of 7,826 or 7,816 coins remaining after the 1990 sale, namely 176 extra coins.
13. Government witnesses testified the ‘possessory collateral’ was intact at his trial in 1993. There was no disclosure that Eastland Bank had segregated 183 silver dollars from any inventory, and placed it under the custody and control of the U.S. Attorney. Can it be that the 183 silver dollars represented the missing 3.8 million dollars from the possessory collateral, once valued at over 5 million dollars or those coins once appraised at thousands of dollars each from the "in-house" assets? Either way, these 183 coins were not available to be considered when computing Chorney’s sentence.
14. On January 25, 2001, a hearing was held in bankruptcy court concerning Mr. Taft’s Motion to Compel Production from Mr. Monzack. Opposing this Motion to Compel was the office of the U.S. Trustee. Despite being notified on several occasions that assets of the estate were missing, signed on behalf of J. Christopher Marshall, United States Trustee, in a Motion to Strike Mr. Taft’s Motion to Compel states, "The United States Trustee understands that Trustee Monzack…..has liquidated all or substantially all estate assets." The Motion to Compel was denied and Mr. Taft was told that he had no standing to bring future motions. (Yet as of October 8, 2006, Mr. Taft is listed as a “Creditor” of Cumberland Investment Corporation.)
15. On February 5, 2002, Chorney sent Requests for Admissions, which still remain unanswered, to Mr. Monzack, concerning the assets and documents of the estate of C.I.C.
16. On February 7, 2002, at a bankruptcy court hearing, ‘newly discovered’ evidence was obtained that all the assets of the C.I.C. estate, with exception of some 380 silver dollars and three ten thousand dollar bills, ‘allegedly’ had been sold at the December 7, 1999, auction. Up to this point in time, Chorney did not know which assets were ‘allegedly’ sold and which assets had not been. This is the first official announcement by the Trustee as to which assets have ‘allegedly’ been sold and which assets have not been sold.
17. Republic Bank and the Trustee claim that these 380 silver dollars are not of high quality and therefore have a value of only $6,000. The government’s own experts graded, allegedly the same coins, as being of higher quality and having significantly higher values. Republic Credit Corporation I, represents to the District Court on May 21, 2002, in MEMORANDUM IN SUPPORT OF MOTION OF REPUBLIC BANK TO DISMISS APPEAL OF APPELLANT HAROLD F. CHORNEY, PRO SE an argument similar to the U.S. Trustee in paragraph 13 above,
"The Trustee has, with the permission of this Court, liquidated all remaining assets of the Debtor."
Republic Bank and the U.S. Trustee, an adjunct of the Justice Department, have adopted the position of the Chapter 7 Trustee, a private attorney, that the assets have been liquidated with the permission of the bankruptcy court.
18. On 9/6/02, the U.S. Trustee’s office placed a motion to be removed as Appellee in Ca. No. 02-1976 to the First Circuit Court of Appeals, stating,
" …. J. Christopher Marshall, the United States Trustee for Region One, moves the Court to remove his former Assistant United States Trustee (Providence, R.I.), Sheryl Serreze, as a named appellee in this appeal, because he did not participate in the proceeding giving rise to the order sub judice, and he has no stake in the appeal’s ultimate resolution."
This motion was subsequently granted by the First Circuit Court of Appeals, despite the arguments presented by Chorney. Chorney believes that the U.S. Trustee and the Chapter 7 Trustee, are both parties to this case and has placed them on the LIST OF PARTIES. In addition, Chorney believes that the granting of the Trustee Motion to be removed as Appellee, was tacit approval of the stance of the Republic Bank.
19. By statute, the U.S. Trustee is responsible for investigating improprieties with the administration of the estate. Chorney and others are claiming that assets are missing and are requesting an accounting of assets from the Chapter 7 Trustee. Since the U.S. Trustee stated that they had no stake in the appeal’s ultimate resolution, the end result of this ruling fosters a
mentality that there is no question concerning missing assets, despite the statutory requirement of the U.S. Trustee to perform an investigation.
20. On November 2003, the Supreme Court of the United States denied Chorney Certiorari, meaning that they did not hear the case, nor did they rule on the merits of the case.
21. On May 13, 2004, Chorney seeks an accounting from the Trustee, Jason Monzack of assets sold by Christies at auction based on newly discovered evidence. Newly discovered was the fact that Christies had been ordered by a Federal Court to pay a one percent penalty to parties, whose assets they had sold, for price fixing with Sotheby’s auction house. In addition Chorney requested Mr. Monzack to respond to a set of Requests for Admissions related to an accounting of the assets under his custody and control as the Chapter 7 Trustee.
22. On November 3, 2004, Judge Votolato issues a court order denying the accounting and further gagging Chorney by denying him the right to file motions directly with the bankruptcy court.
IV. HEARINGS & PLEADINGS:
8 January 1992 Bankruptcy Court Hearing before Judge Votolato
9 March 1994 Allocution in Case No. 92-099P
22 April 2002 Designation of the Record on Appeal of Decision by Judge Votolato to Deny Petitioner an Accounting of Estate Assets
16 September 2003 Supreme Court Appeal of Summary Judgment of Judge Torres in Federal District Court in R.I. and the unpublished opinion of the First Circuit Court of Appeals
18 March 2004 Motion of Jason Monzack, Trustee to Strike Request for Accounting of C.I.C. Estate Assets Exhibits: A B C D E F G H I J K L M N
13 May 2004 Hearing & Related Pleadings
3 November 2004 Ruling of Judge Votolato
1 November 2007 Petition to First Circuit Court of Appeals
28 February 2008 Show Cause Order
13 March 2008 Memo to Show Cause 6
15 April 2008 Supplemental Show Cause Response
27 February 2008 Monzack Response to Motion to Clarify
17 April 2008 Supplemental Response by Monzack
18 April 2008 Offer of Proof
24 April 2008 Chorney Response to Supplemental Position
May 7, 2008, Hearing (Exhibit YY)
May 8, 2008, Order (BA 45)
December 18, 2008, Memorandum & Order (BA 37-44)
December 18, 2008, Judgment for Appellees (BA 36)
January 8, 2009, Order Denying Appellant’s Motion for Reconsideration (BA 35)
March 27, 2009, Brief of Appellant (BA)
Go to List of Exhibits