Brief Summary Of A Case Handled By Andrew L. Quiat
First, we’ll talk about a fellow named Stanley G Miles. I dealt with Stanley before he went off to prison. When I first became acquainted with Stanley, an investigator I worked with for a very long time, Joe Dickerson of Financial Forensic Services, came in to me and he had a situation where Stanley owed a national bank about $2 million and had told the chairman of the bank that he just couldn’t pay it. He’d had a few reversals and had run out of money. Stanley owned a bank himself amongst other assets. So this is one banker talking to another banker and the chairman of the national bank said, “Well, Stanley, if you can’t pay it, you can’t pay it.” But the chairman, out of due diligence and wanting to make sure that things were as they should be, had hired an investigator who did a preliminary search.
Stanley had told the banker in his financial statement about 4 entities that he owned or controlled. The investigator did a preliminary search and came up with just over 20 entities. So we had a number that he had not disclosed to his friend, the chairman of this national bank. At that point, the national bank opened up the scope of the examination, brought me in, and wanted a much deeper search done. As the case went on, we ended up with over 50 partnerships, corporations, trusts and in addition, what I came to call the round robin series of UCC collateral arrangements where you have to dig through a depth of four or five of these security agreements to get down to a nexus of common control and it turned out that Stanley owed a lot of other people a lot of money, about $30 million worth.
Through our efforts, we ended up getting our clients one hundred cents on the dollar, but it had a little stress along the way, especially for Stanley. So there were a couple of different things about Stanley and our encounters with him that I’d recall over time and it would just sort of stick with me and they are interesting. In one of his interviews, we found he had what is called in Nevada, Bearer stock. Nevada and Wyoming can issue Bearer Stock and this makes it very difficult to get your hands on it and liquidate the underlying asset by gaining corporate control. Normally when you get stock in a company, it’s issued in your name or the name of a corporation or a trust or something else that you control. Bearer stock is like a bearer bond where the agent for the corporation will recognize whoever walks into the annual meeting and holding the certificate, the person bearing it or holding it.
As with bearer bond, they don’t worry about whose name it’s in. If you have possession of it and submit a coupon for payment of the interest on it, they pay it. So who is holding this stock? Well, today I may have it but if you are coming at me, I’ll just hand it off to someone else and they are the bearer of it. Hopefully, it’s someone that you are close enough to, who after you leave and the pressure is off, I can either tell them how to roll it or say okay, I’ll take it back and there is no visible public record that I have anything to do with it. What a lovely way to hide your assets. There are 2 states in general that will authorize bearer stocks, Nevada and Wyoming. Stanley had one of those.
At one point we subpoenaed some FedEx records to find out where Stanley might be shipping stuff back and forth with himself and some of his no name associates, wife and ex-wives. We found a package belonging to his wife at Palm Springs and another package going to his wife in Scottsdale. So we started digging and we found that she was living in a very nice area in Scottsdale in a house that was free and clear but it was owned by some corporation called the Cumba Corporation. It took some more digging and what do we find out, the stock is controlled by none other than Stanley’s attorney. We then had to secure legal process to gain access to the house. Inside, the house had a very lovely dining room with high stacked chairs and in the end, we learned these chairs were purchased from Ferdinand Marcos. Ferdinand Marcos was the president of the Philippines and his wife, Imelda Marcos, was famous for collecting shoes, thousands of pairs of high heels and very expensive ones.
Ferdinand Marcos had sold the dining chairs at a couple of thousand dollars a chair, in fact in today’s dollars, it’s probably about $7,000 per chair to Stanley or one of his entities and he also had a really nice chandelier that had the similar history and they were all free and clear assets. So those are assets that we can take and seize and sell and liquidate and apply on our client’s judgment. We also learned through our discovery that the Cumba Corporation had a securities account with Dreyfus Liquid Funds Incorporated. That’s a national outfit. We were very fortunate with the judge. We went in to see the judge and he gave us an extraordinary court order with a discretionary remedy meaning that the court doesn’t have to give it to us, but this judge chose to give it to us based on the showings that we made to the judge of the circumstances and how Stanley was busy hiding things.
We took this court order and we went down to the Dreyfus office, we were in the Denver area at the time and at about 3:45 pm we went into the Dreyfus office and asked to see the General Manager and gave him the court order. The court order basically said Dear Dreyfus, if you are holding anything in the name of Stanley or Cumba or a list of other entities, you are, before you leave your office today, to liquidate it and give a check proceeds payable to Mr. Quiat. This fellow objected and said: “it’s about 6:00 in New York, I have to call our general counsel in New York, so sit tight”. It took about half an hour or 45 mins before they came back and said: “we think we know what we have to do. Now, we do have an account named in the Cumba Corporation with a balance of over $100,000. We have to take a little while to process the court order but we will give you our draft for the balance in the account that you can take with you when you leave.” That’s what we did.
We found out later, interestingly enough, that the Dreyfus folks didn’t bother to call Cumba or Stanley and let them know about this transaction or the withdrawal from the Cumba account. They found out almost a month later when they received their monthly statement in the mail and saw that there had been a withdrawal of $100,000. We felt really good when we left the Dreyfus office that day. We also learned that Stanley owned through other entities a chain of 12 fast food restaurants but as we dug into it we found out they weren’t making money and they just weren’t worth the trouble to go after. We always look at that when we look at assets. Is there equity in them? What are the hurdles in getting to the asset? How much time and trouble will it take? Does it make sense to pursue a particular asset?
In a sizeable case we will, every one or two weeks, go down a list of target assets with the client and assess where we focus and why. Is this where we ought to be or is there some reason to shift it? Stanley also liked automobiles, there were cars to ex-wives, cars to wives, there were some horses here and there. But a horse, a fine Arabian horse like Stanley had, is problematic. I have a rule in my collection work that if it has to be fed, I don’t want to touch it because if it has to be fed that means it can also get sick and then I’ve got to deal with the veterinarian and then I’ve got to deal with some place to get some lodging for this fine aristocratic animal. I just tend to ignore such assets. Probably the most interesting aspect with Stanley was his principal residence.
It was a very fine multimillion dollar home on the 5th hole of Cherry Hills Golf Course just outside of Denver, Colorado. Cherry Hills is a very prominent, fine country club which has hosted one or more National PGA events. Stanley had a nice house there. We went in there with some Sherriff’s civil deputies accompanying us and with some tow trucks and went to all the garages in this fine home and we took away 4 vehicles. Afterward I realized there were 2 items in the garage that I had to leave or I chose to leave. One was in a pile, it was about 4 feet wide, and 5 or 6 feet tall. It was rolled up oriental rugs. The court order that I had not described that I could take oriental rugs. The other item in the garage, that after the fact I thought I should have taken but didn’t, was a very large radio controlled model helicopter.
When I say very big, I mean when we were kids I had small helicopters or I had planes with a wingspan of 3 feet; this helicopter, with the blades and the rotors was probably 15 feet across and the body itself was 5 to 6 feet long. I realized after the fact that it probably did qualify as a motorized vehicle of some sort. We took all of their other cars, one of them was his wife’s jeep but it was not titled to her name. While we were in the process of seizing these assets Stanley’s lead lawyer came roaring into the driveway and accosted all of us including the Sherriff’s deputies and said that we were in trouble now. We tried to calm him down and just continued with our asset seizure.
However, the personal property that we got from Stanley was not what was so interesting about Stanley’s home. Stanley’s home was not titled in his name. It was titled in the name of the Stanley D. Miles Children’s Trust but Stanley and his wife lived in it. When we started doing title work we found that there were a couple of exceptions in titling the name in the children’s trust. Stanley had reserved a life estate unto himself. When you are in law school you go through a real property course and you learn ownership real property is like a bundle of reeds or a sheath of reeds. The whole bundle when we sell it is called a conveyance in fee simple, and if you don’t want to sell all of it, then you can take out one reed here and one reed there and they can each be sold and then whatever you have left, you can sell. One reed is called a life estate. When I have a life estate in my property, I have an absolute right to remain in it as long as I live. That’s what Stanley had for himself. Stanley’s wife also had a life estate; so Mrs. Miles was entitled to live there as long as she lived. However, there was a further restriction on her life estate. Her life estate was what we call a terminable life estate meaning that it could be terminated other than by dying.
So what would terminate her life estate? It was terminable upon the vent of either one of them filing for divorce. That would put her out of the house. We wanted the house as the house had a few million dollars of equity in it. It both had a few million dollars of debt against it and it had a lot of equity. How do you value this because if we seize the asset then it must be sold and only after it’s sold can we get the proceeds and the money to apply to our judgement. This presents an interesting valuation problem when you have a life estate and a terminable life estate. You start by using a statutory mortality table that the actuaries prepare and the state legislature adopts in most but not all circumstances and that tells you how many more years he is likely to live or she is likely to live and based on that the actuary can calculate the economic value of that life estate as a percentage of the total value of all of the real property.
We had a little difficulty. When we’d bring Stanley in for a deposition, he’d just come dragging in and have big black bags underneath his eyes, no wonder as the guy was under a lot of stress. Then when you get problems with the bank and all the other entities, the litigation all over, a guy can get stressed for life. We’d gotten control of Van Schaack Real Estate Company which was a very fine real estate company. It was a very important old line real estate firm in the Denver area for a very long time and Stanley had somehow gotten control of it and in my opinion, he was just decimating it, losing some of their best people and they had problems on every front. We concluded, in our opinion, that there was a possibility that Stanley was a cokehead in those days and was even perhaps, based on undocumented rumors, dealing cocaine. We heard some rumors of that and called in an investigator to develop more insight into one of Stanley’s organizations.
He gave us information and it is always helpful in a case like this. So that presented other issues and Stanley also had allergies, very bad allergies or at least that’s what he told us. So this guy doesn’t fit the normal health profile and so the normal actuarial table may not be the most appropriate in valuing his life estate to know how much his interest in this home is worth. So we went back to the judge and got another order and saying: “judge, these are our circumstances. We really need Stanley to undergo a very thorough physical examination so we can ascertain his health. So the actuary can come to a reasonable and informed conclusion in their professional opinion about how many years Mr. Miles is likely to live. While we are at it, judge, we ought to do the same with Mrs. Miles. We want to be fully informed and we want to make sure we fairly evaluate this property because we are required to bid it in cash a certain percentage of it’s fair market value and the bank has to come up with that cash.”
We wouldn’t want to pay too little for the property and have it subject to attack after the fact even if the money we put up is coming back to use because we have a lien, we still have to comply with this. The judge thought it was a pretty reasonable approach to things and he signed the order. I was recommending that we send Stanley to a proctologist and we never got as far as actually having them undergo physical examinations because it was about that time they decided it was in their best interests, notwithstanding all of their other problems, to come to the table and make a deal. So we ended up foreclosing on the house and selling the house with agreed upon valuations and all the fighting stopped and we stopped all the legal process that was going on simultaneously in multiple states and out of the proceeds of the house, my client was reimbursed and its judgment fully paid.
It’s nice when you have a national bank as a client. At the foreclosure sale they had to come up with a couple of million dollars and the assistant to the chairman of the bank who was watching the whole procedure, said: “that’s fine, we’ll do that, just let us know 24 hours in advance when we’ll have to wire it through the Fed discount window and it’ll be there” They got that back plus they got their judgment paid and it was a happy ending.
A year or two later, a Federal bank regulating organization called me. As I recall they had problems with Stanley’s bank. They were looking into his bank and doing other things and they called me and said: “Mr. Quiat we see that Stanley had this Mercedes 500 something and somehow you had something to do with it at some point. Do you know where it is? Can we get our hands on it?” I had a chuckle on it and said that barn door’s been opened closed, re-opened and that car was long out of there. I seized, sold and liquidated that vehicle a few years ago and at the moment I have no idea where it is. Best of luck to you. That was about the last I heard of Stanley. I did hear, however, that he did end up divorcing that particular wife. What he has done between now and then, other than a stint I’m told in an incarceration facility, I have no idea. I never wish any of the debtors I pursue, any ill will. They simply have business problems that relate to my client and once they realize that there is nothing personal about it and they decide they want to solve that business problem, we are happy to do that. We try to be as fair as we can be in doing so.
If you have a situation that you are looking at and you are not quite sure about what is really there but you think that the person has done wrong, you’ve got a judgment and you are owed money and you have a right to get it collected, let’s talk about it. Complexity does not stop us.
Disclaimer: This website contains general information about legal matters. The information is not legal advice, and should not be treated as such. Quiat Legal makes no representations or warranties in relation to the information on this website.
For more information on Case Studies From Andrew L. Quiat, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (303) 471-8560 today.