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We are a small foundation 501c3 entity. We have an written

We are a small foundation...
We are a small foundation 501c3 entity. We have an written agreement with a former trustee ( an accountant ) to turn over all our foundation documents whether in written or whether in electronic form. He was paid $3600 to resign and turn over our documentation. This was in 2009 and today he continues to hold our Quickbooks files and refuses to turn over our accounting. He now states he filed bankruptcy to protect him from damages we might seek to obtain our accounting files. He claims the Quickbooks files are his we claim he has stolen our property. Can he hide our accounting files behind his bankruptcy?
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Answered in 2 minutes by:
11/9/2012
Fritz
Fritz, Attorney
Category: Bankruptcy Law
Satisfied Customers: 302
Experience: Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases
Verified

Fritz :

Hi, I'd like to assist you with your bankruptcy questions this morning.

Customer:

Will your answer pertain to Utah ?

Fritz :

Yes. I will cite Utah law if necessary.

Fritz :

The fact that the accountant filed for bankruptcy shouldn't affect the fact that he breached the written agreement to turn over the accounting files and documents.

Customer:

Have you got an understanding of our problem or can we send you the written agreement?

Fritz :

So although any potential liability (i.e. money damages) may have been discharged in the bankruptcy (and I say may because it seems like there could be potentially be some kind of fraud or embezzlement involved here, which would not be dischargeable debt).

Fritz :

You could still sue for specific performance (i.e. for the accountant to do something, namely turn over the books).

Fritz :

This is also known as injunctive relief.

Fritz :

And then once you have the books, you could have them independently reviewed for fraud, embezzlement, etc. by this accountant.

Customer:

Ok but now he claims he has deleted our files. When we asked him to go down to a good computer store to have them restored he refuses. Then after that he tells us he got rid of the computer without backing up the files

Fritz :

This entire scenario is really, really suspicious.

Fritz :

I don't have the specific law in front of me (I can find it), but I'm pretty sure he's not allowed to delete files like that.

Fritz :

That would seem to be a breach of his fiduciaries duties to the corporation, which might also be non-dischargeable in bankruptcy.

Customer:

We agree!! We do believe he committed fraud but without that files and its notes we have no proof. Can we obtain injunction relief in small claims?

Fritz :

Let me check to make sure Utah small claims court allows for injunctive relief... please give me a moment.

Customer:

Ok

Fritz :

It's a good thing I checked, because in Utah, a judge can only resolve small claims disputes by awarding money. There is NO injunctive relief.

Customer:

What about district court?

Fritz :

Yes, you would probably want to file in state district court. I would strongly advise hiring a local attorney to help you prepare this lawsuit, as you may be able to seek money damages as well but could get in trouble if you try to do this yourself because of the bankruptcy.

Customer:

what kind of attorney do we hire? Contractual or Bankruptcy ?

Fritz :

Contract/commercial litigation attorney

Fritz :

It might be helpful to look for an attorney with experience in dealing with financial fraud.

Fritz :

There's a lot of overlap in these areas, so it shouldn't be all that difficult to find an attorney with experience with these types of cases.

Fritz :

I would actually shy away from hiring a bankruptcy attorney (unless they also do all of the above), as this isn't truly a bankruptcy case; it's really a breach of contract and possibly fraud.

Fritz :

The bankruptcy aspect of the case is a side issue an experienced attorney should be able to get around without specialized bankruptcy experience.

Customer:

So you feel the bankruptcy is just his way of trying to get us to stop asking for our files?

Fritz :

Most likely. Did you file a Proof of Claim or anything else in the bankruptcy proceeding?

Fritz :

And is the bankruptcy still active?

Customer:

we did not but we found it odd that we were not given a place, date and time to show up to make a claim

Customer:

no it was discharged

Fritz :

Do you know when the discharge was entered? A ballpark guess is okay.

Customer:

2 years ago probably. He told us before bankruptcy and after bankruptcy that he owns the Quickbooks files. We have maintained he is a thief then and now.

Fritz :

Even if he does legally own the files, he still very likely breached his fiduciary duties to the foundation.

Fritz :

This is something you should bring up with your attorney before filing your lawsuit seeking injunctive relief, as your attorney may or may not want to include additional counts for fraud, breach of fiduciary duty, etc.

Fritz :

in the same lawsuit.

Customer:

One other bankruptcy question

Fritz :

Sure, go ahead.

Customer:

I have a feeling he hide a piece of property that has thousands of dollars of equity in it from the bankruptcy trustee. I have first hand knowledge of a private contract between him and another party. How do I bring this to the attention of the Judge?

Fritz :

The first step would probably be to contact the Trustee.

Fritz :

The absolute drop-dead date on this kind of bankruptcy fraud is 10 years, so the Trustee can still take action.

Fritz :

The discharge could be revoked and so forth if this can be substantiated.

Fritz :

Try to obtain the contract (if you can) before contacting the Trustee, as I'm sure it will coincidentally disappear after the accountant becomes aware he's being investigated.

Customer:

The accountant will not let me near his documents so that is impossible but the other party would probably have to testify that the contract exists since I have personally seen the contract.

Fritz :

If you and the other party are both willing to testify under oath that this contract exists, and you know where the property is located, that may be sufficient.

Customer:

Since I know who the other party is but I am sure he is willing to lie under oath to save this accountant ( don't ask me why )

Fritz :

Just be aware that there's a chance this may not be enough evidence for the discharge to be revoked (or it will simply take too much time and money to find the necessary evidence).

Fritz :

That could be a problem.

Fritz :

Do you know where the property is located?

Customer:

Yes I was the property manager on the property

Customer:

The other party still owns it

Customer:

but the contract is a private one that I have personally seen

Fritz :

Transferring the property to the accountant?

Customer:

the accountant has the right to buy the property for $70K less than the appraised value thus cashing in once the property is sold.

Customer:

by exercising the private contract

Customer:

Sounds like an Enron accountant... right?

Fritz :

Do you know whether he paid money for this option?

Fritz :

Without more evidence, you may have to wait until the property is sold and the option is actually exercised. It wouldn't hurt to make the Trustee aware of the issue if you wish to do so though.

Customer:

Ok Thank You Fritz I will make the Trustee aware.

Fritz :

Thank you! Do you have any other questions for me?

Customer:

You have been very helpful !

Fritz :

Please remember to rate my answer, and have a great day!

Customer:

no I think that will do for now. Do I get a transcript?

Fritz :

I'll post the link after the conversation ends. It should be emailed to you.

Fritz
Fritz, Attorney
Category: Bankruptcy Law
Satisfied Customers: 302
Experience: Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases
Verified
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Fritz
Fritz
Fritz, Attorney
Category: Bankruptcy Law
Satisfied Customers: 302
302 Satisfied Customers
Experience: Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases

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