Articles Posted in Criminal Restitution

Mr. Wilhite was convicted of mail fraud and aiding and abetting in violation of federal law. He was also a delinquent taxpayer with an outstanding federal income tax liability and, at the time of certain alleged fraudulent transfers, he was being investigated for the federal crimes he ultimately pled to. During the time period Mr. Wilhite would be considered a “debtor” under Colorado’s UFTA, his wife, Mrs. Wilhite, formed several companies establishing herself as sole owner while Mr. Wilhite was the person essentially controlling and operating the companies.

This case is instructive on so many levels. Every asset protection lawyer should read both the District Court decision and the 10th Circuit’s appellate decision for elucidation of multiple concepts of particular relevance to asset protection community. For example, when a debtor and debtor’s spouse come into your office for the initial meeting, it is not unusual for the debtor to suggest that because of debtor’s outstanding liabilities the debtor’s spouse should form a new company owned 100% by the non-debtor spouse but which will be run by debtor spouse in debtor’s capacity as an employee. Indeed, this brilliant strategy is then shortly followed by the suggestion that the debtor spouse be paid a very modest salary to minimize the amount that could be garnished by the debtor’s creditors.

The Wilhite case addresses the non-debtor spouse’s ownership of a limited liability company run predominantly by the debtor. After analyzing the facts, the District Court determined that Mrs. Wilhite was acting as Mr. Wilhite’s nominee and Mr. Wilhite owned an equitable interest in the company. Interestingly, the conclusion was not as easy to reach as it might first seem because Mrs. Wilhite was not only the owner of record but also performed meaningful services for the company. Nonetheless, when weighing all of the facts including extensive testimony by the company’s employees, it was clear that Mr. Wilhite was viewed as the owner and decision-maker.