United States District Court, D. Maryland
RALPH S. JANVEY
FREDERICK MOTZ, UNITED STATES DISTRICT JUDGE
S. Janvey, in his capacity as a court-appointed receiver for
the Standford International Bank, Ltd., (the
“Receiver”), has filed an appeal from an order
entered by the Bankruptcy Court denying the Receiver's
motion to dismiss pursuant to 11 U.S.C. §707(a). The
issues have been fully briefed. The order of the Bankruptcy
Court will be affirmed.
debtor is Peter Romero. Romero held several positions in the
United States Department of State, including U.S. Ambassador
and Assistant Secretary of State. He served in the Department
of State for approximately twenty-five years. Upon his
retirement, a number of companies sought his consulting
services to utilize his knowledge and experience with doing
business in Central America, South America, and the islands
in the Caribbean. Among the several companies that him hired
was Stanford Financial Group.
was a consultant for Stanford for approximately seven years.
He received $700, 000 for his consulting services over the
years. In truth, Stanford was operating a Ponzi scheme.
Immediately upon learning of the fraud allegations against
Standford, Romero resigned his position as an international
advisor and severed all ties with Standford. Janvey was
appointed as the receiver for Stanford.
filed suit against Romero. Following a jury trial, the United
States District Court for the Northern District of Texas
entered judgment against Romero avoiding all of the advisory
fees that had been paid to him. Romero appealed to the Fifth
Circuit which affirmed the judgment.
attempted to settle the judgment entered against him. Janvey
made no counter offers. Apparently, it did not do so because
Janvey had claims against many other defendants, and he
sought to use Romero - the first individual to be sued - as
an example of what would happen if a defendant defended the
filed Chapter 7 bankruptcy proceedings. Although the primary
reason for filing the bankruptcy proceedings was for
protection against the judgment obtained against him by
Janvey, there were other reasons as well, including legal
fees, his wife's mounting medical expenses that required
substantial out-of-pocket payments and future legal fees.
Romeros own a home located on the waterfront in St.
Michael's, Maryland. They also own a condominium in
Washington, DC, and a townhouse in Alexandria, Virginia. They
owned a 1987 Mercedes Benz convertible and two sailboats.
Romero worked with the Trustee to have the Mercedes and one
of the boats sold at auction, and he and his wife (who owned
the second boat as tenants by the entirety) surrendered the
second boat to pay his creditors, including Janvey. Romero
and his wife also own a number of exempt assets. The validity
of the exemptions are not challenged by Janvey.
wife is a lawyer with the law firm of Greenberg, Traurig,
LLP, and represented clients with respect to international
and commercial law matters. She contracted bacterial
meningitis and encephalitis while working for a non-profit in
South America. She is now incapacitated, has lost motor
skills, is permanently disabled, and unable to practice law.
Her condition required modification to the Romero's home
in St. Michael's to accommodate her wheelchair, an
on-site caregiver, and payment of uninsured medical expenses.
Catliota denied Janvey's motion to dismiss the bankruptcy
case in a sixteen page opinion. Although the Fourth Circuit
has not expressly ruled upon the issue, Judge Catliota
assumed that “bad faith” could constitute
“cause” for the dismissal of the bankruptcy case
under 11 U.S.C. §707(a). However, applying the eleven
criteria set forth in McDow v. Smith, 295 B.R. 69
(Bankr. E.D. Virginia 2003), Judge Catliota found that Romero
had not acted in bad faith in filing the bankruptcy case. His
findings are supported by substantial evidence, and they are
entitled to “substantial deference” and should
“not be disturbed absent a clear abuse of
discretion.” United States v. Russell, 971
F.2d 1098, 1104 (4th Cir. 1992).
effect, Janvey contends that Romero is living a lavish
lifestyle, and that his assets should be used to repay the
victims of the Stanford Ponzi scheme. In fact, the Bankruptcy
Court found that “the debtor lives a comfortable, but
not exorbitant lifestyle.” Moreover, reduced to its
essentials, the Receiver's position is that Romero should
use his exempt assets to pay the judgment the Receiver
obtained against him. This is not the law. See In re
McVicker, 546 B.R. 46 (N.D. Ohio 2016): the
“Bankruptcy Code does not confer ‘general,
equitable power in bankruptcy courts to deny exemptions based
on a debtor's bad faith conduct.'” Id.
at 58. Cf. Law v. Siegel, 134 S.Ct. 1188 (2014). As
explained in McVicker, “a 707(a) dismissal
based upon an ability to pay ...