THE UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION In re: David R.

Sharrock Debtor

Case No. 12-62878 RK Chapter 7 JUDGE Russ Kendig

Daniel M. McDermott, United States Trustee, Region 9 Plaintiff v. David R. Sharrock Defendant

Adv. Pro. No.

COMPLAINT TO DENY DISCHARGE OF DAVID R. SHARROCK Now comes Daniel M. McDermott, the United States Trustee for Region 9, and hereby states the following in support of his complaint to deny the discharge of chapter 7 debtor David R. Sharrock. PARTIES 1. Plaintiff, Daniel M. McDermott (United States Trustee), is the United States

Trustee appointed for Region 9 and has standing to bring this proceeding to deny the discharge of David R. Sharrock under 11 U.S.C. Sections 307 and 727(c). 2. Defendant is David R. Sharrock, the debtor in this case. JURISDICTION 3. This is an adversary proceeding in which the United States Trustee seeks

denial of the discharge of the Defendant under 11 U.S.C. 727 and Rule 7001(4) of the Federal Rules of Bankruptcy Procedure.

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4.

The Court has jurisdiction over this matter pursuant to 28 U.S.C. 1334 and

157(a) and the Referral of Title 11 Matters in the U.S. Bankruptcy Court for the Northern District of Ohio, entered under Order No. 2012-7. It is a core proceeding over which this court has jurisdiction under 28 U.S.C. 157(b)(2)(J). 5. 6. Venue is proper in this Court as provided in 28 U.S.C. 1409. This complaint is timely filed pursuant to Bankruptcy Rules 4004(a) and (b). BACKGROUND and PROCEDURAL HISTORY General Background 7. The Defendant is married with no dependents. Defendants spouse is Doris A.

Sharrock. On the date he filed his bankruptcy petition, Defendant owned multiple rental properties, both individually and through various business entities which he controlled. Beginning in the late 1990s, the Defendant, individually, and in the name of Equity Lenders Mortgage Brokers Co., and D & D Rentals, borrowed money from various private investors. In general, the Defendant agreed to repay the borrowed funds at set terms ranging from one to six or more years, and to make interest payments over time at interest rates ranging from eight to twelve percent. An investor typically could elect to leave the funds invested after the expiration of the original term, in which case the debt would continue to accrue interest and the investor would receive a monthly payment. In most cases, the investors did not receive any security for their investment even though Defendant testified that the private investment funds were used to purchase properties. 8. To date, the documents and testimony provided by the Defendant have not

clearly established that the private investment funds were, in fact, used for real estate investment purposes.

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9.

The documents provided and the Defendants testimony suggest that over time,

Defendant repaid some of the private investors. As of October 23, 2012, the Defendant represented in his bankruptcy schedules that these unsecured loans due to private investors accumulated to approximately $4.82 million of unsecured debt. 10. It is the understanding and belief of the United States Trustee that the

Defendant, individually, and through various business entities, and with or through his spouse, periodically purchased and sold rental properties which the Defendant, individually, and through various business entities managed and rented. 11. It is the understanding and belief of the United States Trustee that some

properties may have been purchased with private investor money and many properties were purchased through bank loans. The Defendant, however, testified that he could not trace any individual investment to any specific parcel of property. 12. The Defendants spouse, Doris A. Sharrock, executed a power of attorney in

April, 1993 which authorized the Defendant to take any acts and sign any documents in connection with real estate. The power of attorney was recorded in Richland County.

According to Defendant, this power was given to him so that his wife would not have to go to closings. It is the understanding and belief of the United States Trustee that the Defendant signed paperwork on behalf of his wife at about 70% of the closings for properties which were placed in her name. 13. On or about February 26, 2004, Doris A. Sharrock, the Defendants spouse,

created a trust. The trust, which bears the Defendants signature, designates the Defendant as a successor co-trustee. Under the terms of the trust, the Defendant is also a beneficiary of the trust.

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Business Entities and Operations 14. It is the understanding and belief of the United States Trustee that the Properties were owned by the

Defendant originally did business as D & D Rentals.

Defendant and/or his spouse individually or by them doing business as D & D Rentals. Commencing around 2003, the Defendant formed various business entities. Such business entities which the Debtor owned and/or controlled included: D & D Rentals, LLC; D & D Rentals (a DBA); D.R.L. Properties, LLC; David Trust Properties, LLC; D & D Charity, LLC; 92nd West 2nd Street, LLC; and 2701 Crider Road, LLC. 15. It is the understanding and belief of the United States Trustee that in October,

2003, Doris A. Sharrock, the Defendants spouse, formed an entity called Herman Trust Properties, LLC (the Herman Trust). It is the understanding and belief of the United States Trustee that the Defendant controlled and managed properties owned by the Herman Trust and in doing so controlled and managed the Herman Trust. Defendant collected rent.

Defendant interviewed prospective tenants. Defendant handled all advertising and paper work related to the Herman Trust properties. 16. The Defendant testified that by 2003, around the time when these various

business entities were formed, he owed approximately $1 million dollars to individual investors. 17. The Defendant testified as the business entities were formed, properties owned

by the Defendant and/or his spouse were transferred to the various business entities. 18. The Defendant testified none of the separate business entities which the

Defendant formed ever signed a promissory note in favor of any of the individual investors.

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19.

The Defendant testified the Herman Trust never signed any promissory note in

favor of any of the individual investors. 20. It is the understanding and belief of the United States Trustee that,

notwithstanding the formation of the various LLCs and The Herman Trust, the Defendant directed advertising, rented, determined rent amounts, selected tenants, and leased and collected rents for the properties owned by him and his various business entities, and by those of the Herman Trust, without distinction. The Defendant did not distinguish between himself, the various business entities or the Herman Trust with tenants. Tenants did not differentiate between the Defendant, his various entities, and the Herman Trust. Rather, the Defendant handled all advertising for all entities and the Herman Trust; he handled all paper work for all entities and the Herman Trust; and he handled all tenants of his, the various entities, and the Herman Trust. According to the Defendant, rents received for properties owned by the Defendant and his various businesses were deposited into an account in the name of DRL and rents received for the Herman Trust properties were deposited into a Herman Trust bank account. 21. It is the understanding and belief of the United States Trustee that an entity

called MPW Trust, LLC was formed on or around May 22, 2006 with David Sharrock as the original registered agent. It is the understanding and belief of the United States Trustee that from around June 1, 2006 to approximately August 11, 2010 the Defendant was a member of MPW Trust, LLC and executed documents as a member of MPW. It is the understanding and belief of the United States Trustee that around October 15, 2010 the registered agent of MPW was changed to Elisa Schunatz, a granddaughter of the Defendant. It is the understanding and belief of the United States Trustee that the initials MPW stand for the children of Elisa

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Schunatz, and that MPW Trust was formed to enable Defendant and his granddaughter to maintain possession and control of properties owned by the granddaughter and her spouse when they encountered financial difficulties. Elisa Schunatz testified that some of the

properties owned by MPW Trust were subject to mortgages that Defendant had co-signed, and he did not want their financial difficulties to adversely affect his own creditworthiness. Prepetition Transfers of Real Estate to the Herman Trust 22. On or about July 8, 2011, David Trust Properties, LLC transferred its interest

in property located at 147 Harvard Avenue, Mansfield, Ohio to the Herman Trust by way of a quitclaim deed. 23. On or about July 8, 2011, MPW Trust, LLC transferred its interest in property

located at 25-27 State Street, Mansfield, Ohio to Defendant and Doris Sharrock by way of a quitclaim deed. On the same day, Defendant and Doris Sharrock transferred the property to the Herman Trust by way of a quitclaim deed. 24. On or about March 22, 2011, Defendant and Doris Sharrock transferred their

joint interest in property located at 3340 Crimson, Road, Mansfield, Ohio to the Herman Trust by way of a quitclaim deed. Defendant signed the deed on behalf of Doris Sharrock. 25. On or about July 13, 2011, D&D Charities transferred its interest in property

located at 408 Water Street, Caledonia, Marion County, Ohio to the Herman Trust by way of a quitclaim deed. 26. On or about February 3, 2012, Defendant and Doris Sharrock transferred their

joint interest in property located at 148 Poplar Street, Mansfield, Ohio to the Herman Trust by way of a general warranty deed. Defendant signed the deed on behalf of Doris Sharrock.

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27.

On or about February 3, 2012, Defendant and Doris Sharrock transferred their

joint interest in property located at 501 Lawn Avenue, Galion, Ohio to the Herman Trust by way of a general warranty deed. Defendant signed the deed on behalf of Doris Sharrock. 28. Defendant testified that his interests in the properties were transferred to the

Herman Trust for an amount equivalent to one half of the county auditor value as of the date of the transfer, but he has not provided independent documentary evidence substantiating that testimony. 29. It is the understanding and belief of the United States Trustee that on the

Defendants bankruptcy filing date, substantially all of the property owned by the Herman Trust was unencumbered. Prepetition Transfer of Real Estate to Residential Fund 118, LLC 30. On or about July 31, 2012 the Defendant individually, jointly with his spouse,

and/or on behalf of various entities which he owned and/or controlled transferred interests in approximately sixty-four (64) properties to an entity called Residential Fund 118, LLC, which has an address at 901 Calle Amanecer, Suite 150, San Clemente, California 92673. HUD statements reflect that the Defendant, his spouse, and various entities which he owned and/or controlled received a total of $318,157.49 from such transfers. 31. HUD statements show that the Defendant individually transferred the

following properties to Residential Fund, LLC on July 31, 2012: 57 Grand Blvd, Shelby, Ohio 4021 CR 61, Mt. Gilead, Ohio 473 Van Buren, Mansfield, Ohio 1064 S.R. 314, Ontario, Ohio

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2 Diamond St., S., Mansfield, Ohio 3232 Crimson Road, Mansfield, Ohio 32. HUD statements show that Defendant and his spouse Doris Sharrock

transferred their interests in the following properties to Residential Fund 118, LLC on or about July 31, 2012: 315 Harker Road, Mansfield, Ohio 23/25 Chilton Road, Mansfield, Ohio 203-205 Buckingham Avenue, Mansfield, Ohio 704 Detroit St., S, Kenton, Ohio 321 Greendale Road, Mansfield, Ohio 167 Wood St., Mansfield, Ohio 472 Hammond, Mansfield, Ohio 16983 C.R. 330, Upper Sandusky, Ohio 267 E. Arch, Mansfield, Ohio 197 Buckingham Ave., Mansfield, Ohio 458 Pearl Street, Mansfield, Ohio 293 3rd Avenue, Mansfield, Ohio 139 Helen Avenue, Mansfield, Ohio 412 Woodland Avenue, Mansfield, Ohio 629 Harding Way E., Mansfield, Ohio 373 Wayne Street, Mansfield, Ohio 652 Bowman, Mansfield, Ohio 154 Blanche W., Mansfield, Ohio

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218 Penn Avenue, Mansfield, Ohio 319 3rd Avenue, Mansfield, Ohio 17 W. Augustine Avenue, Mansfield, Ohio 273 Myers Avenue, Mansfield, Ohio 684 N. State Street, Marion, Ohio 551 Wayne Street, Mansfield, Ohio 36 Sherman Avenue, Shelby, Ohio 316 Wayne Street, Mansfield, Ohio 273 S. Adams, Mansfield, Ohio 33. HUD statements show that David Trust Properties, LLC, an entity owned and controlled by the Defendant, transferred the following properties to Residential Fund 118, LLC on or about July 31, 2012: 86 Caledonia Road, North, Caledonia, Ohio 353 Wood Street, Mansfield, Ohio 50 Reba Avenue, Mansfield, Ohio 371 Beryl, Mansfield, Ohio 442 Thompson, Marion, Ohio 1209 Woodville Road, Mansfield, Ohio 4605 Bott Road, Bellville, Ohio 380 Emerald Avenue, Mansfield, Ohio 30 Auburn Avenue, Shelby, Ohio 350 Sturges Avenue, Mansfield, Ohio 6220 Olivesburg-Fitchville Road, Greenwich, Ohio

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205 Elk Street, Marion, Ohio 391 Dale Avenue, Mansfield, Ohio 320 Indiana Avenue, Mansfield, Ohio 152 McWilliams Court, Marion, Ohio 723 Bennett, Marion, Ohio 510 Cottage Street, Marion, Ohio 559 Bonair, Mansfield, Ohio 34. HUD statements show that DRL Properties, LLC, an entity owned and

controlled by the Defendant, transferred the following properties to Residential Fund 118, LLC on or about July 31, 2012: 419 Waterloo Street, Marion, Ohio 828 Hoover Road, Mansfield, Ohio 918 Harr Road Marion, Ohio 512 Kibler St., S. New Washington, Ohio 252 Pierce Street, S., Galion, Ohio 1087 Woodside Drive, Mansfield, Ohio 585 Garfield Place, Mansfield, Ohio 1021 Elm Street, Bucyrus, Ohio 622 Caldwell Avenue, Mansfield, Ohio 720 Burns Street, Mansfield, Ohio 1875 S.R. 39, Lucas, Ohio

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35.

HUD statements show that DD Charity, LLC, an entity owned and controlled

by the Defendant, transferred the following properties to Residential Fund 118, LLC on or about July 31, 2012: 166 Park Avenue W., Mansfield, Ohio 1401 Ashland Road, Mansfield, Ohio 36. The Defendant testified, under oath, that in 2010, he first commenced

discussions and/or negotiations for the bulk sale of some of the properties he and/or his entities owned. He testified that after one deal for the bulk sale of properties terminated, he negotiated for the sale of properties with Northeastern Capital Resources. The Defendant testified that he negotiated with Northeastern Capital Resources for the sale of his properties and that ultimately the properties transferred to Residential Funds 118 for $600,000. He stated that the deal closed on July 31, 2012 and that Northeastern then sold to Residential Funds 118, who closed the deal. 37. The Defendant testified, under oath, that from the proceeds derived from the

bulk sale, approximately $300,000 was paid to Sutton Bank and United Bank; $70,000 was paid to the title company, Heights Title; $70,000-$80,000 was remitted to pay outstanding taxes; and the Defendant received the net of $105,000 or $115,000. The Defendant testified that he received two deposits one in the amount of $81,000 and one in the amount of $35,000 and that he placed such funds in the DRL bank account or his personal money market account. He testified that he subsequently used such funds to pay his criminal and bankruptcy attorneys.

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Prepetition Transfer of Hummer 38. The Defendant testified, under oath, that in June or July, 2012 he transferred

his interest in a Hummer for $16,000. Ohio Bureau of Motor Vehicle records show that the Defendant transferred this vehicle to Ontario Motors on December 27, 2011. The Defendant testified that the proceeds from the sale of the Hummer were deposited into the DRL bank account. Bank accounts statements reflect that the Defendant deposited $16,000 into a joint individual account, no x6748, on December 27, 2011. Bankruptcy Petition and Schedules 39. On October 23, 2012, the Defendant filed a voluntary petition for relief under

chapter 7 of the Bankruptcy Code. Concurrent with the filing of the petition, the Defendant filed schedules and a Statement of Financial Affairs under penalty of perjury. 40. On or about October 23, 2012, Defendant signed his bankruptcy schedules. In

signing his schedules, Defendant stated I declare under penalty of perjury that I have read the foregoing summary and schedules, consisting of 0 sheets, and that they are true and correct to the best of my knowledge, information, and belief. Defendant filed or caused to be filed these schedules with his electronic signature on October 23, 2013. 41. On or about October 23, 2012, Defendant signed his Statement of Financial

Affairs (SOFA). In signing his Statement of Financial Affairs, Defendant declared that he had read the answers in the Statement of Financial Affairs, and any attachments thereto, and that they were true and correct. 42. On or about October 30, 2012, Defendant also filed or caused to be filed a

Declaration re: Electronic Filing of Documents and Statement of Social Security (ECF Declaration). The ECF Declaration was signed on or about October 26, 2012. In signing

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his ECF Declaration, Defendant swore that the information provided in the electronically filed petition, statements, and schedules, as well as in any other documents that must contain signatures, was true, correct and complete. 43. On October 29, 2012, the Defendant filed amended schedules which included

an Amended Summary of Schedule; Amended Schedule C Property Claimed Exempt; Amended Schedule D Creditors Holding Secured Claims; Amended Schedule E Creditors Holding Unsecured Priority Claims; and a Declaration Concerning Debtors Schedules. The Declaration, signed under penalty of perjury, and signed by the Defendant stated that the information contained in the documents was true and correct to the best of the Defendants knowledge, information, and belief. 44. The Defendant filed additional amendments on December 13, 2012 which

included an Amended Summary of Schedules; Amended Schedule A along with attached exhibits Amended Schedule D, and a Declaration Concerning Debtors Schedules in which the Defendant declared under penalty of perjury that the amendments are true and correct to the best of the Defendants knowledge, information and belief. 45. Defendants originally filed Schedule A disclosed his ownership interest in 36

real properties with an aggregate value of $3,995,000. 46. The Amended Schedule A filed by the Defendant scheduled seven real

properties with a total value of $563,000 in which the Defendant had an interest along with 30 other properties owned by entities in which the Defendant has an interest. Such entities include: David Trust Properties, LLC; D.R.L. Properties, LLC; DD Charities LLC; 92 West 3nd Street, LLC; and, 2701 Crider Road, LLC.

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47.

In Schedule B, Defendant stated that he owned $18,210 in personal property,

including but not limited to the following: Type of Property Description and Location of Property Value of Debtors interest in Property, without deducting any secured claim or exemption $360 $750

1. Cash on hand. 2. Checking, savings or other financial accounts, certificates of deposit, or shares in banks, savings and loan, thrift, building and loan and homestead associations, or credit unions, brokerage houses, or cooperatives. 4. Household goods and furnishings . . . 5. Books; pictures and other art objects. ... 6. Wearing apparel. 7. Furs and jewelry 8. Firearms and sports . . . 14. Interest in partnerships or joint ventures. Itemize. Mechanics Savings 971 Lexington Avenue Mansfield, Ohio 44907 Money Market Account #6748 Balance $200 DRL Account Account #5532 Balance $550 Rooms of furniture located at 1624 Estate Court, Mansfield, Ohio 44906 Old Bibles located at 1624 Estate Court, Mansfield, Ohio 44906 Mens clothing located at 1624 Estate Court, Mansfield, Ohio 44906 Jewelry located at 1624 Estate Court, Mansfield, Ohio 44906 38 handguns located at 1624 Estate Court, Mansfield, Ohio 44906 David Trust Properties, LLC 993 Lexington Avenue Mansfield, Ohio 44907 100% Membership D&D Charity, LLC 993 Lexington Avenue Mansfield, Ohio 44907 50% Membership
14

$7,000 $1,500

$500 $800 $450 Unliquidated

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D.R.L. Properties, LLC 993 Lexington Avenue Mansfield, Ohio 44907 50% Membership 92 West 2nd Street, LLC 993 Lexington Avenue Mansfield, Ohio 44907 50% Membership 2701 Crider Road, LLC 993 Lexington Avenue Mansfield, Ohio 44907 50% Membership 15.Accounts Receivables 19. Equitable or future interests, life estates, and rights or powers exercisable for the benefit of the debtor other than those listed in Schedule A Real Property 20. Contingent and noncontingent interest in estate of a decedent, death benefit plan, life insurance policy, or trust. 25. Automobiles, trucks, trailers, . . . . 28.Office equipment, furnishings, and supplies. Rent from Rental Properties None. $1,850

None.

1999 Dodge Durango 4 x 4 located at 1624 Estate Court, Mansfield, Ohio 44906. Desk, table, 9 chairs, filing cabinets, copy/fax machines 993 Lexington Road Mansfield, Ohio

$2,500

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48.

In Schedule D and Amended Schedule D, Defendant lists secured claims

totaling $1,825,343.66. The secured claims consist of a number of mortgages on various properties in which the Debtor has an interest. 49. In Amended Schedule E, Defendant listed $44,327.80 in unsecured priority

claims consisting of deposits from individuals and taxes and other debts owed to governmental units. 50. Defendants Schedule F lists unsecured claims totaling $4,934,083.96

consisting primarily of unsecured loans from various individuals. It is the understanding and belief of the United States Trustee that such individuals invested funds with the Defendant in exchange for notes in which the Defendant promised to repay over time at interest rates as high as 12% interest. 51. Schedule I discloses that Defendant is self-employed/retired. Defendant stated

in Schedule I that his monthly income consists of $32,687 from real property; $1,245 from Social Security; and $300 from insurance renewals. 52. Schedule I states the Defendants spouse is retired and earns monthly income

from real property in the amount of $15,000 and social security benefits of $520. Schedule I makes no disclosure as to the Herman Trust Properties, LLC. Statement of Financial Affairs 53. Defendants Statement of Financial Affairs, item 1, disclosed that the

Defendant had 2010 earnings of $100,000 income from business operations and $14,900 from Social Security. The Defendant reported 2011 earnings of $100,000 from business operations and $14,940 from Social Security. He did not disclose any income earned by his spouse.

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54.

Defendants Statement of Financial Affairs, item 2, disclosed that he received

income, other than from employment, in 2011 in the amount of $6,000 from the sale of United American Insurance Company policies. No other income from the sale of real estate or other sources was disclosed. 55. In his Statement of Financial Affairs, item 3b, the Defendant answered the

following regarding all payments, where debts are not primarily consumer debts, made within the 90 days before the bankruptcy filing if the aggregate value is $5,850: First Federal of Ohio, payment of $7,914.15 on August 28, 2012; Halligan & Lang Co., LPA, $49,000 on August 15, 2012. 56. In the Defendants answer to the Statement of Financial Affairs, question 3c

regarding payments made within one year preceding the commencement of the case to or for the benefit of creditors who are insiders, the Defendant responded None. 57. The Defendant disclosed payments related to debt counseling or bankruptcy in

response to the Statement of Financial Affairs, question 9 that he paid McDonald Hopkins $25,000 on August 25, 2012 and $10,000 on October 10, 2012. He disclosed he paid BBP Partners $7,500 on August 25, 2012. 58. In his Statement of Financial Affairs, Item 10a, Defendant answered None in

response to the question which requires him to disclose all property, other than property transferred in the ordinary course of his business or financial affairs, either absolutely or as security within the two years preceding the commencement of his case. 59. In his Statement of Financial Affairs, Item 14, Defendant answered None in

response to the question directing disclosure of all property owned by another person that the debtor holds or controls.

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341 Meeting of Creditors 60. On December 13, 2012, Defendant appeared for the meeting of creditors

required by 11 U.S.C. 341. Under oath, Defendant affirmed that the information contained in his petition, schedules, statements, related documents and all amendments to such documents were true and correct, after amendments were filed. When asked if there were any other corrections or additions or errors that the Defendant found, the Defendant replied no. Bankruptcy Administration 61. On November 9, 2012, Mr. DeGirolamo, the chapter 7 trustee, filed a motion

to operate the Defendants business. The motion was granted by way of an order entered on December 21, 2012. Since that time, the chapter 7 trustee has been operating the Defendants real estate business and liquidating estate assets. 62. On December 26, 2012, Mr. DeGirolomo filed Trustee, Anthony J.

Degirolamos, Ex Parte, Motion for Substantive Consolidation, or Alternatively, to Pierce the Corporate Veil (Motion to Consolidate), in which he asked this Court to consolidate the assets of the Defendants bankruptcy estate with the assets of his business entities or, in the alternative, to find the entities alter egos of the Defendant and to deem their assets property of the Defendant, subject to administration in this bankruptcy proceeding. The Motion to

Consolidate alleged, in part, that the Defendant failed to observe corporate formalities for the business entities, commingled funds, and treated all properties as if they were owned by him individually.

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63.

The Defendant did not object to or otherwise challenge any of the allegations

in the Motion to Consolidate. Rather, on or about December 26, 2012 he entered into the Agreed Interim Order Granting Ex Parte Motion of Trustee, Anthony J. DeGirolamo, for Substantive Consolidation (Interim Order) in which the Defendant and the chapter 7 trustee deemed the assets of the business entities, D.D. Charity, LLC; David Trust LLC; DRL Properties Trust LLC; and 92 W. 2nd Street LLC to be assets of the bankruptcy estate subject to the rights of any joint owners of those assets and the rights of non-debtor members of the Related Companies (if any) to prove their respective interests in the properties, companies, or proceeds from the sales of the properties. The Interim Order further clarified that the properties listed on Schedule A attached to the Interim Order would be deemed property of the estate subject to administration by the chapter 7 trustee. 64. The Interim Order was followed by a Judgment Entry Granting Motion of

Trustee, Anthony J. DeGirolamo, for Substantive Consolidation (Judgment Entry). The Judgment Entry, entered on March 5, 2013, is substantially identical to the Interim Order. 65. The United States Trustee secured an order directing the Defendant to appear

for his examination pursuant to Fed. R. Bankr. P. 2004 and produce requested documents. Over the course of two days, on March 21, 2013 and April 16, 2013 the United States Trustee and chapter 7 trustee examined the Defendant. 66. The Defendant also produced numerous documents in response to document

requests by the United States Trustee and chapter 7 trustee. 67. Bank statements from a Mechanics Savings individual joint money market

account in the name of the Defendant and his spouse ending in account number x6748 reflect, in part, the following deposits from December 27, 2011 through October 25, 2012.

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Date 12/27/2011 01/25/2012 02/21/2012 08/08/2012 08/15/2012 08/22/2012 08/28/12 10/09/2012 Total 68.

Description of Deposits Deposit Southside Deposit Southside Deposit Southside FIA CSNA Direct Dep 120807 CIE Wire from Heights Title IOTA Heig Deposit Southside Wire from Heights Title IOTA Heig Deposit Southside

Amount $16,000 $30,000 $25,000 $5,000 $86,218.06 $25,000 $32,000 $9,500 $228,718.06

Bank statements from a Mechanics Savings individual joint money market

account in the name of the Defendant and his spouse ending in account number x6748 reflect, in part, the following withdraws from December 27, 2011 through October 25, 2012. Date 01/13/2012 01/18/2012 01/20/2012 01/24/2012 01/30/2012 02/10/2012 Description of Withdrawal Withdrawal Southside Withdrawal Southside Withdrawal Southside Withdrawal Southside Check Number 1035 Ref #914806731 Withdrawal Southside
20

Amount $8,000 $4,000 $1,500 $1,000 $25,000 $6,100

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02/16/2012 02/24/2012 08/15/2012 08/15/2012 08/17/2012 08/23/2012 08/24/2012 08/28/2012 09/05/2012 09/10/2012 10/11/2012 Total

Withdrawal Southside Check Number 1036 Ref #97129128 Withdrawal Southside Check Number 1037 Ref #700050203 Check Number 1038 Ref #910405373 Check Number 1039 Ref #911414024 Withdrawal Southside Withdrawal Southside Withdrawal Southside Check Number 1040 Ref #912321379 Check Number 1041 Ref #913438034

$5,900 $25,000 $11,000 $26,000 $49,000 $15,200 $14,500 $5,000 $2,000 $25,000 $10,000 $234,200

Books, Records and Postpetition Conduct of the Defendant 69. The Defendant has provided significant amounts of financial records

requested by the United States Trustee and chapter 7 trustee. However, the documents provided do not fully account for the Defendants financial condition and business transactions. 70. Specifically, the documentation provided does not fully account for the private

investment funds secured by the Defendant and the repayments to such investors. 71. The documentation does not fully account for the transfer of properties to the

Herman Trust LLC during the two year prepetition period.

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72.

The documentation does not fully account for the dissipation of over $200,000

deposited into the Defendants joint bank account from December 27, 2011 until his bankruptcy filing date. 73. As of the date of this Complaint, the Defendant continues to provide material,

when requested, however, documents and records are insufficient to ascertain the Defendants financial condition or business transactions. 74. As of the date of the filing of this Complaint, the Defendant has failed to

explain satisfactorily his transfer of assets during the two year prepetition period of time and he has failed to fully account for funds received as consideration for the transfer of such assets. 75. It is the understanding and belief of the United States Trustee that postpetition

the Defendant has sent several e-mails to the chapter 7 trustee regarding the amount of equity in properties owned by his wife and regarding property owned by the Herman Trust that was sold postpetition. COUNT I Violation of 11 U.S.C. 727(a)(4)(A) (False Oath Schedule B Interest in Trust Agreement) 76. The allegations contained in paragraphs 1 through 75 are hereby incorporated

by reference with the same force and effect as if set forth in full herein. 77. Defendant made a false oath and statement under penalty of perjury as to

material matters, knowingly and fraudulently, in and in connection with his bankruptcy case when he stated that his bankruptcy schedules were correct.

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78.

Bankruptcy Code Section 727(a)(4)(A) provides that the Court shall deny the

debtor a discharge if it is found that the debtor knowingly and fraudulently made a false oath or account in or in connection with the case made a false. 79. The Defendant signed his bankruptcy petition, schedules, and all amendments

to such schedules under penalty of perjury. 80. The Defendant testified at his 341 meeting of creditors on December 13, 2012,

under oath, that his bankruptcy schedules and statements as amended were accurate and complete and that nothing was omitted. 81. The Defendant failed to disclose on Schedule B in response to Item 20,

requiring disclosure of contingent and noncontingent interests in estate of a decedent, death benefit plan, life insurance policy, or trust that he is a beneficiary as well as a successor cotrustee of the trust agreement executed on February 26, 2004 by his wife Doris Sharrock, grantor, along with Doris Sharrock, trustee, and Rhonda J. McElroy and the Defendant, as successor co-trustees. 82. On Schedule B, Defendant also stated None as a response to Item 35, which

requires him to disclose other personal property of any kind not already listed and to itemize that property. Defendant failed to disclose that he is a beneficiary of his wifes trust as well as a successor co-trustee in response to Item 35. 83. The Defendant made a false oath and statement, under penalty of perjury, as to

material matters, knowingly and fraudulently, in and in connection with his bankruptcy case when he stated none as a response to Item 20 and 35 of Schedule B. The Defendants statement that he had no such property was made at least recklessly or with gross disregard for the truth.

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84. 727(a)(4)(A).

As a result, Defendants discharge should be denied pursuant to 11 U.S.C.

COUNT II Violation of 11 U.S.C. Section 727 (a)(4)(A) (False Oath Statement of Financial Affairs - #1 and #2 Income) 85. The allegations contained in paragraphs 1 through 75 are hereby incorporated

by reference with the same force and effect as if set forth in full herein. 86. Bankruptcy Code Section 727(a)(4)(A) provides that the Court shall deny the

debtor a discharge if it is found that the debtor knowingly and fraudulently in or in connection with the case made a false oath or account. 87. On or about October 23, 2012, the Defendant signed his bankruptcy Statement

of Financial Affairs. In signing the Statement of Financial Affairs, he declared under penalty of perjury that he read the answers in the Statement of Financial Affairs and that they were true and correct to the best of his knowledge. 88. The Defendant testified, under oath, at his 341 meeting of creditors on

December 13, 2012, that his Statement of Financial Affairs was accurate and complete and that no further corrections needed to be made and that he had not discovered any further errors. 89. The Statement of Financial Affairs, Item #1 requires the disclosure of gross

income the debtor received from employment, trade, or profession, or from operation of the debtors business from the beginning of the calendar year to the bankruptcy filing date and during the two calendar years prior to filing the bankruptcy petition.

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90.

The Statement of Financial Affairs, Item #2 requires the disclosure of all other

income received by the debtor other than from employment, trade, profession or operation of the debtors business during the two years before the filing of the bankruptcy petition. 91. On his Statement of Financial Affairs, Item #1, the Defendant disclosed

income from the Operation of Business during the years 2010 and 2011 and Social Security received during 2010 and 2011. The Defendant failed to disclose any income from any source whatsoever from January 1, 2012 until the bankruptcy petition filing date of October 23, 2012. 92. On his Statement of Financial Affairs, Item #2, the Defendant disclosed

income received of $6,000 from United American Insurance Company policies sold in 2011. The Defendant failed to disclose any other source of income derived in the year 2012 from January 1, 2012 until the bankruptcy petition filing date of October 23, 2012. 93. The Defendant, in fact, omitted disclosure in response to items #1 and #2 of all

income received during the calendar year of 2012 from January 1, 2012 to the bankruptcy filing date of October 23, 2012. 94. The Defendant failed to disclose income received from the sale of a Hummer

for $16,000 on or about December 27, 2011 in item #2 of the Statement of Financial Affairs. 95. The Defendant failed to disclose on item #1 or #2 of the Statement of Financial

Affairs the gross income received from the sale of approximately 64 properties to Residential Fund LLC, 118 on or about July 31, 2012, in an amount exceeding $600,000. 96. The Defendant failed to disclose the gross income received on item #1 or item

#2 of the Statement of Financial Affairs from the transfer of real estate during the two year prepetition period which he owned individually, through entities he wholly owned or

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controlled, or which he owned jointly with his spouse, to the Herman Properties Trust, LLC, including but not limited to properties located at: 147 Harvard Avenue, Mansfield, Ohio; 2527 State Street, Mansfield, Ohio; 3340 Crimson Road, Mansfield, Ohio; 408 Water Street, Caledonia, Marion County, Ohio; 148 Poplar Street, Mansfield, Ohio; and 501 Lawn Avenue, Galion, Ohio. 97. The United States Trustee alleges that the Defendant knowingly and

fraudulently made a false oath or account on his Statement of Financial Affairs, items #1 and #2, by failing to disclose his receipt of income from the sale of a Hummer, the bulk sale of approximately 64 properties to Residential Fund LLC 118 and the transfer of properties he owned jointly with his wife or individually to the Herman Trust Properties, LLC during the two years prior to the filing of his bankruptcy petition. 98. The United States Trustee alleges that pursuant to 11 U.S.C. Section 727(a)(4),

the Court shall not grant the Defendant a chapter 7 discharge. COUNT III Violation of 11 U.S.C. Section 727(a)(4)(A) (False Oath Statement of Financial Affairs - #10a Other Transfers) 99. The allegations contained in paragraphs 1 through 75 are hereby incorporated

by reference with the same force and effect as if set forth in full herein. 100. Bankruptcy Code Section 727 (a)(4)(A) provides that the Court shall deny the

debtor a discharge if it is found that the debtor knowingly and fraudulently in or in connection with the case made a false oath or account. 101. On or about October 23, 2012, the Defendant signed his bankruptcy Statement

of Financial Affairs. In signing the Statement of Financial Affairs, he declared under penalty

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of perjury that he read the answers in the Statement of Financial Affairs and that they were true and correct to the best of his knowledge. 102. The Defendant testified, under oath, at his 341 meeting of creditors on

December 13, 2012, that his Statement of Financial Affairs was accurate and complete and that no further corrections needed to be made and that he had not discovered any further errors. 103. The Statement of Financial Affairs, item #10a requires the disclosure of other

transfers during the two years immediately before the commencement of the bankruptcy case including transfers of all other property, other than property transferred in the ordinary course of the business of financial affairs of the debtor,. The Defendant marked the box none in response to this question. 104. The United States Trustee alleges that the Defendant knowingly and

fraudulently made a false oath on his Statement of Financial Affairs, response to #10 by failing to disclose his transfers of property during the two year prepetition period including his transfer of a Hummer; his transfer of approximately 64 properties to Residential Fund LLC 118, and his transfer of certain properties he owned jointly with his wife or individually to the Herman Trust Properties, LLC. 105. The United States Trustee alleges that pursuant to 11 U.S.C. Section

727(a)(4)(A), the Court shall not grant the Defendant a chapter 7 discharge. COUNT IV Violation of 11 U.S.C. 727(a)(4)(A) (False Oath Statement of Financial Affairs #14 Property Held for Another Person) 106. The allegations contained in paragraphs 1 thorough 75 are hereby incorporated

by reference with the same force and effect as if set forth in full herein.
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107.

Bankruptcy Code Section 727(a)(4)(A) provides that the Court shall deny the

debtor a discharge if it is found that the debtor knowingly and fraudulently in or in connection with the case made a false oath or account. 108. On or about October 23, 2012, the Defendant signed his signed his bankruptcy

Statement of Financial Affairs. In signing the Statement of Financial Affairs, he declared under penalty of perjury that he read the answers in the Statement of Financial Affairs and that they were true and correct to the best of his knowledge. 109. The Defendant testified, under penalty of perjury at his 341 meeting of

creditors on December 13, 2012 that his Statement of Financial Affairs was accurate and complete. He testified that he had no further corrections to make and no further errors were found. 110. The Statement of Financial Affairs, Item 14, Property held for another person,

requires the disclosure of all property owned by another person that the debtor holds or controls. The Defendant responded none to this question. 111. In fact, the Defendant was in control of the Herman Properties Trust LLC

and/or in control of the assets that the Herman Properties Trust LLC owns. 112. It is the understanding and belief of the United States Trustee that the

Defendant managed real estate owned by the Herman Properties Trust LLC, leased properties owned by the Herman Properties Trust LLC, collected rents, deposited rents, and handled most if not all aspects of the Herman Properties Trust LLC business. 113. The United States Trustee alleges that the Defendant knowingly and

fraudulently made a false oath in connection with the Statement of Financial Affairs, item 14 when he responded none regarding the disclosure of all property owned by another person

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that the debtor holds or controls.

The Defendants omission regarding his control of the

Herman Properties Trust, LLC was made at least recklessly or with gross disregard for the truth. 114. 727(a)(4)(A). COUNT V Violation of Section 727(a)(2) (Concealment of Assets Schedule B interest in Trust Agreement) As a result, Defendants discharge should be denied pursuant to 11 U.S.C.

115.

The allegations contained in paragraphs 1 through 75 are hereby incorporated

by reference with the same force and effect as if set forth in full herein. 116. Defendant concealed his interest as a beneficiary and successor co-trustee of

his wifes Trust Agreement with the intent to hinder, delay, or defraud a creditor or an officer of the estate. 117. Bankruptcy Code Section 727(a)(2) provides that the Court shall deny the

debtor a discharge it is found that the debtor, with the intent to hinder, delay, or defraud a creditor or an officer of the estate concealed property of the debtor . . . . 118. The Defendant signed his bankruptcy petition, schedules and all amendments

to such schedules under penalty of perjury. 119. The Defendant testified at his 341 meeting of creditors on December 13, 2012,

under oath, that his bankruptcy schedules and statements as amended were accurate and complete and that nothing was omitted. 120. The Defendant failed to disclose on Schedule B in response to Item 20,

requiring disclosure of contingent and noncontingent interests in estate of a decedent, death

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benefit plan, life insurance policy, or trust that he is a beneficiary as well as a successor cotrustee of the trust agreement executed on February 26, 2004 by his wife Doris Sharrock, grantor, along with Doris Sharrock, trustee; and Rhonda J. McElroy and the Defendant, as successor co-trustees. 121. On Schedule B, Defendant also stated None as a response to Item 35, which

requires him to disclose other personal property of any kind not already listed and to itemize that property. Defendant failed to disclose that he is a beneficiary of his wifes trust as well as a successor co-trustee in response to Item 35. 122. The United States Trustee alleges that the Defendant with the intent to hinder,

delay, or defraud a creditor or an officer of the estate concealed his beneficiary interest in the Trust Agreement created by his wife in which he is a beneficiary and successor co-trustee when he failed to disclose such interest on Schedule B. 123. 727(a)(2). COUNT VI Violation of 11 U.S.C. Section 727 (a)(2)(A) (Concealment Statement of Financial Affairs - #1 and #2 Income) 124. The allegations contained in paragraphs 1 through 75 are hereby incorporated As a result, Defendants discharge should be denied pursuant to 11 U.S.C.

by reference with the same force and effect as if set forth in full herein. 125. Bankruptcy Code Section 727(a)(2)(A) provides that Court shall deny the

debtor a discharge if it is found that the debtor with the intent to hinder, delay or defraud a creditor or an officer of the estate transferred or concealed property of the debtor within one year before the commencement of the bankruptcy case or concealed property of the estate after the bankruptcy filing date.
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126.

On or about October 23, 2012, the Defendant signed his bankruptcy Statement

of Financial Affairs. In signing the Statement of Financial Affairs, he declared under penalty of perjury that he read the answers in the Statement of Financial Affairs and that they were true and correct to the best of his knowledge. 127. The Defendant testified, under oath, at his 341 meeting of creditors on

December 13, 2012, that his Statement of Financial Affairs was accurate and complete and that no further corrections needed to be made and that he had not discovered any further errors. 128. The Statement of Financial Affairs, Item # 1 requires the disclosure of gross

income the debtor received from employment, trade, or profession, or from operation of the debtors business from the beginning of the calendar year to the bankruptcy filing date and during the two calendar years prior to filing the bankruptcy petition. 129. The Statement of Financial Affairs, Item #2 requires the disclosure of all other

income received by the debtor other than from employment, trade, profession or operating of the debtors business during the two years before the filing of the bankruptcy petition. 130. On his Statement of Financial Affairs, Item #1, the Defendant disclosed

income from the Operation of Business during the years 2010 and 2011 and Social Security received during 2010 and 2011. The Defendant failed to disclose any income from any source whatsoever from January 1, 2012 until the bankruptcy petition filing date of October 23, 2012. 131. On his Statement of Financial Affairs, Item #2, the Defendant disclosed

income received of $6,000 from United American Insurance Company policies sold in 2011.

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The Defendant failed to disclose any other source of income derived in the year 2012 from January 1, 2012 until the bankruptcy petition filing date of October 23, 2012. 132. The Defendant, in fact, in response to items #1 and #2 requiring disclosure of

all income received during the calendar year of 2012 from January 1, 2012 to the bankruptcy filing date of October 23, 2012 concealed income received from the sale of assets in which he had an interest during the two years prior to filing his bankruptcy petition. 133. The Defendant failed to disclose income received from the sale of a Hummer

for $16,000 on or about December 27, 2011 in item #2 of the Statement of Financial Affairs. 134. The Defendant failed to disclose on item #1 or #2 of the Statement of Financial

Affairs gross income received from the sale of approximately 64 properties to Residential Fund LLC, 118 on or about July 31, 2012 exceeding $600,000. 135. The Defendant failed to disclose income received on item #1 or item #2 of the

Statement of Financial Affairs from the transfer of real estate during the two year prepetition period which he owned individually, through entities he wholly owned or controlled, or which he owned jointly with his spouse, to the Herman Properties Trust, LLC, including but not limited to properties located at: 147 Harvard Avenue, Mansfield, Ohio; 25-27 State Street, Mansfield, Ohio; 3340 Crimson Road, Mansfield, Ohio; 408 Water Street, Caledonia, Marion County, Ohio; 148 Poplar Street, Mansfield, Ohio; and 501 Lawn Avenue, Galion, Ohio. 136. The United States Trustee alleges that the Defendant with the intent to hinder,

delay, or defraud a creditor or officer of the estate concealed income derived from the sale of assets in which he had an interest during the one year prepetition period, by omitting on his Statement of Financial Affairs, items #1 and #2, his receipt of income from the sale of a Hummer, the bulk sale of approximately 64 properties to Residential Fund LLC 118 and the

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transfer of properties he owned jointly with his wife or individually to the Herman Trust Properties, LLC during the two years prior to the filing of his bankruptcy petition. As a result of such conduct, the Defendant should be denied a discharge under 11 U.S.C. Section 727(a)(2)(A). COUNT VII Violation of 11 U.S.C. Section 727(a)(2)(A) (Transfer and Concealment of Assets Statement of Financial Affairs - #10a Other Transfers) 137. The allegations contained in paragraphs 1 through 75 are hereby incorporated

by reference with the same force and effect as if set forth in full herein. 138. Bankruptcy Code Section 727(a)(2)(A) provides that the Court shall deny the

debtor a discharge if the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under the estate transferred or concealed property of the estate within one year before the date of the filing of the petition. 139. On or about October 23, 2012, the Defendant signed his bankruptcy Statement

of Financial Affairs. In signing the Statement of Financial Affairs, he declared under penalty of perjury that he read the answers in the Statement of Financial Affairs and that they were true and correct to the best of his knowledge. 140. The Defendant testified, under oath, at his 341 meeting of creditors on

December 13, 2012, that his Statement of Financial Affairs was accurate and complete and that no further corrections needed to be made and that he had not discovered any further errors. 141. The Statement of Financial Affairs, item #10a requires the disclosure of other

transfers during the two year immediately before the commencement of the bankruptcy case
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including transfers of all other property, other than property transferred in the ordinary course of the business of financial affairs of the debtor,. The Defendant marked the box none in response to this question. 142. The United States Trustee alleges that the Defendant with the intent to hinder,

delay, or defraud a creditor or an officer of the estate transferred property of the debtor, within one year before he filed bankruptcy when he transferred his interest in a Hummer, sold through a bulk sale interests in approximately 64 parcels of property in which he had an interest, and transferred his interest in six parcels of property that he owned jointly with his spouse, to the Herman Properties Trust, LLC, including but not limited to properties located at: 147 Harvard Avenue, Mansfield, Ohio; 25-27 State Street, Mansfield, Ohio; 3340

Crimson Road, Mansfield, Ohio; 408 Water Street, Caledonia, Marion County, Ohio; 148 Poplar Street, Mansfield, Ohio; and 501 Lawn Avenue, Galion, Ohio. 143. The United States Trustee alleges that the Defendant with the intent to hinder,

delay or defraud a creditor or an officer of the estate concealed property of the debtor within the one year before the bankruptcy filing date when he failed to disclose on his Statement of Financial Affairs, response to #10 consideration received for his transfers of property during the two year prepetition period including his transfer of a Hummer; his transfer of approximately 64 properties to Residential Fund LLC 118 and his transfer of six certain properties he owned individually, through an entity he controlled, or jointly with his wife, to the Herman Trust Properties, LLC. 144. The United States Trustee alleges that pursuant to 11 U.S.C. Section

727(a)(2)(A), the Court shall not grant the Defendant a chapter 7 discharge.

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COUNT VIII Violation of 11 U.S.C. 727(a)(2)(A) (Concealment Statement of Financial Affairs #14 Property Held for Another Person) 145. The allegations contained in paragraphs 1 thorough 75 are hereby incorporated

by reference with the same force and effect as if set forth in full herein. 146. Bankruptcy Code Section 727(a)(2)(A) provides that the Court shall deny the

debtor a discharge if it is finds that the debtor with the intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody concealed property of the debtor, within one year before the commencement of the bankruptcy case. 147. On or about October 23, 2012, the Defendant signed his bankruptcy Statement

of Financial Affairs. In signing the Statement of Financial Affairs, he declared under penalty of perjury that he read the answers in the Statement of Financial Affairs and that they were true and correct to the best of his knowledge. 148. The Defendant testified, under penalty of perjury at his 341 meeting of

creditors on December 13, 2012 that his Statement of Financial Affairs were accurate and complete. He testified that he had no further corrections to make and no further errors were found. 149. The Statement of Financial Affairs, Item 14, Property held for another person,

requires the disclosure of all property owned by another person that the debtor holds or controls. The Defendant responded none to this question. 150. In fact, the Defendant was in control of the Herman Properties Trust LLC

and/or in control of the assets that the Herman Properties Trust LLC owns.

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151.

It is the understanding and belief of the United States Trustee that the

Defendant managed real estate owned by the Herman Properties Trust LLC, leased properties owned by the Herman Properties Trust LLC, determined rent amounts, collected rents, deposited rents, and handled most, if not all, aspects of the Herman Properties Trust LLC business. 152. The United States Trustee alleges that the Defendant with the intent to hinder,

delay, or defraud a creditor or officer of the estate concealed his interest in property of the debtor, within the one year prepetition period when he responded none regarding the disclosure of all property owned by another person that the debtor holds or controls. 153. The United States Trustee alleges that the Defendants control over the

Herman Properties Trust amounted to a de facto interest in the Herman Properties Trust, LLC and his omission regarding his control of the Herman Properties Trust, LLC constitutes a concealment made with the intent to hinder, delay or defraud a creditor of the estate at least recklessly or with gross disregard for the truth of property of the estate within the one year prepetition period. 154. 727(a)(2)(A). COUNT IX Violation of 11 U.S.C. 727(a)(4)(A) (False Oath Declaration Regarding Bankruptcy Schedules) 155. The allegations contained in paragraphs 1 through 75 are hereby incorporated As a result, Defendants discharge should be denied pursuant to 11 U.S.C.

by reference with the same force and effect as if set forth in full herein. On or about September 24, 2012, the Defendant signed his bankruptcy schedules. In signing his

schedules, Defendant stated I declare under penalty of perjury that I have read the foregoing
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summary and schedules, consisting of 21 sheets, and that they are true and correct to the best of my knowledge, information, and belief. Defendant filed or caused to be filed these schedules with his electronic signature on April 20, 2012. 156. In fact, Defendant had made false statements in Schedule B when he failed to

disclose his beneficiary interest in the Trust Agreement executed on February 26, 2004. 157. Defendant made a false oath and statement under penalty of perjury as to

material matters, knowingly and fraudulently, in and in connection with his bankruptcy case when he declared that his bankruptcy schedules and summary were true and correct to the best of his knowledge, information, and belief. recklessly or with gross disregard for the truth. 158. 727(a)(4)(A). COUNT X Violation of 11 U.S.C. 727(a)(4)(A) (False Oath Declaration Under Penalty of Perjury Statement of Financial Affairs 159. The allegations contained in paragraphs 1 through 75 are hereby incorporated As a result, Defendants discharge should be denied pursuant to 11 U.S.C. Defendants statements were made at least

by reference with the same force and effect as if set forth in full herein. At the conclusion of his Statement of Financial Affairs, Defendant signed it under penalty of perjury. In signing the Statement of Financial Affairs, Defendant declared that he had read the answers contained in the Statement of Financial Affairs and any attachments thereto and that they were true and correct. 160. Defendant made a false oath and statement under penalty of perjury as to

material matters, knowingly and fraudulently, in and in connection with his bankruptcy case when declared that Statement of Financial Affairs was true and correct, because Defendant
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had issued false oaths as to one or more material facts in items 3c, 6b, and 10a of his Statement of Financial Affairs. Defendants declaration that his Statement of Financial

Affairs was true and correct was made at least recklessly or with gross disregard for the truth. 161. 727 (a)(4)(A). COUNT XI Violation of 11 U.S.C. 727(a)(4)(A) (False Oath: ECF Declaration) 162. The allegations contained in paragraphs 1 through 75 are hereby incorporated As a result, Defendants discharge should be denied pursuant to 11 U.S.C.

by reference with the same force and effect as if set forth in full herein. In his ECF Declaration, Defendant declared under penalty of perjury that the information provided in his electronically filed petition, statements, and schedules, as well as any other document containing an original signature, was true, correct, and complete. 163. In fact, Defendant had uttered false statements in Schedule B, and in items 1,

10a, and 14 of his Statement of Financial Affairs. Defendant failed to disclose income derived from the sale of assets, failed to disclose his transfer of assets during the two year prepetition period, and failed to disclose that he was in control of the Herman Properties Trust LLC or that he was the de facto owner of such entity on his Statement of Financial Affairs. 164. Defendant made the false oath and statement in his ECF Declaration under

penalty of perjury as to material matters, knowingly and fraudulently, in and in connection with his bankruptcy case when he declared that his bankruptcy Statement of Financial Affairs was true and correct to the best of his knowledge, information, and belief. Defendants statements were made at least recklessly or with gross disregard for the truth.

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165. 727(a)(4)(A).

As a result, Defendants discharge should be denied pursuant to 11 U.S.C.

COUNT XII Violation of 11 U.S.C. 727(a)(3) (Concealed or Failed to Keep Records) 166. The allegations contained in paragraphs 1 through 75 are hereby incorporated

by reference with the same force and effect as if set forth in full herein. On October 23, 2012, Defendant filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code. 167. On February 11, 2013, the Defendant was ordered to appear for his

examination pursuant to Fed. R. Bankr. P. 2004 and produce documents listed on Exhibit A attached to the Motion for Authority to Conduct 2004 Examination and Request for Production of Documents, including but not limited to tax returns filed by the Herman trust from 2008 to 2012; copies of monthly bank account statements for any account for which debtor had signing authority or into which he deposited and withdrew funds from January 1, 201 through December 31, 2012; copies of any solicitation letters sent to individual creditors listed on Schedule F, copies of each and every promissory note for each individual unsecured letter listed on Schedule F along with accounting for proceeds of amount borrowed, ledger of interest and principal payment; post-note correspondence, copy of any financial statement given to any bank or individual investor during 2010 or 2011; among other documents. The chapter 7 trustee made an independent request for documents. 168. Since the initial request for documents by the United States Trustee and

Chapter 7 trustee, the Defendant has turned over significant amounts of documents. However, such documents are insufficient to ascertain the Defendants financial condition or business transactions. In fact, the United States Trustee avers that the Defendant failed to

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keep or preserve recorded information, including books, documents, records, and papers, from which the debtors financial condition or business transactions might be ascertained and such act or failure to act was not justified under the circumstances of the case. 169. The United States Trustee avers that the documents provided fail to

substantiate the Defendants financial condition on the bankruptcy filing date, fail to substantiate the source of the Defendants deposits in excess of $228,000 from the end of December, 2011 to his bankruptcy filing date and withdrawals of more than $234,000 from January, 2012 to his bankruptcy filing date; and fail to substantiate his use of private investor funds, payments to private investors and/or how he determined the amounts and dates of payments to private investors. 170. his case. 171. 727(a)(3). As a result, Defendants discharge should be denied pursuant to 11 U.S.C. Defendants failure or failure to act is not justified under the circumstances of

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WHEREFORE, the United States Trustee asks this Court to deny Defendants discharge under 11 U.S.C. 727(a)(2), (a)(3), (a)(4), and (c) and for such further relief as this Court deems just and proper. Respectfully submitted,

Daniel M. McDermott United States Trustee Region 9 /s/ Amy L. Good Amy L. Good (0055572) U.S. Department of Justice Office of the United States Trustee H.M. Metzenbaum U.S. Courthouse 201 E. Superior Ave., Suite 441 Cleveland, OH 44114-1240 (216) 522-7800, ext. 236 (216) 522-7193 facsimile amy.l.good@usdoj.gov

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