Trustee In Jack Brown Ponzi Case Asks Hold On Property Claimed To Be Exempt From Bankruptcy

Monday, January 14, 2013

Trustee Jerry Farinash is asking that a hold be placed on a wide range of property claimed as exempt from bankruptcy by the Jack E. Brown family of Soddy Daisy.

Mr. Farinash says Brown needs to be required to answer a wide range of questions about some $12 million in missing investor funds before there is any exemption of property.

He said Jack Brown was the main director of a "Ponzi Scheme," but said his wife, Janet, and son, Jason, were involved, and their exempt property claims should not be honored.

Trustee Farinash said Brown's Tax Service was operated at 10838 Dayton Pike, Soddy Daisy, "for the purpose of allowing the debtor, and others, to gain access to the personal financial information of its clients. Once they had access to this personal financial information, Brown would solicit those clients with net worth to “invest” their money with him at a unreasonably higher rate of return than was possible through normal and legitimate investment opportunities.

"These investment opportunities offered by debtor were in reality a Ponzi Scheme perpetrated by the debtor and others in concert with the debtor.

"In furtherance of the Brown Ponzi Scheme, the debtor, and others, utilized form promissory notes (in most instances, but not all) to memorialize each person’s investment. The debtor’s son, Jason Brown, executed some promissory notes for investments made in the Brown Ponzi Scheme. The debtor’s wife, Janet Brown, routinely wrote and signed checks for payments in the Brown Ponzi Scheme.

"The money that the victims of the Brown Ponzi Scheme were investing with the debtor, and others, was misappropriated and used by the debtor and others, to acquire real and personal property of significant value for the benefit of the debtor, his immediate family and others.

"The precise nature, extent and whereabouts of all of the assets of the debtor is not yet fully known. Most, but not all, of the 'investments' received by the Brown Ponzi Scheme were deposited into the accounts of Brown’s Tax Service. Payments made to investors of the Brown Ponzi Scheme were made by check and in cash. The check payments were normally drawn on the accounts of Brown’s Tax Service. Investors would go to the business location of Brown’s Tax Service to pick up their checks and to receive cash. When checks were mailed to investors, they were mailed from the business address of Brown’s Tax Service. The assets of Brown’s Tax Service were used to help perpetrate the Brown Ponzi Scheme."

Trustee Farinash said, "To the extent any asset claimed by the debtor as exempt can be traced to the proceeds of the Brown Ponzi Scheme, the trustee objects to the debtor’s claims. To the extent ownership of any asset was maintained by the use of funds from the Brown Ponzi Scheme, the trustee objects to the debtor’s claims. To the extent the maintenance of any asset was funded from the proceeds of the Brown Ponzi Scheme, the trustee objects to the debtor’s claims. To the extent any asset claimed as exempt is claimed to be owned as tenants by the entireties, and such asset was obtained in whole or in part by the use of funds from the Brown Ponzi Scheme, the trustee objects to the debtor’s claims. 

"To the extent any asset claimed as exempt is claimed to be owned as tenants by the entireties, the trustee would show that Janet Brown, the debtor’s spouse knew or should have known about the fraud being perpetrated by the Brown Ponzi Scheme and that her ownership interest was obtained by fraud thus making a tenancy by the entireties inapplicable."

He said the property located at 198 Sabakewell Lane, Sale Creek, "was obtained, at least in part, by the use of funds from the Brown Ponzi Scheme. The trustee objects to the debtor’s claim of homestead exemption in property obtained by the use of funds from the Brown Ponzi Scheme."

The trustee said the Browns are claiming that the house should be exempt from the bankruptcy.

He also said there should be no exemption on funds in a Community National Bank account, ownership of a 2008 Chevrolet Avalanche truck,  ownership of a golf cart,  a trailer, a four-wheeler, a 2010 dirt bike, and computers.

Trustee Farinash said he is seeking to have Jack Brown "submit to an examination regarding the truth and sufficiency of his property claimed as exempt."

He said, "The trustee requests that the Court deny the debtor’s property claimed as exempt, allowing him to amend those exemptions after he has submitted himself to an examination and fully answer the questions posed to him."



Firefighters Battle Hard To Access Trailer Fire Monday Afternoon

Chattanooga Fire Department was dispatched to 955 O'Grady Dr. at 2:45 p.m. on Monday on multiple reports of a structure fire. A heavy black column of smoke could be seen from Highway 27 as firetrucks from downtown Station 1 responded around the river. Upon arrival, it was discovered that the fully-engulfed structure was an occupied residence sitting close to a quarter of mile ... (click for more)

Corker, Perdue Back Trump Plan On Afghanistan

Senator Bob Corker, chairman of the Senate Foreign Relations Committee, said he supports President Donald J. Trump’s stance on the way forward in Afghanistan.   Senator Corker said, “I had the opportunity to talk with Secretary Tillerson in advance of this evening’s address, and while I look forward to receiving additional details, I support the direction President ... (click for more)

The Soul Of Chattanooga Is In Trouble

As a child growing up in the Chattanooga area, at an early age I became fascinated with the history that cloaks the city. In those days there was enough pollution to cover the town and its history but that didn't stop tourists from coming to visit Lookout Mountain, Missionary Ridge and the Chickamauga battlefield.     Chattanooga's leadership was not very far sighted ... (click for more)

Roy Exum: Writing From Bragg Avenue

Far and away, my favorite comment on destroying statues appeared on my Facebook page the other day and, believe it or not, it was the clear-minded Times Free Press Sports Editor Stephen Hargis who penned, “This statue offends me! It must be torn down!” Underneath his fiery words, the long-suffered UT football fan posted a picture of the bronze monument outside of Bryant-Denny stadium ... (click for more)

No. 25 Vols Work On Situational Football On Monday

Tennessee held Monday morning's fall camp practice at Neyland Stadium as coach Burch Jones and the Vols, who are ranked No. 25 in the preseason Associated Press poll, focused on situational football. "Right now, we have to have the discipline to execute," Jones said. "Football is too hard of a game as it is from the technical aspect of things, from fundamentals, effort ... (click for more)

UTC's Mueller Named SoCon Soccer Player Of The Week

 University of Tennessee at Chattanooga sophomore Jordan Mueller (Hendersonville, Tenn.) was named the Southern Conference women's soccer Player of the Week the league office announced Tuesday.   Mueller led the Mocs to a season opening win over Austin Peay with two goals and an assist on the game winner. She leads Chattanooga in scoring with five points. She has six ... (click for more)