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."