Investment group CHP has filed a series of objections to bankruptcy claims made by Bill Schwyhart, once a high-profile developer in Northwest Arkansas and his wife, Carolyn, contending that some entities listed as creditors are alter egos of the couple.
In court documents, CHP said the Schwyharts funneled money from a large confidential settlement obtained in 2013 through several entities, including Purgo Capital LLC, Southwest Star Capital LLC and Magistratus LLC. CHP is disputing a $4.88 million claim by Southwest Star Capital, a claim by Magistratus for $14.17 million and two claims by Purgo Capital, one in the amount of $14.55 million and a second for $86,288.
In the filings made earlier this week, attorney Brian Ferguson representing CHP -- a Northwest Arkansas-based investment group -- argued that allowing the entities to receive proceeds that the trustee might recover on behalf of unsecured creditors effectively turns the debtors into creditors in their own bankruptcy.
He called the entities instrumentalities for the Schwyharts or their alter egos. He also said in the filing that the allegations in the objections provided "reasonable grounds" to report the activity to the U.S. attorney of the Northern District of Texas for a criminal investigation into the conduct.
In July, Schwyhart and his wife filed for Chapter 7 bankruptcy protection in Texas, claiming more than $90 million in debt. The couple list assets of a little more than $600,000, mostly in the form of individual retirement accounts, as well as vehicles, furnishings, collectibles and jewelry. They reported monthly income of $1,167 and monthly expenses of $6,475.
A complaint to the discharge of the bankruptcy made by CHP and unsealed in February contends that Schwyhart and his wife lied about or failed to disclose their ownership in various business entities to defraud creditors and hide information about their finances.
The complaint was initially placed under seal because it contained information gained from confidential agreements signed in 2013 between Schwyhart and others. Later in February, the Chapter 7 trustee Scott Seidel notified creditors that a special counsel is investigating the Schwyharts' transactions.
In a March filing, the Schwyharts argued that they have done nothing wrong. Their attorney asked that the complaint be dismissed and that their bankruptcy be discharged, saying the couple never intended to hinder, delay or defraud, and that all acts or failures to act outlined in the objection were justified under the circumstances of the case.
CHP contends that the Schwyharts shifted assets secured through the confidential settlement agreements through "a web" of various entities and used that money for living expenses and other spending but denied knowledge of them in their bankruptcy filing.
CHP also argues that the Schwyharts deceived the court by hiding the fact that they owned an 8,333-square-foot house in the Pinnacle Country Club development in Rogers where they lived for years until recently moving to Texas. CHP argues that the couple lived in the house while claiming to be its caretaker for an unknown group while it was in fact owned by Pinnacle Villa LLC, an entity controlled by Bill Schwyhart.
During the Northwest Arkansas building boom, Schwyhart worked with late trucking magnate J.B. Hunt and Tim Graham on the Pinnacle Hills Promenade mall, which opened in 2006. After Hunt's death later that year, his widow, Johnelle Hunt, and Graham broke ties with Schwyhart.
Schwyhart and longtime business partner Robert Thornton formed Pinnacle Investments LLC after the split. Schwyhart was also one of the investors, along with J.B. Hunt, in the now-defunct charter-jet company Pinnacle Air LLC, which did business as Aspen JetRide and filed for Chapter 7 bankruptcy in early 2009.
Later, Johnelle Hunt and Graham sued Schwyhart claiming that he defaulted on various loans. In April 2010, eight development companies managed by Schwyhart filed for bankruptcy, claiming nearly $42 million in debt.
According to the earlier CHP complaint, the 2013 confidential settlements detailed a deal with John P. Calamos of Naperville, Ill., and the chairman of financial company Calamos Asset Management. He became a partner with Schwyhart when Calamos' Ajax merged with Pinnacle Air.
According to the filing, in October 2013 Calamos entered into a confidential settlement agreement that transferred $9.7 million to Schwyhart and some business entities. A second confidential agreement entered into the very same day transferred $3 million to Hunt and Graham, and the rest went into accounts designated by Recipio Investments Strategic Fund I LLC.
The agreement also noted that Low Tide Holdings, controlled by Graham, would convey the quit claim deed conveying the property at 9 Clubhouse Drive to Recipio or its assignee. The filing argues that Recipio, formed in Delaware in August 2011, was set up to funnel money back to Schwyhart.
Business on 04/18/2019