FAYETTEVILLE — U.S. District Judge Jimm Larry Hendren on Tuesday heard arguments that a bankruptcy court erred when it overlooked fraud and allowed former real estate developer John David Lindsey to pay only part of what he owed to a heavy-equipment leasing company after he filed for bankruptcy protection.
Representatives for John David Lindsey and commercial vehicle leasing operator Trans Lease Inc., of Denver, appeared before the chief judge of the Western District’s civil court to dispute the remaining, $554,214.83 worth of debt.
Lindsey invested in residential and commercial real estate and operated dirt excavation and transport services through various companies. He operated or had an interest in an estimated 31 businesses before declaring bankruptcy. He is also principal broker and general manager of real estate firm Lindsey & Associates of Fayetteville.
Lindsey, in a statement released with his February 2010, Chapter 7 bankruptcy filing, blamed the economy for his financial troubles. At least 12Arkansas banks were listed as creditors.
When the U.S. Bankruptcy Court in the Western District of Arkansas approved Lindsey’s $169.6 million, personal bankruptcy case, the court released him from personal liability of certain debts. Bankruptcy judges can also deny a “discharge” of certain debts, in cases involving fraud, theft and other improper conduct as defined under bankruptcy code.
Trans Lease initially appealed Lindsey’s approved Chapter 7 bankruptcy case, arguing that Lindsey committed fraud and other violations that would prevent him from being released from Trans Lease’s portion of debt. It lost the challenge.
Trans Lease filed its civil case in district court in July.
Trans Lease Inc. said in its civil action that it is entitled to the money because Lindsey in 2008 misrepresented his finances and intended to deceive the independent leasing business. The company said it relied on the accuracy of those financial statements in arranging the original deal.
“By 2007, Lindsey knew his company was not doing well,” James R. Cage, Trans Lease’s attorney, said Tuesday. Cage added that subsequent testimony in bankruptcy court showed that Lindsey’s million-dollar losses were paid off by his father, Jim Lindsey, who owns Lindsey & Associates - a prominent local real-estate company founded in 1973.
Jill Jacoway, Lindsey’s attorney, claimed Trans Lease did not thoroughly investigate the submitted financial documents used in a transaction that ended when Trans Lease repossessed Lindsey’s fleet of trucks in March 2010.
The independent leasing business later sold the trucks to pay for Lindsey’s outstanding lease arrangement, leaving an unpaid balance of $554,215.83.
Jacoway said Tuesday that if Trans Lease had been a little wiser in its lending decisions, it would not be in the situation it is in today. She pointed out discrepancies in the financial documents Lindsey submitted to Trans Lease in 2008.
Lindsey “tried to be as honest as he could be in his nonlawyerly manner,” she said.
And Trans Lease relied on the collateral of the trucks, not the integrity of the financial statements, when it brokered the deal with Lindsey, Jacoway of Jacoway Law Firm Ltd. in Fayetteville told Hendren.
Hendren said late Tuesday morning that he could not provide a specific time frame for issuing his decision because of the large volume of cases before the bench.
The case is Trans Lease, Inc. v. Lindsey, 5:11-cv-05162-JLH.
Business, Pages 24 on 01/04/2012