Monthly Archives: May 2012

Doctors: PC (Professional Corp.) or LLC (Limited Liability Company)?

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There was an interesting conversation on the Oregon Trust/Estate attorney Listserv, which started with this question:

For a new physician starting a solo medical clinic, is there any preference for the PC over the LLC?  Are there better ways to structure the entity?  What if there were multiple physicians?  Any difference in your advice?

Here are a few responses, unattributed:

Response No. 1:  … these may not be the issues you are concerned with but a few differences. A PC may make a subchapter S election but it is not automatic. If you are a PC and a member who takes any profit you must draw at least some of your income through payroll. and there must be a reasonable basis to the amount drawn vis a vie [sic] work and/or dividend draws or the IRS can reclassify your income.

[I]f those issues do not matter to your client then have them describe the type of corporate structure they want. do they intend to move members in and out when hiring and firing, do they intend to ever have any offshoot businesses ie clinics with specialization or a legally separate billing department. if so look to see if they can have one entity own the others and any restrictions on doing so.

[T]here are some record keeping issues as well but often I recommend a corporate structure based on what the client is willing to do themselves vs what they want to hire someone to do where their formalities are concerned. the benefit of llcs is you do not need to be as formal as a traditional corporation. but for some clients they are better off treating their structure more formally to later prove clearly the alter ego and avoid suits against their personal assets.

I know there are some out there in Oregon that say you simply cannot pierce the corporate veil ….  However, I have done it in several cases and personally I think it is a risk that should be discussed upfront during formation.

Response No. 2:   Usually I form a PC and make an “S” election for tax purposes.  This way, you limit self employment tax exposure, etc. You also get the corporate liability shield as well.  Typically, doctors make enough money in a year where it is worthwhile to make an “S” election. Continue reading →

Update: Josh & Susan Powell Life Insurance

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First, here’s a brief review:  There is a $1 million policy on Josh’s life, a $1 million policy on Susan’s life (she is not legally deceased, by the way) and a $250,000 policy on the life of each child.  Unsure to whom the policy proceeds belong, the insurer, New York Life Insurance, started a lawsuit in federal court, naming Josh Powell’s heirs, and Susan Powell’s heirs as defendants.

Now, here’s the update:

As required by federal civil procedure rules, Josh’s brother, Michael has filed his “Initial Disclosures,” which tell the Cox family what information he has to support his case.  In turn, the Cox family filed their Initial Disclosures too.

The way an interpleader works, the insurer sues everyone who might claim an interest in the money, and in turn, those people (if they indeed claim an interest) answer the lawsuit by suing the other named people.  So far, nobody has filed a formal response that answers the allegations or claims an interest in the policy proceeds.  This is curious.  Is this because they are negotiating a settlement behind the scenes?  Or are they too busy getting their ducks in a row, collecting information to make their case, playing their cards close to their chest?  Or is someone hard at work on a stellar motion for summary judgment or judgment on the pleadings?

Court Orders Hazelrigg to File Bankruptcy Schedules

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Here is the Court’s order.

Until we read the transcript of the Court’s oral ruling, which constitutes the findings of fact and conclusions of law supporting the order, we’re not sure how this changes anything.  Here’s an excerpt:

“… the Debtor shall filed amended bankruptcy schedules and an amended statement of financial affairs on the same forms filed as Docket No. 40 (collectively, “Amended Schedules”). With respect to each individual question or category on the Amended Schedules, the Debtor shall either answer truthfully or assert the Fifth Amendment privilege. By June 22, 2012, the United States Trustee shall file a pleading identifying any objections to the Amended Schedules. A continued hearing with regard to the Amended Schedules and the Fifth Amendment privilege issues is set for June 29, 2012 at 9:30 a.m.” (emphasis added by TEP)

Hasn’t that already happened?  Hazelrigg pleaded the Fifth on every question, and the trustee objected to each answer.  What is stopping Hazelrigg from just asserting the Fifth on each question again, and then the trustee then objecting to each answer, again?

Prediction:  Hazelrigg will answer the easy ones, re-assert the Fifth on all substantive questions, the trustee will object, and the same objections will be re-argued.

Hazelrigg Real Property: Another Motion to Lift the Stay

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Here’s the status on the real property in this bankruptcy.

First, stay has been lifted on the Klee condo.  Expect Flagstar Bank to foreclose on that soon.

Second, Chase has moved to foreclose on the Lincoln Tower condo (unit 3905), vested in TRH Lenders, LLC.  The other Lincoln Tower condo (unit 4102) was foreclosed prior to the bankruptcy.

Third, GE Commercial Finance Business Property Corporation just filed a motion to lift the automatic stay to complete/perfect its foreclosure of the Bank of the West Building (pictured above left) and another building just down the street, pictured here:

We didn’t know Tom had an interest in either building.  Here and here are letters from an attorney - who purports to represent Tom Hazelrigg’s interests – but doesn’t say precisely who he represents. One of the letters threatens lawsuits related to an alleged Tom Hazelrigg leasehold interest – a penthouse in the Bank of the West Building.

Tom Hazelrigg should list those lawsuits as an asset of the estate, or lose them down the road.  Lawsuits that aren’t listed on a bankruptcy schedule are lost after discharge under the doctrines of standing and judicial estoppel.  And if he is going to come forward and claim those lawsuits as his, how can he then “selectively” plead the Fifth?  Things are getting complicated fast!

Hazelrigg Attorneys: There Was A Criminal Investigation

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In an unsworn statement, Hazelrigg attorney Michael McKay states that there was once a criminal investigation of Hazelrigg – performed by the US Attorney’s office (W.D. Wa.), and that there is no word if it is still ongoing, but there has also been no word it was closed.

The statement is unsworn.

In federal court, when you have evidence, you testify that you have personal knowledge of the facts, and then state what those facts are - under penalty of perjury.  Not so in the Hazelrigg bankruptcy.  Here is the latest Reply, where attorney Marc Stern - now representing Hazelrigg again – attaches an email from the McKay Chadwell firm, stating without much detail that there is indeed a criminal investigation of  Tom Hazelrigg underway.  Stern’s statement is unsworn, and it merely attaches another person’s email, that is unsworn.

Here’s the rule:  Under 28 U.S.C. § 1746, an unsworn declaration subscribed under penalty of perjury may be used in place of a sworn affidavit. “Before evidence may be admitted, a foundation must be laid ‘by evidence sufficient to support a finding that the matter in question is what its proponent claims.’” Beyene v. Coleman  Sec. Serv., Inc., 854 F.2d 1179, 1182 (9th Cir. 1988) (quoting Fed. R. Evid. 901(a) (emphasis added)).

Would it be that difficult to prepare a sworn declaration and have Michael McKay – who represents Hazelrigg – to sign it?  Instead of an unsworn declaration from the bankruptcy attorney, attaching unsworn email, stating that there is a criminal investigation, offered to prove the truth of that matter … i.e. Hearsay.

Federal court litigators are no strangers to the requirements of a declaration, but here, Hazelrigg attorneys are preferring a faster and looser style, omitting the “under penalty of perjury” language, in favor of the unsworn statements.

If we were the US Trustee, this would drive us nuts! (Could the US Trustee file a motion in limine now, asking for an order proscribing this practice, and terms if it continues?)

US Trustee Responds to Hazelrigg Fifth Amendment Claim

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There are two new updates to the Hazelrigg bankruptcy saga.  First, here is the US Trustee’s reply in support of his Motion to Compel Hazelrigg to file his bankruptcy schedules.  So far Hazelrigg has refused, citing his Fifth Amendment privilege against sel incrimination.

The US Trustee’s reply is this:

(1) Attorney Marc Stern’s opposition to the Motion to Compel cited rumors of criminal investigations into Hazelrigg, and nothing more.  Stern lacked personal knowledge, thus his declaration is worthless (We agree with this argument).

(2) Hazelrigg’s claim he can’t travel to Washington is also unsupported.  There is just a letter from a doctor citing health concerns – but no sworn testimony without any sort of foundation.  (We agree with this argument too).

(3) Hazelrigg also seems to claim at various times that records are missing.  TEP pointed out before that he jumps between the Fifth Amendment, and the “I don’t have the info” defense.  The US Trustee correctly points out, that simply lacking the info is not a defense.  If that is the case, the US Trustee says, then say so, under penalty of perjury.

On another front, JP Morgan Chase has asked the bankruptcy court for permission to foreclose on Lincoln Tower unit 3905.  It is currently titled in a Hazelrigg entity called “TRH Lenders.”  Allegedly Dan Chun (whom we believe is a Hazelrigg family associate) lives there (at least as of a couple months ago) and rents the place from TRH Lenders.