Volume XIX, Number 1 – APRIL/MAY 2010
THE JAMIE SOLOW CASE – WHAT REALLY HAPPENED
A Return To Debtors’ Prisons?
The Jamie Solow contempt incarceration case (full text of decision) has caused a lot of people to write a lot of articles and offer a lot of opinions – most of which are completely inaccurate. The author, Howard D. Rosen, is one of Mrs. Solow’s attorneys, attended court hearings, testified, and can state with accuracy what actually transpired in this case. You’ve all heard the expression that “bad facts make bad law”, but the Solow case represents an example of the court and the SEC ignoring the facts and ignoring the law.
IGNORE THE FACTS THE LAW
Instance after instance of the district court judge and the SEC ignoring the facts and ignoring the law can be found in the court’s January 15, 2010 opinion holding Mr. Solow in contempt and ordering his incarceration. Here are a few examples:
1. The term “POD” describing one or more financial accounts was used throughout the opinion, and it was stated that “the SEC believes that “POD” means ‘pay on demand’, and is an authorization for a person other than an account owner to withdraw funds from the account.” The SEC stated that Mrs. Solow had set up POD accounts for Mr. Solow (and that he therefore had access to such funds).The court accepted this as if it were a fact. The SEC’s “belief” came from thin air, based on nothing. If the SEC had taken the time to contact any financial institution, they would have learned that the designation “POD” means “pay on death”, and is merely an ambulatory probate avoidance technique – a commonly used “do-it-yourself” method of transferring assets outside of probate on death.
2. The court stated: “There is no evidence before the Court that this joint bank account was held as tenants by the entireties (TBE).” The Solow court then proceeded to cite the Florida Supreme Court Beal Bank case (See, APN Vol. X, No. 2) which held (creating law in Florida – not evidence, LAW) that “many financial institutions do not provide married couples with the opportunity to declare their intent to establish a tenancy by the entireties, however, there is a presumption in favor of a tenancy by the entireties when a married couple jointly owns personal property.” Emphasis supplied. The Florida Supreme Court then stated that it would take an affirmative act of the account holders to counter that presumption. Translation: Even though the Florida Supreme Court (the highest arbiter of Florida law) has supplied a presumption that spousal joint accounts are tenancy by the entireties accounts, the Solow Court found “no evidence” to that effect. How about Florida law? The court’s attitude toward state law TBE protection is clearly evidenced by this statement: “This Court does not have to recognize the protections of tenancy by the entirety created by State law.” In fact, it is well settled that state law creates and defines property rights, not federal law. Result oriented?
3. Statutes of limitations were consistently ignored by the SEC and by the Solow court. For example, the couples’ most valuable asset, their Florida homestead, was acquired by Mr. and Mrs. Solow as tenants by the entireties in 2002 (prior to any wrongdoing alleged in Mr. Solow’s case). The 2002 acquisition date, well beyond any statute of limitations, was conveniently ignored by both the Solow court and by the SEC. A return to the Statute of Elizabeth?
4. Both the SEC and the court cast an evil implication on transfers that Mr. Solow had made to Mrs. Solow at numerous times beyond the statute of limitations in his case. Any married person knows that spouses routinely transfer assets between themselves with no evil intent. The court found that, by making these transfers (again, beyond the statute of limitations – which was ignored), Mr. Solow created the impossibility which he now claimed prevented him from satisfying the judgment. In so doing, the court ignored the law of civil contempt (See, APN Vol. XVII, No.1), and used its contempt power to punish Mr. Solow (several times in open court the judge indicated his disdain for Mr. Solow, even to the point where the judge stated that he wanted to incarcerate Mr. Solow). The US Supreme Court, in Maggio v. Zeitz (See, APN Vol. XVII, No.1), stated “… but no such acts (referring to acts of the contemnor which made compliance with the instant court order impossible), however reprehensible, warrant issuance of an order which creates a duty impossible of performance, so that punishment can follow. It should not be necessary to say that it would be a flagrant abuse of process to issue such an order to exert pressure on friends and relatives to ransom the accused party from being jailed.” Emphasis supplied. By the way, this is exactly what the Solow judge did: he sought to force Mrs. Solow (by incarcerating Mr. Solow) to join in the sale of the couples’ homestead property (which she had refused to do prior to Mr. Solow’s incarceration).
5. Mr. Solow was ordered to show why he was unable to comply with the court payment order. Mr. Solow in fact did show, in great detail, why he was unable to comply with the court order including, disclosing transfers made to Mrs. Solow, many years earlier – beyond the statute of limitations on fraudulent transfers, and properties owned as tenants by the entireties, also so owned for many years beyond the statute of limitations (which would require Mrs. Solow to execute a deed together with Mr. Solow in order to transfer the properties). The SEC ignored Mr. Solow’s TBE argument (yes, ignored – the SEC did not offer a counter legal argument). Instead, the SEC offered as its response a non sequitur argument citing the inapposite Lawrence case – a case with facts so different and so distinguishable that a realistic comparison could not be made in good faith by a competent lawyer.
Enough examples of the chaos and comedy of errors which are this case. Now for the real facts (no attorney client privilege is broken here – only those matters testified to in open court by Howard Rosen, Esq. and Patricia Donlevy-Rosen, Esq. are discussed).
In early February 2008, Mrs. Solow retained the law firm of DONLEVY-ROSEN & ROSEN, P.A. (“DRR”) to protect her assets (and only assets which had been owned by her for a period beyond the statute of limitations on fraudulent transfers). She wanted to protect those assets because a jury had returned an adverse verdict against Mr. Solow a few days earlier. Her concern was that if she predeceased Mr. Solow, all TBE assets, in particular their homestead property valued at almost $6million, would pass outright to Mr. Solow, and then to his creditors. It was explained to the court that this was Mrs. Solow’s main concern – she wanted that value to pass to her children.
To accomplish this goal, DRR helped Mrs. Solow implement an offshore trust and arrange a mortgage loan on the homestead property (See, APN, Vol. XI, No. 3). The proceeds of that loan were transferred to Mrs. Solow’s trust. Mrs. Donlevy-Rosen testified that those proceeds could not have been spent, nor could they have been distributed to Mr. or Mrs. Solow, but rather, under the terms of the loan agreement, were required to be transferred to Mrs. Solow’s trust.
The loan transaction infuriated both the SEC and the court. Howard Rosen testified that this transaction in no way put the SEC in a worse position (i.e., did not make it any more impossible to reach the property than it already was) than they would have been in if the transaction had not been undertaken, because the subject property was long-term (acquired in 2002) TBE property, and it was not reachable in any event by the SEC. Mr. Rosen testified that the loan transaction would only impair the SEC’s ability to collect its judgment if Mrs. Solow died before Mr. Solow – and, since she was still very much alive, the issue was moot. In one ear and out the other. Example: the court stated: “Like the defendant in Lawrence, Mr. Solow divested himself of his assets in anticipation of the judgment that was about to be entered against him.” Remember, the homestead was acquired in 2002, and other significant assets had also been transferred to Mrs. Solow well beyond the statute of limitations ! How could that (transactions occurring 6 years before the judgment, and years before the conduct resulting in the judgment) be viewed as being “in anticipation of the judgment“?
The Solow court stated: “..an inability defense is unavailable where the inability was created by the defendant himself.” This is exactly the opposite of the Supreme Court ruling in Maggio (see above). The Solow court constantly made an effort to distinguish between a mere money judgment and a disgorgement order (as in the Solow case). The court stated that the latter brought the court’s “equity” jurisdiction into play. Presumably this means that the court can ignore all prior law, ignore all the facts, and do whatever it wants to do.
Important facts, yes actual facts, to note:
1. Mr. Solow did not create an offshore trust; this was not an offshore trust case. This is asignificant factual distinction from Lawrence.
2. Mr. Solow routinely transferred assets to Mrs. Solow during their marriage as many husbands do. Most sizable transfers were made prior to the existence of the facts giving rise to Mr. Solow’s SEC case.
3. Mrs. Solow created an offshore trust funded with assets she alone owned for many years beyond the statute of limitations on fraudulent transfers (yes, received from Mr. Solow). This is another significant factual distinction from Lawrence.
4. Neither Mr. Solow nor Mrs. Solow had any power over the offshore trust (as Lawrence did).
5. Mr. and Mrs. Solow did execute a mortgage on their TBE homestead property, which would have only impeded the SEC’s ability to collect its judgment against Mr. Solow if Mrs. Solow predeceased him (still alive).
6. Statutes of limitations exist to provide certainty for parties’ transactions, regardless of how offensive those transactions are to a court. Even a bank robber can eventually escape prosecution if the statute runs.
7. State law creates exemptions and defines property rights. While a federal court may ignore exemptions, it cannot ignore the very nature of a property right, even where the “creditor” is the United States in a criminal forfeiture proceeding. See, U.S. v. One Single Family Residence With Out Buildings Located At 15621 S.W. 209 Avenue, Miami, Florida, 894 F.2d 1511 (11th Cir. 1990).
8. The judge stated in open court that he wanted to incarcerate Mr. Solow.
Query: Have Debtor’s prisons returned to the United States?
Globally recognized professional asset protection planners in U.S. Donlevy-Rosen & Rosen, P.A. is a law practice with a focus on offshore asset protection planning. Let us explain the significant difference our experience can make when you want to thoroughly protect your assets. Call 305-447-0061 or simply send us a message using our contact page