May 12, 2017 at 3:59 p.m.
Eliason brothers file for Chapter 7 bankruptcy
Filing could result in liquidation of some debts
Eliason brothers file for Chapter 7 bankruptcy
The assistant attorneys general prosecuting the criminal case filed a motion to dismiss all charges April 7, after concluding that they could not prove their case beyond a reasonable doubt. However, Stenz did not sign an order dismissing the charges until April 25.
The bankruptcy paperwork, which includes the brothers' respective spouses as co-parties to the proceedings, was filed May 1 .
In both cases, they checked the boxes saying they estimate they have between 200-999 creditors, estimate their assets to be worth between $100,001 and $500,000 and estimate their liabilities total between $100,000,001 and $500 million.
Chapter 7 bankruptcy is the process by which individuals or businesses may eliminate a portion of their debts while protecting certain assets such as homes, cars and some personal items. Assets that are not protected are sold and the proceeds of those sales are paid to some of the creditors, with those having secured debt paid first. Those holding unsecured debt usually do not get paid as the majority of the money is taken by the first group of creditors.
While bankruptcy eliminates many debts a person has, certain items are exempt, such as real estate mortgages, car loans, student loans, child support, property taxes, fines and orders of restitution imposed by a court of law and income taxes.
Both Eliasons filed for bankruptcy as individuals.
While the cases are being overseen by Chief District Judge Catherine J. Furay, the bulk of the work in bankruptcy cases is done by a trustee, who has the authority to order unprotected assets liquidated. The trustee listed in both cases is James V. Block of Wausau.
Persons owed money by someone filing for bankruptcy are sent a notice by the federal bankruptcy court.
According to court records, notices were sent to 745 creditors in Brian's case and 749 in David's case.
The nine alleged victims in the dismissed criminal cases were sent creditor notices, according to the Form 309A filed in each bankruptcy case. Also listed as a creditor in both filings is Eliason Combination Fund, LLC, which was the subsidiary of their business that was at the heart of the crimes the Wisconsin Department of Justice had accused the two of committing.
The charges followed an investigation conducted by the Wisconsin Department of Financial Institutions (DFI), Division of Securities, Bureau of Enforcement, the results of which were summarized by a report filed on Dec. 10, 2015, that was attached to the criminal complaint.
According to the criminal complaint, around Sept. 30, 2008, the Eliason brothers proposed a new investment called the Eliason Combination Fund, LLC made up of two single-tenant retail properties and four apartment complexes. These properties were already "owned" by these investors through other deals with the brothers, and they transferred their share in the property to the Eliasons for a membership in the LLC equal to their ownership stake.
On May 19, 2009, the Eliasons sued M&I Bank, alleging their refusal in 2008 to provide additional loans was inflicting financial damage on their company. They settled out of court on June 26, 2009 when the financial institution signed an agreement with Eliason Inc., that provided some refinancing of debt and provided some new financing. In September 2009, the Eliasons again started seeking investors in the new company, but allegedly failed to disclose the precarious nature of the company's finances, which was that the firm did not have the money to continue covering operating expenses beyond December 2009. They also allegedly failed to disclose Eliason Inc., was already in default on several loans totaling over $32 million at the time they were selling shares in ECF.
In February 2011, one of the commercial tenants of ECF-owned property filed bankruptcy and stopped making rent payments. In June 2011, another tenant began closing its stores housed in ECF properties. ECF declared bankruptcy less than two weeks after the second commercial tenant stopped paying rent, the report noted.
Approximately 31 investors had purchased membership shares of ECF, many of whom were over the age of 65 at the time of their purchases, according to the complaint.
"Eliason Inc. owed money to ECF, notes in the amount of $805,000," said Stephen Kravit, David Eliason's defense attorney. "Those notes made up only 3 percent of the total value of ECF. Brian and David also personally guaranteed the ECF debt."
Now that all of the preliminary filings in the bankruptcy case have been made in United States Bankruptcy Court in the Western District of Wisconsin, the next step in the process for the Eliasons will be separate 11 U.S. Code ยง 341 meetings of creditors and equity security holders on June 12 in Rothschild overseen by Block. At these hearings, Block will verify each brother's identity and the accuracy of their petitions, according to Lawyers.com.
Creditors have the right to ask questions about the financial affairs of the petitioners at these hearings, but the website says they rarely do so.
Objections to the discharge of the Eliasons' debts must be filed with the court by Aug. 11, according to court records.
Jamie Taylor may be reached at [email protected].
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