Did Bill Schwyhart, the former high-flying northwest Arkansas developer, and his wife, Carolyn, commit bankruptcy fraud?
That question goes before the judicial firing line during a three-day trial scheduled to run today through Wednesday in Dallas before Bankruptcy Judge Harlin Hale.
The Schwyharts are accused of “knowingly and fraudulently” making false statements under oath in their bankruptcy filings and during their creditors meeting.
They also face allegations of their intent to hinder, delay and defraud creditors by:
• Concealing their beneficial ownership in limited liability companies by giving false testimony and by not listing the LLCs as assets in their bankruptcy filings; and
• Transferring bankruptcy estate property after they moved to Texas and filed Chapter 7 on July 6, 2018.
Rounding out the allegations preventing the Schwyharts from exiting debt-free from bankruptcy are unjustifiably failing to keep or preserve business records.
These disputed allegations, which block the couple’s discharge of debts in their long-running bankruptcy case, were raised by the chief nemesis among their creditors: Brian Ferguson of Rogers.
You might recall that Ferguson is trying to collect on more than $800,000 in judgments against Bill Schwyhart, who left millions of dollars of debt and judgments in the wake of his post-2008 business meltdown.
Dogs of War
Ferguson has battled the Schwyharts in Arkansas state court and Texas bankruptcy court for more than two years while unraveling what he alleges is an elaborate scheme by the couple to hide assets and defraud creditors.
His Benton County collection efforts in 2018 chased the couple from Rogers, where they lived in an unusual rent-free/utilities-paid arrangement as caretakers of their former house in the gated Pinnacle Country Club.
Ferguson has pursued a claim on the grand home he believes the couple covertly owns as well as cash and assets associated with a secret financial settlement he exposed. That 2013 settlement, which ended a boatload of litigation for Bill Schwyhart, produced $3 million that Ferguson believes Schwyhart controlled with the help of his son, Alex.
If Ferguson can prove his fraud allegations, the couple’s debts will be deemed non-dischargeable. That means he and other creditors can stake their financial claims against the Schwyharts and others elsewhere in the court system.
Adversary Relationship
The Schwyharts attempted to introduce evidence that Ferguson has a long-standing vendetta against them.
That would-be evidence included media coverage they claim Ferguson has stirred up against them in Arkansas Business and the Arkansas Democrat-Gazette.
Judge Hale kicked out that line of evidence as irrelevant. The issue at hand is the Schwyharts’ conduct, not whether they and Ferguson like each other.
In a bankruptcy hearing last year, Schwyhart tried to drag media coverage of his legal and financial problems into his bankruptcy case in connection with Ferguson’s alleged vendetta.
Ferguson objected to the irrelevant line of questioning and also noted his willingness to stipulate for the court that he and Mr. Schwyhart have an adversary relationship.
Judge Hale sustained his objection.
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