When Rockland real estate broker Joseph A. Brown sold a luxury yacht in 2018, a US bankruptcy trustee says, he did so to defraud his creditors.
Now trustee Fred Stevens is suing the buyer, Wayne Corts, to cancel the transaction and get the yacht back for the benefit of Brown’s creditors.
Brown “orchestrated the fraudulent transaction” to get $15,000 for himself, Stevens states in an adversary proceeding filed April 28 in US Bankruptcy Court, Poughkeepsie, and Corts “was a willing participant because he stood to, and ultimately did, profit significantly from the subsequent sale of the yacht.”
Corts, CEO of Falkirk Estate & Country Club in Central Valley, Orange County, and former owner of Stony Point Marina in Rockland, was not immediately available to respond to the accusations.
Brown, of Rock Hill, Sullivan County, filed for personal Chapter 7 liquidation in 2018, declaring $21,910 in assets and $690,536 in liabilities. He was operating a Re/Max real estate franchise in Nanuet, Rockland County.
Stevens is a Manhattan attorney who was appointed by the court to ensure the integrity of the bankruptcy process. He sued Brown last year to stop him from using bankruptcy to cancel his debts, arguing that Brown had refused to turn over financial records, failed to disclose apparent gambling losses, and concealed the sale of the yacht.
Chief US Bankruptcy Judge Cecelia G. Morris entered a default judgment against Brown last September for not responding to the charges and she ruled that he could not use bankruptcy to discharge his debts.
Now Stevens is going after the yacht.
Brown bought the Meridian 459 Motor Yacht for $400,000 in 2005, according to the complaint, and paid for it by trading in another boat and financing the balance with a loan from TD Bank.
Around 2018, he fell behind on loan payments. He borrowed $30,685 from Heritage Federal Credit Union and used the yacht as collateral. He made two monthly payments and then stopped paying the credit union.
TD Bank was owed more than $200,000 but agreed to accept $95,000 to settle the debt. But Brown did not have enough money to pay even the reduced debt, according to the complaint, so he cut a deal with Corts.
Brown transferred his interests in the yacht to Corts for $110,000, pocketed $15,000 and used $95,000 to pay off the TD Bank loan. The credit union got nothing.
Corts sold the yacht for $200,000 in 2020.
The deal was fraudulent, Stevens argues, because the yacht was worth significantly more than $110,000, as shown by the subsequent sale for $200,000.
He says the transfer also was improper because Brown was insolvent or left insolvent because of the deal and he used the deal “to escape the reach of his creditors,” including the credit union, which was not told about the sale of its collateral.
Stevens is asking the court to cancel the transfer of the yacht and order its return, or its value, to the bankruptcy estate.