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United States v. Yurek

United States District Court, D. Colorado

June 19, 2017



          William Martínez United States District Judge.

         This matter is before the Court on Defendants' Motion to Dismiss as a Result of Claim and Issue Preclusion (ECF No. 147) and Motion to Dismiss-Judicial Estoppel (ECF No. 148), both of which seek dismissal of all claims against both Defendants. For the reasons explained below, both motions are denied.

         I. BACKGROUND

         The criminal charges in this case arise from the Defendants' (the “Yureks”) alleged tax evasion and bankruptcy fraud, committed in the context of communications with the Internal Revenue Service (“IRS”) regarding their tax liability, as well as in a subsequent bankruptcy proceeding precipitated by that tax liability.

         The instant motions argue, based on three separate legal doctrines, that the alleged misconduct or wrongdoing underlying the present criminal charges against the Yureks was already raised and resolved in their bankruptcy case, and that as a result the subsequent criminal prosecution is foreclosed. Accordingly, the Court's analysis begins by setting out the relevant history of the bankruptcy proceedings, followed by summarizing the present criminal charges.

         A. Bankruptcy Proceedings

         The Yureks had unpaid federal income tax liabilities for 1999 and 2004. The IRS rejected their offers in compromise between 2006 and 2010. In 2009, the IRS conducted audits of the Yureks and two business entities affiliated with them (Bolder Venture Partners, or “BVP, ” and Veracity, LLC (“Veracity”). The Yureks then filed a Chapter 7 bankruptcy petition on September 1, 2010. The principal liabilities declared in their bankruptcy case were their tax liabilities, then totaling $1, 266, 187 ($1, 185, 023 for 1999, and $81, 164 for 2004).

         On October 4, 2010, a Meeting of the Creditors was held in the bankruptcy case, pursuant to 11 U.S.C. § 341(a). At that meeting, a representative of the IRS questioned the Yureks about certain matters, including: establishing that Daryl Yurek was paid as the General Manager of Veracity (ECF No. 147-1 at 1); asking whether the Yureks had income from any sources not listed in their bankruptcy petition (id. at 2); establishing that their health insurance was provided by their son's company, at no cost to them (id. at 8); inquiring about “a loan account” provided to the Yureks by Veracity (id. at 148-1); and asking several questions regarding their claim that they continued to live in a residence rented from one of their sons, despite being $79, 200 in arrears on paying rent, a fact they attributed to their son being “a patient landlord” (see Id. at 2-3, 8).

         On February 10, 2011, the bankruptcy court entered a general discharge pursuant to 11 U.S.C. § 727. (ECF No. 47-6.) Boilerplate language accompanying the discharge recited that as a general rule, and subject to exceptions, “[d]ebts for most taxes” are commonly not discharged. (ECF No. 47-6 at 2.)

         After the discharge was entered, the Chapter 7 Trustee (the “Trustee”) identified certain concerns. These included: whether the Yureks had “made a false oath” during the bankruptcy proceedings; whether assets nominally owned by their son-particularly their residence-were actually owned by the Yureks; the nature of the loan(s) from Veracity; and concerns with the ownership or transfer of stock in another affiliated company, ID Watchdog, Inc. (“ID Watchdog”):

From the Trustee's investigation to date, it appears that several areas of inquiry are necessary to determine whether the Debtors made a false oath in connection with this case. Specifically, the Debtor's statements and schedules and their testimony at the § 341 meeting indicate that their son Justin Yurek acquired an ownership interest in Veracity Credit Consultants while in his early 20's, and acquired real property at 1450 Wynkoop, Unit 6D, Denver, Colorado, for $1, 300, 000 at age 27. The Debtors state they have no ownership interest in either of these assets. The Debtors testified that they rent the real property from Justin Yurek, but were in arrears in the rent by some $79, 200.00. The Trustee wishes to further investigate the history of the ownership interests in Veracity Credit Consultants to determine how the entity was capitalized and by whom, and to investigate the source of the funds used to purchase and pay encumbrances on the real property. The Debtors indicated in their Schedule D that Veracity made a $500, 000 loan to them secured by stock in ID Watchdog valued at $85, 000.
According to their Schedule B, the Debtors own an entity known as Bolder Venture Partners, LLP, which in turn owns stock in ID Watchdog. Daryl Yurek is the CEO of record of ID Watchdog. ID Watchdog is currently registered with the Colorado Secretary of State as a Cayman Islands corporation. The Trustee wishes to investigate the Debtors' relationship with ID Watchdog, the pledge of the ID Watchdog stock to Veracity, and related matters.

(ECF No. 147-2 at 1-2.)

         Given these concerns, the Trustee requested an extension of the deadline to object to discharge of the Yureks' debts, which the Court granted. (ECF No. 147-2.)[1]Shortly before the statute of limitations for the Trustee to bring an action to recover would have run, the Trustee reached a settlement with the Yureks as to certain disputes. (ECF No. 147-3.) The settlement agreement specifically addressed two matters, including (1) whether postpetition payments to the Debtors from BVP “are income from personal services or distributions on account of the Debtors' equity interest and property of the bankruptcy estate, ” and (2) whether the Yureks' transfer of shares of ID Watchdog to their sons within two years of their bankruptcy petition, “constitute[d] a preferential or fraudulent conveyance avoidable and recoverable by the Trustee for the benefit of the Debtors' bankruptcy estate pursuant to 11 U.S.C. §§ 544, 547, 548 or 551.” (ECF Nos. 147-3, 147-4.)

         In settlement of these disputes, the Yureks agreed to pay the Trustee $15, 000 cash “in full satisfaction of [the] Trustee's claims to distributions to the Debtors from [BVP] and to avoid and recover the ID Watchdog, Inc. stock or the value thereof from [the Yureks' sons].” (ECF No. 147-4 at 2, ¶ 2.) The agreement included a mutual release of claims as between the Yureks, their sons, and the Trustee; it explained that the settlement “represents a compromise of disputed claims”; and it reserved that “none of the parties admits liability to the other.” (ECF No. 147-4 at 3.)

         The bankruptcy court approved the Yureks' settlement with the Trustee, without objection from the IRS. According to the Trustee's Final Report, the IRS was paid $12, 773.33 as a creditor in the bankruptcy case. The bankruptcy case was closed on October 25, 2013.[2]

         B. Criminal Charges

         The Indictment in this case was filed on October 7, 2015, not quite two years after the bankruptcy case was closed. It charges five counts of criminal conduct related to the Defendants' tax liability, their communications with the IRS, and their bankruptcy case. (See generally ECF No. 1.) The Yureks are jointly charged (in Counts 1 and 2) with tax evasion in violation of 26 U.S.C. § 7201, and with filing a bankruptcy petition in furtherance of a scheme to defraud, in violation of 18 U.S.C. § 157(1). In addition, Mr. Yurek is charged with making a false statement under oath in relation to a bankruptcy proceeding, in violation of 18 U.S.C. § 152(2) (Count 3), and with making false declarations under penalty of perjury in IRS filings, in violation of 26 U.S.C. § 7206 (Counts 4 and 5).

         In broad terms, the charge of tax evasion alleges that the Yureks committed tax evasion by misrepresenting that they had fewer assets and income available to satisfy their tax liability than what they actually owned, and that they used their son and their business entities to shield assets from the IRS and the bankruptcy court, thus illegally evading payment of their outstanding tax obligations. (See generally ECF No. 1 ¶¶ 5-16.) One central allegation is the claim that the Yureks purchased their residence (a luxury loft in downtown Denver) in their son's name, while continuing to live there. The Government also charges that they at times directed their business entities to pay the mortgage and condominium fees for the loft (see Id. ¶¶ 16c.-h., n.), and to pay certain other personal expenses (see ECF No. 14 at 4-5). Further, the Government charges that the Yureks failed to disclose ID Watchdog ...

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