One way a debtor may frustrate an asset search or delay forced collection proceedings is to dissipate assets through an excessive divorce settlement. According to "Tyco gets OK to freeze Kozlowski’s assets" for example, ex-Tyco chief executive Dennis Kozlowski may be using his divorce settlement to delay his creditors. At In Re: Tyco International, Ltd., Securities Litigation, 02-md-1335-B, Tyco therefore filed the following motion to enjoin Mr. Kozlowski from transferring his assets:
1) Main Document, 11 pages
2) Memorandum of Law, 16 pages
3) Exhibit (Affidavit) Declaration of Matthew R.A. Heiman, 6 pages
4) Exhibit A to Declaration of Heiman, 38 pages
5) Exhibit B to Declaration of Heiman, 8 pages
6) Exhibit C to Declaration of Heiman, 4 pages
7) Exhibit D to Declaration of Heiman, 4 pages
8) Exhibit E to Declaration of Heiman, 3 pages
9) Exhibit F to Declaration of Heiman, 5 pages
10) Proposed Order for Preliminary Injunction, 2 pages
11) Proposed Order Temporary Restraining Order, 2 pages
As its memorandum of law indicates, Tyco is seeking injunctive relief because it is a creditor with a $325 million dollar claim against Mr. Kozlowski. Tyco’s memorandum describes how Mr. Kozlowski is in prison for looting Tyco and that Tyco had filed an amended complaint against him for: breach of fiduciary duty, fraud, conversion and breach of contract. The memorandum also alleges that Mr. Kozlowski’s divorce settlement could be part of his scheme as a debtor to prevent Tyco from collecting on its $325 million dollar claim.
At Exhibit "E" of the motion, Tyco additionally requests expedited discovery from Mr. Kozlowski, about his assets and divorce settlement. Tyco may hope that such discovery pursuant to Fed. R. Civ. P. 26, 33 & 34, would prove that Mr. Kozlowski’s divorce settlement is part of a fraudulent conveyance to his wife. Tyco might be able to use expedited discovery from Mr. Kozlowski to ultimately argue that his divorce settlement was excessive since he had only a childless five year marriage. Based upon the foregoing, the Court issued its Order restraining Mr. Kozlowski from transferring assets up through October 17, 2008, while the litigation continues.
Copyright 2008 Fred L. Abrams