It appears that the Chapter 7 trustee has filed a Motion to have the Liquidator held in contempt of court for failure to obey the bankruptcy court's January 19, 2007 order to disgorge her fees.

Stacy Calvaruso of CalMed, and Liquidator in the Charis bankruptcy case, has failed to obey the bankruptcy court's January 19, 2007 Order and return her approximate $200,000.00 in fees to the bankruptcy estate. Reportedly, the attorney for the U.S. Trustee has failed to go before the court to enforce its Order on the basis that Stacy Calvaruso does not have assets.

Wells of Justice has researched many bankruptcy cases, and not once have we found where a bankruptcy judge fails to enforce his/her Order upon a Debtor to turnover funds because they have no assets.

Bankruptcy trustees use Motions for Rule to Show Cause to have Debtors held in contempt for disobeying Orders of the Court. They also file actions to revoke the discharge of Debtors when they fail to obey the Orders of the Court. We have also seen cases where trustees receive Court Ordered Enjunctions over bank accounts to seize funds.

Apparently in this case, the Liquidator will not suffer any consequences for failure to obey an Order of the court because the attorney for the U.S. Trustee is not pursuing legal options to enforce the court's Order.

This bit of information caused us to consider how the attorney for the U.S. Trustee KNOWS that Stacy Calvaruso has no assets. Was it by word of mouth? Was it by using various search tools for property ownership, bank records, etc.? Was any discovery conducted before reaching the conclusion that Stacy came into possession of $200,000.00 that disappeared without a trail?

Is there a chance that U.S. Attorney David Dugas, having knowledge and evidence of the Liquidators embezzlement, and who was just nominated by President Bush for a seat on the federal bench, wants this case to go into a black-hole?

Could it be that U.S. Attorney David Dugas wants to be appointed to the federal bench so he can dismiss any legal action filed against Calvaruso that might cross his desk?

Livingston Parish records provide that between 1999 and 2005, Stacy Calvaruso made numerous property conveyances, mortgages and deed transactions totalling $768,120.00. During that time, from 1998 until June 2001, Stacey Calvaruso was in her own personal chapter 7 bankruptcy.

Bankruptcy trustees have resources to research property ownership. How can property conveyances and transactions during a pending chapter 7 bankruptcy be missed by the chapter 7 trustee?

On August 24, 1998, Calvaruso filed a personal, voluntary joint chapter 7 case. (Middle District of Louisiana (Baton Rouge) Case #: 98-11844). Samera L. Abide, (PO Box 3616, Baton Rouge, LA 70821, (225) 923-1404), was appointed trustee.

The Calvaruso's received their discharge and the case was closed on June 19, 2001. Apparently, bankruptcy trustee Abide failed to call Calvaruso's property ownership and conveyances into question during the chapter 7 case.

A reasonable question is if Calvaruso was appointed Liquidator in the Charis case to pay herself almost $200,000.00 in fees without court approval for a reason associated with her hiding assets in her personal bankruptcy case -- since the U.S. Trustee's attorney seems to know that Stacey Calvaruso has no assets without conducting a citation to discover assets? Maybe the U.S. Trustee's attorney knows where the money went.

Did Stacy Calvaruso commit bankruptcy trustee approved bankruptcy fraud in her personal bankruptcy case? Add these questions to how and why the office of the U.S. Attorney referred Calvaruso as Liquidator in the Charis case, and why the attorney for the U.S. Trustee alleges that Stacy has no assets to pay the court ordered expunged fees, and we have an interesting entanglement of cronyism in the U.S. Trustee Program.

On January 19, 2007, Bankruptcy Judge Douglas D. Dodd entered a Memorandum Opinion and Order in this case. Judge Dodd's Opinion recaps this case and sheds light on the Liquidator's actions, how they effected the Chapter 11 confirmed plan, and eventually led in the case being converted to a Chapter 7. If you are not familiar with the case, we recommend that you read the Memorandum Opinion.

Bankruptcy Judge Dodd ordered disgorgement of all fees the liquidator paid to itself. This is approximately $200,000.00. Judge Dodd also ordered the liquidator's legal counsel, Jones, Walker,Waechter, Poitevent, Carrere & Denegre, L.L.P. to disgorge $9,897.66 of the fees it received.

What Judge Dodd's Order lacks is a date certain for the liquidator and her legal counsel to have the money in the chapter 7 trustee's hands. With a history of not complying with orders of the bankruptcy court, (see July 2006 update below), ordering a date certain would provide the U.S. Trustee with options for a rule to show cause and have the liquidator and her legal counsel held in contempt if they fail to pay.

One of our associates referred to the Court's Memorandum Opinion and Order as a "smoke screen," because the order provides no options for the U.S. Trustee if disobeyed. Let's see if Judge Dodd catches his mistake and corrects the Order, or if the chapter 7 trustee files a Motion for a corrected order to set a date certain.

It is reported that the liquidator, CalMed/Stacy Calvaruso, was recommended by U.S. Attorney David Dugas. It is also reported that Attorney Dugas has known of the impropreities in this case for over 2 years, was seeking appointment to the federal bench and didn't want bad publicity. Upon information and belief, most recently, Attorney Dugas lobbied Senator Vitter of Louisiana for an appointment as a federal judge before President Bush leaves office.

It is better when those who aspire to greater political appointments admit their mistakes, rather than keep them quiet at the harm of innocent people. There is a phrase that a man who will not stand for anything, will fall for everything. The character of hiding mistakes and the improprieties of someone they appointed while an U.S. Attorney, cannot afford to be carried over to a federal district court, or any court for that matter.

Upon information and belief, Stacy Calvaruso (CalMed Consulting) who was Liquidator in this bankruptcy case, filed her own Chapter 7 bankruptcy in 1998. Upon information and belief, Stacy's vehicle and household goods were liquidated in her personal bankruptcy case. Upon information and belief, the IRS was a creditor in her bankruptcy.

Less than 4 months after her bankruptcy case closed, Stacy Calvaruso was appointed by a government agent as Liquidator in the Charis Hospital chapter 11 bankruptcy case.

Upon information and belief, within months of that appointment to liquidate Charis hospital, Stacy Calvaruso purchased a new Infinity and Lincoln Navigator, an upscale house in the costlier part of New Orleans, and a new commercial building in the same area.

The Regional United States Trustee motioned the court to order CalMed/Calvaruso to file a fee application for the $186,000.00 that Calvaruso distributed to herself and her attorney without the court's approval. The court entered order, but CalMed failed to comply.

At a January 3, 2006 hearing, CalMed's attorney argued that the court did not have jurisdiction. The court stated it did, and the Regional United States Trustee requested sanctions and for CalMed to return $186,000 it paid itself without court approval. The court scheduled a sanction hearing

The Regional United States Trustee motioned the court, and the court so ordered CalMed's attorney to file a fee application and request court approval to be paid. At the hearing, CalMed's attorney argued that this request violated attorney/client privilege. The court stated that the

estate, not Calvaruso, was his client and ordered compliance no later than February 6. The court stated that he better not miss this deadline or file nebulous information. CalMed did not comply with that court order.

The Court ordered Calvaruso to appear on January 3 and present evidence of her bond. Calvaruso did not appear and the court ordered a show cause hearing for March 3, 2006.

The Regional United States Trustee asked CalMed/Calvaruso to submit an accounting of the estate auction. Calvaruso had previously testified under oath that all movables were sold at auction. The debtor provided evidence to the United States Trustee that this was false. Again, Calvaruso failed to comply.

After 5 show cause hearings, the judge never followed through and forced the liquidator to appear. After 4 hearings in which the liquidator's attorney indicated that his client had obtained a bond, he finally admitted that she didn't because he didn't think it was necessary. The court did nothing.

In June 2006, the Regional U.S. Trustee held a 2004 examination of the liquidator in which the liquidator finally admitted she placed estate funds in her company's account, didn't get a bond, didn't do anything with the taxes, basically did nothing but cash checks. The Regional U.S. Trustee then held a hearing, subpoenaed the liquidator, and placed her under oath to support the motion to force her and her attorney to return all funds they had paid themselves and friends without court approval.

Upon information and belief, the liquidator stated that she was contacted in July 2001 by the Assistant US Attorney and asked to put in an application to do the estate's accounts receivable management/billing. The liquidator stated that she told the Assistant U.S. Attorney then that she was not qualified. He recommended her ex parte and she was selected.

It appears that the liquidator was personally recruited by the Assistant U.S. Attorney to serve as liquidator in the Charis Hospital case. It also appears that the liquidator deposited funds of the bankruptcy estate into her company's account; invested in an annuity in which the funds are unaccounted for; did not have a bond as required by federal statute; did not pay the taxes, (which the IRS has attacked the home of the people who held ownership interest in Charis and wants them to personally pay the taxes); and that the liquidator paid herself and legal counsel without court approval.

Did the judge order expungement? No! Of all the hearings that CalMed failed to appear, and all the court orders the liquidator has disobeyed, the bankruptcy judge has only entered order that they be sanctioned $250.00.

Upon information and belief, the same bankruptcy judge sanctioned a creditor $500.00 when the creditor failed to appear at a hearing.

The bankruptcy judge now wants more motions, hearings, etc. His rulings can be construed as an attempt to change the context of the proceedings and frame it in a way that he can justify ruling in favor of the liquidator. For instance, he wants to know if this is about inequitable distribution, doesn't mention the bond, wants the U.S. Trustee to state the legal authority for such action, etc.

This case is definitely one to watch. It involves much more, including the former administrator of the hospital who is reported to have political ties and demonstrated mis-managing other health facilities into bankruptcy; and the Asst. U.S. Attorney who hopes for appointment to a federal bench. These ties may be reason why the judge has not ruled in favor of the U.S. Trustee in spite of the liquidator's perjury, violation of federal statute, co-mingling of estate assets with her personal and corporate assets, and disobeying orders of the court, including that she distributed payment to herself and legal counsel without court approval.

The United States Trustee for Region 5 has Motioned for an order compelling attorney Jones Walker, legal counsel for Liquidator Stacy Calvaruso of CalMed, to disclose all fees paid in "connection with this case and to file an application for compensation and reimbursement of expenses as directed by prior order of the Court."

The U.S. Trustee's Motion reports that the Liquidator's Report of Administration shows that CalMed distributed $76,260.04 to Jones Walker without court approval.

On 11/15/2001, the Liquidator, Stacy C. Calvaruso of CalMed Consulting Inc., submitted a check to purchase an annuity in the amount of

The disclosure statement sets forth that if the account is for a Trust, Estate, or minor, that the title should refer to Trustee, Executor, Guardian or Custodian. We point this out, as the Liquidator argued in a motion that her position was the same as that of a bankruptcy trustee. However, on Liquidator did not enter a title on the disclosure statement representing herself as trustee of the debtor's estate. She entered her personal social security number, and a Taxpayer Identification Number.

The annuity was fully surrendered on April 19, 2002. For the section requiring election of withholding, the box is checked "I have read the above information and I do not want Federal Income Tax withheld from my surrender."

The Taxpayer Identification provided on the contract when the annuity was purchased is not the same taxpayer identification provided when the annuity was cashed in. The annuity was fully surrendered to 79-2378897, not 72-1426394.

This case was filed in calendar year 2001 in the Middle District of Louisiana. Four years later, there are allegations that the Liquidator "devised a scheme to ravage the estate to satisfy its own financial interests. This is supported by the refusal to file the 2001 Cost Report while consuming the majority of available estate funds and advancing misinformation in court ordered reports."

Among the allegations in this case are that the Liquidator has concealed assets; transferred assets to her portfolio, disobeyed court orders, and mismanaged estate taxes. It is alleged that the IRS has threatened to seek payment of taxes from the former owners of the hospital, (in their persons), although the bankruptcy court ordered the Liquidator to pay the taxes.

Bank One is also implicated in this case, in addition to issues of conflict of interest, the Liquidator not accounting for Medicare receipts, and failure of the Chapter 7 trustee and Assistant U.S. Attorney to take action to bring the Liquidator to justice.

On July 15, 2005, Bankruptcy Judge Douglas D. Dodd entered an order approving the chapter 7 trustee, Michael Chiasson, to hire TeleRecovery, a collection agency, to collect accounts receivable. The order is nunc pro tunc, which will grant payment to TeleRecovery for work performed since June 24, 2004.

Chapter 7 trustees are paid a sliding scale commission from assets recovered in a case. In this case, trustee Michael Chiasson is also paying TeleRecovery on commission. The court approved that TeleRecovery is paid "25 percent of first placements collected, and 40 percent of collections if suit must be filed."

Depending on the commission paid to trustee Michael Chiasson, in addition to TeleRecovery, there is possibility that a minimum of 45 percent of the accounts receivable recovered will be diverted to their compensation. Add in legal fees for the attorneys for trustee and expenses, and there may not be any assets remaining to distribute to creditors.

The views and facts expressed in the linked documents are those of the writers. Wells of Justice does not confirm or deny the contents.