Initial Filing of Bankruptcy
On November 27, 2006, CRI under intense scrutiny by the Department of Education and being pursued by numerous creditors and at least one lawsuit, finally filed for bankruptcy. The bankruptcy case no. is Bankruptcy No. 06-14202 in the United States Bankruptcy Court For the Western District of Washington at Seattle. The names of approximately 2900 ex-students were listed as possible creditors in the original summary of schedules. Mr. Janisch, CRI's sole shareholder and director filed the bankruptcy as a "no asset" case claiming that CRI had no assets. A handful of ex-students went to the initial Section 341 Meeting of Creditors and provided information to the trustee that CRI had failed to disclose numerous assets in its filing. The trustee hired a forensic accountant and it was discovered that not only had CRI not disclosed assets, Alen Janisch took $600,000 - $800,000 out of the corporation the last six months it was in operation! (See top of page 8 of transcript of hearing) He virtually caused his own insolvency, considering he only filed bankruptcy on $750,000 worth of debt.
Students Protest Hiring of Collection Agency to Pursue Student Debts
For assets, CRI gave the court $200,000 worth of accounts receivables from students who owed the school after their financial aid had run out. CRI wanted to turn these account receivables over to collection agencies. Students objected to the court allowing CRI payment from students who had been cheated by the school. Judge Karen Overstreet agreed, and signed an order denying the trustee's request to hire a collection agency to pursue the overdue accounts, commenting that she didn't want the students who had essentially been defrauded to be pursued by collectors. If you or someone you know is in collections, please direct them to the transcript of the hearing and order. You or they may need to consult an attorney or possibly the bankruptcy court itself for the effect it may have on you. Though it takes away from money that could have gone to pay creditors, it would have been re-victimizing the same people!
WTECB Owed $540,877
According to the Private Vocational School Act, the state is obligated to pursue repayment to the Tuition Reimbursement Fund. In the Section 341 Meeting of Creditors in the Bankruptcy Court in December of 2006, Mr. Janisch stated under oath it was his understanding that by taking the bankruptcy action, the state would not pursue him for that money, and the WTECB was not listed as a potential creditor in his filing. However, shortly before the deadline, the WTECB did indeed file a claim in bankruptcy totaling $540,877 that had been reimbursed to students due to complaints and CRI's closure.
Alen Janisch was deposed on June 6, 2007, by James Rigby who is representing the U.S. trustee's attorney. There is a copy of his deposition including exhibits. This deposition showed how Alen manipulated CRI's finances in order to appear to be solvent before Department of Education audits. It also showed how he transferred almost 1 million dollars from CRI right before it closed.
On June 22, 2007
Mr. Rigby filed a preference complaint filed against Alen Janisch and Kai Moldskred, his former finance manager, demanding the return to CRI of principal sums of $905,360 from Alen Janisch and $464,152 from Kai Moldskred. The allegations are that Alen Janisch looted almost a million dollars from CRI before it closed. The trustee's complaint demands a release of a trust deed worth $295,000 and two diamond rings worth approximately $60,000. This complaint was filed right after Alen Janisch was deposed and the trustee inquired as to what the legitimate basis was for Janisch's withdrawing $905,360 from CRI's bank accounts within six months before CRI declared bankruptcy. Mr. Janisch's responses in the deposition provided enough evidence for the trustee to feel that he had pilfered money and other assets from the corporation.
In essence, Mr. Janisch and Kai Moldskred pledged or loaned money to CRI at the end of the year in order to meet Department of Education financial requirements. As soon as those requirements were met, they withdrew and reduced or removed the pledges. A preference complaint is basically an allegation that a corporate officer, director, or shareholder has "transferred money to himself or others in an attempt to defraud, hinder or delay a creditor." In this case, Alen Janisch and Kai Moldskred paid themselves for loans which were undocumented while ignoring other creditors, thus reducing the amount of money available to pay those creditors. Not surprisingly, Janisch and Moldsred have both filed responses to the preference complaint denying they did anything wrong despite the fact their answers direct contradict Alen Janisch's deposition testimony. Here a copy of Janisch's response and here is Moldskred's.
October 23, 2007
Motion for Summary Judgment
The trustee in the bankruptcy case has filed for a motion for summary judgment on the preference complaints against both Janisch and Moldskred. This motion contends that there is no genuine material fact and thus there is no reason for a trial and the court should enter judgment for the trustee and against both Alen Janisch and Kai Moldskred. Should this be granted, the preference case would be over and judgment would be entered against both of these defendants for the amounts prayed for. The Trustee would enforce these judgments on behalf of the CRI estate. On November 19, 2007, Moldskred filed an opposition to the motion.
November 23, 2007
Janisch Declares Personal Bankruptcy
January 17, 2008
Janisch Finally Files His Personal Bankruptcy Schedules
Here are Alen Janisch's personal bankruptcy schedules which include a summary of schedules, a creditor matrix and the Chapter 7 means test. He has claimed heirloom exemptions for two diamond rings worse in the neighborhood of $72,000 and the trustee has objected to those exemptions.
February 25, 2008
Janisch Does Not Show Up for Meeting of Creditors
The Bankruptcy Trustee has made a motion to extend the date to for creditors and the trustee to object to discharge because of Janisch's various delays and noncompliance in his personal bankruptcy. His schedules contain many errors and omissions and statements which appear to be in stark contrast to reality as the trustee points out in his motion to be heard on March 14, 2008. In a declaration to the court Alen Janisch claims that he is seeking treatment for alcoholism.
February 25, 2008
Trustee Moves to Evict Janisch From House
Janisch returned from his "treatment" and has apparently neglected the house which of course the trustee is in the process of selling. Thus, the trustee has made a motion to evict him and have the U.S. Marshall assist if necessary. That motion will be heard on March 14, 2008.
March 7, 2008
Judge Has Lifted the Automatic Stay to Allow CRI Preference Suit To Continue
The Judge in Alen Janisch's personal bankruptcy has lifted the automatic stay so that the CRI preference suit can continue. That suit seeks the approximately $800,000 that Janisch took from CRI's coffers prior to the bankruptcy, approximately half of that which he transferred to Kai Moldskred allegedly for loans that Moldskred had made to CRI.
Alen Janisch Is Ordered to Appear for the Meeting of Creditors
The court has ordered Alen Janisch to appear for the meeting of the creditors and he did not appear. In previous court filings he had testified that he was unemployed and homeless having been evicted from his house. The attorneys for the trustees in both cases discussed the case with the creditors. A transcript of the hearing will be posted soon.
Alen Janisch's House Is Finally Sold for $300k to Kai Moldskred Who "Rents" it Back to Janisch
Well finally, after all the impediments to the sale of Alen Janisch's house were lifted, i.e., the Alen Janisch bankruptcy filing which came automatic stay that stopped the sale of the house which the mortgage company succeeded in lifting. Janisch finally left the house after the court threatened to evict him. The house was finally listed and when a buyer pulled out of the sale at the last minute the bankruptcy court approved Kai Moldskred purchasing the house for $300,000. Alen Janisch has been seen around the house and has apparently moved back in.
The Court Granted Partial Judgment Against Alen Janisch for $905,360 and Kai Moldskred for $123,000
After a pitched battle between Kai Moldskred and the CRI Trustee and several continuances, at the hearing on the summary judgment motion, the court granted partial judgment in the Trustee's lawsuit against Kai Moldskred for the $123,000 and Alen that was fraudulently transferred from CRI/Alen Janisch to him. Kai Moldskred immediately made a motion for consideration which was denied and then he appealed to the Bankruptcy Appeal.
Second Preference Complaint Against Kai Moldskred Filed
The Judge had suggested that the CRI make a second complaint since the fact that the Janisch bankruptcy complicated the first preference complaint. Kai Moldskred was deposed and then the trustee has filed a second preference lawsuit against Kai Moldskred and then subsequently filed for summary judgment on that complaint.
CRI Trustee Files Preference Complaint Against Steve Fleishman, Alen Janisch's Landlord
CRI Trustee filed this a complaint for turnover of property against Bank of America and Steve Fleishman and a complaint for avoided transfer against the Fleishman Family Trust. On August 8, 2008, Bank of American answered the complaint. Steve Fleishman did one better and answered and counterclaimed for a declaratory judgment. In other words, Fleishman is asking the court to declare that he did not violate the preference law.
The crux of the claim against Steve Fleishman and Bank of America, is that CRI transferred $63,000 to Fleishman who used it to secure a Bank or America letter of credit which was pledged to the Department of Education ("USDOE"). CRI's debt to assets ratio was insufficient to qualify for participation in the federal financial aid program thus it needed a pledge to increase its assets. CRI did this only when when the USDOE performed its annual audit. Once the audit was over, reversed the pledges.
Settlement Proposed for Fleishman Claims and Objected to By Student Creditors
U.S. Trustee Has Filed A Complaint to Deny Bankruptcy Discharge Against Alen Janisch
The U.S. Trustee has filed a summons and complaint to prohibit Alen Janisch for discharging his debts because he misrepresented his financial status in his personal bankruptcy by concealing and transferring various assets. This would result in Alen Janisch not being allowed to discharge his debts after the bankruptcy proceeding is over.
Alen Janisch never answered the complaint so the Bankruptcy Court has entered an order denying Alen Janisch discharge of all the debts that he listed in this bankruptcy. Thus, creditors will be able to come after Janisch to collect debts. Unfortunately, Janisch may well not have any assets for some time.