In this two-part series, we will discuss the shocking case of a Florida lawyer facing dueling Chapter 7 and Chapter 11 bankruptcies, one of them filed as an involuntary petition by his creditors. A court-appointed financial examiner has accused the attorney of wide-ranging financial mismanagement, including a number of troubling issues that could constitute bankruptcy fraud.
Harry Pavilack, a well known Myrtle Beach lawyer and real estate investor, is the subject of an involuntary Chapter 7 bankruptcy petition filed by his creditors and himself filed for Chapter 11 bankruptcy in September. The Sun News reported Monday that court-appointed financial examiner George DuRant filed a report last week accusing Pavilack of hiding assets from creditors, transferring assets to friends and relatives during the bankruptcy process and hoarding cash in foreign accounts.
Wells Fargo Bank, Atlantic Bank & Trust, and First Federal Savings & Loan of Charleston filed an involuntary bankruptcy petition against Pavilack in August to force the liquidation of his assets through Chapter 7. The group of creditors requested a bankruptcy trustee be appointed to manage Pavilack’s assets during the case.
In September, one day before the Chapter 7 judge was to rule on whether to appoint a trustee, Pavilack filed a Chapter 11 reorganization plan to cover both his business and personal debts.
Involuntary Chapter 7 Bankruptcy and Chapter 11 Reorganizations Both Pending
In his Chapter 11 bankruptcy filing, Pavilack estimated his total assets at $50,000 or less. Less than a month later, after being questioned by the examiner, Pavilack filed an amended estimate of his assets asserting they totaled around $8.9 million. In fact, George DuRant claims Pavilack turned over stashes of cash totaling $1.1 million earlier this month — including $994,000 he retrieved from a closet in his office.
Pavilack, a major real estate investor as well as an attorney, claims to owe around $72.5 million to creditors. Most of his debt, he claims, is in the form of losses during the real estate market collapse. His creditors claim he has also owes substantial tax debt, having failed to pay his personal and corporate real estate taxes in six years.
DuRant says Pavilack began to conduct most of his transactions in cash “in order to frustrate the collection efforts of a creditor.” That creditor, Shaul and Meir Levy of the Wings beachwear stores, obtained a $2.5 million judgment against Pavilack and others in February over a failed condominium investment.
“When Levy elected to execute the judgment in February . . . [Pavilack] began converting his demand deposit accounts to cash which he kept in safe deposit boxes and elsewhere to avoid having it attached or taken by Levy,” DuRant’s report states.
The three banks that filed the involuntary Chapter 7 petition against Pavilack have lent him a total of $22.1 million.
Both the Chapter 7 and Chapter 11 bankruptcy cases are going forward.
In the second part of this series, which will appear Friday, we will cover the specific allegations financial examiner George DuRant made in his report for the bankruptcy court.
Source: The Sun News, “Myrtle Beach lawyer says he owes $72.5 million,” David Wren, November 1, 2010