A well known Myrtle Beach attorney and real estate investor, Harry Pavilack is facing simultaneous Chapter 7 and Chapter 11 bankruptcy cases. Three banks, Wells Fargo Bank, Atlantic Bank & Trust, and First Federal Savings & Loan of Charleston, forced Pavilack into Chapter 7 by filing an involuntary petition against him in an attempt to collect on $22.1 million in bad loans. Pavilack filed a competing Chapter 11 case the following month.

Last week, a court-appointed financial examiner filed a report accusing Pavilack of keeping such poor financial records that accurately reconstructing the trail from [Pavilack’s] memory and from third parties seems a pipe dream.” He also charged the attorney with hiding cash, setting up shell companies and transferring assets to friends and relatives to shield them from creditors.

In part I of this series, we discussed the peculiar history of the scandalous case. In this part, we will discuss the specific allegations made by court-appointed examiner George DuRant.

Undisclosed Assets, Transferred Assets, Hoarded Cash Alleged

Wells Fargo, Atlantic Bank & Trust, and First Federal Savings & Loan say they have lent Pavilack a total of $22.1 million. In their request for a trustee to handle Pavilack’s assets during the involuntary Chapter 7 case, the banks said they were concerned that Pavilack “has been transferring assets beyond the reach of creditors.”

They pointed to Pavilack’s financial statements, which showed an unaccountable loss of $7.6 million in cash during the 2009 fiscal year.

DuRant’s report estimates that Pavilack has created more than 60 corporations, some of which appear to be shell companies created for no reason other than to create bank accounts. Despite having no actual business, DuRant found that “significant amounts of funds and other assets have passed through” them, often in cash disbursements to Pavilack.

The examiner also alleged that Pavilack of transferring assets to friends and relatives to shield them from creditors, which could constitute bankruptcy fraud. For example, he is said to have transferred real estate and mineral rights into a Peruvian company partially owned by his nephew.

DuRant said that Pavilack’s financial records are so inaccurate that it may be impossible to determine how much money Pavilack actually has. For example, $3 million worth of certificates of deposit have been unaccounted for in the records since the end of 2007.

A court-appointed accountant said she cannot complete Pavilack’s 2009 personal tax return because “his income and expenses could not be determined.”

In addition, 48 lawsuits have been filed against Pavilack and his corporations this year alone, which DuRant says “represents a further indication of the perilous financial circumstances he occupies and the likelihood of serious dissipation of his financial assets.”

Pavilack has been practicing law in Myrtle Beach for 43 years. A pre-trial conference was scheduled for November 3in a Charleston bankruptcy court. Pavilack is also scheduled for a November 13 hearing in which he will be questioned under oath about his assets.

Source: The Sun News, “Myrtle Beach lawyer says he owes $72.5 million,” David Wren, November 1, 2010