Creditors close in on Reynolds’ financial web
Larry Reynolds has not been apprehended by US Marshals under the contempt warrant issued for his arrest by a federal bankruptcy judge, but a boat belonging to the Martha Reynolds Trust has been arrested despite attempts by Reynolds and his wife Janice to have the arrest stayed by filing two different bankruptcy cases.
The problem is, the federal bankruptcy court in Anchorage dismissed both the bankruptcy claims.
US Marshalls arrested the M/V Janice Ruth II, a boat docked at the small boat harbor, after creditors – namely the Independent Bank of Texas – secured a court order for the seizure last July. According to court documents in the case, “the US Marshal affixed notice of the arrest to the M/V JANICE RUTH II.”
The arrest was observed by Valdez police according to court documents.
On July 14, a United States Magistrate Judge in Anchorage granted a stay on a foreclosure of the vessel by creditors, but noted the vessel was still under arrest despite a bankruptcy filing by Reynolds and regardless of the accusation Reynolds had removed the notice of arrest from the vessel. The magistrate ordered the notice be reaffixed to the vessel.
Valdez police reports filed as evidence in the bank’s pursuit to take possession of the vessel state Reynolds was observed scraping off the notice of arrest and no trespassing signs affixed by the US Marshal with a utility knife. Police notified the Marshals and took documentary evidence.
In the first bankruptcy filing last July, documents that appear to be filled in by hand by Reynolds claimed the vessel was the only asset of the Martha Reynolds Trust and was valued at $250,000. It listed the Independent Bank of Texas as its only creditor and claimed an outstanding debt of $745,000.
The bankruptcy was filed in Anchorage July 13. The bankruptcy was denied by the court August 3. According to court documents, the bankruptcy was denied after Reynolds failed to hire an attorney for the case as required by law.
A second bankruptcy case was filed on behalf of the Martha Reynolds Trust August 9 by Reynolds’ wife, Janice. In the second filing, Mrs. Reynolds signed the claim and documents stating she is the trustee of the Martha Reynolds Trust and claimed the Independent Bank of Texas as a creditor but also listed the Port Valdez Marine and Outdoor Supply as a creditor.
The filing by Janice Reynolds failed to note that the Martha Reynolds Trust was a 75 percent shareholder of the Aguila Investments – the company originally formed by Neal Dees to buy out the assets of Reynolds Alaska holdings when it went bankrupt in 2009.
In early August, Larry Reynolds sent a letter to creditors in the Valdez area accusing Dees of removing documents from the store- a charge that has not been substantiated by any court.
Mr. Dees denies he removed any documents from the store.
Reynolds also sent copies of a state business license naming the Reynolds Trust as its owners. In recent weeks, the sign in front of the Egan Street business was changed and dropped “Port” from its name. It is unclear who owns the business with the competing business licenses naming two different corporate owners.
Dees deferred comments pending future litigation on ownership of the Valdez store.
Kay Hill, assistant United States Trustee, filed court documents August 8 showing evidence of repeated filings on behalf of the Martha Reynolds Trust. Another motion was filed by the trustee August 11 alleging the Martha Reynolds trust is not a business trust as defined by law and ineligible for bankruptcy and asked the court to dismiss the bankruptcy claim filed by Janice Reynolds.
The bankruptcy court sided with the trustee and the second claim of bankruptcy was dismissed September 7.
Court documents dated September 6 state the Martha Reynolds Trust “can’t have it both ways,” claiming to be an asset free trust in the Texas bankruptcy case “and an active business trust in the Alaska case.”
The Martha Reynolds Trust - who owns it and who benefits from it - was a topic of concern in the Texas bankruptcy court hearing earlier this month.
In the meantime, Reynolds’ Texas attorney has filed an official appeal of the arrest warrant issued by the North Texas bankruptcy court alleging Reynolds was in contempt of court. The warrant was issued when Reynolds failed to personally appear in court after the trustee for his personal bankruptcy, Dan Lain, alleged Reynolds had lied in filing bankruptcy schedules, hid assets from the bankruptcy trust, sold mineral rights to properties owned by the bankruptcy trust without reporting the profits to the trustee, withdrew money from the bankruptcy trust accounts without authorization and then failed to return the money despite a court order to do so.
The Texas bankruptcy judge referred the allegations to the Dept. of Justice for investigation and possible criminal prosecution.