Arizona Real Estate Developer Denied Chapter 7 Bankruptcy

Written by CFB Blogger. Posted in Blog

In December 2012, Alexander Papakyriakou, an Arizona real-estate investor, and his wife, Roxanne Papakyriakou, filed for Chapter 7 bankruptcy, claiming less than $1 million in assets and liabilities of less than $50,000. So why are we reporting on this bankruptcy case 1 ½ years later? Well, according to an in-depth article on www.azcentral.com by Catherine Reagor, Mr. & Mrs. Papakyriakou (aka Papas), apparently “tried to defraud their creditors by hiding millions of dollars in assets, according to the judge’s ruling in the long-running bankruptcy case. According to creditors, those assets included homes in Paradise Valley, Arizona, and Laguna Beach, California, luxury cars, life-insurance policies and expensive jewelry”. Papas is accused by creditors of transferring million-dollar homes to a company he still runs, hundreds of thousands of dollars to his two sons and covering up expensive jewelry and car sales. An Arizona U.S. Bankruptcy Court Judge has recently denied the couple’s bid to discharge their debts through Chapter 7 bankruptcy, allowing more than 100 creditors with some $141 million in claims to keep trying to get paid what is owed them. The judge determined that through property and money transfers to his sister, his company Cobea and his two sons, Papas “knowingly and fraudulently” failed to disclose assets that could have been used to repay his debts. The bankruptcy back-story:  Papas was a partner with Phoenix-based real-estate group Barness Papas Inc., a firm that collected and consolidated investors’ money to purchase and develop over 100 shopping centers between 1999 and 2008. In late 2007, with the crash of the real-estate market, the company started defaulting on their loans. Shortly thereafter, a number of investors and creditors filed lawsuits against the investment firm. A Phoenix attorney who is working with the bankruptcy court-appointed trustee stated in the same article, “’This is certainly an atypical bankruptcy. About 90 percent of bankruptcies are approved. Papas has a certain skill in structuring assets and transactions to cover up who owns what. Now, we will continue to fight our way through that and find other assets transferred after his bankruptcy filing.’” Papas’ partner, Ron Barness, a Phoenix-area real-estate broker and developer, died in October 2012. His estate is not involved in Papas’ bankruptcy. Papas’ attorney avers that his client plans to appeal the denial of his Chapter 7 bankruptcy discharge and that Papas has already repaid $20 million to his creditors. A Los Angeles-area attorney as well as family & friends have been fighting for about seven years to get Papas to repay the approximate $6 million they had previously invested with Barness Papas Inc. According to the newspaper account, “this investment group was told ten years ago that it was investing in a deal to pay $17.2 million for the Palm Glen Shopping Center in west Phoenix. The shopping center actually was purchased by Barness Papas for more than $2 million less. In court filings, [this investment group] contends Barness Papas pocketed the difference”. In March 2011, a Maricopa County Superior Court jury awarded $4.4 million to another group of investors that had reportedly accused Barness and Papas of “fraud, misconduct, mismanagement and improper self-dealing in other shopping-center deals” in Mesa and New Mexico. According to court documents, Papas formed a company called Cobea in the summer of 2008 and named his sister, Xanthipi Papakyriakou, managing director. According to Papas’ filings, she was to receive the proceeds from Cobea to repay her for taking care of their elderly parents in South Africa. Creditors said she has received only a management fee. Reportedly, Papas then transferred title of his Paradise Valley home to Cobea, which took over the $2.4 million in mortgage debt. The Papakyriakou Family Trust also transferred ownership of a Laguna Beach house and condominium, together valued at over $5 million, to Cobea. Cobea also purchased a home in Phoenix for almost $400,000 in 2008 that Papas began living in for $1,000 a month after filing for bankruptcy in 2010. After the bankruptcy filing, the Papases used a Cobea account to pay for a golf membership and dance lessons and continued to use at least one of the Laguna Beach homes. Besides property and money transfers to Cobea, creditors allege that after filing for bankruptcy the Papases transferred over $800,000 to their sons for college and $500,000 in life-insurance policies to a family trust, not disclosing those monetary transfers. The couple also each drove Mercedes at the time of the bankruptcy, which they did not disclose, according to creditors allegations. Almost $300,000 in jewelry, including a 7-carat diamond necklace, purchased between 2003 and 2008, were also not listed in the couple’s bankruptcy. According to the Papas’ sons, they had funded their college educations with student loans, with their father retaining access to their college accounts. Payments to the Papas sons were allegedly made to defraud the bankruptcy creditors, according to the ruling of the bankruptcy judge. The judge stated (in the newspaper account), “’It is clear from the record that Mr. Papas is a ‘sophisticated businessman. The evidence shows the transfer of assets did not commence until Mr. and Mrs. Papas began experiencing financial difficulties in mid- to late 2007.’” Bankruptcy fraud is a federal crime.  The attorneys at Client First Bankruptcy take their obligation seriously.  Our attorneys approach each case with care and precision and we request relevant documentation to be able to protect its clients from allegations like these.  Don’t go to less experienced or less careful attorneys who try to sell you on ‘fast relief’ or ‘speedy filings’.  Haste often leads to bigger problems than those that caused the client to seek representation in the first place. The Client First Bankruptcy attorneys are among the most knowledgeable consumer bankruptcy attorneys in the country, representing thousands of clients in consumer bankruptcy cases. Call us toll-free at 800-383-6004 Monday thru Friday from 8:30 a.m.-6:00 p.m. Central Time. You can also log onto our easy-to-navigate, interactive website at www.clientfirstbankruptcy.com 24/7 for timely and accurate information on filing your Chapter 7 or Chapter 13 bankruptcy. Don’t take chances with your family’s financial security; call the attorneys at Client First Bankruptcy for trustworthy and compassionate personal bankruptcy services.