JACKSON-Charles Evans Jr. was set to be questioned this week about his trust account, but a federal judge ruled Monday that the exam will be delayed until July in order to allow time for the examination of a significant amount of documents recently found in a storage facility.
For months creditors have tried to determine whether Evans and his brother Chris Evans are still in possession of significant sums of money. The brothers were accused in September by Mississippi Valley Title Insurance Company (MVT) of running a commercial real estate mortgage scheme that has done at least $40 million in damages to more than 30 Mississippi banks.
Evans is currently jailed in Madison County on felony charges related to resisting arrest by U.S. Marshals who sought to apprehend him for failing to appear in bankruptcy court. Chris Evans filed for bankruptcy in October, and all case proceedings were subsequently transferred to federal bankruptcy court.
Evans, a lawyer, filed an emergency motion on June 3 for his own release, saying he could not comply with a bankruptcy court order for a Rule 2004 examination while he was in jail.
On May 28 a MVT attorney produced a receipt for a unit at Uncle Bob’s Self Storage in Jackson that Charles Evans Jr. had been renting. The receipt was given to the creditor by Evans’ wife.
On June 3 Evans’ attorney Terry Levy obtained a key for the storage unit from Chris Evans and discovered about “10 bankers’ boxes” of documents.
On Monday bankruptcy Judge Neil Olack said that the request to delay bankruptcy proceedings until the resolution of Evans’ felony proceedings was unreasonable. Levy would have to “deal with the fact” that he has a client in jail, Olack said, examine the storage unit documents, and shuttle them back and forth to the Madison jail for comment from Evans.
Levy said his goal was to comply with court orders without violating Evans’ attorney-client privilege or infringing on his fifth amendment rights.
Any documents determined not to be privileged will be turned over to the bankruptcy trustee, since debtor property is supposed to be in his possession, Olack said. The situation should be resolved immediately, with the storage information being moved to Levy’s office, because they had a “debtor running around with the key for stuff that should be possessed by the trustee,” he said.
Evans will be examined July 28-30. The case is set to be tried in October.
A Rule 2004 examination under U.S. Bankruptcy Code is a thorough investigation of a debtor’s estate by a creditor. Under the rule a debtor’s attendance for examination and the production of documents may be compelled. The examination may relate only to the acts, conduct, property, liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor’s estate.
More than $40 million in claims have been filed against MVT by banks, which were used as investors in an alleged Ponzi scheme conducted by the Evans brothers. Public records show that the brothers stacked multiple commercial real estate development loans on single pieces of property. Loans were obtained through shell companies, using various parcels of land as collateral, when the title to the collateral was often not owned by the business entities obtaining the loans. As the brothers defaulted on loans, banks scrambled for rights to the land and for payment from the insurance company.
Charles Evans Jr. was an approved attorney who wrote title insurance policies for MVT. Alleged illegal activities began in 2003. The shell companies owned properties in Madison, Harrison and DeSoto counties and also in the state of Texas. The brothers were first sued in September by MVT. The case is being handled by federal bankruptcy court in Jackson.
No criminal charges have been filed in the case regarding fraudulent activities.
Charles Evans Jr. was arrested on May 26 by U.S. Marshals in the MetroCenter Mall parking lot in Jackson after resisting arrest. He was in possession of a firearm. Bankruptcy Court Judge Neil Olack had issued a warrant for Evans on May 21 after holding him in civil contempt for failure to appear at a hearing and surrender information about his trust account.
Evans is being held in Madison County jail awaiting his next hearing on the felony charges. Law requires that he be indicted within the next 30 days.
A Mississippi Valley Title Insurance attorney said recently that the company believes Evans has access to significant funds.
An FBI agent testified last week in federal district court that although the agency has been investigating the case for almost a year, it still cannot determine whether Evans has significant funds left.
MVT has $30 million set aside for claims reserves, which is not enough to pay the 65 claims made by banks. The company’s parent, Old Republic National Title Insurance Company (ORNT), jointly issued all of the company’s policies. ORNT has several hundred million in claims reserves.
An FBI agent testified in federal district court that the agency has been investigating the case for almost a year but still could not determine whether the brothers have significant funds.
Evans defense attorney, John Collete, has said Evans does not have money.