Former CPA Wise asserts Fifth Amendment in bankruptcy court
By Linda Bentley | March 18, 2009
$75,000 retainer paid by bankrupt ‘non-debtor third party’
SCOTTSDALE – On Feb. 11, the same day Sonoran News ran “The faces of greed and the victims left in their wake” about former Scottsdale CPA Danny “Dan” Wise, accused of running a $75 million Ponzi scheme, a man in New York called to say he was a private money lender, as Wise professed to be, who had recently been scammed by Wise.
In early November, several victims of Wise’s scheme filed an involuntary bankruptcy against him and Whispering Winds Properties, LLC, which the summary of schedules filed by Wise on Monday indicates victims have been defrauded out of more than $79 million.
The New York caller said he spoke to a man named Steve Floersheim in California, whom he later referred to as a “tax preparer masquerading as a CPA,” about Whispering Winds possibly investing with the New Yorker’s firm.
When Floersheim asked how he and Wise would know he was serious and actually had funds to loan, the New Yorker wired $160,000 in late November to an account provided by Floersheim.
When the New Yorker contacted the California State Accountancy Board, he said they pointed him back to Wise.
The timing of that funds transfer became more interesting upon Attorney Andrea M. Palmer of Ryley Carlock & Applewhite (RCA) filing her disclosure of compensation of attorneys for the debtors last week.
Palmer stated, “I have agreed to accept $100,000 as a retainer and have received a total of $75,000 to date. On Dec. 3, 2008, in accordance RCA’s engagement by the debtors before the petition date, RCA received a retainer in the amount of $25,000 for professional services to be rendered and charges and disbursements to be incurred by RCA in connection with such services. On Dec. 4, RCA received an additional $50,000 as a retainer. Prior to the filing of this statement RCA drew down $36,460.70 from the retainer on account of pre-petition services.”
This prompted several of Wise’s victims to question where he was getting that kind of money to pay attorneys and were outraged Wise would be using victims’ money to pay his legal fees.
Palmer, however, claims, “The source of the compensation paid to me was: ACCUFAST Services, LLC, a non-debtor third party.”
It turns out Steven Gary Floersheim is the owner of Accufast Business Services in Palmdale, Calif.
Floersheim was discharged as a debtor last month after he filed for Chapter 7 bankruptcy protection in late October 2008, which followed his entering into a wrongful termination settlement agreement with former Accufast employee Barbara Zulueta in the amount of $17,000.
So, as Accufast is being presented as a non-debtor third party, Parker may need to explain how Floersheim and Accufast were able to come up with $75,000 only weeks after filing for bankruptcy and claiming to have no cash, checking, savings or other financial accounts.
On his Schedule F – Creditors Holding Unsecured Nonpriority Claims, Floersheim lists numerous individuals as providing him business loans in 2007 in amounts of $10,000, $15,000 and $25,000.
However, he lists no assets for his business, claiming he has only a leased computer system with a server and five work stations and two leased copy machines.
He used a Small Business Administration loan to purchase a $700,000 commercial building in 2003, but notes on his bankruptcy schedule, “After cost of sale and the applicable exemption, there is no realizable equity in this property.”
Floersheim also owed over $20,000 in deficiencies for a repossessed Cadillac and repossessed Corvette.
So, as a guy claiming average monthly income of $16,833 and average monthly expenses of $22,066, a net monthly income of -$5,233, Floersheim wouldn’t appear to be someone who could possibly pay out $75,000 for someone else’s attorney fees.
And, what happened to the $160,000 wired to Accufast in late November?
Meanwhile, as Wise and Whispering Winds plod along through involuntary Chapter 7 bankruptcy proceedings, Wise has delayed production of documents.
Under Section 10(a) of the Statement of Financial Affairs for Whispering Winds, it asks for “Other transfers” and states, “List all other property, other than property transferred in the ordinary course of the business or financial affairs of the debtor, transferred either absolutely or as security within two years immediately preceding the commencement of this case.
The section is addressed with the response, “Debtor is asserting Dan Wise’s Fifth Amendment privilege with respect to transferred property.”
Trustee Maureen Gaughan filed a “Notice of Sale” last week stating Dan Wise’s Season Sun Tickets, Section 113, Row C, Seats 3-5 will be sold to the general public at ticketmaster.com or through the Phoenix Sun’s office.
Attorney Dan Collins of Collins, May, Potenza, Baran & Gillespie, on behalf of Gaughan, recently filed an emergency motion for turnover of Wise’s computers, business records, files and financial records.
Palmer responded at 5:22 p.m. on Monday with a hearing set for the matter at 1:30 p.m. on Tuesday.
She asserts in her response the property and records requested contains Wise’s attorney-client privileged information; information Wise is obligated to protect, such as social security numbers; sensitive and confidential information of third-parties, including investors, clients and former clients; as well as Wise’s Fifth Amendment privilege against self-incrimination.
Besides, Palmer claims, computer equipment is a tool of the trade and statutorily exempt due to Wise’s work as a tax return preparer.
She offers up instead a computer located in the Wise’s home, which Palmer states is used solely by his minor son, contains no privileged information and is available for “immediate turnover for imaging.”
According to Palmer, the remainder of the computers referenced in the Forensic Consultant Agreement, contain e-mail correspondence between Wise and his attorneys that is protected by attorney-client privilege.
Palmer states the computers, in addition to the rest of the requested property, also contain information that “Wise’s criminal counsel advises is protected by Wise’s Fifth Amendment privilege against self-incrimination due to a pending SEC investigation.”
So, until an agreement is in place protecting Wise’s privileged and confidential information, Palmer is requesting the court deny the motion.
Landing in their respective state’s bankruptcy courts almost simultaneously, Floersheim, Accufast, Wise and Whispering Winds have failed to pay their mortgages, bills, loans and investors.
Even discounting genealogy records, which indicate Wise and Floersheim are most likely related, it appears impossible for a bankrupt Floersheim to bail out a bankrupt Wise and be considered a legitimate “non-debtor third party,” especially since the connection between the two has already been made by a victim from New York.