One of America's most corporate-crime-friendly judges forced to recuse himself | Hacker News Reader

One of America's most corporate-crime-friendly judges forced to recuse himself

pluralistic.net

114 pointsrbanffy31 comments

The judge got prevented from continuing to judge in favor of the immoral scheme, but the scheme continues.

https://en.wikipedia.org/wiki/Texas_two-step_bankruptcy

> A Texas two-step bankruptcy is a two-step bankruptcy strategy under US bankruptcy law in which a solvent parent company spins off liabilities into a new company, and then has that new company declare bankruptcy.[1] In the first step, the parent company undergoes a Texas divisive merger, which allows companies to split off their liabilities from their assets. In the second step, the newly created spin-off declares a chapter 11 bankruptcy, usually in North Carolina, where bankruptcy courts are perceived to be more open to this scheme. The Texas two-step allows solvent companies to shield their assets from litigants using protections that are normally reserved for bankrupt companies.[1] The goal of a Texas two-step is for the parent company to gain a third-party release of all liabilities it assigned to its spinoff, thus preventing litigants from pursuing those claims against the parent.

Does that work for individuals? I wonder if I can sell my credit card debt to someone else, and then have him deal with the consequences of not paying the bills.

You need to spinoff the other human being. That means it's your child. A bit insensitive IMHO.

Not much more seriously how about selling your debts to a company you just create for the occasion ? Sounds much more "the Texan way" to me.

i have heard of people who earn no income. they formed a corporation that owns all of their property. the person does not have a job, but the corporation is hired. the corporation pays for everything. this seems like something that would allow for that kind protection from debt

Theoretically it stands to reason that the person might be able to avoid being personally liable for any debt. But it’s worth remembering that collecting a debt from an entity is often far less cumbersome than collecting against an individual. For example, the LLC has no homestead; none of a corporation’s profits are protected wages.

Yes, unless something like the Texas Two-step divestment scheme is also available to that hypothetical entity. Then the entity which owes the debt would no longer be the one with the revenue/assets.

I truly wish I could get a good explanation from someone wise vis a vis why this wouldn’t just be a fraudulent transfer but yes, I hear what you are saying and it seems true, assuming you get over that hurdle (which everyone with sufficient lawyers seems to be able to do).

> That means it's your child. A bit insensitive IMHO.

Other way around - give your child all your assets, then retain the liabilities and declare bankruptcy. Then hope your child is willing to support you long term, since you no longer have any assets. Also works with your wife.

You can't just give your wife to your child!

No but my wife gave birth to my children !

Aha who's laughing now ?

You give all of your assets to your child, but only in a conservatorship that dissolves after your death. Then you don't have to hope the child is willing to support you.

You're the wrong king of person. This sort of thing is only available to people of the type "corporation" and their relatives.

Even regardless of the Texas two-step, these corporate/LLC shenanigans don't really work well for individuals. That's what makes this dynamic especially galling. As an individual you can certainly create the entities, but in the event of any significant suit it's very likely the corporate veil will get pierced based on reasons of you being personally involved in operating the company, undercapitalization, or lacking complete separation from your personal activities. It only works when you can hire patsies to do all the actual work, while remaining at arms length from the details. Technically those patsies can themselves be held individually liable for their own negligent/harmful actions performed for the LLC, but the point is that they're mostly judgement proof or members of the attorneys' guild, so lawyers leave them alone.

(also nit about the article - the terms are "limited liability company" or "corporation", generally not both)

> Does that work for individuals?

Could a lawyer comment on Texas two-stepping a trust?

> Does that work for individuals?

It does. You can't spin off your liabilities, but you can get rid of all your assets, then declare bankruptcy and get rid of your liabilities.

A contractor did that to me: He gave all his money to his wife, declared bankruptcy, I got none of the money he owed me, and he lived off of his wife's money.

You can, for example, place your house in an irrevocable charitable trust, with a rule that you can live there rent free till you die. Things like that - you need to get creative, but you can move all your assets to places that are not "yours" but that you still benefit from.

Google "Transferring Property Before Filing for Bankruptcy" - it's important to get the timing right, if your transfer the property too close to the bankruptcy they can take it back.

Yes, but you would have to sell it for negative money. The name of this service is “debt consolidation.”

Yup. I've been on the receiving end of something like this in my small company. We were contracted with a large corp to develop a new control board for one of their products. As we were finishing up, the corporation decided that they wanted out of the market the product was for. So they spun-off that division into its own tiny company and immediately bankrupt it.

That was the first and only time we had to have our lawyer write a client. We got some of our pay from them, but certainly not all.

In hindsight we should have been worried when all of our contacts in that company were jumping ship.

I don't think knowing it in advance would have helped immensely, unless you noticed that before investing too much efforts. Although at that time it would have also been too early to commit to a different course of action...

> Their papers including invisible metadata that identified the case as destined for Judge Drain's court, in a bid to trick the court's Case Management/Electronic Case Files system to assign the case to him.

Hit them with hacking charges

did they use the hacker tool known as View Source to see the invisible metadata?

Or just "highlight text"

Hacking charges are reserved for teenagers sharing copyrighted works.

Or journalist opening the browser console.

> Even if they didn't own communal property, judges should not hear cases where one of the parties is represented by their long term romantic partner. I mean, that is a weird sentence to have to type, but I stand by it.

I was a basketball referee when younger and I had a hard time being able to referee games my girlfriend played in, in what was basically a step above rec league...

This article is a long-winded retelling of this news piece. The judge’s undisclosed romantic relationship is the reason.

https://www.businessinsider.com/prominent-bankruptcy-judge-r...

The Pluralistic post is only about 20% longer than that article, and it adds useful context about why an average American should care about this particular judge and the Texas Two-Step.

Not a criticism of the Business Insider article, individual news stories don't need to have a full history of every subject they talk about, but if I saw the first few paragraphs I might think "never heard of this judge or company, don't live in Texas, this story has nothing to do with me".

Corporations should not be considered people.

Corporate persons should not get special rights and privileges that are unavailable to persons of human origin.

On perhaps, if corporations get more rights than people, then at birth, every American citizen should get a SSN and their own LLC. Let everyone bend the rules, or no one.

This article smartly sets the context for how corporations are able to profit from negligent homicide.

There are hundreds of those kinds of judges, including on the Supreme Court.

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