SUPREME COURT: STATE OF NEW YORK COUNTY OF NASSAU. Respondents.

Transcription

1 SHORT FORM ORDER SCAN SUPREME COURT: STATE OF NEW YORK COUNTY OF NASSAU PRESENT: HON. IRA B. WARSHAWSKY, Justice. TRI/IS PART FORENSIC CPA, P. - against - Petitioner INDEX NO. : /2004 MOTION DATE: 07/01/2004 MOTION SEQUENCE: 001 GREGORY HASHO aia GREGORY M. HASHO CONTINNTAL BROKER-DEALER CORP. STEPHEN B. WEXLER, individually and as trstee of the GREGORY M. HASHO VOTING TRUST TRUE CARE, INC., and JOHN DOES NOS. " THROUGH " 10", the identities of such persons being fictitious, and intended to be persons who are fraudulent transferees of the assets of defendant GREGORY HASHO and who aided and abetted in such fraudulent transfers Respondents. The following papers read on this motion: Order to Show Cause, Affrmation, Petition & Exhibits Anexed... Affirmation of Stephen B. Wexler in Opposition & Exhibits Anexed... Affidavit in Opposition & Exhibits Anexed Respondent, Continental Broker-Dealer Corp.'s Memorandum of Law in Opposition... Reply Affrmation & Exhibits Anexed... Additional Reply Affrmation & Exhibits Anexed The petition by Forensic CPA, P.C. ("Forensic ), petitioner, against the respondents Gregory Hasho, Continental Broker-Dealer Corp. ("Continental"), Stephen B. Wexler Individually and as Trustee of The Gregory M. Hasho Voting Trust ("The Hasho Trust"), True

2 Care, Inc. ("TCf' ) and John Does " I" through " 10", the identities of such persons being fictitious, and intended to be persons who are fraudulent transferees of the assets of Gregory Hasho and who aided and abetted in such fraudulent transfers, is determined as follows. This special proceeding before the cour arses from the efforts of the petitioner to satisfy a money judgment obtained against Gregory Hasho in the sum of $ in June of2004. Hasho was the one-hundred percent beneficial owner and holder of all stock in Continental, a licensed broker-dealer. However, in November of 1995, The Hasho Trust was created for the purpose of inter alia, holding Hasho s shares of Continental stock in order to satisfy the proprietar bar imposed by an Order of the Securties and Exchange Commission SEC"). Upon the creation ofthe trust, all ofhasho s shares were transferred to the trstee to hold in a fiduciar capacity. Currently, the trstee of The Hasho Trust and holder of Hasho shares is Respondent Stephen B. Wexler. In June of2003 and subsequent to the creation of The Hasho Trust, Hasho created TCI, a corporation which offers a medical savings plan to the public. Petitioner claims that Hasho has contrbuted substantial propert and other assets to TCI and continues to directly and/or indirectly control the company. Moreover, on or about July and prior to the entr of the aforementioned money judgment, petitioner claims that Continental executed an indemnification agreement wherein it agreed to pay, on Hasho s behalf any sum awarded to the petitioner. Based on the foregoing facts, petitioner commenced this special proceeding seeking: (1) an order pursuant to CPLR 95225(a), directing Gregory Hasho, the judgment debtor and beneficial owner of shares of stock of Continental and TCI, to deliver the duly endorsed certificates of stock to the sheriff of Nassau County in order that petitioner may execute on the stock certificates to satisfy petitioner judgment; (2) an order pursuant to CPLR 95225(b) and 95227, directing the respondent Stephen B. Wexler, trstee of The Hasho Trust and title holder of the remaining shares of stock of Continental, to deliver the duly endorsed certificates of stock to the sheriff of Nassau County in order that petitioner may execute on the stock certificates to satisfy petitioner s judgment; (3) an order pursuant to CPLR 95225(b) and 95227, that respondents Continental and TCI be compelled to pay petitioner those funds they are holding for the judgment debtor and those monies they owe to the judgment debtor for loans propert and other funds advanced to such entities;

3 (4) an order pursuant to CPLR 95227, directing the respondent Continental to pay petitioner suffcient fuds to satisfy petitioner s judgment based on a written indemnification agreement, which agreement is the basis for the action commenced by the judgment debtor against Continental in this cour, index no ; and (5) an award of reasonable counsel fees based upon the written retainer agreement, together with such other and further relief as may be just and proper. In support of the request that respondent Hasho deliver the certificates of the stock owned by him in both Continental and TCI, petitioner argues that Hasho has an ownership interest in both entities, and such an interest is subject to the enforcement of a judgment. Gallant v. Kanterman, 249 A.D. 2d (1st Dept. 1998). Regarding Continental, it is apparent that the stock certificates, previously owned and held by Hasho, are now in possession of The Hasho Trust, discussed infra. Thus, since such certificates are not in the possession ofhasho, an order pursuant to CPLR 95225(a) is unwarranted. As to TCI, petitioner contends, without contradiction, that Hasho has contrbuted substantial propert and other assets to TCI, and thus TCI is indebted to Hasho. Also that Hasho directly and/or indirectly controls TCI and has an ownership interest in the corporation which can be reached by a judgment creditor. Therefore an order pursuant to CPLR 95225(a) directing Gregory Hasho, the judgment debtor and beneficial owner of shares of stock in TCI, to deliver the duly endorsed certificates of stock to the sheriff of Nassau County can be granted. In support of an order pursuant to CPLR 95225(b) and directing Stephen B. Wexler, trstee of The Hasho Trust, to tuover stock certificates in Continental, petitioner argues that, notwithstanding that The Hasho Trust is record owner of the stock certificates Gregory Hasho has "beneficial ownership of Continental' s stock." Consequently, petitioner should be able to levy on Hasho s ownership of the stock in order to satisfy its judgment. Respondents contend that Hasho does not have beneficial ownership interest in the stock.. Alternatively, that all Continental stock is owned by The Hasho Trust and thus, the stock is not propert in which Hasho has an interest. Despite respondents' argument, it is apparent that Hasho possesses a beneficial ownership interest in Continental. As stipulated in Paragraph Third of The Hasho Trust Indenture, the "trustee is holding such shares only in a fiduciary capacity subject to the terms and

4 condition ofth(e) indenture. " Pursuant to the terms of the indenture, the grantor of the trst Gregory Hasho, has retained substantial power over the stock even after it was transferred to The Hasho Trust. For example, the indenture provided in Paragraph Fifth that "the trst shall have no authority to sell, assign... or otherwise transfer... shares, except upon the direction of the Grantor, in writing." Lastly, the Order Accepting Offer of Settlement dated May 6, 2004 makes numerous, unambiguous referrals to Hasho s beneficial ownership of the Continental shares. Therefore, Hasho clearly has an ownership interest that is subject to the reach of judgment creditors. Consequently, this court holds that, pursuant to CPLR 95225(b) and 95227, Stephen B. Wexler, acting as trstee of The Hasho Trust, is directed to deliver the duly endorsed stock certificates of Continental to the sheriff in compliance with the aforementioned rules insofar as it is propert in which Hasho retains an interest. Transfer of the stock certificates from Hasho to Forensic shall occur in full compliance with the NASD Order and all applicable NASD and SEC rules. Forensic shall acquire Continental subject to any and all obligations and/or burdens imposed by the SEC, NASD or other regulatory or governental agency. The transfer of the stock shall serve, not only toward satisfyng the petitioner s judgment, but also toward fulfilling the obligations ofhasho as imposed by the NASD Order of May 6, Next, petitioner seeks an order pursuant to CPLR 95225(b) and directing Continental and TCI to pay petitioner those funds they are holding for the judgment debtor and those monies they owe to the judgment debtor for loans, propert and other fuds advanced such entities. As to TCI, in light of Hasho s uncontested ownership interest, such order is granted. With respect to Continental, it has been established that the sole substantial asset of Continental is an escrow account. Such account was established pursuant to the mandate of NASD for the purpose of paying the defrauded customers of Continental. Currently, Hasho is not entitled to possession of said account, nor has Forensic established that their rights are superior to those of the defrauded customers. However, it is undisputed that Continental wil be indebted to Hasho for any amount contained in the escrow account subsequent to the fulfillment or removal of all obligations imposed by the NASD, SEC or other regulatory/governmental agency. Consequently, an order pursuant to CPLR is granted insofar as Continental is

5 compelled to pay petitioner those funds it is holding for Hasho and those monies it owes to Hasho for loans, propert and other fuds advanced to such entities, upon the fulfillment or removal of all obligations of Continental imposed by the NASD, SEC or any other regulatory and/or government agency. Petitioner also seeks an order pursuant to CPLR directing Continental to satisfy petitioner s judgment based on a written indemnification agreement. The aforesaid agreement is the subj ect of an action curently pending before this court. In light of the foregoing, an order based upon this agreement is prematue and canot be granted at this junctue. Lastly, petitioner seeks an award of attorney s fees based upon the retainer agreement entered into between Forensic and Hasho. In relevant par, the retainer states that "if collection action for past-due bilings becomes necessary, all costs to collect, including but not limited to reasonable legal fees and costs... wil be due." The instant action is an effort by Forensic to satisfy a judgment rendered against Hasho due to his outstanding balance for accounting services provided by petitioner. As such, the legal fees associated with the instant action are a cost to collect and Respondent Hasho is liable for such fees. Thus, petitioner is awarded reasonable attorneys' fees associated with the instant action. The paries may agree to submit papers on the issue of attorney fees. If the paries canot agree, a hearing on this issue wil be held before the cour. The paries are to contact the court no later than August 11, Submit judgment. Dated: July 27, 2004 ENTERED JUL 3 0 U COUNTY COUlt;: CLERK' OFFICS