Initial Filing of Bankruptcy
On November 27, 2006, CRI under intense scrutiny by the Department of Education and being pursued by numerous creditors and at least one lawsuit, finally filed for bankruptcy. The bankruptcy case no. is Bankruptcy No. 06-14202 in the United States Bankruptcy Court For the Western District of Washington at Seattle. The names of approximately 2900 ex-students were listed as possible creditors in the original summary of schedules. Mr. Janisch, CRI's sole shareholder and director filed the bankruptcy as a "no asset" case claiming that CRI had no assets.
A handful of ex-students went to the initial Section 341 Meeting of Creditors and provided information to the trustee that CRI had failed to disclose numerous assets in its filing. They also confronted Alen Janisch about some of the discrepancies in his filings. Here is a copy of the transcript of the meeting. The trustee hired a forensic accountant and it was discovered that not only had CRI not disclosed assets, Alen Janisch took over $900,000 out of the corporation the last six months it was in operation. He virtually caused his own insolvency, considering he only filed bankruptcy on $750,000 worth of debt. He also made preferable transfers totaling approximately $400,000 to his friends who had infused cash into CRI.
March 23, 2007
CRI Trustee Makes Motion to Hire Collection Agency to Pursue Student Debts
McCarthy, the CRI Trustee moved the court, though his attorney, James Rigby, for an order allowing him to employ Professional Collection Agencies International, Inc. to pursue $200,000 worth of CRI's accounts receivables from students who owed the school after their financial aid had run out. According to its declaration, this collection company had been previously employed by CRI.
On April 10, 2007, Judy McKinney filed an objection arguing that allowing CRI payment from students who had been cheated by the school was unfair. Judge Karen Overstreet agreed, and signed an order denying the trustee's request. She stated that she did not want the students who had essentially been defrauded to be pursued by collectors.
If you or someone you know is in collections, please direct them to the transcript of the hearing and order. You or they may need to consult an attorney or possibly the bankruptcy court itself for the effect it may have on you. Though it takes away from money that could have gone to pay creditors, it would have been re-victimizing the same people.
WTECB Owed $540,877
According to the Private Vocational School Act, the state is obligated to pursue repayment to the Tuition Reimbursement Fund. In the Section 341 Meeting of Creditors in the Bankruptcy Court in December of 2006, Mr. Janisch stated under oath it was his understanding that by taking the bankruptcy action, the state would not pursue him for that money, and the WTECB was not listed as a potential creditor in his filing. However, shortly before the deadline, the WTECB did indeed file a claim in bankruptcy totaling $540,877 that had been reimbursed to students due to complaints and CRI's closure.
June 6, 2007
Alen Janisch Deposed
Alen Janisch was deposed on June 6, 2007, by James Rigby who is the CRI Trustee's attorney. There is a copy of his deposition including exhibits. This deposition showed how Alen manipulated CRI's finances in order to appear to be solvent before Department of Education audits. It also showed how he transferred almost 1 million dollars from CRI right before it closed.
June 22, 2007
Mr. Rigby filed a preference complaint filed against Alen Janisch and Kai Moldskred, his former finance manager, demanding the return to CRI of principal sums of $905,360 from Alen Janisch and $464,152 from Kai Moldskred. The allegations are that Alen Janisch looted almost a million dollars from CRI before it closed. The trustee's complaint demands a release of a trust deed worth $295,000 and two diamond rings worth approximately $60,000. This complaint was filed right after Alen Janisch was deposed and the trustee inquired as to what the legitimate basis was for Janisch's withdrawing $905,360 from CRI's bank accounts within six months before CRI declared bankruptcy. Mr. Janisch's responses in the deposition provided enough evidence for the trustee to feel that he had pilfered money and other assets from the corporation.
In essence, Mr. Janisch and Kai Moldskred pledged or loaned money to CRI at the end of the year in order to meet Department of Education financial requirements. As soon as those requirements were met, they withdrew and reduced or removed the pledges. A preference complaint is basically an allegation that a corporate officer, director, or shareholder has "transferred money to himself or others in an attempt to defraud, hinder or delay a creditor." In this case, Alen Janisch and Kai Moldskred paid themselves for loans which were undocumented while ignoring other creditors, thus reducing the amount of money available to pay those creditors. Not surprisingly, Janisch and Moldskred have both filed responses to the preference complaint denying they did anything wrong despite the fact their answers direct contradict Alen Janisch's deposition testimony. Here a copy of Janisch's response and here is Moldskred's.
October 23, 2007
Motion for Summary Judgment
The trustee in the bankruptcy case has filed for a motion for summary judgment on the preference complaints against both Janisch and Moldskred. The motion contains the Declaration of Mr. McCarthy, the CRI Trustee and the Declaration of Richard Ginnis, who is Mr. McCarthy's accounting expert. Mr. McCarthy declares that Moldskred and Janisch received more of the on their pre-petition preference and fraudulent conveyance transfers that they would have received out of a Chapter 7 bankruptcy administration. Mr. Ginnis declares that CRI was insolvent when the transfers were made. The CRI Trustee offers a proposed order granting the motion. This motion contends that there is no genuine material fact and thus there is no reason for a trial and the court should enter judgment for the trustee and against both Alen Janisch and Kai Moldskred. The motion was largely based on the Deposition of Alen Janisch and the exhibits thereto. Should this be granted, the preference case would be over and judgment would be entered against both of these defendants for the amounts prayed for. The Trustee would enforce these judgments on behalf of the CRI estate. On November 19, 2007, Moldskred filed an response opposing to the motion. This response included the Declaration of Mr. Moldskred which included four exhibits and the Declaration of William Hanlin. Mr. Moldskred declares his innocence. Mr. Hanlin is an accounting expert who contends that CRI was solvent when the transfers were made.
November 23, 2007
Janisch Declares Personal Bankruptcy
January 17, 2008
Janisch Finally Files His Personal Bankruptcy Schedules
Here are Alen Janisch's personal bankruptcy schedules which include a summary of schedules, a creditor matrix and the Chapter 7 means test. He has claimed heirloom exemptions for two diamond rings worth in the neighborhood of $72,000 and the trustee has objected to those exemptions.
February 25, 2008
Janisch Does Not Show Up for Meeting of Creditors
The Bankruptcy Trustee has made a motion to extend the date to for creditors and the trustee to object to discharge because of Janisch's various delays and noncompliance in his personal bankruptcy. His schedules contain many errors and omissions and statements which appear to be in stark contrast to reality as the trustee points out in his motion to be heard on March 14, 2008. In a declaration to the court Alen Janisch claims that he is seeking treatment for alcoholism.
February 25, 2008
Trustee Moves to Evict Janisch From House
Janisch returned from his "treatment" and has apparently neglected the house which of course the trustee is in the process of selling. Thus, the trustee has made a motion to evict him and have the U.S. Marshall assist if necessary. That motion will be heard on March 14, 2008.
March 7, 2008
Judge Has Lifted the Automatic Stay to Allow CRI Preference Suit To Continue
The Judge in Alen Janisch's personal bankruptcy has lifted the automatic stay so that the CRI preference suit can continue. That suit seeks the approximately $800,000 that Janisch took from CRI's coffers prior to the bankruptcy, approximately half of that which he transferred to Kai Moldskred allegedly for loans that Moldskred had made to CRI.
The deposition of Moldskred was taken and is included here with all exhibits.
July 10, 2008
Alen Janisch Appear for the Meeting of Creditors as Ordered.
Alen Janisch appear for the meeting of the creditors. In previous court filings he had testified that he was unemployed and homeless having been evicted from his house. Here is a transcript of the proceedings.
Alen Janisch's House Is Finally Sold for $300k to Kai Moldskred Who "Rents" it Back to Janisch
Well finally, after all the impediments to the sale of Alen Janisch's house were lifted, i.e., the Alen Janisch bankruptcy filing which came automatic stay that stopped the sale of the house which the mortgage company succeeded in lifting. Janisch finally left the house after the court threatened to evict him. The house was finally listed and when a buyer pulled out of the sale at the last minute the bankruptcy court approved Kai Moldskred purchasing the house for $300,000. Alen Janisch has been seen around the house and has moved back in for awhile but has not disappeared.
July 11, 2008
The Court Granted Partial Judgment Against Alen Janisch for $905,360 and Kai Moldskred for $123,000
After a pitched battle between Kai Moldskred and the CRI Trustee and several continuances which resulted from Janisch's bankruptcy declaration, the hearing on the CRI's Trustee's motion for summary judgment was held. The court granted partial judgment in the Trustee's lawsuit against Kai Moldskred for the $123,000 and Alen that was fraudulently transferred from CRI/Alen Janisch to him. Here is an audio of the summary judgment hearing. Kai Moldskred immediately made a motion for consideration. The judge ultimately denied it. Moldskred then appealed to the Bankruptcy Appeal. Here is the designation of record on appeal.
July 18, 2008
Second Motion for Summary Judgment Against Kai Moldskred Filed
The CRI Trustee make a second summary judgment which included declarations (included in the copy of the main motion) and a statement of uncontroverted facts. The motion seeks a summary ruling on the fact that Moldskred's transfer of the $150,000 was not in good faith. Moldskred filed a response which included a Declaration by Moldskred and Declaration of William Hanlin who is an accountant. Moldskred also filed a statement of disputed facts. The CRI Trustee filed a reply and the Janisch's estate trustee also filed a response. The motion was denied on August 22, 2008 and set for trial. Here is the audio of the oral argument.
CRI Trustee Files Preference Complaint Against Steve Fleishman, Alen Janisch's Landlord
CRI Trustee filed this a complaint for turnover of property against Bank of America and Steve Fleishman and a complaint for avoided transfer against the Fleishman Family Trust. On August 8, 2008, Bank of American answered the complaint. Steve Fleishman did one better and answered and counterclaimed for a declaratory judgment. In other words, Fleishman is asking the court to declare that he did not violate the preference law.
The crux of the claim against Steve Fleishman and Bank of America, is that CRI transferred $63,000 to Fleishman who used it to secure a Bank or America letter of credit which was pledged to the Department of Education ("USDOE"). CRI's debt to assets ratio was insufficient to qualify for participation in the federal financial aid program thus it needed a pledge to increase its assets. CRI did this only when when the USDOE performed its annual audit. Once the audit was over, reversed the pledges. Here is a copy of Fleishman's deposition which was taken on December 5, 2007.
September 4, 2008
Court Has Denied Bankruptcy Discharge To Alen Janisch
The U.S. Trustee has filed a summons and complaint to prohibit Alen Janisch for discharging his debts because he misrepresented his financial status in his personal bankruptcy by concealing and transferring various assets. This would result in Alen Janisch not being allowed to discharge his debts after the bankruptcy proceeding is over.
Alen Janisch never answered the complaint so the Bankruptcy Court has entered an order denying Alen Janisch discharge of all the debts that he listed in this bankruptcy. Thus, creditors will be able to come after Janisch to collect debts. Unfortunately, Janisch may well not have any assets for some time.
September 22, 2008
CRI Trustee Proposes Settling Fleishman Adversaries Complaints
The CRI Trustee, James Rigby, proposed to settle the Fleishman and Fleishman Family Trust Complaints on very favorable terms outlined in his declaration attaching the proposed settlement. In the aforementioned complaints Rigby is suing for $62,000 and $150,000 respectively and proposes to settle both claims for $92,000.
October 16, 2008
Student Creditors Oppose Proposed Fleishman Adversary Settlement
Mr. Rigby filed a reply to the students' opposition as well as a declaration supporting the settlement Fleishman's attorney filed a reply supporting the settlement and the Janisch trustee, Katherine Ellis, also filed a supportive reply.
At the hearing on October 17, the judge felt that the student creditors' concerns were valid and requested further briefing before making a decision as to whether or not to accept the settlement. Here is an audio of the hearing.
Trustee, James Rigby, filed a
supplemental declaration with various exhibits to bolster the case
for settlement. Exhibit A to the
declaration is the
Deposition of Alen Janisch
and Exhibit B is the
Deposition of Steve Fleishman.
McKinney filed a
supplemental declaration in opposition to the settlement which
included exhibits detailing evidence of the Workforce Board's revocation
of CRI's license the Department of Education's program review of CRI
which allege that CRI owed the Department of Education refunds.
The Judge finally approved the proposed settlement between the CRI and Janisch's trustees to split 50-50 the proceeds of any recovery and also to allow James Rigby, the CRI Trustee, to settle the Fleishman and Fleishman Family Trust complaints for $92,000. Her opinion turned on the fact that Fleishman, because he was not ever a CRI employee, might well have not known that his loans to Janisch enabled Janisch to "skirt" Department of Education regulations concerning the receipt of federal aid. James Rigby has presented proposed orders on both settlements for the judge to sign.
December 12, 2008
Rigby, the CRI Trustee's Attorney, Moves to Approve Settlement of Moldskred Claims
Rigby has proposed to settlement the various preference complaints against Kia Moldskred. This motion is supported by Rigby's declaration and McCarthy's. The court granted Rigby's first motion for summary judgment against Moldskred awarding the CRI estate $123,000. Moldskred is appealing that ruling to the Ninth Circuit. There is also a claim for $150,000 which was due to be tried. This claim revolved around whether or not Moldskred knowingly made the $150,000 to Janisch knowing it was avoidable. Additionally, Moldskred's possesses two yellow gold diamond rings, one 14 karats and the other 18. These were given to Moldskred by Janisch for no consideration according to Janisch's deposition and according to Moldskred it was to secure a loan. The jewelry is valued at $56,800 according to the Janisch Trustee's response to the second motion for summary judgment. Rigby proposes to settle these claims for a payment of $108,826.91 and the retention of the $45,673.09 from the sale of Janisch's home which Moldskred has a claim against due to his second deed of trust on Janisch's home. Moldskred would be allowed to retain the jewelry. Objections to the settlement would have to be filed by January 2, 2009.
December 22, 2008
Rigby, the CRI Trustee's Attorney, Moves to Destroy CRI's Records
Mr. Rigby made a motion to destroy CRI's records inasmuch as he has assumed the that case against Moldskred will be settled. However, Judy McKinney objected to the destruction of the records and Rigby withdrew the motion after the judge denied his motion to compromise the Moldskred lawsuit inasmuch as he would need the files for the trial and Ms. McKinney had raised additional reasons why the retention of the records was necessary.
January 2, 2009
Objection Filed to Settlement of Moldskred Adversary Action
Judy McKinney, a student and creditor, filed an objection to the settlement pointing out that she felt the settlement was inadequate considering the strength of the case against Moldskred. The CRI Trustee's attorney, Mr. Rigby filed a response which pointed to the amount further litigation would cost The CRI Trustee, Mr. McCarthy filed a declaration supporting Mr. Rigby's position.
January 9, 2009
Judge Denies Motion to Settle Moldskred Adversary Case, Sets Trial
Pursuant to Ms. McKinney's objection, the judge denied the CRI's Trustee to compromise the claims against Moldskred and issued an order setting the case for trial on March 25-26, 2009. Here is an audio of the oral argument and the signed order denying the compromise. The trial has since been moved to April 8, 2009.
January 14, 2009
Rigby Sets a Supplemental Deposition for Moldskred to Investigate His Assets
Rigby has set a deposition of Kai Moldskred for the purpose of discovering what assets Moldskred has to satisfy the $123,000 judgment against him. The deposition is set for January 22, 2009.
February 2, 2009
McCarthy, the CRI Trustee Moves to Allow the Estate to Keep $10,000 in Collections From Students
Almost two years ago, McCarthy moved the court to allow him to retain a collection agency to pursue students who still owed CRI money. That request was objected to and the court denied it. The court also suggested that McCarthy make a motion to abandon the assets, however none was made. According to Mr. McCarty, despite the fact that he told both collection companies to cease collection activities, some students still "voluntarily" made payments to another collection agency, Elliott Bay Adjustment Company,
apparently under an old agreement with CRI. These payments total $9,938.92 and were turned over to Mr. McCarthy. Mr. McCarthy has noticed a motion for, among other things, a proposed order allowing the CRI estate to keep the $9,938.92. Responses to this motion must be filed by February 20, 2009.
February 13, 2009
Rigby Has Moved on Shortened Time to Approve a Second Compromise of Claims Against Moldskred
James Rigby has moved for and received an order shortening time to bring a Second Motion for Order Approving Compromise of Claims against Moldskred. The motion will be heard on February 27, 2009 and responses to the motion will be accepted up to that date. The proposed settlement agreement is attached to Mr. Rigby's declaration.
February 20, 2009
Objection Filed to CRI Trustee's Motion to Allow Estate to Keep $10,000 in Collection From Students
Judy McKinney filed an objection and a supporting declaration to the CRI Trustee's Motion to Keep $10,000 from former students collected by a collection company under contract to CRI. The objection was based on the fact that the judge had denied a previous motion by Mr. Rigby. Former students Pam Fukai, Linda James and Jan Harlan also filed declarations.
February 23, 2009
Trustee McCarty Files Reply In Support of His Motion Re Accounts
Ms. McKinney filed a supplemental objection and supplemental declaration to Mr. McCarthy's Motion re Accounts Receivable pointing out that the collection company contracts were possibly executory and inasmuch as they were never reaffirmed, then they were rejected. Mr. McCarty filed a reply to Ms. McKinney's Objection and Supplemental Objection.
February 25, 2009
Ms. McKinney Filed an Objection to Mr. Rigby's Motion to Compromise Claims Against Moldskred
Ms. McKinney filed an objection and declaration to Mr. Rigby's Motion to Compromise the Moldskred claims. Ms. McKinney also filed a declaration in response to Mr. McCarty's reply in support of an order allowing the CRI estate to keep the $10,000 the collection companies collected.