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IN THE UNITED STATES BANKRUPTCY COURT FOR THEWESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
IN RE: § §
GARY L. BRADLEY § §
Debtor. §
CASE NO. 02-12741CHAPTER 7
BRADLEY BEUTEL, §TRUSTEE OF AND ON BEHALF OF §THE LAZARUS EXEMPT TRUST §
Plaintiff, § §
v. § §
RONALD E. INGALLS, §CHAPTER 7 TRUSTEE §
Defendant. §
ADVERSARY NO. 02-1205
CONSOLIDATED UNDER ADVERSARY NO. 02-1183
UNITED STATES’ POST-TRIAL BRIEFINCLUDING PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
Respectfully submitted,
EILEEN J. O’CONNORAssistant Attorney General
HERBERT W. LINDERState Bar No. OH-0065446
CHRISTOPHER R. EGAN State Bar No. 24036516
Attorneys, Tax DivisionDepartment of Justice717 N. Harwood, Suite 400Dallas, Texas 75201(214) 880-9754/32
JOHNNY K. SUTTON United States AttorneyAugust 2004
i
TABLE OF CONTENTS
PROPOSED FINDINGS OF FACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A. IRS Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. Bradley, Personal Friends, and Close Business Partners . . . . . . . . . . . . . . . . . . . . . . . . . . 2
C. Bradley and Gressett Secretly Agreed to Jointly Own Assets 80/20 . . . . . . . . . . . . . . . . . 6
D. Bradley Created Lazarus Exempt Trust to Prevent Collection of the His Debts . . . . . . . . 7
E. Bradley Sold His Streetman Homes Stock to James Gressett Using a Set of ShamTransactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
F. Bradley Fraudulently Transferred His Notes Receivables to Lazarus Investments . . . . . 15
G. Bradley Contributed Cash to Lazarus Exempt Trust for No Consideration . . . . . . . . . . 18
H. Bradley Contributed His Interest in Phoenix Holdings to Lazarus Investments for No Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
I. Bradley Contributed His Interest in the Spillar/Pfluger Property to Phoenix Holdings for No Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
J. Bradley Contributed His Interest in Webb Group Enterpises to Lazarus Investment for No Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
K. Bradley Contributed His O’Quinn Contract to Rasaca Austin for No Consideration . . . 29
L. Bradley Contributed His Interest in MedTech Ventures to Lazarus Investments for No Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
PROPOSED CONCLUSIONS OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
A. Federal Tax Liens Attach To All Lazarus Exempt Trust Assets that Gary Bradley Owned During or After His Federal Income Taxes Were Assessed . . . . . . . . . . . . . . . . 34
B. Federal Tax Liens Attach To All Distributions That Lazarus Exempt Trust Should Make and Has Made to Gary Bradley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ii
ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
A. The United States’ Tax Liens Attach to All Assets That Bradley Contributed to Lazarus Exempt Trust Without Consideration, to the Streetman Stock Sale Proceeds, and to All Required Support Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
1. United States Tax Liens Attach To All Assets That Bradley Contributed toLazarus Exempt Trust Without Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2. United States Tax Liens Attach to $1,619,092 of Notes and AccountsReceivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3. United States Tax Liens Attach to the Assets that Lazarus ExemptTrust Purchased With the $5.4 Million of Proceeds From Bradley’sSale of His Streetman Homes Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4. United States Tax Liens Attach to All Distributions That LazarusExempt Trust Should Make and Has Made to Gary Bradley . . . . . . . . . . . . . . . . 44
B. The United States’ Tax Liens Follow Assets that Have Been Transferred for No Consideration and Attach to All Proceeds from Assets That Have Been Sold to Bona Fide Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
PROPOSED ORDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
CITATIONS
CASES:
Beaty v. United States, 937 F.2d 288 (6th Cir. 1991) . . . . . . . . . . . . . . . . . . . . . . . . 36, 45Glass City Bank v. United States, 326 U.S. 265 (1945) . . . . . . . . . . . . . . . . . . . . . . 34, 39Oxford Capital Corp. v. United States, 211 F.3d 280 (5th Cir. 2000) . . . . . . . . . . . . 35, 39Phelps v. United States, 421 U.S. 330 (1975) . . . . . . . . . . . . . . . . . . . . . . . . . . . 36, 43, 45Towe Antique Ford Foundation v. Internal Revenue Service,
791 F. Supp. 1450 (D. Mont. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35United States v. Alfano, 34 F. Supp. 2d 827 (E.D.N.Y. 1999) . . . . . . . . . . . . . . 35, 40, 45United States v. Blakeman, 997 F.2d 1084 (5th Cir. 1992) questioned on
other grounds by In re Bouchie, 324 F.3d 780 (5th Cir. 2003) . . . . . . . . . . . . . . 37United States v. Gonzales, Civ. No. 89-F-1740, 1991 WL 53281,
at *4 (D. Colo. Feb. 6, 1991), aff’d, 951 F.2d 1261 (10th Cir. 1991) . . . 35-36, 41
iii
United States v. Morrell, 137 F.Supp. 2d 130 (E.D.N.Y. 2001) . . . . . . . . . . . . . 37, 40, 43United States v. National Bank of Commerce, 472 U.S. 713 (1985) . . . . . . . . . 34-35, 39United States v. Taylor, 254 F.Supp. 752 (N.D. Cal. 1966) . . . . . . . . . . . . . . . . . . . 37, 44
STATUTES:
11 U.S.C.§ 545(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
26 U.S.C.:§ 6321 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34-36, 39-41, 44-45§ 6322 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35§ 6323 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35-36, 41§ 6323(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35-36, 40-41, 45§ 6323(h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35-36, 40-41, 45
TEX. BUS. & COM. CODE § 24.006(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
TEX. BUS. & COM. CODE § 24.006(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36, 41
MISCELLANEOUS:
Treas. Reg. 301.6323(h)-1(f)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35-36
1If the Court determines that it does not have jurisdiction to determine the United States’ interests in
Lazarus Exempt Trust’s property, the United States will promptly move to lift the stay so that it may pursue the
property outside of bankruptcy.
IN THE UNITED STATES BANKRUPTCY COURT FOR THEWESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
IN RE: § §
GARY L. BRADLEY § §
Debtor. § §
CASE NO. 02-12741
CHAPTER 7
§ §
BRADLEY BEUTEL, §TRUSTEE OF AND ON BEHALF OF §THE LAZARUS EXEMPT TRUST §
§Plaintiff, §
§v. §
§RONALD E. INGALLS, §CHAPTER 7 TRUSTEE §
§Defendant. §
ADVERSARY NO. 02-1205
CONSOLIDATED UNDER ADVERSARY NO. 02-1183
UNITED STATES’ POST-TRIAL BRIEFINCLUDING PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
Brad Beutel has asked the Court to declare that none of Gary Bradley’s creditors have
any interest in Lazarus Exempt Trust’s assets, but the United States believes that the following
proposed findings of fact and conclusions of law demonstrate two reasons why Bradley’s
creditors may use Lazarus Exempt Trust’s assets to satisfy Bradley’s debts: (1) Lazarus Exempt
Trust is self-settled; and (2) the United States’ statutory tax assessment liens attach to particular
property within Lazarus Exempt Trust.1
2See IRS Proof of Claim, admitted as G OVERNM ENT EXH IBIT 13; Gary Bradley Testimony, Trial Trans. at
520-521, lns. 22-5.
3See IRS Proof of Claim, admitted as G OVERNM ENT EXH IBIT 13. The assessment dates were stipulated to
on the record. See Assessment Stipulation, Trial Trans., at 270-271, lns. 12-19.
4See Offer to W aive Restrictions on Assessment and Collection, admitted as G OVERNM ENT EXH IBIT 11.
5See IRS Proof of Claim, admitted as G OVERNM ENT EXH IBIT 13. The United States has a priority claim for
$3,672,708 .61 of 1994 and 1996 taxes.
U.S. Post-Trial Brief
Page 2 of 48
PROPOSED FINDINGS OF FACT
Gary Bradley systematically used secret agreements and sham transactions to hide his
assets and contribute them to Lazarus Exempt Trust for no consideration. He hoped that he
could conceal his activities in a mountain of paperwork and complicated accounting, but the
following findings of fact show that he has failed.
A. IRS Claim
1. Petition Date – On July 19, 2002, the debtor, Gary Bradley, filed his Chapter 7 petition.2
2. IRS Claim – On October 17, 2002, the Internal Revenue Service filed a proof of claim for
Bradley’s 1994 and 1996 federal income taxes, which were assessed on May 1, 2000, and
April 14, 2000, respectively.3 Bradley consented to these 1994 and 1996 federal income
tax assessments.4 On or about December 19, 2002, the IRS filed Amendment No. 2 to its
proof of claim dated October 10, 2002, asserting priority and unsecured claims in the
amounts of $4,743,639.60 and $399,135.13, respectively.5 This amendment added
Bradley’s 2001 tax liability, which was assessed on December 20, 2002.
B. Bradley, Personal Friends, and Close Business Partners
3. Gary Bradley – For most of his career, Gary Bradley has done business under the name
6Gary Bradley Testimony, Trial Trans. at 55, lns. 5-10.
7See Gary Bradley T estimony, Trial Trans. at 56, lns. 6-15 (used Bradley Development to represent his
“global entity”).
8See Excerpts from Clouston Video Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 898, at 7, lns.
1-21 (admitting that he owned thirty to forty entities when he sold the Tiger Lily property “[j]ust before the end of
the year”); Clouston V ideo Deposition Date Stipulation, T rial Trans., at 65, lns. 17-25) (stipulating that Bradley’s
video deposition in the Clouston case occurred on February 2, 2001).
9See Note Transfer Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-ING ALLS 714, at LOVE
02715 (Feb. 19, 2002) (195,725/6 = 32,620.97; 24,000/6 = 4,000).
10Dianna Patterson Testimony, Trial Trans., at 1220, lns. 9-10.
11Gary Bradley Testimony, Trial Trans., at 20, lns. 7-9.
12Brad Beutel Testimony, Trial Trans., at 540, lns. 16-25.
13Gary Bradley Testimony, Trial Trans., at 20, lns. 16-21.
14Gary Bradley Testimony, Trial Trans., at 430-431, lns. 23-25.
15Gary Bradley Testimony, Trial Trans., at 432-433, lns. 19-2.
U.S. Post-Trial Brief
Page 3 of 48
Bradley Development.6 This name represents a “global entity” that encompasses all of
Bradley’s business interests and entities.7 Bradley has admitted that, as of late 2000, this
global entity included at least thirty to forty entities.8 During the six months from January
1, 2001 through June 30, 2001, Bradley’s monthly income averaged $32,620.97, and his
child support obligations averaged $4,000 per month.9 Bradley’s initials are GLB.10
4. Kay Bradley Hulse – Kay Bradley Hulse is Gary Bradley’s sister.11 Brad Beutel alleges
that she alone settled the Lazarus Exempt Trust with $1,000.12
5. James Gressett – Gary Bradley and James Gressett have been close friends since college.
In college, Bradley was Gressett’s fraternity brother and roommate.13 After college,
Gressett worked his way up to accounting partner for KPMG, but he left KPMG in 1981
to become close business partners with Bradley.14 Gressett directed all of Bradley
Development’s accounting and tax functions.15 While in this role, he showed a
16See First Transaction Memo from Brad Beutel to B ill Love, admitted as E XHIBIT D-ING ALLS 152, at LAZ-
ET 001837, par. IV (June 20, 2000) (Gressett suggesting manipulation of partnership income).17
See Lazarus T rust E-Mail from David Hughes to Bill Love, admitted as G OVERNM ENT EXH IBIT 7
(Gressett worried about scrutiny from creditors).18
Brad Beutel Testimony, Trial Trans, at. 869-870, lns. 25- 2 (Phoenix Holdings transaction was back dated
because James Gressett did not want to recognize the taxab le income produced by Phoenix Holdings).19
Gressett 2001 Tax Return, admitted as GOVERNM ENT EXH IBIT 12 (absence of Streetman Homes stock sale
on Gressett’s original and amended 2001 federal income tax return).
20See Dianna Patterson Testimony, Trial Trans., at 1220, lns. 7-8.
21Gary Bradley Testimony, Trial Trans., at 21, lns. 1-2.
22Brad Beutel Testimony, Trial Trans., at 536, lns. 15-18.
23See Brad Beutel Testimony, Trial Trans., at 538, lns. 10-24 (explaining work for Alien); Excerpts from
4/30/02 FDIC Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 892, at 117, lines 18-19 (Beutel was architect
of Bradley-Gressett split).
U.S. Post-Trial Brief
Page 4 of 48
willingness to manipulate financial transactions to improperly avoid tax liability and
creditor scrutiny. For example, he suggested manipulating income recognition from a
deal with Hatsy Heep,16 he suggested structuring Lazarus Exempt Trust in a way that
would avoid creditor scrutiny,17 and he backdated the transfer of Phoenix Holdings to
Lazarus Investments to avoid the recognition of taxable income.18 He showed this same
willingness to improperly avoid tax liability in his personal life when he failed to report
the Streetman Homes stock sale on his original and first amended 2001 federal income
tax return.19 Gressett’s initials are JDG.20
6. Brad Beutel – Brad Beutel is Gary Bradley’s cousin.21 He has a BBA Finance degree
from the University of Texas at Austin and a graduate degree from the Southwest
Graduate School of Banking at SMU.22 About the time Gressett decided to separate from
Bradley, Beutel joined Bradley Development to help manage Bradley’s financial affairs
and separate Bradley and Gressett’s his joint interests.23 To facilitate this financial
24See Lazarus Exempt Trust Agreement, admitted as EXHIBIT BEU TEL 1.
25William Love Testimony, Trial. Trans., at 1000-1002, lns. 18-4, at 1149-1150, lns. 23-4.
26Gary Bradley Testimony, Trial Trans., at 268, lns. 6-21.
27William Love Testimony, Trial Trans., at 999-1000, lns. 22-5.
28See William Love Testimony, Trial Trans., at 1077, lns. 10-20 (writes accurate memos); William Love
Testimony, Trial Trans., at 1071-1072, lns. 15-1 (writes accurate invoices).
29Gary Bradley Testimony, Trial Trans., at 280, lns. 2-5, at 1173, lns. 14-16.
30William Love Testimony, Trial Trans., at 1060, lns. 21-23.
31Gary Bradley Testimony, Trial Trans., at 347, lns. 6-12.
32Gary Bradley Testimony, Trial Trans., at 207-208, lns. 22-23.
U.S. Post-Trial Brief
Page 5 of 48
management role, Beutel became trustee of Lazarus Exempt Trust.24
7. William Love – For over twenty years, William Love has prepared Bradley’s and
Gressett’s personal and business tax returns.25 Love has also represented Bradley in front
of the IRS.26 He is a licensed CPA, and he formerly worked for KPMG as both an audit
and tax partner.27 To facilitate his role as Bradley’s tax advisor, Love regularly attends
Bradley business meetings and writes file memos and business invoices to record what is
discussed at those meetings.28 Love is knowledgeable about Bradley’s financial affairs.29
His initials are WCL.30
8. Dianna Patterson – Dianna Patterson has worked for Bradley as an in-house bookkeeper
since 1977.31 She managed all of the bookkeeping functions for Bradley Development’s
entities. She had signature authority on Alien, Inc.’s business bank accounts and Gary
Bradley’s personal bank accounts. She regularly signed Bradley and Gressett’s checks
with permission.32
9. Hamad and Vahid Noshirvani – Hamad and Vahid Noshirvani have been described as
33See Spillar Negotiation Letter from B rad Beutel to Matt Mathias, admitted as EXHIBIT D-ING ALLS 570, at
LAZ-PH6 000699 (Bradley has partnered with Noshirvanis since 1977); Brad Beutel Testimony, Trial Trans., at
726, lns. 17-25.
34See Spillar Negotiation Letter from B rad Beutel to Matt Mathias, admitted as EXHIBIT D-ING ALLS 570, at
LAZ-PH6 000699 (Bradley has partnered with Noshirvanis since 1977).
35See Phoenix Holdings section below for details and support. Bradley has even admitted under oath that
he owned Streetman Homes. See Excerp ts from 4/30/02 FDIC Deposition of Bradley, admitted as EXHIBIT D-
ING ALLS 890 and 892; Excerpts from Clouston Video Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 899, at
19, lns. 5-8 (admitting that he owned part of Streetman Homes when he purchased the Tiger Lily property for
Tammy Clouston on June 28, 1999)
36See Streetman section for more detail and support.
37See Phoenix section for more detail and support.
U.S. Post-Trial Brief
Page 6 of 48
“guardian angels” of Bradley’s properties.33 They have been close business partners with
Bradley since 1977.34 In particular, they invested in Bradley’s Circle C projects.35
C. Bradley and Gressett Agreed to Jointly Own Assets 80/20
10. Bradley and Gressett Secretly Owned Property in an 80/20 Ratio – Although formal
ownership documents show that Bradley owned virtually nothing when his 1994 and
1996 income taxes were assessed, internal accounting records, memorandums, and other
documents show that Bradley secretly owned many joint interests with James Gressett.
For example, stock certificates show that Bradley and Gressett’s wives owned 57,000
shares of Streetman Homes stock, but Bradley Development’s internal records show that
Bradley and Gressett owned the stock.36 Also, Phoenix Holdings partnership agreement
and CC Residential Corp’s ownership documents show that Hamad Noshirvani owned
60% of Phoenix Holdings, Ltd, but Bradley Development’s internal records show that
Bradley and Gressett owned two-thirds of that 60% interest.37 Bradley and Gressett
divided these secret interests using an 80/20 ratio: their real estate assets were owned
80% by Bradley and 20% by Gressett, but their non-real estate assets were owned 80% by
38See 3/31/94 Bradley-Gressett Balance Sheet, admitted as E XHIBIT D-ING ALLS 706 (showing Gressett’s
20% investment and 20% equity and Bradley’s 80% investment and 80% equity); Excerpts from 4/30/02 FDIC
Deposition of Bradley, admitted as E XHIBIT D-ING ALLS 892, at 116, lines 8-25 (describing 80/20 and genesis of
separation).
39See Excerp ts from 4/30/02 FDIC Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 892, at 115-116,
119-120 (Gressett wanted out of real estate, so they started working toward separation); 2000 Phoenix Tax Issues
Memo from Bill Love to Phoenix Holdings File, admitted as E XHIBIT D-INGALLS 833 (“Bradley and Gressett are
making an effort to dissolve their interests”); Love Bill for Discussing Bradley-Gressett Asset Settlement, admitted
as EXHIBIT D-ING ALLS 718; Phoenix Assignment Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-
ING ALLS 840, at Love 07275 (Apr. 9, 2001) (referring to “doing the JDG/GLB ”).
40See Excerp ts from 4/30/02 FDIC Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 892, at 117-118
(“Brad’s job was...to find equivalent values to trade”); Excerpts from 4/30/02 FDIC Deposition of Bradley, admitted
as EXHIBIT D-ING ALLS 891 , at 132-333 (“we traded out”); Love Bill for Discussing Asset Transfer with Gressett,
admitted as E XHIBIT D-ING ALLS 543 (“exchange of assets between Gary Bradley and Jim Gressett”).
41See Excerp ts from 4/30/02 FDIC Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 890, at 136, lns.
1-15 (Streetman Homes was the most equivalent value from Bradley’s side).
U.S. Post-Trial Brief
Page 7 of 48
Gressett and 20% by Bradley.38
11. Bradley and Gressett Decided to Start Separating Their Interests – In 1999, Bradley and
Gressett decided to separate their assets and business interests.39 To execute this
separation, Gressett and Bradley began transferring assets to obtain separate ownership
values roughly equal to their respective 80/20 joint ownership values.40 Bradley has
admitted that his interest in Streetman Homes was the largest asset that had to be
accounted for during this separation.41
D. Bradley Created Lazarus Exempt Trust to Prevent Collection of His Debts
12. Bradley Met with His Advisors to Discuss Creation of a Trust that Would Prevent His
Creditors from Collecting His Debts – On April 11, 2000, Bradley met with David
Hughes, Brad Beutel, and William Love on April 11, 2000 to discuss forming a trust that
would shelter Bradley’s investments from his creditors: “The purpose of the Lazarus
Trust is to create a [sic] entity for Gary to make investments in the future which is
42Trust Formation Meeting Memo from William Love to Bradley Development File, admitted as
GOVERNM ENT EXH IBIT 24, at LAZ-PH8 00373 (Apr. 26, 2000). See also Love Bill for Trust Formation Meeting,
admitted as G OVERNM ENT EXH IBIT 27, at TT-GLB 003759; Hughes Notes from Trust Formation Meeting, admitted
as EXHIBIT D-INGALLS 19; David Hugues Testimony, Trial Trans., at 1533, lns. 15-18 (Bradley present for entire
meeting). Brad Beutel reviewed Loves’s memo and marked up incorrect statements, but he did not mark up any of
the statements regarding creditor avoidance or assets to be contributed to Lazarus Exempt Trust. See markings on
Love’s Trust Formation Meeting Memo. Trust Formation Meeting Memo from William Love to Bradley
Development File, admitted as GOVERNM ENT EXH IBIT 24 (Apr. 26, 2000); Brad Beutel Testimony, Trial Trans., at
768, lns. 1-5 (markings on GOVERNM ENT EXH IBIT 24 are Beutel’s handwriting), at 768-772, lns. 22-8 (Beutel
reviewed and marked out incorrect statements on GOVERNM ENT EXH IBIT 24, but there are no lines through around
creditor avoidance statements or statements about contributing Streetman and Web T roup to trust). Bradley admitted
at trial that he had been told that it was unwise to own anything. Gary Bradley Testimony, Trial Trans., at 84, lns.
10-21.
43Trust Formation Meeting Memo from William Love to Bradley Development File, admitted as
GOVERNM ENT EXH IBIT 24, at LAZ-PH8 00373 (Apr. 26, 2000).
44See Trust Formation Meeting Memo from William Love to Bradley Development File, admitted as
GOVERNM ENT EXH IBIT 24, at LAZ-PH8 000374 (Apr. 26, 2000) (referring to Streetmand and Webb Trust in section
titled “Other Entities to Lazarus Trust”); Hughes Notes from Trust Formation Meeting, admitted as E XHIBIT D-
INGALLS 19, at BMC 00440-00442; Hughes Testimony, Trial Trans., at 1533, lns. 19-21 (took notes in chronological
order), at 1535 , lns. 22-25 (Hughes and Love were like scribes noting what they hear); David Hughes Testimony,
Trial Trans., at 1536, lns. 1-3 (source of meeting information was Bradley or Beutel).
45See Trust Formation Meeting Memo from William Love to Bradley Development File, admitted as
GOVERNM ENT EXH IBIT 24, at LAZ-PH8 000374 (Apr. 26, 2000) (referring to Streetmand and Webb Trust in section
titled “Other Entities to Lazarus Trust”); Hughes Notes from Trust Formation Meeting, admitted as E XHIBIT D-
INGALLS 19, at BMC 00440 (“the agree is 50/50"), at BMC 00442 (“deals w/ Gressett are 80/20").
U.S. Post-Trial Brief
Page 8 of 48
creditor protected given the fact that Gary continues to have a significant judgment
outstanding with the RTC....”42 The attendees decided that “there are a number of assets
that will need to be acquire[d] by the trust that are currently held by Jim Gressett or Penny
Gressett and Jimmy Evans.”43 Bradley or Beutel specifically identified Bradley’s
investments in Webb Troup Enterprises and Streetman Homes as assets to be contributed
to his creditor-protected trust.44 Love’s and Hughes’s notes from this meeting indicate
that Bradley and Gressett jointly owned a 75% interest in Streetman Homes that they
divided 80/20 respectively, and Bradley and Evans jointly owned property in Webb Troup
that they divided 50/50.45 Beutel reviewed Loves’s notes and marked up incorrect
statements, but he did not mark up any of the statements regarding creditor avoidance or
46See markings on Love’s Trust Formation Meeting Memo. Trust Formation Meeting Memo from William
Love to Bradley Development File, admitted as GOVERNM ENT EXH IBIT 24 (Apr. 26 , 2000); Brad B eutel Testimony,
Trial Trans., at 768, lns. 1-5 (markings on GOVERNM ENT EXH IBIT 24 are Beutel’s handwriting), at 768-772, lns. 22-8
(Beutel reviewed and marked out incorrect statements on GOVERNM ENT EXH IBIT 24, but there are no lines through
creditor avoidance statements or statements about contributing Streetman and Webb Troup to trust).
47See Love B ill for Discussing Asset Transfer with Gressett, admitted as EXHIBIT D-ING ALLS 543
(“consideration of assets to be purchased by Lazarus Trust”); First Transaction Memo from Brad B eutel to B ill
Love, admitted as EXHIBIT D-ING ALLS 152 (June 20, 2000) (discussing assets to be purchased by Lazarus
Investments; cc: to James Gressett); Second T ransaction M emo from Brad Beutel to B ill Love, admitted as E XH IBIT
D-ING ALLS 151 (June 27, 2000) (discussing Lazarus Trust ownership and Lazarus Development acquisitions; cc: to
James Gressett).
48See Invoice for B ill Love Payment, admitted as G OVERNM ENT EXH IBIT 27 ($760 paid for Love Bills);
Bradley Check Payable to Bill Love, admitted as G OVERNM ENT EXH IBIT ($760 check to B ill Love).
49See Lazarus Exempt Trust Agreement, admitted as EXHIBIT BEU TEL 1.
50Brad Beutel Testimony, Trial Trans., at 540, lns. 16-25. One day after the Trust was funded with $1,000
Brad Beutel obtained exactly $1,000 in cash for Gary Bradley. See GOVERNM ENT EXH IBIT 41, chk. No. 001659;
Diane Patterson Testimony, Trial Trans., 1234-1235, lns., 21-23.51
See First Transaction Memo from Brad Beutel to B ill Love, admitted as E XHIBIT D-ING ALLS 152, at
001836 (June 20, 2000) (mentioning directive given to Beutel); Brad Beutel Testimony, Trial Trans., at 772-773, at
lns. 14-15 (directive came from “Jim and Gary”).
52See Collection Information Fax from W illiam Love to Brad Beutel, admitted as G OVERNM ENT EXH IBIT 9
(copies of collection information statements submitted during settlement talks with IRS); Brad Beutel Testimony,
Trial Trans., at 728, lns. 10-13 (was aware of Bradley’s tax liabilities when trust formed).
U.S. Post-Trial Brief
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assets to be contributed to Lazarus Exempt Trust.46 James Gressett did not attend this
meeting, but Love later discussed trust contributions with him, and he attended various
meetings regarding the trust.47 Gary Bradley used his personal funds to pay Bill Love’s
fees for attending this meeting.48
13. Bradley Created Lazarus Exempt Trust – Lazarus Exempt Trust was created on May 2,
2000.49 Lazarus Exempt Trust’s Trustee, Brad Beutel, claims that Lazarus Exempt Trust
was created by Bradley’s sister, Kay Hulse, with only $1,000.50 But after creation, Gary
Bradley instructed Beutel to start transferring Bradley’s assets to the Trust.51
14. Beutel Knew of Bradley’s Tax Liabilities – Brad Beutel was aware of Bradley’s 1994 and
1996 federal income tax liabilities at the time the trust was created.52 Beutel was also
53See Collection Information Fax from W illiam Love to Brad Beutel, admitted as G OVERNM ENT EXH IBIT 9
(Aug. 30, 2000) (listing FDIC judgment on collection information statement).
54Lazarus Exempt Trust Agreement, admitted as EXHIBIT BEU TEL 1.
55Lazarus Exempt Trust Agreement, admitted as EXHIBIT BEU TEL 1.
56See Gary Bradley Testimony, Trial Trans., at 281-282, lns. 24-22 (no repayment schedule and no
recollection of documents or interest), at 526, lns. 10-18 (no recollection of documents assigning Bradley Notes to
Lazarus Trust). Dianna Patterson testified that as long as she worked there, Bradley had access to cash from any
entity that Alien managed. Dianna Patterson Testimony, Trial Trans., at 1210-1211, lns. 16-10.
57See Lazarus T rust Summary, admitted as EXHIBIT D-ING ALLS 126; Castle Realty 2001 Tax Return,
admitted as Exhibit Beutel 13, at LAZ-INV 22893 (K-1 for Lazarus Investments, L.P .); Brad Beutel Testimony,
Trial Trans., at 551, lns. 20-22.
58See Lazarus T rust Summary, admitted as EXHIBIT D-ING ALLS 126
U.S. Post-Trial Brief
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aware of the FDIC’s judgment against Bradley at the time the Lazarus Exempt Trust was
created.53
15. Bradley is the Trust’s Sole Beneficiary – Bradley is currently the sole beneficiary of
Lazarus Exempt Trust.54 Under its agreement, the trust is required to distribute to Bradley
“any amounts out of the net income and principal (if income is insufficient) of the trust
as, in the sole reasonable discretion of the trustees, are necessary or advisable” for
Bradley’s “health, education, support or maintenance.”55 Brad Beutel claims that the trust
also loans money to Bradley, but none of the alleged notes and payables owed by Bradley
have set interests rates, loan documents, or repayment schedules.56
16. The Trust Owns Various Real Estate Investment Entities – Lazarus Exempt Trust owns
100% of Lazarus Development, L.P., Strategic Land Management Consultants, LLC.,
Phoenix Holdings, G.P. and Lazarus Investments, L.P. Lazarus Investments, L.P. owns
ninety-five percent of Castle Realty Management Services, LLC and 99% of Phoenix
Holdings, Ltd.57 Phoenix Holdings, G.P. owns the remaining 1% of Phoenix Holdings,
Ltd.58 As of December 31, 1999, Phoenix Holdings Ltd. owned approximately 479 acres
59See Phoenix Buyout Fax from W illiam Love to Jim Gressett, admitted as EXHIBIT D-INGALLS 738, at
LOVE 04530 (listing acres, receivables and bonds in buyout calculation). The United States does not know what
Phoenix property has been transferred or sold since the petition date.
60See 10/31/01 Lazarus Investments Balance Sheet, admitted as E XHIBIT D-ING ALLS 342 (Phoenix Holdings
listed under investments). The United States does not know what Phoenix property has been transferred, sold, or
encumbered since the petition date.
61Steve Bartlett Testimony, Trial Trans., at 1574-1575, lns 11-3.
62See Excerp ts from 4/30/02 FDIC Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 889, at 110-111;
Steve Bartlett Testimony, Trial Trans., at 1574-1575 , lns. 14-3 (Bradley, G ressett, and Bartlett discussed vertically
integrating by helping start Streetman Homes).
63During his deposition in another case, Bradley admitted that he owned part of Streetman Homes in June of
1999. See Excerp ts from Clouston Video Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 899 , at 19, lns. 5-8
(admitting that he owned part of Streetman Homes when he purchased the Tiger Lily property for Tammy Clouston
on June 28, 1999); Bradley 12/31/99 General Ledger, admitted as EXHIBIT D-ING ALLS 674, at LOVE 01249
(showing 6/28/1999 entry for $172,000 Tiger Lily Note Receivable), LOVE 01244 (showing 6/28/1999 entry for
$172,000 check to Commonwealth Title). Bradley produced no evidence showing that his Streetman stock was
transferred between June of 1999 and January of 2001, the alleged date this Streetman stock was transferred to
Lazarus Exempt Trust. See, e.g., Streetman Stock Certificates, admitted as EXHIBIT BEUTEL 35.
U.S. Post-Trial Brief
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of land within Travis County, $2,450,000 in note receivables, and $4,500,000 in MUD
Bonds.59 As of October 31, 2001, Beutel valued these Phoenix Holdings assets at
$44,985,063.60
E. Bradley Sold His Streetman Homes Stock to James Gressett Using a Set of ShamTransactions
17. Bradley and Gressett Jointly Owned Streetman Homes – Bradley owned 45,600 shares of
stock in Streetman Homes, Inc. when the IRS assessed him with his 1994 and 1996
income taxes. Bradley and Gressett wanted to vertically integrate Bradley Development
by going into home building,61 so they helped start Streetman Homes in the mid 1990's.62
They took a cumulative 75% of Streetman Homes, or 57,000 shares of its stock.63 Based
on their 80/20 ownership agreement, Bradley owned 45,600 of these shares and Gressett
64William Love’s memo describing an April 2000 trust formation meeting lists “75% Gressett and 80/20%
60% from Jim Gressett” next to “Streetman Homes.” Trust Formation Meeting M emo from W illiam Love to
Bradley Development File, admitted as GOVERNM ENT EXH IBIT 24, at LAZ-PH8 000374 (Apr. 26, 2000). An
estimated tax letter from William Love indicates that the “80/20” refers to Bradley and Gressett’s ownership division
by stating that income from entities like Streetman homes would be divided 80 percent to Bradley, and 20 percent to
Gressett. Estimated Tax Letter from W illiam Love to Gary Bradley, admitted as EXHIBIT D-ING ALLS 682 (Jan. 4,
2001). David Hughes’s notes from the April meeting explain that “deals w/ Gressett are 80/20,” so Lazarus Exempt
Trust was expected to purchase 80% of the Streetman stock held by Penny Gressett. Hughes Notes from Trust
Formation Meeting, admitted as E XHIBIT D-INGALLS 19, at BMC 00442.
65See Streetman Stock Certificates, admitted as EXHIBIT BEU TEL 35 (showing Lisa Bradley Owning 600
shares; 45,000 shares; 3,800 shares; 3,800 shares; and 3,800 shares for a total of 57,000 shares); Gary Bradley
Testimony, Trial Trans., at 84, lns. 10-21; EXHIBIT D-ING ALLS 761.66
Gary Bradley Testimony, Trial Trans., at 320, lns. 320.
67See Trust Formation Meeting Memo from William Love to Bradley Development File, admitted as
GOVERNM ENT EXH IBIT 24, at LAZ-PH8 000373-000374 (Apr. 26, 2000) (describing assets that the trust would have
to acquire from Penny Gressett, Jim Gressett, and Jimmy Evans); Hughes Notes from Trust Formation Meeting,
admitted as E XHIBIT D-ING ALLS-19 (Streetman stock currently owned by Penny Gressett); James Gressett Testimony,
Trial Trans., at 1469, lns. 18-21 (Gressett puts documents in front of his wife and she signs them without review).
68Gressett suggested using a second trust to avoid creditor scrutiny, but Bill Love and the Trust’s lawyer,
David Hughes, advised against it. See Streetman Purchase E-Mail from David Hughes to Bill Love, admitted as
GOVERNM ENT EXH IBIT 7.
U.S. Post-Trial Brief
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owned the remaining 11,400.64 Bradley originally caused his wife, Lisa Bradley, to hold
all of Bradley and Gressett’s cumulative shares because Bradley and Gressett were
personally liable for the FDIC judgment, and they had been advised not to hold assets in
their own names.65 But Bradley separated from Lisa in 1995,66 so he and Gressett then
caused Gressett’s wife, Penny Gressett, to hold the shares.67 Thus, as of April of 2001,
Penny Gressett held James Gressett’s 11,400 shares and Bradley’s 45,600 shares.
18. Bradley Sold His Interest in Streetman Homes to James Gressett – Using Lazarus Exempt
Trust as a conduit, Bradley sold his Streetman stock to James Gressett. Bradley and
Gressett structured this sale with two steps that they hoped would avoid creditor
scrutiny:68
Step 1. Penny Gressett Transferred the Streetman Stock to the Trust – Penny
Gressett transferred 45,600 shares of Streetman stock million to Lazarus
69See Note for Streetman T ransfer from Penny Gressett to Lazarus Exempt Trust, admitted as EXH IBIT
BEU TEL 38.
70See Note for Streetman T ransfer from Penny Gressett to Lazarus Exempt Trust, admitted as EXH IBIT
BEU TEL 38.
71James and Penny Gressett’s 2001 individual tax return shows that Lazarus Exempt Trust paid Penny
Gressett for only two months of interest on the no te Lazarus Exempt Trust granted to Penny for Lazarus’s purchase
of Streetman stock. The Trust originally paid the Gressett’s $178,520.54, but Penny then returned $113,000 as
“nominee” interest because she had not earned it. Gressett 2001 Tax Return, admitted as GOVERNM ENT EXH IBIT 12,
at GRES0607. William Love Testimony, Trial Trans., at 1087-1088, lns. 21-3 (choose term “nominee” because
interest was not earned). Lazarus Exempt T rust’s 2001 tax return confirms that it paid the Gressetts only $65,521 in
interest. 2001 Lazarus Exempt Trust Tax Return, admitted as EXHIBIT D-INGALLS 748 , at LOVE 05566. T his
$65 ,521 of interest represents a little over two months of interest when the $3.6 million note given to Penny Gressett
is amortized. Brad Beutel Testimony, Trial Trans, at 789-790, lns. 25-7 ($60,000 could represent two months of
interest); William Love Testimony, at 1092-1093, lns. 16-6 ($60,000 represents two months of interest without
compounding). Since the subsequent agreement to sell the Streetman stock back to the Gressetts was executed on
June 30, 2001 , the Trust’s initial purchase of the Streetman stock must have occurred about two months earlier in
late April 2001. See James Gressett’s Agreement to Purchase Streetman Stock from Lazarus Exempt Trust, admitted
as EXHIBIT D-ING ALLS 755 (sale from Lazarus Investments to Gressett dated June 30, 2001); Brad Beutel Testimony,
Trial Trans. at 790, lns. 8-12 (possible that sale took place around April 30, 2001); William Love Testimony, Trial
Trans., at 1093 , lns. 7-16 (confirming logic of sale dated April 30, 2001). See also 4/31/2001 Lazarus Exempt Trust
Balance Sheet, admitted as GOVERNM ENT EXH IBIT 79 (4/17/01 print out showing that the Streetman stock was not
reflected on Lazarus Exempt Trust’s balance sheet); Streetman Entry Memo from Dianna to Pattsy & Wanelle,
admitted as E XHIBIT D-ING ALLS 179 (May 22, 2001) (stating that 4/30/01 entries must be reversed back to 1/1/01).
72James Gressett Testimony, Trial Trans., at 1470, lns. 6-22 (no negotiation documents); at 1473, lns. 10-16
(no calculation documents).
73See Gressett 2001 Original Income T ax Return, admitted as GOVERNM ENT EXH IBIT 12, at GRES0608
(filed in November 2002); Gressett Amended 2001 Income Tax Return, admitted as GOVERNM ENT EXH IBIT 12, at
GRES0620 (filed in October 2003).
U.S. Post-Trial Brief
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Exempt Trust for a $3.6 million note.69 The paperwork for this was
transfer was dated January 1, 2001,70 but the two months of interest
actually paid on the $3.6 million note shows that this transfer actually
occurred sometime in April or May of 2001.71 The Gressetts assert that
this was a legitimate sale for a negotiated price, but they have no
documents recording a negotiation,72 they did not report a sale of
Streetman stock on their original or amended 2001 income tax returns,73
74See Brad Beutel Testimony, Trial Trans., at 557-558, lns. 5-9 (sale-back to Gressett had been discussed).
In fact, no interest on Penny Gressett’s $3.6 million note was paid until the later sale to James Gressett. Brad Beutel
Testimony, Trial Trans., at 782, lns. 1-3 (no interest payments were made because none were due until after the sale
to Gressett).
75See Lazarus Purchase of Streetman M emo from William Love to Bradley File, admitted as EXHIBIT D-
ING ALLS 690 (Aug. 7, 2000). Love admitted at trial that a person cannot make a gift of property that he or she does
not own. William Love Testimony, Trial Trans., at 1046, lns. 1-6.
76See James Gressett Agreement to Buy Streetman Stock from Lazarus Exempt Trust, admitted as EXH IBIT
D-ING ALLS 755; Brad Beutel Testimony, at 553-554, lns. 25-4.
77$9 million minus $3.6 million. Beutel claims that he increased Streetman Homes’ value by helping
convert it from a S Corporation to a Limited Partnership , but this conversion saved Streetman only $7,329.60 in
franchise taxes during the 2000 tax year. See Franchise Tax Letter from Blake P. Houston to Brad Beutel, admitted
as BEU TEL EXH IBIT 42 (May 31, 2001).
U.S. Post-Trial Brief
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and, the sale back to Gressett had already been discussed.74 Bradley’s
accountant, William Love, raised concerns that the transfer would subject
Bradley to gift tax.75
Step 2. The Trust Sold the Streetman Stock to James Gressett – Within one to
three months after the transfer to Lazarus Exempt Trust, Lazarus Exempt
Trust sold the same 45,600 shares of Streetman stock back to Penny
Gressett’s husband, James Gressett, for a $5.4 million note that matured
on July 31, 2001 and assumption of the $3.6 million note that Lazarus
owed to Penny Gressett.76 This gave Lazarus Trust a $5.4 million profit
for merely holding the Streetman stock for less than a few months.77
Collapsing the Streetman steps shows that Bradley used Lazarus Exempt Trust to cash out
his Streetman stock. James Gressett paid Lazarus Exempt Trust $5.4 million for
Bradley’s 45,600 shares of Streetman stock.
19. Bradley Invested the Streetman Proceeds into Other Trust Assets – Lazarus Exempt Trust
78See Accounting of Streetman Sales Proceeds, GOVERNM ENT EXH IBIT 29. The difference between
$5,339,423 and $5,400,000 appears to equal costs of sale.
79See Accounting of Streetman Sales Proceeds, GOVERNM ENT EXH IBIT 29; 12/31/01 Lazarus Exempt Trust
General Ledger, admitted as EXHIBIT D-ING ALLS 752 , at LOVE 05591, 8 /2/2001 entry.
80See 12/31/01 Lazarus Exempt Trust General Ledger, admitted as EXHIBIT D-ING ALLS 752, at LOVE
05591, 7/17 /2001 entry; 12/31/01 Lazarus Investments General Ledger, admitted as EXHIBIT D-ING ALLS 766, at
LOVE 05810, 7 /17/2001 entry.
81See 12/31/01 Lazarus Investments General Ledger, admitted as EXHIBIT D-ING ALLS 766, at LOVE 05810,
7/16/2001 entry.
82See 12/31/01 Lazarus Investments General Ledger, admitted as EXHIBIT D-ING ALLS 766, at LOVE 05810,
7/16/2001 entry.
83See Note Transfer Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-ING ALLS 714, at LOVE
02711-02712 (Feb. 19, 2002) (showing Bradley Balance Sheet as of June 30, 2001); Alien 200K Note, admitted as
EXHIBIT BEU TEL 0227; Gressett 35K N ote, admitted as EXHIBIT BEU TEL 228; Gressett 39K Note, admitted as
U.S. Post-Trial Brief
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then used Bradley’s $5.4 million contribution to pay debts and invest in other assets.78
These assets include the following:
• Golf Club Partners – Lazarus Exempt Trust directly invested $2,000,000 into
Golf Club Partners;79
• 2601 Jarret Avenue – Lazarus Exempt Trust directly invested $26,000 into the
2601 Jarret Avenue property;
• Rowell Property – Lazarus Exempt Trust transferred $1,300,900 to Lazarus
Investments,80 and Lazarus Investments invested $1,030,568 of that transferred
money into the Rowell property;81 and
• Rasaca Property – Lazarus Investments invested $100,000 of the Streetman
money transferred from Lazarus Exempt Trust into the Rasaca Property.82
F. Bradley Fraudulently Transferred His Notes Receivables to Lazarus Investments
20. Before Bankruptcy Bradley Owned Various Notes – As of 6/30/01, Bradley owned the
following note receivables and accounts receivables:83
EXHIBIT BEU TEL 229. 84
See Note Transfer Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-ING ALLS 714, at LOVE
02705-02706 (Feb . 19, 2002) (transaction 6-104 showing note transfer entries).
85Brad Beutel Testimony, Trial Trans., at 656-657, lns. 22-5. Prior to his deposition on October 7, 2003,
Bradley claims that he did not even know that his notes were transferred. Gary Bradley Testimony, Trial Trans., at
334, lns. 8-13.
86Gary Bradley’s agent, Bill Love, has admitted that Bradley was insolvent when the notes were transferred.
See Offer in Compromise Letter from W illiam Love to Glenda Hudgens, admitted as GOVERNM ENT EXH IBIT 42, at 2
(Mar. 1, 2002) (stating that a June 30, 2001 balance sheet show that Bradley is insolvent).
U.S. Post-Trial Brief
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21. Bradley Attempted to Transfer the Alien, Beutel, and Gressett Receivables to Lazarus
Investments – Prior to filing for bankruptcy, Bradley attempted to transfer all of the above
Alien, Beutel, and Gressett notes and accounts receivable to Lazarus Investments for
Lazarus Investments’ assumption of Bradley’s debts owed to Alien, Inc., Lazarus Exempt
Trust, James Evans, Kay Hulse, and Talex.84 But there are no transfer or sales documents
evidencing this alleged transfer, no documents from the makers of these notes receivable
agreeing to the alleged transfer, and no documents releasing Bradley from any of the
debts.85 Thus, the transfer never occurred. Even if it did occur, the assumed debts were
antecedent, and Bradley was insolvent when he executed the transfer.86
87See Check from Gary Bradley to Lazarus Investments, admitted as G OVERNM ENT EXH IBIT 69 (showing
cash payment date as July 17, 2002).
88See 550K Phoenix Note Bill of Sale, admitted as GOVERNM ENT EXH IBIT 58; Bradley Testimony, Trial
Trans., at 201, lns. 8-11 (stating that Beutel’s research valued Circle C trademark at $50,000).
89See 550K Phoenix Note Bill of Sale, admitted as GOVERNM ENT EXH IBIT 58.
90Brad Beutel Testimony, Trial Trans., at 760, lns. 7-19 (Evans did not execute any documents agreeing to
seek payment from trust or releasing Bradley from liability).
91See 550K Phoenix Note Bill of Sale, admitted as GOVERNM ENT EXH IBIT 58.
92See 12/31/2002 Lazarus Investments General Ledger, admitted as E XHIBIT D-ING ALLS 372, at LAZ-INV
020323 (showing Bradley’s $64,000 deposit to Lazarus Investments on June 27, 2002 and Lazarus Investments
$17 ,380.48 payment to Bradley on June 30 , 2002); Brad B eutel Testimony, Trial Trans., at 758-760, lns. 17-1
(explaining that $17,380.48 paid to Bradley for 550k Phoenix note came from $64,000 Bradley deposit).
93See 100K Phoenix Note Bill of Sale, admitted as EXHIBIT D-ING ALLS 212. The $15,672.87 no te first
appeared on November 1, 2001 as a payable owed to Bradley, not by B radley.
U.S. Post-Trial Brief
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22. Bradley Transferred the 550K Phoenix Note Receivable to Lazarus Investments – On July
17, 2002,87 Bradley transferred his 550k Phoenix note receivable, his $20,000 Houston
Rockets tickets, and his $50,000 Circle C trademark to Lazarus Investments, L.P. for
$17,380.48 in cash and the assumption of $256,121.46 of Bradley’s debts.88 During this
transfer, the 550k Phoenix note had a principal and interest balance of $203,501.94.89
Bradley owed $101,489.03 of the assumed debt to Jimmy Evans, but Evans did not
execute any documents agreeing to Lazarus Investments’ assumption of Bradley’s debt.90
Bradley owed the remaining $154,632.43 of assumed debt to two entities wholly owned
by Lazarus Exempt Trust: Lazarus Investments, L.P. and Strategic Land Mgmt.91 The
cash consideration came from Bradley’s own funds.92
23. Bradley Transferred the 100k Phoenix Note Receivable to Castle Realty Management –
After filing for bankruptcy, Bradley transferred his 100k Phoenix Note Receivable to
Castle Realty Management Services for $22,000 in cash and assumption of a $15,672.87
payable.93 During this transfer the 100K Phoenix Note had a stated principal and interest
94See 100K Phoenix Note Bill of Sale, admitted as EXHIBIT D-ING ALLS 212.
95See 100K Phoenix Note Bill of Sale, admitted as EXHIBIT D-ING ALLS 212.
96Compare Check from Gary Bradley to Castle Realty Mgmt Services, admitted as GOVERNM ENT EXH IBIT
67 (showing $23,006 .21 payment to Castle Realty on June 26, 2002) with Check from Castle Realty Management
Services, LLC to Gary Bradley, admitted as GOVERNM ENT EXH IBIT 70 (showing $22,000 payment back to Bradley
on June 30, 2002).
U.S. Post-Trial Brief
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balance of $36,151.87.94 Bradley allegedly owed the assumed debt to Castle Realty
Management Services,95 and the cash consideration came from Bradley’s own funds.96
G. Bradley Contributed Cash to Lazarus Exempt Trust for No Consideration
24. Pre-Petition, Bradley Contributed Over $350,000 in Cash to Lazarus Exempt Trust –
Before filing for bankruptcy, Bradley made the following cash contributions to Lazarus
Exempt Trust and entities owned by Lazarus Exempt Trust:
97See Castle Deposit Slip, admitted as GOVERNM ENT EXH IBIT 35 (referring to “Gary Bradley”).
98Dianne Patterson Testimony, Trial Trans., at 1275, lns. 7-22 (regardless of who owned it, Bradley and
Gressett always had an interest in Circle C).
99See Circle C Land Use Letter from Gary Bradley to Kenneth Chang, admitted as EXHIBIT D-ING ALLS 566,
at LAZ-PH5 000961 (May 17, 2001).
100See Circle C Land Use Letter from Gary Bradley to Kenneth Chang, admitted as EXHIBIT D-ING ALLS
566, at LAZ-PH 5 000963 (May 17, 2001) (describing tracts purchased by Bradley Development as tracts “I
acquired”); Proposed T ransaction Letter from Gary Bradley to Dan King, admitted as EXHIBIT D-ING ALLS 572, at
LAZ-PH6 001142 (April 13 , 2000) (describing Bradley Development as “my company”); Gary Bradley Testimony,
Trial Trans., at 39, lns. 12-22 (admitting that he was an owner of Bradley Development in 1992); Gary Bradley
Testimony, Trial Trans., at 233, lns. 20-24.
101See Circle C Land Use Letter from Gary Bradley to Kenneth Chang, admitted as EXHIBIT D-ING ALLS
566 , at LAZ-PH5 000961 (M ay 17, 2001) (explaining that Bradley Development took residential property when it
divided properties with Freeport); Gary Bradley Testimony, Trial Trans., at 516, lns. 15-21 (stating that he
contracted to purchase Freeport-McM oran’s Circle C interests).
U.S. Post-Trial Brief
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25. Bradley’s Post-Petition Cash Contributions to Lazarus Exempt Trust – After filing for
bankruptcy, Bradley continued to contribute cash to entities owned by Lazarus Exempt
Trust. In 2003, for example, Bradley contributed $41,416.37 to Castle Realty
Management Services.97
H. Bradley Contributed His Interest in Phoenix Holdings to Lazarus Investments forNo Consideration
26. Bradley and Gressett Originally Owned the Circle C Development Residential Property –
Bradley has maintained an interest in the Circle C Development since its inception.98
Prior to 1995, Circle C Development was owned by Bradley Development and Freeport
McMoran.99 Bradley Development represented Bradley and Gressett’s respective 80/20
joint interest in the Circle C Development.100 In 1995, Bradley and Freeport decided to
split their holdings, so Bradley Development took ownership of Circle C Development’s
residential property.101
27. Bradley and Gressett Transferred the Circle C Property to Phoenix Holdings – In 1995,
102Bradley personally guaranteed the $3 million payment made by Phoenix Holdings to Circle C Land
Corp. See Agreement for Phoenix Holdings Purchase of Circle C Land, admitted as EXHIBIT D-ING ALLS 809, at
LOVE 06354 (paragraph 2(b)), LOVE 06370 (Bradley signature for personal guarantee in paragraph 2(b)).
103See Limited Partnership Agreement for Phoenix Holdings, Ltd., admitted as E XHIBIT D-INGALLS 806, at
LOV E 06342 (listing partners). 104
See Gary Bradley T estimony, Trial Trans., at 159-160, lns. 22-1, at 420 , lns. 19-21 (Vahid and Hamid
Noshirvani owned CC Residential); Brad Beutel Testimony, Trial Trans., at 726, lns. 11-13 (CC Residential is the
Noshirvanis).
105See Capital Account Analysis for Phoenix Holdings, Ltd, admitted as G OVERNM ENT EXH IBIT 51, at
LOVE 06872, G OVERNM ENT EXH IBIT 76, at LOVE 04457, E XHIBIT D-INGALLS 738, at 04531 (showing CC
Residential’s share of Phoenix Holdings split with Bradley/Gressett owning 2/3 and CC Residential owning 1/3;
capital account analysis showing Bradley/Gressett share used to prepare Phoenix Holdings, Ltd.’s 1999 balance
sheet, CC Residential Corp.’s 1996 federal tax return, and Phoenix Holdings Ltd’s buyout calculation); William
Love Testimony, Trial Trans., at 1099-1100, lns. 20-3, at 1133-1134 , lns. 1-3 (used capital account analysis to
understand capital account flow and calculate basis for gain and loss), at 1099 , lns. 5-19 (did not make this up or pull
out of thin air the 1/3 CC Residential and 2/3 Bradley/Gressett split). Income was d istributed in accordance with
these ownership percentages. See Phoenix Holdings, Ltd. Income Distribution Percentages, attached as
GOVERNM ENT DEMON STRATIVE A.
106See 1995 Phoenix Holdings, GP K-1s for Hamad and Vahid Noshirvani, admitted as EXHIBITS D-
ING ALLS 769, 770; 1995 Phoenix Holdings, GP K-1 for Grant Gomez, admitted as EXHIBIT D-ING ALLS 771 .
U.S. Post-Trial Brief
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Bradley caused Phoenix Holdings, Ltd. to acquire the Circle C residential property
formerly held by Circle C Development.102 The named partners in Phoenix Holdings,
Ltd. were Grant Gomez (39.6%), CC Residential Corp. (59.4%), and Phoenix Holdings,
G.P. (1%).103 CC Residential Corp. was formally owned only by Hamad Noshirvani,104
but accounting records show that Gary Bradley and James Gressett also owned part of CC
Residential’s interest in Phoenix Holdings. Noshirvani secretly agreed with Bradley and
Gressett that he would own one-third of Circle C Residential’s interest in Phoenix
Holdings, and Bradley and Gressett would jointly own two-thirds.105 Phoenix Holdings,
G.P. was Phoenix Holdings, L.P.’s 1% general partner. Phoenix Holdings, G.P. was
formally owned by only by Grant Gomez, Hamad Noshirvani and Vahid Noshirvani,106
but accounting records show that Bradley and Gressett owned two-thirds of the
107See Capital Account Analysis for Phoenix Holdings, Ltd, admitted as GOVERNM ENT EXH IBIT 51, at
LOVE 06872, G OVERNM ENT EXH IBIT 76, at LOVE 04457, E XHIBIT D-INGALLS 738, at 04531 (showing CC
Residential’s share of Phoenix Holdings split with Bradley/Gressett owning 2/3 and CC Residential owning 1/3).
108See Phoenix Buyout Fax from W illiam Love to Jim Gressett, admitted as EXHIBIT D-INGALLS 738, at
LOVE 04530, G OVERNM ENT EXH IBIT 76, at LOVE 04456 (buyout calculation used to support summary of IRS
payments and preparation of CC Residential’s 1999 tax return).
U.S. Post-Trial Brief
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Noshirvanis’ interest in Phoenix Holdings, G.P.107 Thus, as of 1/1/1999, the following
chart shows Phoenix Holdings’ true ownership:
28. Bradley and Gressett Bought Out Gomez and the Noshirvanis and Contributed Phoenix
Holdings to Lazarus Investments – In 1999, when Phoenix Holdings had a total asset
value of $16,001,190,108 Bradley and Gressett decided to buyout Gomez’s and the
Noshirvanis’ interests in Phoenix Holdings and contribute Phoenix Holdings to Lazarus
Investments. They accomplished this buyout and contribution in four steps:
109See Grant Gomez Buyout Memo, admitted as EXHIBIT D-ING ALLS 529 (“Gary and Grant agreed” “Gary
agreed with Grant”); Gomez Meeting Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-ING ALLS 841
(Aug. 23, 1999) (“Gary will not agree to pay tax”); Dianna Patterson Testimony, Trial Trans., at 1218, lns. 13-25;
Gary Bradley Testimony, at 168, lns. 4-6 (admitting that he negotiated Gomez buyout).
110See Grant Gomez Buyout Memo, admitted as EXHIBIT D-ING ALLS 529 (Gomez and B radley agreed to
$7,000,000 note); CC Residential Tax Return Issue Memo from W illiam Love to CC Residential File, admitted as
EXHIBIT D-ING ALLS 730 , at LOVE 04429 (Mar. 13, 2000) (describing CC Residential’s purchase of Phoenix
Holdings).111
See Phoenix ownership chart above.
112William Love Testimony, Trial Trans., at 1040-1041, lns. 20-6 (Gressett calculated Phoenix FMV on
page 04530 schedule), at 1108, lns. 17-25 (page 04530 calculates twenty percent of Phoenix value), at 1109-1110,
lns 11-2 ($3,704,238 on page 004529 equals CC Residential’s twenty percent share of Phoenix), at 1132, lns. 20-25
(page 04530 calculates CC Residential’s interest). The $3,704 ,238 value includes the Noshirvanis’ preferred return.
James Gressett Testimony, at 1490-1491, lns. 5-9.
113Notice that on the CC Residential IRS Payment Summary, EXHIBIT D-ING ALLS 738, at LOVE 04529,
one-third of the taxes paid by CC Residential is subtracted from the purchase price paid to the Noshirvanis. See
William Love Testimony, Trial Trans., at 1111-1113, lns. 3-4 (explaining tax calculation and subtraction from note
given to the Noshirvanis). This subtraction was made because the Noshirvanis owned only one-third of CC
U.S. Post-Trial Brief
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Step 1. CC Residential Purchased Gomez’s Interest in Phoenix Holdings –
Bradley and Gressett first used CC Residential to purchase Gomez’s
interest in Phoenix Holdings. Bradley negotiated a $7,000,000 purchase
price for Gomez’s 40% interest,109 so CC Residential issued Gomez a
$7,000,000 note.110 This purchase gave CC Residential all of Phoenix
Holdings because it already held the Noshirvani and Bradley-Gressett
interests.111
Step 2. Gressett Purchased Phoenix Holdings From CC Residential – Gressett
and Bradley then purchased the Noshirvanis’ interest in Phoenix Holdings
by purchasing all of Phoenix from CC Residential. Gressett calculated
that the Noshirvanis’ 20% interest in Phoenix Holdings was worth
$3,704,238.112 But the Noshirvanis owed $317,406.54 for one third of CC
Residential’s tax for the year 2000,113 so Gressett subtracted $317,406.54
Residential’s interest in Phoenix Holdings and were responsible for only one-third of its taxes. See James Gressett
Testimony, Trial Trans., at 1489-1490 , lns. 23-1 (subtracting 1/3 of CC Residential’s taxes from price paid to
Noshirvanis). James Gressett and Gary Bradley were responsible for the other two thirds. This ties exactly to the
one-third/two-third capital account analysis on EXHIBIT D-ING ALLS 738, at LOVE 04531.
114See Phoenix Buyout Fax from W illiam Love to Jim Gressett, admitted as EXHIBIT D-INGALLS 738, at
LOVE 04529-04530 (04530 showing pre-tax amount to CC Residential; 04529 showing net amount to CC
Residential).
115See CC Residential Tax Return Issue Memo from W illiam Love to CC Residential File, admitted as
EXHIBIT D-ING ALLS 730, at LOVE 04430 (Mar. 13, 2000) (describing Gressett purchase of Phoenix Holdings);
Second Transaction M emo from Brad Beutel to B ill Love, admitted as E XHIBIT D-ING ALLS 151, at LAZ-ET 001834
(June 27, 2000) (Jim Gressett purchased Phoenix for Lazarus Exempt Trust).
116See Gray & Becker Bill for Transfer and Assignment From Gressett to Beutel, admitted as E XHIBIT D-
ING ALLS 641 (worked on transfer documents on 2/27/2001); Brad B eutel Testimony, Trial Trans., at 581-582, lns.
25-8 (transfer from Gressett to Beutel had not been executed as of March 14, 2001).
117See 2000 Phoenix Tax Issues Memo from Bill Love to Phoenix Holdings File, admitted as E XHIBIT D-
INGALLS 833; Phoenix Assignment Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-ING ALLS 840
(Apr. 9, 2001) (attached agreement for assignment from James Gressett to Brad Beutel).
U.S. Post-Trial Brief
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from the $3,704,238 value, and agreed to purchase the Noshirvanis’
interest for $3,386,831.114 To accomplish that purchase, he issued CC
Residential a $3,386,831 note and assumed the $7,000,000 Gomez note in
return for all of Phoenix Holdings.115 Gressett claims that he and Bradley
previously had no interest in Phoenix Holdings, but CC Residential
allowed him to purchase Phoenix’s total asset value of $16,001,190 for
only $10,386,832. That leaves a $5,614,358 interest that Gressett received
for no consideration.
Step 3. Gressett Assigned Phoenix Holdings to Beutel – Sometime after March 14,
2001,116 Gressett assigned his interest in Phoenix Holdings to Brad Beutel,
and Buetel assumed the buyout notes owed to Gomez and CC
Residential.117
Step 4. Beutel Transfered Phoenix Holdings to Lazarus Investments – On or after
118See Gray & Becker Bill for Transfer and Assignment From Beutel to Lazarus, admitted as EXHIBIT D-
ING ALLS 640 (draft of agreement e-mailed to Beutel on 4/5/2001); Brad B eutel Testimony, Trial Trans., at 561, lns.
14-20 (Jan. 1, 2000 was transfer’s effective date, not actual transfer date), at 584-585, lns. 21-2 (transfer from Beutel
to Lazarus not executed until April 5, 2001).
119See Agreement Draft Letter from Brad Beutel to David Hughes, admitted as EXHIBIT D-ING ALLS 16
(Sept. 20, 200[1]) (date printed on letter appears to be incorrect because the agreement draft attached to it is dated
Mar. 14, 2001); Gray & Becker Bill for Transfer and Assignment From Beutel to Lazarus, admitted as EXHIBIT D-
ING ALLS 640 (draft of agreement e-mailed to Beutel on 4/5/2001).
120See 2000 Phoenix Tax Issues Memo from Bill Love to Phoenix Holdings File, admitted as E XHIBIT D-
INGALLS 833 (Bradley and Gressett are making an effort to dissolve their interests and had come to an agreement
regarding Phoenix Holdings by transferring it to the Trust for no additional consideration).
121$7,000,000 + $3,386,831 = $10 ,386 ,831 . See also Brad Beutel Testimony, Trial Trans., at 563
(substance of Phoenix transfer was Gressett transfer to Lazarus Trust for no consideration other than debt
assumption), at 570-571, lns. 19-2 (Phoenix purchase price was assumption of $7,000,000 Gomez Note and
$3,386,831 CC Residential Note), at 578-579, lns. 21-8 (didn’t pay any consideration other than debt assumption).
122$16 ,001,190 - ($7,000,000 + $3,386,831) = $5 ,614 ,358 .
U.S. Post-Trial Brief
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April 5, 2001,118 Brad Beutel assigned his interest in Phoenix Holdings to
Lazarus Investments, and Lazarus Investments assumed the buyout notes
owed to Gomez and CC Residential.119
A collapsing of the above steps shows that Bradley and Gressett contributed their
$5,614,358 interest in Phoenix Holdings to Lazarus Investments for no consideration.120
Lazarus Investments purchased Phoenix Holdings’ total interest worth $16,001,190 for
only $10,386,831 in notes.121 That leaves a $5,614,358 interest that Lazarus Investments
received for no consideration.122 The following chart demonstrates:
123See Estimated T ax Letter from W illiam Love to Gary Bradley, admitted as EXHIBIT D-ING ALLS 682 (Jan.
4, 2001); 2000 Phoenix Tax Issues Memo from Bill Love to Phoenix Holdings File, admitted as E XHIBIT D-ING ALLS
833. It is unclear whether Gressett traded his twenty percent interest in Phoenix to Bradley for some other asset.
124See Amended Spillar/Pfluger Option Agreement, admitted as EXHIBIT D-ING ALLS 561, at LAZ-PH4
001058, par. 25; Special Warranty Deed, admitted as EXHIBIT D-ING ALLS 563.
125See Amended Spillar/Pfluger Option Agreement, admitted as EXHIBIT D-ING ALLS 561 (Gary Bradley
signs last page); Trust Formation Meeting Memo from William Love to Bradley Development File, admitted as
GOVERNM ENT EXH IBIT 24, at LAZ-PH8 000372-000373 (Apr. 26, 2000) (states that Bartlett holds Spillar/Pfluger
U.S. Post-Trial Brief
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Of Bradley and Gressett’s $5,614,358 contribution, Bradley owned at least and 80%
interest worth $4,491,486.123
I. Bradley Contributed His Interest in the Spillar/Pfluger Property to PhoenixHoldings for No Consideration
29. Bradley Originally Owned the Spillar/Pfluger Property – The Spillar/Pfluger tracts are
approximately 1,750 acres of land located adjacent to the Circle C Ranch subdivision.124
In 1998, Steve Bartlett, one of Bradley Development’s employees, held Gary Bradley’s
bridge-financing option to purchase the Spillar/Pfluger property from Capital Pacific
Holdings.125 In substance, this bridge-financing option was more like a loan from Capital
option). William Love’s memo on the Lazarus Trust formation meeting indicates that the Spillar/Pfluger Option was
to be contributed to Lazarus Exempt Trust because it lists the option immediately before a category titled “Other
Entities to Lazarus Trust.” Id. Bartlett stated he held the option for Phoenix Holdings which as shown previously
was owned in part by Gary Bradley. Steve Bartlett Testimony, Trial Trans., at 1580-1581, lns. 10-11 and 24-3.
126See Amended Spillar/Pfluger Option Agreement, admitted as EXHIBIT D-ING ALLS 561.
127On May 30, 2000 Gary Bradley received $274 ,164.65 from Ladon Corp and deposited that amount into
Alien’s money market account. See Landon Transfer Detail, admitted as GOVERNM ENT EXH IBIT 18, at TT-GLB
006172 (showing $274,164.65 payoff on note Ladon owed to Bradley). On M ay 31, 2000, $273,979.25 of this
amount was deposited into Alien’s operating account and used to make part of the $790 ,344.17 extension payment to
Capital Pacific. See 5/31/00 First American Account Statement, admitted as GOVERNM ENT EXH IBIT 21, at GLB
20706 (showing deposit for “LADON PMTTO GLB -GLB LOAN”); Extenstion Payment Check, admitted as
GOVERNM ENT EXH IBIT 20, at GLB 21681 ($790,344.17 check to Capital Pacific includes $753,698.66 for extension
and $36,645.51 for interest). This $790,344.17 extension payment was ultimately used to reduce the purchase price
of the Spillar/Pfluger properties. See Spillar Ranch Purchase Price Calculation, admitted as E XHIBIT D-INGALLS 558
(showing purchase price reduced by $753,698.66 extension payment); Amended Spillar/Pfluger Option Agreement,
admitted as E XHIBIT D-ING ALLS 561 , at LAZ-PH4 001052 (extension payment applied to purchase price). See also,
Gary Bradley T estimony, Trial Trans., at 149, lns. 15-17 (admitting that he “helped” extend the option).
128Compare Amended Spillar/Pfluger Option Agreement, admitted as EXHIBIT D-ING ALLS 561, at LAZ-PH4
001052 (requiring option purchaser to pay $1,382,468.17 regarding “City Settlement”) with City Settlement
Promissory Note, admitted as EXHIBIT D-ING ALLS 594 (showing Gary Bradley’s initials on every page and signature
on last page) and City Settlement Promissory Note Letter from Eric Willis to Dianna Patterson, admitted as EXH IBIT
D-ING ALLS 593 (May 19, 2000) (stating that note is between “Gary Bradley and Capital Pacific Holdings, LLC”).
129See Spillar Finder Fee Agreement Letter from Dianna Patterson to John Bruce, admitted as EXHIBIT D-
ING ALLS 557 (Aug. 22, 2000) (documenting that Gary Bradley agreed to pay agent a one percent finders fee for
related to a $4 ,098 ,500 sale of Spillar property); Dianna Patterson Testimony, Trial Trans. at 1215 , lns. 5-8 (letter to
John Bruce indicates that Bradley agreed to pay finders fee).
130See Contract for Assignment of Spillar/Pfluger Option to Phoenix Holdings, admitted as E XHIBIT D-
ING ALLS 560; Brad Beutel Testimony, Trial Trans., at 565, lns. 20-22 (option transferred to Phoenix Holdings for no
consideration).
U.S. Post-Trial Brief
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Pacific with a large balloon payment due at the loan term’s end.126 Bradley increased the
value of his interest in Spillar/Pfluger by paying $273,979.25 to extend the option’s
term,127 $1,382,468.17 to settle a suit with the City of Austin,128 and at least $40,985.00 in
sales commissions.129
30. Bartlett Transferred the Spillar/Fluger Property to Phoenix Holdings – In August of
2000, Steve Bartlett transferred the Spillar/Pfluger option to Phoenix Holdings, Ltd, for
no consideration.130 Phoenix Holdings then immediately exercised the option and
131See Spillar/Pfluger W arranty Deed, admitted as EXHIBIT D-ING ALLS 563; Spillar/Pflugar Option Price
Calculation, admitted as EXHIBIT D-ING ALLS 558 . When Phoenix Holdings exercised this option, Bradley still
owned Phoenix Holdings because it had not been transferred to Beutel, Trustee or Lazarus Investments. See Part H
above.
132See Webb T roup Allocation Memo from William Love to Gary Bradley File, admitted as EXHIBIT D-
ING ALLS 584, at LAZ-PH8 000352-000353 (M ay 5, 2000) (describing the secret agreement and properties); Hughes
Notes from Trust Formation Meeting, admitted as E XHIBIT D-INGALLS 19, at BM C 00440 (describing properties).
133Webb T roup Allocation Memo from William Love to Gary Bradley File, admitted as EXHIBIT D-ING ALLS
584 , at LAZ-PH8 000352 (M ay 5, 2000). See also Hughes Notes from Trust Formation Meeting, admitted as
EXHIBIT D-INGALLS 19, at BMC 00440 (referring to 50/50 agreement with Evans); Trust Formation Meeting Memo
from W illiam Love to Bradley Development File, admitted as G OVERNM ENT EXH IBIT 24, at LAZ-PH8 000374 (Apr.
26, 2000) (listing “50/50” next to “Welb Trust”).
134See Webb/Troup Return Letter from Jimmy Evans to Gary Bradley, admitted as EXHIBIT D-ING ALLS 579,
at LAZ-PH8 000346 (referring to “Webb-Troup/G.B.”); Invoice from W illiam Love, admitted as GOVERNMENT
EXH IBIT 6, at LAZ-PH15 01732 (discussing how Bradley and Evans could balance Webb Troup equity issues).
135See Webb T roup Allocation Memo from William Love to Gary Bradley File, admitted as EXHIBIT D-
ING ALLS 584, at LAZ-PH 8 000352 (May 5, 2000); Notes on W ebb T roup Calculations, admitted as E XHIBIT D-
ING ALLS 578, at LAZ-PH8 000341 (stating that Webb Troup sold Bethany Tract for $900,000 net gain).
136See Second Transaction M emo from Brad Beutel to B ill Love, admitted as E XHIBIT D-ING ALLS 151, at
LAZ-ET 001835 (June 27, 2000).
U.S. Post-Trial Brief
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acquired the Spilllar/Pfluger properties.131
J. Bradley Contributed His Interest in Webb Troup Enterprises to LazarusInvestments for No Consideration
31. Bradley and Evans Agreed to Purchase and Sell Three Properties Through Webb Troup
Enterprises – Bradley and Jimmy Evans secretly agreed to jointly purchase and sell three
different properties: Bethany Lutheran Tract, Wildflower Tract, and 34 Acres tract.132
Bradley and Evans each had a fifty percent interest in the venture, but they agreed that
“until Bradley could hold property, Evans would acquire the properties and hold Gary’s
interest.”133 Evans used Webb Troup Enterprises to execute the joint venture.134
32. Webb Troup Purchased and Sold the Bethany Lutheran Tract – Webb Troup purchased
and sold the Bethany Lutheran Tract in 1996 for a $900,000 profit.135 This profit was
later rolled into the Wildflower Tract.136
137See Notes on Webb T roup Calculations, admitted as E XHIBIT D-ING ALLS 578, at LAZ-PH8 000341
(calculating gain on Wildflower sale). Notice that Beutel calculated the Wildflower gain using the $1,200,000
referenced in Jimmy Evans August 9, 2000 , letter. Compare Notes on Webb T roup Calculations, admitted as
EXHIBIT D-ING ALLS 578, at LAZ-PH8 000341 (calculating gain on Wildflower sale) with Webb/Troup Return Letter
from Jimmy Evans to Gary Bradley, admitted as EXHIBIT D-ING ALLS 579, at LAZ-PH8 000347 (listing $1,200,000
next to “Webb T roup/G.B.” return).
138See Notes on Webb T roup Calculations, admitted as E XHIBIT D-ING ALLS 578, at LAZ-PH8 000341
(calculating 50% of gain on Wildflower sale); Second Transaction Memo from Brad Beutel to Bill Love, admitted as
EXHIBIT D-ING ALLS 151, at LAZ-ET 001835 (June 27, 2000) (half of gain from Wildflower will be subtracted from
the price Lazarus Investments will pay for the 34 acre tract).
139See Hughes Notes from Trust Formation M eeting, admitted as E XHIBIT D-INGALLS 19, at BMC 00440
(stating that 34 acres was to be sold to the trust); Trust Formation Meeting Memo from William Love to Bradley
Development File, admitted as GOVERNM ENT EXH IBIT 24, at LAZ-PH8 000374 (Apr. 26, 2000) (stating that 34 acres
was to be developed); Webb T roup Allocation Memo from William Love to Gary Bradley File, admitted as EXH IBIT
D-ING ALLS 584, at LAZ-PH8 000353 (May 5, 2000) (discussing scenarios for Lazarus Trust’s purchase of 34 acres).
140See Second Transaction M emo from Brad Beutel to B ill Love, admitted as E XHIBIT D-ING ALLS 151, at
LAZ-ET 001835 (June 27, 2000) (describing how the price Lazarus Investments will pay for the 34 acre tract will be
manipulated); Notes on Webb T roup Calculations, admitted as E XHIBIT D-ING ALLS 578, at LAZ-PH8 000341
(calculating 50% of gain on Wildflower sale).
141Note that the $440,000 price is net of tax. The amount paid before tax is $550,000. Beutel claims that
the 34 Acres price was negotiated, but he has produced no documents evidencing any negotiations or offers.
U.S. Post-Trial Brief
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33. Webb Troup Purchased and Sold the Wildflower Tract – Webb Troup purchased the
Wildflower Tract in 1997 and later sold it for a net-tax profit of $720,000.137 Bradley’s
fifty percent interest in this profit was $360,000.138
34. Bradley Transferred His Interest in the Wildflower Profit and 34 Acres Tract to Lazarus
Investments for No Consideration – When Lazarus Trust was created, Bradley and Evans
decided to end their Webb Troup partnership and divide the Wildflower profit and 34
Acres tract.139 To accomplish this division, Evans sold Lazarus Investments the 34 Acres
tract in late 2000 for a price discounted by 50% for Bradley’s ownership interest in the 34
Acres Tract and by $360,000 for Bradley’s share of the Wildflower profit.140 The
following chart demonstrates:141
142$360,000 + $800 ,000 = $1 ,160 ,000 . See also Webb T roup Payoff Scenario, admitted as EXHIBIT D-
ING ALLS 583 (showing a Webb Troup payoff of $1,160,000 for each party, but not naming the parties).
143See O’Quinn Option Execution Letter from Gary Bradley to John O’Quinn, admitted as EXHIBIT D-
ING ALLS 248 (Sept. 26, 2000) (expressing Bradley’s desire to execute the O’Quinn option); O’Quinn Real Estate
Contract, admitted as EXHIBIT D-ING ALLS 244, at LAZ-INV 012966 (stating that purchase price was set by appraisal
performed in September of 1999).
144See O’Quinn Real Estate Contract, admitted as EXHIBIT D-ING ALLS 244, at LAZ-INV 012966.; Gary
Bradley Testimony, Trial Trans., at 243, lns. 16-24, at 276, lns. 9-17.
U.S. Post-Trial Brief
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Thus, Evans gave Lazarus Investments a $1,160,000 interest in 34 Acres to compensate
Bradley for his 50% share of Web Troup.142
35. Lazarus Investments Subsequently Transferred the 34 Acre Tract to Rasaca Austin – The
34 Acre tract was subsequently transferred by Lazarus Investments to Slaughter Holdings,
L.P.; by Slaughter, L.P. to 34 Acres, L.P.; and by 34 Acres, L.P. to Rasaca Austin, L.P.
Lazarus Investments is a partner in Slaughter Holdings, 34 Acres, L.P., and Rasaca
Austin, L.P.
K. Bradley Contributed His O’Quinn Contract to Rasaca Austin for No Consideration
36. Bradley Owned the O’Quinn Option – In September of 1999, Bradley obtained an option
to purchase real estate from John O’Quinn.143 This real estate included one 62.4822 acre
tract and a ½ interest in a 7.9641 acre tract known as the Common Fords Road tract.144
While he held this option, Bradley paid at least $10,321.70 in legal, water, and
145See 12/31/99 Bradley General Ledger, admitted as EXHIBIT D-ING ALLS 674, at LOVE 01279 (showing
$8,803.60 of payments related to the Commons Ford property); 12/31/00 Bradley General Ledger, admitted as
EXHIBIT D-ING ALLS 676, at LOVE 01428 (showing $1,518.10 of payments related to the Commons Ford property).
146See O’Quinn Option Execution Letter from Gary Bradley to John O’Quinn, admitted as EXHIBIT D-
ING ALLS 248 (Sept. 26, 2000) (expressing Bradley’s desire to execute the O’Quinn option); O’Quinn Real Estate
Contract, admitted as EXHIBIT D-ING ALLS 244..147
See O’Quinn Real Estate Contract, admitted as EXHIBIT D-ING ALLS 244, at LAZ-INV 012966 (contract
required $100,000 in earnest money).
148O’Quinn Contract Review, admitted as EXHIBIT D-ING ALLS 243 (explaining assignment limitations).
149See Assignment of O’Quinn Contract, admitted as EXHIBIT D-ING ALLS 280 .
150See Deed of O’Quinn Property, admitted as EXHIBIT BEUTEL 137; 3/31/03 Rasaca Austin B alance Sheet,
admitted as E XHIBIT D-ING ALLS 276, at LAZ-INV 014025 (showing “LAND ACQ-RACACA (62.4822 ACRES)”
asset worth $3,146 ,048 .07). The $3,146,048.07 does not include the value of the 7 .9641 acre tract.
151See Lazarus T rust Summary, admitted as EXHIBIT D-ING ALLS 126 (showing entities that Lazarus
Investments has an interest in); 3/31/03 Rasaca Austin Balance Sheet, admitted as EXHIBIT D-ING ALLS 276, at LAZ-
INV 014026 (showing Lazarus Investments as partner).
U.S. Post-Trial Brief
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administrative fees to help prepare the property for development.145
37. Bradley Exercised the O’Quinn Option – Bradley exercised his option by sending
O’Quinn a letter in September of 2000 and executing a real estate contract in July of 2001
to purchase the O’Quinn property for $2,488,154.79.146 To secure this contract, Bradley
deposited $100,000 in earnest money.147
38. Bradley Contributed the O’Quinn Real Estate Contract to Rasaca Austin, L.P. – Even
though the contract with O’Quinn prohibits Bradley from assigning his contract rights to
an entity he does not possess directly or indirectly,148 Bradley assigned his contract rights
and the $100,000 earnest money deposit to Rasaca Austin, L.P. for no consideration.149
Rasaca Austin then purchased this property and booked it as worth at least $3,146,048.150
During this transfer and on the Bradley’s petition date, Lazarus Investments was a partner
of and had an interest in Rasaca Austin, L.P.151
39. Bradley Continues to Exercise Control Over Rasaca – Bradley currently owns the water
152See LCRA W ater Sale Contract, admitted as G OVERNM ENT EXH IBIT 49; 12/31/00 Bradley General
Ledger, admitted as EXHIBIT D-ING ALLS 678, at LOVE 01428 (showing LCRA expense paid on 1/17/2000 for
Commons Ford Prop.).
153See Ragland Loan Agreement, admitted as EXHIBIT D-ING ALLS 645 (stating that “Howard gets to pick
one for free” or “accept $600,000 cash”).
154See 8/31/93 Balance Sheet for Alien, Inc., admitted as E XHIBIT D-ING ALLS 698, at LOVE 02314
(showing Bradley with 75% common stock and Gressett with 75% common stock); Alien Transfer Memo from
William Love to Alien File, admitted as EXHIBIT D-ING ALLS 692, at LOVE 01658 (Aug., 17, 1996) (stating that
Bradley is a 75% shareholder in Alien); Gary Bradley Testimony, Trial Trans., at 174, lns. 10-13.
155See Thompson Note Security Agreement, admitted as EXHIBIT D-ING ALLS 302; Thompson Note Escrow
Agreement, admitted as EXHIBIT D-ING ALLS 305; Tommy Thompson Testimony, Trial Trans., at 1642, lns. 18-21
(treated Lazarus like an investor).
156See Thompson Note Financing Statement, admitted as EXHIBIT D-INGALLS 303; Thompson Note Security
Agreement, admitted as EXHIBIT D-ING ALLS 302; Thompson Note Escrow Agreement, admitted as EXHIBIT D-
ING ALLS 305; Tommy Thompson Testimony, at 1623-1624, lns 23-24 (Alien loaned $250,000 to Thompson).
157Gary Bradley Testimony, Trial Trans., at 174, lns. 14-23.
U.S. Post-Trial Brief
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rights associated with the Rasaca property,152 and on February 1, 2002, he promised
Howard Ragland a Rasaca lot worth $600,000.153
L. Bradley Contributed His Interest in MedTech Ventures to Lazarus Investments forNo Consideration
40. Bradley Owned 75% of Alien, Inc. – Bradley and James Gressett formed Alien, Inc.
sometime in 1982. As of August 31, 1993, Bradley owned 75% of Alien and Gressett
owned 25%.154
41. Alien Secured its Loan to Thompson with MedTech Stock – On October 28, 1994, Alien,
Inc., invested $250,000 into MedTech Ventures, Ltd.155 This investment was structured
as a loan to Tommy Thompson that was secured by 15 common units of MedTech
Ventures, Ltd.156
42. Bradley Transferred his Alien Interest to James Gressett – In 1996, Bradley transferred
his 75% interest in Alien, Inc. to James Gressett for no consideration.157 Nevertheless, the
following shows that Bradley continued to secretly own 75% of the Tommy Thompson
158Thomas Thompson Testimony, Trial Trans., at 1635 lns. 14-24 (discussed Agennix), at 1646, lns. 6-12
(Bradley and Gressett knew about Agennix transaction).
159See Thompson Note Bill of Sale, admitted as EXHIBIT D-INGALLS 334; Thompson Journal Entries,
admitted as E XHIBIT D-ING ALLS 308, at LAZ-INV 014529 (6/30/00 entries for Lazarus Investments’ purchase of
Thompson note).
160See Thompson Note Bill of Sale, admitted as EXHIBIT D-INGALLS 334 and EXHIBIT BEU TEL 89 (showing
scratched out December); Thompson Journal Entries, admitted as EXHIBIT D-ING ALLS 308, at LAZ-INV 014529
(stating that effective date occurred before Lazarus Investments was organized); Brad Beutel Testimony, Trial
Trans., at 595-596, lns. 20-10 (admitting that note to Alien was backdated), at 889-890, lns. 12-16 (admitting that
note purchase had not been documented on Dec. 5, 2000), at 963-964, lns. 24-1 (admitting that Bill of Sale was
backdated); Lisa Dean Testimony, Trial Trans., at 1202-1205 (Beutel’s assistant pleading 5th Amendment when
asked whether she notarized backdated documents); Alien Journal Entry Workpapers from 6/30/00 through
12/31/00, admitted as GOVERNM ENT EXH IBIT 5 (showing absence of entries for the Thompson Note sale on 6/30/00
and the Lazarus Investments 200,000 note payable); James Gressett Testimony, Trial Trans., at 1467-1468, lns. 5-11
(confirming absence of entries).
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note.
43. Bradley and Gressett Liquidated the MedTech Units – In late 2000, Bradley and Gressett
knew that MedTech was going to make a large profit from the sale of its Agennix
stock,158 so they decided to cash out that profit by liquidating and separating their joint
interest in MedTech. They accomplished this liquidation and separation with four steps:
Step 1. Alien Sold the Thompson Note to Lazarus Investments – On or after
December 30, 2000, Alien sold the Tommy Thompson note to Lazarus
Investments for an unsecured $200,000 note payable.159 Beutel and
Gressett attempted to avoid creditor scrutiny and legitimize this
transaction by backdating it to June 30, 2000, a date before Lazarus
Investments was created.160
Step 2. Thompson Assigned the MedTech Units to Lazarus Investments – In
December of 2000, Lazarus Investments accepted assignment of the 15
161See MedTech Assignment Documents, admitted as EXHIBIT D-ING ALLS 338 (correspondence and
documents associated with assignment and extinguishment dated December of 2000 indicate that transaction will
close shortly).
162See MedTech Sale Letter from Brad Beutel to Thomas Thompson, admitted as EXHIBIT D-ING ALLS 421
and EXHIBIT BEUTEL 90 (notation states that $841,204 was received on 1/16/00); Thompson Journal Entries,
admitted as E XHIBIT D-ING ALLS 308, at LAZ-INV 014529 (showing journal entry for sale of MedTech stock);
Tommy Thompson Testimony, Trial Trans., at 1636-1637, lns. 20-3 (Gordon Cane bought Medtech’s Agennix
stock), at 1642, lns. 18-21 (paid Lazarus profit from Agennix sale like an investor, not note holder).
163See Accounting of MedTech Funds, admitted as EXHIBIT D-ING ALLS 307 (showing $213,216.44 paid
toward Lazarus Investments’ Alien note).
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MedTech units for extinguishment of the original $250,000 debt.161
Step 3. Lazarus Sold the MedTech Units – Lazarus then received $841,204 of
profit from MedTech’s sale of Agennix stock.162
Step 4. Lazarus Paid Off Gressett – Lazarus Investments then paid $213,216 to
Alien for the 200k note that Lazarus originally gave Alien for the
Thompson note.163 This $213,216 equals approximately 25% of the total
$841,204 proceeds.
When the above steps are collapsed and placed in the context of Bradley and Gressett’s
original 75/25 ownership of Alien, Inc., it becomes clear that Bradley cashed out his
$627,988 interest in MedTech Ventures and contributed it Lazarus Investments for no
consideration. Lazarus purchased Alien’s $841,204 MedTech interest for only $213,216.
That leaves a $627,988 contribution for no consideration.
44. Bradley Invested the MedTech Proceeds in Rasaca – Lazarus Investments used $481,230
of the funds from the MedTech stock sale to purchase a Thompson’s half interest in
7.9641 acres of property known as the Common Ford Roads property or Rasaca
164See Accounting of MedTech Funds, admitted as EXHIBIT D-ING ALLS 307 (showing $481,230 loaned
Lazarus Development); Brad Beutel Testimony, Trial Trans., at 749-750, lns. 18-3 (explaining that the $481,230 was
spent on Thompson’s half interest in the 7.9641 acres).
165See Brad Beutel Testimony, Trial Trans., at 745-748, lns. 7-17 (explaining how Bradley deposited
$18 ,000 and K ay Bradley deposited $32 ,000 into the trust at same time that the trust made $50,000 down payment to
Thompson for his half interest in Common Ford Roads property); Lazarus Exempt Trust Invoice for TomCamp Joint
Venture Downpayment, admitted as GOVERNM ENT EXH IBIT 17; Bradley $18,000 Check, admitted as GOVERNMENT
EXH IBIT 60; Lazarus Exempt Trust 2000 Checking Account Summary, admitted as EXHIBIT D-ING ALLS 164, at LAZ-
ET 002562 (showing Gary and Kay Bradley deposits). Kaye Bradley’s $32,000 was paid back from the MedTech
proceeds. See Lazarus Investments’ 12/31 /2001 General Ledger, admitted as EXHIBIT D-ING ALLS 766, at LOVE
05809 (1/18/01 entry showing the $841,204 MedTech funds being deposited with a $58,000 transfer to the Lazarus
Exempt Trust); Lazarus Exempt Trust 2001 Checking Account Summary, admitted as EXHIBIT D-INGALLS 156
(showing $52,909.59 payment to Kay Hulse); Accounting of M edTech Funds, admitted as EXHIBIT D-ING ALLS 307
($52,909 paid to Kay Hulse).
166See BEU TEL EXH IBIT 139, at LAZ-INV 020548 (entry titled “1300870 Rasaca Austin L.P., Rasaca”), at
LAZ-INV 020549 (entry titled “1407000 Land-1/2 UNDIV. INT. 79641 A”).
16726 U .S.C. § 6321; United States v. National Bank of Commerce, 472 U .S. 713, 719 (1985); Glass City
Bank v. United States, 326 U.S. 265, 267-69 (1945).
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property.164 Bradley also personally paid at least $18,000 of the down payment for
Thompson’s half of the 7.9641 acres.165 Lazarus Investments then contributed the Rasaca
property to Rasaca Austin, L.P.166
PROPOSED CONCLUSIONS OF LAW
The law governing this case prevents debtors from avoiding their debts by transferring
their assets to a spend-thrift trust for no consideration. The Bankruptcy Trustee is responsible for
arguing self-settlement, so the following law applies only to the lien issue.
A. Federal Tax Liens Attach To All Lazarus Exempt Trust Assets that Gary BradleyOwned During or After His Federal Income Taxes Were Assessed
1. Federal Tax Liens Are Created When One Refuses or Fails to Pay Tax – If a person
refuses or fails to pay an owed tax after demand, 26 U.S.C. § 6321 creates a federal tax
lien that attaches to all of that person’s property and rights to property owned on the
assessment date or acquired thereafter.167 The § 6321 federal tax lien arises on the
16826 U.S.C. § 6322; United States v. National Bank of Commerce, 472 U.S. 713, 719 (1985).
169E.g., Oxford Capital Corp. v. United States, 211 F.3d 280, 284 (5th Cir. 2000) (IRS may levy upon
nominee assets because nominee is not true beneficial owner).
170Oxford Capital Corp. v. United States, 211 F.3d 280, 284 n.1 (5th Cir. 2000) (quoting Towe Antique
Ford Foundation v. Internal Revenue Service, 791 F. Supp. 1450 (D. Mont. 1992).
17126 U.S.C § 6323(a) (stating that a subsequent purchaser has priority over a § 6321 lien if notice of that
lien was not filed during the purchase); 26 U .S.C 6323(h) (defining “purchaser” as one who pays full and adequate
consideration for the underlying property); United States v. Alfano, 34 F. Supp. 2d 827, 849 (E.D.N.Y. 1999).
172E.g., United States v. Gonzales, Civ. No. 89-F-1740, 1991 WL 53281, at *4 (D. Colo. 1991) (“Nominal
cash consideration that is remarkably below the fair market value for the land is not adequate and full
consideration.”); T reas. Reg. 301.6323(h)-1(f)(3 ) (“the term ‘adequate and full consideration in money or money’s
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assessment date and continues until the underlying tax liability is paid or becomes
unenforceable.168
2. Property Includes Interests Held by Nominees – A taxpayer’s property interests includes
property held for that taxpayer by a nominee.169 When deciding whether an entity or
person is another person’s nominee, the Fifth Circuit considers the following elements:
“(a) No consideration or inadequate consideration paid by the nominee; (b) Property
placed in the name of the nominee in anticipation of a suit or occurrence of liabilities
while the transferor continues to exercise control over the property; (c) Close relationship
between transferor and the nominee; (d) Failure to record conveyance; (e) Retention of
possession by the transferor; and (f) Continued enjoyment by the transferor of benefits of
the transferred property.”170
3. Tax Liens Encumber Subsequent Transferees’ Interests if They Do Not Pay Full and
Adequate Consideration – Under 26 U.S.C. § 6323, a lien created under 26 U.S.C. § 6321
encumbers a subsequent transferee’s interest if that transferee did not pay full and
adequate consideration for the underlying property.171 Nominal cash payments well
below the underlying property’s market value do not constitute adequate consideration.172
worth’ means a consideration in money or money’s worth having a reasonable relationship to the true value of the
interest in property acquired”).
173See Treas. Reg. 301.6323(h)-1(f)(3 ) (“the term ‘adequate and full consideration in money or money’s
worth’ means a consideration in money or money’s worth having a reasonable relationship to the true value of the
interest in property acquired”).
17426 U.S.C § 6323(a) (subsequent purchaser has priority over a § 6321 lien if notice of that lien was not
filed during the purchase); 26 U.S.C 6323(h) (defining “purchaser” as own who receives a valid property interest
under local law); United States v. Gonzales, Civ. No. 89-F-1740, 1991 WL 53281, at *4 (D. Colo. Feb. 6, 1991),
aff’d, 951 F.2d 1261 (10th Cir. 1991).
175TEX. BUS. & COM . CODE § 24.006(a).
176TEX. BUS. & COM . CODE § 24.006(b).
177See 26 U.S.C. § 6323(a).
178Phelps v. United States, 421 U.S. 330, 334-35 (1975); Beaty v. United States, 937 F.2d 288, 292 (6th
Cir. 1991).
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The assumption of illusory debt does not constitute adequate consideration.173
4. Tax Liens Encumber Subsequent Transferees’ Interest if They Receive Their Interest
Through a Fraudulent Transfer – Under 26 U.S.C. § 6323, a lien created under 26 U.S.C.
§ 6321 has priority over a subsequent transferee’s interest if that transferee received the
underlying property in a transfer that is fraudulent under state law.174 Under TEX. BUS. &
COM. CODE § 24.006(a), a debtor’s transfer is fraudulent as to pre-transfer creditors if the
transfer was made without receiving equivalent value and when the debtor was
insolvent.175 Under TEX. BUS. & COM. CODE § 24.006(b), a debtor’s transfer is fraudulent
as to pre-transfer creditors if the transfer was made to an insider for an antecedent debt
when the debtor was insolvent, and the insider had reason to believe the debtor was
insolvent.176
5. Tax Liens Attach to the Proceeds From Sales to Bona Fide Purchasers – If a federal tax
lien becomes invalid because the encumbered property is sold to a bona fide purchaser
without notice,177 the federal tax lien attaches to the proceeds from that sale.178
179United States v. Blakeman, 997 F.2d 1084, 1092-1093 (5th Cir. 1992) questioned on other grounds by In
re Bouchie, 324 F.3d 780 (5th Cir. 2003); United States v. Morrell, 137 F.Supp.2d 130, 138-139 (E.D.N.Y. 2001).180
United States v. Taylor, 254 F.Supp 752, 756 (N.D. Cal. 1966).
181United States v. Taylor, 254 F.Supp 752, 756 (N.D. Cal. 1966).
182If the Court finds that this property is part of Gary Bradley’s bankruptcy estate, the United States
acknowledges that § 545(2) of the Bankrup tcy Code allows the Bankruptcy Trustee to avoid the United States’
unfiled statutory liens. Nevertheless, the United States wishes to preserve its lien interests in case the Bankruptcy
Trustee decides to abandon any property that the United States believes is worth pursuing.
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6. Tax Liens Attach to Appreciation – A tax lien attaches to all passive appreciation of
encumbered property from the original attachment date until foreclosure.179
B. Federal Tax Liens Attach To All Distributions That Lazarus Exempt Trust ShouldMake and Has Made to Gary Bradley
7. Tax Lien Attachment to Actual and Required Trust Distributions – A 26 U.S.C. § 6321
tax lien that attaches to a trust beneficiary’s property attaches to all distributions that the
trust makes to the beneficiary and all distributions that the trust agreement requires the
trust to make to the beneficiary.180
8. Determination of Required Support Distributions – The value of distributions required by
a support trust can be calculated by assessing the beneficiary’s current living needs and
living expenses.181
ANALYSIS
The above proposed findings of fact and conclusions of law demonstrate two reasons why
Bradley’s creditors may use Lazarus Exempt Trust’s assets to satisfy Bradley’s debts: (1)
Lazarus Exempt Trust is self-settled; and (2) the United States’ statutory tax assessment liens
attach to particular property within Lazarus Exempt Trust.182 Since the Bankruptcy Trustee is
responsible for arguing self-settlement, the following analysis applies only to the lien issue.
183See Proposed Findings of Fact, at Part G.
184As of December 31 , 1999, Phoenix Holdings Ltd. owned approximately 479 acres of land within Travis
County, $2,450,000 in note receivables, and $4,500,000 in MUD B onds. As of October 31, 2001, Beutel valued
these Phoenix Holdings assets at $44,985 ,063 . See Proposed Findings of Fact, at Part D for detail.
185See Proposed Findings of Fact, at Part I.
186See Proposed Findings of Fact, at Part J.
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A. The United States’ Tax Liens Attach to All Assets That Bradley Contributed toLazarus Exempt Trust Without Consideration, to the Streetman Stock SaleProceeds, and to All Required Support Distributions
The above proposed findings of fact show that the United States’ tax liens attach to
specific assets that Bradley contributed to Lazarus Exempt Trust for no consideration. The
United States asks the Court to determine that the United States’ tax liens attach to these assets
and encumber any interest in these assets held by Lazarus Exempt Trust or any entity owned by
Lazarus Exempt Trust.
1. United States Tax Liens Attach To All Assets That Bradley Contributed to LazarusExempt Trust Without Consideration
The United States’ tax liens attach to and encumber Lazarus Exempt Trust’s interest in
the following assets that Bradley contributed to Lazarus Exempt Trust for no consideration:
• $378,969.96 of cash;183
• a $4,491,486 interest in Phoenix Holdings, LP and Phoenix Holdings, GP;184
• a $1,697,432.42 interest in the Spillar/Pfluger property from Bradley’s
$273,979.25 payment to extend the option’s term, $1,382,468.17 payment to settle
a suit with the City of Austin, and $40,985.00 payment for sales commissions;185
• a $1,160,000 interest in the 34 acres property purchased from Webb Troup;186
• a contract to purchase the O’Quinn property and a $100,000 earnest money
187See Proposed Findings of Fact, at Part K.
188See Proposed Findings of Fact, at Part L.
189See Proposed Findings of Fact, at Part L.
19026 U .S.C. § 6321; United States v. National Bank of Commerce, 472 U .S. 713, 719 (1985); Glass City
Bank v. United States, 326 U.S. 265, 267-69 (1945).
191E.g., Oxford Capital Corp. v. United States, 211 F.3d 280, 284 (5th Cir. 2000) (IRS may levy upon
nominee assets because nominee is not true beneficial owner).
192Proposed Findings of Fact, at Part A.
193Proposed Findings of Fact, at Parts G, K.
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deposit;187
• a total $531,230 interest in 7.9641 acres of property known as the Common Ford
Roads property that was purchased with $481,230 of proceeds from the sale of
MedTech’s Agennix stock, with Gary Bradley’s $18,000 down payment, and with
Kay Bradley’s $32,000 down payment that was later reimbursed with proceeds
from the sale of MedTech’s Agennix stock;188
• $146,758 of remaining proceeds from the sale of the MedTech Agennix stock;189
The United States’ tax liens attach to all the above assets and appreciation of those assets
because Bradley owned them on or after his tax assessment dates. When a person fails to pay a
tax deficiency after demand, 26 U.S.C. § 6321 creates a federal tax lien that attaches to all of that
person’s property and rights to property owned on the assessment date or acquired thereafter.190
A person’s property rights include any property held by a nominee.191 In this case, Bradley’s
1994 taxes were assessed on May 1, 2000, his 1996 taxes were assessed on April 14, 2000, and
his 2001 taxes were assessed on December 20, 2002.192 On or after the 1994 and 1996
assessment dates, Bradley owned the cash and O’Quinn contract in his own name,193 so the 1994
and 1996 tax liens attach to those assets. In addition, on or after the 1994 and 1996 assessment
194See Proposed Findings of Fact, at Parts H, I, J, L.
195See Proposed Findings of Fact, at Parts H, I, J, L.
196See Proposed Findings of Fact, at Part B (the Noshirvanis owned CC Residential).
197See Proposed Findings of Fact, at Parts H, I, J, L.
19826 U.S.C § 6323(a) (stating that a subsequent purchaser has priority over a § 6321 lien if notice of that
lien was not filed during the purchase); 26 U .S.C 6323(h) (defining “purchaser” as one who pays full and adequate
consideration for the underlying property); United States v. Alfano, 34 F. Supp. 2d 827, 849 (E.D.N.Y. 1999).
199See Proposed Findings of Fact, Parts H, I, J, L.
200See, e.g., United States v. Morrell, 137 F.Supp.2d 130, 138-139 (E.D.N.Y. 2001).
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dates, Circle C Residential, Steve Bartlett, Jimmy Evans, and James Gressett held Gary Bradley’s
respective interests in Phoenix Holdings, Spillar/Pfluger, Webb Troup, and MedTech as
Bradley’s nominees.194 These nominee relationships are evidenced by the following factors:
• the lack of consideration paid for the nominees’ interests;195
• Bradley’s large debt owed to the FDIC when these nominees took their interest;
• the close relationship between Bradley and these nominees;196 and
• Bradley’s continued use of these assets to invest in Lazarus Exempt Trust’s real
estate ventures.197
Thus, the United States’ tax liens attach to all of the above assets.
The United States’ tax liens encumber Lazarus Exempt Trust’s interest in this property
because Bradley transferred them to Lazarus entities for no consideration. Section 6323(a)
protects purchasers from statutory tax liens that have not been filed. But to be a purchaser, one
must give “adequate and full” consideration.198 In this case, Lazarus Exempt Trust and its
entities gave no consideration for the above assets,199 so they do not qualify as purchasers.
Finally, the United States tax liens attach to any passive appreciation of the above assets
because Bradley transferred his assets subject to the United States’ liens.200 In other words, the
201Proposed Findings of Fact, at Parts F.
20226 U.S.C § 6323(a) (subsequent purchaser has priority over a § 6321 lien if notice of that lien was not
filed during the purchase); 26 U.S.C 6323(h) (defining “purchaser” as own who receives a valid property interest
under local law); United States v. Gonzales, Civ. No. 89-F-1740, 1991 WL 53281, at *4 (D. Colo. Feb. 6, 1991),
aff’d, 951 F.2d 1261 (10th Cir. 1991).
203TEX. BUS. & COM . CODE § 24.006(b).
204Proposed Findings of Fact, at Parts F.
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assets are burdened with the lien, not a specific value.
2. United States Tax Liens Attach to $1,619,092 of Notes and Accounts Receivable
On or after the 1994 and 1996 assessment dates, Bradley owned $1,619,092.02 of notes
and accounts receivable in his own name,201 so the 1994 and 1996 tax liens attach to the
receivables.
The tax liens encumber Lazarus Investment, L.P.’s and Castle Realty Management
Services’ interest in these receivables because they were fraudulently transferred to those entities.
Under 26 U.S.C. § 6323, a federal tax lien has priority over a subsequent transferee’s interest if
that transferee received the underlying property in a transfer that is fraudulent under state law.202
Transfers are fraudulent under Texas law if they are made to insiders for antecedent debt while
the debtor is insolvent, and the insider has reason to believe the debtor was insolvent.203 In
Bradley’s case, he was insolvent when he transferred the notes to insiders Lazarus Investments,
L.P. and Castle Realty Management Services for antecedent debts owed to Alien, Inc., Lazarus
Exempt Trust, James Evans, Kay Hulse, Talex, Lazarus Investments, L.P., Strategic Land
Management, and Castle Realty Management Services.204 In addition, the trustee of the entity
that owns Lazarus Investments, L.P. and Castle Realty Management Services, Brad Beutel, at
205See Proposed Findings of Fact, at Parts F (Bradley and Love believed that Bradley’s debts were
worthless because he was insolvent).
206See Accounting of Streetman Sales Proceeds, GOVERNM ENT EXH IBIT 29; 12/31/01 Lazarus Exempt Trust
General Ledger, admitted as EXHIBIT D-ING ALLS 752 , at LOVE 05591, 8 /2/2001 entry.
207See Proposed Findings of Fact, at Part E.
208See Proposed Findings of Fact, at Part E.
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least had reason to know that Bradley’s debt to the FDIC made Bradley insolvent.205 Thus, the
note transfers were fraudulent, and the United States’ tax liens have priority over Lazarus
Investments, L.P and Castle Realty Management Services.
3. United States Tax Liens Attach to the Assets that Lazarus Exempt TrustPurchased With the $5.4 Million of Proceeds From Bradley’s Sale of HisStreetman Homes Stock
The United States’ tax liens also attach to and encumber the following assets that Lazarus
Exempt Trust purchased with the proceeds from Bradley’s sale of his Streetman Homes stock:206
• a $2,000,000 interest in Golf Club Partners;
• a $26,000 interest in the 2601 Jarret Avenue property;
• a $1,030,568 interest in the Rowell property; and
• a $100,000 interest the Rasaca Property.
The tax liens attach to and encumber the above assets because they can be traced from
Bradley’s original ownership interest in Streetman Homes. The tax liens attached to the
Streetman Homes stock because Bradley owned it in 2000 through his nominee Penny Gressett.
Penny Gressett’s nominee status is evidenced by the following factors:
• the lack of consideration she gave for her interest in Streetman Homes;207
• Bradley’s large debt owed to the FDIC when she took her interest,
• her close relationship to Bradley as James Gressett’s wife;208 and
209See Proposed Findings of Fact, at Part E.
210Phelps v. United States, 421 U.S. 330, 334-35 (1975).
211See Proposed Findings of Fact, Part E.
212See, e.g., United States v. Morrell, 137 F.Supp.2d 130, 138-139 (E.D.N.Y. 2001).
213Proposed Findings of Fact, Part E.
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• Bradley’s continued use of the Streetman property to invest in Lazarus Exempt
Trust’s real estate ventures.209
Thus, the United States’ tax liens attached to the Streetman stock. After the Streetman stock was
sold, the United States’ liens continued to attach to the sale proceeds and any assets purchased
with those proceeds because federal tax liens follow proceeds.210 These United States liens
encumber Lazarus Exempt Trust’s and its entities’ interest in these assets because Lazarus
Investments paid no consideration for the Streetman proceeds.211 Finally, the United States’ tax
liens attach to any passive appreciation of the assets, because the assets are burdened by the
liens.212
Even if the transfer of Streetman Homes stock to and from Lazarus Exempt Trust were
legitimate, the United States’ tax liens still attach to the $5.4 million in stock proceeds. When
Penny Gressett transferred the Streetman Homes stock to Lazarus Investments for a $3.6 million
note, these shares were valued at $9 million.213 Thus, she transferred $5.4 million of stock to
Lazarus Exempt Trust for no consideration. Accordingly, Lazarus Exempt Trust cannot qualify
as a purchaser. It received Bradley’s Streetman stock subject to the United States’ tax liens, and
when the Streetman stock was re-sold to James Gressett, the United States’ tax lien attached to
the proceeds from that sale. These liens encumber Lazarus Exempt Trust’s interest in the stock
because Lazarus Exempt Trust did not pay any consideration for the $5.4 million of stock.
214United States v. Taylor, 254 F.Supp. 752, 756 (N.D. Cal. 1966).
215Proposed Findings of Fact, Part B.
216See United States v. Taylor, 254 F.Supp 752, 756 (N.D. Cal. 1966).
217See Bradley Bankruptcy Schedule J (showing expenses, excluding rent, of $25,125.55); Schedule I
(showing available monthly income of $3,348.23). Another Bradley income statement shows that he needs
$741,904.65 per year in support. See Note Transfer Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-
ING ALLS 714 , at LOVE 02717 (showing Bradley’s net income as a negative $309 ,126.94 for a 5 month period in
2001).
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4. United States Tax Liens Attach to All Distributions That Lazarus Exempt TrustShould Make and Has Made to Gary Bradley
Even if the United States’ tax liens do not attach to particular assets held by Lazarus
Exempt trust, the tax liens do attach to the support distributions that Lazarus Exempt Trust’s
agreement requires it to make to Gary Bradley. Under 26 U.S.C. § 6321, federal tax liens attach
to required support distributions if they can be adequately measured.214 In this case, Lazarus is a
support trust, so its agreement requires it to distribute to Bradley “any amounts out of the net
income and principal (if income is insufficient) of the trust as, in the sole reasonable discretion of
the trustees, are necessary or advisable” for Bradley’s “health, education, support or
maintenance.”215 This distribution requirement can be measured by evaluating Bradley’s current
living needs and living expenses,216 so Bradley’s right to these distributions is a property interest
that the United States’ tax liens attach to.
Bradley asserts in his Bankruptcy schedules that he needs $21,777.32 per month above
his salary for his current living needs and expenses,217 so the United States argues that Bradley
has a right to receive $21,777.32 per month from Lazarus Exempt Trust. Since that monthly
payment is a property right, the United States’ tax liens attach to it.
218See 26 U.S.C § 6323(a) (stating that a subsequent purchaser has priority over a § 6321 lien if notice of
that lien was not filed during the purchase); 26 U.S.C 6323(h) (defining “purchaser” as one who pays full and
adequate consideration for the underlying property); United States v. Alfano, 34 F. Supp. 2d 827, 849 (E.D.N.Y.
1999).
219See Phelps v. United States, 421 U.S. 330, 334-35 (1975); Beaty v. United States, 937 F.2d 288, 292
(6th Cir. 1991).
220See Bankruptcy Trustee’s post-trial briefing on self-settlement for more detail.
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B. The United States’ Tax Liens Follow Assets that Have Been Transferred for NoConsideration and Attach to All Proceeds from Assets That Have Been Sold to BonaFide Purchasers
Since the above assets were first contributed to Lazarus Exempt Trust, many of them may
have been transferred or sold. Nevertheless, the United States’ tax liens continue to attach to the
transferred assets if they have been transferred for inadequate consideration.218 If, on the other
hand, they have been sold to bona fide purchasers, the United States’ tax liens attach to the sale
proceeds.219
Since the United States does not know which assets have been transferred or sold, the
United States asks the Court to generally determine that its tax liens attach to the above assets
that have been transferred for inadequate consideration and to any proceeds from sales to bona
fide purchasers.
PROPOSED ORDER
The United States asks the Court to Order the following:
1. Lazarus Exempt Trust’s property is part of Gary Bradley’s bankruptcy estate.220
2. The United States’ statutory assessment liens attach to the following assets and encumber
any interest in the following assets held by Lazarus Exempt Trust or any entity owned by
Lazarus Exempt Trust:
221As of December 31 , 1999, Phoenix Holdings Ltd. owned approximately 479 acres of land within Travis
County, $2,450,000 in note receivables, and $4,500,000 in MUD B onds. As of October 31, 2001, Beutel valued
these Phoenix Holdings assets at $44,985 ,063 . See Proposed Findings of Fact, at Part D for detail.
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• $1,619,092.02 of notes and accounts receivable;
• $378,969.96 of cash;
• a $4,491,486 interest in Phoenix Holdings, LP and Phoenix Holdings, GP;221
• a $1,697,432.42 interest in the Spillar/Pfluger property;
• a $1,160,000 interest in the 34 acres property;
• a contract to purchase the O’Quinn property and a $100,000 earnest money
deposit;
• a $531,230 interest in 7.9641 acres of property known as the Common Ford
Roads property;
• $146,758 of remaining proceeds from the sale of the Med Tech Agennix stock;
• a $2,000,000 interest in Golf Club Partners;
• a $26,000 interest in the 2601 Jarret Avenue property;
• a $1,030,568 interest in the Rowell property;
• a $100,000 interest the Rasaca Property; and
• $21,777.32 of monthly distributions that Lazarus Exempt Trust should have and
should be making for Gary Bradley’s benefit.
3. The United States’ tax liens continue to attach to and encumber any transferee’s interest
in any of the assets in paragraph one that have been transferred outside of the trust for
inadequate consideration.
4. The United States’ tax liens attach to the proceeds from any sale of the assets in
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paragraph one to bona fide purchasers and encumber any interest in those proceeds held
by Lazarus Exempt Trust or any entity owned by Lazarus Exempt Trust.
JOHNNY K. SUTTONUnited States Attorney
By: /s/ Christopher R. Egan
HERBERT W. LINDERAttorney, Tax DivisionState Bar No. 0065446
CHRISTOPHER R. EGANAttorney, Tax DivisionState Bar No. 24036516Department of Justice717 N. Harwood, Suite 400Dallas, Texas 75201(214) 880-9732(214) 880-9741 (FAX)
ATTORNEYS FOR THE UNITED STATES
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CERTIFICATE OF SERVICE
IT IS HEREBY CERTIFIED that service of the foregoing UNITED STATES’ POST-
TRIAL BRIEF has been made on August 28, 2004, by mailing a copy thereof to:
Patrich C. Hargadon Elizabeth G. SmithAttorney for Trustee Ronald E. Ingalls Davis & Opper, P.C.Hargadon & Wise, PC 6655 First Park Ten, Suite 116400 West 15th, #710 San Antonio, TX 78213Austin, Texas 78701
Raymond W. Battaglia Frank Ikard Attorney for Debtor Ikard & Golden, P.C.Oppenheimer Blend Harrison & Tate 106 East 6th Street, Suite 500717 Navarro, Suite 600 Austin, Texas 78701San Antonio, Texas 78205
UNITED STATES TRUSTEE 903 San Jacinto, Suite 230 Austin, TX 78701
Eric J. TaubeAttorney for Bradley Beutel, Trustee of and on Behalf of the Lazarus Exempt Trust Hohmann, Taube & Summers, LLP 100 Congress Ave., Suite 1600 Austin, Texas 78701
Sam E. Taylor, Jr.Federal Deposit Insurance Corporation1910 Pacific Ave., 3rd FloorDallas, Texas 75201
/s/ Christopher R. Egan CHRISTOPHER R. EGAN
Phoenix Holdings, GP Grant Gomez CC Res (1/3) Bradley/Gressett (2/3) Total1995Net Income Share (7,324.00) (290,022.00) (145,011.00) (290,023.00) (732,380.00) Percentage 1.00% 39.60% 19.80% 39.60% 100.00%
1996Net Income Share 7,648.00 302,813.00 151,406.00 302,812.00 764,679.00 Percentage 1.00% 39.60% 19.80% 39.60% 100.00%
1997Net Income Share (1,266.00) (50,151.00) (25,077.00) (50,153.00) (126,647.00) Percentage 1.00% 39.60% 19.80% 39.60% 100.00%
1998Net Income Share 59,556.00 2,358,448.00 1,179,224.00 2,358,448.00 5,955,676.00 Percentage 1.00% 39.60% 19.80% 39.60% 100.00%
*Based on Net Income from Phoenix Holdings, Ltd. Capital Account Analysis, admitted as Government Exhibit 51, at LOVE 06872, Government Exhibit 76, at LOVE 04457, Exhibit D-Ingalls 738, at 04531
Government DemonstrativeA
1995-1998Phoenix Holdings Distribution of Net Income*