A pair of Spokane doctors may be able to settle their $191 million bankruptcy by paying as little as $130,000 to be split among more than 8,000 creditors.
Attorney John Munding, who was appointed as trustee in the case, proposed the settlement earlier this month in a bid to resolve the Chapter 7 bankruptcy filed by Drs. Debra and Sajid Ravasia.
Along with a list of conditions, the Ravasias could settle the case by either transferring $175,000 from a deferred compensation account or coming up with $130,000 in cash.
The Ravasias jointly filed for bankruptcy in January based on the failed companies run by Debra Ravasia, a gynecologist, who up until last year was the executive director of the Northwest Health Summit and Ajuva Spa.
The bankruptcy filing generated scores of complaints from former clients who questioned the billing practices of the businesses run by Debra Ravasia. Sajid Ravasia is a psychiatrist at Providence Sacred Heart Medical Center.
After the bankruptcy filing, Munding began reviewing thousands of pages of documents. In June he filed a separate civil action asking the judge to deny the bankruptcy petition after discovering significant funds the couple failed to disclose as part of their required disclosure forms.
Among those findings, Munding learned that the Ravasias withdrew about $14,485 from bank accounts just days before filing bankruptcy; they paid about $46,000 on several credit cards that weren’t disclosed; and they failed to account for $494,500 worth of personal property.
“The defendants have been unable to produce any documents evidencing the disposition of such property or the difference in stated values between the financial statement prepared by their certified public accountant and that which is set for in their schedules,” Munding wrote in court records.
In addition to blaming the Ravasias for lying under oath about their finances, Munding accused the couple of shielding ownership of a ski condominium in Rossland, B.C., by signing it over to Ravasia’s father, Ed Truelove.
Munding noted that Truelove agreed to pay $1 to assume the unpaid portion of the loan, some $236,274. However, Munding discovered that Debra and Sajid Ravasia continued to pay the mortgage, utilities and association dues, not Truelove, and they maintained its use as their vacation home.
The Ravasias “kept much, if not most, of their tangible personal property at the ski condo, and concealed or permitted to be concealed their secret interest therein, in order to hinder, delay, or defraud creditors,” Munding wrote.
Despite those allegations Munding proposed a settlement.
As part of the motion to settle the case, Munding wrote that he would agree not to pursue the “fraudulent transfer and strong arm avoidance claims” and he would not challenge the transfer of the ski condo to Truelove.
“After months of informal and formal discussions, hours of review of discovery documents produced in this matter, in conjunction with legal research and expert consultation, as well as arm’s length negotiations in good faith, the Chapter 7 trustee and debtors have reached a settlement,” Munding wrote.
Neither the Ravasia’s attorney, Dan O’Rourke, nor Munding returned calls seeking comment about the proposed settlement they signed on Aug. 1.
But in court records, Munding makes it clear he believes the cost of the ongoing legal fight would outweigh the benefits of a quick settlement.
“All matters addressed by the settlement would take a year, if not longer, to conclude through hearings, trial, and appellate process,” he wrote. “The cost associated with pending motions, objections, and anticipated litigation, including appeals, will be in the range of $75,000 to $100,000, with no guaranteed outcome.”
The $175,000 from the deferred compensation plan or $130,000 cash “represents the highest and best possible offer in exchange for the considered tendered under the settlement,” he wrote.
House of debt
After the settlement was proposed, attorneys for Wells Fargo and Umpqua banks both asked the bankruptcy judge to turn the Ravasias out of their home.
While it appears Munding was willing to allow the couple to keep the home, attorneys for the two banks noted that the Ravasias own no equity in it.
According to court records, the Ravasias owe Wells Fargo some $445,789 for the remaining mortgage and late fees. Umpqua Bank also has liens on the property for a total of $404,984.
Since the combined amount owed far outweighs the home’s $650,000 appraised value the banks asked the judge to intervene.
“After consideration of all liens against the property … together with the costs of liquidation that would be associated with any sale of the property, there is no equity for the estate,” attorney Lance Olsen wrote. “Because the debtor has filed for protection under the liquidation provisions of Chapter 7 … the property cannot be argued as necessary for an effective reorganization.”
Olsen said he had no comment beyond what he wrote in the court filing.
Attorney Trevor Pincock represents Walt Worthy, who leased the two buildings that Debra Ravasia used for her failed businesses. Worthy believes Debra Ravasia owes him $150,000. Court records indicate that anyone hoping to get a portion of the settlement must file a proof of claim by Nov. 3.
“This settlement provides more assets than expected,” Pincock said. “As of right now, we have no intention to object to the settlement.”
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