A U.S. Bankruptcy judge last week denied the Chapter 7 petition filed by a pair of Spokane doctors who lied about their finances, prompting the judge to rule that their “failure to provide accurate information was knowing and fraudulent.”
Dr. Sajid Ravasia, a longtime psychiatrist at Providence Sacred Heart Medical Center, and Dr. Debra Ravasia, a gynecologist, originally filed for creditor protection in 2017 from about 8,000 former clients of Debra Ravasia’s failed businesses, Northwest Health Summit and Ajuva Spa.
While it appeared the case had ended with a settlement in 2017, the U.S. Trustee’s Office objected to that settlement and the case proceeded to trial, which convened last month.
Chief Bankruptcy Judge Frederick Corbit ruled against the Ravasias on Thursday, agreeing that acting U.S. Trustee Gregory Garvin proved by a preponderance of the evidence that the Ravasias lied about their incomes to avoid a restructuring plan that would have provided some payment to those people and companies that were owed money.
Judge Corbit noted that the bankruptcy proceedings exist to allow an “honest debtor to discharge debts and to make a fresh start, free from the burden of past indebtedness,” he wrote.
But Corbit ruled that Garvin showed that the couple lied about both their incomes and expenses during the case.
“The Ravasias both acknowledged that the report of their expenses was inaccurate. The Ravasias knowingly provided false information and failed to amend their schedules with accurate information,” Corbit wrote. “This financial information is material and, under these circumstances, the failure to provide accurate information was knowing and fraudulent.”
The $191 million bankruptcy was filed after Debra Ravasia shut down both of her businesses in 2016, which Sajid Ravasia apparently did not help manage.
The couple’s actual debt was vastly lower than $191 million. Their first attorney, Dan O’Rourke, previously explained that they had arrived at the $191 million-figure by assigning a $20,000 value on each of the businesses’ 8,000 former clients.
However, the couple nonetheless sought Chapter 7 protection under the argument that their living expenses, which included paying staff to care for their lawn, swimming pool and cost of tuition to a private school for their children, far exceeded Debra Ravasia’s ability to pay because she was no longer employed or employable.
O’Rourke was replaced in October 2019 by Nancy Isserlis, a former Spokane City Attorney, and Darren Digiacinto, who both work for the law firm, Winston and Cashatt. Isserlis was not available for comment Monday and Digiacinto did not immediately return a request Monday seeking comment.
In court records, Debra Ravasia claimed her income at the time of filing the petition in January 2017 was $0 and Sajid Ravasia listed his gross monthly income of $26,818. Both marked “yes” when they expected their incomes to drop after filing for bankruptcy.
Then in 2019, they filed new court documents and Debra Ravasia again listed her income for 2017 as $0. The documents, prepared by an attorney and signed by the Ravasias, said that Sajid Ravasia was making about $20,800 a month or $250,000 a year in 2017.
But tax records showed differently. Sajid Ravasia reported a gross income for 2017 of about $668,000 or more than $55,000 a month. Asked why he didn’t update court records, Sajid Ravasia said he “believed they informed his lawyer about his increased income,” court records state.
And, Debra Ravasia, who estimated in initial documents that she spends $1,500 a month on clothing and laundry service, apparently quickly found work.
Her records, which she later acknowledged at trial, showed she had a gross income of more than $260,000 for about eight months of work in 2017. And, an investigator found the couple had a combined-gross income of about $967,000 despite reporting to the Internal Revenue Service on their joint tax return of combined wages of about $648,000, the records state.
“To the extent Debra Ravasia testified that she was not employable and her income was always uncertain, the court finds her testimony not credible,” Corbit wrote. “The debtors acted with intent to deceive interested parties about the income earned by Debra Ravasia.”
Garvin, the acting U.S. Trustee, made further allegations that the couple lied in the bankruptcy documents about their debt, their 2016 income “and conduct related to a ski condominium.”
According to previous court records, John Munding, the trustee originally assigned to the case, found that 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.
Munding also accused the couple of shielding ownership of a ski condominium in Rossland, B.C., by signing over the $236,274 remaining on the condominium’s loan to Ravasia’s father, Ed Truelove, for $1.
Munding later discovered that the Ravasias continued to pay the mortgage, utilities and association dues, not Truelove, and the Ravasias 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.
Corbit, the bankruptcy judge, wrote that he had enough evidence to rule on the case without even addressing the condo dealings.
“The court does not need to address these additional allegations in light of the court’s findings of fact and conclusions of law regarding the Ravasias’ false oaths related to income and expenses,” he wrote.
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