Do you support either the plaintiff or the defendant based on the facts of the case and your interpretation of the law?

Did Lieben act ethically in this case? Could Reaves have prevented the fraud and embezzlement by keeping better track of his company's financial affairs?

Case13.2Federal Court Case Bankruptcy DischargeSpeedsportz v. Lieben

2013 Bankr. Lexis 3783 (2013)

Facts

John Reaves is the sole owner and president of a small business called Speedsportz, LLC, which is in the business of refurbishing exotic automobiles. Reaves had been in this business for about 30 years when he met Angela Lieben. Shortly after meeting, they started dating and Lieben moved in with Reaves, who hired her as his company's office manager and bookkeeper. Lieben's duties included paying bills, reconciling bank statements, and entering information in the company's accounting software. Several years later, Reaves ended their relationship and terminated Lieben's employment. Reaves then discovered irregularities in the company's bank statements, checks that were written by unauthorized and forged signatures, cash that was missing, and unauthorized ATM withdrawals. Evidence showed that Lieben had previously been convicted of forgery. Lieben subsequently filed for personal bankruptcy. Speedsportz and Reaves filed documents with the bankruptcy court, alleging that Lieben's debt from her defalcations was not dischargeable in bankruptcy because they had been committed by fraud or embezzlement.

Issue

Did debtor Lieben's defalcations result from fraud or embezzlement and were therefore not dischargeable in bankruptcy?

Language of the Court

"Dear Thief," she wrote in her diary, "I'm writing this letter to understand you better and ask why you're such a dominant archetype in my life." Debtor Angela Lieben says this was just part of a fictional short story she was writing. Plaintiff John Reaves claims this letter was evidence that his former bookkeeper stole money from him. Entries in Lieben's diaries and personal emails implicate her in this type of conduct against Reaves. The court finds that Lieben is liable to Speedsportz for the unauthorized transactions and concludes that these debts are nondischargeable because she committed fraud and embezzlement.

Decision

The U.S. bankruptcy court held that Lieben had committed fraud and embezzlement and was liable to Speedsportz for $49,232. The bankruptcy court ruled that this amount owed to Speedsportz could not be discharged in Lieben's bankruptcy.

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