Bankruptcy Trustee Alleges Dutrow Hid Assets

[Wandering Eyes]

The court-appointed trustee who oversaw the Chapter 7 bankruptcy case of Richard E. “Rick” Dutrow in 2017 filed new litigation on Nov. 13 alleging that the barred Thoroughbred trainer engaged in “fraudulent conveyance” of real estate and money in an effort to hide assets and “hinder and delay” payments due to creditors.

 

 

 

Dutrow, according to the complaint filed in United States Bankruptcy Court (Eastern District of New York), allegedly transferred his $75,000 equity interest in two houses and $92,570 in bank funds to his mother, Victoria Dutrow.

 

These transfers allegedly commenced in 2013–four years before Rick Dutrow voluntarily petitioned the bankruptcy court for a debt discharge, but after the Internal Revenue Service had already filed a $564,733 federal tax lien against him and Stanley Penn & Sons Feed, Inc., near Belmont Park, sent him a demand letter for $207,095 in unpaid bills.

 

Victoria Dutrow–and not Rick–is named as the defendant in the federal lawsuit, which seeks to void the allegedly fraudulent transactions and recover monetary damages that will go to pay creditors.

 

Neither of the two Dutrows could be reached for comment prior to deadline for this story.

 

Rick Dutrow, 59, is the 2008 GI Kentucky Derby-winning trainer whose long history of racing infractions resulted in a 10-year suspension that is currently in effect until 2023.

 

He was granted Chapter 7 bankruptcy protection on July 20, 2017. At that time, he claimed total liabilities of $1.763 million, and wrote in court documents that he was unemployed and had access to only $50 in cash and $12.50 in a joint checking account with his mother.

 

A trustee in a bankruptcy case is generally an attorney assigned by the court to examine the bankruptcy petition and verify information using the debtor’s financial documents and independent sources. Even after the court has granted a debt discharge, a trustee who suspects fraud can still gather evidence and file a lawsuit to gain money for creditors. A trustee can also turn over findings to a prosecutor who could bring criminal charges.

 

 

In the Dutrows’ case, trustee Marc Pergament is alleging that on Aug. 19, 2013, Rick Dutrow transferred his interest in two properties in Gansevoort, New York, (12 miles north of Saratoga Race Course) to his mother.

 

 

 

In both instances, according to the lawsuit, Victoria Dutrow did not sign the deeds for those houses, nor did she provide her son “with any [financial] consideration in exchange for his interest.” She also “did not sign or execute any documents” stating in substance she was “assuming and agreeing” to pay the mortgages.

 

In addition, both Dutrows were joint owners of a bank account. The lawsuit alleges that from April 2013 through Rick Dutrow’s Apr. 4, 2017, petition for bankruptcy protection, he transferred $92,570 to an account at the same bank solely owned by his mother.

 

Rick Dutrow, according to the lawsuit, had testified during his bankruptcy proceedings that the joint account was really his, and that “the only reason” his mother had been listed on it “was so that she could do all of the transactions.”

 

Yet during that same period, the lawsuit alleges, Rick Dutrow was “insolvent at all times…or was rendered insolvent as a result of making” those transfers. The combined bank and real estate transfers, in effect, “diminished the assets of the Debtor’s bankruptcy estate.”

 

According to Equibase, Rick Dutrow-trained horses earned more than $87 million between 1979 and 2013. But during that same time frame, his list of racing offenses totals at least 75 infractions spread out over multiple jurisdictions.

 

In addition to Rick Dutrow’s oft-cited troubles with equine medication violations, his sanctions listed with the Association of Racing Commissioners International include multiple penalties for personal drug use, check forgery, falsified applications, failing to report a criminal conviction, plus various license refusals for “moral turpitude,” “evidence of unfitness,” and attempts to “deceive state racing officials.”

 

On Jan. 17, 2013, New York regulators rescinded Rick Dutrow’s training license for 10 years and fined him $50,000 after one of his Aqueduct Racetrack winners tested positive for an opioid analgesic and syringes containing a painkiller and a sedative were found in his backstretch stable office.

 

This past July, after previously exhausting his legal appeals to have the case overturned or re-adjudicated, Rick Dutrow had yet another request to modify his penalty based on time served denied by the New York State Gaming Commission.

 

 

A public petition posted earlier this year on Change.org has garnered 2,562 online signatures–many from within the racing community–in support of Rick Dutrow being allowed to return to training. @thorntontd

 

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