Jacqueline Laurita Says Her Home is Not in Foreclosure; Jacqueline’s Business ‘JL Beauty Enterprises’ Could Have Huge Tax Debt (Updated 6/17/2013)
UPDATE 6/17/2013: TMZ reported that the Lauritas struck a deal with their bank and saved their mansion from foreclosure. “The Lauritas were sued by Hudson City Savings earlier this year. The bank claimed they missed a mortgage payment on her 5,600-square-foot crib — a cool $10,175. Here’s the kicker … under the housewife’s contract, one missed payment meant the bank could demand the entire balance owed, which it did. When the Lauritas couldn’t cough it up … HCS asked to foreclose. But good news … Jacqueline managed to strike a deal with the bank outside of court, and in return Hudson City Savings dropped the suit. The case was dismissed on April 17. Now if only that little tax problem could go away …”
On the morning of April 25, 2013, at 7:32 AM (15 minutes after this blog was published), Jacqueline Laurita tweeted that she is not rich nor is she broke, and implied that Autism treatments and therapies for her son Nicholas are causing financial distress for her family:
“Some say we are rich. Some say we are broke. We are not rich & we are not broke. We are doing ok. Autism treatments & therapies are very expensive ya know?”
According to TMZ on March 2, 2013, Jacqueline has a massive tax debt and owes the State of New Jersey $340,000. The tax debt of $340,000 is owed to the State of New Jersey, not the Federal government (IRS):
“The Garden State is picking a cat-fight with ‘Real Housewives of New Jersey’ star Jacqueline Laurita — claiming she needs to pay off a $340,000 tax bill … OR ELSE. The NJ Division of Taxation filed the tax lien against Jacqueline — who has been a regular on the show since season 1 — earlier this year for exactly $338,337.05. The docs don’t specify which year(s) Jacqueline allegedly racked up the debt, but if she doesn’t pay up soon, they could go after her assets. Jacqueline is not the only NJ housewife to botch her finances — her two nemesis on the show, Danielle Staub and Teresa Giudice, are both in the middle of a bankruptcy right now. Hey Bravo, maybe an episode called ‘The Girls Pay Their Bills’” is in order.”
A source close to Jacqueline says she owns her own business named JL Beauty Enterprises, which could be the cause of the Laurita’s huge tax debt owed to the State of New Jersey:
“Jacqueline should have never made comments about Teresa’s finances when she has issues. As for the tax lien, I wonder if this has to do with her business…JL Beauty Enterprises. I’m surprised she hasn’t commented about this twitter. Also, the years weren’t specified in docs as per TMZ. At any rate, she needs to pay her taxes like the rest of us. Jac started the company last year. She did tell someone on twitter she was making a million dollars. Tamara Tattles blogged about it. Not making excuses for her. This huge tax debt means the income was high. Can’t have it all.”
On September 2, 2012, Tamara Tattles published a Twitter direct message (DM) from Jacqueline to TeeCee66, where she claimed to be making over a million per year for endorsing products:
“I make over a million a year. I just love the [Acne] product. Besides the show, I have successful products out there that I don’t make known to the show to cheapen the brands. :0 I work too. I enjoy it.”
Perhaps one of the deals Jacqueline is referring to is her affiliation with Altruistic Beauty Medspa, which opens this fall in Oakland, NJ. According to Jacqueline’s biography on BravoTV’s website, Jacqueline is the owner of the spa, but the spa’s website suggests she is, at best, a celebrity partner:
“Aside from spending time with her family, Jacqueline continues her passion and career in the beauty industry as an owner of a beauty Medspa in Oakland, N.J. called, “Altruistic Beauty Medspa” that should be opening late summer/early fall 2013. The spa is dedicated to those who are unselfishly devoted to the welfare of others. This sanctuary is all about giving back [excerpt from Jacqueline’s biography on BravoTV’s website].”
Jacqueline is denying reports that her New Jersey home is in foreclosure. She told Tom Murro of FoxCT:
“Thank you for all who were concerned, but my house is NOT in foreclosure. We simply modified our mortgage which is a process. Our mortgage modification has been approved and all is good. My husband and I have ALWAYS filed and paid our taxes every year. We have NEVER evaded taxes. The $340k was from a tax audit in 2006 in which about 1/2 of that was added interest. We have been disputing this because we didn’t think it was fair to pay so much interest on something that we didn’t even know we owed until recently. The IRS is currently working with us to lower the amount owed, and once that new amount is decided we will, of course, pay the amount.”
However, according to TMZ on April 16, 2013, Jacqueline is being sued by Hudson City Savings Bank, and the bank is asking a judge for permission to foreclose on their home:
“A ‘Real Housewives of New Jersey’ star could be downgraded from ‘housewife’ to just plain old ‘wife’ … because a bank is trying to FORECLOSE on her mansion. Jacqueline Laurita is being sued by Hudson City Savings Bank. The bank claims Jacqueline took out a $1.6 million mortgage back in 2007 on a 5,600-square-foot pad, but in February 2012 failed to cough up the $10,175 monthly mortgage payment. Big mistake … according to the deal … if Jacqueline misses ONE payment the bank can demand the entire balance — which it did. The bank is now asking a judge for permission to foreclose on the home. It’s not Jacqueline’s only financial woe — the State of NJ says she still owes over $340,000 in unpaid taxes. If only she had a sex tape to hock.”
According to Zillow, a notice of lis pendends has been filed against the Laurita’s Franklin Lakes home — if a lis pendens is filed with the county recorder against a piece of property, this indicates that the house is already in some stage of the foreclosure process. The homeowners are no longer in the preforeclosure stage, or merely behind in payments.
One of the legal terms that homeowners in foreclosure often come across is lis pendens. They may initially find out about the term when attempting to refinance their house and the mortgage broker turns them down because of this type of document filed against the property. If a lis pendens has been filed, it will show up with the county recorder as a document affecting the title.
A lis pendens does not stop or prevent foreclosure at all, as it is merely a document serving notice upon any other party that is researching the particular property affected by the document. In most cases of a homeowner behind on the mortgage payments, the lender’s attorneys will file the initial foreclosure lawsuit with the court and a lis pendens will be sent to the county clerk or recorder’s office to indicate that a particular property is in the process of a pending litigation.
The term lis pendens is Latin for “lawsuit pending,” and the lawsuit that it is referring to is the legal process of foreclosure. If the lender was not suing for the property to be sold for payment of the defaulted mortgage loan, this document would never be filed in the first place, as no lawsuit would be pending.
In fact, a lis pendens specifically indicates that the property is facing foreclosure, and the document will show anyone, such as a title company or prospective foreclosure refinance lender, researching the real estate that it is involved in a lawsuit. So the lis pendens is meant to signify the foreclosure; it does nothing to prevent the foreclosure, but it does not itself affect the homeowners’ ability to save their home.
The most commonly used legal mechanism that would stop foreclosure is filing bankruptcy with the court, and even this only puts the process on hold while the creditor and debtor are coming to an agreement to negotiate a settlement of the debt.
Homeowners may also wish to consider getting rid of the lis pendens affecting their home by mounting a defense against the lawsuit that has led to the foreclosure process. This is a direct defense of the litigation, though, not an extra legal process like bankruptcy that may be used to put the suit on hold.
If a lis pendens is filed with the county recorder against a piece of property, this indicates that the house is already in some stage of the foreclosure process. The homeowners are no longer in the preforeclosure stage, or merely behind in payments. At this point, foreclosure can not prevented, as it is already being pursued by the lender and its attorneys — it must be stopped, and homeowners need to begin putting together a realistic plan and researching various ways to stop foreclosure, such as a mortgage modification, repayment plan, selling the house, or a foreclosure bailout loan.
The Lauritas were having financial issues at the same time as the Giudices. While RHONJ season 2 was taping:
- In September 2009, creditors of Chris and Joseph Laurita’s company, Signature Apparel, pushed the company into bankruptcy protection (the company had only been in operation since 2005).
- A month later, on October 29, 2009, the Giudices filed for bankruptcy protection.
It looks like Chris has formed several different LLCs to spread the money around for blk., just like he did with Signature Apparel and the Laurita Pyramid Companies (Pyramid Trading, Inc., Pyramid Trading Corp., Retail Solutions, Four Brothers Retail and Cool Five LLC). With the blk. venture, Chris already has more than one company name associated with it: including Blk Brands LLC and blk.beverages, LLC (there are probably others).
The Lauritas didn’t file bankruptcy protection – creditors of Signature Apparel filed an involuntary petition against Signature Apparel in the U.S. Bankruptcy Court, seeking relief under chapter 7 of title 1 of the U.S. Bankruptcy Code. The creditors forced the bankruptcy in hopes of getting restitution – basically going after the Laurita’s personally, and the other companies that they siphoned funds to (including Pyramid Trading, Inc., Pyramid Trading Corp., Retail Solutions, Four Brothers Retail and Cool Five LLC – collectively referred to as the “Laurita Pyramid Companies”).
The creditors of Signature Apparel are suing the Lauritas for “treating the assets of Signature Apparel as if those assets were Chris and his brother Joseph’s own personal assets – they wrongfully utilized and depleted the corporate assets of Signature to further their own individual financial interests.”
Chris and his brother Joseph each 50% owner/member of Signature Apparel LLC (which was formed in 2005 and went bankrupt in 2010), diverted funds from the company for personal expenses and transferred company funds to family members and other family businesses, draining the company so dry that it was an empty shell and creditors couldn’t be paid. Jacqueline is also named as a defendant in the case because she and other family members “accepted funds they knew belonged to Signature and for which they each knew they had performed no services and/or provided no value.”
From the original lawsuit filed on behalf of the creditors of Signature Apparel LLC against the Laurita brothers:
The Laurita Bankruptcy – Signature Apparel LLC Was Drained of Its Funds and Assets to Support the Lauritas’ Opulent Lifestyle (Updated 3/12/2015)
“Everyone likes to have nice things, but I’m not one to brag about it.” – Jacqueline Laurita, RHONJ Season 1 & 2 Tagline
“I had heard that Joe was saying things that discredit my reputation as a businessman. I was furious, because if there’s one thing I’m not, it’s shady.” – Chris Laurita, Season 4 Episode
UPDATE 3/4/2015: Below is an excerpt from the Memorandum Opinion for two motions before the court. Click here to read the entire motion, which includes background, cover-up, and procedural history of the case.
Counts I and II: Fraud and Negligent Misrepresentation
Counts III and IV: Breach of Fiduciary Duty and Aiding and Abetting Breach of Fiduciary Duty
Count V: Conspiracy
Counts VI and VII: Breach of Contract and Tortious Interference with Contract
Count VIII: Conversion
Count IX: Unjust Enrichment
On March 4, 2015, the Court entered its Memorandum Opinion (A) Granting in Part and Denying in Part the Parties’ Cross-Motions for Summary Judgment and (B) Denying the Defendants’ Daubert Motion (the “Opinion”). For the reasons set forth in the Opinion, it is hereby:
ORDERED that summary judgment is GRANTED to the Defendants as to Counts V and VIII of the Amended Complaint; and it is further
ORDERED that Counts V and VIII of the Amended Complaint are hereby DISMISSED; and it is further
ORDERED that summary judgment is DENIED as to Counts VI and VII of the Amended Complaint; and it is further
ORDERED that summary judgment is GRANTED IN PART AND DENIED IN PART as to Counts I, II, III, IV, and IX of the Amended Complaint, as fully set forth in the Opinion; and it is further
ORDERED that the Daubert Motion is DENIED; and it is further
ORDERED that trial in the above-captioned adversary proceeding shall commence on April 21, 2015.
UPDATE 11/14/2014: An order was granted to extend the time to file objections to the claims though January 30, 2015,
UPDATE 8/2/2014: The trial in the adversarial proceedings against the Lauritas, with Signature Apparel as the plaintiff, is scheduled for November 13, 2014. To delay the trial, the Laurita’s attorneys submitted notices to the court on July 16, 2014, requesting to withdraw as counsel in their four-year representation of the Lauritas on the basis of their failure to pay legal fees. The court granted the request. The Laurita Adversary Proceeding and the Laurita/Iconix Adversary Proceeding each have been pending for years, and the Withdrawal Notices came on the eve of scheduled summary judgment motions and trial in these matters. Signature Apparel objected to the withdrawal motions, stating:
“The Laurita Defendants pillaged Signature pre- and post-Petition, as will be demonstrated in the forthcoming proceedings, and they are well aware that the estate has limited resources. The proposed withdrawal of their counsel should not be an occasion for yet more delay and needless waste of Signature’s limited resources.
“Delay has been the Laurita Defendants’ primary defense tactic in these proceedings, and Signature is concerned that this latest and last gambit simply is more of the same. Withdrawal for failure to pay fees at this late stage in these matters, when Troutman Sanders clearly was aware of that issue for months, is ethically suspect at the least. Signature respectfully submits that, prior to the resolution of this issue, the Laurita Defendants should be required to provide information concerning who specifically intends to hire new counsel and what efforts he or she will undertake to minimize any further delay of the dispositive motion practice and proceedings in these matters.”
Jacqueline Laurita in her final Bravo blog for season 4 said:
“I know I said during the reunion that I wished Joe Giudice would go to jail, but regardless of if I think he deserves it or not, I will not wish anything bad for Teresa or Joe. They have 4 beautiful girls, and if anything unfortunate happens to either one of them, it effects those girls, and as a mother I do not want that.”
Jacqueline Laurita is implying that Joe Giudice deserves to go to jail — does she feel the same way about herself, her husband and other Laurita family members? Chris Laurita and his brother Joseph diverted funds from their company (Signature Apparel LLC, which went bankrupt in 2010) for personal expenses and transferred company funds to family members and other family businesses, draining the company so dry that it was an empty shell and creditors couldn’t be paid.
Jacqueline, who is named as a defendant in the bankruptcy case, had been summoned for a deposition on November 13, 2012. The trustee’s attorney Michael Fox told RumorFix on October 25, 2012:
“It frustrates me that they are so public about their lavish lifestyle and they show indifference.”
Signature requested to extend the deadlines: for fact discovery and depositions to January 18, 2013, reply expert reports to April 16, 2013, and expert discovery and depositions to May 22, 2013.
“Here’s how the Laurita bankruptcy contrasts to the Guidice bankruptcy: Teresa and Joe were making big bucks but spent ALL of their money, and had no savings. So when the real estate crash happened, they were in no way prepared for the massive decrease in income both personally and for Joe’s business. Obviously, they had no choice but to file bankruptcy, which initially was completely legitimate. Should they have been wiser with their money when times were good? Yes, but this a free country and they’re free do what they want (legally). Luckily, Teresa was able to start making more money than ever had before, and they are now better off as they have withdrawn their bankruptcy and are living more modestly and paying down their debts. While there were problems with fraud later on in their bankruptcy filing (which I believe were resolved, possibly allowing them to file again if they wanted to), it is better for everyone that they are committing to paying instead of trying to discharge their debt. I would label Teresa and Joe as just stupid with money and victims of the economy. The Lauritas are criminals.” – CenNJ, October 26, 2012, Fame-Whorgas
On March 14, 2013, arguments were scheduled to be heard for all motions in the federal bankruptcy case against the Lauritas:
Until these motions are settled, all depositions have been suspended. However, the discovery part, both fact and expert, is ongoing. More than likely, Jacqueline will not have to appear, and it is doubtful Bravo will film it. This is preliminary until all evidence is gathered and examined. Once completed, then it will be decided whether charges are to be filed. But there certainly appears to be a mountain of evidence, so the Lauritas definitely have a lot on their plate right now between the hearings, the tax lien, the possible foreclosure, and Jacqueline’s plastic surgery bills. – Jeannie5233, March 13, 2013, Fame-Whorgas
According to legal documents dated March 24, 2011 (one of the main points is that creditors forced a bankruptcy, supposedly before the Lauritas could sell a valuable license, yet they went ahead and sold it anyway – click on the link and see pages 5, 6 and 25):
Chris and Joseph failed to respect the separate legal existence of Signature Apparel LLC and the other Laurita companies [including Pyramid Trading, Inc., Pyramid Trading Corp., Retail Solutions, Four Brothers Retail and Cool Five LLC (collectively referred to as the “Laurita Pyramid Companies” ), or to companies or business ventures in which Chris and Joseph were investing, including Angelo’s Favorite, The Hungry Ghosts Movie LLC, and the BSTC Group], and treated the assets of those companies as if those assets were Chris and Joseph’s own personal assets, including, by way of example:
- Using Signature funds to pay the personal expense of the other Laurita family members,
- Causing the diverted funds to be conveyed away from Signature to Pyramid Trading Inc. (another Laurita company),
- Making other fraudulent transfers to other Laurita companies, and
- Conveying the Rocawear and Artful Dodger Licenses to a third party while retaining for themselves a percentage of the gross fees received from those licenses.
Utilizing their position in Signature and the Laurita Pyramid Companies, Chris and Joseph, in concert with one another, have wrongfully utilized and depleted the corporate assets of Signature to further their own individual financial interests, in total disregard of the interests of Signature.
- From 9/5/2008 – 8/18/2009, within a year prior to the petition date, Joseph Laurita received a total of $873,689 in transfers of interests in Signature’s property.
- From 9/5/2008 – 8/14/2009, within a year prior to the petition date, Christopher Laurita received a total of $405,730 in transfers of interests in Signature’s property.
Chris and Joseph, in concert with one another, have wrongfully siphoned corporate funds from Signature which resulted in Signature becoming grossly undercapitalized to the point of financial extinction, while amassing personal assets for themselves and their family members.
To this day, Chris and Joseph, while claiming the financial crises of Signature, still drive luxurious vehicles, own buildings and residences and have assets which may be worth millions of dollars.
Signature was so controlled and dominated by Chris and Joseph, and its separate legal existence so ignored, that Signature primarily transacted the personal business of Chris and Joseph, and is therefore a mere instrumentality and the alter ego of Chris and Joseph.
Such control and domination has been exercised to commit fraud and engage in other wrongful conduct, which has resulted in an unjust financial loss and injury to Plaintiff.
As a matter of equity, the Plaintiff (Signature Apparel LLC) is entitled to pierce the corporate veil of the other Laurita companies, and to reach the assets of Chris and Joseph, jointly and severally, to satisfy any judgment obtained in this litigation.
Joseph Laurita and Christopher Laurita, defendants in the case and each 50% owner/member of Signature Apparel LLC (which was formed in 2005), are accused of:
- Draining the company of all its funds and assets in order to support their families’ increasingly opulent lifestyle of private jets, limousines, extravagant parties, premium automobiles, designer clothing, ostentatious home furnishings and lavish vacations.
- Using company funds for their own personal expenses, and making payments to themselves and their family members from company funds for amounts not owed to them by Signature.
Also named as defendants in the case are Jacqueline Laurita, Adeline Laurita (Joseph’s wife), and Anthony Laurita (Chris and Joseph’s brother).
- Chris and Joseph directed Signature to pay the expenses of and make payments to other companies owned, controlled by or affiliated with Chris Laurita and Joseph Laurita.
- Chris and Joseph improperly directed Signature’s vendors, including certain of the petitioning creditors, to make payments to certain of the Laurita’s other companies of funds that were rightfully owed to Signature. Those payments totaled at least and no less than $718,214, and further depleted Signature’s assets.
- Chris and Joseph directed Signature to pay the personal expenses of, and make outright payments to the other Laurita family members (Jacqueline and other family members accepted funds they knew belonged to Signature and for which they each knew they had performed no services and/or provided no value). These payments totaled at least and no less than $7,086,013 (the “Fraudulent Transfers”). These improper payments have no legitimate business purpose, provided no value to Signature, and include:
* At least $1,994,845 for payments to 40 different credit cards for Laurita family members and the Laurita’s other companies
* At least $331,637 for payments on no less than eleven leased cars, including a Bentley and a Maserati
* At least $284,793 in airline travel expenses for the Laurita Family
* At least $145,894 for private airplane rentals for the Laurita Family
* At least $25,000 to Studio Dante, and off-Broadway theater company, for production expenses for the film ‘The Hungry Ghosts’
* At least $73,793 for taxi, limousine and car-service related expenses
* At least $16,951 for car rentals
* At least $5,813 in travel tolls
* At least $6,207 in car insurance premiums
* At least $28,711 for miscellaneous transportation-related expenses
* At least $7,280 for travel agent expenses for the Laurita Family
* At least $1,084 for train travel expenses
* At least $1,379,187 to Joseph Laurita for undocumented or insufficiently documented reasons
* At least $755,184 to Christopher Laurita for undocumented or insufficiently documented reasons
* At least $62,500 to Adeline Laurita for undocumented or insufficiently documented reasons
* At least $40,000 to Anthony Laurita for undocumented or insufficiently documented reasons
* At least $20,909 to Frank Laurita for undocumented or insufficiently documented reasons
* At least $4,860 for rent and utility expenses for 78 Valley Road in Connecticut, the site for Pyramid Trading (another Laurita company)
* At least $325,696 in payments to or on behalf of other entities owned or controlled the Lauritas
* At least $791,509 in payments to Roc Apparel Group LLC for undocumented or insufficiently documented reasons
* At least $784,160 of disbursements to unknown recipients, without any documentation whatsoever
These fraudulent transfers were made voluntarily with the actual intent to hinder, delay or defraud some or all of Signature’s then existing and/or future creditors (including, without limitation, the Petitioning Creditors — Signature Apparel, the plaintiff, will further amend the Complaint when additional information is obtained concerning other monies and property that were fraudulently transferred by or for the benefit of the Laurita family, the defendants, and Laurita Pyramid Companies).
Instead of being used to sustain and develop Signature’s business, pay Signature’s vendors and creditors, Signature’s assets were misused to make outright and unjustified payments to Laurita family members, and to fund the operations of the Laurita brothers’ other companies and business ventures. That diversion of funds constituted a waste of corporate assets and opportunities.
Chris and Joseph wrongfully caused Signature to make outright payments and other transfers to themselves, other Laurita family members, other Laurita companies, and to other companies and business ventures in which Chris and Joseph were investing. After Signature’s bankruptcy, Chris and Joseph conveyed the Licenses away from Signature while retaining for themselves a percentage of gross fees from the licenses, further damaging Signature and effectively rendering the Company an empty shell with no means to pay its creditors. This conduct caused the funds and property of Signature to be squandered, grossly mismanaged and wasted, and contributed to, exacerbated, deepened and/or caused Signature’s insolvency.
- Chris and Joseph breached their fiduciary duties by using Company funds for the payment of their own personal expenses and the personal expenses of other Laurita family members. Signature was damaged in an amount to be determined, but believed to be not less than $7,086,013 plus interest.
- Chris and Joseph breached their fiduciary duties by coordinating the transfer of the Rocawear License and the Artful Dodger Licenses to a third-party, as a new license, while retaining for themselves, rather than Signature, a percentage of the gross fees from the Licenses. As a direct and proximate result, Signature was damaged in an amount to be determined, but believed to be not less than $718,214 plus interest. That transfer provided Chris and Joseph with continuing income from the Rocawear and Artful Dodger Licenses, while reducing Signature to an empty shell with little or no means to pay its debts or continue its business.
Signature had a possessory right and interest to its assets, including its receipts, accounts receivable, property and general funds. Defendants converted Signature’s assets and property when they received monies in the form of payments and other wrongful transfers. Defendants actions deprived Signature of its use of its assets, and contributed to, exacerbated, deepened or caused Signature’s insolvency.
Signature and the other Laurita companies were grossly undercapitalized at their respective inception, and their respective assets were unreasonably small in proportion to their respective obligations.
Defendants Joseph Laurita and Christopher Laurita assert rights to payment allegedly owned by Signature. Pursuant to Bankruptcy Code section 502(d), the Joseph Laurita claim and the Christopher Laurita claim must each be disallowed unless and until such defendants pays Signature an amount equal to transfer made to such defendants that is avoided.
The actions of the defendants described in the Complaint, and as further to be proven upon discovery of additional facts, constitutes inequitable, unconscionable, and unfair conduct. Such inequitable, unconscionable, and unfair conduct of the defendants resulted in harm to Signature and its creditors and/or gave the defendants an unfair advantage over Signature’s other creditors.
- Joseph Laurita asserts that Signature is indebted to him in the amount of $5,337,414 in connection to unsecured loans (the “Joseph Laurita Loans”) allegedly made by him to Signature, as described in the Joseph Laurita claim.
- Christopher Laurita asserts that Signature is indebted to him in the amount of $3,387,414 in connection to unsecured loans (the “Christopher Laurita Loans”) allegedly made by him to Signature, as described in the Christopher Laurita claim.
The insider loans were each a sham, not true loans.
The insider loans represented the equity contributions of defendants Joseph and Christopher Laurita, each 50% owner/member of Signature. Neither Joseph nor Christopher are in the business of lending money, and there was no legitimate business reason for such Defendants to make such insider loans.
Although cast in the form of loans, the insider loans had the substance and character of an equity contribution: there were no arms’-length, good-faith commercial negotiation the terms of the insider loans; at all relevant times, Signature was not adequately capitalized to repay the insider loans; Signature had no ability to obtain comparable financing from a lending institution at the interest rate provided in the insider loans.
At all relevant times, Joseph and Christopher Laurita were insiders of Signature and exercised effective control over Signature. Through actual and effective control over Signature, overreaching and inequitable conduct, defendants Joseph and Christopher operated Signature in an undercapitalized, deceptive and unsound manner, to the detriment of Signature’s creditors.
If the insider loans are not recharacterized as equity, unsecured creditors will receive less than they otherwise would from monies recovered from defendants in this action and in other actions that have been or will be brought by or on behalf of Signature and its estate. Accordingly, the insider loans should be recharacterized as equity contributions in Signature.
Defendants Joseph Laurita and Christopher Laurita have filed the Joseph Laurita Claim and Christopher Laurita Claim (together, the “Proof of Claim”), respectively, in the bankruptcy proceeding. Defendants claims are not supported by the books and records of Signature, nor the materials annexed to the respective Proofs of Claim submitted by Defendants, and therefore should be allowed. As a result of the foregoing, Signature is entitled to an order disallowing the Claims.
About Signature Apparel LLC:
Signature was formed in 2005 by brothers Joseph and Christopher Laurita, as a privately-owned, multi-facted apparel company in the business of designing, manufacturing and distributing branded apparel worldwide. Joseph and Christopher Laurita each owned 50% percent of the Company.
In or about 2005, Signature entered into an exclusive license with a predecessor-in-interest of Iconix Brand Group, Inc. to design, manufacture and distribute junior’s apparel bearing the “Rocawear” trademarks, which license was assigned in or about 2007 to Studio IP Holdings LLC, a subsidiary of Iconix.
In or about 2005, Signature entered into an exclusive license with a subsidiary of Iconix, Artful Holdings LLC, to design, manufacture and distribute apparel bearing the “Artful Dodger” trademarks.
In or about 2005, Signature designed, manufactured and distributed apparel pursuant to the Rocawear License and, beginning in or about 2007, Signature designed, manufactured and distributed apparel pursuant to the Artful Dodger License, and sold such apparel to Signature’s wholesale customers throughout the United States.
Signature achieved more than $250 million in sales from Rocawear and Artful Dodger branded apparel alone between 2005 and 2009.
About the Original Petition by Creditors and the Laurita Brother’s Claims:
U.S. Bankruptcy Court Southern District of New York (Manhattan)
Case No. 09-15378 (JMP)
Signature Apparel Group, LLC, Involuntary Debtor (Plaintiff)
Joseph Laurita, Christopher Laurita, Adeline Laurita, Anthony Laurita and Jacqueline Laurita (Defendants)
Creditors of Signature Apparel Group LLC, which owns the Fetish trademark and holds the licenses for Rocawear Juniors and Artful Dodger, are looking to push the company into bankruptcy protection, court filings showed. – Reuters, September 4, 2009
On September 4, 2009 (the “Petition Date”), Hitch & Trail Inc., Talful Ltd., and Harvestway (China) Limited (the “Petitioning Creditors”) filed an involuntary petition against Signature in the U.S. Bankruptcy Court for the Southern District of New York, seeking relief under chapter 7 of title 1 of the U.S. Bankruptcy Code.
The three original petitioners in the bankruptcy case (other petitioners may have since been added) and the amount owed them:
- Hitch & Trail, Inc., NY NY; $3,556,793.18 (September 3, 2009)
- Talful Ltd, Hong Kong, China; owed $4,757,078,62 (September 3, 2009)
- Harvestway (China) Limited, Hong Kong, China; owed $6,465,464.50 (September 2, 2009)
- Class 1 Priority Non-Tax and Priority Tax Claim, scheduled claims $14,906.80 (CIT Group has since been paid in full)
- General Unsecured Claims: $28,676,703.13 (the Complaint may have since been amended with more petitioning creditors)
On November 9, 2009, the debtor filed its motion to convert the case to a case under chapter 11, and on November 12, 2009 the court granted the motion to convert.
On June 29, 2010, a chapter 11 plan of reorganization was confirmed, and Anthony Labrosciano was named the responsible person of Signature Apparel LLC (he is representing Signature Apparel as the Plaintiff against the Defendants Christopher Laurita, Joseph Laurita, Anthony Laurita, Adeline Laurita and Jacqueline Laurita).
On August 5, 2010, Signature Apparel Group, LLC went out of business.
Affadavit of Joseph Laurita, chairman of Signature Apparel Group
My brother Christopher Laurita and I are the two member of the debtor, each owning a 50% membership interest in the debtor. The debtor is a privately owned multi-faceted apparel company that designs, develops, manufactures, distributes and sells branded apparel worldwide.
Christopher Laurita, Officer and President, 2003 – present
Joseph Laurita, Chairman, 2003 – present
On January 4, 2010, Joseph Laurita filed a general unsecured claim against Signature in the amount of $5,337,414 on account of purported loans made by Joseph to Signature.
On January 5, 2010, Christopher Laurita filed a general unsecured claim against Signature in the amount of $3,387,414 on account of purported loans made by Christopher to Signature.
A list of the 20 largest unsecured creditors is attached as Exhibit ‘A’.
Note: If you copy all or part of this article, please clearly credit and link back to Fame-Whorgas since it took considerable time and effort to type out this information from the PDF file and then edit it down (the Complaint is about 3 times the size of this article), format it, and re-organize it for readability.
UPDATES ON THE BANKRUPTCY CASE:
Since the original complaint was filed (which I found online and included in this article), other creditors have come forward (but I don’t have access to the amended complaint). FRE (link above) has the updates on the case and the amount (which totals $55 million) creditors are claiming are owed to them by the Laurita brothers. Other creditors include:
- Susan G Komen Cancer Foundation $18,000
- Federal Express $14,300
- American Express $$83,000
- UPS $9,500
- Ikon Financial $95,000
- Artful Holdings, LLC $10,350,000
- Studio IP Holdings, LLC $20,700,000
- CitiGroup Commercial $200,000
- Daihwa $456,000
- Hitch & Trail, Inc. $3,699,000
- Putnam Leasing $444,000
- GiftTex: $96,000
- Talful, LTD $4,750,000
- Harvestway Ltd $5,051,000
Chris Laurita removed computers from the Signature Apparel offices. He claims the computers were removed so that the equipment could be used in his new business, New Star Group, LLC (the Company that promotes BLK). Chris disclosed that he was also in possession of a server originally belonging to Signature Apparel. The Memorandum of Law filed in support of the Motion painstakingly sets forth the number of times Chris Laurita, through counsel, insisted that all computers, hard drives, servers and electronic equipment remained at the Signature Apparel warehouse before Laurita finally admitted that he and his personal assistant absconded with the equipment.
These are just some highlights gleaned from the most recent 311-page document from the Signature Apparel bankruptcy lawsuit.