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The Giudice Bankruptcy and Federal Indictment (with Links to Official Documents)

October 19, 2013 218 comments

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Joe was well-aware of his wife’s burning urge to shop, but says the expenses were manageable during cash-flush times. “For the nine years we’ve been married, she had a credit-card bill, and I would pay it. She might spend $10,000 on stupid things, but I didn’t question it – and it always got paid.” – People magazine, June 28, 2010

According to the U.S. government, the Giudices failed to file federal tax returns from 2004 through 2008; lied on bank loan applications from 2001 through 2008 (and because they used U.S. mail and wire communications to deliver the loan documents, they also committed mail and wire fraud); and lied in their petition to the U.S. bankruptcy court filed on October 29, 2009 (and lied in later amendments).

On their chapter 7 bankruptcy petition (see below for a summary of the debt they wanted to discharge), a U.S. bankruptcy trustee accused them of making false statements as to income, assets and expenses, including failure to disclose Teresa’s Bravo salary increase for season 2, income from TG Fabulicious sales and website sales, payments from personal and magazine appearances, and income from real estate holdings.

In December 2010, approximately one year after Teresa and Joe Giudice filed bankruptcy, the US Trustee overseeing their case accused Teresa and Joe of lying to the court by knowingly concealing various assets, which were legally required to be included in their bankruptcy paperwork… Specifically, the Trustee accused Teresa and Joe of knowingly concealing the following assets: three cars, a boat, the Giudice family pizzeria, three homes and several other investment properties, dozens of bank accounts, and Teresa’s pending book deal and business interests in TG Fabulicious LLC and 1576 Maple Avenue Associates LLC. The revenues generated by Teresa’s book, Skinny Italian, alone exceeded $280,000. [Source]

Maple Avenue Associates LLC, which Joe didn’t disclose as an asset in his bankruptcy petition filed in October 2009, is the pizzeria and laundromat with the apartments above which was featured on the show in season 3. Joe paid $575,000 cash for the investment property in April 2008, at the time season 1 was taping. Joe’s attorney, James Kridel, told People magazine in July 2010 that the building was in Joe’s father’s name and therefore should never have been considered an asset at the time of the bankruptcy filing, but that is a lie: the building was in Joe’s business name, 1576 Maple Avenue Associates LLC, which has Giuseppe Giudice listed as the Principal.

The following is a report of the all-cash transaction for the sale of 1576 Maple Avenue in Hillside, NJ. in the May 9 – 22, 2008 issue of the Mid Atlantic Real Estate Journal (page 4).

The Kislak Company, Inc. completes $575,000 sale of 1576 Maple Ave. in Hillside

HILLSIDE, NJ – The Kislak Company, Inc., the dominant multi-family and retail investment sales firm in the tri-state region, recently completed the $575,000 sale of 1576 Maple Ave., a 10-unit, mixed-use building in Hillside. Sales Associate Jeff Squires represented the seller, a private individual, and VP Joni Sweetwood represented the buyer, a private individual, in this all-cash transaction.

“This transaction was a unique opportunity for The Kislak Co.,” said Squires. “Our firm generally completes investment sales transactions for income-producing properties. However, at the time of the sale, 1576 Maple Ave. was gutted down to the studs and was essentially a vacant brick shell.

The buyer is completely rebuilding the inside of the property, from installing sheetrock and electrical systems to new plumbing and kitchens before the property can be leased and turned into a value-added opportunity.”

1576 Maple Ave. is a two-story, mixed-use building that is comprised of five retail units and five apartments and includes a lot that will be paved for parking. Many future tenants await the completion of this project located in the center of town.

Attorney Fred Roughgarden represented the buyer in this transaction. Attorney Michael Rasso represented the seller in this transaction.

Joe and Teresa withdrew their bankruptcy filing two years later, in late 2011, after the bankruptcy trustee alleged that they had committed fraud on their petitions:

Given the chance to respond to the Trustee’s allegations, Joe Giudice had a change of heart about his bankruptcy. When questioned about hiding the family’s assets, Joe chose to invoke his Fifth Amendment right against self-incrimination; and, soon thereafter, he settled his dispute with the Trustee. [Source]

According to the consent order, Teresa agrees to waive discharge of her debts, and acknowledges that she wishes to resolve the Trustee’s proceedings against her “without the need for further inquiry or litigation, and without her making any further admissions.” [Source]

The following is a summary of Joe’s and Teresa’s outstanding debt per their October 29, 2009, chapter 7 bankruptcy filing.

Joe Giudice’s Income for the Years He Did Not File Tax Returns (from the Federal Indictment):

2004 – $243,919
2005 – $323,481
2006 – $26,194
2007 – $377,423
2008 – $25,442

Primary Residence at 6 Indian Lane, Towaco, NJ (Amount Owed – $1.72 million):

  • 1st mortgage of $1.72 million with Community Bank of Bergen County (in Joe’s and Teresa’s name), September 2008 (this was initially a construction loan for $1.7 million in February/March 2008 that was converted to a $1.72 million mortgage loan) – the Giudices were making their mortgage payments and the bank had not begun any foreclosure procedures

Shore House at 49 Sylvia Lane, Stafford, NJ (Amount Owed – $550,266):

  • 1st mortgage of $266,365 with America’s Servicing Co. (in Teresa’s name)
  • 2nd mortgage of $33,903 with Ocwen Loan Servicing (in Teresa’s name)
  • 3rd mortgage of $249,998 with Wachovia (in Teresa’s name)

Other Property at 68 Pine Brook Rd, Lincoln Park, NJ (Amount Owed – $314,162):

  • 1st mortgage of $122,125 with America’s Servicing Co. (in Teresa’s name)
  • 2nd mortgage of $24,962 with Amtrust Bank (in Teresa’s name)
  • 3rd mortgage of $167,075 with Wachovia (in Teresa’s name)

East Orange, NJ Apartment Buildings (Amount Owed with Co-Debtor, Joe Mastropole – $5.12 million):

  • 168-170 South Clifton Street, $1.723 million with Wachovia (in the name of 168-170 South Clifton Street Associates LLC), May 2007
  • 17 Webster Place, East Orange, NJ, $2.1 million with Wachovia (in the name of 17 Webster Place Associates LLC), December 2007
  • 6 Glenwood Avenue, East Orange, NJ, $1.3 million with Dime Savings Bank (in the name of 6 Glenwood Avenue Associates LLC), July 2005 and May 2006

Credit Cards, Building Materials and Services/Repairs:

  • $83,255 credit cards (Bloomingdale’s, Nordstrom, Neiman Marcus, HSBC, Citi Cards, Home Depot)
  • $92,936 building services
  • $91,266 building materials

Other Debt:

  • $11,769 fertility treatments
  • $2,239 phone bill
  • $840 utility bill

Legal Fees and Judgments:

When tabloids covered the Giudice’s bankruptcy in 2010, reports said they were almost $11 million in debt, however, the line items in the bankruptcy document suggest it was $8.7 million, with $282,305 of that being unsecured debt (credit cards, utilities, home repairs/improvements, services, etc.), excluding legal fees and judgments. In their bankruptcy petition, the mortgages on the apartment buildings were qualified as unsecured because they were all in foreclosure, and the money from cash-out refinances of the apartment buildings appears to have been spent on their mansion and other properties and expenses rather than improving and maintaining the buildings:

$5,123,103 mortgages on 3 apartment buildings (in foreclosure)
$2,585,377 mortgages on 3 residential homes
$722,046 judgments and legal fees (includes $300,000 already paid to former business partner)
$282,305 unsecured debt (credit cards, building materials/services, etc.)
$8,712,831 Total Debt Itemized in Bankruptcy Petition

The Giudices should have worked with their banks to short-sale apartments buildings if those buildings were the real reason for their financial hardship. And why not use the financial windfall from Bravo to pay off some of the debt? The Giudices continued to pay the mortgage on their primary residence, so they were not planning to let their home go into foreclosure, so why not work out short-sale deals with the banks on their investment properties? Did they not want to use new money to pay off old debt? Perhaps they had the mindset that everyone was doing it (filing bankruptcy), so why not them?

The Giudices should not have filed for bankruptcy protection – it is because they did and then allegedly committed fraud on their petitions that the feds scrutinized their finances, which led to the federal indictment on money fraud. What a terrible decision on their part!

Giudice’s Chapter 7 Bankruptcy Filing, October 29, 2009:

http://www.jdsupra.com/legalnews/voluntary-petition-for-chapter-7-bankrup-54212//

First Amendment to Giudice’s Bankruptcy Petition, December 17, 2009:

http://www.jdsupra.com/legalnews/amendments-to-bankruptcy-petition-in-re-54627/

Second Amendment to Giudice’s Bankruptcy Petition, January 8, 2010:

http://www.jdsupra.com/legalnews/amendments-to-bankruptcy-petition-in-re-54869/

Summary of the U.S. Government’s Case Against the Giudices for Bankruptcy Fraud, September 2, 2010:

http://mnconsumerattorney.files.wordpress.com/2011/09/giudice_ust_cplt_obj_to_discharge1.pdf

Roberta A. DeAngelis, the U.S. Trustee overseeing the Giudice bankruptcy petition, filed a complaint objecting to discharge. DeAngelis requested Judge Morris Stern not grant the couple’s chapter 7 bankruptcy petition because of the many “falsehoods” and omissions in their filing.

Complaint Objecting to the Discharge of the Giudice’s Debt, Submitted by John Sywilok, June 30, 2010:

http://www.thesmokinggun.com/file/desperate-housewife

Application by Chapter 7 Trustee to Proceed to Public Sale (Auction of Home Furnishings), August 15, 2010:

http://images.eonline.com/static/news/pdf/TeresaGiudiceDocs.pdf

Denial of Discharge of Debt and Consent Order Waiving Discharge of Teresa Giudice, December 5, 2011:

http://cdn2.getoutofdebt.org/wp-content/uploads/2012/03/118132468022.pdf

Mastropole v. Giudice, Opinion Letter by Bankruptcy Judge Morris Stern, January 3, 2011:

http://www.leagle.com/decision/In%20BCO%2020110103227

Mastropole v. Giudice, Opinion Letter Summary, January 3, 2011:

http://www.meislik.com/cases/giudice/

Federal Indictment Against the Giudices for Money Fraud, July 29, 2013:

http://www.justice.gov/usao/nj/Press/files/pdffiles/2013/Guidice,%20Giuseppe%20and%20Teresa%20Indictment.pdf

In their bankruptcy petition, the Giudices listed Teresa’s RHONJ season 1 salary of $3,333 per month and claimed she was unemployed, even though she was taping season 2 at the time and her monthly salary was $9,167 or $110,000 yearly; and they listed Joe’s monthly income as $3,250, plus $10,000 per month in assistance from family members (see image below) – they said they “reasonably did not anticipate any increase or decrease in income within the year following their filing.”

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