Newspaper article THE JOURNAL RECORD

Bankruptcy Law in Florida Creates `Deadbeat's Haven'

Newspaper article THE JOURNAL RECORD

Bankruptcy Law in Florida Creates `Deadbeat's Haven'

Article excerpt

N.Y. Times News Service

PONTE VEDRA BEACH, Fla. _ For an admitted felon who arrived in Ponte Vedra Beach just a step ahead of the irate victims of his insider trading, Martin A. Siegel manages to live quite well, thank you. The former Wall Street investment banker occupies a $3.25 million, 7,000-square-foot beachfront home whose purchase put Siegel's assets out of reach of a $2.75 billion civil suit.

Just up the road at the Marsh Landing Country Club lives Bowie K. Kuhn, the former baseball commissioner who moved here in 1990 as his Manhattan law firm was going through bankruptcy proceedings.

Kuhn enjoys the benefits of a Florida life style in his million-dollar, five-bedroom, five-bath house, which he bought after creditors seized his weekend house in the Hamptons and were just about to attach his $1.2 million home in Ridgewood, N.J.

Good weather and the many golf courses and beach resorts scattered across this elegant Jacksonville suburb are not the only advantages of a legal residence in Florida.

As Siegel and Kuhn knew when they came here, a state law prohibits the seizure of a person's legal residence in bankruptcy proceedings, regardless of the value of the property. Florida also allows debtors to protect a broad array of financial assets, ranging from wages to annuities and pension plans.

The law is part of a broad and increasingly controversial network of legal exemptions from bankruptcy claims that have led Florida to be dubbed "the deadbeat's haven" and "the debtor's paradise."

"I believe this law is grossly unfair," said Judge A. Jay Cristol, a federal bankruptcy judge in Miami who has been an outspoken advocate of overhauling Florida's bankruptcy and homestead exemptions. "Theoretically, you could shelter the Taj Mahal in this state and no one could do anything about it."

Siegel and Kuhn are not alone in their decision to seek refuge in Florida. A multimillion-dollar horse ranch near Ocala is now owned by Marvin Warner, an Ohio banker and former U.S. ambassador to Switzerland with more than $4 billion in claims against him as the result of the collapse of the savings and loan association he owned. In April 1991, Warner began serving a prison term of 3 years for violating securities laws and making unauthorized money transfers.

And Harvey Myerson, Kuhn's law partner in the New York firm Myerson Kuhn, moved to Key West in the midst of his travails, where he bought a $1.75 million Mediterranean-style oceanfront home known locally as "the southernmost house in the United States."

Had Myerson remained in New York, he would have been allowed to shelter only $10,000 in a homestead. In California, he could have sheltered $50,000 for a home that he alone occupied or $75,000 for a family home. Texas and a few Plains and Midwestern states also have unlimited homestead exemptions, but none seem to draw wealthy debtors like Florida.

"It has been my experience over the years that people from all sorts of places suddenly seem to move to Florida once they know they are in trouble with the law," said Frank Maas, a New York lawyer who represented Marine Midland Bank, which lost a $3.1 million claim against Kuhn and Myerson.

What is more, Florida has sweetened the attraction with numerous other broad exemptions that attract millionaire debtors from other states. In addition to sheltering their homes, people filing for bankruptcy in Florida are allowed to exempt all of their wages, including wages deposited in bank accounts, and the total value of any annuities, pension plans, individual retirement accounts, life insurance policies or profit-sharing benefits they have. Creditors can go after cars, boats, jewelry and other personal property.

Florida's homestead exemption is part of a populist tradition that dates to the 19th century, when a person could buy a comfortable house in the city, or a large working farm, for $1,000 or less. …

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