Verdict Against Barron Thomas

[rmccallum]

This was reported in VerdictSearch February 25th:

Plaintiffs claimed defendant was running a Ponzi scheme
Amount:
$867,880.2
Type:
Decision-Plaintiff
State:
Texas
Venue:
Dallas County
Case Type:
Fraud -
Case Name:
Ken and Martha Zeiler, Joe Zeiler, and the Estate of Mary Mabry v. Barron Thomas,
Agnes Clarke, Barron Thomas Aviation Inc., a Delaware corporation, Barron
Thomas Aviation Sales Inc., Barron Thomas Inc., Barron Thomas Southwest Inc.,
Barron Thomas Scottsdale LLC, Barron Thomas Aviation Realty LLC, Barron
Thomas PLLC, Barron Thomas Aviation Holdings Inc., and Barron Thomas
Consulting Inc.
Date:
January 22, 2013
Parties
Plaintiff(s):
Joe Zeiler (Male, 47 Years),
Ken Zeiler (Male, 55 Years),
Martha Zeiler (Female, 55 Years),
estate of Mary Mabry (Female, 83 Years)
Plaintiff
Attorney(s):
Ron C. McCallum; Ted B. Lyon & Associates; Mesquite, TX, for Joe Zeiler, Ken
Zeiler, Martha Zeiler, estate of Mary Mabry Ben Barmore; Ted B. Lyon &
Associates; Mesquite, TX, for Joe Zeiler, Ken Zeiler, Martha Zeiler, estate of
Mary Mabry
Plaintiff
Expert(s):
Steve Wentworth ; Aircraft; Minneapolis, MN called by: Joe Zeiler, Ken Zeiler,
Martha Zeiler, estate of Mary Mabry
Defendant(s):
Agnes Clarke,
Barron Thomas,
Barron Thomas Inc.,
Barron Thomas PLLC,
Barron Thomas Aviation Inc.,
Barron Thomas Scottsdale LLC,
Barron Thomas Southwest Inc.,
Barron Thomas Consulting Inc.,
Barron Thomas Aviation Realty LLC,
Barron Thomas Aviation Sales Inc.,
Barron Thomas Aviation Holdings Inc.
Defense
Attorney(s):
W. Ira Bowman; Godwin Lewis; Dallas, TX, for Agnes Clarke, Barron Thomas,
Barron Thomas Inc., Barron Thomas PLLC, Barron Thomas Aviation Inc., Barron
Thomas Scottsdale LLC, Barron Thomas Southwest Inc., Barron Thomas
Consulting Inc., Barron Thomas Aviation Realty LLC, Barron Thomas Aviation
Sales Inc., Barron Thomas Aviation Holdings Inc.
Facts:
In the early 2000s, Barron Thomas entered into written contracts with plaintiffs Ken and Martha Zeiler, both
55; Mary Mabry, 83; and Joe Zeiler, 47. Pursuant to the contracts, the plaintiffs invested in Barron Thomas
Aviation Inc., and the investments were to be secured by a first lien on an aircraft of value greater than or
equal to the investments. According to the plaintiffs, the investments were "no risk" and were to be repaid,
with interest, but they were not repaid. Mabry died in 2007.
The plaintiffs claimed that Barron was running a Ponzi scheme and that he never intended to pay back the
investments.

The plaintiffs further claimed that Barron used numerous sham corporations to hide his fraud. Besides Barron
Thomas Aviation Inc., the companies included Barron Thomas Aviation Sales Inc., Barron Thomas Inc.,
Barron Thomas Southwest Inc., Barron Thomas Scottsdale LLC, Barron Thomas Aviation Realty LLC,
Barron Thomas PLLC, Barron Thomas Aviation Holdings Inc., and Barron Thomas Consulting Inc.
The plaintiffs further claimed that Barron's mother, Agnes Clarke, was his bookkeeper, accountant, and
assistant and that she conspired with him to defraud the plaintiffs.
The plaintiffs, including Mabry's estate, sued Thomas, Clarke, and the companies for fraud.
According to the plaintiffs, the defendants agreed to pledge specific aircraft as collateral for the plaintiffs'
investments and falsely represented that the aircraft would be airworthy and for sale as inventory. The
plaintiffs claimed that the defendants intentionally chose derelict, wrecked, non-airworthy aircraft, which
were laying in pieces in a junkyard in Arizona and were beyond repair. The plaintiffs' expert on the aircraft's
condition was the man from whom Barron had purchased the aircraft.
The plaintiffs said Thomas touted the investment as being "no-risk" because the contract required him to give
the plaintiffs a first lien on airworthy aircraft of value equal to or greater than the investment. They said
Thomas Instead bought junk or totaled aircraft in order to use the "tail number" or data plate to grant the
liens.
The defendants denied any fraud.
In his deposition, Thomas asserted the Fifth Amendment on all substantive questions of fact.
The defendant companies denied that there was any evidence that they were inter-linked or part of the
scheme.
Clarke denied the allegations against her and said she was only a "gopher." She settled in February 2012, for
$10,000.
Injury:
Pursuant to the contracts, Ken and Martha Zeiler invested $150,000, the estate of Mary Mabry invested
$100,000, and Joe Zeiler invested $50,000, and the defendants were to pay 12 percent interest per annum.
The defendants stopped making payments to Ken and Martha Zeiler in August 2008, to the Mabry estate in
December 2008, and to Joe Zeiler in September 2008.
Including interest, the plaintiffs sought liquidated actual damages of $229,500 for Ken and Martha Zeiler,
$149,000 for the Mabry estate, and $76,000 for Joe Zeiler, a total of $454,500.
The plaintiffs sought punitive damages of four times the economic damages, and they sought attorney fees of
$163,380.20 through trial.
The plaintiffs claimed that Thomas basically stole their retirement.

Result:
After a bench trial, the court awarded actual damages of $229,500 to Ken and Martha Zeiler, $149,000 to the
Mabry estate and $76,000 to Joe Zeiler.
The court further found that the conduct of the Thomas Defendants was designed to defraud the plaintiffs and
that it was committed intentionally and with malice. The court awarded punitive damages of $150,000 to Ken
and Martha Zeiler, $50,000 to the Mabry estate, and $50,000 to Joe Zeiler.
The court also awarded the plaintiffs $163,380.20 in attorney fees through trial, bringing the total judgment
to $867,880.20, plus additional attorney fees contingent on appeal.
The plaintiffs' counsel described Thomas as a "con artist who stole over $10 million dollars from people all
over the country." In 2011, Thomas was indicted in Arizona for acts similar to those alleged by the plaintiffs,
and he later pled guilty to some of the charges and was sentenced to prison.
Trial Information:
Judge:
Sally Montgomery
Demand:
$454,500 and a confession of fraud
Offer:
$300,000
Trial Length:
1 days
Editor's Comment:
This report is based on information that was provided by plaintiffs' counsel and defense counsel.

 

[weilke]

Good luck collecting on that judgement. It'll be $5251 per plaintiff after the lawyers and bankruptcy trustees have taken their cut.

 

[schmookeeg]

"Here's a wingless cherokee parked in Eloy, the plaintiffs and their counsel can divide it 24 ways and call it even"

 

[timwinters]

Barron Thomas,
Barron Thomas Inc.,
Barron Thomas PLLC,
Barron Thomas Aviation Inc.,
Barron Thomas Scottsdale LLC,
Barron Thomas Southwest Inc.,
Barron Thomas Consulting Inc.,
Barron Thomas Aviation Realty LLC,
Barron Thomas Aviation Sales Inc.,
Barron Thomas Aviation Holdings Inc.

Wow, really?

I have "a few" "entities" to protect asset "a" from asset "b"...but...

Wow, really?

 

[docmirror]

This is a cautionary tale for those that think 'piercing the corp veil' is difficult or that articles of incorporation provide a lot of protection. Of course, I don't have all the facts of the interlocking structure, and the verdict is against someone who is already convicted in a criminal trial, but be careful about your private and corp finances. Many small businesses wind up like this when they get involved in the tort system.

 

[comanchepilot]

This is a cautionary tale for those that think 'piercing the corp veil' is difficult or that articles of incorporation provide a lot of protection. Of course, I don't have all the facts of the interlocking structure, and the verdict is against someone who is already convicted in a criminal trial, but be careful about your private and corp finances. Many small businesses wind up like this when they get involved in the tort system.

I would imagine that 20 years of properly prepared corporate documents would take up quite a bit of space for so many entities, even if they only exist on paper - so if as I suspect they were not operated properly in accordance with the law and regulatory reporting requirements, then piercing the veil is fairly simple.

 

[weilke]

So you pierce the corporate veil only to find out that the only asset the corporation owns is a collection of parts in a salvage yard. Big Win.

 

[comanchepilot]

So you pierce the corporate veil only to find out that the only asset the corporation owns is a collection of parts in a salvage yard. Big Win.

you don't pierce the corporate veil to get at the assets of the corporation - you pierce the veil to get at Tarron Bhomas' assets.

 

[weilke]

you don't pierce the corporate veil to get at the assets of the corporation - you pierce the veil to get at Tarron Bhomas' assets.

....which are being shuffled around in a never ending shell-game using entities and trusts.

I wonder what he has a PLLC for ? Is he a licensed social worker or something ?

 

[wabower]

Well, a socio-something perhaps, based on the evidence. Dunno if they need a license.

....which are being shuffled around in a never ending shell-game using entities and trusts.

I wonder what he has a PLLC for ? Is he a licensed social worker or something ?

 

[docmirror]

So you pierce the corporate veil only to find out that the only asset the corporation owns is a collection of parts in a salvage yard. Big Win.

In this case - yes. In other cases where there are assets in the corp and there has been a commingling, piercing the veil could be potentially catastrophic. Barron fleeced all his clients, many other legitimate corporations have liabilities that can bring them down. Basic rules without going into detail is everything at arms length. No commingling, no direct asset transfers, make sure you keep meetings and records, etc.

 

[wabower]

Having seen the details, I'm now wondering if I would have been permitted to testify as an expert. The judge is in my Sunday-school class.

 

[steingar]

Tarron Bhomass will spend a few months in the clink and go right back to hit. You watch.

 

[Henning]

Tarron Bhomass will spend a few months in the clink and go right back to hit. You watch.

If I'm not mistaken, that already happened.

 

[wabower]

I didn't know he vacationed at the Gray-bar. From when to when?

Were any "hereinafter ceasing and desisting" orders issued as part of the process?

If I'm not mistaken, that already happened.

 

[JeffDG]

Most people don't understand the corporate veil well at all...

Take owning your plane in an LLC for example. If you crash your plane into a busload of investment bankers, the LLC will provide no protection whatsoever. That's because there are two entities that are responsible: 1) The LLC that owns the aircraft, and 2) The PIC who is responsible for the safe operation of the flight.

Now, if the plaintiff were dumb enough to only sue the LLC, you'd lose the plane and the insurance proceeds, but that would be it. But they'll also sue you as the pilot and voila, say goodbye to your house if you don't have adequate personal liability insurance!

Contrast that with: You own a plane in an LLC, and your buddy at the airport borrows it and crashes it into a bus full of investment bankers. You still lose the plane and insurance proceeds (assets of the LLC), but your house is untouched, because you, as a person, are not at fault. If you owned the plane yourself, you'd be hosed.

 

[Henning]

I didn't know he vacationed at the Gray-bar. From when to when?

Were any "hereinafter ceasing and desisting" orders issued as part of the process?

Well, he was indicted and convicted on the criminal Security Fraud charges connected with this and other acts a while back. I thought I read he got some time for that. Not sure what the sentence was or if he managed probation, but typically you don't get out of time altogether on these things. As for Cease and desist, I'm not sure of any of that end of it. I don't follow this closely. I had a dealing with him early on when I was looking for my first plane, I walked away knowing I wouldn't do business with him no matter what.

 

[weilke]

Most people don't understand the corporate veil well at all...

Take owning your plane in an LLC for example. If you crash your plane into a busload of investment bankers, the LLC will provide no protection whatsoever. That's because there are two entities that are responsible: 1) The LLC that owns the aircraft, and 2) The PIC who is responsible for the safe operation of the flight.

This case is not at all about personal liability as it relates to the operation of an aircraft.
This revolved around a network of corporations soliciting investments from members of the public. Now, the plaintiffs managed to get the civil verdict against not only the corporate entities but also the principals of those entities. The fact that one of the principals pled guilty to a crime related to the investments probably helped to get a verdict against him personally rather than the corp alone. This is somewhat unusual as (barring criminal conduct), the officers of a corporation are typically not held responsible for liabilities incurred by the corporation. If I got screwed over by citigroup in 2009, I can't recover from Mr Parsons personally.

 

[Gerhardt]

I had a dealing with him early on when I was looking for my first plane, I walked away knowing I wouldn't do business with him no matter what.

Fifteen or twenty years go I saw an ad for a beautiful plane. Fell in love with it just from the pictures and write-up. I called, no answer, so I left a message. No return call. I called again, same story. I was young and dumb at the time and after another call or two I finally received a response. He was rather terse and the gist of his message was that he was busy but he'd get back with me. He never did.

It was a several years before I realized how fortunate I was.

 

[wabower]

Just wondering. I think the "I have cash" cards continue to arrive occasionally, so my assumption was that they forbade his selling paper but did not slam the door on selling planes. But maybe not.

Well, he was indicted and convicted on the criminal Security Fraud charges connected with this and other acts a while back. I thought I read he got some time for that. Not sure what the sentence was or if he managed probation, but typically you don't get out of time altogether on these things. As for Cease and desist, I'm not sure of any of that end of it. I don't follow this closely. I had a dealing with him early on when I was looking for my first plane, I walked away knowing I wouldn't do business with him no matter what.

 

[Henning]

Just wondering. I think the "I have cash" cards continue to arrive occasionally, so my assumption was that they forbade his selling paper but did not slam the door on selling planes. But maybe not.

I believe that was part of it. They can't really keep him from dealing in planes in a buy and sell manner since that's not regulated.

 

[JeffDG]

This case is not at all about personal liability as it relates to the operation of an aircraft.
This revolved around a network of corporations soliciting investments from members of the public. Now, the plaintiffs managed to get the civil verdict against not only the corporate entities but also the principals of those entities. The fact that one of the principals pled guilty to a crime related to the investments probably helped to get a verdict against him personally rather than the corp alone. This is somewhat unusual as (barring criminal conduct), the officers of a corporation are typically not held responsible for liabilities incurred by the corporation. If I got screwed over by citigroup in 2009, I can't recover from Mr Parsons personally.

But the principle is the same...acts by an individual make that individual subject to liability, regardless of corporate status. Corporations protect other corporate officers/directors/shareholders from vicarious liability from employees and others, but do not protect from their own actions.

If Mr. Parsons did something specific to screw you over, yes you can. Now, the corporate insurance would likely indemnify him, but you can still pursue him personally, and if the insurance were insufficient, attach his assets, regardless of the corporate veil.

 

[steingar]

I am a bit surprised anyone would deal with this individual. I heard bad things shortly after commencing my aviation training. I find it hard to believe that I was in such rarified company.

 

[JeffDG]

I am a bit surprised anyone would deal with this individual. I heard bad things shortly after commencing my aviation training. I find it hard to believe that I was in such rarified company.

P.T. Barnum was right.

 

[wabower]

Never say never. In a plea bargain they can set whatever terms they deem necessary to prevent future misdeeds.

I believe that was part of it. They can't really keep him from dealing in planes in a buy and sell manner since that's not regulated.

 

[Henning]

That's always been my take on it too, Corporate veil is about protecting against vicarious liability, not personal liability. IOW, if the CEO gave the orders directly that opened the tort, the CEO can be held personally liable. That's why all these cases name everyone and thing, "jointly and severally".

 

[Gerhardt]

acts by an individual make that individual subject to liability.

This is what drives me nuts when people set up LLCs for every willy-nilly business venture, even things as simple as single rental units when they own dozens of them (i.e. they'll create a separate LLC for every house). It's like talking to a brick wall to tell them that's what insurance is for, but it's amazing how many accountants tell their clients to set up LLCs for liability protection. It doesn't always work that way. For ex. if I form an LLC that owns a rental house, but I know that the exhaust for the gas furnace is clogged and the tenants perish because of it...both the LLC and I personally can be liable.

 

[Henning]

This is what drives me nuts when people set up LLCs for every willy-nilly business venture, even things as simple as single rental units when they own dozens of them (i.e. they'll create a separate LLC for every house). It's like talking to a brick wall to tell them that's what insurance is for, but it's amazing how many accountants tell their clients to set up LLCs for liability protection. It doesn't always work that way. For ex. if I form an LLC that owns a rental house, but I know that the exhaust for the gas furnace is clogged and the tenants perish because of it...both the LLC and I personally can be liable.

Ok, but lets say you have 20 houses all owned by a different LLC. In your example both the LLC for the house they were living in and your personal wealth and house are at stake, but would the other 19 houses/LLCs be at stake?

 

[gismo]

Well, he was indicted and convicted on the criminal Security Fraud charges connected with this and other acts a while back. I thought I read he got some time for that. Not sure what the sentence was or if he managed probation, but typically you don't get out of time altogether on these things. As for Cease and desist, I'm not sure of any of that end of it. I don't follow this closely. I had a dealing with him early on when I was looking for my first plane, I walked away knowing I wouldn't do business with him no matter what.

Henning, are you in town (Ft Lauderdale/Miami)? I'm over in Venice (with Baron) for another week or so and am looking for someone to visit.

 

[weilke]

For ex. if I form an LLC that owns a rental house, but I know that the exhaust for the gas furnace is clogged and the tenants perish because of it...both the LLC and I personally can be liable.

But if the local slip+fall scamster lawyer sues you on behalf of a client who sprained his ankle stepping off the curb in front of your rental townhouse, it is between your serial LLC and the serial LLCs insurance company. Also, the slip+fall scamsters suit will not keep you from selling one of your other rental properties while the litigation is going on. Rental units is probably one of the few situations where individual trusts or LLCs that only hold one asset make sense. For a personally operated plane, probably not so much.

 

[JeffDG]

This is what drives me nuts when people set up LLCs for every willy-nilly business venture, even things as simple as single rental units when they own dozens of them (i.e. they'll create a separate LLC for every house). It's like talking to a brick wall to tell them that's what insurance is for, but it's amazing how many accountants tell their clients to set up LLCs for liability protection. It doesn't always work that way. For ex. if I form an LLC that owns a rental house, but I know that the exhaust for the gas furnace is clogged and the tenants perish because of it...both the LLC and I personally can be liable.

If we look at the airplane context...I would set up an LLC, just for the simple fact that I know other pilots who may want to borrow my (someday) plane from time to time, and I'd rather have that as cheap insurance.

 

[gismo]

Ok, but lets say you have 20 houses all owned by a different LLC. In your example both the LLC for the house they were living in and your personal wealth and house are at stake, but would the other 19 houses/LLCs be at stake?

If you owned the other LLCs, I'd say they would be among the assets you might lose in a judgement involving a different LLC titled house. As already mentioned, the best you can hope for in terms of liability protection from a LLC is eliminating your exposure to the actions of other people involved with the LLC and/or it's assets. Putting property into an LLC doesn't in any way shield it from actions against you directly that don't involve the LLC. It's my understanding that there are ways to do that involving trusts but I'm not sure how that would apply in the case you mentioned.

 

[Henning]

Henning, are you in town (Ft Lauderdale/Miami)? I'm over in Venice (with Baron) for another week or so and am looking for someone to visit.

Yep, in Fort Lauderdale right now, come on over. If you're flying, FXE is closest.

 

[timwinters]

Ok, but lets say you have 20 houses all owned by a different LLC. In your example both the LLC for the house they were living in and your personal wealth and house are at stake, but would the other 19 houses/LLCs be at stake?

Exactly. And the answer is "no"...if all the paperwork trail is in order.

Well, I guess actually the answer is "it depends" but having them all in separate LLCs gives you a far better chance of defending your assets than having them all in one does.

 

[weilke]

If you owned the other LLCs, I'd say they would be among the assets you might lose in a judgement involving a different LLC titled house. As already mentioned, the best you can hope for in terms of liability protection from a LLC is eliminating your exposure to the actions of other people involved with the LLC and/or it's assets. Putting property into an LLC doesn't in any way shield it from actions against you directly that don't involve the LLC. It's my understanding that there are ways to do that involving trusts but I'm not sure how that would apply in the case you mentioned.

If you are the sole member of a LLC that may be the case. If the LLC or corp has other members, the claimant cannot force the LLC or corp to dissolve to satisfy a unrelated claim against one member.

(YMMV, LLCs are a state construct, your states rules may be different)

 

[gismo]

If you are the sole member of a LLC that may be the case. If the LLC or corp has other members, the claimant cannot force the LLC or corp to dissolve to satisfy a unrelated claim against one member.

(YMMV, LLCs are a state construct, your states rules may be different)

True but I'd think a judgement could take your share of the LLC, or is this prohibited as well? Certainly if I owned stock in a private corporation that had value I'd expect that value to be exposed.

 

[JeffDG]

If you owned the other LLCs, I'd say they would be among the assets you might lose in a judgement involving a different LLC titled house. As already mentioned, the best you can hope for in terms of liability protection from a LLC is eliminating your exposure to the actions of other people involved with the LLC and/or it's assets. Putting property into an LLC doesn't in any way shield it from actions against you directly that don't involve the LLC. It's my understanding that there are ways to do that involving trusts but I'm not sure how that would apply in the case you mentioned.

Now, if you hired a property manager at each property, then you have a different scenario. Having all the properties in 1 LLC would expose all of them to a tort by the property manager of one of them.

 

[JeffDG]

True but I'd think a judgement could take your share of the LLC, or is this prohibited as well? Certainly if I owned stock in a private corporation that had value I'd expect that value to be exposed.

Yes, that's what would happen. The creditor would take ownership of your stake in the other LLC.

 

[gismo]

Yep, in Fort Lauderdale right now, come on over. If you're flying, FXE is closest.

Sent you a phone text. I plan to fly over tomorrow for lunch. I'll call before I leave.

 

[weilke]

True but I'd think a judgement could take your share of the LLC, or is this prohibited as well? Certainly if I owned stock in a private corporation that had value I'd expect that value to be exposed.

Based on the operating agreemenrt, the majority members will hold a vote and give you your $33.32 back.
If I redeem a $22 GE stock certificate, I get $22. I can't demand to take the nuclear reactor division instead. Owning a stock certificate or membership interest does not establish ownership or title to any of the entities assets. It gives you whatever the bylaws or operating agreement give you upon redeeming your share. Bylaws and operating agreements can be amended by majority vote.
Ever tried to borrow money against a LLC interest (without entering a mortgage or security interest against the underlying house/airplane ) ?