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HMG Investments proved to be a popular topic of questioning Monday in the bankruptcy fraud trial of Bill and Carolyn Schwyhart in Dallas.
The limited liability company is controlled by the Schwyharts but only referenced in their bankruptcy filings as a $490,000 creditor.
Brian Ferguson of Rogers alleges their concealed beneficial ownership of HMG Investments is part of a scheme designed to hinder, delay and defraud creditors. Ferguson is trying to collect on more than $800,000 in judgments against Bill Schwyhart, who left millions of dollars of debt and judgments in the wake of his post-2008 meltdown.
The HMG Investments bank account was used as the couple’s primary account to pay bills, according to testimony by Carolyn Schwyhart.
The Schwyharts didn’t disclose the account as part of their bankruptcy filing although they are the only signatories on the account.
Ferguson’s contention is the couple used the HMG Investments account to hide money from creditors.
The Schwyharts opened the HMG Investments account in December 2013, a few weeks after a financial settlement was reached to end lawsuits with John Calamos of Chicago and Johnelle Hunt of Rogers.
That settlement ended Bill Schwyhart’s expensive legal battles with the two billionaires that erupted over contentious corporate jet investments.
The HMG Investments account at Bank of America was closed in July 2018 days after the Schwyharts filed bankruptcy.
The couple did list HMG Investments as a creditor. According to their bankruptcy filing, they owe HMG $490,000.
They consider the disputed debt a loan although there are no written loan documents. The $490,000 reflects how much money flowed from the HMG bank account on HMG checks written by Carolyn Schwyhart to pay for the couple’s personal expenses.
According to testimony, monthly HMG bank statements are the closest thing to document the loan’s existence, and Bill Schwyhart testified he believed the bank statements were adequate to verify the loan.
He said the $490,000 loan was calculated by adding up how much he and his wife spent from the HMG account each month to pay for personal expenses.
According to his testimony, the HMG debt was accrued during 5-6 or 8 years. As portrayed by Schwyhart, the loan is unrecorded and appears to be interest-free.
Asked how a creditor could discern which payments through the HMG account were personal expenses, Bill Schwyhart said, “You have to ask me.”
Asked for the source of funds for the HMG account, Schwyhart said “You have the deposit slips.”
In her testimony, Carolyn Schwyhart said the primary source of HMG funds was TWG Resources LLC. The venture was described as Alex Schwyhart’s company. Alex is Bill’s son.
Bank documents submitted into evidence indicate that since July 2014, the Schwyharts spent more than $600,000 that flowed into HMG’s bank account from TWG Resources.
The Schwyharts testified they didn’t believe they had done anything to deceive or defraud creditors. Their time on the witness stand dominated Monday’s testimony.
COVID-19 accessories and protocol were on display as courtroom participants donned masks covering nose and mouth while trying to maintain six feet of social separation during the trial.
Bankruptcy Judge Harlin Hale asked witnesses to testify with masks down and transparent screens up, so he could see their faces while on the stand.
The trial resumes at 3 p.m. Tuesday. Hale said Monday that a ruling could come over the next few weeks.