corrected.index.mol.opp.mot.dismiss.2.26.10 (2)

8/19/2019 Corrected.index.mol.Opp.mot.Dismiss.2.26.10 (2)

http://slidepdf.com/reader/full/correctedindexmoloppmotdismiss22610-2 1/27

David H. Relkin, Esq.

The Law Offices Of

DAVID H. RELKIN

575 Eighth Avenue

Suite 1706

New York, New York 10018

212-244-8722Attorney Appearing for Donna A. Sturman: David H. Relkin, Esq. ( [email protected])

UNITED STATES DISTRICT COURT FOR

THE SOUTHERN DISTRICT OF NEW YORK

In re:

WAYNE A. STURMAN,

Debtor .

Bankruptcy AppealCase No. 10-CV-325 (DAB)

In re:

BRUCE D. STURMAN,

Debtor.

In re:

HOWARD P. STURMAN

Debtor.

MEMORANDUM OF LAWIN OPPOSITION TO MOTION BY TRUSTEE TO

DISMISS THE APPEAL OF DONNA STURMAN



TABLE OF CONTENTS

Page(s)

Table of Authorities………………………………………………………………………………i

Preliminary Statement…………………………………………………………………………...1

Background………………………………………………………………………………………3

A. The Brothers Convert

And Embezzle The Assets

Of the Properties and Entities……………………………………………………………….….3

B. Donna Obtains The

Injunctions Against Her Brothers’ Transfers…………………………………………….……4

C.

The Proxy FightThe Margin Calls

And The Complicity

And Fraud Of The Banks………………………………………………………………….……5

POINT I

THE BROTHERS BANKRUPTCY

WAS CONDUCTED THROUGH FRAUD

AND MANIPULATION TO ADVANCE THE GOALS OF MHT……………………..……7

POINT II

THE TRUSTEE “SETTLES” DONNA’S CLAIMS…………………………………….…...10

POINT III

THE TRUSTEE TRIES TO GET

RID OF DONNA’S DANGEROUS CLAIMS

WHICH WOULD WIPE OUT THE ESTATE……………………………………………….16

CONCLUSION………………………………………………………………………………....19



i

TABLE OF AUTHORIES

Cases Pages

Bates v. Long Island R.R. Co., 997 F.2d 1028, 1037 (2d Cir.),

cert. den., 510 U.S. 992, 126 L. Ed. 2d 452, 114 S. Ct. 550 (1993)……………………………..15

In re BDC 56 LLC , 330 F.3d 111, 118 (2d Cir. 2003)………………………………………...7, 13

Birnbaum v. Birnbaum, 73 N.Y.2d 461, 466, 541 N.Y.S.2d 746 (1989)………………………..15

Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1285 (11th Cir. 2002)…………………….......18

In re Busick, 831 F.2d 745, 750 (7th Cir. 1987)…………………………………………………..8

In re Cassidy, 892 F.3d 637, 641 (7th Cir. 1990)………………………………………………..19

In re Elsa Designs, Ltd ., 155 B.R. 859, 863 (Bankr. S.D.N.Y. 1993)……………………….......13

In re Hazel Atlas-Glass Co., v Hartford Empire Co., 322 U.S. 238, 239, 245 (1944)…………..21

In re Kornrich, 19 Misc. 3d 663, 854 N.Y.S.2d 293 (Sur. 2008)………………………………..15

In re Leslie Fay Cos., 175 B.R. 525, 533 (Bankr. S.D.N.Y. 1994)…………………………….....9

In re Onyx Telecomm., Ltd ., 60 B.R. 492, 496 (Bankr. S.D.N.Y. 1985)………………………...13

Salomon Smith Barney, Inc. v. Harvey, M.D., 269 F.3d 1302, 1308 (11th Cir. 2001)…..………18

New Hampshire v. Maine, 532 U.S. 742, 749 (2001)……………………..………………….….19

Estate of Wallens, 9 N.Y.3d 117, 847 N.Y.S.2d 156 (2007)………….……..……………….….15

Statutes Pages

11 U.S.C. §303 (b)…………………………………………………………….…………………13

11 U.S.C. §327……………………………………………………...………….………………...13

11 U.S.C. §327 (a)…………………………………………………...………….…………….....13

11 U.S.C. §341………………………………………………………..…………..………………9



ii

Rules Pages

FCBP 2014(a)...……………………………………………………………………………….8, 12

FCBP 2004………………………………………………………………………………………...9



[- 1 -]

Preliminary Statement

The instant motion is another in the long line of frivolous and vicious motions by the

Trustee in Bankruptcy to prevent Donna Sturman from having her claims adjudicated in these 20

year old Cases. There is absolutely no merit to the Trustee’s claim that Donna Sturman lacks

“standing” to bring an appeal in these Cases. Rather, she was literally locked out in the cold and

stripped of her assets by the Trustee, the creditors and the Court, and is perhaps the only person

who does have standing to bring this Appeal. To anyone who hears the facts of these cases, the

only genuine response is shock and disbelief.

1

There is no question that the property that was used, administered and sold by the Trustee

in these Cases, even recognized at one point by Judge Beatty2, was not “property of the estates.”

This is well-settled law, not open to dispute, and is fully demonstrated in each of Donna

Sturman’s recent submissions to the Bankruptcy Court, submitted herewith.3

The properties owned by The Sturman Family Enterprises, inherited by Donna Sturman

and the three debtors equally, were unequivocally never part of the debtor’s Estates since the

properties were all owned by non-debtor partnerships and corporations (the “Entities”). Thus,

the debtors, and therefore the Trustee, held only “bare legal title” to the Entities, and thus the

1 This Court should be aware that the Trustee recently moved to hold Ms. Sturman and her counsel inContempt for filing a motion in the Surrogate’s Court for an Accounting of her looted Mother’s Estate.

Her response is submitted accompanying this Brief. That motion by the Trustee is similarly frivoloussince there is no property of the Estates in the Surrogate’s Court and none of the property or assets in theBrothers’ Bankruptcy Cases is “property of the Estate.” (See accompanying Briefs at Ft. Nt. “3” below.)2 See December 7, 2001 Transcript at p. 17, Exhibit “GG” to Objection to Trustee’s Final Report.3 See accompanying Objection to Trustee’s Final Report dated October 29, 2009 at Point IV (the“Objection to the Final Report”), and the Cross-Motion of Donna Sturman for an Accounting and inOpposition to the Trustee’s Motion for Sanctions against Donna Sturman for Violation of the AutomaticStay at Point II (Donna Sturman’s “Cross-Motion to the Trustee’s Motion For Sanctions”).



[- 2 -]

Trustee—and the Court—never had jurisdiction to manage, use or sell the underlying properties

(the “Properties”).

According to the Trustee’s Final Reports, over $40 Million Dollars passed through these

three Estates—the proceeds of the unlawful sales of the Properties—which proceeds were used

to pay creditors and over $8,000,000 in fees and commissions to the Trustee and other

professionals.

Under well-settled law, cited in the accompanying briefs, since none of the Properties

was property of the Estates, Ms. Sturman was not a simple 10¢ on the dollar creditor—she was

an owner of the Entities, and was entitled to object (however, ineffectively) to the use,

management and sale of the Properties by the Trustee to pay other, bigger and more powerful

creditors such as Chase Manhattan Bank.

What the institutional lenders did in tandem with the Trustee and his many law firms in

these Estates was to sell the Properties over which the Bankruptcy Court had no jurisdiction,

completely stripping Ms. Sturman of her legitimate interests in the Entities and the Properties.

As a result, without notice to her, Ms. Sturman was forced into an involuntary and

fraudulent bankruptcy in which the Trustee purported to “settle” all of Donna Sturman’s claims

in her three brothers’ Estates in a collusive settlement agreement in which, among other things,

the Trustee exculpated himself from an Adversary Proceeding brought by Donna in the

bankruptcies in violation of his fiduciary duties. This fraudulent “release” is the sole basis on

which the Trustee now relies to dismiss Donna Sturman’s Appeal of the bankruptcy Orders

which impoverished her.



[- 3 -]

Backround

Ms. Sturman is the sister of the three debtors in these Cases. They equally inherited

approximately 20 corporations and partnerships from the Estates of their mother and father.

Each corporation or partnership held real estate. Incredibly, both Estates remain open, with no

proper accounting having ever been submitted by the Executors, Howard Sturman, and Joseph

Warren.

A. The Brothers Convert

And Embezzle The Assets

Of the Properties and Entities

In 1987 Ms. Sturman became aware of the fact that her brothers were transferring and

embezzling the assets of the Entities constituting The Sturman Family Enterprises for their own

purposes and using them to invest in other ventures to the exclusion of Ms. Sturman.

Accordingly, after attempting to resolve this problem directly with her brothers, she was

compelled to commence a state court action in New York Supreme Court for an accounting, an

injunction and a constructive trust as to the transferred assets.4 It soon became clear that the

brothers had been secreting assets for some time, treating the Entities as one business and

ignoring the distinctions between the Entities in their personal dealings as if they were the sole

owners.

Ms. Sturman and her counsel, Milbank Tweed, soon learned that Donna’s brothers were

borrowing huge amounts of money from institutional lenders, the largest being MHT. It later

became clear that, in continuation of their thirst for money, the brothers had represented to

4 See Amended Complaint at Exhibit “A” to the Complaint of the Trustee to prevent the discharge of Bruce Sturmanannexed at Exhibit “B” to the Cross-Motion of Donna Sturman to the Motion for Sanctions by the Trustee.



[- 4 -]

lenders in fraudulent financial statements5 (notably, after MHT had made the loans to the

Brothers) that they were extremely wealthy, and convinced these lenders to loan them huge

amounts of money to purchase stock to wage a proxy fight.

B. Donna Obtains The

Injunctions Against

Her Brothers Transfers

Donna Sturman’s counsel quickly moved in State Court for an injunction against the

brothers continuing to transfer the Properties and assets of the Entities, which injunction was

issued on July 28, 1987.6 Donna soon discovered that her brothers, one of whom, Howard

Sturman, was the Co-Executor of the Estate of Donna’s mother Muriel Sturman, had also

converted the assets of all six corporations in the Estate, with the exception of a partnership,

Yorkville Associates, which owned a substantial piece of prime real estate on East 86th

Street in

Manhattan. 7

Accordingly, Ms. Sturman commenced proceedings in the Surrogate’s Court for an

accounting, discovery and injunctive relief. In this connection, Ms. Sturman obtained Probate

Court Orders compelling Howard Sturman to produce an accounting and preventing any further

5 For which they were later indicted and convicted of felonies and each sentenced to 13 months in prison.6 See Order of Justice Martin Evans at Exhibit “B”.7 It also became clear to Ms. Sturman that the assets in her mother’s Estate were being secreted and used

by the brothers in the same way. Howard Sturman, later convicted with his two brothers of felonioussubmissions of financial statements, was a co-executor of the Estate of Muriel Sturman with JosephWarren, whom Ms. Sturman also named as a defendant in the Supreme Court action. Ms. Sturman soonfound out that the corporations and partnerships in her mother’s Estate were also being used by the brothers to fund their proxy fight and moved in the Surrogate Court for relief. Accordingly, shecommenced a proceeding in the Surrogate’s Court in New York County for an accounting and aninjunction, which injunction was issued by Surrogate Renee Roth on September 25, 1990. (See Exhibit“AA” to Objection to Trustee’s Final Report.)



[- 5 -]

dissipation or sale of any of the Entities or Properties by her brothers.8 (To this date, neither

Howard, nor the other co-executor, Joseph Warren, has ever issued and settled an accounting.)9

Although the brothers, who were represented by Stroock, Stroock & Lavan,10

stonewalled

Donna’s discovery requests in the Supreme Court action by repeatedly making motions for

protective orders, which were denied after Milbank sought sanctions, Milbank was finally able to

obtain information in discovery in June 1988 that the brothers were continuing to borrow huge

amounts of money, including mortgaging some of the Properties to MHT, in violation of their

fiduciary duties to her.

C. The Proxy Fight

The Margin Calls

And The Complicity

And Fraud Of The Banks

The brothers had been using the proceeds of the Entities and Properties to purchase stock

in a in a publicly traded company, The Cooper Companies, Inc., and to meet margin calls in

order to obtain a controlling interest, threaten a proxy fight and to be named to the Board of

Directors.

In one of the most egregious examples of the conduct of MHT, the brothers mortgaged

the property of H. Development Corp., a 22 acre piece of property on the Hudson River to MHT,

in which Donna had a 25% interest.

8 The Trustee’s sales of the Properties not only violated the Bankruptcy Code, but were in direct

contravention of the State Court and Surrogate Court injunctions. In fact, despite filing two notices ofappearance in the Surrogate’s Court and an aborted motion for an accounting, he never sought thedissolution of such Injunctions.9 Accompanying this Memorandum is Ms. Sturman’s Cross-Motion to the Trustee’s Motion forSanctions, which he requests simply because she requested that the Surrogate’s Court and the Trustee provide an accounting.10 The Bankruptcy Judge handling this matter below, Judge Beatty, had formerly been a partner atStroock .



[- 6 -]

After the brothers requested additional loans of $6,000,000 from MHT to meet margin

calls, MHT devised a scheme to secure the brothers’ prior outstanding unsecured loans

approximating the sum of $7,000,000.

Instead of loaning the money to the brothers, MHT loaned H. Development the sum of

$13,492,000, took a mortgage on the property, and then paid itself back the $7,000,000

unsecured loans by means of a fraudulent conveyance, and advanced the $6,000,000 in loans to

the brothers from H. Development for the margin calls. Thus, MHT fraudulently secured its

unsecured loans and effectively rendered H. Development worthless.11

This transaction clearly

established that Donna Sturman could trace the proceeds of the fraudulent Properties to the

Cooper stock and to MHT.12

Only days after MHT received a subpoena from Milbank, and with knowledge that Ms.

Sturman was a 25% owner of Wayne-Adam Corp., MHT even loaned an additional $2,000,000

to the brothers for margin calls and took 75% of the stock of Wayne-Adam Corp. one of the most

valuable Entities.13

11

Since Donna Sturman had previously instituted a derivative action against H. Development Corp., thetransfer of the assets of H. Development was a per se fraudulent conveyance pursuant to Debtor andCreditor Law §273-a. See page 18 in the Objection to the Trustee’s Final Report and the analysis of theBank’s fraudulent conveyances at pp. 78-84 at Point VIII thereof.12 See a full discussion of this fraudulent conveyance and MHT’s aiding and abetting breaches offiduciary duty at the Objection to the Trustee’s Final Report at pp. 14-21.13 Notably, the Trustee abandoned the 75% interest of the debtors in this Property and it was sold to athird party in derogation of Donna’s rights.



[- 7 -]

POINT I

THE BROTHERS BANKRUPTCY

WAS CONDUCTED THROUGH FRAUD

AND MANIPULATION TO ADVANCE THE GOALS OF MHT

On August 4, 1989, knowing that Ms. Sturman was on the verge of suing MHT for fraud

and aiding and abetting breaches of fiduciary duties, among other wrongdoings, MHT filed

involuntary “no-asset” petitions in bankruptcy against the brothers.

Notwithstanding that MHT was the only petitioning creditor, the claims registers on

PACER show that there were 41 creditors in the Wayne Estate, 34 creditors in the Howard Estate

and 27 Creditors in the Bruce Estate, making the filing jurisdictionally defective under §303—

something never asserted by the Trustee, as he was required to do under §704, since he was

taking his marching orders from the Bank.

More importantly, and most telling about how the Trustee was the agent of MHT, despite

the fact that all the Properties were subject to prior Injunctions in the Supreme and Surrogate

Courts, and although Ms. Sturman immediately put the Court on notice that the loans of MHT

and the other institutional creditors were subject to a bona fide dispute,14

and reserved her rights

to a jury trial, neither the Trustee nor the Court ever investigated the merits of Ms. Sturman’s

claims, instead they stripped her of everything she owned to line the pockets of the Trustee and

pay his benefactor, MHT.15

While there are various standards to interpret the “bona fide dispute” provision, the

controlling law in the Second Circuit is an objective standard. In Key Mechanical Inc. v. BDC

56 LLC (In re BDC 56 LLC), 330 F.3d 111 (2d Cir. 2003), the circuit court noted that this

14 See Exhibit “J” to the Objection to the Trustee’s Final Report.15 See accompanying Objection to the Trustee’s Final Report at pp.2-3.



[- 8 -]

standard “considers whether there is either a genuine issue of material fact that bears upon the

debtor's liability or a meritorious contention as to the application of law to undisputed facts.” Id.,

at 117. Stated another way, “‘[T]he bankruptcy court must determine whether there is an

objective basis for either a factual or a legal dispute as to the validity of [the] debt.’” Id., quoting

In re Busick, 831 F.2d 745, 750 (7th Cir. 1987).

There was no question in these cases that a bona fide dispute existed as to the

indebtedness of the brothers to MHT. MHT aided and abetted breaches of fiduciary duty,

committed fraud, and engaged in fraudulent conveyances of the H. Development and Wayne-

Adam, Corp. Properties.

16

Moreover, MHT gave direct instructions to Otterbourg Steindler, who was retained by the

Trustee.17

Mr. Gitter of Otterbourg disclosed in his 2014 (a) affirmation that “Otterbourg had

acted, and would continue to act, as counsel for MHT, Chemical, Boston Safe and Deposit

Company, and Bank of New York” – all major creditors of the debtors.18

Despite this utterly

disqualifying disclosure (which the Trustee himself later admitted in 1993),19

-20

which was a

clear violation of FRBP 2014(a), Otterbourg was nevertheless retained and earned approximately

$3,000,000 in fees.

16 See Objection to the Trustee’s Final Report at pp.2-3 (including ft.nt.7) and Points II, VII and VIII.17 See Footnote 7 to the Objection to the Trustee’s Final Accounting and Exhibit “H” referred to therein.MHT later became Chemical Bank.18

See Gitter 2014 (a) affirmation dated April 25, 1991 at Exhibit “E” to the Objection to the Trustee’sFinal Accounting, dated October 29, 2009, submitted herewith.19 It is perhaps no coincidence that, when Mr. Goldberg joined Dreyer and Traub in 1993, he disclosedthis conflict in order to retain his new firm. See Objection to the Trustee’s Final Accounting, submittedherewith at Exhibit “PP.”20 Mr. Goldberg states therein, in pertinent part: “[Otterbourg] has informed the Trustee that it suffers

a conflict with respect to anticipated preference litigation and objections to claims concerning

institutional lenders which have and continue to be clients of [Otterbourg]”



[- 9 -]

As further discussed herein, a full and complete 2014(a) affirmation “is the responsibility

of the professional, not of the court, to make sure that all relevant connections have been brought

to light. . . . So important is the duty of disclosure that the failure to disclose relevant connections

is an independent basis for the disallowance of fees or even disqualification. In re Leslie Fay

Cos., 175 B.R. 525, 533 (Bankr. S.D.N.Y. 1994) (citations omitted).”

As to the claims of MHT, the Trustee not only never held any §341 meetings in these

cases, but never took any depositions of the Bank or analyzed their proof of claim for possible

fraud. In light of the clearly fraudulent transfers of assets by the Brothers to MHT of at least $18

Million Dollars of property of the Entities prior to the Bankruptcy, this was outrageous.

21

At one point, in support of a motion to take her 2004 examination, based on the Trustee’s

acknowledgment that “Ms Sturman …has instituted several suits against the Debtor[s] and…

against their partnerships and/or corporations…and against creditors of the Debtors,” and that

“she claims to have an interest in a number of the parcels of real property owned individually or

through partnerships and corporations by…the brothers,” and has “information which reveals

that the …Brothers have, inter alia, mismanaged the partnerships and corporations and have

taken money for their own personal use,” the Trustee claimed that “[i]n order to properly

effectuate the administration and subsequent liquidation of the estate[s], the Trustee believes an

examination of Ms. Sturman Butler is of utmost importance.”

Nevertheless, despite acknowledging the critical information possessed by Ms. Sturman

regarding the fraudulent transfers of the debtors and the banks, the Trustee never took her

deposition. Parenthetically, in direct contradiction to the Trustee’s assessments of Donna’s

21 See Exhibit “B” to the Objections to the Trustee’s Final Report.



[- 10 -]

claims, he annexed her Supreme Court Complaint as Exhibit “A” to his motion to deny a

discharge to Bruce Sturman.22

Rather, in continuation of what the debtors had begun, despite his fiduciary obligations to

her, and in violation of her civil and constitutional rights, the Trustee embezzled, converted and

dissipated Ms. Sturman’s interests in the Entities and the Properties, trouncing Donna Sturman’s

rights, which Properties were never part of the debtors’ estates and over which over which the

Bankruptcy Court never had jurisdiction.23

Without any exaggeration or gloss, this Bankruptcy Court was used by the Trustee in

these Cases to further criminal and fraudulent purposes for over 19 years.

POINT II

THE TRUSTEE “SETTLES” DONNA’S CLAIMS

Finally, indigent as a result of the Trustee withholding her assets and evicted over seven

times with her three small children, Ms. Sturman was thrown into bankruptcy24 by her former

law firm, Pollack & Greene, after her attorney announced in open Court that:

“Right now she has zero money. She's being evicted inapproximately three weeks, with three children, nowhere to go andno money.”

25

22 See Exhibit “C” to the Cross-Motion to the Trustee’s Motion for Sanctions, submitted herewith.23 See the indisputable law on this subject at Point II of the Cross-Motion to the Trustee’s Motion forSanctions, submitted herewith.24 See Exhibit “M” to the Objections to the Trustee’s Final Report.25 Transcript of December 7, 2001 Hearing at p. 22, at Exhibit “GG” to Objection to Trustee’s FinalReport.



[- 11 -]

Nevertheless, the Petition was mailed to her at an address from which all the parties knew

she had been evicted.

In response to Ms. Sturman’s counsel advising the Court that Donna was about to be

homeless again, and in one of the most egregious and insulting comments of a bankruptcy Court

one is ever likely to hear, Judge Beatty, demonstrating her animus against Donna Sturman,

sarcastically stated that:

“It's very simple if you know how much money she needs to stayin the apartment for six months, and to stay there let's say youknow that number, you'll go to Pollack & Green, and you say, it'sChristmas, play the little violin, you know, and say, you don't want

to put a lady and three kids back on a street.”

26

Thus, not only did the bankruptcy Court have no personal jurisdiction over Donna

Sturman—and they knew it—but Pollack & Greene, the petitioning creditor, actually “split its

claims” into three by including two members of its own firm as separate creditors.27 As

discussed in Donna’s Objection to the Trustee Final Distributions, once they filed the Petition,

Pollack & Greene had its debt to Chase wiped clean.28

Once in full control of Donna’s claims in these Bankruptcy Cases, the Trustee entered a

surreptitious, collusive and criminal settlement of Donna’s claims (including settling Donna

Sturman’s Adversary Proceeding against the Trustee himself in violation of his fiduciary duties),

on an ex parte order without a Hearing and thus made all of Donna Sturman’s claims

“magically” disappear.

26 Transcript of December 7, 2001 Hearing at p. 39, at Exhibit “GG” to Objection to Trustee’s FinalReport.27 See letterhead of Pollack & Greene showing Mitchell Mandell and Lori Samet as members of the Firm,at Exhibit “A” hereto and the Involuntary Petition against Donna Sturman at Exhibit “M” to theObjections to the Trustee’s Final Report.28 See p. 7 therein.



[- 12 -]

Counsel for Pollack & Greene, Donna’s creditor, which filed the Involuntary Petition

against Donna Sturman was Kane Kessler. Almost immediately after the Petition, the Trustee,

Alan Nisselson, made a motion to retain Kane Kessler as his counsel in an outrageous violation

of FRBP 2014(a).

In his affirmation supporting the retention of Kane Kessler, dated September 25, 2002 he

stated:

The Law Firm has no connection with the Trustee, the Debtor orher creditors or any other party in interest or their respectiveattorneys, or the United States Trustee or any employee of theoffice of the United States Trustee, except that the Law Firm

represented the Petitioning Creditors. The Law Firm representsno interest adverse to the Trustee or to the Debtor’s estate, in thematters upon which it is to be engaged by the Trustee. (Emphasisadded.)

In his final Report, Mr. Nisselson stated about Kane Kessler’s retention that:

Since K&K had represented the Petitioning Creditors, it had

acquired extensive knowledge about the Debtor's pre-Petition

Date conduct and the nature of her debts. Accordingly, the Trusteedetermined that it was in the best interest of the Debtor's estate andits creditors to retain K&K as his counsel. Accordingly, uponapplication of the Trustee and by Order dated October 24, 2002,this Court authorized the retention of K&K, as replacementcounsel to the Trustee. (Emphasis added.)29

Kane Kessler represented Pollack & Greene in filing a fraudulent involuntary petition in

bankruptcy against Donna Sturman. By filing the Petition, Pollack & Green benefited by

receiving a discharge of their debts owed to Chase.30

29 Note that, despite the fact that a Trustee is a fiduciary and must act in the best interests of the creditorsand the debtor, the only knowledge claimed for Kane Kessler was their supposed knowledge of Donna’sdebts. 30 See Exhibit “N” and page 7 of the accompanying Objection to Trustee’s Final Report.



[- 13 -]

Moreover, Kane Kessler filed a Petition in which they clearly knew that the three

petitioning creditors were “splitting” their claims since they were all from the same law firm.

Kane Kessler simply could not be “disinterested,” as required by §327 of the Code since

they assisted Pollack & Green in filing a fraudulent petition. They could not be disinterested

since they knew that by splitting their claims, Pollack & Green violated §303 (b) of the Code

since there were not three petitioning creditors and they knew that Ms. Sturman was not

insolvent since she had substantial claims and interests in the Brothers’ Cases and even after the

collusive settlement was made between the Trustee and Alan Nisselson, the Trustee for Donna

Sturman’s phony bankruptcy, there was a surplus of approximately $700,000.

The requirements of §303 (b) confer subject matter jurisdiction on the bankruptcy Court,

and hence can be raised at any time as a basis for the dismissal of the Bankruptcy. See In re

BDC 56 LLC , 330 F.3d 111, 118 (2d Cir. 2003): “Bankruptcy courts in this Circuit have

construed the requirement that a petitioning creditor’s claim not be subject to a bona fide dispute

as “both an element of the condition upon which a controverted order for relief may be entered

and a necessary prerequisite for the bankruptcy court's jurisdiction.” In re Elsa Designs, Ltd .,

155 B.R. 859, 863 (Bankr. S.D.N.Y. 1993); see also In re Onyx Telecomm., Ltd ., 60 B.R. 492,

496 (Bankr. S.D.N.Y. 1985).31

§327(a) provides in relevant part that: “the trustee, with the court’s approval, may employ

one or more attorneys, accountants, auctioneers, or other professional persons, that do not hold or

represent an interest adverse to the estate, and that are disinterested persons. . . .” Obviously,

31 They knew or should have known that Pollack & Greene was a defendant in a malpractice litigationcommenced by Donna Sturman in Supreme Court (Index No. 603023/96)—and thus that Pollack &Green’s claims were subject to a bona fide dispute.



[- 14 -]

Kane Kessler could not be disinterested since they sought to gain the greatest advantage against

Donna Sturman and for their client, Pollack & Greene—not for Donna.

Moreover, they knew nothing about what Mr. Nisselson claimed they knew: extensive

knowledge about the Debtor's pre-Petition Date conduct. Ms. Sturman had a $20,000,000

claim in the Brothers Cases. How could she be insolvent when she had such a large claim? Kane

Kessler did absolutely nothing to investigate such claims, and the total amount of time that Mr.

Nisselson spent investigating Donna Sturman’s claims in the Brothers Cases was 7.4 hours

according to his time sheets which he submitted in connection with his Final Report.32

They could not be disinterested in connection with the collusive settlement agreement

entered into by Alan Nisselson with the Trustee since they had no interest in maximizing the

Estate other than to get their client, Pollack & Green paid.

Moreover, only a year earlier, the Trustee testified that, after a thorough analysis of

Donna Sturman’s claims, they were “substantial, meaningful and undeniable.” When the Trustee

and MHT could not “get rid of Donna” through the front door, they kicked her out the back.

Barely four months after the Court denied a settlement to Ms. Sturman in the Brothers’ Cases for

$3.75 Million, she was thrown into bankruptcy and the Trustee quietly settled her claims,

without any findings of fact, conclusions of law or even a Hearing.33

Nevertheless, during Mr. Nisselson’s 7.4 hours he claimed to have “conducted a series of

negotiations to settle [Donna’s $20,000,000 constructive trust claims, claims of fraudulent

32 See Exhibit “C” to Donna Sturman’s Cross-Motion to the Trustee’s Motion for Sanctions.33 Despite the fact that the Order signed by the Court settling Donna’s claims states that there was aHearing on this matter, nowhere does such a Hearing exist on any docket.



[- 15 -]

conveyances, subordination of Chase’s] claims,” and after all that time, he concluded that “All

assets of the Debtor’s Estate have been collected.”34

Under any construction of the law, that settlement agreement is void, is no more than a

fraud and is the sole basis upon which the Trustee supports his frivolous claim that Donna

Sturman lacks standing to raise any of these issues on Appeal.

The Trustee’s continuation of the fraud upon Ms. Sturman using bullying tactics more

suited to the playground should not be condoned and his motion to dismiss this Appeal.

He spuriously claims that Donna Sturman wants to “relitigate” her claims—she has never

had even one opportunity.

In Estate of Wallens, 9 N.Y.3d 117, 847 N.Y.S.2d 156 (2007), the Court of Appeals of

New York expressed its long-held position on fiduciary obligations, stating:

This is a sensitive and “inflexible” rule of fidelity, barring not only blatant self-dealing, but also requiring avoidance of situations inwhich a fiduciary’s personal interest possibly conflicts with theinterest of those owed a fiduciary duty. (Citing Birnbaum v.

Birnbaum, 73 N.Y.2d 461, 466, 541 N.Y.S.2d 746 (1989).)

A similar result was announced in In re Kornrich, 19 Misc. 3d 663, 854 N.Y.S.2d 293

(Sur. 2008) (Per Roth, Sur.), where the trustee claimed that the trust language excused him from

accounting during the period of the trust: “There is a basis reason that such a provision cannot be

enforced, namely that accountability is an essential element of all fiduciary relationships which

cannot be waived.” 19 Misc. 3d 665, 854 N.Y.S. at 295.

The Trustee cannot stand on the collusive settlement he arranged with Alan Nisselson to

deny Donna Sturman standing to appeal to this Court. It goes directly against all obligations he

had regarding his fiduciary duty to Donna, both as a creditor and owner of the Properties, which

34 See Exhibit “C” to Donna Sturman’s Cross-Motion to the Trustee’s Motion for Sanctions.



[- 16 -]

the Trustee testified under oath—and is judicially estopped from denying that they—were

certainly provable in the amount of $20,000,000.



[- 17 -]

POINT III

THE TRUSTEE TRIES TO GET

RID OF DONNA’S DANGEROUS CLAIMS

WHICH WOULD WIPE OUT THE ESTATE

After struggling to present her claims for over 14 years from the time she commenced her

State Court action against her brothers, in June of 2001, the Trustee strongly supported the

approval of a settlement of Donna Sturman’s claims that he believed to be “substantial,

meaningful and undeniable.”

A brief analysis of Ms. Sturman’s claim in the bankruptcy cases of her brothers is

necessary to an understanding of this motion. She asserted a constructive trust over the

defalcations of the brothers from the Entities in which she was a 25% owner, having inherited

them equally with her brothers, and the embezzlement from the Muriel Estate. As the Trustee

stated: “The predicate for Donna’s argument is her assertion that pre-petition, the Debtors

absconded with, and stole her 25% interest in their father’s assets through fraudulent acts.”

Donna also asserted that she was entitled to the assets transferred by Howard and/or the brothers

from the Muriel Estate. Thus, Ms. Sturman was entitled to 25% of the Trustee’s receipts in the

bankruptcy cases (plus the entire Muriel Estate) since assets subject to a constructive trust do not

become property of the bankruptcy estate.

To enforce her rights, Ms. Sturman had sued the Trustee for mismanagement, including

the arson destroying the books and records of the Sturman Enterprises, sued Chase Manhattan

Bank to subordinate their claims, since the brothers encumbered the Sturman Enterprises with

mortgages held by Chemical (and later Chase) without her consent thereto; and had objected to

every distribution to attorneys and creditors.



[- 18 -]

In 2001, the Trustee and his counsel finally admitted that Donna Sturman’s entitlement to

“the approximately $8 Million Dollars of Estate assets which found their way into the

Bankruptcy Cases at their commencement, which were embezzled funds from corporations she

was suing in the State Court as a 25% owner,” the entire Muriel Estate and other defalcations,

amounting in all to over $15 Million Dollars. As the Trustee conceded, however, this type of

payment would require massive disgorgement from creditors.

The argument of the Trustee’s counsel in support of the proposed settlement in his

testimony in July 2001 was that the failure to allow her claims was:

“[A]n unlawful taking of her property without compensation.You can’t do that. Nobody can do that. She has a claim. We

used her property without paying her for ten years. That claim,if this settlement is not approved, that claim will be made here.That claim will be heard by Your Honor, and it worries me because it is real and it is clear.

What I ask you to focus on, Judge, is this: In addition to the factorsthat are incumbent upon you to address, remember this: In terms ofDonna’s constructive trust claim and the other unliquidated claimsshe makes, there is no real question that she has an entitlement andshe deserves to be paid for them.

The constructive trust claims [Ms. Sturman asserted in theBankruptcy Cases] could wipe out the estate.

35

35 See Transcript of July 3, 2001, at pages 106-110, at Exhibit “NN” to Donna Sturman’s Objection to the

Final Distribution by the Trustee, dated October 29, 2009, submitted herewith. (Emphasis added.)

Moreover , these comments in open court fall under the doctrine of judicial estoppel which “prevents a

party from asserting a factual position in a legal proceeding that is contrary to a position previously taken by him in a prior legal proceeding … judicial estoppel protects the sanctity of the oath and the integrity ofthe judicial process.” Bates v. Long Island R.R. Co., 997 F.2d 1028, 1037 (2d Cir.), cert. den., 510 U.S.992, 126 L. Ed. 2d 452, 114 S. Ct. 550 (1993). To trigger judicial estoppel, two factors must be shown:“[f]irst, it must be shown that the allegedly inconsistent positions were made under oath in a prior proceeding. Second, such inconsistencies must be shown to have been calculated to make a mockery ofthe judicial system.” See Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1285 (11th Cir. 2002) (quotingSalomon Smith Barney, Inc. v. Harvey, M.D., 269 F.3d 1302, 1308 (11th Cir. 2001)).



[- 19 -]

The Trustee’s justification for settling Donna’s $20 million claim for $3.75 Million

Dollars was ironically his acknowledgment that it was completely valid . Moreover, in light of

his testimony on July 3, 2001, that Donna Sturman’s claims were indisputably valid, he was

judicially estopped from taking an inconsistent position in Donna’s fraudulent bankruptcy.

“Judicial estoppel prevents a party from prevailing with a certain legal argument at one

legal phase, only to advocate a contradictory position at a later legal phase.36 It seeks to prevent

litigants from “playing fast and loose with the courts” by asserting inconsistent positions before

the courts.37

The Trustee’s counsel admitted that his reason to settle with Ms. Sturman was:

[H]is concern that Donna Sturman would be able or could besuccessful in her efforts to impose a constructive trust on all of theassets in the Estates, therefore leaving nothing for attorneys’

fees, Trustee’s commissions or other Creditors.38

Similarly, even the Court below recognized the indisputable validity of Ms. Sturman’s

claims, as stated in the same Hearing:

I think that the Trustee has taken a thorough look at DonnaSturman’s likelihood of being able to construct the ConstructiveTrust claims, which were somewhat extensive.I think that the Trustee has shown she would, in fact, end up with a$20 Million claim…

39

Nevertheless, since Chase Manhattan Bank (the successor in interest to MHT) and

Boston Safe and Deposit Company objected to the settlement with Donna Sturman the Court

refused to approve it.

36 New Hampshire v. Maine, 532 U.S. 742, 749 (2001).37 In re Cassidy, 892 F.3d 637, 641 (7th Cir. 1990).38 Transcript of Trustee’s motion to approve the settlement of Donna’s claims, dated July 3, 2001, at p. 5,lines 10-14, at Exhibit “II” to Donna Sturman’s Objection to the Final Distribution of the Trustee, datedOctober 29, 2009, submitted herewith.39 Transcript dated December 7, 2001, at p.17, lines 17-24, at Exhibit “GG” to Ms. Sturman’s Objectionto the Trustee’s Final Report.



[- 20 -]

As the Court stated:

It’s $20 million. It is a distribution, one that would turn out to payfar more in interest than ultimately the distribution that would beoffered to other creditors -- it would be greater than the distribution

that would be offered to Creditors such as Chase.

40

I'm aware that Courts should not substitute their business large forthat of the Trustee. However, I have to take note of the fact thatthere are no Creditors supporting the settlement, and that thecreditors, in fact, actively object to the settlement, the largestCreditors.

41

It is a distribution, one that would turn out to pay far more ininterest than ultimately the distribution that would be offered toother creditors -- it would be greater than the distribution thatwould be offered to Creditors such as Chase.

42

In order to get Ms. Sturman out of the way for his own aggrandizement and to protect his

benefactor MHT/Chase, so that he could continue to milk these Estates not for 2, not for 10, but

for 19 years, ultimately earning over $8,000,000 in fees and commissions while keeping Ms.

Sturman and her children in poverty, he and MHT only one year after his testimony under oath

orchestrated an involuntary bankruptcy against Ms. Sturman without any notice.43

CONCLUSION

Donna’s involuntary bankruptcy was permeated with fraud, was in violation of the

Trustee’s fiduciary duties since he was settling his own liabilities raised on Donna Sturman’s

Adversary Proceeding against him, and was entered without any jurisdiction.

40 Page 19, Lines 12-18, December 7, 2001, submitted herewith.41 Page 18, lines 5-9, December 7, 2001.42 December 7, 2001 Transcript at p.19, lines 13-19.43 As part of the cover up of the Bankruptcy Fraud permeating these Cases, after Ms. Sturman commencedadversary proceedings against the Trustee and MHT, and their fraudulent conduct was about to beexposed,



[- 21 -]

Moreover, the claims of Donna to the Estates of her Brothers were completed grounded

in fact. None of the Properties sold by the Trustee were property of the Estate. She was entitled

to be paid her due, both as an owner and under her claim of constructive trust which she was

fully able to establish.

The issue of Fraud on the Court is so commanding the US Supreme Court has stated that

the statute of limitations is made moot, as it stated in the precedential case of In re Hazel Atlas-

Glass Co., v Hartford Empire Co., 322 U.S. 238, 239, 245 (1944) that “due to fraud on the court

a party can seek relief even nine years after the decision and open a previously closed case.

Establishing the precedent that Fraud upon the Court by Officers of the Court is an offense so

heinous that the Statute of Limitations cannot be utilized as an evasive tool by Officers of the

Court who would abuse established positions to pervert justice.”

Neither should this Court condone the perversions of justice perpetrated against Donna

Sturman by the Trustee. The conduct of the Trustee should not be condoned and his motion to

dismiss denied. Donna Sturman should have at least one court in which to present her claims.44

Dated: New York, New YorkFebruary 26, 2010

Respectfully submitted,

The Law Offices of David H. RelkinCounsel for Donna A. Sturman

/s/ David H. Relkin

By: _____________________David H. Relkin

44 While this brief does not address itself to the other issues which undermine the fraudulent settlement:namely, the fact that all of her claims were non-core and could not have been settled and disposed of in aBankruptcy Court. This is more fully discussed in her Cross-Motion in Response to the Trustee’s Motionfor Contempt at Point IV.



EXHIBIT “A”



,

POLLACK GREENE

.

,

. -

A1_

....

f.lCH.A.E1.. E.

GR£E1'IE

l DP.I SAWET ~ A A Z

foCfTCHEl.1.C.

SCOTT - S O M ~ ~ · ·

~ J GOl-DBERGe:n

CARl.

M

KUNTZ'

GOUNSa

HOWAJll:'l £.

GOLDF U. >S

I O'NoOVU)

SnBEL

DA'VtO

E. ~ ~ T 1 N E l l

_ ~

~ _

CIl C'CU l

ATTOf tNEYS

...T LAW

~

-'OCSON

AYEHVE

NEW YORK. NEW YORK T O O Z : ~

~ I Z I _ ~

~ 1 2 1 : l 1 6 e e S 1 e O

RE'TAINBR AGRE EME NT

Ju ly 8, 1993

_ - . v a

.,

.... ~ s n t a T

Nl:WAItioI. . ...

0 7 1=

nolleu

1Mo

~ =

7ClCD.JCIlO4O

l \J f IN-. : I :

II IXlCI8Uf;,\ NY

117'111

~ n l l . _ 1 7

fois. Conna Sturman

Eas t

68 th

S t r e e t

N e ~ York. New

York 10022

Re:

Reta i ne r

Agreement

Dear

o..'nna:

This l e t ~ e r

con£lL

...... :.b.a:. __ .. r ~ ; o i.1' led the law f i rm

of ~ o l l a c k & Greene

(the -Firm-)

to

represent

you in connect ion

~ i t h

numerous matters

involving

the es ta tes

of your l a te

parents ,

~ l a i m s aga in s t

your

bro thers and poten t ia l cla ims

aga ins t

v a r i o ~ s

p r o ~ e s s i o n a l s and f i duc i a r i e s .

You

recovery from

th e

sa l e

of

profes s iona l

have

agreed

to pay t h i s Firm one - th i rd of any gross

any

source

whatsoever i nc luding but not

l i m i t ~ ~ to

r ea l

e s t a t e

d i s t r ibu t ions

from

any

fiduciar-.f

o r

and

proceeds of any l i t i g a t i on

r ecovery .

In the event you

s ha ll e it he r

di scharge t h i s Firm as your

a t t o rn ey s o r

di scont inue

any ac t ion you

agree

to pay t h i s Firm a

fee re f l ec t ing

our

s tandard

hour ly

b il la b le r at e i . e . par tners a t

a maximum

of

225 pe r hour; assoc ia tes a t a maximum

of 150 pe r

hour ;

pa ra lega l s

a t

a maximum of S50 per

hou r) e xpende d to

th e d ate

o f our di scharge

o r the

t e rmina t ion

of

any mat t e r .

In

add i t i on .

you h a v ~ agreed to re imburse

t h i s

Firm fo r

any

out-a f -pocke t

di sbursements

inclUding,

bu t no t l imi ted to a l l

co s t s

such

as the f i l i ng

of papers , index numbers, exper t

witnes se s consu l t a t ions t r anspo r ta t ion

pr in t e r s .

accountant s

app r a i s e r s

cour t

r epo r t e r s

long

dis tance

te lephone

ca l l s

messengers . xerox,

t r ave l

meals , lodging and s ec r e t a r i a l over t ime,

'>'here.. app l icab le .

/

corrected.index.mol.opp.mot.dismiss.2.26.10 (2)

Documents