in the united states bankruptcy court for...

IN THE UNITED STATES BANKRUPTCY COURT FOR THEWESTERN DISTRICT OF TEXAS

AUSTIN DIVISION

IN RE: § §

GARY L. BRADLEY § §

Debtor. §

CASE NO. 02-12741CHAPTER 7

BRADLEY BEUTEL, §TRUSTEE OF AND ON BEHALF OF §THE LAZARUS EXEMPT TRUST §

Plaintiff, § §

v. § §

RONALD E. INGALLS, §CHAPTER 7 TRUSTEE §

Defendant. §

ADVERSARY NO. 02-1205

CONSOLIDATED UNDER ADVERSARY NO. 02-1183

UNITED STATES’ POST-TRIAL BRIEFINCLUDING PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW

Respectfully submitted,

EILEEN J. O’CONNORAssistant Attorney General

HERBERT W. LINDERState Bar No. OH-0065446

CHRISTOPHER R. EGAN State Bar No. 24036516

Attorneys, Tax DivisionDepartment of Justice717 N. Harwood, Suite 400Dallas, Texas 75201(214) 880-9754/32

JOHNNY K. SUTTON United States AttorneyAugust 2004

i

TABLE OF CONTENTS

PROPOSED FINDINGS OF FACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

A. IRS Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B. Bradley, Personal Friends, and Close Business Partners . . . . . . . . . . . . . . . . . . . . . . . . . . 2

C. Bradley and Gressett Secretly Agreed to Jointly Own Assets 80/20 . . . . . . . . . . . . . . . . . 6

D. Bradley Created Lazarus Exempt Trust to Prevent Collection of the His Debts . . . . . . . . 7

E. Bradley Sold His Streetman Homes Stock to James Gressett Using a Set of ShamTransactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

F. Bradley Fraudulently Transferred His Notes Receivables to Lazarus Investments . . . . . 15

G. Bradley Contributed Cash to Lazarus Exempt Trust for No Consideration . . . . . . . . . . 18

H. Bradley Contributed His Interest in Phoenix Holdings to Lazarus Investments for No Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

I. Bradley Contributed His Interest in the Spillar/Pfluger Property to Phoenix Holdings for No Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

J. Bradley Contributed His Interest in Webb Group Enterpises to Lazarus Investment for No Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

K. Bradley Contributed His O’Quinn Contract to Rasaca Austin for No Consideration . . . 29

L. Bradley Contributed His Interest in MedTech Ventures to Lazarus Investments for No Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

PROPOSED CONCLUSIONS OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

A. Federal Tax Liens Attach To All Lazarus Exempt Trust Assets that Gary Bradley Owned During or After His Federal Income Taxes Were Assessed . . . . . . . . . . . . . . . . 34

B. Federal Tax Liens Attach To All Distributions That Lazarus Exempt Trust Should Make and Has Made to Gary Bradley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

ii

ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

A. The United States’ Tax Liens Attach to All Assets That Bradley Contributed to Lazarus Exempt Trust Without Consideration, to the Streetman Stock Sale Proceeds, and to All Required Support Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

1. United States Tax Liens Attach To All Assets That Bradley Contributed toLazarus Exempt Trust Without Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . 38

2. United States Tax Liens Attach to $1,619,092 of Notes and AccountsReceivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

3. United States Tax Liens Attach to the Assets that Lazarus ExemptTrust Purchased With the $5.4 Million of Proceeds From Bradley’sSale of His Streetman Homes Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

4. United States Tax Liens Attach to All Distributions That LazarusExempt Trust Should Make and Has Made to Gary Bradley . . . . . . . . . . . . . . . . 44

B. The United States’ Tax Liens Follow Assets that Have Been Transferred for No Consideration and Attach to All Proceeds from Assets That Have Been Sold to Bona Fide Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

PROPOSED ORDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

CITATIONS

CASES:

Beaty v. United States, 937 F.2d 288 (6th Cir. 1991) . . . . . . . . . . . . . . . . . . . . . . . . 36, 45Glass City Bank v. United States, 326 U.S. 265 (1945) . . . . . . . . . . . . . . . . . . . . . . 34, 39Oxford Capital Corp. v. United States, 211 F.3d 280 (5th Cir. 2000) . . . . . . . . . . . . 35, 39Phelps v. United States, 421 U.S. 330 (1975) . . . . . . . . . . . . . . . . . . . . . . . . . . . 36, 43, 45Towe Antique Ford Foundation v. Internal Revenue Service,

791 F. Supp. 1450 (D. Mont. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35United States v. Alfano, 34 F. Supp. 2d 827 (E.D.N.Y. 1999) . . . . . . . . . . . . . . 35, 40, 45United States v. Blakeman, 997 F.2d 1084 (5th Cir. 1992) questioned on

other grounds by In re Bouchie, 324 F.3d 780 (5th Cir. 2003) . . . . . . . . . . . . . . 37United States v. Gonzales, Civ. No. 89-F-1740, 1991 WL 53281,

at *4 (D. Colo. Feb. 6, 1991), aff’d, 951 F.2d 1261 (10th Cir. 1991) . . . 35-36, 41

iii

United States v. Morrell, 137 F.Supp. 2d 130 (E.D.N.Y. 2001) . . . . . . . . . . . . . 37, 40, 43United States v. National Bank of Commerce, 472 U.S. 713 (1985) . . . . . . . . . 34-35, 39United States v. Taylor, 254 F.Supp. 752 (N.D. Cal. 1966) . . . . . . . . . . . . . . . . . . . 37, 44

STATUTES:

11 U.S.C.§ 545(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

26 U.S.C.:§ 6321 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34-36, 39-41, 44-45§ 6322 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35§ 6323 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35-36, 41§ 6323(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35-36, 40-41, 45§ 6323(h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35-36, 40-41, 45

TEX. BUS. & COM. CODE § 24.006(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

TEX. BUS. & COM. CODE § 24.006(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36, 41

MISCELLANEOUS:

Treas. Reg. 301.6323(h)-1(f)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35-36

1If the Court determines that it does not have jurisdiction to determine the United States’ interests in

Lazarus Exempt Trust’s property, the United States will promptly move to lift the stay so that it may pursue the

property outside of bankruptcy.

IN THE UNITED STATES BANKRUPTCY COURT FOR THEWESTERN DISTRICT OF TEXAS

AUSTIN DIVISION

IN RE: § §

GARY L. BRADLEY § §

Debtor. § §

CASE NO. 02-12741

CHAPTER 7

§ §

BRADLEY BEUTEL, §TRUSTEE OF AND ON BEHALF OF §THE LAZARUS EXEMPT TRUST §

§Plaintiff, §

§v. §

§RONALD E. INGALLS, §CHAPTER 7 TRUSTEE §

§Defendant. §

ADVERSARY NO. 02-1205

CONSOLIDATED UNDER ADVERSARY NO. 02-1183

UNITED STATES’ POST-TRIAL BRIEFINCLUDING PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW

Brad Beutel has asked the Court to declare that none of Gary Bradley’s creditors have

any interest in Lazarus Exempt Trust’s assets, but the United States believes that the following

proposed findings of fact and conclusions of law demonstrate two reasons why Bradley’s

creditors may use Lazarus Exempt Trust’s assets to satisfy Bradley’s debts: (1) Lazarus Exempt

Trust is self-settled; and (2) the United States’ statutory tax assessment liens attach to particular

property within Lazarus Exempt Trust.1

2See IRS Proof of Claim, admitted as G OVERNM ENT EXH IBIT 13; Gary Bradley Testimony, Trial Trans. at

520-521, lns. 22-5.

3See IRS Proof of Claim, admitted as G OVERNM ENT EXH IBIT 13. The assessment dates were stipulated to

on the record. See Assessment Stipulation, Trial Trans., at 270-271, lns. 12-19.

4See Offer to W aive Restrictions on Assessment and Collection, admitted as G OVERNM ENT EXH IBIT 11.

5See IRS Proof of Claim, admitted as G OVERNM ENT EXH IBIT 13. The United States has a priority claim for

$3,672,708 .61 of 1994 and 1996 taxes.

U.S. Post-Trial Brief

Page 2 of 48

PROPOSED FINDINGS OF FACT

Gary Bradley systematically used secret agreements and sham transactions to hide his

assets and contribute them to Lazarus Exempt Trust for no consideration. He hoped that he

could conceal his activities in a mountain of paperwork and complicated accounting, but the

following findings of fact show that he has failed.

A. IRS Claim

1. Petition Date – On July 19, 2002, the debtor, Gary Bradley, filed his Chapter 7 petition.2

2. IRS Claim – On October 17, 2002, the Internal Revenue Service filed a proof of claim for

Bradley’s 1994 and 1996 federal income taxes, which were assessed on May 1, 2000, and

April 14, 2000, respectively.3 Bradley consented to these 1994 and 1996 federal income

tax assessments.4 On or about December 19, 2002, the IRS filed Amendment No. 2 to its

proof of claim dated October 10, 2002, asserting priority and unsecured claims in the

amounts of $4,743,639.60 and $399,135.13, respectively.5 This amendment added

Bradley’s 2001 tax liability, which was assessed on December 20, 2002.

B. Bradley, Personal Friends, and Close Business Partners

3. Gary Bradley – For most of his career, Gary Bradley has done business under the name

6Gary Bradley Testimony, Trial Trans. at 55, lns. 5-10.

7See Gary Bradley T estimony, Trial Trans. at 56, lns. 6-15 (used Bradley Development to represent his

“global entity”).

8See Excerpts from Clouston Video Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 898, at 7, lns.

1-21 (admitting that he owned thirty to forty entities when he sold the Tiger Lily property “[j]ust before the end of

the year”); Clouston V ideo Deposition Date Stipulation, T rial Trans., at 65, lns. 17-25) (stipulating that Bradley’s

video deposition in the Clouston case occurred on February 2, 2001).

9See Note Transfer Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-ING ALLS 714, at LOVE

02715 (Feb. 19, 2002) (195,725/6 = 32,620.97; 24,000/6 = 4,000).

10Dianna Patterson Testimony, Trial Trans., at 1220, lns. 9-10.

11Gary Bradley Testimony, Trial Trans., at 20, lns. 7-9.

12Brad Beutel Testimony, Trial Trans., at 540, lns. 16-25.


14Gary Bradley Testimony, Trial Trans., at 430-431, lns. 23-25.



Page 3 of 48

Bradley Development.6 This name represents a “global entity” that encompasses all of

Bradley’s business interests and entities.7 Bradley has admitted that, as of late 2000, this

global entity included at least thirty to forty entities.8 During the six months from January

1, 2001 through June 30, 2001, Bradley’s monthly income averaged $32,620.97, and his

child support obligations averaged $4,000 per month.9 Bradley’s initials are GLB.10

4. Kay Bradley Hulse – Kay Bradley Hulse is Gary Bradley’s sister.11 Brad Beutel alleges

that she alone settled the Lazarus Exempt Trust with $1,000.12

5. James Gressett – Gary Bradley and James Gressett have been close friends since college.

In college, Bradley was Gressett’s fraternity brother and roommate.13 After college,

Gressett worked his way up to accounting partner for KPMG, but he left KPMG in 1981

to become close business partners with Bradley.14 Gressett directed all of Bradley

Development’s accounting and tax functions.15 While in this role, he showed a

16See First Transaction Memo from Brad Beutel to B ill Love, admitted as E XHIBIT D-ING ALLS 152, at LAZ-

ET 001837, par. IV (June 20, 2000) (Gressett suggesting manipulation of partnership income).17

See Lazarus T rust E-Mail from David Hughes to Bill Love, admitted as G OVERNM ENT EXH IBIT 7

(Gressett worried about scrutiny from creditors).18

Brad Beutel Testimony, Trial Trans, at. 869-870, lns. 25- 2 (Phoenix Holdings transaction was back dated

because James Gressett did not want to recognize the taxab le income produced by Phoenix Holdings).19

Gressett 2001 Tax Return, admitted as GOVERNM ENT EXH IBIT 12 (absence of Streetman Homes stock sale

on Gressett’s original and amended 2001 federal income tax return).

20See Dianna Patterson Testimony, Trial Trans., at 1220, lns. 7-8.


22Brad Beutel Testimony, Trial Trans., at 536, lns. 15-18.

23See Brad Beutel Testimony, Trial Trans., at 538, lns. 10-24 (explaining work for Alien); Excerpts from

4/30/02 FDIC Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 892, at 117, lines 18-19 (Beutel was architect

of Bradley-Gressett split).


Page 4 of 48

willingness to manipulate financial transactions to improperly avoid tax liability and

creditor scrutiny. For example, he suggested manipulating income recognition from a

deal with Hatsy Heep,16 he suggested structuring Lazarus Exempt Trust in a way that

would avoid creditor scrutiny,17 and he backdated the transfer of Phoenix Holdings to

Lazarus Investments to avoid the recognition of taxable income.18 He showed this same

willingness to improperly avoid tax liability in his personal life when he failed to report

the Streetman Homes stock sale on his original and first amended 2001 federal income

tax return.19 Gressett’s initials are JDG.20

6. Brad Beutel – Brad Beutel is Gary Bradley’s cousin.21 He has a BBA Finance degree

from the University of Texas at Austin and a graduate degree from the Southwest

Graduate School of Banking at SMU.22 About the time Gressett decided to separate from

Bradley, Beutel joined Bradley Development to help manage Bradley’s financial affairs

and separate Bradley and Gressett’s his joint interests.23 To facilitate this financial

24See Lazarus Exempt Trust Agreement, admitted as EXHIBIT BEU TEL 1.

25William Love Testimony, Trial. Trans., at 1000-1002, lns. 18-4, at 1149-1150, lns. 23-4.


27William Love Testimony, Trial Trans., at 999-1000, lns. 22-5.

28See William Love Testimony, Trial Trans., at 1077, lns. 10-20 (writes accurate memos); William Love

Testimony, Trial Trans., at 1071-1072, lns. 15-1 (writes accurate invoices).

29Gary Bradley Testimony, Trial Trans., at 280, lns. 2-5, at 1173, lns. 14-16.

30William Love Testimony, Trial Trans., at 1060, lns. 21-23.




Page 5 of 48

management role, Beutel became trustee of Lazarus Exempt Trust.24

7. William Love – For over twenty years, William Love has prepared Bradley’s and

Gressett’s personal and business tax returns.25 Love has also represented Bradley in front

of the IRS.26 He is a licensed CPA, and he formerly worked for KPMG as both an audit

and tax partner.27 To facilitate his role as Bradley’s tax advisor, Love regularly attends

Bradley business meetings and writes file memos and business invoices to record what is

discussed at those meetings.28 Love is knowledgeable about Bradley’s financial affairs.29

His initials are WCL.30

8. Dianna Patterson – Dianna Patterson has worked for Bradley as an in-house bookkeeper

since 1977.31 She managed all of the bookkeeping functions for Bradley Development’s

entities. She had signature authority on Alien, Inc.’s business bank accounts and Gary

Bradley’s personal bank accounts. She regularly signed Bradley and Gressett’s checks

with permission.32

9. Hamad and Vahid Noshirvani – Hamad and Vahid Noshirvani have been described as

33See Spillar Negotiation Letter from B rad Beutel to Matt Mathias, admitted as EXHIBIT D-ING ALLS 570, at

LAZ-PH6 000699 (Bradley has partnered with Noshirvanis since 1977); Brad Beutel Testimony, Trial Trans., at

726, lns. 17-25.

34See Spillar Negotiation Letter from B rad Beutel to Matt Mathias, admitted as EXHIBIT D-ING ALLS 570, at

LAZ-PH6 000699 (Bradley has partnered with Noshirvanis since 1977).

35See Phoenix Holdings section below for details and support. Bradley has even admitted under oath that

he owned Streetman Homes. See Excerp ts from 4/30/02 FDIC Deposition of Bradley, admitted as EXHIBIT D-

ING ALLS 890 and 892; Excerpts from Clouston Video Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 899, at

19, lns. 5-8 (admitting that he owned part of Streetman Homes when he purchased the Tiger Lily property for

Tammy Clouston on June 28, 1999)

36See Streetman section for more detail and support.

37See Phoenix section for more detail and support.


Page 6 of 48

“guardian angels” of Bradley’s properties.33 They have been close business partners with

Bradley since 1977.34 In particular, they invested in Bradley’s Circle C projects.35

C. Bradley and Gressett Agreed to Jointly Own Assets 80/20

10. Bradley and Gressett Secretly Owned Property in an 80/20 Ratio – Although formal

ownership documents show that Bradley owned virtually nothing when his 1994 and

1996 income taxes were assessed, internal accounting records, memorandums, and other

documents show that Bradley secretly owned many joint interests with James Gressett.

For example, stock certificates show that Bradley and Gressett’s wives owned 57,000

shares of Streetman Homes stock, but Bradley Development’s internal records show that

Bradley and Gressett owned the stock.36 Also, Phoenix Holdings partnership agreement

and CC Residential Corp’s ownership documents show that Hamad Noshirvani owned

60% of Phoenix Holdings, Ltd, but Bradley Development’s internal records show that

Bradley and Gressett owned two-thirds of that 60% interest.37 Bradley and Gressett

divided these secret interests using an 80/20 ratio: their real estate assets were owned

80% by Bradley and 20% by Gressett, but their non-real estate assets were owned 80% by

38See 3/31/94 Bradley-Gressett Balance Sheet, admitted as E XHIBIT D-ING ALLS 706 (showing Gressett’s

20% investment and 20% equity and Bradley’s 80% investment and 80% equity); Excerpts from 4/30/02 FDIC

Deposition of Bradley, admitted as E XHIBIT D-ING ALLS 892, at 116, lines 8-25 (describing 80/20 and genesis of

separation).

39See Excerp ts from 4/30/02 FDIC Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 892, at 115-116,

119-120 (Gressett wanted out of real estate, so they started working toward separation); 2000 Phoenix Tax Issues

Memo from Bill Love to Phoenix Holdings File, admitted as E XHIBIT D-INGALLS 833 (“Bradley and Gressett are

making an effort to dissolve their interests”); Love Bill for Discussing Bradley-Gressett Asset Settlement, admitted

as EXHIBIT D-ING ALLS 718; Phoenix Assignment Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-

ING ALLS 840, at Love 07275 (Apr. 9, 2001) (referring to “doing the JDG/GLB ”).

40See Excerp ts from 4/30/02 FDIC Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 892, at 117-118

(“Brad’s job was...to find equivalent values to trade”); Excerpts from 4/30/02 FDIC Deposition of Bradley, admitted

as EXHIBIT D-ING ALLS 891 , at 132-333 (“we traded out”); Love Bill for Discussing Asset Transfer with Gressett,

admitted as E XHIBIT D-ING ALLS 543 (“exchange of assets between Gary Bradley and Jim Gressett”).

41See Excerp ts from 4/30/02 FDIC Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 890, at 136, lns.

1-15 (Streetman Homes was the most equivalent value from Bradley’s side).


Page 7 of 48

Gressett and 20% by Bradley.38

11. Bradley and Gressett Decided to Start Separating Their Interests – In 1999, Bradley and

Gressett decided to separate their assets and business interests.39 To execute this

separation, Gressett and Bradley began transferring assets to obtain separate ownership

values roughly equal to their respective 80/20 joint ownership values.40 Bradley has

admitted that his interest in Streetman Homes was the largest asset that had to be

accounted for during this separation.41

D. Bradley Created Lazarus Exempt Trust to Prevent Collection of His Debts

12. Bradley Met with His Advisors to Discuss Creation of a Trust that Would Prevent His

Creditors from Collecting His Debts – On April 11, 2000, Bradley met with David

Hughes, Brad Beutel, and William Love on April 11, 2000 to discuss forming a trust that

would shelter Bradley’s investments from his creditors: “The purpose of the Lazarus

Trust is to create a [sic] entity for Gary to make investments in the future which is

42Trust Formation Meeting Memo from William Love to Bradley Development File, admitted as

GOVERNM ENT EXH IBIT 24, at LAZ-PH8 00373 (Apr. 26, 2000). See also Love Bill for Trust Formation Meeting,

admitted as G OVERNM ENT EXH IBIT 27, at TT-GLB 003759; Hughes Notes from Trust Formation Meeting, admitted

as EXHIBIT D-INGALLS 19; David Hugues Testimony, Trial Trans., at 1533, lns. 15-18 (Bradley present for entire

meeting). Brad Beutel reviewed Loves’s memo and marked up incorrect statements, but he did not mark up any of

the statements regarding creditor avoidance or assets to be contributed to Lazarus Exempt Trust. See markings on

Love’s Trust Formation Meeting Memo. Trust Formation Meeting Memo from William Love to Bradley

Development File, admitted as GOVERNM ENT EXH IBIT 24 (Apr. 26, 2000); Brad Beutel Testimony, Trial Trans., at

768, lns. 1-5 (markings on GOVERNM ENT EXH IBIT 24 are Beutel’s handwriting), at 768-772, lns. 22-8 (Beutel

reviewed and marked out incorrect statements on GOVERNM ENT EXH IBIT 24, but there are no lines through around

creditor avoidance statements or statements about contributing Streetman and Web T roup to trust). Bradley admitted

at trial that he had been told that it was unwise to own anything. Gary Bradley Testimony, Trial Trans., at 84, lns.

10-21.

43Trust Formation Meeting Memo from William Love to Bradley Development File, admitted as

GOVERNM ENT EXH IBIT 24, at LAZ-PH8 00373 (Apr. 26, 2000).

44See Trust Formation Meeting Memo from William Love to Bradley Development File, admitted as

GOVERNM ENT EXH IBIT 24, at LAZ-PH8 000374 (Apr. 26, 2000) (referring to Streetmand and Webb Trust in section

titled “Other Entities to Lazarus Trust”); Hughes Notes from Trust Formation Meeting, admitted as E XHIBIT D-

INGALLS 19, at BMC 00440-00442; Hughes Testimony, Trial Trans., at 1533, lns. 19-21 (took notes in chronological

order), at 1535 , lns. 22-25 (Hughes and Love were like scribes noting what they hear); David Hughes Testimony,

Trial Trans., at 1536, lns. 1-3 (source of meeting information was Bradley or Beutel).


GOVERNM ENT EXH IBIT 24, at LAZ-PH8 000374 (Apr. 26, 2000) (referring to Streetmand and Webb Trust in section

titled “Other Entities to Lazarus Trust”); Hughes Notes from Trust Formation Meeting, admitted as E XHIBIT D-

INGALLS 19, at BMC 00440 (“the agree is 50/50"), at BMC 00442 (“deals w/ Gressett are 80/20").


Page 8 of 48

creditor protected given the fact that Gary continues to have a significant judgment

outstanding with the RTC....”42 The attendees decided that “there are a number of assets

that will need to be acquire[d] by the trust that are currently held by Jim Gressett or Penny

Gressett and Jimmy Evans.”43 Bradley or Beutel specifically identified Bradley’s

investments in Webb Troup Enterprises and Streetman Homes as assets to be contributed

to his creditor-protected trust.44 Love’s and Hughes’s notes from this meeting indicate

that Bradley and Gressett jointly owned a 75% interest in Streetman Homes that they

divided 80/20 respectively, and Bradley and Evans jointly owned property in Webb Troup

that they divided 50/50.45 Beutel reviewed Loves’s notes and marked up incorrect

statements, but he did not mark up any of the statements regarding creditor avoidance or

46See markings on Love’s Trust Formation Meeting Memo. Trust Formation Meeting Memo from William

Love to Bradley Development File, admitted as GOVERNM ENT EXH IBIT 24 (Apr. 26 , 2000); Brad B eutel Testimony,

Trial Trans., at 768, lns. 1-5 (markings on GOVERNM ENT EXH IBIT 24 are Beutel’s handwriting), at 768-772, lns. 22-8

(Beutel reviewed and marked out incorrect statements on GOVERNM ENT EXH IBIT 24, but there are no lines through

creditor avoidance statements or statements about contributing Streetman and Webb Troup to trust).

47See Love B ill for Discussing Asset Transfer with Gressett, admitted as EXHIBIT D-ING ALLS 543

(“consideration of assets to be purchased by Lazarus Trust”); First Transaction Memo from Brad B eutel to B ill

Love, admitted as EXHIBIT D-ING ALLS 152 (June 20, 2000) (discussing assets to be purchased by Lazarus

Investments; cc: to James Gressett); Second T ransaction M emo from Brad Beutel to B ill Love, admitted as E XH IBIT

D-ING ALLS 151 (June 27, 2000) (discussing Lazarus Trust ownership and Lazarus Development acquisitions; cc: to

James Gressett).

48See Invoice for B ill Love Payment, admitted as G OVERNM ENT EXH IBIT 27 ($760 paid for Love Bills);

Bradley Check Payable to Bill Love, admitted as G OVERNM ENT EXH IBIT ($760 check to B ill Love).

49See Lazarus Exempt Trust Agreement, admitted as EXHIBIT BEU TEL 1.

50Brad Beutel Testimony, Trial Trans., at 540, lns. 16-25. One day after the Trust was funded with $1,000

Brad Beutel obtained exactly $1,000 in cash for Gary Bradley. See GOVERNM ENT EXH IBIT 41, chk. No. 001659;

Diane Patterson Testimony, Trial Trans., 1234-1235, lns., 21-23.51

See First Transaction Memo from Brad Beutel to B ill Love, admitted as E XHIBIT D-ING ALLS 152, at

001836 (June 20, 2000) (mentioning directive given to Beutel); Brad Beutel Testimony, Trial Trans., at 772-773, at

lns. 14-15 (directive came from “Jim and Gary”).

52See Collection Information Fax from W illiam Love to Brad Beutel, admitted as G OVERNM ENT EXH IBIT 9

(copies of collection information statements submitted during settlement talks with IRS); Brad Beutel Testimony,

Trial Trans., at 728, lns. 10-13 (was aware of Bradley’s tax liabilities when trust formed).


Page 9 of 48

assets to be contributed to Lazarus Exempt Trust.46 James Gressett did not attend this

meeting, but Love later discussed trust contributions with him, and he attended various

meetings regarding the trust.47 Gary Bradley used his personal funds to pay Bill Love’s

fees for attending this meeting.48

13. Bradley Created Lazarus Exempt Trust – Lazarus Exempt Trust was created on May 2,

2000.49 Lazarus Exempt Trust’s Trustee, Brad Beutel, claims that Lazarus Exempt Trust

was created by Bradley’s sister, Kay Hulse, with only $1,000.50 But after creation, Gary

Bradley instructed Beutel to start transferring Bradley’s assets to the Trust.51

14. Beutel Knew of Bradley’s Tax Liabilities – Brad Beutel was aware of Bradley’s 1994 and

1996 federal income tax liabilities at the time the trust was created.52 Beutel was also

53See Collection Information Fax from W illiam Love to Brad Beutel, admitted as G OVERNM ENT EXH IBIT 9

(Aug. 30, 2000) (listing FDIC judgment on collection information statement).

54Lazarus Exempt Trust Agreement, admitted as EXHIBIT BEU TEL 1.

55Lazarus Exempt Trust Agreement, admitted as EXHIBIT BEU TEL 1.

56See Gary Bradley Testimony, Trial Trans., at 281-282, lns. 24-22 (no repayment schedule and no

recollection of documents or interest), at 526, lns. 10-18 (no recollection of documents assigning Bradley Notes to

Lazarus Trust). Dianna Patterson testified that as long as she worked there, Bradley had access to cash from any

entity that Alien managed. Dianna Patterson Testimony, Trial Trans., at 1210-1211, lns. 16-10.

57See Lazarus T rust Summary, admitted as EXHIBIT D-ING ALLS 126; Castle Realty 2001 Tax Return,

admitted as Exhibit Beutel 13, at LAZ-INV 22893 (K-1 for Lazarus Investments, L.P .); Brad Beutel Testimony,

Trial Trans., at 551, lns. 20-22.

58See Lazarus T rust Summary, admitted as EXHIBIT D-ING ALLS 126


Page 10 of 48

aware of the FDIC’s judgment against Bradley at the time the Lazarus Exempt Trust was

created.53

15. Bradley is the Trust’s Sole Beneficiary – Bradley is currently the sole beneficiary of

Lazarus Exempt Trust.54 Under its agreement, the trust is required to distribute to Bradley

“any amounts out of the net income and principal (if income is insufficient) of the trust

as, in the sole reasonable discretion of the trustees, are necessary or advisable” for

Bradley’s “health, education, support or maintenance.”55 Brad Beutel claims that the trust

also loans money to Bradley, but none of the alleged notes and payables owed by Bradley

have set interests rates, loan documents, or repayment schedules.56

16. The Trust Owns Various Real Estate Investment Entities – Lazarus Exempt Trust owns

100% of Lazarus Development, L.P., Strategic Land Management Consultants, LLC.,

Phoenix Holdings, G.P. and Lazarus Investments, L.P. Lazarus Investments, L.P. owns

ninety-five percent of Castle Realty Management Services, LLC and 99% of Phoenix

Holdings, Ltd.57 Phoenix Holdings, G.P. owns the remaining 1% of Phoenix Holdings,

Ltd.58 As of December 31, 1999, Phoenix Holdings Ltd. owned approximately 479 acres

59See Phoenix Buyout Fax from W illiam Love to Jim Gressett, admitted as EXHIBIT D-INGALLS 738, at

LOVE 04530 (listing acres, receivables and bonds in buyout calculation). The United States does not know what

Phoenix property has been transferred or sold since the petition date.

60See 10/31/01 Lazarus Investments Balance Sheet, admitted as E XHIBIT D-ING ALLS 342 (Phoenix Holdings

listed under investments). The United States does not know what Phoenix property has been transferred, sold, or

encumbered since the petition date.

61Steve Bartlett Testimony, Trial Trans., at 1574-1575, lns 11-3.

62See Excerp ts from 4/30/02 FDIC Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 889, at 110-111;

Steve Bartlett Testimony, Trial Trans., at 1574-1575 , lns. 14-3 (Bradley, G ressett, and Bartlett discussed vertically

integrating by helping start Streetman Homes).

63During his deposition in another case, Bradley admitted that he owned part of Streetman Homes in June of

1999. See Excerp ts from Clouston Video Deposition of Bradley, admitted as EXHIBIT D-ING ALLS 899 , at 19, lns. 5-8

(admitting that he owned part of Streetman Homes when he purchased the Tiger Lily property for Tammy Clouston

on June 28, 1999); Bradley 12/31/99 General Ledger, admitted as EXHIBIT D-ING ALLS 674, at LOVE 01249

(showing 6/28/1999 entry for $172,000 Tiger Lily Note Receivable), LOVE 01244 (showing 6/28/1999 entry for

$172,000 check to Commonwealth Title). Bradley produced no evidence showing that his Streetman stock was

transferred between June of 1999 and January of 2001, the alleged date this Streetman stock was transferred to

Lazarus Exempt Trust. See, e.g., Streetman Stock Certificates, admitted as EXHIBIT BEUTEL 35.


Page 11 of 48

of land within Travis County, $2,450,000 in note receivables, and $4,500,000 in MUD

Bonds.59 As of October 31, 2001, Beutel valued these Phoenix Holdings assets at

$44,985,063.60

E. Bradley Sold His Streetman Homes Stock to James Gressett Using a Set of ShamTransactions

17. Bradley and Gressett Jointly Owned Streetman Homes – Bradley owned 45,600 shares of

stock in Streetman Homes, Inc. when the IRS assessed him with his 1994 and 1996

income taxes. Bradley and Gressett wanted to vertically integrate Bradley Development

by going into home building,61 so they helped start Streetman Homes in the mid 1990's.62

They took a cumulative 75% of Streetman Homes, or 57,000 shares of its stock.63 Based

on their 80/20 ownership agreement, Bradley owned 45,600 of these shares and Gressett

64William Love’s memo describing an April 2000 trust formation meeting lists “75% Gressett and 80/20%

60% from Jim Gressett” next to “Streetman Homes.” Trust Formation Meeting M emo from W illiam Love to

Bradley Development File, admitted as GOVERNM ENT EXH IBIT 24, at LAZ-PH8 000374 (Apr. 26, 2000). An

estimated tax letter from William Love indicates that the “80/20” refers to Bradley and Gressett’s ownership division

by stating that income from entities like Streetman homes would be divided 80 percent to Bradley, and 20 percent to

Gressett. Estimated Tax Letter from W illiam Love to Gary Bradley, admitted as EXHIBIT D-ING ALLS 682 (Jan. 4,

2001). David Hughes’s notes from the April meeting explain that “deals w/ Gressett are 80/20,” so Lazarus Exempt

Trust was expected to purchase 80% of the Streetman stock held by Penny Gressett. Hughes Notes from Trust

Formation Meeting, admitted as E XHIBIT D-INGALLS 19, at BMC 00442.

65See Streetman Stock Certificates, admitted as EXHIBIT BEU TEL 35 (showing Lisa Bradley Owning 600

shares; 45,000 shares; 3,800 shares; 3,800 shares; and 3,800 shares for a total of 57,000 shares); Gary Bradley

Testimony, Trial Trans., at 84, lns. 10-21; EXHIBIT D-ING ALLS 761.66

Gary Bradley Testimony, Trial Trans., at 320, lns. 320.


GOVERNM ENT EXH IBIT 24, at LAZ-PH8 000373-000374 (Apr. 26, 2000) (describing assets that the trust would have

to acquire from Penny Gressett, Jim Gressett, and Jimmy Evans); Hughes Notes from Trust Formation Meeting,

admitted as E XHIBIT D-ING ALLS-19 (Streetman stock currently owned by Penny Gressett); James Gressett Testimony,

Trial Trans., at 1469, lns. 18-21 (Gressett puts documents in front of his wife and she signs them without review).

68Gressett suggested using a second trust to avoid creditor scrutiny, but Bill Love and the Trust’s lawyer,

David Hughes, advised against it. See Streetman Purchase E-Mail from David Hughes to Bill Love, admitted as

GOVERNM ENT EXH IBIT 7.


Page 12 of 48

owned the remaining 11,400.64 Bradley originally caused his wife, Lisa Bradley, to hold

all of Bradley and Gressett’s cumulative shares because Bradley and Gressett were

personally liable for the FDIC judgment, and they had been advised not to hold assets in

their own names.65 But Bradley separated from Lisa in 1995,66 so he and Gressett then

caused Gressett’s wife, Penny Gressett, to hold the shares.67 Thus, as of April of 2001,

Penny Gressett held James Gressett’s 11,400 shares and Bradley’s 45,600 shares.

18. Bradley Sold His Interest in Streetman Homes to James Gressett – Using Lazarus Exempt

Trust as a conduit, Bradley sold his Streetman stock to James Gressett. Bradley and

Gressett structured this sale with two steps that they hoped would avoid creditor

scrutiny:68

Step 1. Penny Gressett Transferred the Streetman Stock to the Trust – Penny

Gressett transferred 45,600 shares of Streetman stock million to Lazarus

69See Note for Streetman T ransfer from Penny Gressett to Lazarus Exempt Trust, admitted as EXH IBIT

BEU TEL 38.

70See Note for Streetman T ransfer from Penny Gressett to Lazarus Exempt Trust, admitted as EXH IBIT

BEU TEL 38.

71James and Penny Gressett’s 2001 individual tax return shows that Lazarus Exempt Trust paid Penny

Gressett for only two months of interest on the no te Lazarus Exempt Trust granted to Penny for Lazarus’s purchase

of Streetman stock. The Trust originally paid the Gressett’s $178,520.54, but Penny then returned $113,000 as

“nominee” interest because she had not earned it. Gressett 2001 Tax Return, admitted as GOVERNM ENT EXH IBIT 12,

at GRES0607. William Love Testimony, Trial Trans., at 1087-1088, lns. 21-3 (choose term “nominee” because

interest was not earned). Lazarus Exempt T rust’s 2001 tax return confirms that it paid the Gressetts only $65,521 in

interest. 2001 Lazarus Exempt Trust Tax Return, admitted as EXHIBIT D-INGALLS 748 , at LOVE 05566. T his

$65 ,521 of interest represents a little over two months of interest when the $3.6 million note given to Penny Gressett

is amortized. Brad Beutel Testimony, Trial Trans, at 789-790, lns. 25-7 ($60,000 could represent two months of

interest); William Love Testimony, at 1092-1093, lns. 16-6 ($60,000 represents two months of interest without

compounding). Since the subsequent agreement to sell the Streetman stock back to the Gressetts was executed on

June 30, 2001 , the Trust’s initial purchase of the Streetman stock must have occurred about two months earlier in

late April 2001. See James Gressett’s Agreement to Purchase Streetman Stock from Lazarus Exempt Trust, admitted

as EXHIBIT D-ING ALLS 755 (sale from Lazarus Investments to Gressett dated June 30, 2001); Brad Beutel Testimony,

Trial Trans. at 790, lns. 8-12 (possible that sale took place around April 30, 2001); William Love Testimony, Trial

Trans., at 1093 , lns. 7-16 (confirming logic of sale dated April 30, 2001). See also 4/31/2001 Lazarus Exempt Trust

Balance Sheet, admitted as GOVERNM ENT EXH IBIT 79 (4/17/01 print out showing that the Streetman stock was not

reflected on Lazarus Exempt Trust’s balance sheet); Streetman Entry Memo from Dianna to Pattsy & Wanelle,

admitted as E XHIBIT D-ING ALLS 179 (May 22, 2001) (stating that 4/30/01 entries must be reversed back to 1/1/01).

72James Gressett Testimony, Trial Trans., at 1470, lns. 6-22 (no negotiation documents); at 1473, lns. 10-16

(no calculation documents).

73See Gressett 2001 Original Income T ax Return, admitted as GOVERNM ENT EXH IBIT 12, at GRES0608

(filed in November 2002); Gressett Amended 2001 Income Tax Return, admitted as GOVERNM ENT EXH IBIT 12, at

GRES0620 (filed in October 2003).


Page 13 of 48

Exempt Trust for a $3.6 million note.69 The paperwork for this was

transfer was dated January 1, 2001,70 but the two months of interest

actually paid on the $3.6 million note shows that this transfer actually

occurred sometime in April or May of 2001.71 The Gressetts assert that

this was a legitimate sale for a negotiated price, but they have no

documents recording a negotiation,72 they did not report a sale of

Streetman stock on their original or amended 2001 income tax returns,73

74See Brad Beutel Testimony, Trial Trans., at 557-558, lns. 5-9 (sale-back to Gressett had been discussed).

In fact, no interest on Penny Gressett’s $3.6 million note was paid until the later sale to James Gressett. Brad Beutel

Testimony, Trial Trans., at 782, lns. 1-3 (no interest payments were made because none were due until after the sale

to Gressett).

75See Lazarus Purchase of Streetman M emo from William Love to Bradley File, admitted as EXHIBIT D-

ING ALLS 690 (Aug. 7, 2000). Love admitted at trial that a person cannot make a gift of property that he or she does

not own. William Love Testimony, Trial Trans., at 1046, lns. 1-6.

76See James Gressett Agreement to Buy Streetman Stock from Lazarus Exempt Trust, admitted as EXH IBIT

D-ING ALLS 755; Brad Beutel Testimony, at 553-554, lns. 25-4.

77$9 million minus $3.6 million. Beutel claims that he increased Streetman Homes’ value by helping

convert it from a S Corporation to a Limited Partnership , but this conversion saved Streetman only $7,329.60 in

franchise taxes during the 2000 tax year. See Franchise Tax Letter from Blake P. Houston to Brad Beutel, admitted

as BEU TEL EXH IBIT 42 (May 31, 2001).


Page 14 of 48

and, the sale back to Gressett had already been discussed.74 Bradley’s

accountant, William Love, raised concerns that the transfer would subject

Bradley to gift tax.75

Step 2. The Trust Sold the Streetman Stock to James Gressett – Within one to

three months after the transfer to Lazarus Exempt Trust, Lazarus Exempt

Trust sold the same 45,600 shares of Streetman stock back to Penny

Gressett’s husband, James Gressett, for a $5.4 million note that matured

on July 31, 2001 and assumption of the $3.6 million note that Lazarus

owed to Penny Gressett.76 This gave Lazarus Trust a $5.4 million profit

for merely holding the Streetman stock for less than a few months.77

Collapsing the Streetman steps shows that Bradley used Lazarus Exempt Trust to cash out

his Streetman stock. James Gressett paid Lazarus Exempt Trust $5.4 million for

Bradley’s 45,600 shares of Streetman stock.

19. Bradley Invested the Streetman Proceeds into Other Trust Assets – Lazarus Exempt Trust

78See Accounting of Streetman Sales Proceeds, GOVERNM ENT EXH IBIT 29. The difference between

$5,339,423 and $5,400,000 appears to equal costs of sale.

79See Accounting of Streetman Sales Proceeds, GOVERNM ENT EXH IBIT 29; 12/31/01 Lazarus Exempt Trust

General Ledger, admitted as EXHIBIT D-ING ALLS 752 , at LOVE 05591, 8 /2/2001 entry.

80See 12/31/01 Lazarus Exempt Trust General Ledger, admitted as EXHIBIT D-ING ALLS 752, at LOVE

05591, 7/17 /2001 entry; 12/31/01 Lazarus Investments General Ledger, admitted as EXHIBIT D-ING ALLS 766, at

LOVE 05810, 7 /17/2001 entry.

81See 12/31/01 Lazarus Investments General Ledger, admitted as EXHIBIT D-ING ALLS 766, at LOVE 05810,

7/16/2001 entry.

82See 12/31/01 Lazarus Investments General Ledger, admitted as EXHIBIT D-ING ALLS 766, at LOVE 05810,

7/16/2001 entry.

83See Note Transfer Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-ING ALLS 714, at LOVE

02711-02712 (Feb. 19, 2002) (showing Bradley Balance Sheet as of June 30, 2001); Alien 200K Note, admitted as

EXHIBIT BEU TEL 0227; Gressett 35K N ote, admitted as EXHIBIT BEU TEL 228; Gressett 39K Note, admitted as


Page 15 of 48

then used Bradley’s $5.4 million contribution to pay debts and invest in other assets.78

These assets include the following:

• Golf Club Partners – Lazarus Exempt Trust directly invested $2,000,000 into

Golf Club Partners;79

• 2601 Jarret Avenue – Lazarus Exempt Trust directly invested $26,000 into the

2601 Jarret Avenue property;

• Rowell Property – Lazarus Exempt Trust transferred $1,300,900 to Lazarus

Investments,80 and Lazarus Investments invested $1,030,568 of that transferred

money into the Rowell property;81 and

• Rasaca Property – Lazarus Investments invested $100,000 of the Streetman

money transferred from Lazarus Exempt Trust into the Rasaca Property.82

F. Bradley Fraudulently Transferred His Notes Receivables to Lazarus Investments

20. Before Bankruptcy Bradley Owned Various Notes – As of 6/30/01, Bradley owned the

following note receivables and accounts receivables:83

EXHIBIT BEU TEL 229. 84

See Note Transfer Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-ING ALLS 714, at LOVE

02705-02706 (Feb . 19, 2002) (transaction 6-104 showing note transfer entries).

85Brad Beutel Testimony, Trial Trans., at 656-657, lns. 22-5. Prior to his deposition on October 7, 2003,

Bradley claims that he did not even know that his notes were transferred. Gary Bradley Testimony, Trial Trans., at

334, lns. 8-13.

86Gary Bradley’s agent, Bill Love, has admitted that Bradley was insolvent when the notes were transferred.

See Offer in Compromise Letter from W illiam Love to Glenda Hudgens, admitted as GOVERNM ENT EXH IBIT 42, at 2

(Mar. 1, 2002) (stating that a June 30, 2001 balance sheet show that Bradley is insolvent).


Page 16 of 48

21. Bradley Attempted to Transfer the Alien, Beutel, and Gressett Receivables to Lazarus

Investments – Prior to filing for bankruptcy, Bradley attempted to transfer all of the above

Alien, Beutel, and Gressett notes and accounts receivable to Lazarus Investments for

Lazarus Investments’ assumption of Bradley’s debts owed to Alien, Inc., Lazarus Exempt

Trust, James Evans, Kay Hulse, and Talex.84 But there are no transfer or sales documents

evidencing this alleged transfer, no documents from the makers of these notes receivable

agreeing to the alleged transfer, and no documents releasing Bradley from any of the

debts.85 Thus, the transfer never occurred. Even if it did occur, the assumed debts were

antecedent, and Bradley was insolvent when he executed the transfer.86

87See Check from Gary Bradley to Lazarus Investments, admitted as G OVERNM ENT EXH IBIT 69 (showing

cash payment date as July 17, 2002).

88See 550K Phoenix Note Bill of Sale, admitted as GOVERNM ENT EXH IBIT 58; Bradley Testimony, Trial

Trans., at 201, lns. 8-11 (stating that Beutel’s research valued Circle C trademark at $50,000).

89See 550K Phoenix Note Bill of Sale, admitted as GOVERNM ENT EXH IBIT 58.

90Brad Beutel Testimony, Trial Trans., at 760, lns. 7-19 (Evans did not execute any documents agreeing to

seek payment from trust or releasing Bradley from liability).

91See 550K Phoenix Note Bill of Sale, admitted as GOVERNM ENT EXH IBIT 58.

92See 12/31/2002 Lazarus Investments General Ledger, admitted as E XHIBIT D-ING ALLS 372, at LAZ-INV

020323 (showing Bradley’s $64,000 deposit to Lazarus Investments on June 27, 2002 and Lazarus Investments

$17 ,380.48 payment to Bradley on June 30 , 2002); Brad B eutel Testimony, Trial Trans., at 758-760, lns. 17-1

(explaining that $17,380.48 paid to Bradley for 550k Phoenix note came from $64,000 Bradley deposit).

93See 100K Phoenix Note Bill of Sale, admitted as EXHIBIT D-ING ALLS 212. The $15,672.87 no te first

appeared on November 1, 2001 as a payable owed to Bradley, not by B radley.


Page 17 of 48

22. Bradley Transferred the 550K Phoenix Note Receivable to Lazarus Investments – On July

17, 2002,87 Bradley transferred his 550k Phoenix note receivable, his $20,000 Houston

Rockets tickets, and his $50,000 Circle C trademark to Lazarus Investments, L.P. for

$17,380.48 in cash and the assumption of $256,121.46 of Bradley’s debts.88 During this

transfer, the 550k Phoenix note had a principal and interest balance of $203,501.94.89

Bradley owed $101,489.03 of the assumed debt to Jimmy Evans, but Evans did not

execute any documents agreeing to Lazarus Investments’ assumption of Bradley’s debt.90

Bradley owed the remaining $154,632.43 of assumed debt to two entities wholly owned

by Lazarus Exempt Trust: Lazarus Investments, L.P. and Strategic Land Mgmt.91 The

cash consideration came from Bradley’s own funds.92

23. Bradley Transferred the 100k Phoenix Note Receivable to Castle Realty Management –

After filing for bankruptcy, Bradley transferred his 100k Phoenix Note Receivable to

Castle Realty Management Services for $22,000 in cash and assumption of a $15,672.87

payable.93 During this transfer the 100K Phoenix Note had a stated principal and interest

94See 100K Phoenix Note Bill of Sale, admitted as EXHIBIT D-ING ALLS 212.

95See 100K Phoenix Note Bill of Sale, admitted as EXHIBIT D-ING ALLS 212.

96Compare Check from Gary Bradley to Castle Realty Mgmt Services, admitted as GOVERNM ENT EXH IBIT

67 (showing $23,006 .21 payment to Castle Realty on June 26, 2002) with Check from Castle Realty Management

Services, LLC to Gary Bradley, admitted as GOVERNM ENT EXH IBIT 70 (showing $22,000 payment back to Bradley

on June 30, 2002).


Page 18 of 48

balance of $36,151.87.94 Bradley allegedly owed the assumed debt to Castle Realty

Management Services,95 and the cash consideration came from Bradley’s own funds.96

G. Bradley Contributed Cash to Lazarus Exempt Trust for No Consideration

24. Pre-Petition, Bradley Contributed Over $350,000 in Cash to Lazarus Exempt Trust –

Before filing for bankruptcy, Bradley made the following cash contributions to Lazarus

Exempt Trust and entities owned by Lazarus Exempt Trust:

97See Castle Deposit Slip, admitted as GOVERNM ENT EXH IBIT 35 (referring to “Gary Bradley”).

98Dianne Patterson Testimony, Trial Trans., at 1275, lns. 7-22 (regardless of who owned it, Bradley and

Gressett always had an interest in Circle C).

99See Circle C Land Use Letter from Gary Bradley to Kenneth Chang, admitted as EXHIBIT D-ING ALLS 566,

at LAZ-PH5 000961 (May 17, 2001).

100See Circle C Land Use Letter from Gary Bradley to Kenneth Chang, admitted as EXHIBIT D-ING ALLS

566, at LAZ-PH 5 000963 (May 17, 2001) (describing tracts purchased by Bradley Development as tracts “I

acquired”); Proposed T ransaction Letter from Gary Bradley to Dan King, admitted as EXHIBIT D-ING ALLS 572, at

LAZ-PH6 001142 (April 13 , 2000) (describing Bradley Development as “my company”); Gary Bradley Testimony,

Trial Trans., at 39, lns. 12-22 (admitting that he was an owner of Bradley Development in 1992); Gary Bradley

Testimony, Trial Trans., at 233, lns. 20-24.

101See Circle C Land Use Letter from Gary Bradley to Kenneth Chang, admitted as EXHIBIT D-ING ALLS

566 , at LAZ-PH5 000961 (M ay 17, 2001) (explaining that Bradley Development took residential property when it

divided properties with Freeport); Gary Bradley Testimony, Trial Trans., at 516, lns. 15-21 (stating that he

contracted to purchase Freeport-McM oran’s Circle C interests).


Page 19 of 48

25. Bradley’s Post-Petition Cash Contributions to Lazarus Exempt Trust – After filing for

bankruptcy, Bradley continued to contribute cash to entities owned by Lazarus Exempt

Trust. In 2003, for example, Bradley contributed $41,416.37 to Castle Realty

Management Services.97

H. Bradley Contributed His Interest in Phoenix Holdings to Lazarus Investments forNo Consideration

26. Bradley and Gressett Originally Owned the Circle C Development Residential Property –

Bradley has maintained an interest in the Circle C Development since its inception.98

Prior to 1995, Circle C Development was owned by Bradley Development and Freeport

McMoran.99 Bradley Development represented Bradley and Gressett’s respective 80/20

joint interest in the Circle C Development.100 In 1995, Bradley and Freeport decided to

split their holdings, so Bradley Development took ownership of Circle C Development’s

residential property.101

27. Bradley and Gressett Transferred the Circle C Property to Phoenix Holdings – In 1995,

102Bradley personally guaranteed the $3 million payment made by Phoenix Holdings to Circle C Land

Corp. See Agreement for Phoenix Holdings Purchase of Circle C Land, admitted as EXHIBIT D-ING ALLS 809, at

LOVE 06354 (paragraph 2(b)), LOVE 06370 (Bradley signature for personal guarantee in paragraph 2(b)).

103See Limited Partnership Agreement for Phoenix Holdings, Ltd., admitted as E XHIBIT D-INGALLS 806, at

LOV E 06342 (listing partners). 104

See Gary Bradley T estimony, Trial Trans., at 159-160, lns. 22-1, at 420 , lns. 19-21 (Vahid and Hamid

Noshirvani owned CC Residential); Brad Beutel Testimony, Trial Trans., at 726, lns. 11-13 (CC Residential is the

Noshirvanis).

105See Capital Account Analysis for Phoenix Holdings, Ltd, admitted as G OVERNM ENT EXH IBIT 51, at

LOVE 06872, G OVERNM ENT EXH IBIT 76, at LOVE 04457, E XHIBIT D-INGALLS 738, at 04531 (showing CC

Residential’s share of Phoenix Holdings split with Bradley/Gressett owning 2/3 and CC Residential owning 1/3;

capital account analysis showing Bradley/Gressett share used to prepare Phoenix Holdings, Ltd.’s 1999 balance

sheet, CC Residential Corp.’s 1996 federal tax return, and Phoenix Holdings Ltd’s buyout calculation); William

Love Testimony, Trial Trans., at 1099-1100, lns. 20-3, at 1133-1134 , lns. 1-3 (used capital account analysis to

understand capital account flow and calculate basis for gain and loss), at 1099 , lns. 5-19 (did not make this up or pull

out of thin air the 1/3 CC Residential and 2/3 Bradley/Gressett split). Income was d istributed in accordance with

these ownership percentages. See Phoenix Holdings, Ltd. Income Distribution Percentages, attached as

GOVERNM ENT DEMON STRATIVE A.

106See 1995 Phoenix Holdings, GP K-1s for Hamad and Vahid Noshirvani, admitted as EXHIBITS D-

ING ALLS 769, 770; 1995 Phoenix Holdings, GP K-1 for Grant Gomez, admitted as EXHIBIT D-ING ALLS 771 .


Page 20 of 48

Bradley caused Phoenix Holdings, Ltd. to acquire the Circle C residential property

formerly held by Circle C Development.102 The named partners in Phoenix Holdings,

Ltd. were Grant Gomez (39.6%), CC Residential Corp. (59.4%), and Phoenix Holdings,

G.P. (1%).103 CC Residential Corp. was formally owned only by Hamad Noshirvani,104

but accounting records show that Gary Bradley and James Gressett also owned part of CC

Residential’s interest in Phoenix Holdings. Noshirvani secretly agreed with Bradley and

Gressett that he would own one-third of Circle C Residential’s interest in Phoenix

Holdings, and Bradley and Gressett would jointly own two-thirds.105 Phoenix Holdings,

G.P. was Phoenix Holdings, L.P.’s 1% general partner. Phoenix Holdings, G.P. was

formally owned by only by Grant Gomez, Hamad Noshirvani and Vahid Noshirvani,106

but accounting records show that Bradley and Gressett owned two-thirds of the

107See Capital Account Analysis for Phoenix Holdings, Ltd, admitted as GOVERNM ENT EXH IBIT 51, at

LOVE 06872, G OVERNM ENT EXH IBIT 76, at LOVE 04457, E XHIBIT D-INGALLS 738, at 04531 (showing CC

Residential’s share of Phoenix Holdings split with Bradley/Gressett owning 2/3 and CC Residential owning 1/3).


LOVE 04530, G OVERNM ENT EXH IBIT 76, at LOVE 04456 (buyout calculation used to support summary of IRS

payments and preparation of CC Residential’s 1999 tax return).


Page 21 of 48

Noshirvanis’ interest in Phoenix Holdings, G.P.107 Thus, as of 1/1/1999, the following

chart shows Phoenix Holdings’ true ownership:

28. Bradley and Gressett Bought Out Gomez and the Noshirvanis and Contributed Phoenix

Holdings to Lazarus Investments – In 1999, when Phoenix Holdings had a total asset

value of $16,001,190,108 Bradley and Gressett decided to buyout Gomez’s and the

Noshirvanis’ interests in Phoenix Holdings and contribute Phoenix Holdings to Lazarus

Investments. They accomplished this buyout and contribution in four steps:

109See Grant Gomez Buyout Memo, admitted as EXHIBIT D-ING ALLS 529 (“Gary and Grant agreed” “Gary

agreed with Grant”); Gomez Meeting Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-ING ALLS 841

(Aug. 23, 1999) (“Gary will not agree to pay tax”); Dianna Patterson Testimony, Trial Trans., at 1218, lns. 13-25;

Gary Bradley Testimony, at 168, lns. 4-6 (admitting that he negotiated Gomez buyout).

110See Grant Gomez Buyout Memo, admitted as EXHIBIT D-ING ALLS 529 (Gomez and B radley agreed to

$7,000,000 note); CC Residential Tax Return Issue Memo from W illiam Love to CC Residential File, admitted as

EXHIBIT D-ING ALLS 730 , at LOVE 04429 (Mar. 13, 2000) (describing CC Residential’s purchase of Phoenix

Holdings).111

See Phoenix ownership chart above.

112William Love Testimony, Trial Trans., at 1040-1041, lns. 20-6 (Gressett calculated Phoenix FMV on

page 04530 schedule), at 1108, lns. 17-25 (page 04530 calculates twenty percent of Phoenix value), at 1109-1110,

lns 11-2 ($3,704,238 on page 004529 equals CC Residential’s twenty percent share of Phoenix), at 1132, lns. 20-25

(page 04530 calculates CC Residential’s interest). The $3,704 ,238 value includes the Noshirvanis’ preferred return.

James Gressett Testimony, at 1490-1491, lns. 5-9.

113Notice that on the CC Residential IRS Payment Summary, EXHIBIT D-ING ALLS 738, at LOVE 04529,

one-third of the taxes paid by CC Residential is subtracted from the purchase price paid to the Noshirvanis. See

William Love Testimony, Trial Trans., at 1111-1113, lns. 3-4 (explaining tax calculation and subtraction from note

given to the Noshirvanis). This subtraction was made because the Noshirvanis owned only one-third of CC


Page 22 of 48

Step 1. CC Residential Purchased Gomez’s Interest in Phoenix Holdings –

Bradley and Gressett first used CC Residential to purchase Gomez’s

interest in Phoenix Holdings. Bradley negotiated a $7,000,000 purchase

price for Gomez’s 40% interest,109 so CC Residential issued Gomez a

$7,000,000 note.110 This purchase gave CC Residential all of Phoenix

Holdings because it already held the Noshirvani and Bradley-Gressett

interests.111

Step 2. Gressett Purchased Phoenix Holdings From CC Residential – Gressett

and Bradley then purchased the Noshirvanis’ interest in Phoenix Holdings

by purchasing all of Phoenix from CC Residential. Gressett calculated

that the Noshirvanis’ 20% interest in Phoenix Holdings was worth

$3,704,238.112 But the Noshirvanis owed $317,406.54 for one third of CC

Residential’s tax for the year 2000,113 so Gressett subtracted $317,406.54

Residential’s interest in Phoenix Holdings and were responsible for only one-third of its taxes. See James Gressett

Testimony, Trial Trans., at 1489-1490 , lns. 23-1 (subtracting 1/3 of CC Residential’s taxes from price paid to

Noshirvanis). James Gressett and Gary Bradley were responsible for the other two thirds. This ties exactly to the

one-third/two-third capital account analysis on EXHIBIT D-ING ALLS 738, at LOVE 04531.


LOVE 04529-04530 (04530 showing pre-tax amount to CC Residential; 04529 showing net amount to CC

Residential).

115See CC Residential Tax Return Issue Memo from W illiam Love to CC Residential File, admitted as

EXHIBIT D-ING ALLS 730, at LOVE 04430 (Mar. 13, 2000) (describing Gressett purchase of Phoenix Holdings);

Second Transaction M emo from Brad Beutel to B ill Love, admitted as E XHIBIT D-ING ALLS 151, at LAZ-ET 001834

(June 27, 2000) (Jim Gressett purchased Phoenix for Lazarus Exempt Trust).

116See Gray & Becker Bill for Transfer and Assignment From Gressett to Beutel, admitted as E XHIBIT D-

ING ALLS 641 (worked on transfer documents on 2/27/2001); Brad B eutel Testimony, Trial Trans., at 581-582, lns.

25-8 (transfer from Gressett to Beutel had not been executed as of March 14, 2001).

117See 2000 Phoenix Tax Issues Memo from Bill Love to Phoenix Holdings File, admitted as E XHIBIT D-

INGALLS 833; Phoenix Assignment Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-ING ALLS 840

(Apr. 9, 2001) (attached agreement for assignment from James Gressett to Brad Beutel).


Page 23 of 48

from the $3,704,238 value, and agreed to purchase the Noshirvanis’

interest for $3,386,831.114 To accomplish that purchase, he issued CC

Residential a $3,386,831 note and assumed the $7,000,000 Gomez note in

return for all of Phoenix Holdings.115 Gressett claims that he and Bradley

previously had no interest in Phoenix Holdings, but CC Residential

allowed him to purchase Phoenix’s total asset value of $16,001,190 for

only $10,386,832. That leaves a $5,614,358 interest that Gressett received

for no consideration.

Step 3. Gressett Assigned Phoenix Holdings to Beutel – Sometime after March 14,

2001,116 Gressett assigned his interest in Phoenix Holdings to Brad Beutel,

and Buetel assumed the buyout notes owed to Gomez and CC

Residential.117

Step 4. Beutel Transfered Phoenix Holdings to Lazarus Investments – On or after

118See Gray & Becker Bill for Transfer and Assignment From Beutel to Lazarus, admitted as EXHIBIT D-

ING ALLS 640 (draft of agreement e-mailed to Beutel on 4/5/2001); Brad B eutel Testimony, Trial Trans., at 561, lns.

14-20 (Jan. 1, 2000 was transfer’s effective date, not actual transfer date), at 584-585, lns. 21-2 (transfer from Beutel

to Lazarus not executed until April 5, 2001).

119See Agreement Draft Letter from Brad Beutel to David Hughes, admitted as EXHIBIT D-ING ALLS 16

(Sept. 20, 200[1]) (date printed on letter appears to be incorrect because the agreement draft attached to it is dated

Mar. 14, 2001); Gray & Becker Bill for Transfer and Assignment From Beutel to Lazarus, admitted as EXHIBIT D-

ING ALLS 640 (draft of agreement e-mailed to Beutel on 4/5/2001).

120See 2000 Phoenix Tax Issues Memo from Bill Love to Phoenix Holdings File, admitted as E XHIBIT D-

INGALLS 833 (Bradley and Gressett are making an effort to dissolve their interests and had come to an agreement

regarding Phoenix Holdings by transferring it to the Trust for no additional consideration).

121$7,000,000 + $3,386,831 = $10 ,386 ,831 . See also Brad Beutel Testimony, Trial Trans., at 563

(substance of Phoenix transfer was Gressett transfer to Lazarus Trust for no consideration other than debt

assumption), at 570-571, lns. 19-2 (Phoenix purchase price was assumption of $7,000,000 Gomez Note and

$3,386,831 CC Residential Note), at 578-579, lns. 21-8 (didn’t pay any consideration other than debt assumption).

122$16 ,001,190 - ($7,000,000 + $3,386,831) = $5 ,614 ,358 .


Page 24 of 48

April 5, 2001,118 Brad Beutel assigned his interest in Phoenix Holdings to

Lazarus Investments, and Lazarus Investments assumed the buyout notes

owed to Gomez and CC Residential.119

A collapsing of the above steps shows that Bradley and Gressett contributed their

$5,614,358 interest in Phoenix Holdings to Lazarus Investments for no consideration.120

Lazarus Investments purchased Phoenix Holdings’ total interest worth $16,001,190 for

only $10,386,831 in notes.121 That leaves a $5,614,358 interest that Lazarus Investments

received for no consideration.122 The following chart demonstrates:

123See Estimated T ax Letter from W illiam Love to Gary Bradley, admitted as EXHIBIT D-ING ALLS 682 (Jan.

4, 2001); 2000 Phoenix Tax Issues Memo from Bill Love to Phoenix Holdings File, admitted as E XHIBIT D-ING ALLS

833. It is unclear whether Gressett traded his twenty percent interest in Phoenix to Bradley for some other asset.

124See Amended Spillar/Pfluger Option Agreement, admitted as EXHIBIT D-ING ALLS 561, at LAZ-PH4

001058, par. 25; Special Warranty Deed, admitted as EXHIBIT D-ING ALLS 563.

125See Amended Spillar/Pfluger Option Agreement, admitted as EXHIBIT D-ING ALLS 561 (Gary Bradley

signs last page); Trust Formation Meeting Memo from William Love to Bradley Development File, admitted as

GOVERNM ENT EXH IBIT 24, at LAZ-PH8 000372-000373 (Apr. 26, 2000) (states that Bartlett holds Spillar/Pfluger


Page 25 of 48

Of Bradley and Gressett’s $5,614,358 contribution, Bradley owned at least and 80%

interest worth $4,491,486.123

I. Bradley Contributed His Interest in the Spillar/Pfluger Property to PhoenixHoldings for No Consideration

29. Bradley Originally Owned the Spillar/Pfluger Property – The Spillar/Pfluger tracts are

approximately 1,750 acres of land located adjacent to the Circle C Ranch subdivision.124

In 1998, Steve Bartlett, one of Bradley Development’s employees, held Gary Bradley’s

bridge-financing option to purchase the Spillar/Pfluger property from Capital Pacific

Holdings.125 In substance, this bridge-financing option was more like a loan from Capital

option). William Love’s memo on the Lazarus Trust formation meeting indicates that the Spillar/Pfluger Option was

to be contributed to Lazarus Exempt Trust because it lists the option immediately before a category titled “Other

Entities to Lazarus Trust.” Id. Bartlett stated he held the option for Phoenix Holdings which as shown previously

was owned in part by Gary Bradley. Steve Bartlett Testimony, Trial Trans., at 1580-1581, lns. 10-11 and 24-3.

126See Amended Spillar/Pfluger Option Agreement, admitted as EXHIBIT D-ING ALLS 561.

127On May 30, 2000 Gary Bradley received $274 ,164.65 from Ladon Corp and deposited that amount into

Alien’s money market account. See Landon Transfer Detail, admitted as GOVERNM ENT EXH IBIT 18, at TT-GLB

006172 (showing $274,164.65 payoff on note Ladon owed to Bradley). On M ay 31, 2000, $273,979.25 of this

amount was deposited into Alien’s operating account and used to make part of the $790 ,344.17 extension payment to

Capital Pacific. See 5/31/00 First American Account Statement, admitted as GOVERNM ENT EXH IBIT 21, at GLB

20706 (showing deposit for “LADON PMTTO GLB -GLB LOAN”); Extenstion Payment Check, admitted as

GOVERNM ENT EXH IBIT 20, at GLB 21681 ($790,344.17 check to Capital Pacific includes $753,698.66 for extension

and $36,645.51 for interest). This $790,344.17 extension payment was ultimately used to reduce the purchase price

of the Spillar/Pfluger properties. See Spillar Ranch Purchase Price Calculation, admitted as E XHIBIT D-INGALLS 558

(showing purchase price reduced by $753,698.66 extension payment); Amended Spillar/Pfluger Option Agreement,

admitted as E XHIBIT D-ING ALLS 561 , at LAZ-PH4 001052 (extension payment applied to purchase price). See also,

Gary Bradley T estimony, Trial Trans., at 149, lns. 15-17 (admitting that he “helped” extend the option).

128Compare Amended Spillar/Pfluger Option Agreement, admitted as EXHIBIT D-ING ALLS 561, at LAZ-PH4

001052 (requiring option purchaser to pay $1,382,468.17 regarding “City Settlement”) with City Settlement

Promissory Note, admitted as EXHIBIT D-ING ALLS 594 (showing Gary Bradley’s initials on every page and signature

on last page) and City Settlement Promissory Note Letter from Eric Willis to Dianna Patterson, admitted as EXH IBIT

D-ING ALLS 593 (May 19, 2000) (stating that note is between “Gary Bradley and Capital Pacific Holdings, LLC”).

129See Spillar Finder Fee Agreement Letter from Dianna Patterson to John Bruce, admitted as EXHIBIT D-

ING ALLS 557 (Aug. 22, 2000) (documenting that Gary Bradley agreed to pay agent a one percent finders fee for

related to a $4 ,098 ,500 sale of Spillar property); Dianna Patterson Testimony, Trial Trans. at 1215 , lns. 5-8 (letter to

John Bruce indicates that Bradley agreed to pay finders fee).

130See Contract for Assignment of Spillar/Pfluger Option to Phoenix Holdings, admitted as E XHIBIT D-

ING ALLS 560; Brad Beutel Testimony, Trial Trans., at 565, lns. 20-22 (option transferred to Phoenix Holdings for no

consideration).


Page 26 of 48

Pacific with a large balloon payment due at the loan term’s end.126 Bradley increased the

value of his interest in Spillar/Pfluger by paying $273,979.25 to extend the option’s

term,127 $1,382,468.17 to settle a suit with the City of Austin,128 and at least $40,985.00 in

sales commissions.129

30. Bartlett Transferred the Spillar/Fluger Property to Phoenix Holdings – In August of

2000, Steve Bartlett transferred the Spillar/Pfluger option to Phoenix Holdings, Ltd, for

no consideration.130 Phoenix Holdings then immediately exercised the option and

131See Spillar/Pfluger W arranty Deed, admitted as EXHIBIT D-ING ALLS 563; Spillar/Pflugar Option Price

Calculation, admitted as EXHIBIT D-ING ALLS 558 . When Phoenix Holdings exercised this option, Bradley still

owned Phoenix Holdings because it had not been transferred to Beutel, Trustee or Lazarus Investments. See Part H

above.

132See Webb T roup Allocation Memo from William Love to Gary Bradley File, admitted as EXHIBIT D-

ING ALLS 584, at LAZ-PH8 000352-000353 (M ay 5, 2000) (describing the secret agreement and properties); Hughes

Notes from Trust Formation Meeting, admitted as E XHIBIT D-INGALLS 19, at BM C 00440 (describing properties).

133Webb T roup Allocation Memo from William Love to Gary Bradley File, admitted as EXHIBIT D-ING ALLS

584 , at LAZ-PH8 000352 (M ay 5, 2000). See also Hughes Notes from Trust Formation Meeting, admitted as

EXHIBIT D-INGALLS 19, at BMC 00440 (referring to 50/50 agreement with Evans); Trust Formation Meeting Memo

from W illiam Love to Bradley Development File, admitted as G OVERNM ENT EXH IBIT 24, at LAZ-PH8 000374 (Apr.

26, 2000) (listing “50/50” next to “Welb Trust”).

134See Webb/Troup Return Letter from Jimmy Evans to Gary Bradley, admitted as EXHIBIT D-ING ALLS 579,

at LAZ-PH8 000346 (referring to “Webb-Troup/G.B.”); Invoice from W illiam Love, admitted as GOVERNMENT

EXH IBIT 6, at LAZ-PH15 01732 (discussing how Bradley and Evans could balance Webb Troup equity issues).

135See Webb T roup Allocation Memo from William Love to Gary Bradley File, admitted as EXHIBIT D-

ING ALLS 584, at LAZ-PH 8 000352 (May 5, 2000); Notes on W ebb T roup Calculations, admitted as E XHIBIT D-

ING ALLS 578, at LAZ-PH8 000341 (stating that Webb Troup sold Bethany Tract for $900,000 net gain).

136See Second Transaction M emo from Brad Beutel to B ill Love, admitted as E XHIBIT D-ING ALLS 151, at

LAZ-ET 001835 (June 27, 2000).


Page 27 of 48

acquired the Spilllar/Pfluger properties.131

J. Bradley Contributed His Interest in Webb Troup Enterprises to LazarusInvestments for No Consideration

31. Bradley and Evans Agreed to Purchase and Sell Three Properties Through Webb Troup

Enterprises – Bradley and Jimmy Evans secretly agreed to jointly purchase and sell three

different properties: Bethany Lutheran Tract, Wildflower Tract, and 34 Acres tract.132

Bradley and Evans each had a fifty percent interest in the venture, but they agreed that

“until Bradley could hold property, Evans would acquire the properties and hold Gary’s

interest.”133 Evans used Webb Troup Enterprises to execute the joint venture.134

32. Webb Troup Purchased and Sold the Bethany Lutheran Tract – Webb Troup purchased

and sold the Bethany Lutheran Tract in 1996 for a $900,000 profit.135 This profit was

later rolled into the Wildflower Tract.136

137See Notes on Webb T roup Calculations, admitted as E XHIBIT D-ING ALLS 578, at LAZ-PH8 000341

(calculating gain on Wildflower sale). Notice that Beutel calculated the Wildflower gain using the $1,200,000

referenced in Jimmy Evans August 9, 2000 , letter. Compare Notes on Webb T roup Calculations, admitted as

EXHIBIT D-ING ALLS 578, at LAZ-PH8 000341 (calculating gain on Wildflower sale) with Webb/Troup Return Letter

from Jimmy Evans to Gary Bradley, admitted as EXHIBIT D-ING ALLS 579, at LAZ-PH8 000347 (listing $1,200,000

next to “Webb T roup/G.B.” return).

138See Notes on Webb T roup Calculations, admitted as E XHIBIT D-ING ALLS 578, at LAZ-PH8 000341

(calculating 50% of gain on Wildflower sale); Second Transaction Memo from Brad Beutel to Bill Love, admitted as

EXHIBIT D-ING ALLS 151, at LAZ-ET 001835 (June 27, 2000) (half of gain from Wildflower will be subtracted from

the price Lazarus Investments will pay for the 34 acre tract).

139See Hughes Notes from Trust Formation M eeting, admitted as E XHIBIT D-INGALLS 19, at BMC 00440

(stating that 34 acres was to be sold to the trust); Trust Formation Meeting Memo from William Love to Bradley

Development File, admitted as GOVERNM ENT EXH IBIT 24, at LAZ-PH8 000374 (Apr. 26, 2000) (stating that 34 acres

was to be developed); Webb T roup Allocation Memo from William Love to Gary Bradley File, admitted as EXH IBIT

D-ING ALLS 584, at LAZ-PH8 000353 (May 5, 2000) (discussing scenarios for Lazarus Trust’s purchase of 34 acres).

140See Second Transaction M emo from Brad Beutel to B ill Love, admitted as E XHIBIT D-ING ALLS 151, at

LAZ-ET 001835 (June 27, 2000) (describing how the price Lazarus Investments will pay for the 34 acre tract will be

manipulated); Notes on Webb T roup Calculations, admitted as E XHIBIT D-ING ALLS 578, at LAZ-PH8 000341

(calculating 50% of gain on Wildflower sale).

141Note that the $440,000 price is net of tax. The amount paid before tax is $550,000. Beutel claims that

the 34 Acres price was negotiated, but he has produced no documents evidencing any negotiations or offers.


Page 28 of 48

33. Webb Troup Purchased and Sold the Wildflower Tract – Webb Troup purchased the

Wildflower Tract in 1997 and later sold it for a net-tax profit of $720,000.137 Bradley’s

fifty percent interest in this profit was $360,000.138

34. Bradley Transferred His Interest in the Wildflower Profit and 34 Acres Tract to Lazarus

Investments for No Consideration – When Lazarus Trust was created, Bradley and Evans

decided to end their Webb Troup partnership and divide the Wildflower profit and 34

Acres tract.139 To accomplish this division, Evans sold Lazarus Investments the 34 Acres

tract in late 2000 for a price discounted by 50% for Bradley’s ownership interest in the 34

Acres Tract and by $360,000 for Bradley’s share of the Wildflower profit.140 The

following chart demonstrates:141

142$360,000 + $800 ,000 = $1 ,160 ,000 . See also Webb T roup Payoff Scenario, admitted as EXHIBIT D-

ING ALLS 583 (showing a Webb Troup payoff of $1,160,000 for each party, but not naming the parties).

143See O’Quinn Option Execution Letter from Gary Bradley to John O’Quinn, admitted as EXHIBIT D-

ING ALLS 248 (Sept. 26, 2000) (expressing Bradley’s desire to execute the O’Quinn option); O’Quinn Real Estate

Contract, admitted as EXHIBIT D-ING ALLS 244, at LAZ-INV 012966 (stating that purchase price was set by appraisal

performed in September of 1999).

144See O’Quinn Real Estate Contract, admitted as EXHIBIT D-ING ALLS 244, at LAZ-INV 012966.; Gary

Bradley Testimony, Trial Trans., at 243, lns. 16-24, at 276, lns. 9-17.


Page 29 of 48

Thus, Evans gave Lazarus Investments a $1,160,000 interest in 34 Acres to compensate

Bradley for his 50% share of Web Troup.142

35. Lazarus Investments Subsequently Transferred the 34 Acre Tract to Rasaca Austin – The

34 Acre tract was subsequently transferred by Lazarus Investments to Slaughter Holdings,

L.P.; by Slaughter, L.P. to 34 Acres, L.P.; and by 34 Acres, L.P. to Rasaca Austin, L.P.

Lazarus Investments is a partner in Slaughter Holdings, 34 Acres, L.P., and Rasaca

Austin, L.P.

K. Bradley Contributed His O’Quinn Contract to Rasaca Austin for No Consideration

36. Bradley Owned the O’Quinn Option – In September of 1999, Bradley obtained an option

to purchase real estate from John O’Quinn.143 This real estate included one 62.4822 acre

tract and a ½ interest in a 7.9641 acre tract known as the Common Fords Road tract.144

While he held this option, Bradley paid at least $10,321.70 in legal, water, and

145See 12/31/99 Bradley General Ledger, admitted as EXHIBIT D-ING ALLS 674, at LOVE 01279 (showing

$8,803.60 of payments related to the Commons Ford property); 12/31/00 Bradley General Ledger, admitted as

EXHIBIT D-ING ALLS 676, at LOVE 01428 (showing $1,518.10 of payments related to the Commons Ford property).

146See O’Quinn Option Execution Letter from Gary Bradley to John O’Quinn, admitted as EXHIBIT D-

ING ALLS 248 (Sept. 26, 2000) (expressing Bradley’s desire to execute the O’Quinn option); O’Quinn Real Estate

Contract, admitted as EXHIBIT D-ING ALLS 244..147

See O’Quinn Real Estate Contract, admitted as EXHIBIT D-ING ALLS 244, at LAZ-INV 012966 (contract

required $100,000 in earnest money).

148O’Quinn Contract Review, admitted as EXHIBIT D-ING ALLS 243 (explaining assignment limitations).

149See Assignment of O’Quinn Contract, admitted as EXHIBIT D-ING ALLS 280 .

150See Deed of O’Quinn Property, admitted as EXHIBIT BEUTEL 137; 3/31/03 Rasaca Austin B alance Sheet,

admitted as E XHIBIT D-ING ALLS 276, at LAZ-INV 014025 (showing “LAND ACQ-RACACA (62.4822 ACRES)”

asset worth $3,146 ,048 .07). The $3,146,048.07 does not include the value of the 7 .9641 acre tract.

151See Lazarus T rust Summary, admitted as EXHIBIT D-ING ALLS 126 (showing entities that Lazarus

Investments has an interest in); 3/31/03 Rasaca Austin Balance Sheet, admitted as EXHIBIT D-ING ALLS 276, at LAZ-

INV 014026 (showing Lazarus Investments as partner).


Page 30 of 48

administrative fees to help prepare the property for development.145

37. Bradley Exercised the O’Quinn Option – Bradley exercised his option by sending

O’Quinn a letter in September of 2000 and executing a real estate contract in July of 2001

to purchase the O’Quinn property for $2,488,154.79.146 To secure this contract, Bradley

deposited $100,000 in earnest money.147

38. Bradley Contributed the O’Quinn Real Estate Contract to Rasaca Austin, L.P. – Even

though the contract with O’Quinn prohibits Bradley from assigning his contract rights to

an entity he does not possess directly or indirectly,148 Bradley assigned his contract rights

and the $100,000 earnest money deposit to Rasaca Austin, L.P. for no consideration.149

Rasaca Austin then purchased this property and booked it as worth at least $3,146,048.150

During this transfer and on the Bradley’s petition date, Lazarus Investments was a partner

of and had an interest in Rasaca Austin, L.P.151

39. Bradley Continues to Exercise Control Over Rasaca – Bradley currently owns the water

152See LCRA W ater Sale Contract, admitted as G OVERNM ENT EXH IBIT 49; 12/31/00 Bradley General

Ledger, admitted as EXHIBIT D-ING ALLS 678, at LOVE 01428 (showing LCRA expense paid on 1/17/2000 for

Commons Ford Prop.).

153See Ragland Loan Agreement, admitted as EXHIBIT D-ING ALLS 645 (stating that “Howard gets to pick

one for free” or “accept $600,000 cash”).

154See 8/31/93 Balance Sheet for Alien, Inc., admitted as E XHIBIT D-ING ALLS 698, at LOVE 02314

(showing Bradley with 75% common stock and Gressett with 75% common stock); Alien Transfer Memo from

William Love to Alien File, admitted as EXHIBIT D-ING ALLS 692, at LOVE 01658 (Aug., 17, 1996) (stating that

Bradley is a 75% shareholder in Alien); Gary Bradley Testimony, Trial Trans., at 174, lns. 10-13.

155See Thompson Note Security Agreement, admitted as EXHIBIT D-ING ALLS 302; Thompson Note Escrow

Agreement, admitted as EXHIBIT D-ING ALLS 305; Tommy Thompson Testimony, Trial Trans., at 1642, lns. 18-21

(treated Lazarus like an investor).

156See Thompson Note Financing Statement, admitted as EXHIBIT D-INGALLS 303; Thompson Note Security

Agreement, admitted as EXHIBIT D-ING ALLS 302; Thompson Note Escrow Agreement, admitted as EXHIBIT D-

ING ALLS 305; Tommy Thompson Testimony, at 1623-1624, lns 23-24 (Alien loaned $250,000 to Thompson).



Page 31 of 48

rights associated with the Rasaca property,152 and on February 1, 2002, he promised

Howard Ragland a Rasaca lot worth $600,000.153

L. Bradley Contributed His Interest in MedTech Ventures to Lazarus Investments forNo Consideration

40. Bradley Owned 75% of Alien, Inc. – Bradley and James Gressett formed Alien, Inc.

sometime in 1982. As of August 31, 1993, Bradley owned 75% of Alien and Gressett

owned 25%.154

41. Alien Secured its Loan to Thompson with MedTech Stock – On October 28, 1994, Alien,

Inc., invested $250,000 into MedTech Ventures, Ltd.155 This investment was structured

as a loan to Tommy Thompson that was secured by 15 common units of MedTech

Ventures, Ltd.156

42. Bradley Transferred his Alien Interest to James Gressett – In 1996, Bradley transferred

his 75% interest in Alien, Inc. to James Gressett for no consideration.157 Nevertheless, the

following shows that Bradley continued to secretly own 75% of the Tommy Thompson

158Thomas Thompson Testimony, Trial Trans., at 1635 lns. 14-24 (discussed Agennix), at 1646, lns. 6-12

(Bradley and Gressett knew about Agennix transaction).

159See Thompson Note Bill of Sale, admitted as EXHIBIT D-INGALLS 334; Thompson Journal Entries,

admitted as E XHIBIT D-ING ALLS 308, at LAZ-INV 014529 (6/30/00 entries for Lazarus Investments’ purchase of

Thompson note).

160See Thompson Note Bill of Sale, admitted as EXHIBIT D-INGALLS 334 and EXHIBIT BEU TEL 89 (showing

scratched out December); Thompson Journal Entries, admitted as EXHIBIT D-ING ALLS 308, at LAZ-INV 014529

(stating that effective date occurred before Lazarus Investments was organized); Brad Beutel Testimony, Trial

Trans., at 595-596, lns. 20-10 (admitting that note to Alien was backdated), at 889-890, lns. 12-16 (admitting that

note purchase had not been documented on Dec. 5, 2000), at 963-964, lns. 24-1 (admitting that Bill of Sale was

backdated); Lisa Dean Testimony, Trial Trans., at 1202-1205 (Beutel’s assistant pleading 5th Amendment when

asked whether she notarized backdated documents); Alien Journal Entry Workpapers from 6/30/00 through

12/31/00, admitted as GOVERNM ENT EXH IBIT 5 (showing absence of entries for the Thompson Note sale on 6/30/00

and the Lazarus Investments 200,000 note payable); James Gressett Testimony, Trial Trans., at 1467-1468, lns. 5-11

(confirming absence of entries).


Page 32 of 48

note.

43. Bradley and Gressett Liquidated the MedTech Units – In late 2000, Bradley and Gressett

knew that MedTech was going to make a large profit from the sale of its Agennix

stock,158 so they decided to cash out that profit by liquidating and separating their joint

interest in MedTech. They accomplished this liquidation and separation with four steps:

Step 1. Alien Sold the Thompson Note to Lazarus Investments – On or after

December 30, 2000, Alien sold the Tommy Thompson note to Lazarus

Investments for an unsecured $200,000 note payable.159 Beutel and

Gressett attempted to avoid creditor scrutiny and legitimize this

transaction by backdating it to June 30, 2000, a date before Lazarus

Investments was created.160

Step 2. Thompson Assigned the MedTech Units to Lazarus Investments – In

December of 2000, Lazarus Investments accepted assignment of the 15

161See MedTech Assignment Documents, admitted as EXHIBIT D-ING ALLS 338 (correspondence and

documents associated with assignment and extinguishment dated December of 2000 indicate that transaction will

close shortly).

162See MedTech Sale Letter from Brad Beutel to Thomas Thompson, admitted as EXHIBIT D-ING ALLS 421

and EXHIBIT BEUTEL 90 (notation states that $841,204 was received on 1/16/00); Thompson Journal Entries,

admitted as E XHIBIT D-ING ALLS 308, at LAZ-INV 014529 (showing journal entry for sale of MedTech stock);

Tommy Thompson Testimony, Trial Trans., at 1636-1637, lns. 20-3 (Gordon Cane bought Medtech’s Agennix

stock), at 1642, lns. 18-21 (paid Lazarus profit from Agennix sale like an investor, not note holder).

163See Accounting of MedTech Funds, admitted as EXHIBIT D-ING ALLS 307 (showing $213,216.44 paid

toward Lazarus Investments’ Alien note).


Page 33 of 48

MedTech units for extinguishment of the original $250,000 debt.161

Step 3. Lazarus Sold the MedTech Units – Lazarus then received $841,204 of

profit from MedTech’s sale of Agennix stock.162

Step 4. Lazarus Paid Off Gressett – Lazarus Investments then paid $213,216 to

Alien for the 200k note that Lazarus originally gave Alien for the

Thompson note.163 This $213,216 equals approximately 25% of the total

$841,204 proceeds.

When the above steps are collapsed and placed in the context of Bradley and Gressett’s

original 75/25 ownership of Alien, Inc., it becomes clear that Bradley cashed out his

$627,988 interest in MedTech Ventures and contributed it Lazarus Investments for no

consideration. Lazarus purchased Alien’s $841,204 MedTech interest for only $213,216.

That leaves a $627,988 contribution for no consideration.

44. Bradley Invested the MedTech Proceeds in Rasaca – Lazarus Investments used $481,230

of the funds from the MedTech stock sale to purchase a Thompson’s half interest in

7.9641 acres of property known as the Common Ford Roads property or Rasaca

164See Accounting of MedTech Funds, admitted as EXHIBIT D-ING ALLS 307 (showing $481,230 loaned

Lazarus Development); Brad Beutel Testimony, Trial Trans., at 749-750, lns. 18-3 (explaining that the $481,230 was

spent on Thompson’s half interest in the 7.9641 acres).

165See Brad Beutel Testimony, Trial Trans., at 745-748, lns. 7-17 (explaining how Bradley deposited

$18 ,000 and K ay Bradley deposited $32 ,000 into the trust at same time that the trust made $50,000 down payment to

Thompson for his half interest in Common Ford Roads property); Lazarus Exempt Trust Invoice for TomCamp Joint

Venture Downpayment, admitted as GOVERNM ENT EXH IBIT 17; Bradley $18,000 Check, admitted as GOVERNMENT

EXH IBIT 60; Lazarus Exempt Trust 2000 Checking Account Summary, admitted as EXHIBIT D-ING ALLS 164, at LAZ-

ET 002562 (showing Gary and Kay Bradley deposits). Kaye Bradley’s $32,000 was paid back from the MedTech

proceeds. See Lazarus Investments’ 12/31 /2001 General Ledger, admitted as EXHIBIT D-ING ALLS 766, at LOVE

05809 (1/18/01 entry showing the $841,204 MedTech funds being deposited with a $58,000 transfer to the Lazarus

Exempt Trust); Lazarus Exempt Trust 2001 Checking Account Summary, admitted as EXHIBIT D-INGALLS 156

(showing $52,909.59 payment to Kay Hulse); Accounting of M edTech Funds, admitted as EXHIBIT D-ING ALLS 307

($52,909 paid to Kay Hulse).

166See BEU TEL EXH IBIT 139, at LAZ-INV 020548 (entry titled “1300870 Rasaca Austin L.P., Rasaca”), at

LAZ-INV 020549 (entry titled “1407000 Land-1/2 UNDIV. INT. 79641 A”).

16726 U .S.C. § 6321; United States v. National Bank of Commerce, 472 U .S. 713, 719 (1985); Glass City

Bank v. United States, 326 U.S. 265, 267-69 (1945).


Page 34 of 48

property.164 Bradley also personally paid at least $18,000 of the down payment for

Thompson’s half of the 7.9641 acres.165 Lazarus Investments then contributed the Rasaca

property to Rasaca Austin, L.P.166

PROPOSED CONCLUSIONS OF LAW

The law governing this case prevents debtors from avoiding their debts by transferring

their assets to a spend-thrift trust for no consideration. The Bankruptcy Trustee is responsible for

arguing self-settlement, so the following law applies only to the lien issue.

A. Federal Tax Liens Attach To All Lazarus Exempt Trust Assets that Gary BradleyOwned During or After His Federal Income Taxes Were Assessed

1. Federal Tax Liens Are Created When One Refuses or Fails to Pay Tax – If a person

refuses or fails to pay an owed tax after demand, 26 U.S.C. § 6321 creates a federal tax

lien that attaches to all of that person’s property and rights to property owned on the

assessment date or acquired thereafter.167 The § 6321 federal tax lien arises on the

16826 U.S.C. § 6322; United States v. National Bank of Commerce, 472 U.S. 713, 719 (1985).

169E.g., Oxford Capital Corp. v. United States, 211 F.3d 280, 284 (5th Cir. 2000) (IRS may levy upon

nominee assets because nominee is not true beneficial owner).

170Oxford Capital Corp. v. United States, 211 F.3d 280, 284 n.1 (5th Cir. 2000) (quoting Towe Antique

Ford Foundation v. Internal Revenue Service, 791 F. Supp. 1450 (D. Mont. 1992).

17126 U.S.C § 6323(a) (stating that a subsequent purchaser has priority over a § 6321 lien if notice of that

lien was not filed during the purchase); 26 U .S.C 6323(h) (defining “purchaser” as one who pays full and adequate

consideration for the underlying property); United States v. Alfano, 34 F. Supp. 2d 827, 849 (E.D.N.Y. 1999).

172E.g., United States v. Gonzales, Civ. No. 89-F-1740, 1991 WL 53281, at *4 (D. Colo. 1991) (“Nominal

cash consideration that is remarkably below the fair market value for the land is not adequate and full

consideration.”); T reas. Reg. 301.6323(h)-1(f)(3 ) (“the term ‘adequate and full consideration in money or money’s


Page 35 of 48

assessment date and continues until the underlying tax liability is paid or becomes

unenforceable.168

2. Property Includes Interests Held by Nominees – A taxpayer’s property interests includes

property held for that taxpayer by a nominee.169 When deciding whether an entity or

person is another person’s nominee, the Fifth Circuit considers the following elements:

“(a) No consideration or inadequate consideration paid by the nominee; (b) Property

placed in the name of the nominee in anticipation of a suit or occurrence of liabilities

while the transferor continues to exercise control over the property; (c) Close relationship

between transferor and the nominee; (d) Failure to record conveyance; (e) Retention of

possession by the transferor; and (f) Continued enjoyment by the transferor of benefits of

the transferred property.”170

3. Tax Liens Encumber Subsequent Transferees’ Interests if They Do Not Pay Full and

Adequate Consideration – Under 26 U.S.C. § 6323, a lien created under 26 U.S.C. § 6321

encumbers a subsequent transferee’s interest if that transferee did not pay full and

adequate consideration for the underlying property.171 Nominal cash payments well

below the underlying property’s market value do not constitute adequate consideration.172

worth’ means a consideration in money or money’s worth having a reasonable relationship to the true value of the

interest in property acquired”).

173See Treas. Reg. 301.6323(h)-1(f)(3 ) (“the term ‘adequate and full consideration in money or money’s

worth’ means a consideration in money or money’s worth having a reasonable relationship to the true value of the

interest in property acquired”).

17426 U.S.C § 6323(a) (subsequent purchaser has priority over a § 6321 lien if notice of that lien was not

filed during the purchase); 26 U.S.C 6323(h) (defining “purchaser” as own who receives a valid property interest

under local law); United States v. Gonzales, Civ. No. 89-F-1740, 1991 WL 53281, at *4 (D. Colo. Feb. 6, 1991),

aff’d, 951 F.2d 1261 (10th Cir. 1991).

175TEX. BUS. & COM . CODE § 24.006(a).

176TEX. BUS. & COM . CODE § 24.006(b).

177See 26 U.S.C. § 6323(a).

178Phelps v. United States, 421 U.S. 330, 334-35 (1975); Beaty v. United States, 937 F.2d 288, 292 (6th

Cir. 1991).


Page 36 of 48

The assumption of illusory debt does not constitute adequate consideration.173

4. Tax Liens Encumber Subsequent Transferees’ Interest if They Receive Their Interest

Through a Fraudulent Transfer – Under 26 U.S.C. § 6323, a lien created under 26 U.S.C.

§ 6321 has priority over a subsequent transferee’s interest if that transferee received the

underlying property in a transfer that is fraudulent under state law.174 Under TEX. BUS. &

COM. CODE § 24.006(a), a debtor’s transfer is fraudulent as to pre-transfer creditors if the

transfer was made without receiving equivalent value and when the debtor was

insolvent.175 Under TEX. BUS. & COM. CODE § 24.006(b), a debtor’s transfer is fraudulent

as to pre-transfer creditors if the transfer was made to an insider for an antecedent debt

when the debtor was insolvent, and the insider had reason to believe the debtor was

insolvent.176

5. Tax Liens Attach to the Proceeds From Sales to Bona Fide Purchasers – If a federal tax

lien becomes invalid because the encumbered property is sold to a bona fide purchaser

without notice,177 the federal tax lien attaches to the proceeds from that sale.178

179United States v. Blakeman, 997 F.2d 1084, 1092-1093 (5th Cir. 1992) questioned on other grounds by In

re Bouchie, 324 F.3d 780 (5th Cir. 2003); United States v. Morrell, 137 F.Supp.2d 130, 138-139 (E.D.N.Y. 2001).180

United States v. Taylor, 254 F.Supp 752, 756 (N.D. Cal. 1966).

181United States v. Taylor, 254 F.Supp 752, 756 (N.D. Cal. 1966).

182If the Court finds that this property is part of Gary Bradley’s bankruptcy estate, the United States

acknowledges that § 545(2) of the Bankrup tcy Code allows the Bankruptcy Trustee to avoid the United States’

unfiled statutory liens. Nevertheless, the United States wishes to preserve its lien interests in case the Bankruptcy

Trustee decides to abandon any property that the United States believes is worth pursuing.


Page 37 of 48

6. Tax Liens Attach to Appreciation – A tax lien attaches to all passive appreciation of

encumbered property from the original attachment date until foreclosure.179

B. Federal Tax Liens Attach To All Distributions That Lazarus Exempt Trust ShouldMake and Has Made to Gary Bradley

7. Tax Lien Attachment to Actual and Required Trust Distributions – A 26 U.S.C. § 6321

tax lien that attaches to a trust beneficiary’s property attaches to all distributions that the

trust makes to the beneficiary and all distributions that the trust agreement requires the

trust to make to the beneficiary.180

8. Determination of Required Support Distributions – The value of distributions required by

a support trust can be calculated by assessing the beneficiary’s current living needs and

living expenses.181

ANALYSIS

The above proposed findings of fact and conclusions of law demonstrate two reasons why

Bradley’s creditors may use Lazarus Exempt Trust’s assets to satisfy Bradley’s debts: (1)

Lazarus Exempt Trust is self-settled; and (2) the United States’ statutory tax assessment liens

attach to particular property within Lazarus Exempt Trust.182 Since the Bankruptcy Trustee is

responsible for arguing self-settlement, the following analysis applies only to the lien issue.

183See Proposed Findings of Fact, at Part G.

184As of December 31 , 1999, Phoenix Holdings Ltd. owned approximately 479 acres of land within Travis

County, $2,450,000 in note receivables, and $4,500,000 in MUD B onds. As of October 31, 2001, Beutel valued

these Phoenix Holdings assets at $44,985 ,063 . See Proposed Findings of Fact, at Part D for detail.

185See Proposed Findings of Fact, at Part I.

186See Proposed Findings of Fact, at Part J.


Page 38 of 48

A. The United States’ Tax Liens Attach to All Assets That Bradley Contributed toLazarus Exempt Trust Without Consideration, to the Streetman Stock SaleProceeds, and to All Required Support Distributions

The above proposed findings of fact show that the United States’ tax liens attach to

specific assets that Bradley contributed to Lazarus Exempt Trust for no consideration. The

United States asks the Court to determine that the United States’ tax liens attach to these assets

and encumber any interest in these assets held by Lazarus Exempt Trust or any entity owned by

Lazarus Exempt Trust.

1. United States Tax Liens Attach To All Assets That Bradley Contributed to LazarusExempt Trust Without Consideration

The United States’ tax liens attach to and encumber Lazarus Exempt Trust’s interest in

the following assets that Bradley contributed to Lazarus Exempt Trust for no consideration:

• $378,969.96 of cash;183

• a $4,491,486 interest in Phoenix Holdings, LP and Phoenix Holdings, GP;184

• a $1,697,432.42 interest in the Spillar/Pfluger property from Bradley’s

$273,979.25 payment to extend the option’s term, $1,382,468.17 payment to settle

a suit with the City of Austin, and $40,985.00 payment for sales commissions;185

• a $1,160,000 interest in the 34 acres property purchased from Webb Troup;186

• a contract to purchase the O’Quinn property and a $100,000 earnest money

187See Proposed Findings of Fact, at Part K.

188See Proposed Findings of Fact, at Part L.

189See Proposed Findings of Fact, at Part L.

19026 U .S.C. § 6321; United States v. National Bank of Commerce, 472 U .S. 713, 719 (1985); Glass City

Bank v. United States, 326 U.S. 265, 267-69 (1945).

191E.g., Oxford Capital Corp. v. United States, 211 F.3d 280, 284 (5th Cir. 2000) (IRS may levy upon

nominee assets because nominee is not true beneficial owner).

192Proposed Findings of Fact, at Part A.

193Proposed Findings of Fact, at Parts G, K.


Page 39 of 48

deposit;187

• a total $531,230 interest in 7.9641 acres of property known as the Common Ford

Roads property that was purchased with $481,230 of proceeds from the sale of

MedTech’s Agennix stock, with Gary Bradley’s $18,000 down payment, and with

Kay Bradley’s $32,000 down payment that was later reimbursed with proceeds

from the sale of MedTech’s Agennix stock;188

• $146,758 of remaining proceeds from the sale of the MedTech Agennix stock;189

The United States’ tax liens attach to all the above assets and appreciation of those assets

because Bradley owned them on or after his tax assessment dates. When a person fails to pay a

tax deficiency after demand, 26 U.S.C. § 6321 creates a federal tax lien that attaches to all of that

person’s property and rights to property owned on the assessment date or acquired thereafter.190

A person’s property rights include any property held by a nominee.191 In this case, Bradley’s

1994 taxes were assessed on May 1, 2000, his 1996 taxes were assessed on April 14, 2000, and

his 2001 taxes were assessed on December 20, 2002.192 On or after the 1994 and 1996

assessment dates, Bradley owned the cash and O’Quinn contract in his own name,193 so the 1994

and 1996 tax liens attach to those assets. In addition, on or after the 1994 and 1996 assessment

194See Proposed Findings of Fact, at Parts H, I, J, L.


196See Proposed Findings of Fact, at Part B (the Noshirvanis owned CC Residential).


19826 U.S.C § 6323(a) (stating that a subsequent purchaser has priority over a § 6321 lien if notice of that

lien was not filed during the purchase); 26 U .S.C 6323(h) (defining “purchaser” as one who pays full and adequate

consideration for the underlying property); United States v. Alfano, 34 F. Supp. 2d 827, 849 (E.D.N.Y. 1999).

199See Proposed Findings of Fact, Parts H, I, J, L.

200See, e.g., United States v. Morrell, 137 F.Supp.2d 130, 138-139 (E.D.N.Y. 2001).


Page 40 of 48

dates, Circle C Residential, Steve Bartlett, Jimmy Evans, and James Gressett held Gary Bradley’s

respective interests in Phoenix Holdings, Spillar/Pfluger, Webb Troup, and MedTech as

Bradley’s nominees.194 These nominee relationships are evidenced by the following factors:

• the lack of consideration paid for the nominees’ interests;195

• Bradley’s large debt owed to the FDIC when these nominees took their interest;

• the close relationship between Bradley and these nominees;196 and

• Bradley’s continued use of these assets to invest in Lazarus Exempt Trust’s real

estate ventures.197

Thus, the United States’ tax liens attach to all of the above assets.

The United States’ tax liens encumber Lazarus Exempt Trust’s interest in this property

because Bradley transferred them to Lazarus entities for no consideration. Section 6323(a)

protects purchasers from statutory tax liens that have not been filed. But to be a purchaser, one

must give “adequate and full” consideration.198 In this case, Lazarus Exempt Trust and its

entities gave no consideration for the above assets,199 so they do not qualify as purchasers.

Finally, the United States tax liens attach to any passive appreciation of the above assets

because Bradley transferred his assets subject to the United States’ liens.200 In other words, the

201Proposed Findings of Fact, at Parts F.

20226 U.S.C § 6323(a) (subsequent purchaser has priority over a § 6321 lien if notice of that lien was not

filed during the purchase); 26 U.S.C 6323(h) (defining “purchaser” as own who receives a valid property interest

under local law); United States v. Gonzales, Civ. No. 89-F-1740, 1991 WL 53281, at *4 (D. Colo. Feb. 6, 1991),

aff’d, 951 F.2d 1261 (10th Cir. 1991).

203TEX. BUS. & COM . CODE § 24.006(b).

204Proposed Findings of Fact, at Parts F.


Page 41 of 48

assets are burdened with the lien, not a specific value.

2. United States Tax Liens Attach to $1,619,092 of Notes and Accounts Receivable

On or after the 1994 and 1996 assessment dates, Bradley owned $1,619,092.02 of notes

and accounts receivable in his own name,201 so the 1994 and 1996 tax liens attach to the

receivables.

The tax liens encumber Lazarus Investment, L.P.’s and Castle Realty Management

Services’ interest in these receivables because they were fraudulently transferred to those entities.

Under 26 U.S.C. § 6323, a federal tax lien has priority over a subsequent transferee’s interest if

that transferee received the underlying property in a transfer that is fraudulent under state law.202

Transfers are fraudulent under Texas law if they are made to insiders for antecedent debt while

the debtor is insolvent, and the insider has reason to believe the debtor was insolvent.203 In

Bradley’s case, he was insolvent when he transferred the notes to insiders Lazarus Investments,

L.P. and Castle Realty Management Services for antecedent debts owed to Alien, Inc., Lazarus

Exempt Trust, James Evans, Kay Hulse, Talex, Lazarus Investments, L.P., Strategic Land

Management, and Castle Realty Management Services.204 In addition, the trustee of the entity

that owns Lazarus Investments, L.P. and Castle Realty Management Services, Brad Beutel, at

205See Proposed Findings of Fact, at Parts F (Bradley and Love believed that Bradley’s debts were

worthless because he was insolvent).

206See Accounting of Streetman Sales Proceeds, GOVERNM ENT EXH IBIT 29; 12/31/01 Lazarus Exempt Trust

General Ledger, admitted as EXHIBIT D-ING ALLS 752 , at LOVE 05591, 8 /2/2001 entry.

207See Proposed Findings of Fact, at Part E.



Page 42 of 48

least had reason to know that Bradley’s debt to the FDIC made Bradley insolvent.205 Thus, the

note transfers were fraudulent, and the United States’ tax liens have priority over Lazarus

Investments, L.P and Castle Realty Management Services.

3. United States Tax Liens Attach to the Assets that Lazarus Exempt TrustPurchased With the $5.4 Million of Proceeds From Bradley’s Sale of HisStreetman Homes Stock

The United States’ tax liens also attach to and encumber the following assets that Lazarus

Exempt Trust purchased with the proceeds from Bradley’s sale of his Streetman Homes stock:206

• a $2,000,000 interest in Golf Club Partners;

• a $26,000 interest in the 2601 Jarret Avenue property;

• a $1,030,568 interest in the Rowell property; and

• a $100,000 interest the Rasaca Property.

The tax liens attach to and encumber the above assets because they can be traced from

Bradley’s original ownership interest in Streetman Homes. The tax liens attached to the

Streetman Homes stock because Bradley owned it in 2000 through his nominee Penny Gressett.

Penny Gressett’s nominee status is evidenced by the following factors:

• the lack of consideration she gave for her interest in Streetman Homes;207

• Bradley’s large debt owed to the FDIC when she took her interest,

• her close relationship to Bradley as James Gressett’s wife;208 and


210Phelps v. United States, 421 U.S. 330, 334-35 (1975).

211See Proposed Findings of Fact, Part E.

212See, e.g., United States v. Morrell, 137 F.Supp.2d 130, 138-139 (E.D.N.Y. 2001).

213Proposed Findings of Fact, Part E.


Page 43 of 48

• Bradley’s continued use of the Streetman property to invest in Lazarus Exempt

Trust’s real estate ventures.209

Thus, the United States’ tax liens attached to the Streetman stock. After the Streetman stock was

sold, the United States’ liens continued to attach to the sale proceeds and any assets purchased

with those proceeds because federal tax liens follow proceeds.210 These United States liens

encumber Lazarus Exempt Trust’s and its entities’ interest in these assets because Lazarus

Investments paid no consideration for the Streetman proceeds.211 Finally, the United States’ tax

liens attach to any passive appreciation of the assets, because the assets are burdened by the

liens.212

Even if the transfer of Streetman Homes stock to and from Lazarus Exempt Trust were

legitimate, the United States’ tax liens still attach to the $5.4 million in stock proceeds. When

Penny Gressett transferred the Streetman Homes stock to Lazarus Investments for a $3.6 million

note, these shares were valued at $9 million.213 Thus, she transferred $5.4 million of stock to

Lazarus Exempt Trust for no consideration. Accordingly, Lazarus Exempt Trust cannot qualify

as a purchaser. It received Bradley’s Streetman stock subject to the United States’ tax liens, and

when the Streetman stock was re-sold to James Gressett, the United States’ tax lien attached to

the proceeds from that sale. These liens encumber Lazarus Exempt Trust’s interest in the stock

because Lazarus Exempt Trust did not pay any consideration for the $5.4 million of stock.

214United States v. Taylor, 254 F.Supp. 752, 756 (N.D. Cal. 1966).

215Proposed Findings of Fact, Part B.

216See United States v. Taylor, 254 F.Supp 752, 756 (N.D. Cal. 1966).

217See Bradley Bankruptcy Schedule J (showing expenses, excluding rent, of $25,125.55); Schedule I

(showing available monthly income of $3,348.23). Another Bradley income statement shows that he needs

$741,904.65 per year in support. See Note Transfer Fax from Dianna Patterson to Bill Love, admitted as E XHIBIT D-

ING ALLS 714 , at LOVE 02717 (showing Bradley’s net income as a negative $309 ,126.94 for a 5 month period in

2001).


Page 44 of 48

4. United States Tax Liens Attach to All Distributions That Lazarus Exempt TrustShould Make and Has Made to Gary Bradley

Even if the United States’ tax liens do not attach to particular assets held by Lazarus

Exempt trust, the tax liens do attach to the support distributions that Lazarus Exempt Trust’s

agreement requires it to make to Gary Bradley. Under 26 U.S.C. § 6321, federal tax liens attach

to required support distributions if they can be adequately measured.214 In this case, Lazarus is a

support trust, so its agreement requires it to distribute to Bradley “any amounts out of the net

income and principal (if income is insufficient) of the trust as, in the sole reasonable discretion of

the trustees, are necessary or advisable” for Bradley’s “health, education, support or

maintenance.”215 This distribution requirement can be measured by evaluating Bradley’s current

living needs and living expenses,216 so Bradley’s right to these distributions is a property interest

that the United States’ tax liens attach to.

Bradley asserts in his Bankruptcy schedules that he needs $21,777.32 per month above

his salary for his current living needs and expenses,217 so the United States argues that Bradley

has a right to receive $21,777.32 per month from Lazarus Exempt Trust. Since that monthly

payment is a property right, the United States’ tax liens attach to it.

218See 26 U.S.C § 6323(a) (stating that a subsequent purchaser has priority over a § 6321 lien if notice of

that lien was not filed during the purchase); 26 U.S.C 6323(h) (defining “purchaser” as one who pays full and

adequate consideration for the underlying property); United States v. Alfano, 34 F. Supp. 2d 827, 849 (E.D.N.Y.

1999).

219See Phelps v. United States, 421 U.S. 330, 334-35 (1975); Beaty v. United States, 937 F.2d 288, 292

(6th Cir. 1991).

220See Bankruptcy Trustee’s post-trial briefing on self-settlement for more detail.


Page 45 of 48

B. The United States’ Tax Liens Follow Assets that Have Been Transferred for NoConsideration and Attach to All Proceeds from Assets That Have Been Sold to BonaFide Purchasers

Since the above assets were first contributed to Lazarus Exempt Trust, many of them may

have been transferred or sold. Nevertheless, the United States’ tax liens continue to attach to the

transferred assets if they have been transferred for inadequate consideration.218 If, on the other

hand, they have been sold to bona fide purchasers, the United States’ tax liens attach to the sale

proceeds.219

Since the United States does not know which assets have been transferred or sold, the

United States asks the Court to generally determine that its tax liens attach to the above assets

that have been transferred for inadequate consideration and to any proceeds from sales to bona

fide purchasers.

PROPOSED ORDER

The United States asks the Court to Order the following:

1. Lazarus Exempt Trust’s property is part of Gary Bradley’s bankruptcy estate.220

2. The United States’ statutory assessment liens attach to the following assets and encumber

any interest in the following assets held by Lazarus Exempt Trust or any entity owned by

Lazarus Exempt Trust:

221As of December 31 , 1999, Phoenix Holdings Ltd. owned approximately 479 acres of land within Travis

County, $2,450,000 in note receivables, and $4,500,000 in MUD B onds. As of October 31, 2001, Beutel valued

these Phoenix Holdings assets at $44,985 ,063 . See Proposed Findings of Fact, at Part D for detail.


Page 46 of 48

• $1,619,092.02 of notes and accounts receivable;

• $378,969.96 of cash;

• a $4,491,486 interest in Phoenix Holdings, LP and Phoenix Holdings, GP;221

• a $1,697,432.42 interest in the Spillar/Pfluger property;

• a $1,160,000 interest in the 34 acres property;

• a contract to purchase the O’Quinn property and a $100,000 earnest money

deposit;

• a $531,230 interest in 7.9641 acres of property known as the Common Ford

Roads property;

• $146,758 of remaining proceeds from the sale of the Med Tech Agennix stock;

• a $2,000,000 interest in Golf Club Partners;

• a $26,000 interest in the 2601 Jarret Avenue property;

• a $1,030,568 interest in the Rowell property;

• a $100,000 interest the Rasaca Property; and

• $21,777.32 of monthly distributions that Lazarus Exempt Trust should have and

should be making for Gary Bradley’s benefit.

3. The United States’ tax liens continue to attach to and encumber any transferee’s interest

in any of the assets in paragraph one that have been transferred outside of the trust for

inadequate consideration.

4. The United States’ tax liens attach to the proceeds from any sale of the assets in


Page 47 of 48

paragraph one to bona fide purchasers and encumber any interest in those proceeds held

by Lazarus Exempt Trust or any entity owned by Lazarus Exempt Trust.

JOHNNY K. SUTTONUnited States Attorney

By: /s/ Christopher R. Egan

HERBERT W. LINDERAttorney, Tax DivisionState Bar No. 0065446

CHRISTOPHER R. EGANAttorney, Tax DivisionState Bar No. 24036516Department of Justice717 N. Harwood, Suite 400Dallas, Texas 75201(214) 880-9732(214) 880-9741 (FAX)

ATTORNEYS FOR THE UNITED STATES


Page 48 of 48

CERTIFICATE OF SERVICE

IT IS HEREBY CERTIFIED that service of the foregoing UNITED STATES’ POST-

TRIAL BRIEF has been made on August 28, 2004, by mailing a copy thereof to:

Patrich C. Hargadon Elizabeth G. SmithAttorney for Trustee Ronald E. Ingalls Davis & Opper, P.C.Hargadon & Wise, PC 6655 First Park Ten, Suite 116400 West 15th, #710 San Antonio, TX 78213Austin, Texas 78701

Raymond W. Battaglia Frank Ikard Attorney for Debtor Ikard & Golden, P.C.Oppenheimer Blend Harrison & Tate 106 East 6th Street, Suite 500717 Navarro, Suite 600 Austin, Texas 78701San Antonio, Texas 78205

UNITED STATES TRUSTEE 903 San Jacinto, Suite 230 Austin, TX 78701

Eric J. TaubeAttorney for Bradley Beutel, Trustee of and on Behalf of the Lazarus Exempt Trust Hohmann, Taube & Summers, LLP 100 Congress Ave., Suite 1600 Austin, Texas 78701

Sam E. Taylor, Jr.Federal Deposit Insurance Corporation1910 Pacific Ave., 3rd FloorDallas, Texas 75201

/s/ Christopher R. Egan CHRISTOPHER R. EGAN

Phoenix Holdings, GP Grant Gomez CC Res (1/3) Bradley/Gressett (2/3) Total1995Net Income Share (7,324.00) (290,022.00) (145,011.00) (290,023.00) (732,380.00) Percentage 1.00% 39.60% 19.80% 39.60% 100.00%

1996Net Income Share 7,648.00 302,813.00 151,406.00 302,812.00 764,679.00 Percentage 1.00% 39.60% 19.80% 39.60% 100.00%

1997Net Income Share (1,266.00) (50,151.00) (25,077.00) (50,153.00) (126,647.00) Percentage 1.00% 39.60% 19.80% 39.60% 100.00%

1998Net Income Share 59,556.00 2,358,448.00 1,179,224.00 2,358,448.00 5,955,676.00 Percentage 1.00% 39.60% 19.80% 39.60% 100.00%

*Based on Net Income from Phoenix Holdings, Ltd. Capital Account Analysis, admitted as Government Exhibit 51, at LOVE 06872, Government Exhibit 76, at LOVE 04457, Exhibit D-Ingalls 738, at 04531

Government DemonstrativeA

1995-1998Phoenix Holdings Distribution of Net Income*