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Chatman for Congress Campaign Issues Statement on "Fraudulent Conveyance" Appeal She Lost in 2003

by: lowkell

Tue Mar 18, 2014 at 14:53:58 PM EDT

Earlier today, I reached out to the Lavern Chatman for Congress campaign for comment on something troubling that's been floating around. "Floating around out there" includes chatter among multiple 8th CD political operatives, as well as forwarded emails about a court case and at least one Facebook posting on the subject. Personally, I hadn't known anything about this until very recently. What is "this" exactly? See below for excerpts from the court ruling, in which "Appellant, Lavern Chatman, seeks reversal of the trial court's decision to hold her jointly and severally liable for $1.4 million in punitive damages because of her involvement in a fraudulent conveyance." In the end, the judge affirmed a previous "finding of liability, based on sufficient evidence of malice, and...sustain{ed} the court's decision to award punitive damages in some amount" against Chatman.

In sum, the court found that Chatman helped Roy Littlejohn, "a longtime friend and associate" with "a friendship and business relationship spanning fifteen years," to avoid paying his 297 employees (of J.B. Johnson Nursing Home) $1,447,651.99 in wages. In addition, Chatman was found by the court to have allowed Littlejohn to "transfer" his assets to her in a manner the court found to be illegal and malicious, the aim of which was to help Littlejohn evade the court judgment that he pay the back wages.

Here's an excerpt from the D.C. Court of Appeals' ruling on September 4, 2003:

After a three-day non-jury trial, the court found appellant and Roy Littlejohn liable on all three counts of the complaint, but also found that "the evidence was not sufficient to show that Mrs. Littlejohn was involved in the fraudulent transfer ...." The court explicitly rejected appellant's testimony, finding it to be "patently incredible." It further found that "the papers drawn up by the parties were entirely bogus, and that anyone with Ms. Chatman's background and sophistication knew it." The court was therefore satisfied that "the plaintiffs have demonstrated by the preponderance of the evidence that the two were engaged in a civil conspiracy to defraud."

The court also found appellant and Littlejohn jointly and severally liable for $1.4 million in punitive damages, ruling that there was "clear and convincing evidence that Mr. Littlejohn and Ms. Chatman acted with evil motive, actual malice and with willful disregard for the rights of the plaintiffs." The court characterized their behavior as "outrageous and grossly fraudulent," especially considering the disparity in wealth between appellant and Littlejohn and the "people whom they scammed." The court also described the transaction as a "deliberate scheme to get around a lawful judgment," and stated that in its opinion "each defendant needs to be punished for their conduct [and] each defendant needs to serve as an example to prevent others from acting in a similar way."

lowkell :: Chatman for Congress Campaign Issues Statement on "Fraudulent Conveyance" Appeal She Lost in 2003

The record in this case supports the trial court's finding, by clear and convincing evidence, that appellant's conduct was outrageous, grossly fraudulent, and in willful disregard of the employees' rights. We cannot overlook the massive scale of the fraud, which was designed to defraud not just one, but 297 persons. Another factor making appellant's actions particularly egregious and oppressive was the enormous disparity of wealth between appellant and the employees. While her exact net worth may be a matter of debate, as we shall discuss later in this opinion, she is indeed a very wealthy woman.9 As for the employees, the trial court described their situation by stating, "based on the type of employment that [they] had ... people in that economic situation ... literally suffer when they don't get a paycheck." Yet, despite the employees' precarious financial situation, which was attributable in large part to Mr. Littlejohn and the collapse of Urban Shelters (as the first lawsuit showed), appellant willingly engaged in a fraudulent transaction with Mr. Littlejohn that prolonged their financial distress by forcing them to endure yet another lawsuit in order to receive their due compensation.

Although appellant does not challenge the court's finding that she knowingly and willingly participated in a fraud, she does argue that a finding of malice cannot stand because she did not have actual knowledge of the judgment against the Littlejohns when she entered into the fraudulent transaction. According to her logic, in order for punitive damages to be awarded, it is not enough that she willingly committed fraud; in addition, she claims, she had to know exactly who was being defrauded. This somewhat novel argument overlooks the trial court's factual finding-which was not plainly wrong or lacking in evidentiary support-that appellant was indeed aware that she was defrauding the employees.

So, those are the legal facts of the matter. Now, here's a statement by the Chatman campaign, which they sent me a few hours after I asked them about this case earlier today.

This series of events was a nightmare scenario.  My first husband had just died after a long battle with lung cancer and his estate was still not settled. After that, a former employer and someone I thought was a trusted friend came to me in need of a loan. Without asking tough questions, I agreed to a loan where he signed over property to me as collateral. Given this tough time, I didn't pay much attention to the details.

I had no idea of the financial chaos of Mr. Littlejohn's business: he was broke, his employees were suing him and he had a pending judgment against him. Even though I didn't know what he was doing and I was mourning, I should have asked more questions. I take responsibility for that.

During the worst year of my life, this is one instance of bad judgment, not an example of any bad intentions. I did not stand to benefit and I did not know about Mr. Littlejohn's grand scheme, but I was forced to pay for his mistakes since he was insolvent at the time.

At a different time in my life this would have never happened.  

That said, I take personal responsibility for my involvement. I certainly learned a great deal from this. It's an example of how you can make a serious error, not through bad actions, but from not asking enough questions and through inaction.

I am now the type of leader who asks the tough questions.

Before and since 1998, I've dedicated my life to giving back. I've run three community organizations and I have mentored dozens of young people to encourage them to make good financial and life decisions.

Personally, I'm having trouble reconciling the court's clear and strong language with the Chatman campaign's statement. Also, a "loan" (what the Chatman campaign calls it) and a "fraudulent conveyance" are very different things. What do you think?

P.S. My understanding from multiple sources is that the Chatman campaign polled on this issue a while back, to see if it would make voters less likely to support her. So, the Chatman campaign clearly were/are aware of it.

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This Might Change That Drop Out Prediction Below (0.00 / 0)

I doubt it. (0.00 / 0)
My guess is that her supporters won't care, that it's too complicated (and not "fun" or "sexy" enough) a story for the corporate media, and that 99% of people are not paying attention to the 8th CD primary regardless. I'd love to be proven wrong about those things, but I strongly doubt I will be.

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[ Parent ]
Not sexy enough . . ? (3.00 / 1)
I don't know- Oprah fundraising for someone convicted of "fraudulent conveyances" (ie, transferring assets to defraud in bankruptcy) is pretty sexy.

I could see the right wing media hopping all over this due to their apparent hatred of Oprah. At minimum this will hurt Chatman among well-informed voters.

At any rate, somebody had this ready for Chatman- Don't know who- but there's something about Chatman taking possession of a Volvo car in the proceedings.

"8th CD: A whole lotta crazy!"

[ Parent ]
It may hurt Oprah as well (0.00 / 0)
This does not reflect well on Oprah's judgement

[ Parent ]
Same argument (4.00 / 1)
Ms. Chatman must be hoping that voters do not look into the matter. The court's opinion is written as if the court considered her arguments almost frivolous. Nominating a person with this sort of history would be a way to give a Republican a shot at the seat. Surely Ms. Chatman can see that.    

Chatman's statement (4.00 / 1)
Her statement is directly contradicted by the findings of the court, and her own actions in the litigation.  In her statement, she says it was just a loan, and that she was unaware that it was being made to avoid a judgment--but the court specifically found her testimony on that point to be "patently incredible."  In her statement, she says she had no "bad intentions"--yet the appellate decision notes that she didn't even appeal the court's finding that she knowingly and willingly participated in a fraud, and that the lower court found, based on all the evidence presented, that Chatman "was indeed aware that she was defrauding the employees."  Chatman "knowingly and willingly participated in a fraud" to "scam" people who had far less money than she.  How on EARTH she could believe she is qualified to hold the 8th District Congressional seat is beyond me.

This is very BAD (0.00 / 0)
Look, maybe it wouldn't be so bad if she were a Republican...or a Democrat in a less-competitive field...or a Democrat who was more well-known amongst primary voters...or if it had been any crime but one that defrauded hundreds of hard-working, underpaid workers of their wages. But this...she expects to walk away from this with the nomination? No way, no how.

There is a narrative forming about Lavern that, rightly or wrongly, paints her as something of an opportunist. The residency thing--is she or is she not a resident of North Carolina?--and flaunting of wealth (wearing a fur coat to democratic events)...and now being convicted of fraud...I don't think even Oprah can help her pull this out. She'll get creamed in the debates/forums, by the press, and, God forbid, by the eventual Republican nominee.

There are too many other good, solid democrats in this race to put our faith in someone who is relatively unknown and who may, or may not, have learned from a doozy of a past "mistake."    



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