Road funding

Ex-lawyer Chris Pettit now faces a possible contempt of court charge

Former San Antonio attorney Christopher “Chris” Pettit, who allegedly defrauded his clients of millions, is in hot water with the trustee overseeing his bankruptcy case.

Pettit, 55, liquidated a retirement account last week and withdrew $125,000 from it as the money was part of the bankruptcy estate, the trustee claimed.

Eric Terry, the Chapter 11 administrator, filed an emergency motion Friday evening with the bankruptcy court asking him to order Pettit to show why he should not be held in contempt for withdrawing the funds.

“It’s a big no-no,” San Antonio attorney Martin Seidler, who represents some of Pettit’s creditors, said of the alleged withdrawals. “You cannot use this money without the consent of the court, or unless it is set aside.”

Terry wants the court to order Pettit to return the funds withdrawn from the Fidelity Investments retirement account, as well as any money he may have withdrawn from other accounts. The trustee also seeks to prevent Pettit from withdrawing funds or other assets in the future.

A hearing on the trustee’s motion is scheduled for Wednesday.

Pettit’s troubles began when several clients sued him for allegedly running away with their money. A lawyer has alleged he looted $50 million or more from clients. Pettit subsequently filed for bankruptcy protection for himself and his law firm. He listed $27.8 million in assets and $115.2 million in liabilities in his individual case, making it one of the largest ever in San Antonio. He also gave up his attorney’s license and closed his practice, which specialized in estate planning and personal injury cases.

The FBI investigated.

Since his appointment as Chapter 11 trustee, Terry has changed the locks on Pettit’s law offices and received court approval to collect all monies owed to Pettit and his law firm.

In his court filing, Terry said he learned on Friday that since July 1, Pettit had “apparently liquidated approximately $137,000 in assets in his Fidelity account and withdrawn, it appears, at least $125,000 from that account.” “.

The filing included screenshots reflecting the activity of a Pettit retirement account at Fidelity. They show Pettit received an early distribution of $50,000 on July 5 and another of around $75,000 on Thursday.

On Wednesday, two days before learning of the alleged withdrawals, Terry sent a letter to Fidelity regarding Pettit’s account.

“Unless I expressly state otherwise in writing, no one other than me is authorized to modify, suspend, close or request transactions relating to the account(s) of the debtors with Fidelity”, a- he writes in bold.

Neither Terry nor Michael Colvard, Pettit’s bankruptcy attorney, immediately responded to requests for comment on Monday.

During his bankruptcy, Pettit said he held about $95,000 in a Fidelity Individual Retirement Account. He also said he has nearly $635,000 in a 401(k) retirement account with Fidelity.

Pettit claims both accounts are ‘exempt’ from the bankruptcy estate – meaning he wants to keep the money for himself rather than pay creditors.

“The bankruptcy code basically says you can claim what you think is exempt, and then creditors and interested parties, including the trustee, have the ability to object to whether it’s exempt or not,” said Ray Battaglia, a San Antonio attorney representing a creditor in the case.

Whether Pettit’s exemption request is allowed has not been decided. The question is addressed about a month after the first meeting of creditors, which did not take place.

“So right now everything belongs to the estate, including the supposedly exempt property,” Battaglia said.

Some creditors may object to the funds being classified as exempt, alleging that the money stolen from them funded the accounts. It has not been proven.

Regarding Terry’s motion on Friday, Pettit will have to show that his alleged withdrawal was not in violation of a court order.

Holding a debtor in contempt is one of the most powerful penalties a bankruptcy judge can impose. US Bankruptcy Chief Judge Craig Gargotta, who is presiding over Pettit’s case, has already done so.

In December, he found a San Antonio debtor in contempt for refusing to pay a $7,500 fine. Gargotta sent the man to jail, where he remained for over six months.

Pettit and related entities have already come under scrutiny for transferring at least seven properties worth millions of dollars to the same buyer less than two months before the June 1 bankruptcy.

The buyer was Sin Reposo LLC, whose sole member and director is Garrett Glass. He is also Chief Financial Officer of EF EnergyFunders Inc., an oil and gas investment firm based in Calgary but with executive offices in San Antonio. He appointed him to the post in March.

Pettit was director of EnergyFunders. On May 20, a day after the Express-News first reported his legal troubles, Pettit resigned from the board of directors of EnergyFunders, a penny stock company that trades on the Stock Exchange. TSX growth in Canada.

pdanner@express-news.net