Opening arguments heard in developer’s disputed bankruptcy

A creditor of a former Northwest Arkansas real estate developer and his wife argued Monday in a Dallas bankruptcy court that the couple hid assets in a bid to hinder, delay and defraud their creditors.

In the first day of the trial of Bill Schwyhart and his wife Carolyn, the attorney for creditor CHP LLC. told the court that the pair, via a multiyear scheme, shifted assets through various entities and used that money for living expenses and other spending but then denied knowledge of them and other entities linked to them and made other false claims in their bankruptcy filings.

The Schwyharts filed for Chapter 7 bankruptcy protection in Texas in July 2018, claiming more than $90 million in debt, mostly related to business. CHP is asking the court to deny the discharge of the Schwyhart’s bankruptcy.

The Schwyharts’ attorneys have said the couple never intended to hinder, delay or defraud, and that all acts or failures to act outlined in court documents were justified under the circumstances of the case.

Both Bill and Carolyn Schwyhart took the stand Monday to testify about their financial dealings in the trial before Judge Harlin Hale of the U.S. Bankruptcy Court for the Northern District of Texas.

During opening statements, Attorney John Lewis Jr. representing Bill Schwyhart characterized CHP as a “vulture creditor” that acquired $376,000 of the Schwyhart’s debt prior to their bankruptcy. He contended CHP’s actions were aggressive adding its claims only represent about 1% of the total creditor pool.

Lewis told the court CHP’s accusations attack Bill Schwyhart’s credibility and honesty and the couple’s goal is to clear their good names. He said the court has to determine if the Schwyharts are honest debtors and deserving of a discharge and that the court will find overwhelmingly the answer is yes.

Lewis said the couple’s financial trouble came in the financial crisis of 2008 and 2009 and while they made every effort to recover, they eventually were forced to file for bankruptcy. He said the vast majority of Schwyharts’ debt goes back to those times, calling it “zombie debt.”

Brian Ferguson, representing CHP, told the court the Schwyharts had control over the HMG Investment’s account and regularly used the account for living expenses to the tune of about $12,000 a month but then concealed their ownership interest.

He noted they also went on to list HMG as a creditor in the amount of $490,000. He said the HMG account was funded through Bill Schwyhart’s son.

In court filings, CHP contends that the Schwyharts shifted assets gained through confidential settlement agreements obtained years earlier through “a web” of various entities, and used that money for living expenses and other spending but denied knowledge of them in their bankruptcy filing. CHP also argued in earlier filings that the Schwyharts deceived the court by hiding the fact that they owned an 8,333-squarefoot house at 9 Clubhouse Drive in the Pinnacle Country Club development in Rogers where they lived until moving to Texas.

Throughout the day Monday, CHP attorneys questioned the Schwyharts regarding their knowledge of various business entities including HMG and Sterling Management Company, Inc., and about various credit cards and two trusts.

Under cross examination by his attorney, Bill Schwyhart said he never intentionally lied or made misstatements during his bankruptcy. He said the funds obtained through HMG, a business entity what was formed in 1982, were loans. He said he listed HMG as a creditor as a matter of transparency.

During the Northwest Arkansas building boom, Bill Schwyhart worked with trucking magnate J.B. Hunt and Tim Graham on the Pinnacle Hills Promenade mall, which opened in 2006. After Hunt’s death later that year, his widow, Johnelle Hunt, and Graham broke ties with Schwyhart.

Schwyhart was also one of the investors, along with J.B. Hunt, in the now-defunct charter-jet company Pinnacle Air LLC, which did business as Aspen JetRide. It filed for Chapter 7 bankruptcy protection in early 2009.

Later, Johnelle Hunt and Graham sued Schwyhart claiming that he defaulted on various loans. In April 2010, eight development companies managed by Schwyhart filed for bankruptcy, claiming nearly $42 million in debt.

According to the earlier CHP complaint, the 2013 confidential settlements detailed a deal with John P. Calamos of Naperville, Ill., and the chairman of financial company Calamos Asset Management. He became a partner with Schwyhart when Calamos’ Ajax merged with Pinnacle Air.

According to the filing, in October 2013 Calamos entered into a confidential settlement agreement that transferred $9.7 million to Schwyhart and some business entities. A second confidential agreement entered into the very same day transferred $3 million to Hunt and Graham, and the rest went into accounts designated by Recipio Investments Strategic Fund I LLC.

The agreement also noted that Low Tide Holdings, controlled by Graham, would convey the quit claim deed conveying the property at 9 Clubhouse Drive to Recipio or its assignee. The filing argued that Recipio, formed in Delaware in August 2011, was set up to funnel money back to Schwyhart.