Janvey v. Romero
MEMORANDUM. Signed by Judge J. Frederick Motz on 1/30/2017. (dass, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
RALPH S. JANVEY
Civil No. – JFM-16-3355
Ralph S. Janvey, in his capacity as a court-appointed receiver for the Standford
International Bank, Ltd., (the “Receiver”), has filed an appeal from an order entered by the
Bankruptcy Court denying the Receiver’s motion to dismiss pursuant to 11 U.S.C. §707(a). The
issues have been fully briefed. The order of the Bankruptcy Court will be affirmed.
The debtor is Peter Romero. Romero held several positions in the United States
Department of State, including US Ambassador and Assistant Secretary of State. He served in
the Department of State for approximately twenty-five years. Upon his retirement, a number of
companies sought his consulting services to utilize his knowledge and experience with doing
business in Central America, South America, and the islands in the Caribbean. Among the
several companies that him hired was Stanford Financial Group.
Romero was a consultant for Stanford for approximately seven years. He received
$700,000 for his consulting services over the years. In truth, Stanford was operating a Ponzi
scheme. Immediately upon learning of the fraud allegations against Standford, Romero resigned
his position as an international advisor and severed all ties with Standford. Janvey was
appointed as the receiver for Stanford.
Janvey filed suit against Romero. Following a jury trial, the United States District Court
for the Northern District of Texas entered judgment against Romero avoiding all of the advisory
fees that had been paid to him. Romero appealed to the Fifth Circuit which affirmed the
Romero attempted to settle the judgment entered against him. Janvey made no counter
offers. Apparently, it did not do so because Janvey had claims against many other defendants,
and he sought to use Romero – the first individual to be sued – as an example of what would
happen if a defendant defended the Receivers’ claims.
Romero filed Chapter 7 bankruptcy proceedings. Although the primary reason for filing
the bankruptcy proceedings was for protection against the judgment obtained against him by
Janvey, there were other reasons as well, including legal fees, his wife’s mounting medical
expenses that required substantial out-of-pocket payments and future legal fees.
The Romeros own a home located on the waterfront in St. Michael’s, Maryland. They
also own a condominium in Washington, DC, and a townhouse in Alexandria, Virginia. They
owned a 1987 Mercedes Benz convertible and two sailboats. Romero worked with the Trustee to
have the Mercedes and one of the boats sold at auction, and he and his wife (who owned the
second boat as tenants by the entirety) surrendered the second boat to pay his creditors, including
Janvey. Romero and his wife also own a number of exempt assets. The validity of the
exemptions are not challenged by Janvey.
Romero’s wife is a lawyer with the law firm of Greenberg, Traurig, LLP, and represented
clients with respect to international and commercial law matters. She contracted bacterial
meningitis and encephalitis while working for a non-profit in South America. She is now
incapacitated, has lost motor skills, is permanently disabled, and unable to practice law. Her
condition required modification to the Romero’s home in St. Michael’s to accommodate her
wheelchair, an on-site caregiver, and payment of uninsured medical expenses.
Judge Catliota denied Janvey’s motion to dismiss the bankruptcy case in a sixteen page
opinion. Although the Fourth Circuit has not expressly ruled upon the issue, Judge Catliota
assumed that “bad faith” could constitute “cause” for the dismissal of the bankruptcy case under
11 U.S.C. §707(a). However, applying the eleven criteria set forth in McDow v. Smith, 295 B.R.
69 (Bankr. E.D. Virginia 2003), Judge Catliota found that Romero had not acted in bad faith in
filing the bankruptcy case. His findings are supported by substantial evidence, and they are
entitled to “substantial deference” and should “not be disturbed absent a clear abuse of
discretion.” United States v. Russell, 971 F.2d 1098, 1104 (4th Cir. 1992).
In effect, Janvey contends that Romero is living a lavish lifestyle, and that his assets
should be used to repay the victims of the Stanford Ponzi scheme. In fact, the Bankruptcy Court
found that “the debtor lives a comfortable, but not exorbitant lifestyle.” Moreover, reduced to its
essentials, the Receiver’s position is that Romero should use his exempt assets to pay the
judgment the Receiver obtained against him. This is not the law. See In re McVicker, 546 B.R.
46 (N.D. Ohio 2016): the “Bankruptcy Code does not confer ‘general, equitable power in
bankruptcy courts to deny exemptions based on a debtor’s bad faith conduct.’” Id. at 58. Cf.
Law v. Siegel, 134 S. Ct. 1188 (2014). As explained in McVicker, “a 707(a) dismissal based
upon an ability to pay using exempt property would be doing indirectly that which the Supreme
Court has prohibited bankruptcy courts from doing directly – putting a constraint on exemptions
without a clear statutory basis.” Ibid.
For these reasons the order entered by the Bankruptcy Court will be affirmed.
Date: January 30, 2017
J. Frederick Motz
United States District Judge
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