November 22, 2017

Attorney Volunteers Needed for Hurricane Harvey Victims

The Colorado Bar Association extends its heartfelt sympathy and support to those affected by Hurricane Harvey. In light of the severity of the situation, the Texas Supreme Court has issued an order allowing attorneys licensed and in good standing in another U.S. jurisdiction to practice in Texas for six months so that they can volunteer their services to assist victims of this natural disaster. According to the ABA Journal, lawyers will be needed for disaster appeals with the Federal Emergency Management Agency, to help people secure temporary housing, to get money for home repairs, and to deal with insurance claims. Click here for more information and to volunteer.

Out-of-state lawyers without practice-area expertise or the time to handle cases may consider donating money to area legal services groups, particularly Lone Star Legal Aid. Lone Star Legal Aid suffered a double blow from the hurricane when their flood-damaged Houston office exploded. Currently, their Angleton/Clute, Beaumont, Bryan, Conroe, and Galveston offices also remain closed. The Colorado Bar Association Young Lawyers Division is holding a donation drive for Lone Star Legal Aid from now through next Friday. Click here to donate to Lone Star Legal Aid through the CBA-YLD donation drive.

Other legal aid organizations providing help through the area are also accepting donations, including Texas Rio Grande Legal Aid and Southeast Louisiana Legal Services.

The CBA thanks those Colorado attorneys who are willing and able to help.

HB 16-1129: Strengthening Measures Against Charitable Fraud

On January 20, 2016, Reps. Polly Lawrence & Beth McCann and Sens. Larry Crowder & Rollie Heath introduced HB 16-1129Concerning Measures for Enhanced Enforcement Against Acts of Charitable Fraud, And, In Connection Therewith, Making An Appropriation. The bill was assigned to the House Judiciary Committee, where it was amended and referred to Appropriations. The Appropriations Committee amended the bill and referred it for Second Reading, where it passed with amendments, and passed Third Reading. The bill has now been introduced in the Senate and assigned to the Senate Judiciary Committee.

This bill is proposed in four sections. Section 1 of the bill would create enhanced penalties under the Colorado Consumer Protection Act for committing acts of charitable fraud involving knowledge or intent under the Colorado Charitable Solicitations Act. The bill proposes a penalty of $10,000 for each violation with no cap for a related series of violations.

Sections 2 and 4 of the bill would require two things. First, a statement on applications for registration by a paid solicitor to the Secretary of State, stating that neither the paid solicitor nor any officer, director, or employee serves on the board of directors of a charitable organization or directs the operations of a charitable organization in which the paid solicitor solicits contributions. Furthermore, the statement shall state that no officer, director, or employee of the paid solicitor’s charitable organization clients have any financial interest in the paid solicitor.

Second, Sections 2 and 4 of the bill require paid solicitors to have either a bond or savings account, deposit, or certificate of deposit in a financial institution payable to the State of Colorado. This is conditional upon the performance of the paid solicitor in good faith without fraud or fraudulent representation and without the violation of any provision of the Colorado Charitable Solicitations Act.

Lastly, Section 3 of the bill proposes to make it charitable fraud to misrepresent that a charitable organization, for which a paid solicitor solicits, has a significant membership of a certain type, such as active police, sheriff, patrol, firefighters, first responders, or veterans. Additionally, Section 3 of the bill proposes to make a charitable organization liable with a paid solicitor if the charitable organization knew or should have known that the paid solicitor was engaged in charitable fraud on behalf of the charitable organization.

Mark Proust is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

“Roll Out the Barrels” Food Drive Underway at CBA/DBA Offices

Roll-out-the-barrels

The Denver Bar Association’s Community Action Network (CAN) is hosting its annual Roll Out the Barrels food drive from April 21 through May 2, 2014. All donations benefit Metro CareRing, Denver’s largest hunger-relief organization. Please bring your dry goods to the CBA/DBA offices. The barrel for food donations is located in the lobby.

The top ten most wanted pantry items are hearty soup (meat or vegetarian), canned tuna, canned cooked beans (pinto, black, refried), peanut butter, canned mixed vegetables, canned fruit, canned tomatoes,whole grain pasta, pasta sauce, and whole grain brown rice. No glass or perishable items, please.

If you would prefer to donate online, click here.

Tenth Circuit: If Debtor Transfers More Than 15% of GAI to Qualified Organization, Trustee May Recover Entire Amount, Not Just Amount in Excess of 15%

The Tenth Circuit Court of Appeals published its opinion in Wadsworth v. The Word of Life Christian Center on Monday, December 16, 2013.

Debtors Lisa and Scott McGough filed for bankruptcy relief under Chapter 7 in 2009. During 2008, the McGoughs made contributions to the Word of Life Christian Center (the Center), totaling $3,478. During 2009, they made contributions to the Center totaling $1,280. Their taxable income for 2008 and 2009 was $6,800 and $7,487, respectively. They also received social security benefits in 2008 and 2009 totaling $22,036 and $23,164, respectively.

The Trustee filed an adversary proceeding against the Center seeking to recover the contributions made to it by the McGoughs under 11 U.S.C. §§ 548(a)(1)(B) and 550. Both parties filed motions for summary judgment. According to the Center, because the individual amounts of each contribution made by the McGoughs did not exceed 15% of their gross annual income (“GAI”), none were avoidable under the safe harbor provision of § 548(a)(2). The Trustee took the opposite view: the contributions must be considered in the aggregate and because the total contributions made by the McGoughs exceeded 15% of their GAI in those years, he could recover them in their entirety.

The bankruptcy court agreed with the Trustee in part: for purposes of the safe harbor provision of § 548(a)(2), a debtor’s contributions must be considered in their annual aggregate. However, it sided with the Center on the avoidance issue—if the contributions exceeded 15% of a debtor’s GAI, only the amount exceeding 15% is subject to avoidance. Thus, the Trustee’s recovery was limited to the amount of the contributions exceeding 15% of the McGoughs’ GAI. The Trustee appealed to the Bankruptcy Court of Appeals (BAP). Therefore, the only issue before the BAP was whether § 548(a)(2) allows a trustee to recover the entire amount of a charitable contribution if it exceeds 15% of GIA or only the amount in excess of 15%. The BAP agreed with the bankruptcy court—only the amount exceeding 15% was avoidable.

The sole question on appeal was a narrow one: If a restricted debtor transfers more than 15% of his GAI to a qualified religious or charitable organization, may the trustee avoid the entire annual transfer or only the portion exceeding 15%? The bankruptcy court and Bankruptcy Court of Appeals (BAP) said circumstances here only permitted the trustee to avoid the portion of the transfer exceeding 15%. The issue presented was a matter of first impression in the Tenth Circuit.

The Tenth Circuit agreed with the Trustee’s argument: § 548(a)(2) is unambiguous and clearly provides a safe harbor from the trustee’s avoidance power only if the “transfer” does not exceed 15% of GAI. Thus the converse must also be true—if the “transfer” exceeds 15% of GAI, then the “transfer”—meaning the entire transfer—is subject to avoidance. Had Congress intended for only the portion of the transfer exceeding 15% of GAI to be subject to avoidance, it would have added limiting language to that effect.  It did not.

REVERSED.