An investor learns the hard way that a civil judgment can be little more than a certificate for bitter frustration
(The following story is a factual account of an investor’s efforts to enforce a civil judgment. Names have been changed or omitted to protect the privacy of the investor.)
On a crisp January morning in 2014, in a ramshackle motel room not far from Pismo Beach, California, Ryan Pound watched the lukewarm, fetid water of the bathtub slowly change color as crimson clouds billowed from the veins he had opened in each arm.
Some part of Pound might have smiled at this final middle finger he was flipping to his creditors. “Schedule your debtor’s exam at the coroner’s office,” might have crossed his mind. Or perhaps “you can attach that wage garnishment to my corpse.”
With more than a half-million dollars in unsatisfied judgments finally fading in his rearview mirror, for Pound death was the ultimate dodge. But while suicide may have been relatively painless for him, for his investors it was a final painful insult.
For one investor in particular, who had poured hundreds of thousands of dollars into a building product that Pound had developed years earlier, his untimely death left her feeling betrayed by a legal system in which debtors have turned dodging judgments into a farcical sport.
For more than a decade before he killed himself, Pound had hustled a series of investors out hundreds of thousands of dollars through his eponymous The Pound Group. In the beginning he solicited funds for a seemingly novel idea to manufacture and market a patented device to conceal electrical outlets, an aesthetic flourish that showed promise during the building boom of the 2000s.
One investor, Carol Dornan, sunk more than $300,000 into the Pound Group based on the value of the patent and purchase orders that both turned out to be worthless.
In 2006 Pound reached a settlement with Dornan that allowed him five years to pay off the debt. The settlement stipulated that Pound could not discharge the debt in bankruptcy. On paper at least, Dornan had taken the proper legal steps to recover her investment.
Yet soon after the judgment was recorded, Pound defaulted on its modest terms. With the recession in full bloom, it wasn’t difficult to believe his entreaties that he was barely making ends meet. Months turned to years, however, and the investor grew frustrated waiting for him to right his financial ship.
In 2012, Dornan hired Sapient Investigations to look into the self-professed pauper’s finances. It turns out he was actually living a lifestyle something more akin to a prince. Pound resided in a luxury townhome in a gated community in Mission Viejo, drove a new Ford F-150, and was active in an area ‘mega-church’ where he co-sponsored relief missions to Africa and Haiti. His Facebook profile revealed that he enjoyed squiring local women away on expensive weekends in California wine country.
In a debtor’s exam in Orange County Superior Court Pound calmly repeated his claims of unemployment and poverty. He had no job, but scraped together a hundred or so dollars a week from day labor gigs that sympathetic friends offered him when they could. His new truck? Not his. A friend had loaned it to him. The relief missions abroad? They too were sponsored by generous friends and a church fundraiser. Why hadn’t he sought employment? He was depressed. And his weekend getaways with the ladies? The pictures were a little more glamorous than the actual trips, he said, and his lady friends covered most of the costs.
During his testimony and afterward, Pound professed sympathy for his investor and regret that he had been unable to honor the terms of the settlement. He vowed to begin making payments again and pay off the debt entirely within a year by ‘cashing out’ of his stake in a business he’d been developing with partners.
This, of course, turned out to be another hollow promise. And as investigators looked deeper into Pound’s finances they determined that he had essentially made himself into something close to ‘judgment proof.’
While Pound had launched a series of new companies with ‘business partners’ (some who he had cultivated through his church contacts) to help him raise capital, none of these companies appeared to have any tangible assets. Rather, these entities seemed like simply fresh vehicles for Pound to subsidize his upscale lifestyle under the guise of developing a business operation.
The self-professed pauper was living in a luxury community in Orange County and squiring girlfriends away for weekends in wine country.
Bank records obtained by investigators revealed that while Pound was ostensibly penniless more than $80,000 had been deposited into and then withdrawn from business accounts established in his companies’ names. He had also spent more than $30,000 on office space in a corporate park in nearby Aliso Viejo, California. When investigators questioned the property manager about the operation–which Pound walked away from several months after leasing it–the agent admitted he never learned the even the basic nature of Pound’s opaque business.
Despite the challenges, Dornan slowly ratcheted up the heat on Pound by serving subpoenas on his business partners.
Investigators believed one of those partners, a wealthy San Clemente businessman, was the nexus between Pound and his various enterprises, particularly an organic farm operation and its distribution arm. In a tense deposition, the businessman admitted providing Pound with cash, leased and registered his vehicles and paid the lease on his townhouse. He denied the two were business partners but said he was uncertain how much he had actually given Pound or for how long.
At the next court hearing, Pound appeared in front of the judge with a smartly dressed Orange County attorney who argued that the investor had been improperly waging a fishing expedition into his client’s life and business ventures that did not concern the terms of her stipulated judgment.
Outside of the court, Pound’s attorney chastised the investor that even if she could prove that Pound had earned money from his various enterprises, he would be able to secure exemptions to protect his client from wage attachments.
Perhaps the final insult came when during one of the last court appearances. With her writ in hand the investor asked the judge for what’s commonly called a ‘hand over’ order, in which Pound would be required to turn over his wallet to the bailiff and the court would seize whatever cash he had on hand. She also requested that the court seize the very expensive-looking watch Pound was wearing.
The judge, who had presided over the case for a year and was familiar with Pound’s ever-evolving contortions about his poverty, replied that she had no application for such an order and without the paperwork declined to issue one herself. Pound never wore a watch to court again.
After attempting to collect on the judgment for nearly two years, the investor came to understand just how impotent the system charged with enforcing judgment can be. She was now was faced with the bleak proposition of mounting a costly and lengthy legal case to pierce the corporate veil of Pound and his partners’ companies. She was unsure how to proceed
But before she made up her mind, Pound made up his.
It is unknown why Pound decided to take his own life. Perhaps he was afraid that this investor would keep him in court forever. Maybe it was the totality of the numerous investors and creditors lurking on the horizon. Perhaps his partners were growing increasingly nervous over their own involvement with him. Or maybe he was the subject of a law enforcement investigation. No one knows.
But in the end, Pound decided to take a road trip up the coast to a place not far from where in better days his judgment-proof life had shined brightly on the shoreline. And there, alone in the tub of a motel room, he reassigned his case to a different court, where once again he won’t be wearing his watch.