- Category: Judge Karlin
- Published on 17 May 2011
- Written by Judge Karlin
Solis v. Asif, 09-07061 (Bankr. D. Kan. May 16, 2011) Doc. # 109
SIGNED this 13 day of May, 2011.
JANICE MILLER KARLIN
UNITED STATES BANKRUPTCY JUDGE
OPINION DESIGNATED FOR PRINT PUBLICATION
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS
In re: )
MOHAMMAD ASIF and UZMA SHAHZADI, ) Case No. 09-41026
) Chapter 7
HILDA L. SOLIS, Secretary of Labor )
United States Department of Labor, )
) Adv. No. 09-7061
MOHAMMAD ASIF, )
DARCY D. WILLIAMSON, Trustee for the )
bankruptcy estate of Mohammad Asif and )
Uzma Shahzadi, )
) Adv. No. 10-7007
MOHAMMAD ASIF and UZMA SHAHZADI,
Case 09-07061 Doc# 109 Filed 05/13/11 Page 1 of 45
MEMORANDUM OPINION AND ORDER
This matter is before the Court on the Complaint by Hilda L. Solis, Secretary of Labor,
(“DOL”) objecting to the discharge of the debt owed by Debtor and Defendant, Mohammad Asif
(“Asif”), pursuant to 11 U.S.C. § 523(a)(2)(A), and the Complaint by Darcy Williamson, Chapter7 Trustee (“Trustee”), objecting to Asif obtaining a discharge pursuant to §§ 727(a)(3), (4)(A),
(4)(D), and (5). 2 Trustee also seeks turnover of estate property pursuant to § 542 and a money
judgment of $48,000 plus costs and post-judgment interest.3
The Court conducted a consolidated trial on these two adversary proceedings, has reviewed
the parties’ post trial briefs with proposed findings of fact and conclusions of law, which the parties
requested to file, and is ready to rule. These matters constitute core proceedings over which the
Court has jurisdiction and authority to enter a final order.4
I. FINDINGS OF FACT
The Court makes the following findings of fact based upon the numerous stipulations of the
parties contained in the Pretrial Order entered in each adversary and the evidence presented at trial.
Debtors were the owners/operators of several convenience stores/gas stations in the Topeka, Kansas
1All future statutory references are to the Bankruptcy Code, as amended by the Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005, 11 U.S.C. §§ 101 -1532 (2005), unless otherwise specifically noted.
2Although the Trustee’s Adversary Proceeding was originally brought against both Debtors, the Trustee
voluntarily dismissed the action against Defendant Uzma Shahzadi at the commencement of the trial.
3The Trustee actually seeks a money judgment of $48,000 “plus any additional amount not accounted for by
Debtors.” See Adv. No. 10-7007, Pretrial Order, Doc. 44, p. 11.
4See 28 U.S.C. § 157(b)(2)(I) and (J) (core proceedings) and § 157(b)(1) (authority to hear core proceedings).
The parties stipulated to venue and jurisdiction in each of the two Pretrial Orders, Adv. No. 09-7061, Doc. 74 and Adv.
No. 10-7007, Doc. 44, respectively, in the DOL and § 727 Complaints.
Case 09-07061 Doc# 109 Filed 05/13/11 Page 2 of 45
th th th
area, including the 29 Street Quick Stop (located on 29 Street), A & U LLC (located on 6
Avenue), the Topeka Quick Stop LLC (located on Topeka Blvd), and two other convenience stores
at 2701 SE California and 29 th and Randolph. 5 Debtors also owned and managed two parent
companies for the above convenience stores—Maham, Inc. and Mahaom LLC.
These companies owned the real estate at both the 6 Avenue and California Street locations.
Although the ownership percentages varied, each of the above businesses was solely owned by
Debtors. The evidence at trial showed that only Asif actively participated in operating these
businesses, and that Uzma Shahzadi had very little, if any, role in the daily operations of the
convenience stores or the parent companies, or in making any decisions about their operation. The
evidence also established that while Asif had help from his accountant, Ajay Dave, on many aspects
of the businesses, including seeking nonimmigrant workers, Asif was fully aware of and authorized
all of Dave’s actions conducted in connection with these businesses.
A. Facts relating to the first H-1B application
In 2005, Asif and Mahaom LLC participated in the federal government’s H-1B visa programin an attempt to bring two Pakistani specialty workers to the United States.7 The H-1B visa program
is designed to allow employers to bring nonimmigrant workers into the United States on a temporary
5See Case No. 09-41026, Doc. 1, Statement of Financial Affairs Question 18 at p. 43.
6This program’s nomenclature, the H-1B program, arises from its placement in Title 8, United States Code, at
8 U.S.C. § 1101(a)(15)(H)(i)(b) (emphasis added). 8 U.S.C. § 1184, to which § 1101 provides definitions, deals with
the admission of nonimmigrants into the United States.
7Asif initially testified at his § 341 meeting that he only participated once in this program, but after discovery
was complete, DOL discovered this was untrue, as discussed further, below. Asif then quibbled about who he had told
what information concerning the second application. The Court finds his testimony lacking in credibility on this issue.
Case 09-07061 Doc# 109 Filed 05/13/11 Page 3 of 45
basis to fill jobs requiring specialized knowledge and training. 8 In order to receive these
nonimmigrant visas, an employer must file a Labor Condition Application for Nonimmigrant
Workers (“LCA”) with the United States Department of Labor under procedures set forth by 8
U.S.C. § 1182(n). The employer then must file an I-129 Petition for Nonimmigrant Worker with the
United States Customs and Immigration Service (“USCIS”).
One of the guarantees an employer must make in filing these applications is that it will pay
the foreign worker at least the local prevailing wage for the job for which the worker will be hired.
This is so H-1B workers do not displace U.S. workers,10 and further to protect U.S. workers by
ensuring that foreign workers do not depress wages, working conditions, or fringe benefits for U.S.
Asif authorized a fairly low level employee11 of one of his convenience stores to sign the
LCA, and in doing so, declared that “By signing this form, I on behalf of the employer attest that the
information and labor condition statements provided are true and accurate; that I have read the
Sections E and F of the cover pages (Form ETA 9035CP), and that I agree to comply with the Labor
Condition Statements as set forth in the cover pages and with the Labor Department regulations (20
8 See generally 20 C.F.R. § 655.700, which discusses the statutory bases that govern this and similar programs;
Cyberworld Enterprise Technologies, Inc. v. Napolitano, 602 F.3d 189 (3rd Cir. 2010).
98 U.S.C. § 1182(n) deals with labor condition applications.
1020 C.F.R. § 655.705(c)(1).
11At trial, it was clear this employee knew absolutely nothing about what she was signing. Her education level
was low, and when she was examined about the underlying program, it was clear these documents had been handed to
her to sign and so she signed them, no questions asked. There is no possible way she drafted these documents. Putting
her on the stand to suggest she, and not Asif, was somehow responsible for creating these documents, or for any errors,
was not fruitful or persuasive on this point.
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CF part 655 Subpart H and J).” 12 The LCA also stated “I understand and agree that, by filing the
LCA . . . I am attesting that all statements in the LCA are true and accurate and that I am
undertaking all the obligations that are set out in the LCA and the accompanying instructions.”13
On May 25 and June 1, 2005, under the H-1B program, Asif and Mahaom LLC, through their
accountant Ajay Dave, filed an LCA and I-129 Petition seeking to bring Ghulam Hussain
(“Hussain”) into the United States to work as a financial manager for Mahaom LLC for a three year
period beginning October 2005. The Petition certified, under penalty of perjury, that the job duty
for Hussain was “financial manager.” It further required a salary of $44,429, and represented that
100% of his duties would be to “direct the preparation of financial reports.” 14 Attachments to the
LCA described Hussain’s expected working conditions to be “in comfortable offices, often close to
top managers” with “direct access to state of the art computer systems and information services.”15
According to Asif, he intended to start a fuel distribution business to aid in the profitability
of his convenience stores/gas stations. He believed that such a fuel distribution business would
allow him to capture the profits that were now going to the fuel distributor that provided gasoline
to his stores. The description of the Mahaom, LLC business contained in the DOL paperwork was
that it consults, develops, manages and operates businesses, researches market regarding viability
of such franchises and its operations. Because of that business, it contended it needed “superior
financial analysis and marketing,” which Hussain was to supply.
12Exhibit 1, p. 5 (emphasis added).
13Id. at p. 2.
14Exhibit 14, p. 2; Transcript. pp. 110-111 (hereafter “Tr.”).
he never occupied once he got to the United States.
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At Asif’s direction, 38 identical Consulting Contracts with different company names, all
signed by his wife, Uzma Shahzadi, were attached to demonstrate that there was adequate work for
a finance manager at Mahaom, LLC. No services were ever performed by Hussain, or anyone else,
in furtherance of those purported contracts. 16 In fact, at trial, both Asif and his accountant, Dave,
testified they only needed this financial manager for the gasoline wholesaler project, not for the
secondary business represented on the attachments. The Consulting Contracts used as a supporting
documents for Hussain’s application, therefore, had nothing to do with the job Hussain was intended
to perform. Asif tried to argue that the attachments referenced above were only submitted for the
secondary business, but the Court finds the evidence is clearly otherwise.
B. Facts relating to the second H-1B application
The alleged purpose of the secondary business was to sell gasoline to other area gas stations.
And, in hopes of enticing other stations to bring their gasoline needs to Mahaom, Asif and Dave
intended to provide additional consulting and business services to these stations. They believed the
consulting aspect of the new business model for Mahaom required a second financial manager.
Accordingly, on July 6, 2005, Asif submitted a second H-1B application, for an individual named
Amir Latif (“Latif”), to work the other end of this business plan, again as “financial manager” at the
same salary of $44,429, for the same three year period as in the first application. 17 Asif, as owner
16Tr. p. 518, Exhibits 19 and 21.
17The Court notes that at Asif’s § 341 meeting on September 2, 2009, he denied participating in the H-1B
program more than once, which also turned out to be false testimony. See Exhibit 107, p. 26; Tr. pp. 523-24. He tried
to explain away this testimony by claiming that because the other worker’s petition was later revoked, he did not really
“participate” for that worker. He then testified that he simply “forgot” about this worker. Either version of the story
might have been believable if this was the only false statement the Court heard; it was instead just one of many. See also
Adv. No. 09-7061, Doc. 65, which is this Court’s Order Granting Plaintiff’s Motion Allowing Leave to File Amended
Response in Opposition to [Asif’s] Summary Judgment Motion and for Leave to Amend Pretrial Order, which details
this Court’s first exposure to Asif’s false statements in this case, which occurred after entry of the original Pretrial Order.
Case 09-07061 Doc# 109 Filed 05/13/11 Page 6 of 45
of Mahaom, or Dave, similarly directed the low level employee to sign all the same documents,
certifying their accuracy under penalty of perjury. Before he could come to the United States,
however, Latif’s visa was revoked when it was discovered that he had falsified his credentials.
The fuel distribution business never materialized, as Asif was unable to obtain financing to
start that new venture. Asif knew no later than April or May 2006, months before Hussain’s visa
was even issued, that he could not get financing for either a fuel wholesale or consulting business
for which a financial manager was supposedly needed. 18 Accordingly, at least 5 or 6 months before
Hussain came to the United States, Asif knew he had no financial manager position for him.
Notwithstanding that fact, Asif and Dave continued to communicate with Hussain by email
about the job and his visa,19 but, according to Hussain, never informed him there was no financial
manager position before he came to the States. None of the emails suggest the job was gone, and
the Court simply found Hussain much more credible on this and all issues. Further, Asif and Dave
continued to work with Hussain and the American consulate in Pakistan to complete the
documentation needed for the H-1B visa well after they both knew the “specialty position” no longer
existed. 20 At no time during this process did Asif, Mahaom, or any of its agents, notify anyone in
the DOL, or at the H-1B program, or Customs, or the consulate that the financial manager position
that might at one time have been available for Mr. Hussain would never come to fruition.
18Adv. No. 09-7061, Amended Pretrial Order, Doc. 74, Stipulation L; Tr. pp.141-43; Tr. pp. 428-30.
19Exhibit 29, pp. 16-21, Tr. pp. 259-66. In fact, Dave encouraged Hussain to contact the consulate, in June 2006
(several months after the purported need for a financial manager had disappeared) about the visa, and the Court has found
that Asif was aware of, and authorized, Dave’s contacts with Hussain.
20Adv. No. 09-7061, Amended Pretrial Order, Doc. 74, Stipulation K; Exhibit 29, Tr. pp. 260-65.
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The visa was finally issued August 16, 2006 for Hussain to travel to the United States, and
Asif arranged to pay for his airline ticket through a Pakistani travel agent. He arrived at the Kansas
City airport on October 14, 2006. Accounts concerning the circumstances of Hussain’s arrival in
the United States varied significantly between Asif and Hussain. Asif testified that he or Dave told
Hussain numerous times before he arrived that the financial manager position no longer existed and
that he should not travel to the United States for that employment. He further testified that Hussain
appeared unexpectedly at his door on or about October 14, 2006, at which time he reluctantly agreed
to allow Hussain to live in his home, and to give Hussain a job as a cashier at the 29th Street Quick
Stop. He also testified he paid him $550-$580 in cash each week for approximately 40 hours of
Conversely, Hussain testified that he was never informed that the financial manager position
was no longer available, and that in fact Asif sent him a photograph of the office area where he
would supposedly work, as well as of the computer and laptop he would use. He testified that he
came to the United States expecting to serve in that capacity at the required annual salary contained
in the H-1B visa of $44,429. And contrary to Asif’s claim that Hussain showed up unannounced at
Asif’s home, Hussain testified that Asif personally picked him up at the Kansas City airport and
drove him to his home to live in his basement until he could obtain his own place.
Hussain claimed that upon starting work for Asif, he was taken to the 29th Street Quick Stop,
trained how to use the cash register and told to learn the prices of the items in the store. He said he
21The Court finds—for many reasons—that nearly every aspect of Asif’s testimony lacked credibility. One of
the reasons is the fact that if Asif truly was paying Hussain between $13.75 and $14.50 per hour, as he claimed, for
Hussain to serve as a cashier/stocker in his convenience store, this was twice the rate he payed his other employees for
the same work. Asif could not and did not explain why he would pay Hussain upwards of 50% more than any other
further eroding Asif’s testimony that he did not know Hussain was coming.
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was informed that he needed to learn the clerk’s duties because it was important for him to learn the
business, top to bottom, before assuming his financial manager position. Hussain also testified that
he was required to work approximately 80 hours per week for far less than minimum wage.22
According to Hussain, Asif deposited just enough money into his bank account to pay for his rent
and utilities (after Asif’s wife asked him to help get Hussain an apartment so he would move out of
their home), along with approximately $200 per month for food and all other needs. 23 At no time
was he paid even close to the $44,420 salary Mahaom had pledged to pay him when applying for
Hussain’s H-1B visa.
Hussain eventuallyquit, on October15, 2007. He and his familymoved awayfrom Kansas,24
after which time he contacted the Kansas Department of Labor, claiming he had not been paid the
wages required by law. Because he had come to the United States through a federal program, the
state referred the matter to the DOL. Hussain ultimately filed a wage and hour claim against
Mahaom in April 2008, alleging that he was not paid the amount Asif committed to pay him, and
the amount required under the H-1B program (the local prevailing wage for a financial manager).
22Hussain testified he was required to open the store by 6:00 a.m. Monday through Friday,and worked until 4:00
or 5:00 p.m. those days. On the weekends, he was required to both open and close the store, requiring him to work from
6:00 a.m. to 11:00 p.m. Saturday and Sunday. Although Asif tried to counter this testimony by saying his brother in law
worked some of these hours, he did not elect to call his brother in law as a witness, even though he apparently resides
in the city where the trial occurred.
23Tr. pp. 270-71 and Exhibit 30 (showing varying amounts deposited in Hussain’s checking account, which
would corroborate these funds represented rent and utility bills, the latter of which would vary each month both by usage
24There was conflicting testimony about whether Asif was holding Hussain’s passport (and those of his child
and wife) against his will, resulting in a physical confrontation when Hussain finally demanded them. Hussain’s wife
called the police (who in turn called the FBI) to get the passports from a locked safe deposit box at one of Asif’s
businesses. Once again, the Court finds Hussain’s version of these events far more credible than Asif’s. See Tr. pp. 274
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Interestingly, although Asif/Mahaom had numerous employees at all these convenience
stores, he apparently paid his employees with cash, and kept no payroll records. One exception was
a check Asif deposited directly into Hussain’s bank account (on which he had signature authority)
for $3,000, but which amount Asif then immediately withdrew from Hussain’s account to pay Uzma
Shahzadi that same amount. 25 In addition, during his entire year of employment, Hussain was given
only one pay stub, which he apparently needed to demonstrate employment so he could qualify for
an apartment lease. 26 Accordingly, Asif’s testimony about Hussain’s wages cannot be corroborated
with normal payroll records one would expect to see in such a business.27
During its investigation, DOL determined that because Hussain actually worked as a
cashier/stocker for Mahaom, as opposed to a salaried professional, his employment was not exempt
from the requirement to pay overtime wages for any work in excess of 40 hours per work. In
September 2009, it eventually obtained a judgment28 in the United States District Court for the
District of Kansas in the amount of $45,326.45 against both Asif and Mahaom for unpaid wages and
overtime benefits. Neither defendant appealed, the judgment is a final order, and that is the amount
of the debt subject to this § 523(a)(2)(A) claim.
C. Facts relating to Debtor’s failure to keep books and records
25Tr. pp. 271-72; Exhibits 31 and 32.
26Tr. pp. 230-31 and 271-73. Asif had an interest in getting Hussain into an apartment because his wife finally
requested he do so.
27Adv. No. 09-7061, Amended Pretrial Order, Doc. 74, Stipulation V (“Most of Mr. Hussain’s compensation
was paid in cash with no record keeping by the employer [Asif]”).
28Id. at Stipulation AA; Exhibit 11.
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Debtors closed their convenience stores by February 2009. The real estate and businesses
owned by Mahaom LLC, located at 1320 SW 6th Avenue and 2701 SE California in Topeka, were
sold to Alliance Petroleum LLC for a total sale price of $610,000 at the end of January 2009
(hereafter called “Alliance Petroleum Transaction”). Out of that sale price, Alliance assumed two
loans in the amounts of $218,311.54 and $212,876.69. After crediting these assumed loans against
the sale price, Mahaom received a cash sum of $170,218.83, which was wired to and deposited in
a bank account owned by Mahaom LLC (again, owned 100% by these Debtors).
The Trustee solicited testimony that Asif wrote checks and/or withdrew cash from the bank
where the Alliance Petroleum Transaction proceeds were deposited within nine days of that closing,
Unknown Dates Unknown Transfers
Debtors also indicated on their Statement of Financial Affairs that of this $170,218, theyused
$119,270 to pay a fuel bill owed by Mahaom LLC to Lion Petroleum and $13,000 to pay a fuel bill
owed by Maham Inc. to Lion Petroleum. Debtors indicated the remaining amount, which was nearly
$38,000, was used to pay final bills for their other convenience stores prior to their closing. Debtors
did not indicate, in response to Questions 3 and 10 of their SOFA, that they had paid any secured
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lender upon the sale of the businesses. Debtors did provide the Trustee, however, at a second § 341
hearing, documents evidencing the automatic transfers of these funds to these entities.29
At his two § 341 meetings, Asif testified he used approximately $48,000 from the Alliance
Petroleum Transaction to pay fuel bills. He also claimed to have paid tobacco product bills to Sant
Joe and Shariam.30
Although Debtors filed bankruptcy only a few months after these payments were allegedly
made, Asif allegedly retained no invoices or other business records to document the bills owed to
Lion or Alliance, or to document any of the other debts Asif claimed he paid with these sale
proceeds. In addition, he testified that he purposefully elected to destroy any and all books he had
kept for these businesses, including any invoices or check registers, and that he had no electronic or
other accounting system to corroborate the payments. Asif testified he discarded the records because
he knew he could contact the vendors at a future date and get replacement copies if he ever needed
Because of that testimony that he could easily get replacement copies of anything needed,
the Trustee made a written request in August 2009 for all documents related to the Alliance and Lion
Petroleum transactions, including security agreements and promissory notes for two vehicles31 and
copies of the sales and related documents for the property sold to Alliance and Lion to document
how and for what the proceeds were paid. A few documents were ultimately provided by Asif to his
counsel after the discovery cut-off, and bank information from one of two loans was provided, again
29See Trustee’s Exhibit 122-2.
30Trustee’s Exhibit 107, pp. 21-22.
31Adv. No. 10-7007, Doc. 44, p. 7, ¶ O, Trustee’s Exhibit 101.
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after preparation of the Amended Pretrial Order and discovery cutoff, but considerable information
about these transactions was never provided.32
This decision to discard these records immediately after the sale was in direct conflict with
the advice his own accountant, Ajay Dave, had given to him. Dave testified, and Asif agreed, that
Dave had advised Asif to retain all of his business records (including receipts and other documents
necessary for preparation of tax returns) for five to seven years because Asif had previously been
audited by taxing authorities, and Dave knew the number of years the IRS required records to be
retained. Asif admitted he chose to ignore this advice because of his own personal belief he did not
really need to retain the records.33
The Trustee also solicited testimony that during the year Hussain worked for Asif/Mahaom,
Asif deposited $9,000 into Hussain’s personal checking account (on April 9, 2007), and another
$1,000 the next day. One day later, on April 11, a $9,900 wire transfer was made from Hussain’s
own checking account to an engineering firm in Lahore, Pakistan. Asif infers these were wages he
paid to Hussain, but Hussain says he never received that money, that he is not from Lahore and has
32Interestingly, Asif claimed not to have the records, even though they were “destroyed” only 4 months prior
to filing bankruptcy, but the testimony was he later filed the requisite federal and state tax returns for that year (which
would have been due after the filing of bankruptcy). He admitted these same “destroyed” records would have been
needed by his accountant, Dave, to prepare those returns. And here is yet another area of testimony where Asif changed
his story in mid-stream, further eroding his already impaired credibility. He indicated that the missing business records
were at his attorney’s office, and then he said he had given them to the accountant and maybe he (Dave) never returned
them. Dave testified he returned the records to Asif on or about June 19, 2009, and upon cross-examination, Asif
suggested Dave’s testimony was incorrect. As between Dave and Asif on this issue, Dave was the more credible witness.
Thus, there was no credible evidence that Asif had turned over all the required invoices to his attorney or to the Trustee
so she could verify what amounts were actually paid for fuel, to whom, and on what dates.
33The Court also notes that Asif’s Statement of Financial Affairs indicates he first consulted bankruptcy counsel
about filing this bankruptcy case (his second, the prior having been filed in 2000), on April 29, 2009, only 2 months prior
to filing (and seven days after he was sued in federal district court by DOL). See Exhibit 104, p.38. So it appears likely
that Debtor knew he was going to be filing bankruptcy when he elected to discard these material records. In addition,
because Debtor had previously been through the bankruptcy process, he had more information about what a bankruptcy
trustee would require than someone who had never been through that process. This causes the Court to wonder whether
he discarded them for the purpose of denying the trustee the records she needed to trace these sale proceeds.
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no family or friends there, and that he did not transfer these funds. Conversely, both Asif and his
wife went to high school in Lahore, they were married in Lahore, and numerous friends and family
members resided there during this time.34
Although the testimony was clear that Hussain had nothing to do with these deposits, and
Asif was the only other signatory on this bank account, Asif denied he had anything to do with these
deposits. The Court finds that testimony also lacking in credibility.
The ownership of the various companies owned by Debtors was explored, and although
Debtors testified at their § 341 hearing that they were 50/50 owners in all the business, the tax
returns for the entities indicated differently. In every instance the companies were wholly owned by
them, but the percentages were significantly different than they disclosed.
At trial, Asif also called several friends and acquaintances to testify that they had loaned Asif
cash in the past, and that he had repaid them—also in cash—out of the proceeds from the sale of the
convenience stores. These personal cash loans were supposedlyin theamounts of $15,000,35 $5,000,
$6,000, $9,000 and $13,000, and not a single loan was evidenced by any writing or receipts.36 Every
witness testified, in lockstep fashion, that 1) the loans were purely cash transactions given to Asif
34It was odd that Asif split the $10,900 transaction into two, on two separate dates, so it was below the $10,000
threshold. This may have been a transfer of assets to one of Asif’s family members that for whatever reason Asif wanted
to keep off the books as it related to him, as the Trustee suggested. Transferring assets to a family member is one of the
badges of fraud.
35Although each witnessmade a special point to testify that as between friends,they would never charge interest,
Debtor never explained why he repaid one of the friends $18,000 when the original loan was only $15,000. See Tr. pp.
192 and 621. Similarly, on the Alam loans totaling $13,000, Debtor testified he repaid that $13,000, but the withdrawals
he alleges represent those loan repayments only reflect $12,000. See Tr. pp. 621-22 and pp. 391-393. These are just
two more examples where the Court found Asif’s testimony lacked credibility.
36Hussain testified that nothing in the Muslim faith or the Koran suggests one would not keep at least personal
records of loans made to another, and that it is best if you do make a writing so there is no question what you borrowed
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on his personal guarantee that he would repay the debts; and 2) that in their culture, they loan money
to anyone else in their culture who they know needs the money, without evidence of the debt or
repayment terms. 37 Asif testified that he elected to repay his friends, rather than the thousands of
other debts he owed others, because he did not want his wife to know that he had needed to borrow
the money from his friends prior to the filing of the bankruptcy.38
Finally, the following fact pattern provides further evidence why this Court is convinced that
Asif lied continuously during the trial. Although Hussain worked for Asif until October 15, 2007,
Asif wrote a letter dated September 6, 2007 to the U.S. Consulate in Islamabad, Pakistan requesting
revocation of Hussain’s visa. In that letter, he stated that “the beneficiary [Hussain] never reported
to work after landing in USA.” 39 At this point in time, Hussain had been employed by Asif’s
company for almost 11 months, including a few month’s stay in Asif’s own home. Asif then sent
a second letter, immediately after the confrontation over the passport and Hussain’s departure, on
October 20, 2007. This letter was sent to the Department of Homeland Security withdrawing
37None of these loans was disclosed on Debtors’ SOFA because they occurred more than 90 days before filing
38His sworn testimony at trial about who he paid with the loan proceeds differed from his sworn testimony
during the § 341 hearings. He tried to explain away his § 341 false testimony by saying he did not want his wife to know
he had taken out these private loans. But by that time, they had both had to file for bankruptcy, so it was no secret to
his spouse that he owed hundreds of thousands of dollars. Thus, the Court does not find it believable that is why he lied,
and even if so, it was not justifiable. Again, Debtor Asif changes his testimony depending on who his audience is, so
when this Court is faced with deciding whether to believe Asif over other witnesses who did not display this same
disregard for the oath they took, the Court has no difficulty believing the other witness in almost every instance.
Compare Exhibit 107, pp. 21-22 with Tr. at p. 629.
39Adv. No. 09-7061, Amended Pretrial Order, Doc. 74, Stipulation EE; Tr. pp. 431-33; Exhibit 24.
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Hussain’s H-1B petition, and it again falselystated that that “[t]he beneficiarynever reported to work
after landing in USA.”40
Additional facts will be disclosed below, when necessary.
II. CONCLUSIONS OF LAW
A. DOL’s claim for unpaid wages is non-dischargeable.
The first issue is whether the debt owed by Asif to the DOL should be excepted from
discharge pursuant to § 523(a)(2)(A). In 2009, the DOL filed a lawsuit against Mahaom and Asif
seeking damages for unpaid wages and overtime benefits on behalf of Hussain. The DOL obtained
a $45,326.45 judgment, jointly and severally, against Asif and Mahaom. In that litigation, although
Asif was properly served, he elected not to defend the action.
1. Preliminary matters raised by Asif
Asif now wishes to raise, in this litigation, defenses that he should have, and could have,
raised in the federal district court action. First, he suggests that because DOL elected not to bring
an administrative proceeding against him, personally, before bringing the action in federal court,
DOL was somehow estopped from bringing the action against him in federal court that resulted in
a money judgment. He provides no citation to authority for this position.
40Adv. No. 09-7061, Amended Pretrial Order, Doc. 74, Stipulation HH; Tr. pp. 433-35; Exhibit 25. When Asif
retained a lawyer to handle the DOL matterr, the lawyer sent a letter to U.S. Immigration and Naturalization Service,
dated December 17, 2007, retracting only the September 6, 2007 letter. He then claimed he terminated Hussain on
October 15, 2007. See Adv. No. 09-7061, Amended Pretrial Order, Doc. 74, Stipulation GG; Exhibit 26.
Case 09-07061 Doc# 109 Filed 05/13/11 Page 16 of 45
Even if he had authority to support that argument, this is a defense he should have timely
raised in that litigation. He is precluded from now raising potential defenses to DOL’s federal
district court litigation under the principles of res judicata.41
Similarly, Asif belatedly argues that DOL can only bring this kind of wage and hour claim
against the actual employer, and claims either Mahaom, or even his accountant, Ajay Dave, was
Hussain’s true employer. Again, the Court finds that Asif is precluded from raising this issue now,
again because he failed to raise this defense in the DOL case.
Asif also argues that perhaps the District Court did not have jurisdiction to hear that case
under either Section 17 of the Fair Labor Standards Act or 28 U.S.C. § 1345. Once again, the
jurisdiction to hear that case was not raised in that proceeding, and it is too late to now raise this as
a defense to that judgment.
Asif then tries to undermine the amount of the judgment entered against him by the District
Court by presenting evidence that he actually paid Hussain wages in excess of what he was credited
by the District Court when it calculated damages. Asif was required to raise in that proceeding any
argument regarding the amount of his liability. Because he did not challenge the numbers presented
by DOL, and because he elected not to appeal the decision after it was entered, he is barred from
making these arguments here. The Court cannot allow Asif to do through the back door of this
litigation what he declined to do through the front door via a proper defense of the district court
litigation, or a timely appeal of the adverse decision entered against him.
41 Reed v. McKune, 298 F.3d 946, 950 (10th Cir. 2002) (holding that the doctrine of res judicata prohibits
litigation of certain claims based on the resolution of an earlier action between the same parties. “Under res judicata, a
final judgment on the merits of an action precludes the parties ... from relitigating issues that were or could have been
raised in that action,”) (quoting Allen v. McCurry, 449 U.S. 90, 94 (1980)).
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Finally, Asif argues that DOL effectively does not have standing to bring this § 523(a)(2)(A)
action because if he made any misrepresentation, which he denies, it was to Hussain, not the DOL,
and Hussain failed to bring an action within the time allowed by Fed. R. Bankr. P. 4007(c). In other
words, he argues only Hussain is a creditor, rather than DOL, and thus it has no claim upon which
a dischargeability action can be pursued. Section 523(c)(1) does limit standing to bring §
523(a)(2)(A) actions to “the creditor to whom such debt is owed.”
As DOL correctly notes in its submissions, however, the H-1B program is statutorily
designed to authorize DOL to bring actions against those who violate the program,42 and DOL did
so here. In fact, once DOL has initiated a case on behalf of a victim, the victim expressly has no
private right of action under 8 U.S.C. § 1182(n),43 and Asif does owe a debt to DOL.
Accordingly, the Court finds that the Secretary has the statutory authority to seek the
nondischargeability of this debt. She is the party entitled to payment of the money judgment, and
she is the only party with authority to bring this action. Mr. Hussain remains the statutory
beneficiary to receive the back pay award,44 but the Secretary is the proper party plaintiff.45
42A statute can create a cause of action that gives rise to a “claim” or “debt” under the Bankruptcy Code.
43 Watson v. Bank of America, 196 Fed. Appx. 306, 307-08, 2006 WL 2482845, 1 (5th Cir. 2006). Section
216(b) of Title 29 provides that once the Secretary brings the action, the rights of an individual to become a party
plaintiff are terminated.
Brennan v. Heard, 491 F.2d 1, 4 (5 Cir. 1974), overruled on other grounds, McLaughlin v. Richland Shoe
Co., 486 U.S. 128 (1988).
45 Cf. Herman v. Egea (In re Egea), 236 B.R. 734, 742-43 (Bankr. D. Kan. 1999) (denying debtor’s motion to
dismiss on the basis that DOL did not have standing to bring a § 523(a)(4) action against the debtor for misappropriating
funds from an ERISA-qualified employee benefit plan, holding that “whenever Congress designates a public agent as
responsible for enforcing federal laws in the public interest, the agent comes within the ambit of a ‘creditor to whom such
judgment is owed’”) (citing SEC v. Hodge (In re Hodge), 216 B.R. 932 (Bankr. S. D. Ohio 1998) (holding SEC is proper
plaintiff to bring § 523(a)(2)(A) action)). See also SEC v. Maio (In re Maio), 176 B.R. 170 (Bankr. S. D. Ind.1994)
(holding SEC had standing to prosecute dischargeability action even though it would not be recipient of monies owed
by the debtor); In re Austin, 138 B.R. 898 (Bankr. N. D. Ill.1992) (holding FTC has standing under 11 U.S.C. § 523(c)
as the representative of defrauded individuals). Most courts finding the existence of standing by the federal agency rely
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2. Analysis of DOL’s § 523(a)(2)(A) claim
The burden of proof rests with the party opposing discharge. Thus, in this case, DOL has the
burden of proof, by a preponderance of the evidence. 46 Discharge provisions are strictly construed
against the objecting creditor. Because of the fresh start objectives of bankruptcy, doubt is to be
resolved in the favor of debtors. 47 Courts typically look for specific indicia of fraud, often referred
to as “badges of fraud,” when analyzing a case under § 523(a)(2)(A).48 However, when analyzing
a case in light of these badges of fraud, the Court must be mindful that these cases are peculiarly fact
specific, and the conduct in each case must be viewed individually.49
The DOL claims that the debt it is owed is non-dischargeable pursuant to § 523(a)(2)(A),
which provides as follows:
(a) A discharge under section 727 ... of this title does not discharge an individual debtor from
* * *
on the United States Supreme Court case of Nathanson v. NLRB, 344 U.S. 25 (1952) (holding NLRB qualified as a
creditor under the Bankruptcy Act, and had standing to pursue an action against an employer for back pay owed to its
employees, stating that the NLRB was the “public agent chosen by Congress to enforce the National Labor Relations
46See Grogan v. Garner, 498 U.S. 279, 291 (1991) (holding that preponderance of the evidence standard, not
clear and convincing standard, applies to all exceptions to discharge). See also In re Busch, 369 B.R. 614, 623 (10th
Cir. BAP 2007).
47Bellco First Fed. Credit Union v. Kaspar (In re Kaspar), 125 F.3d 1358, 1361 (10th Cir. 1997).
48Actions from which fraudulent intent has been inferred include situations in which a debtor conceals pre-
bankruptcy conversions, converts assets immediately before the filing of the bankruptcy petition, gratuitously transfers
property, continues to use transferred property, and transfers property to family members. Courts also consider the
monetary value of the assets converted, whether the debtor obtained credit in order to purchase exempt property, whether
the conversion occurred after entry of a large judgment against the debtor, whether the debtor had engaged in a pattern
of sharp dealing prior to bankruptcy, and whether the conversion rendered the debtor insolvent. Cadle Company v.
Stewart (In re Stewart), 263 B.R. 608, 611 (10th Cir. BAP 2001). Many of these apply to the facts of this case.
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(2) for money, property, services, or an extension, renewal, or refinancing of credit,
to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a
statement respecting the debtor's or an insider's financial condition.
In order to prevail on a claim under § 523(a)(2)(A), a creditor must prove, by a preponderance of the
evidence, that (1) the debtor made a false representation, (2) the debtor had the intent to deceive the
creditor, (3) the creditor relied on the debtor’s conduct, (4) the creditor’s reliance was justifiable, and
(5) the creditor was damaged as a proximate result.50
The DOL asserts that Asif, through his companyMahaom, LLC, filed a false LCA and a false
I-129 Petition in support of a visa application to employ Hussain. The parties stipulated that Asif
represented during the visa application process that Hussain would be hired as a financial manager,
would have specific duties exclusively relating to accounting and financial operations for Mahaom,
Inc., and would be paid approximately $44,000 annually to perform those specific duties. However,
after applying for the H-1B visa for Hussain, Asif instead employed Hussain as a cashier/stocker at
one of Asif’s convenience stores. Hussain never worked as a financial manager for Mahaom.
Asif admits that the financial manager position never came to fruition, and that Hussain never
worked as a financial manager for Mahaom, or any other company owned or operated by Asif.
However, Asif claims that at the time he submitted the H-1B application, it was his honest intent to
create that position for the fuel distribution business and for Hussain to serve as the financial
manager for that company. Asif testified he thought the company would operate as contemplated
until he learned that he could not obtain bank financing to fund the project. Asif claims that he
50Johnson v. Riebesell (In re Riebesell), 586 F.3d 782, 789 (10th Cir. 2009).
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contacted Hussain at that point to inform him of this development, and to advise him not to come
to the United States because the job no longer existed.
Asif further claims that Hussain insisted on coming to the United States, and showed up at
Asif’s front door, unannounced, despite Asif telling him not to come. 51 Asif then allowed Hussain
to work for his company in the only position available, cashier/stocker, in an effort to aid a fellow
Pakistani now that he was in the United States.
The Court finds that DOL did not sustain its burden to prove that Asif intentionally made
false or misleading statements at this initial stage of the process to obtain a visa for Hussain to enter
the United States. Asif’s testimony concerning the creation of the fuel distributor business was
believable mostly because it was corroborated by other evidence. First, Ajay Dave’s testimony
concerning the creation of the distribution business matched Asif’s testimony, at least on this aspect
of the case. In addition, documentaryevidence was admitted demonstratingAsif’s attempts toobtain
financing for this business venture. The timeline created with the application to bring Hussain to
the United States to work as a financial manager and the application for credit to begin the fuel
distributor business were also consistent.
The Court also finds that the representations Asif made concerning the second H-1B
application for Latif were satisfactorily explained. Contrary to the assertions made by the DOL, Asif
testified that Latif was to be hired to occupy a different financial manager position than the one
Hussain was to hold. The business model needed two separate financial managers: one for the fuel
51Hussain disputed this claim. Hussain testified that it was Asif who purchased his plane ticket to the United
States and told him where in Pakistan to pick up the ticket. Hussain also testified that it was Asif who personally drove
from Topeka to Kansas City, a distance of over 60 miles, to pick him up at the airport in Kansas City upon his arrival
in the United States. Hussain’s testimony on this subject was by far the more credible.
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distribution operation, and the other to handle the side-business of tax and financial consulting to
customers of the distribution operation. Therefore, the Latif application does not necessarily cast
suspicion over the Hussain application.
Although the Court finds that DOL did not prove that Asif made intentionally false or
misleading statements in the initial LCA or I-129 Petition to bring Hussain to the United States, the
inquiry does not end there. As noted by the DOL, Asif’s obligation to provide truthful information
under the H-1B program did not end with the filing of those documents. Asif was under a continuing
duty to inform the federal government of any significant changes to the employment of Hussain,
including filing a new LCA in the event of significant changes in job duties.52
Testimony from DOL’s investigative agent confirming this duty is corroborated by specific
federal regulation, specifically 8 C.F.R. § 214.2(h)(2)(i)(E). That regulation unequivocally requires
"[t]he petitioner shall file an amended or new petition, with fee, with the Service Center
where the original petition was filed to reflect any material changes in the terms and
conditions of employment or training or the alien's eligibility as specified in the original
approved petition. An amended or new H-1C, H-1B, H-2A, or H-2B petition must be
accompanied by a current or new Department of Labor determination. In the case of an H-1B
petition, this requirement includes a new labor condition application."
The Court can think of no more “material change in the terms and conditions of employment” than
the fact that the advertised job no longer existed.
Asif disputes he had a duty, arguing that nothing in the H-1B program required him to notify
DOL of any changes after he submitted the original paperwork. He relies on 20 C.F.R. §
655.731c)(7) to support this argument. That regulation provides that if the H-1B employee is not
52Testimony of DOL employee, Daryl Laurie at Tr. 55-56.
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performing work due to a decision of the employer, the employer must nevertheless pay the worker
the prevailing wage. He contends this was his only duty, and thus he had no duty to tell DOL that
the job that was the entire basis for the application no longer existed (before Hussain’s visa was ever
issued), and that Hussain was not working in the occupation, or at the wages, upon which his H-1B
visa was conditioned. In so arguing, he overlooks the cited regulation.
The H-1B program did require Asif to notify DOL of the fact that an allowed position under
the H-1B program no longer existed, since the statute and regulations implementing the program
require, as critically material conditions, that a nonimmigrant worker not take a “non-speciality” job
that an American can perform, and that he not occupy a job at below minimum wage, which could
serve to give the employer a competitive edge, and could depress wages.
And in fact, this is exactly what happened after Asif failed to disclose that conditions had
changed. Hussain was issued a visa he should never have been given, and this allowed Asif to
employ Hussain at wages significantly below minimum wage. This gave him and his company a
competitive advantage over other convenience store businesses in the area. Further, giving that job
to Hussain meant it was not available for an American (and in fact, two Americans since this Court
believes Hussain’s testimony that he was working close to 80 hours each week). The Court agrees
with DOL that a change of the type of work the H-1B worker would occupy was such a substantive
changes in employment that it actually required Asif and Mahaom to file an entirely new petition
pursuant to 8 U.S.C. § 214. Accordingly, had Asif notified DOL, it would have denied the visa (and
required a new petition if another such job later became available), since the job where Asif
ultimately placed Hussain was not an allowed position under the program.
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Asif did not notify anyone in the federal government that the financial manager position no
longer existed prior to Hussain coming to the United States. 53 Asif also did not inform anyone that
Hussain, upon his arrival in the United States, was being employed as a cashier/stocker at the 29th
Street Quick Stop rather than as the financial manager upon which issuance of the visa was
conditioned. Asif similarly did not inform anyone that Hussain was working for wages significantly
below those required by his H-1B visa, and with working conditions that in no way resembled those
that Asif, as owner of Mahaom, had represented to Hussain or DOL. And Asif did not pay Hussain
the wages required pursuant to the regulation upon which Asif relies to exonerate him from his
Although Asif knew at least by April/May 2006, when the bank rejected his financing
requests, that the original premise for the application for Hussain had evaporated and he could no
longer meet the statutory requirements of the program, the first time he took it upon himself to notify
the federal government that there was any issue, whatsoever, with the Hussain visa was when he
personally signed and sent a letter on September 6, 2007. 54 That letter, addressed to the U.S.
Consulate in Islamabad, Pakistan, was sent almost 11 months after Hussain moved in with Asif and
began working for Asif at one of his convenience stores. It requested the revocation of Hussain’s
visa, and the basis for this request was his assertion that Hussain had never reported to work in the
United States. This letter’s content was completely fabricated; even Asif stipulates Hussain had
worked directly for him since late October, 2006.
53Tr. pp. 430-31.
54Tr. pp. 429-432, 437; Exhibits 24 and 25.
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The second time Asif contacted the government was October 20, 2007 when he wrote to
USCIS. This time he requested the withdrawal of his company’s H-1B Petition. In this letter, he
once again lied to the U.S. government, restating that Hussain had never reported to work upon
arriving in the United States. Only when Asif hired a lawyer to represent him on DOL’s potential
claim did he attempt to correct at least one of these intentional false statements.
On December 17, 2007, Shannon Oury, Asif’s attorney at the time, sent a letter to USCIS
retracting the September 6, 2007 letter. This letter admitted that Hussain had, in fact, reported to
work, but now claimed Asif had terminated his employment on October 15, 2007. These letters are
demonstrative evidence of what this judge witnessed first-hand at the trial: Asif has no trouble lying
when he thinks he can gain an advantage by doing so,55 or when he wishes to punish someone, as
he undoubtedly wished to punish Hussain for finally complaining about his wages, and ultimately
reporting him to DOL.
The Court finds that Asif’s failure to inform the federal government that the financial
manager position was no longer available prior to Hussain’s arrival in the United States, or that
Hussain was actually being employed as a cashier/stocker at the 29th Street Quick Shop for wages
considerably below what was represented in the H-1B visa process, constitute intentionally false
statements made by Asif. Silence or concealment may constitute the requisite “false pretenses,” for
55Another example that Debtor had no difficulty lying to the government was demonstrated in discussions
regarding his 2007 tax return for Mahaom. He originally signed the return claiming he had paid no salaries. Asif, at
some point in time after he was confronted by DOL about underpaying, Hussain, created a W-2 showing he had paid him
wages in excess of $30,000. The Court believes he did not pay those wages, but the importance of this point is that after
the DOL matter arose, he then amended his 2007 tax return to show he had paid that wage, after all, so he would have
a defense to the DOL suit. See Exhibit 140. So he signed the tax return under penalty of perjury showing no wages, but
when it would help him in the DOL suit, he amended the return to show he had paid wages, which amendment he again
signed under penalty of perjury.
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nondischargeability purposes, if the debtor has a duty to disclose the concealed facts. 56 And the
letters Asif ultimately sent to DOL and USCIS in September and October 2007 demonstrate that he
knew he had a duty to disclose pertinent information about an H-1B application and employee to the
government. They also demonstrate that Asif well knew how to contact DOL and/or USCIS to
discuss H-1B program issues.
Finally, his attempts during trial to cast off responsibility for his acts on to his accountant,
Dave, were non-persuasive. 57 He had a duty to disclose pertinent information to DOL, he knew how
to fulfill that duty, and he had a motive not to disclose this information. Non-disclosure enabled him
to have a below-minimum wage employee who would work 80 hours a week for less than half the
wages he would have to pay to an American worker, thus resulting in financial gain to him.
The second element of the § 523(a)(2)(A) test requires a plaintiff to prove that the false
statement/false pretenses were intentional. The Court finds that Asif intended to deceive DOL when
he failed to notify DOL of these material changes. Intent to deceive may be inferred from the totality
56 In re Khafaga, 419 B.R. 539, 546 (Bankr.E.D.N.Y. 2009) (holding that conscious deception and concealment
of material information may constitute false pretenses under § 523(a)(2)(A)), citing In re Weinstein, 31 B.R. 804, 809
(Bankr. E.D.N.Y. 1983) for the proposition that “[a]s distinguished from false representation, which is an express
misrepresentation[,] false pretense involves an implied misrepresentation or conduct intended to create and foster a false
impression..”); In re Sielschott, 332 B.R. 570 (Bankr. C.D. Cal. 2005). See also Holiday Rambler Corp. v. First Nat.
Bank & Trust Co. of Great Bend, Kan., 723 F.2d 1449, 1453 (10th Cir. 1983) (noting that under Kansas law, courts often
look to all the surrounding facts and circumstances to see if there exists some “artifice, trick [or] design,” or “an act of
deception or cunning intentionally and effectively used to cheat a person of his rights.”).
57In addition, a court may consider conduct at the time of any representations as well as subsequent conduct to
discern intent. See Farmer's State Bank v. Diel (In re Diel), 277 B.R. 778, 782 (Bankr. D. Kan. 2002) (holding that
subsequent conduct, to the extent that it provides an indication of debtor's statement of mind at the time the
representations were made, is relevant and may be considered).
Case 09-07061 Doc# 109 Filed 05/13/11 Page 26 of 45
of the circumstances,58 and not necessarily by direct evidence, and the circumstances here fully
support the inference.
The Court believed Hussain’s testimony that Asif required him to work upwards of 80 hours
a week at far less than minimum wage, which wages he would have had to pay a nonimmigrant
worker. This allowed Asif to make higher profits for his company and himself by using this cheap
labor. Thus, Asif had every monetary incentive to get such a worker to the United States. And as
even Asif argues, most nonimmigrant workers are used to earning almost nothing for their hard
work—at least according to America’s standards—and if Asif could get Hussain to the States, he
likely figured he could keep him and pay him much less than he would have to pay anyone else.59
This is especially true since the Court also finds he took control of Hussain’s passport and made it
difficult for Hussain to leave, even threatening to harm him when he left.
The third element of the § 523(a)(2)(A) test requires that the creditor relied on the
representation. The two LCA packets for two financial manager jobs were complete and contained
no obvious inaccuracies or errors on the forms checked for by DOL under 8 U.S.C. § 1182(n)(1)(G).
Unless an LCA is incomplete or is obviously inaccurate, the Secretary is to provide certification to
proceed with the H-1B application. I-129 Petitions for visas were then filed with USCIS specifically
for Ghulam Hussain and Amir Latif. Extensive supporting documents were sent in support of the
58 In re Riebesell, 586 F.3d at 791 (citing Fowler Bros. v. Young (In re Young), 91 F.3d 1367, 1373 (10th
59Asif makes this argument to suggest his version of the facts was true—that Hussain understood there was no
accountant job for him, but was making almost nothing in Pakistan and thus was willing to come to the United States
even if it meant a low level job. The Court finds that by bringing Hussain to the United States for a professional level
job that did not exist, Asif actually deprived Hussain of the opportunity to find a legitimate H-1B employer elsewhere
in the United States, the same way he had found this job (on an internet employment website). There is simply no
credible evidence that Hussain elected to come knowing the nature and salary of the job he ultimately received.
Case 09-07061 Doc# 109 Filed 05/13/11 Page 27 of 45
petitions for both workers, including the multiple Consulting Contract Agreements, the Business
Plan, the cover letters detailing the extensive work that the company was doing, the corporate officer
chart, and the attachment detailing that each of the job positions would entail only preparation of
financial reports. 60 Hussain’s H-1B visa was issued on August 16, 2006, and Ghulam Hussain came
to the United States to work as a financial manager on October 14, 2006.
Nothing was received from Asif or Mahaom, LLC to indicate that there were any changes
in the proposed job or work, and the package of material sent induced the government to believe that
a specialty position was ready for Hussain to fill when that visa was issued. Accordingly, DOL did
rely on these documents to submit the visa, and further relied on Asif’s silence, as President of the
company seeking the employee, inferring that nothing had changed in the interim. Had Asif timely
and accurately informed DOL of the changes in Hussain’s potential employment, the Court has no
doubt that Hussain would not have been allowed to enter the United States under the H-1B visa to
work for Mahaom.
The fourth element of the § 523(a)(2)(A) test is the creditor’s reliance must be “justifiable.”
The standard is whether the creditor’s reliance is “justifiable” from a subjective standpoint. 61 “In
determining whether a creditor's reliance was justifiable, a court should therefore examine ‘the
qualities and characteristics of the particular plaintiff, and the circumstances of the particular case,
rather than [applying] a community standard of conduct to all cases.’”62
60See Exhibits 14-21.
61In re Riebesell, 586 F.3d at 791 (relying on Field v. Mans, 516 U.S. 59, 74-75 (1995)).
62Id. at 792 (quoting Field v. Man, 516 U.S. at 71).
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The Court has no doubt that the DOL justifiably relied on Asif to provide this information,
and did not act to revoke Hussain’s petition, or stop issuance of his visa, based on its justified belief
that there were no material changes in Hussain’s proposed employment. In addition, the government
would not have issued a visa under the H-1B program for Ghulam Hussain, a man with a masters
degree in economics,63 to work 80+ hours per week as a convenience store clerk at approximately
$2.20 per hour. Any reasonable person with Asif’s experience would have known this. The
government relied on the attestations and certifications made in the applications in this voluntary
program, and it was justified in relying that there had been no material changes in the application for
this voluntary program.
Finally, Plaintiff must prove that the damages sustained were the proximate result of the false
representation. DOL proved that Asif’s failure to disclose that he no longer had the specialty job for
Hussain, and his failure to pay Hussain the wages associated with that job even after the job
evaporated, was the direct result of the damages for unpaid wages. The claim for unpaid wages
would never have arisen had Asif timely informed the federal government that the specialty
occupation no longer existed. The visa would never have been issued, and Hussain would not have
worked 80 hours each week for almost a year at sub-standard wages.
Asif makes one final argument why he should prevail in this action. He argues that DOL had
the opportunity to seek, at the administrative or district court level, civil penalties against him if his
actions were truly willful or intentional, and it elected not to do so. He then suggests that DOL’s
decision not to seek civil penalties is “strong evidence that Plaintiff did not believe there had been
any willful misrepresentations of any material facts in connection with the LCA application
Case 09-07061 Doc# 109 Filed 05/13/11 Page 29 of 45
submitted for Mr. Hussain’s employment.”64 The Court finds Asif’s logic unsupported either by law
or public policy.
First, Asif provides no caselaw support for this theory, and the Court has found none.
Second, when the government decides what actions to bring, and against whom, among the panoply
of offenses contained in the United States Code, it has been vested with broad discretion to conduct
civil proceedings, including its power to select the charges to seek in a particular case. 65 It is a
quantum leap, without support, to argue that a decision not to seek additional penalties on top of
other damages sought can or should be construed as an admission that the agency had determined
it could not prevail if it did assert such a claim. It could easily be that DOL was more concerned
about being able to collect actual damages, so Hussain as the intended beneficiary would receive full
recovery of his damages, than obtaining a larger judgment for penalties that might have only
benefitted the Treasury.
Therefore, the Court finds that the DOL has met its burden of proving that the debt owed by
Asif was procured by fraud and is non-dischargeable pursuant to § 523(a)(2)(A). And although Asif
tried to suggest the amount of the judgment obtained in federal court against him was inflated, he
did not appeal the amount of that judgment when entered, and this Court is bound by the amount of
the judgment found by the District Court.
B. Debtor Asif’s discharge is denied pursuant to § 727.
64See Adv. No. 09-7061, Defendant’s post-trial brief, Doc. 107 at p. 20.
65 Cf. United States v. Bradshaw, 580 F.3d 1129 (10th Cir. 2009). Although Bradshaw is admittedly a criminal
case, this Court sees no difference in this proposition between enforcing a civil, or a criminal, statute. The United States
(and its agency, the Department of Labor) has the power and discretion to civilly prosecute, or not prosecute a particular
defendant, and a given cause of action, and this decision is not evidence of anything about the merits of action.
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The Trustee has objected to Debtor Asif receiving a discharge on the basis that (1) he failed
to keep or preserve books, documents, records and papers from which his financial condition or
business transactions might be ascertained, (2) he knowingly and fraudulently made a false oath or
account in connection with his bankruptcy case, (3) he knowingly and fraudulently withheld from
the Trustee books, documents, records and papers relating to Debtors’ property or financial affairs,
and (4) he failed to explain any loss of assets or deficiency of assets to meet his liabilities.
The Trustee established that Asif failed to keep or preserve books,
documents, records and papers from which Debtor’s financial condition
or business transactions might be ascertained.
To state a claim under § 727(a)(3), the Trustee must show that Asif failed to maintain and
preserve adequate records, and that the failure made it impossible to ascertain his financial condition
and material business transactions.66 “In order to deny discharge for failure to keep records the court
need not find that the debtor intended to conceal his financial condition.” 67 Although issues
surrounding the denial of a debtor’s discharge should ordinarily be viewed in a light most favorable
to the debtor, “this generalization should be qualified bynoting that the interests protected by section
727 ‘are those of creditors and that the debtor is required to take such steps as ordinary fair dealing
and common caution dictate to enable the creditors to learn what he did with his estate.’” 68 “If the
facts disclose an apparent breach of the debtor’s duty to creditors to keep or preserve proper books
or records and the debtor fails to establish facts and circumstances to justify the lack of records, a
66 Gullickson v. Brown (In re Brown), 108 F.3d 1290, 1295 (10th Cir.1997).
67 Meridian Bank v. Alten, 958 F.2d 1226, 1234 (3d Cir.1992); see also Razzaboni v. Schifano (In re Schifano),
378 F.3d 60, 70 (1st Cir. 2004) (“Under § 727(a)(3), a creditor need not prove a fraudulent intent, but only that the
debtor unreasonably failed to maintain sufficient records to adequately ascertain his financial situation”).
686 Collier on Bankruptcy ¶ 727.03 (15th rev. ed. 2001) (quoting Koufman v. Sheinwald, 83 F.2d 977 (1st
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discharge should be denied.” 69 The records do not need to be kept in any particular form; however,
they must be sufficient to “enable his creditors reasonably to ascertain his present financial condition
and to follow his business transactions for a reasonable period in the past.”70
The Court finds the Trustee has met her burden of establishing Asif failed to keep and
maintain sufficient records to enable his creditors and the Trustee to ascertain material business
transactions. The business records that Debtor maintained (and later turned over) relating to the
business operations were spotty, at best. The majority of ordinary business records were apparently
either non-existent, or were simply discarded by Asif. Payroll records were not maintained, but tax
returns were magically completed. Asif claimed he had discarded invoices and other records the
Trustee requested and needed, but managed to later put together tax returns for the 2009 tax year.
As to the sale of the Mahaom business, Asif was able to provide the Trustee with nothing more than
documents dealing with Alliance Petroleum’s purchase of certain convenience store real estate from
Mahaom and a large and incomplete stack of invoices for fuel purchases.
Asif failed to keep any general accounting ledgers or invoices for other products sold, failed
to keep cancelled checks, failed to keep inventories for his businesses, and failed to keep receipts.
It appears that most of these records, which are routinely kept by most businesses, were simply not
kept in the course of Asif’s business practices. The limited business records that Asif claims he did
keep were apparently discarded by him following the close of the businesses, despite express
directions by his accountant, Ajay Dave, to retain the records in the event of another tax audit.71
70 Mercantile Peninsula Bank v. French (In re French), 499 F.3d 345 (4th Cir. 2007).
71Asif or one of his companies was audited a couple of years earlier for irregularities in his or his companies’
2005, 2006, 2007 and part of 2008 tax years, and again in 2008 because of sales tax irregularities.
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Asif also kept no documentation of the numerous personal loans he belatedly claimed he
obtained from his acquaintances (some of whom seemed remote in closeness of the relationship to
justify the size and informality of the loan), which loans were also conveniently repaid in cash from
the sale of Mahaom’s assets within just a few months of the bankruptcy. There were no promissory
notes, no receipts for payment, no cancelled checks, no ledgers, no journal entries, no calendar
entries—no documentation of any kind This failure to keep records also prejudices a trustee’s
attempts to avoid preferences for the mutual benefit of all unsecured creditors, resulting in some
creditors getting repaid 100% of their unsecured, while others receive nothing. It also prevents the
Trustee from quickly and accurately ascertaining if a debtor is actually making transfers to insiders,
or simply pocketing the money.
Debtor contends that because the missing financial records relate to his business operations,
rather than his personal finances, § 727(a)(3) cannot be applied to deny his individual discharge. To
support this argument, Debtor cites to several cases for the proposition that “[a]n individual debtor’s
failure to maintain books and records of a corporation is not in itself sufficient to deny that debtor
a discharge under § 727(a)(3) because an objection to discharge must be based on the debtor’s failure
to produce books and records which depict the individual debtor’s finances, not that of his or her
Debtor’s theory is more fully explained in Buckeye Ret. Co., LLC v. Bishop (In re Bishop),73
72Krohn v. Cromer (In re Cromer), 214 B.R. 86, 99 (Bankr. E.D.N.Y. 1997).
73420 B.R. 841 (Bankr. N.D. Ala. 2009).
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In the present case, however, Plaintiff did not allege that the corporate records Debtor
failed to produce were necessary to determine the personal finances of the Debtor.
This court believes that the absence of any such allegation coupled with the rule that
§ 727 must be construed strictly against any creditor and liberally in favor of the
Debtor, requires a finding by the court that the Plaintiff failed to meet its burden of
proof. The Plaintiff, by failing to show that the corporate records were necessary to
determine the financial condition of the Debtor, failed to show that the Debtor did not
produce records necessary to determine the financial condition of the Debtor.74
However, as explained even in Bishop, if “corporate records are necessary to determine the debtor's
financial condition, and the debtor has not kept or preserved such records, the debtor's discharge
should be denied pursuant to § 727(a)(3).”75
“Some courts have specifically stated that corporate records are relevant to denial of
discharge proceedings where the ‘financial condition of the individual debtor and the corporation
are closely connected.’”76 “Where the bankrupt . . . is the principal or a truly responsible officer of
a corporation, and incurs substantial obligations as a result of corporate activities, he is required to
keep books and records.”77
Although the Debtor is correct that the Trustee has not specifically alleged that the corporate
books and records were necessary to fully determine Debtors’ personal finances, it is clear from the
Pretrial Order, and from the evidence received at trial, that this is the case the Trustee was making.
Debtors were the sole owners of the businesses in question and interchangeably used the funds from
those businesses as their personal assets. Even Asif admitted at trial that he used the assets from the
sale of Mahaom to pay fuel bills of another corporation he owned, A & U. He testified “[w]hen I
74Id. at 851-52.
75Id. at 851.
76 Id. (quoting Wachovia Bank v. Spitko (In re Spitko), 357 B.R. 272, 307 (Bankr. E. D. Pa. 2006)).
77In re Halpern, 387 F.2d 312, 315 (2nd Cir. 1968).
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own all the companies I have the right whatever I want I can transfer the money.” 78 Asif also claims
to have used the money from the sale of his businesses to repay personal loans to friends and
acquaintances at a time when the businesses still owed hundreds of thousands of dollars in debt.
So not only did Asif keep poor and oftentimes non-existent records, he then ignored
corporate formalities by using assets of one company to pay obligations of another (or to just pay
himself). All of this made it nearly impossible for this Trustee to do her job. It most certainly made
it more tedious and expensive.
Without being able to trace the financial history of Debtors’ various businesses, it is
impossible to fully understand Debtors’ personal finances in this case. For example, after the sale
of the property held by Mahaom and the closing of the different convenience stores, Mahaom
received a payment of over $170,000. If any of that payment remained in Asif’s possession or
control on the date of filing of this bankruptcy, it could constitute property of the Debtors’
bankruptcy estate, assuming Mahaom’s own creditors had been paid. Further, if any preferential or
fraudulent payments were made with that money, the Trustee could institute a proceeding to collect
those funds for the benefit of the estate. The failure to keep business records in this case directly
impaired the Trustee’s ability to do her job, and for the creditors of the estate to determine Debtor’s
Although the Trustee can admittedly attempt to seek records from third parties to determine
if there were inappropriate dissipation of assets, preferential transfers, fraudulent transfers, or
outstanding assets to be recovered, she is seriously hampered since she does not know the identity
of many of the payees. Again, she does not have this information because Asif elected, contrary to
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advice he received from an accountant, to either not keep the records in the first place, or discard
them in the second place, or both. Accordingly, this is precisely the type of case that § 727(a)(3) is
meant to address, and Debtor Asif’s discharge is denied on that basis.
The Trustee has failed to show that Debtor Asif knowingly and
fraudulently withheld recorded information in connection with this
The next claim by the Trustee is that Asif withheld recorded information in connection with
the bankruptcy case, and that his discharge should be denied pursuant to § 727(a)(4)(D). The Court
finds that the Trustee failed to establish at trial that the recorded information she sought existed as
of the date of the bankruptcy, or that it was in Asif’s possession. In fact, the Trustee was successful
in demonstrating that Debtor failed to keep and preserve appropriate business records, which formed
the basis for the Court’s denial of discharge under § 727(a)(3). In other words, if a debtor fails to
keep records, it is difficult to also argue he should have turned over the records that were not kept.
The Trustee met her burden of showing that Debtor Asif knowingly and
fraudulently made a false oath or account in connection with his
The next claim by the Trustee is that Debtor Asif’s discharge should be denied pursuant to
§ 727(a)(4)(A) because he knowingly and fraudulently made a false oath or account in connection
with his bankruptcy case. That statute provides, in part, that “[t]he court shall grant the debtor a
discharge, unless . . . the debtor knowingly and fraudulently, in or in connection with the case . . .
made a false oath or account.” 79 The primary purpose of § 727(a)(4)(A) is to ensure that dependable
information is supplied to those interested in the administration of the bankruptcy estate so they can
rely on that information to be true. Neither the Trustee nor creditors should have to independently
7911 U.S.C. § 727(a)(4)(A).
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investigate the facts to verify their accuracy.80 The Trustee and the creditors are entitled to honest
and accurate “signposts on the trail” showing what propertypassed through the debtor's hands during
the period prior to bankruptcy.81
The Trustee has the burden to prove that the debtor knowingly and fraudulently made an
oath, and that the oath related to a material fact. 82 She must show that (1) the debtor made a
statement under oath; (2) the statement was false; (3) the debtor knew the statement was false; (4)
the debtor made the statement with intent to defraud; and (5) the statement related to the bankruptcy
in a material way. 83 The Trustee must prove each one of these elements by a preponderance of the
A false statement or omission within a debtor’s schedules may qualify as a false oath under
§ 727(a)(4)(A). 85 Intent may be inferred, and reckless indifference to the truth may rise to the level
of fraudulent intent. 86 Discharge will not be denied, however, when a false statement is due to mere
80Job v. Calder (In re Calder), 907 F.2d 953, 956 (10th Cir. 1990) (holding creditors are not compelled to
conduct an extensive investigation of a debtor's assets and transactions, but rather may rely upon the information
provided in the bankruptcy pleadings and schedules).
81Job v. Calder (In re Calder), 93 B.R. 734, 737 (Bankr. D. Utah 1988).
82Fed. R. Bankr. P. 4005; Job v. Calder (In re Calder), 907 F.2d at 955 (citing 4 Collier on Bankruptcy ¶
727.04 at 727-54 to -57 (15th ed. 1987)); see also In re Brown, 108 F.3d 1290, 1294 (10th Cir. 1997) (holding that
creditor must show that debtor knowingly and fraudulently made an oath that relates to a material fact).
83Keeney v. Smith (In re Keeney), 227 F.3d 679, 685 (6th Cir. 2000); In re Brown, 108 F.3d at 1294.
84 In re Serafini, 938 F.2d 1156 (10th Cir. 1991) (holding proper standard of proof in a § 727(a)(4)(A)
proceeding is proof by a preponderance of the evidence rather than by clear and convincing evidence).
6 Collier on Bankruptcy ¶ 727.04[c], 727-41 to 727–42 (15 rev. ed. 2001).
86Id. at ¶ 727.04[a], 727-40.
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mistake or inadvertence.87 Honest errors that are corrected will not jeopardize a debtor’s discharge.88
A false oath is “material,” if it bears a relationship to the debtor’s business transactions or
estate, or concerns the discovery of assets, business dealings, or the existence and disposition of his
property. 89 Although a debtor cannot excise a false oath by making subsequent corrections to his
bankruptcy petition, if the estate would have no interest in the property that was omitted, then the
omission should not justify a denial of discharge. 90 However, even assets of little or no value may
give rise to a denial of discharge if the omission prevents the trustee or a creditor from fully
examining the debtor’s pre-bankruptcy financial dealings.91
The Trustee demonstrated that Debtor Asif testified, under oath, about the use of the Alliance
Petroleum sale proceeds at the § 341 meeting. He testified approximately $48,000 was used to pay
two tobacco and fuel/ grocery vendors. In later sworn interrogatory answers, in his deposition, and
ultimately at trial, however, he changed this testimony. His latter testimony was that the money was,
in fact, used to repay 5 private loans.92
There is really no dispute that Asif intentionally made a false statement under oath; the only
real issue is if he had an intent to defraud. Asif contends, however, that his lie was immaterial
87In re Butler, 38 B.R. 884, 889 (Bankr. D. Kan. 1984).
88In re Brown, 108 F.3d at 1294 (citing Drewes v. Magnuson (In re Magnuson), 113 B.R. 555, 559 (Bankr. D.
N.D. 1989) (holding honest error or mere inaccuracy not proper basis for denial of discharge)).
89In re Calder, 907 F.2d at 955.
90 Bensenville Cmty. Ctr. Union v. Bailey (In re Bailey), 147 B.R. 157, 165 (Bankr. N. D. Ill. 1992); 6 Collier
on Bankruptcy ¶ 727.04[b], 727-40 to 727–41 (15th rev. ed. 2001).
6 Collier on Bankruptcy ¶ 727.04[b], 727-40 to 727–41 (15 rev. ed. 2001).
92 Compare Trustee Exhibit 107, pp.21-22 with Trustee Exhibit 110, p. 32, with Tr. p. 629. Debtor claims his
trial testimony was the truth and his § 341 testimony was the lie. See Tr. p. 658.
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because the money was repaid outside the 90 day preference period, so even had he told the truth
initially, the Trustee could still not have pursued recovery for the estate.
The Court finds this information was material and in connection with the case. As noted
above, even assets of little or no value may give rise to a denial of discharge if the omission prevents
the trustee or a creditor from fully examining the debtor’s pre-bankruptcy financial dealings. Asif’s
decision to lie about these loans caused the Trustee here to go down a rabbit hole, requesting
documents, using deposition time, seeking interrogatory answers, and generally trying to find
documentation of the $48,000 allegedly paid to pre-petition vendors.
In addition, if Asif would lie about this, the Trustee must surely then inquire what else he was
lying about. Perhaps the loans to friends (or to pre-petition vendors) were repaid not after 90 days
from the filing of bankruptcy, but instead, within 90 days, such that she could pursue the return of
the assets. Or perhaps, like with the $10,900 Lahore transfer that Asif arranged using Hussain’s
checking account, which seems likely to have been made to insiders, this $48,000 was simply
hidden. The Trustee should not have to guess, and this Court doubts the creditors or the Trustee will
ever know for sure what Asif did with the sale proceeds. Accordingly, all the elements of the false
oath claim are satisfied.
The Trustee failed to show that Asif had failed to explain any loss of
assets or deficiency of assets to meet his liabilities.
The Trustee claims that Debtor Asif’s discharge should be denied pursuant to § 727(a)(5)
because he has failed to explain any loss of assets or deficiency of assets to meet his liabilities. In
order to prevail on this claim, the Trustee must make an initial showing of “the disappearance of
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substantial assets or of unusual transactions.”93 Once this initial showing is met, debtors are required
to satisfactorily explain what happened to the assets, since “[t]he debtor is usuallyin the best position
to reconstruct past dealings and the debtor may not hide behind Rule 4005 to avoid doing so.” 94 As
the Second Circuit Court of Appeals stated in Federal Provision Co. v. Ershowsky,95 “It is [the
debtor] who has caused the loss, who has access to the facts, and who alone knows what the
explanation is; let him make it, let him satisfy the court that it really explains. Else he will not be
The Trustee successfully satisfied her initial burden in this case. At the end of January 2009,
Debtors sold the propertyheld byMahaom LLC for $610,000. Approximatelysixmonths later, they
filed for bankruptcy claiming to have only $714.14 in their checking account. Given this significant
sale of property, the fact that these Debtors owned 100% of that company, and the lack of proceeds
remaining a relatively short time later, it is incumbent on Debtor to explain what happened to all of
Debtor explained (and adequate documentaryevidence corroborated) that from the total sales
price, Alliance assumed a loan in the amount of $218,311.54 and a loan in the amount of
$212,876.69. After crediting the assumption of these loans against the sales price, the sum of
$170,218.83 remained, and that amount was wired to, and deposited in, a bank account owned by
Mahaom LLC. Debtors indicated on their Statement of Financial Affairs that with this $170,218.83,
6 Collier on Bankruptcy ¶ 727.08 (15 rev. ed. 2001).
9594 F.2d 574 (2nd Cir. 1938).
96Id. at 575.
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they used $119,270 to pay a fuel bill owed by Mahaom LLC to Lion Petroleum and $13,000 to pay
a fuel bill owed by Maham Inc. to Lion Petroleum. Although the records necessary to substantiate
this information were not retained by Debtor, Debtor did finally produce incomplete records. They
were so incomplete, however, as to make it impossible for the Trustee to corroborate that these
amounts were the correct amount to pay these entities.
There was no evidence to suggest that Debtor had any motivation to overpay these creditors,
however. For that reason, it is the remaining $48,000 that is of greater concern to the Court.
Debtor initially testified at a § 341 hearing, under oath, that he used the remaining sum to pay
other miscellaneous expenses from winding down the remaining convenience store businesses. As
noted, however, Asif later changed that story and claimed he actually used the funds to repay five
loans he had received from friends and acquaintances in 2008. Debtor called five witnesses to testify
that they had loaned Debtor large sums of cash during 2008. These loans varied between $5,000 and
$8,000, with some witnesses testifying they loaned him cash on two separate occasions.
Not a single one of these loans was recorded by any writing, and each witness presented
nearly identical testimony that (1) they were friends with Asif, (2) he asked for money to help and
they gave it to him—no questions asked, (3) in their culture (all were from Pakistan or neighboring
countries), they do not charge interest or make written promises to repay debts, (4) they gave the
money to Asif in cash that they had located in their possession (not in the bank such that one could
trace the transaction), and (5) Asif repaid them—also in cash, around February or March of 2009,
just months before filing this bankruptcy.
The Court found the testimony concerning these loans to be odd. Not only was the testimony
by each witnesses almost identical, but some witnesses seemed eager to volunteer testimony, such
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as the fact that it is not their custom to make written promises to repay debts, before even being
asked by Debtors’ counsel. In addition, the Court notes that at least one of these witnesses claimed
to have only met Asif approximately four times prior to agreeing to loan him thousands of dollars
with nothing more than an oral promise that the debt would be repaid. The Court also questioned
how one witness, who was a college student working for Asif as a cashier at one of his convenience
stores, would have thousands of dollars sitting at home to loan Asif with no questions asked. Again,
it seemed odd that someone who needed a job working minimum wage at a convenience store would
also have thousands of dollars available to loan to his boss.
That said, the Court notes there was no evidence presented to refute any of the testimony
given. Although the evidence was not entirely convincing, it was the only evidence presented, and
the Court cannot find that the evidence presented was not truthful when testimony to deny discharge
should be viewed in the light most favorable to the Debtor.
In addition, one of the witnesses that testified did state that he would have at least one bank
record that would show the withdrawal and deposit of the money he loaned to Asif, and identified
the specific identity and location of the bank. The Trustee had the opportunity to subpoena those
records, because there was a break in the trial for several weeks after that testimony was received.
She either did not obtain the records, or elected not to present the evidence, in an effort to rebut that
Again, because it is the Trustee’s ultimate burden to show that Debtor failed to account for
the funds, and it appears the funds were more likely than not spent in the manner Debtor claims,
there is no unexplained disappearance or shortage of assets. Accordingly, discharge will not be
denied on the § 727(a)(5) claim.
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The Trustee has failed to show that she is entitled to turnover of
property pursuant to § 542.
The Trustee next claims that she is entitled to the turnover of certain estate property pursuant
to § 542. Specifically, the Trustee claims, in the Pretrial Order, that the following documents and/or
accountings have not been provided:
certain documents relating to the Alliance Petroleum and Lion Petroleum
transactions; loan documentation relating to two vehicles; loan documentation
relating to real and personal property located at 1320 SW 6th Avenue and 2701 SE
California; documentation accounting for the $610,000 in gross sale proceeds and the
net sum of $170,218.83; documentation regarding the alleged assumption of loans
by Alliance Petroleum in the amounts of $218,311.54 and $212,876.69;
documentation evidencing a debt obligation and payment of $119,270.00 and
$13,984.39 to Lion Petroleum; documentation regarding withdrawals totaling
$48,000 plus unknown withdrawals and transfers from Mahaom LLC’s checking
account number xxxx213 at Community National Bank; and documentation
regarding transfers to and withdrawals by Debtor Asif from Hussain’s personal
checking account at Community National Bank.97
The Trustee has the burden of proving what property belongs to the estate, and thus has to be turned
over to the estate.98
The Court finds that the Trustee did not establish that the itemized information existed, was
in Debtor’s possession, and had not been turned over. In fact, much of the information sought
formed the basis for the Trustee’s successful claim under § 727(a)(3), wherein the Court held that
Debtor had failed to keep and preserve business records that would enable the Trustee to fully
examine Debtors’ financial affairs. After reviewing the evidence presented at trial, the Court finds
that none of the property sought by the Trustee, as outlined above, is in Debtor’s possession
97See Adv. No. 10-7007, Pretrial Order, Doc. 44 at p. 9.
98 In re Lee, 415 B.R. 518, 523 (Bankr. D. Kan. 2009) (citing In re Amdura Corp, 75 F.3d 1447, 1451 (10th Cir.
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(although it may still be in the possession of third party vendors or others). Therefore, the Trustee’s
claim under § 542 is denied.
The Trustee has failed to show she is entitled to a judgment in the
amount of $48,000.
The Trustee has requested a judgment in the amount of $48,000 plus all unknown sums
transferred and not accounted for by Asif. The Court has held that Asif finally explained—albeit
belatedly and pretty weakly—what he did with the $48,000 remaining from the sale of his
businesses. The only evidence presented at trial was that this money was used to repay personal
loans to friends who had lent him money. The Trustee has not advanced any other basis for a
judgment in the amount of $48,000, and has not shown that Asif had this, or any other unreported
assets, in his possession on the date of filing. Therefore, the Court finds there is no basis for
awarding the Trustee a monetary judgment in this case.
In his post-trial brief, Asif actually argues that because he is an “honest but unfortunate”
Debtor, the Court should deny all claims against him. This is ironic, because although the vast
majority of debtors this Court sees each year are honest but unfortunate, this Debtor does not come
close to meeting that description. Based on the foregoing analysis, the Court finds that the debt
owed to the Department of Labor by Defendant, Asif, is a non-dischargeable debt pursuant to §
The Court finds that Asif’s failure to notify DOL that he no longer had a position for Hussain
as a financial manager, which he knew well before the H-1B visa was issued to Hussain, constitutes
the kind of actionable false representation or false pretenses contemplated by § 523(a)(2)(A). But
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for that failure to notify the government of the material change in the job that was now available for
the H-1B employee, Hussain would not have come to the United States to work for Asif at
substandard wages, so the damages are directly caused by that omission.
The Court further finds that Asif made similar omissions when he failed to notify DOL after
Hussain’s arrival that he was not working as a financial manager, as required by the H-1B program,
and he did not pay Hussain the wages required by the H-1B program. Accordingly, the debt that
arose as a result of his multiple failures to comply with the H-1B program, is non-dischargeable.
The Court also finds that Debtor Asif should be denied a general discharge pursuant to §
727(a)(3) for failure to keep or preserve proper financial records and pursuant to § 727(a)(4)(A) for
knowingly and fraudulently making a false oath or account in connection with his bankruptcy case.
IT IS, THEREFORE, BY THE COURT ORDERED that judgment be entered in favor
of Hilda L. Solis, Secretary of Labor, on her Complaint objecting to the discharge of the debt owed
by Defendant, Mohammad Asif, pursuant to 11 U.S.C. § 523(a)(2)(A).
IT IS FURTHER ORDERED that judgment is entered in favor of Darcy Williamson,
Trustee, on her Complaint objecting to Mohammad Asif obtaining a discharge pursuant to 11 U.S.C.
§§ 727(a)(3) and (4)(A). Judgment is entered in favor of Debtor on the Trustee’s Complaint to the
extent it sought a denial of discharge pursuant to § 727(a)(4)(D), § 727(a)(5), to the extent it sought
turnover pursuant to § 542, and to the extent it sought a money judgment against him.
# # #
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