By Alfred Villoch, III, at Savage, Combs & Villoch, PLLC
Today, the Wall Street Journal ran an article entitled “A Maze of Paper. SEC Judgment against Raider Paul Bilzerian: $62 Million. Collected: $3.7 Million.” In the article, Michael Rothfeld and Brad Reagan write how Paul Bilzerian was a corporate raider in the 1980s who victimized investors, parked stocks in other people’s names, and failed to make disclosures of his interest in other companies, to name a few things. Due to this fraud, Rothfeld and Reagan explain how the U.S. Securities & Exchange Commision (“SEC”) obtained federal court orders for Mr. Bilzerian to pay a whopping $62 million as penalties, but was able to collect only $3.7 million from him.
The WSJ article explores a few methods that Bilzerian used to thwart the SEC’s collection efforts, including moving to another country, but the article touched on one maneuver in particular that is dear to Floridians’ hearts: Bilzerian’s move to Florida to purchase land and build a 28,000-square-foot mansion.
How could a powerful federal agency, like the SEC, have trouble collecting a judgment against Bilzerian when Bilzerian moved to Florida and built this mansion? The answer lies largely with Florida’s homestead exemption. Florida’s homestead exemption is found in the Florida Constitution Article 10, Section 4 and the Sections 222.01 through 222.05 of the Florida Statutes.
Paul Bilzerian and his wife bought land and built a 28,000-square-foot mansion near Tampa, Florida in the early 1990s after the SEC had clobbered him with a $62 million judgment. In moving, Bilzerian thumbed his nose at the SEC and immediately benefited from Florida’s constitutional right to protect one’s home from (most) creditors. Specifically, Article 10, Section 4(a)(1) states “There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person: a homestead ….” (emphasis added).
Generally, this part of the Florida Constitution shield’s one’s home or homestead from (most of) his or her creditors regardless of the home’s value. The home could be worth $100,000 or $1 million, all the same. Additionally, the Florida Supreme Court has expressly ruled since Bilzerian that “[t]he transfer of nonexempt assets into an exempt homestead with the intent to hinder, delay, or defraud creditors is not one of the three exceptions to the homestead exemption provided for in article X, section 4.” Havoco of Am., Ltd. v. Hill, 790 So.2d 1018, 1028 (Fla.2001) (“Havoco I”) (emphasis added); Havoco of Am., Ltd. v. Hill, 255 F.3d 1321, 1322 (11th Cir.2001) (“Havoco II”) (affirming that judgment debtor’s purchase of home with intent to hinder creditors did not overcome homestead exemption, based on answer to certified question in Havoco I).
In other words, a person could move to Florida on the eve of collection efforts by his or her creditors and purchase a home with the express intent to take advantage the homestead exemption. This is one of the reasons that many legal commentators call Florida a “debtor’s paradise.” That is precisely what Bilzerian accomplished.
In short, one of the reasons why the SEC struggled to collect $62 million from Paul Bilzerian is because he moved to Florida, put millions of dollars into his home, and shielded that money from his creditors. The Bilzerian case was one of the first required readings in my Debtor and Creditor class at Penn State. My professor, Peter Alexander, had us read that case to demonstrate the powers of certain broad, state law exemptions, like Florida’s homestead exemption. That was in 2001. Years later, Robert Trigaux notes how the Bilzerian saga continues to this day. See “Years after $62 million judgment, Paul Bilzerian is alive and well on Caribbean island.” Florida’s homestead exemption played a large role in Bilzerian’s ability to dodge the SEC.
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