Former West Des Moines businessman John Vratsinas should not be allowed to use federal bankruptcy laws as a shield against $6.4 million in debts because he has attempted to hide assets and misled or lied to court officials, according to the bankruptcy court official who serves as a watchdog over the case.
Vratsinas filed to liquidate assets and seek protection from creditors under Chapter 7 of federal bankruptcy law in June 2013. His filing has been challenged by creditors, other court officials and a Des Moines attorney who a Polk County judge charged with dissolving a West Des Moines-based construction company that was controlled by Vratsinas.
The Vratsinas story is a complicated one, and it appears to have come unraveled in federal bankruptcy court in Mason City, where Vratsinas filed his claim.
In a court filing Monday on behalf of U.S. Trustee Daniel McDermott, Vratsinas is accused of concealing assets and the transfer of funds from companies he operated to his personal accounts. Those funds were used for personal expenses, including flights, international travel, hotels, dining, his Minnesota condo rent and season tickets to the Minnesota Twins in 2013, according to the court document.
Vratsinas also misled bankruptcy court officials about an international flight that included a stop in Switzerland, where, according to the court document, he told officials he left the airport to smoke. However, banking statements showed hotel and dining charges in various locations in Switzerland between July 22 and July 24, 2013, one month after he filed the bankruptcy case.
Vratsinas initially concealed his involvement with a range of companies, some of which he later identified as "downstream" entities. He served as president, manager or director of those entities.
The extent of Vratsinas' legal problems came to light in late 2012, when Greater Des Moines vendors were told by the Internal Revenue Service that they could be liable for employee payroll taxes that were supposed to have been paid under a contract with Vratsinas' InFocus Partners employee services provider.
According to the bankruptcy court filing, Vratsinas borrowed $4.9 million from his father, Gus Vratsinas, whose former Arkansas-based construction company built Jordan Creek Town Center, to pay those payroll taxes.
Merit Resources Inc. took over InFocus Partners' accounts in late 2012, but Vratsinas continued to convert funds from InFocus Partners' parent company to his personal use, according to court documents.
In the bankruptcy case, Vratsinas feigned ignorance about the operations of companies he created and controlled. When asked during a meeting of creditors in the current case about Heartland Equity Partners LLC, a pass-through entity he controlled, Vratsinas testified, "I have no idea. I have no role in that company." The court filing points out that he was the manager of the company and controlled its bank accounts.
It is unusual for a federal bankruptcy judge to reject a U.S. trustee's request to deny a debtor's discharge from debts.
Click here to read the trustee's complaint.
Meanwhile, the trustee assigned to collect assets and pay any bills of the Vratsinas bankruptcy estate has reached an agreement on a complaint he had filed seeking the turnover of Heartland Equity Partners' assets to the estate.
David Seargent said in a court filing today that he has reached a compromise after Vratsinas submitted defenses concerning Heartland Equity Partners.
Vratsinas will settle all claims of the estate to the assets of Heartland Equity Partners in exchange for the transfer of $100,000 and the company's stake in Heartland Agri Partners LLC, free and clear of any liens and security interests, including those of Vratsinas Capital Resources LLC, Gus Vratsinas, or any of his or his son's related entities.
Heartland Agri Partners does business as Urbandale-based Insta-Pro International Ltd., a manufacturer of food and feed processors.