application.to.stay.closing.of.cases.10.29.09 (1) (1)

8/19/2019 Application.to.Stay.closing.of.Cases.10.29.09 (1) (1)

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THE LAW OFFICES OF DAVID H. RELKIN

575 Eighth Avenue

Suite 1706

New York, New York 10018

212-244-8722

Attorney Appearing for Partner/Shareholder/Beneficiary Donna A. Sturman:

David H. Relkin, Esq. ( [email protected] )

UNITED STATES BANKRUPTCY COURT FOR

THE SOUTHERN DISTRICT OF NEW YORK

In re:

WAYNE A. STURMAN,

Debtor .

Case No.

89 B 11932

(PCB)

In re:

BRUCE D. STURMAN,

Debtor.

Case No.

89 B 11933

(PCB)

In re:

HOWARD P. STURMAN,

Debtor.

Case No.

89 B 11934

(PCB)

REPLY APPLICATION IN FURTHER SUPPORT OF

APPLICATION OF DONNA STURMAN BY HER COUNSEL

OBJECTING TO THE TRUSTEE’S MOTION TO CLOSE THESE CASES,

FOR AN ACCOUNTING, A TURNOVER

AND THE REOPENING OF TWO WRONGFULLY DISMISSED ACTIONS

mailto:[email protected]:[email protected]:[email protected]:[email protected]


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David H. Relkin, Esq.

Preliminary Statement

There can be no question that these 20 year old “no-asset” Bankruptcy Estates will be

cited and studied for years as among the most notorious and egregious examples of a

Bankruptcy Court being used for criminal purposes, including:

• Allowing three no asset Chapter 7 bankruptcy Petitions to be filed in bad faith

under 11 U.S.C.§303 by Manufacturers Hanover Trust (“MHT”) after it knowingly participated

in making fraudulent transfers (in the guise of loans) to insolvent debtors which stripped all the

equity of two corporations of which Donna Sturman was a known 25% owner

1

even after being

subpoenaed in Donna’s state court action.2

• Allowed the Trustee to satisfy the debts of MHT’s out of fraudulently acquired

non-debtor properties.

• Allowed the unsecured lenders to satisfy all of their unsecured debts out of non-

debtor assets.

1 There can be no question that, since Donna’ s fr audulent involun tary Petition was dismissed pursuantto 11 U.S.C.§349, all her i nterests revested in her . Senate Report No. 95-989 states: “Subsection (b)

specifies that the dismissal reinstates proceedings or custodianships that were superseded by the

bankruptcy case, reinstates avoided transfers, reinstates voided liens, vacates any order, judgment, or

transfer ordered as a result of the avoidance of a transfer, and revests the property of the estate in the

entity in which the property was vested at the commencement of the case. The court is permitted to order

a different result for cause. [Which it did not do in this Case.] The basic purpose of the subsection is to

undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which

they were found at the commencement of the case.” See Dismissal of Donna’s Case at Exhibit “A” datedJune 10, 2004. 2 There can be no question that MHT was well-aware of Donna’s interest in the properties as early asOctober 1986, a year before MHT started making fraudulent transfers of assets of the Sturman in the

guise of secured loans, and certainly in mid 1987 when MHT started to receive subpoenae from Millbank

Tweed who was prosecuting Donna’s state court action. (In the Bankruptcy, Donna filed a Complaint,

dated December 11, 1998, Donna A. Sturman, et al. against CMB et al . [89-8076A] at Exhibit “B”.) The

incomprehensible dismissal and docket sheet of this Adversary for failure to prosecute,

notwithstanding that it was fully briefed, is found at Exhibit “C.”


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• Mr. Goldberg, whose sole reference in the 1989 Martindale-Hubbell directory

was MHT3, was “encouraged” to retain the law firm of Otterbourg Steindler Houston & Rosen,

whose partner Morton Gitter claimed in its Bankr. R. 2014 (a) affidavit:

“ Neither I nor any member or associate of my firm represents professionally,

or is associated with the Trustee, the Debtor, its creditors or any other party ininterest although my f irm has acted and continues to act as counsel, inunr elated matters for Manufacturers Hanover Trust Company, Chemical

Bank , Boston Safe and Deposit Company and Bank of New York , who may

be creditors of the Debtor .”4

• In other words, Mr. Gitter’s firm, Otterbourg, had no conflicts except that it had

every possibl e conf l ict —a blatant and clearly disqualifying breach of Bank. R. 2014(a) and 11

U.S.C. §101 (14) (e)! How could Mr. Gitter actually claim that he didn’ t know that each and

every creditor in the Cases were his then-present client?—how could a man of his stature and

connections claim that such a “non-conflict-conflict” did not render him and his firm utterly

incapable of being “disinterested” and thus completely disqualified to act as counsel for the

Trustee in these Cases?5

• The retention of Otterbourg is exactly the type of retention that Bankr. R. 2014(a)

was designed to prohibit—one that facilitated constant contact and instructions by the Vice

3 See Marc Stuart Goldberg’s listing in the 1989 Martindale Hubbell directory at Exhibit “D”. 4 See Exhibit “E.” Is it not strange that Mr. Gitter named each and every Institutional Creditor in these

cases but said that they “may be creditors in this case?” He knew that they were creditors—not that they“may” be creditors. This is a plain and simple misrepresentation under Bank. R. 2014 (a)

warranting a denial of all attorneys’ fees Goldberg. See In re Georgetown of Kettering, Ltd.,750 F.2d

536 (6th Cir. 1984). 5 In fact, the choice of Goldberg as the Trustee in these Cases, a solo practitioner at the time, was onlyallowed by MHT to serve as the Trustee, the largest creditor in the Cases, if he agreed to retain

Otterbourg, as a quid pro quo. (See Donna Sturman’s Reply to the “joint” objections of the Trustee andCMB—as if they were not joined at the hip—drafted by Helen Chaitman, Esq. and Charles A. Stewart III

at Exhibit “F”, pp. 4-5.)


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President and Assistant General Counsel of MHT, Richard Gerard, Esq. to the main litigator in

these Cases, Glen Rice, Esq. at Otterbourg,6 as to virtually every major decision in the Cases.7,8

•

Allowing the Trustee to take over on unsigned and ex parte orders manage every

property of the once-vast Sturman Family Enterprises— none of which were in Bankruptcy —

without Notice or a Hearing, no less even a legal analysis or determination as to what assets were

part of the Estates.9

• Unlawfully allowing the Trustee and the alleged Creditors to steamroll over the

well-settled rule of 11 U.S.C. §541 that an individual debtor’s interest in partnerships and

corporations, such as those in these Cases, does not become part of the Debtors’ estates—thus

preventing the underlying assets of the entities from becoming part of the Estates—which is

exactly what Goldberg totally disregarded in these cases.

6 The Court should note Goldberg’s affirmation dated July 30, 1996 at ¶2-3 in which he admits that hemet with MHT and Otterbourg shortly after he was appointed privately together without stating what

the conversations were about and vouched for Mr. Gitter’s disinteredness—also a violation of Bankr.

R. 2014 (a). (See Exhibit “G” hereto.) (Upon a full review of these cases, one cannot but come to the

conclusion that Goldberg was in violation of 18 U.S.C. §152 (6) “[by] knowingly and fraudulently gives,

offers, receives, or attempts to obtain any money or property, remuneration, compensation, reward,

advantage, or promise thereof for acting or forbearing to act [for MHT]” in these cases.) 7 See a sample of the substantial correspondence between Richard Gerard, Esq., Vice President and

Assistant General Counsel of Chemical to Glen Rice, Esq. at Otterbourg, at Exhibit “H.”8 See Mr. Goldberg’s Bankr. R. 2014 (a) affirmation regarding the retention of Harrington, Ocko &Monk (“HOM”), to which he moved sometime in 1997, claiming that HOM also had no conflicts with

Chase. But see HOM’s Representative Client List from their website, behind Goldberg’s affirmation,

which shows that Chase was indeed a major client of HOM. Thus, Mr. Goldberg’s Bankr. R. 2014 (a)

affirmation, at Exhibit “I” is fraudulent, is violative of 18 U.S.C. §§152 and 157.9 See Exhibit “J”, Ms. Sturman’s July 1990 Notice to the Bankruptcy Court that the loans to H.Development were not bona fide loans and were subject to her claims in the State Court Action to

recover on behalf of all the partnerships and corporations.


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• Thus, Goldberg finished what MHT had started—the fraudulent conduct of the

Banks’ aiding and abetting the breach of fiduciary duties owed to Donna by converting non-

debtor property into “debtor” property.

• The taking of property which was sold to satisfy MHT’s and other creditors

without 11 U.S.C.§363 hearings, without notice, findings of fact or conclusions of law—all of

which sales were all objected to by Donna, therefore requiring Notice and Hearing (§363(c)(2)) –

which never happened (with the exception of Yorkville)—and were therefore void since

Goldberg failed to “segregate and account [to Donna] for any cash collateral in the trustee’s

possession, custody or control” as he was required to do under 11 U.S.C. §363 (c) (4).

• Thus, every single sale of non-debtor property, and all of it was non-debtor

property, by Goldberg—each of which was objected to by Donna—was a direct violation of §363

and was clearly an unconstitutional, unlawful taking of property from Donna implicitly approved

by this Court—since it never held him to account under his fiduciary duties.

• One must ask why were the Debtors indicted and tried for submitting fraudulent

financial statements to the Bank, while the Bank officers testified with immunity.10

• Allowing the underlying once-valuable assets of the corporations and partnerships

which made up the Sturman Family Enterprises to be abandoned to MHT or foreclosed upon or

simply act as cash cows, and then sold for the asking by creditors (such as Yorkville where the

Trustee took in $1.0 Million Dollars a year for seven years—and never accounted for one penny).

10 What did MHT have to hide and why did so many of MHT’s employees leave its employee after theTrial? See MHT Credit Facility Review dated April 14, 1998 showing that, according to MHT, Donna

owned many of the properties and that the Brothers had a net worth of over $30,000,000.00 at Exhibit

“K ”.


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• How was Goldberg to operate the Yorkville property from 1991 to 1998 and only

in 1994 did he become “aware” of the American Savings Bank $3.0 Million Dollar mortgage—

why was the mortgage in default? What happened to the money from Yorkville for those three

years? Nowhere does Mr. Goldberg account for that money.

• And yet, despite the obvious fraudulent conveyances, deepening insolvency aiding

and abetting breaches of fiduciary duty, Goldberg did nothing—not take even one deposition of

the Banks who had allegedly “loaned” the Debtors close to $40 Million Dollars to the Debtors

$1.2 Million Dollars each to cover “margin calls” in 1987. This was clearly gross and reckless

negligence amounting to knowing fraud11 by the Banks and an egregious violation of aiding and

abetting the willful misapplication of funds of a federally insured bank in violation of 18 U.S.C.

§ 2 and § 656. See US v. Giragosian, 349 F.2d 166 (1st Cir. 1965); US v. Williams, 478 F.2d

369, 373 (4th Cir. 1973).

• Improper lending is a federal crime and does not require that the bank officer

profited from the transaction, only that the off icer acted in reckless disregard of the bank’ s

interest . See 18 U.S.C. §§645 and 656: theft, embezzlement or misapplication of funds by

Trustee and Bank officers, respectively.

• There can be no question that lending $40 Million to Debtors without any

personal assets, was reckless disregard. See Logson v. U.S., 252 F.2d 12 (6th Cir. 1958). In fact,

such lending, with knowledge of Donna’s suit, was a violation of both above sections: “An

11 See McClellan v. Cantrell, 217 F.3d 890, 893 (7th Cir. 2000): “Fraud is a generic term, which embracesall the multifarious means which human ingenuity can devise and which are resorted to by one individual

to gain an advantage over another by false suggestions or by the suppression of truth. No definite and

invariable rule can be laid down as to a general proposition defining fraud, and it includes all surprise,

trick, cunning, dissembling, and any unfair way by which another is cheated.”

https://www.lexis.com/research/buttonTFLink?_m=3a0f780cbccf125a7de311ef2fc3ddf8&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b349%20F.2d%20166%5d%5d%3e%3c%2fcite%3e&_butType=4&_butStat=0&_butNum=14&_butInline=1&_butinfo=18%20U.S.C.%202&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVtz-zSkAb&_md5=6c7dfa5e1069c63be3d02285fdaf24cfhttps://www.lexis.com/research/buttonTFLink?_m=3a0f780cbccf125a7de311ef2fc3ddf8&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b349%20F.2d%20166%5d%5d%3e%3c%2fcite%3e&_butType=4&_butStat=0&_butNum=14&_butInline=1&_butinfo=18%20U.S.C.%202&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVtz-zSkAb&_md5=6c7dfa5e1069c63be3d02285fdaf24cfhttps://www.lexis.com/research/buttonTFLink?_m=3a0f780cbccf125a7de311ef2fc3ddf8&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b349%20F.2d%20166%5d%5d%3e%3c%2fcite%3e&_butType=4&_butStat=0&_butNum=15&_butInline=1&_butinfo=18%20U.S.C.%20656&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVtz-zSkAb&_md5=fe15b657bac1638d006a55305c1b0212https://www.lexis.com/research/buttonTFLink?_m=3a0f780cbccf125a7de311ef2fc3ddf8&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b349%20F.2d%20166%5d%5d%3e%3c%2fcite%3e&_butType=4&_butStat=0&_butNum=15&_butInline=1&_butinfo=18%20U.S.C.%20656&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVtz-zSkAb&_md5=fe15b657bac1638d006a55305c1b0212https://www.lexis.com/research/buttonTFLink?_m=3a0f780cbccf125a7de311ef2fc3ddf8&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b349%20F.2d%20166%5d%5d%3e%3c%2fcite%3e&_butType=4&_butStat=0&_butNum=14&_butInline=1&_butinfo=18%20U.S.C.%202&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVtz-zSkAb&_md5=6c7dfa5e1069c63be3d02285fdaf24cfhttps://www.lexis.com/research/buttonTFLink?_m=3a0f780cbccf125a7de311ef2fc3ddf8&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b349%20F.2d%20166%5d%5d%3e%3c%2fcite%3e&_butType=4&_butStat=0&_butNum=14&_butInline=1&_butinfo=18%20U.S.C.%202&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVtz-zSkAb&_md5=6c7dfa5e1069c63be3d02285fdaf24cf


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action can …be taken knowingly [under 18 U.S.C.§§152, 645 and 656] if the defendant merely

turned a blind eye to the obvious facts. See U.S. v. Yasser , 114 F.3d 558 (“he wilfully closed his

eyes to facts which [constituted fraud and] made the existence of such an officer obvious”). The

Bank was on inquiry notice of Donna’s suit and worked as fast as it could to flip unsecured loans

into secured loans. (See discussion of its fraudulent conduct regarding H. Development, infra, at

pages 14-15.)

• It is no wonder that Mr. Goldberg passed into obscurity long-ago and has not been

on the Chapter 7 Trustee Panel or heard from for over ten years once the creditors had him do

their bidding, converting the non-debtor assets into cash, and dissipating the cash flow from the

Estates, and has now chosen to bring this motion “out of the blue” (dated April 29, 2009) to

disburse a pittance of the monies that he has been holding for years (with nothing going to Donna

who owned 25% of the $40 Million Dollars that the Debtors were allegedly worth until he and

the Court received copies of my correspondence to the US Trustee’s Office and the US Attorney

in a scramble to avoid the scrutiny he deserves but hopes to vanish like the Sturman Family

Enterprises did.12

• Allowing the only true victim of these Cases—Ms. Sturman—to languish,

spending every last dollar she had, until she became impoverished and homeless with three

children, to defend herself against the vexatious litigation against Donna by the Banks, the

Trustee to protect “his” creditors from being exposed in their knowingly aiding and abetting

breaches of fiduciary duty, inducing deepening insolvency, and fraudulent conveyances, their

grossly reckless conduct in making millions of dollars of improper loans, conversion and


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fraudulent conveyances and continued to loan money to three brothers (having knowledge that

Donna was an owner of the entities to whom they loaned money after they were subpoenaed by

Donna’s counsel in March 1988, in her State Court Action.13

• The Banks’ naked attempts to manipulate these bankruptcy proceedings and their

illegal use of the threat of criminal proceedings and non-dischargability against the Debtors to

bend them to MHT’s will.

• Then, when MHT and the Trustee couldn’t get rid of Donna, the Banks forced

Donna into a fraudulent involuntary Bankruptcy by calling in a favor from one of their pet law

firms to join in with two other purported creditors in the same law firm holding $400 “claims”

(and who never even put in proofs of claim)14 to force Ms. Sturman into a “bad-faith”

bankruptcy to grab her numerous claims against the Trustee and the Creditors and, just to

sweeten the deal, cancelling the law firm’s debt to the Bank.15

• It was only in the context of Donna’s Bankruptcy that they could get rid of

Donna’s claims in a collusive and fraudulent Settlement Agreement entered into by and between

Alan Nisselson and Marc Goldberg purporting to settle all of Donna claims —and then

12

See my letters of September 4, 2009 and September 10, 2009 at Exhibit “L”. 13 See infra at Exhibit “X, at page 11. 14 See Involuntary Petition at Exhibit “M” hereto in which Lori Samet Schwartz, Esq. and Mitchell G.Mandell, Esq., members of Pollack & Green, each claimed to have $400 claims, to amount to 3 creditors

but never put in Proofs of Claim. This type of “Splitting claims” is a violation of 18 U.S.C. §§152 and

157. 15 See Chase’s coincidental termination of its security interest in Pollack & Greene’s assets at Exhibit“N.” This Petition was a violation by Pollack & Greene, Lori Samet Schwartz and Mitchell G. Mandell

of 18 U.S.C. §§152 and 157 by filing a “fraudulent involuntary bankruptcy” under §303.


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exculpated each other in this connection. (See Settlement Agreement at ¶12, at Exhibit

“O.”)16

• The outrageous attempted exculpation of Nisselson (Donna’s Trustee) and

Goldberg of each other is not only a breach of a Trustee’s fiduciary duty but is void as against

Public Policy. “The attempted exoneration of [a] fiduciary for any loss unless occasioned by

“willful neglect or misconduct’ is a nugatory provision amounting to nothing more than a

waste of good white paper.” Matter of Curley, 151 Misc. 664, 675, 272 N.Y.S. 489, 501, mod.

on other grounds, 245 App. Div. 255, 280 N.Y.S. 80 (2d Dep’t 1935), aff’d 269 NY 548 (1935).

See also, Resorts Int’l, Inc. v. Lowenschuss, 67 F.3d 1394, 1401-02, 1402 n.6 (9th Cir. 1995);

Landsing Diversified Props.-II v. First National Bank and Trust Co. of Tulsa, 922 F2d 592, 600-

02 (10th Cir. 1990), which hold such non-debtor releases are void against public policy as a

matter of law.

• Moreover, Surrogate Roth has admonished any “attempt [by a Trustee] to draft a

trust instrument that would render him unaccountable under any circumstances may also violate

the Code of Professional Responsibility’s proscription against knowingly advancing a claim that

is unwarranted under existing law.” 22 NYCRR §1200.33 (a) (2)17 (citing Matter of Lubin, 143

Misc.2d 121, 539 N.Y.S.2d 695 (Sur. Ct. Bronx Co. 1989).

16 See undated collusive Settlement Agreement between Nisselson and Goldberg and Order by this Courtapproving such Settlement dated December 16, 2002 at Exhibit “O”. 17 Now Rule 3.1(b) (1), which states that “A lawyer’s conduct is “frivolous” for purposes of this Rule if:the lawyer knowingly advances a claim or defense that is unwarranted under existing law…”


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• Allowing Pollack & Greene’s bad-faith bankruptcy proceeding to continue

without any findings of fact, conclusions of law—indeed, has no record of any hearings—despite

adjudicating Ms. Sturman bankrupt without any notice to her or counsel of record,18 and by

appointing Goldberg’s cohort in crime, Alan Nisselson, to take over her numerous actions,

objections and claims in the Brothers’ Bankruptcy19--to dismiss them, bar her from going into

Surrogate’s Court to protect the once-substantial assets of her mother’s Estate from dissipation,

and forcing a settlement upon her of all her rightful claims, ownership and beneficiary interests,

for 5 cents on the dollar and, as a reward for their collusive conduct, obtaining a blessing from

this Court of almost a million dollars in attorneys’ fees and allowing them to release all her

claims and each other for their brilliant work.

• We now all know the daily dirty secrets which arise virtually every day and

assault us from every direction again and again from the Television and newspapers exposing the

frauds, the ponzi schemes, the kickbacks, the embezzlements—it is now the only subject of the

nightly news—but even awash with the detritus of the unending judges, promoters, celebrities,

investors, and the long-line of attorneys now exposed as criminals being hauled off in handcuffs

(“who would have guessed—he seemed so honest”)—I was still astonished at the unbelievable

confluence of power and greed, and without even the slightest irk of shame in destroying the

innocent lives of Donna and her children by keeping her broke—to control her—either by

voluntarily or involuntarily forcing her into Bankruptcy.

18 See infra at footnote 55, at page 42—Notice is the essential to due process and failure to provide it toa debtor is a violation of due process embodied in the 5th and 14th Amendments to the Constitution. 19

Since Donna Sturman’s claims were brought on behalf of the Sturman Family Enterprises, which were

not in bankruptcy, Nisselson and Goldberg had no standing to release such claims and they were not

under the jurisdiction of the Court since they were non-core proceedings. This was also a violation of

judicial estoppel Bates v. Long Island R.R., 997 F.2d 1028, 1037 (2d Cir.) cert. den. 510 U.S. 992 (1993)


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ARGUMENT

POINT I

GOLDBERG’S ATTEMPT TOCLOSE THE ESTATES IS

CONTRARY TO PUBLIC POLICY

AND MUST BE DENIED

This Memorandum of law is submitted in further support of Donna Sturman’s Objection

and Request for a Hearing to deny the submission of the Final Report submitted by Marc S.

Goldberg, and in further support of Donna Sturman’s motion for an accounting and turnover of

all money in his possession and disgorgement in objection to the belated attempt by Goldberg,

the “Trustee” in these Cases, to distribute the pittance of monies he now continues to hold—for

at least three years he seems to have done absolutely nothing in these cases—to various

remaining “creditors” who have no valid right or claims therein.

From the filing of the involuntary petitions in bankruptcy by MHT beginning these

Estates, it was recognized that the claims of Donna Sturman, having been the one innocent

party in these proceedings, were the only valid, genuine claims which involved non-core

issues—and therefore could not be done away with in this Court—and should be paid.20

Indeed, she was forced into poverty and ultimately into an involuntary bankruptcy orchestrated

by the Banks, Nisselson and Goldberg.

The Trustee’s application is nothing more than an attempt to bury the huge abuses of his

powers and responsibilities as a Trustee with a fiduciary obligation to Donna in which he failed

to make even a simple analysis of what were the assets of these Estates . Instead, he colluded


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with the major creditors of the Estates—especially MHT, which completely controlled the

Brothers Cases—to transfer to them every one of the non-debtor assets and, thereby, breached

his fiduciary duties as a Trustee to return property to its true owner.

Goldberg was owned by the Banks and so they owned the property. To this day there

have never been a finding of facts or determinations of law, no less any analysis of what

constituted the assets of the Estate; but there can be no question that the non-debtor

partnerships and corporations were never part of the Estates.21 MHT, Chemical and Boston

Safe Deposit, and Bank of New York made the Rules for the Trustee in this case—not the

Bankruptcy Code.

The Trustee was put in place with Otterbourg by his side as a quid pro quo for allowing

him to stay on as Trustee. The facts are not in dispute: MHT and Chemical, now JP Morgan

Chase (“Chase”) put in their Trustee, put in their attorneys (Otterbourg), who r epresented

everyone but the Debtors , and then they gave their attorneys their marching orders and banged

on the table until they got their more than their pound of flesh.

Chase threw money at the Brothers until they found out about their sister Donna

Sturman who clearly owned a one-quarter interest in all of the Sturman entities—except those

to which the Brothers had unlawfully and fraudulently transferred assets from the Sturman

entities. Many showed great wealth and assets, like candy, for the taking, after which the Banks

ran.22 All the claims by the Banks were avoidable or were subject to equitable subordination—

20 See Transcript of March 16, 1999 Hearing, at pages 25-27, at Exhibit“P,” in which it is made clear thatthe money that went through the estate was Donna’s money.21 See Points IV and VI. 22 See pages 73, 104, 105, 106 of Criminal Trial at Exhibit “Q”.


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for which the Brothers went to prison, knowing full-well that the Banks would do anything to

crush them.23

MHT/Chase was well aware that Donna Sturman was a one-quarter owner of the

numerous properties that she had also inherited from her parents since her interests were shown

in her lawsuit, on the Bank statements and in the Muriel Estate.24 Chase then put its plan into

motion after their eyes were opened that the brothers had what Donna had: no personal assets to

satisfy their enormous loans which the Banks almost forced upon them.

POINT II

THE COURT MUST DENY THE TRUSTEE’S ATTEMPT

TO CLOSE THE CASES DUE TO SERIOUS

MATERIAL ISSUES OF TRUSTEE ABUSE

The history of these cases is rampant with bankruptcy fraud, creditor fraud, Bank. R.

2014(a) fraud, Trustee fraud, fraudulent conveyance and this Court has been used by the

Trustee and his “creditors” (the Banks) to destroy the Sturman Enterprises, in violation of Ms.

Sturman’s rights as a partner, shareholder and beneficiary.

As fully demonstrated herein, there was absolutely no basis at law to sell the

partnerships or corporations of the Sturman Enterprises even if the debtors were shareholders or

partners—the corporate and shareholder assets simply cannot be reached by a creditor such as

MHT.

After being forced to defend her interests in these proceedings instituted by a bad faith

23 See superseding Indictment at Exhibit “R ”. 24 See Financial Statement of the Debtors dated October 30, 1986, at Exhibit “S.”


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filing by MHT, all of which has been briefed and documented in her actions against Chase and

the Trustee (which this Court dismissed without basis) and in her Reply to the Objections to her

proofs of claim, 25 Ms. Sturman’s claims are, and have always been asserted on behalf of the

entities (the partnerships and corporations) which are non-core matters on which this Court has

never had the authority to enter final Orders. This is because they concern non-debtor assets

and interests which were trampled on in this Court by means of collusion, fraud and avarice.

Ms. Sturman’s Proof of Claim established her prima facie entitlement to a full

distribution of her assets from a Bankruptcy proceeding that sought her complete destruction as

an owner of the Sturman Assets.26

The depths to which MHT and the Trustee sunk in these Cases is a new low: as a result

of “arson,” ten days after the location of the books and records were broken into, which the

Trustee failed to take control of or insure, as required by 11 U.S.C. §704(1), the Trustee became

unable, and remains unable to controvert any of her claims.

Since she was an owner of the assets, she was entitled to be paid 100 cents on the

dollar—not because that would have been “nice”—but because that is the law.27

Instead of acting in a fiduciary relationship with Ms. Sturman, which was his fiduciary

responsibility, the Trustee, put into his role by MHT, with the proviso that he would take his

25 The Court has dismissed both of these cases, as futher discussed herein. They must be reopened toallow any justice to be achieved in these cases. 26 See Yorkville Partnership agreement at Exhibit “T”, specifically allowing the partners to hold the property in their personal names as tenants in partnership. Notwithstanding this, and the well-settled rule

that partnership property is not part of a debtor’s estate, this Court allowed the sale of the Yorkville

Associates property.


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marching orders from Otterbourg, counsel to every creditor in these cases, began to write the

Bank’s law: “what’s mine is mine and what’s yours is mine.”

There is a Bankruptcy Code establishing rights, obligations and duties of a Trustee,

none of which Goldberg fulfilled.

Initially, the Trustee was required to ascertain the assets of the Estate. To this day,

twenty years after MHT precipitously and wrongfully filed the Involuntary Petitions in these

Cases, which Goldberg never investigated, which they did with the sole wrongful purpose to

stop Donna’s State Court litigation (and, after MHT was served with subpoenas by Donna’s

counsel, Millbank, Tweed), the Trustee has yet to articulate what the assets of these Estates

really were—except that they were whatever the Bank said they were.28

The H. Development (“HD”) transaction is a perfect example of the brutal depths to

which Chase went. As made clear in the Criminal Trial (for example, on page 364-374 of the

Transcript of the testimony of Paige Davis),29 Chase had over $7 Million outstanding to the

Brothers which were unsecured loans.30 So, what did the Bank do? Lend the money to the

brothers?—no. Lend the money to the Corporation. Then, the Corporation “loaned” the $7

Million previously unsecured money back to the Bank (abracadabra, the money is now a

27 See evidence of Arson 11 days after the Trustee was aware of a break-in attempt at the location of the

organizations’ books and records which the Trustee somehow thought it was not his responsibility to takeunder his control in violation of §704(1) at Exhibit “U”. 28 See the Complaint of Donna A. Sturman et al. against Marc Goldberg [99-8076A] at Exhibit “V.” 29

See the testimony of Paige Davis, pages 364-374 of the Criminal Trial Transcript, at Exhibit “W” in

which she admitted that MHT made an additional loan to the Debtors of $2.0 Million after notice of

Donna’s lawsuit and receipt of a subpoena duces tecum. 30 According to Glen Rice of Otterbourg, counsel for the Trustee, at the inception of the Cases, Mr.Goldberg was in possession of $7,866,145.10, comprised of Cooper Stock, money market accounts in the

name of the Debtors, and collections of rent from Yorkville. (See October 10, 1991 Transcript at pages


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secured loan), then MHT had HD “loan” $6 Million to the Brothers. This is the very definition

of deepening insolvency, aiding and abetting breaches of fiduciary duty, fraudulent conveyances

as well as being sufficient to equitably subordinate MHT’s claims—MHT exercised total

control over the Debtors and the spigot from which they obtained their fraudulently derived

monies. See, e.g., Schact v. Brown, 711 F.2d 1343, 1350 (7th Cir. 1983) (citing In re Investors

Funding Corp. of N.Y. Sec. Lit., 523 F.Supp. 533, 536 (S.D.N.Y. 1980); S&K Sales Co. v. Nike,

Inc., 816 F2d. 843, 851 (2d Cir. 1987); In re Sharp, 302 B.R. 760, 770 (E.D.N.Y. 2003).

Before this fraudulent transaction HD would have had at least $15 Million in equity.

After the “transaction” HD was a shell. Donna, who owned 25% of HD, as the Bank knew,31

had all of her equity stolen or fraudulently conveyed to MHT and to her brothers, who used the

money to buy stock in Cooper.

The HD transaction was also a fraudulent conveyance. Before the transaction, the

corporation had value. Afterwards, the corporation, having received no value, lost close to $14

Million in equity. (See, e.g ., Debtor and Creditor Law §273-a32 [since Donna had an action

pending against HD, and §276.) Knowing that Donna had already sued the Brothers in the

names of the entities, including HD, the Banks quickly pushed this loan through (before Donna

3-5, Exhibit “X.”) It is this amount that Mr. Spielberg, counsel for the Trustee stated in open Court belonged to Ms. Sturman, at pages 23-24. See also Exhibit “KK ” hereto, infra, at page 25.31

This was known from the Public Tax Records where it filed its Mortgage on the property, the Bank’sown records (see financial statement of the MHT, dated April 14, 1988 and the earlier Financial

statements provided by the Brothers to the bank, including the October 30, 1986 financial statement) and,

most importantly, from the Donna State Lawsuit. (See Exhibit “Y” annexed hereto.) 32 The weight of authority holds that a claim for constructive fraudulent conveyance under §273-a is notrequired to be pleaded with particularity under Fed. R. Civ. P. 9(b). SIPC v. Stratton Oakmont, Inc., 234

B.R. 293, 319 (Bankr. S.D.N.Y. 1999) (“The pleading of constructive fraud, as opposed to actual fraud,

must only comply with Fed. R. Civ. P. 8(a) because scienter is not an element”). This is because

“although tagged with the title ‘fraudulent,’ fraud has nothing to do with the constructive fraudulent


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was able to obtain discovery in the State Court action) to provide the Debtors with sufficient

capital to meet margin calls, effectively making HD the equitable owner of the Cooper

Company Stock—which even the Trustee and his counsel acknowledged belonged to Donna.

After the loans, the Bank improperly filed the Involuntaries,33 where they could move

for relief from the stay on the HD mortgage—which is exactly what Chase did.34 The Trustee

and this Court knew that the Banks knowingly made loans to the Debtors whom they knew

were not the only owners of the Properties because of so many reasons, including Donna’s

challenge in this and the State and Surrogate’s Court to the validity of such Petitions as being

filed solely to stop her state court litigation against the Debtors and MHT yet the Trustee and

this Court looked in the other direction and allowed MHT to control and manipulate the

Bankruptcy Court proceedings.35

Yet, what the Banks and the Trustee did was exceedingly more devious. After moving

for relief from the stay to sell HD on February 28, 1992—which would have allowed MHT to

obtain a deficiency judgment against the Debtors for the difference between the appraised value

of $9,300,000.00 and the amount of the loan $17,714,142.94, which MHT would have been

transfer claim. The transaction is based on the transferor’s financial condition and the sufficiency of the

consideration provided by the transferee.” White Metal Rolling, 222 B.R. at 428-429. 33 See In re Collins, 250 B.R. 645 (Bankr. N.D. Ill. 2000) (holding a court imposed sanctions againstChapter 7 debtor and attorney because bankruptcy case was filed in bad faith since debtor had net worth

of $2.3 Million Dollars, annual income of over $200,000, and the case was cited to

escape liability to a single disfavored creditor). 34 See motion by Chase for Relief from the stay to foreclose on H. Development at Exhibit “Z,” andDonna, despite noticing the Court of the lack of bona fides of the loans, she was not on the service list.35 See Donna’s removed action with answer of the brothers at Exhibit “AA”. Thus, these claims werenot part of the Bankruptcy, and at most were non-core proceedings, on which this Court could not

rule—nor could they be settled by the Trustees in the collusive settlement agreement between

Goldberg and Nisselson—“It is basic that “a settlement agreement or contract [with no notice to

Donna], like any other, may be attacked on the grounds that it was procured by fraud. First Nat.

Bank of Cincinnati v. Pepper, 454 F.2d 626, 632 (2d Cir. 1972).


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entitled to—instead, MHT had Goldberg “abandon” HD by motion dated March 23, 1992.

Thus, MHT did not have to use up any amount of i ts $17 M il li on Dollars in debt to foreclose

on the proper ty, all owing them to “double-dip” 36 –holding onto their $17 M il li on Doll ar debt

and use it to acquire other assets of the non-debtor estate.37 ,38 ,39 Indeed, the Banks and the

Trustee had a great deal to fear from Donna.

The knowing and active cover-up and concealment of MHT’s and the Debtors’

fraudulent conduct is the very definition of aiding and abetting breaches of fiduciary duty by

transforming a purported unsecured loan into equity in the Properties subject to a bona fide

dispute.

MHT which engaged in this type of flipping unsecured loans into secured loans or

equity, constituted clear aiding and abetting a breach of fiduciary duty. See, e.g., Richard C.

Mason, “Civil Liability for Aiding and Abetting,” 61 Bus. Law. 1135, 1166 (May 2006) and

Bondi v. Bank of America Corp., 383 F.Supp.2d 587, 590 (S.D.N.Y. 2005). I nstead, the

Tr ustee fai led to avoid, no less even investigate any of these transfers and “gave” the property

36 It is incredible to the writer of this Brief that a court could approve such an agreement which trouncedDonna’s rights. 37 See Notice of Abandonment by Goldberg’s counsel Otterbourg, dated March 23, 1992, which allowedMHT to keep its $17.4 Million Dollar debt without using any part of it to acquire HD at Exhibit “BB.”

In light of Donna’s objection to the loans against HD (at Exhibit “J”), previously filed in July 1990, thisabandonment of HD couldn’t have been more criminal! 38 No doubt, MHT placed heavy pressure on the Debtors, in addition to the threat of criminal prosecution, to allow MHT to acquire HD for nothing—allowing MHT to keep its $17.4 Million Dollar

loan to acquire other assets. (See Exhibit “BB”, the abandonment motion.) 39 It was for their silent agreement that the brothers got their discharge, even though all the banks all brought non-dischargability complaints, which they used as further leverage during the Bankruptcy. After

MHT got what they wanted they dropped their objections to the Debtors’ discharge (See discharge of the

Debtors, dated February 10, 1994 for Bruce, January 10, 1995 for Howard and Wayne. at Exhibit “CC”.)


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to the Bank—he even joined in the Bank’s motion for relief from the stay.40

MHT’s knowing participation in the Debtors’ breaches of fiduciary duties owed to

Donna by denuding the value of the properties, leaving the Properties with all debt and no

value, was to advance money to the Debtors to wage a proxy fight to gain control of Cooper

Company. See Nisselson v. Drew Indus. (In re White Metal Rolling), 222 B.R. 417, 428-29

(S.D.N.Y. 1998) (“the title ‘fraudulent,’ fraud has nothing to do with the constructive

fraudulent transfer claim [under §273-a]. The transaction is based on the transferor's financial

condition and the sufficiency of the consideration provided by the transferee”—which, in the

case of HD was no value); See also Whitney v. Citibank , 782 F.2d 1106 (2d Cir. 1986) in which

the Second Circuit found aiding and abetting breaches of fiduciary duties in circumstances

remarkably like the case at bar. The leftover equity of HD was then transferred in contravention

of Donna’s rights in order to allow the Debtors to buy more stock in Cooper and wage a proxy

war.

It should be kept in mind that, just after the Petition, the Trustee was holding, according

to the Trustee’s counsel, the sum of $7,866,145.10, comprised of Cooper Stock, money market

accounts in the name of the Debtors, and collections of rent from Yorkville—which Goldberg’s

later counsel agreed on the record belonged entirely to Donna. (See Exhibit “X“.)

In their proxy fight, as MHT knew, the Brothers had submitted SEC 13-D statements in

which they had to state whether they were involved in any litigation—which they denied.

40 This insidious act would have substantially increased the ability of Donna to prove a fraudulent


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The Banks clearly knew that this misrepresentation could force the brother into a

criminal prosecution and would hold onto this card until later. But the Banks, too, could be

liable for such failure to disclose since they also knew that the loans were for a proxy fight, that

SEC documents would have to be filed and that the Brothers were defendants in an action for

money damages. From this distance, these Cases take on more and more the look of a

conspiracy to commit money laundering and Bankruptcy Fraud. 18 U.S.C. §1962(d); Money

Laundering, 18 U.S.C. §1956; and Bankruptcy Fraud, 18 USC §152.

Now it is clear why the Trustee didn’t take the deposition of a single loan officer or

creditor—after Donna notified the Court that the loans by the Banks were subject to a bona fide

dispute—the Brothers and the Bank could be criminally liable. Moreover, the Trustee failed to

segregate and separate Donna’s interest in the sold properties from other property and account

to her under §363 (c) (4). A trustee may not commingle trust property with his or her own

property or commingle the trust’s property with the property of other trusts. See Austin W.

Scott & William F. Fratcher, The Law of Trusts § 179 (Little, Brown 4th ed. 1987). In the

Bankruptcy context, the Trustee improperly used Donna’s cash collateral based on her $20

Million Dollar claim.

Thus the money transferred out of HD was no longer property of the Estates and was only

available only to Donna. As the Court held in In re Thurman, 901 F.2d 839, 841 (10th Cir.

1990): “The words: ‘Property of the debtor,’ are not the same as ‘property in which the debtor

has a derivative interest.’ [Such as the derivative proceeds of the HD “loan” in the possession of

the Brokers.] To the contrary, the language of the statute is sufficiently circumscriptive to

conveyance under D&C §§273-a or 276. Similarly, it would have also lowered the bar for the Trustee to


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eliminate such an interpretation. MBank contends the Bankruptcy Code defines ‘property’ to

include equitable interests of the debtor, 11 U.S.C. § 541(a)(1). Hence, the creditor maintains the

transfer of an asset of a corporation is the transfer of property in which a stockholder has an

equitable interest to which §727(a)(2)(A) would extend. The purpose of § 541(a)(1) is to define

‘property of the estate.’ If MBank's theory is correct, the estate of a debtor who holds a share in a

corporation would not only include the value that share would bring, but also a liquidatable

interest in any asset owned by that corporation. That is not the scope of § 541(a)(1) .”

The greedy Debtors’ fraudulent conveyances of all of the equity possessed by HD

property to these predatory lenders continued unabated (and ignored by the Trustee), who

remains liable to Donna even now. See, e.g ., 18 U.S.C. § 645: Theft, embezzlement, or

misapplication by a Trustee. In addition, the bank officers and their employees ran afoul of 18

U.S.C. §656”: theft, embezzlement or misapplication by a bank officer or employee.41

Moreover, these fraudulent transfers of the equity of HD constituted the unjust

enrichment of MHT. Unjust enrichment does not require the performance of any wrongful act

by the one enriched. See Lengel v Lengel , 86 Misc. 2d 460, 465-466 (Nassau Cnty. 1976);

Richards v Richards, 58 Wis.2d 290, 293-294 , 206 N.W.2d 134 (Sup. Ct. Wisc. 1973); see,

generally, 5 Scott, Trusts [3d ed], § 462.2).

What is required, generally, is that a party hold property “under such circumstances that

in equity and good conscience he ought not to retain it.” See Miller v Schloss, 218 N.Y. 400,

407 (1916); see also Sharp v Kosmalski, 40 N.Y.2d 119, 121 (1976); Sinclair v Purdy, 235

prove the fraudulent conveyance-which he never chose to do in violation of his fiduciary duties.

https://www.lexis.com/research/buttonTFLink?_m=00843517d21c6877a4078c72a5db408e&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b349%20F.2d%20166%5d%5d%3e%3c%2fcite%3e&_butType=4&_butStat=0&_butNum=31&_butInline=1&_butinfo=18%20U.S.C.%20656&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVtb-zSkAl&_md5=02c86fa4551604a1e101ca735f81093ahttps://www.lexis.com/research/buttonTFLink?_m=00843517d21c6877a4078c72a5db408e&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b349%20F.2d%20166%5d%5d%3e%3c%2fcite%3e&_butType=4&_butStat=0&_butNum=31&_butInline=1&_butinfo=18%20U.S.C.%20656&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVtb-zSkAl&_md5=02c86fa4551604a1e101ca735f81093a


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N.Y. 245, 253-254 (1923).

Even after she commenced an action against the Debtors in State Court for denuding

the Properti es and sought discovery—despite the repeated motions for protective orders by

MHT to produce documentation of i ts aiding and abetting such breaches of f iduciary duty ,

and advised this Court that the loans and mortgages on the Sturman Properties were subject to

a bona fide dispute, the Debtors continued to mortgage properties, including an unrecorded

mortgage to SFS in the sum of $11.5 Million Dollars on Yorkville Associates property and a

pledge of the stock of Wayne-Adam Corp.

Donna repeatedly objected to such sales in these Cases (despite the contrary position

taken by the Court in its one opinion)—and that somehow Yorkville (known as 86 th Street)

could be, at the same time, according to this Court, a partnership and a tenants-in-common

relationship. Certainly, on Appeal, the District Court will recognize the error of this Court and

there will be what Donna has always said there would be—a reversal of this Court’s decision

approving the sale of non-debtor partnership property and disgorgement on a huge scale.42

The Trustee’s obligations were of a fiduciary relationship to Donna as an owner of the

properties to return the property to her—and to close the cases expeditiously. See 11 U.S.C.

§704 (a). This is perhaps a Trustee’s most important duty—after a determination of the

property of the Estate. A 20 year bankruptcy, which extended 15 years after the Debtors

41 It is no wonder why the representatives of the Banks testified with immunity at the Brothers’criminal trial.42

In addition, this Court and the Trustee violated injunctions against the transfer of any of the properties

in the Surrogate’s Court and the Supreme Court, without any finding that the Bankruptcy Code or an

Order of the Court overrode these Orders, which it could not do in any case. See Marshall v. Marshall,

547 U.S. 293, 311-12, 126 S. Ct. 1735, 1748 (2006) (“the probate exception reserves to state probate


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(incredibly) obtained a discharge is not expeditious. This Court’s failure to hold any hearings

as to the validity of such conveyances of Property to the Banks in which Ms. Sturman was a

25% owner despite her repeated filing of objections to such fraudulent conveyances which

violated the Trustee’s duty to investigate the validity of her claims. 11 U.S.C. §704 (1), (2), (4),

(5) and (6).

Why didn’t the Trustee seek non-dischargability claims against the felonious Debtors

who walked away with the “harsh” penalty of paying $10,000 and having to file their tax

returns?43

The United States Trustee Program has enacted standards that set minimum qualifications

for appointment. 28 CFR 58.3 and 58.4. Trustees are fiduciaries with wide-ranging

responsibilities to effectuate the goals of the particular chapter under which a bankruptcy case is

filed.44

Because they are fiduciaries, trustees are held to very high standards of honesty and

loyalty. See generally Woods v. City National Bank & Trust Co., 312 U.S. 262, 278 (1941);

Mosser v. Darrow, 341U.S. 267 (1951); See also Meinhard v. Salmon, 249 N.Y. 458, 464, 164

N.E.545, 546 (1928) (Cardozo, C.J.). Trustees are held to high standards not only because of

their fiduciary duties to debtors and creditors but because they take charge of debtors’ property

and they hold large amounts of other people’s money. The conduct by the Trustee in league

with the Banks was not only given the imprimatur of this Court but administered in a way so as

courts the probate or annulment of a will and the administration of a decedent's estate; it also precludes

federal courts from endeavoring to dispose of property that is in the custody of a state probate court.”) 43 See Debtors’ discharge at Exhibit “CC.”


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to deprive Donna of her Property interests in non-debtor property , leaving Donna and her three

children to live in abject poverty.

There is no question that these Cases were used in furtherance of Bankruptcy Fraud

namely: the abuse of the Bankruptcy Code by MHT to file involuntary Chapter 7 petitions for

the improper purpose of obstruction of justice and to gain an advantage over plaintiff by

stopping her action in New York Supreme Court to void the fraudulent transfers by the Debtors

of the Properties.

MHT’s goal was complete: they siphoned off the equity of the non-debtor Properties for

their own benefit so that the Debtors could acquire Cooper stock, the knowing aiding and

abetting of such breaches of fiduciary duty to plaintiff by Chemical Bank 45 and MHT.

These cases, which “celebrated” on August 4, 2009 their twenti eth year under the

jur isdiction of this Court , and the intentional and malevolent victimization of Donna Sturman,

which, started by her brothers, has been continued to be perpetrated against her by the Trustee,

who stepped into the Brothers shoes, with the Banks’ certain knowledge of Donna’s existence as

a owner, are a travesty by this Court.46

With the proceeds of the fraudulent transfers and with the aid and assistance of Chemical

Bank, MHT and the Trustee, the Banks and the Debtors looted virtually all the assets and real

44 Apparently, Goldberg couldn’t stay his own thirst for embezzlement and, unknown to Donna and perhaps unknown to this Court Marc Stuart Goldberg took in over $50,000 in rental commissions in

1995 alone on leases on the 86 th Street Property . (See Exhibit “DD.”)

45 Upon information and belief, Chemical Bank was merged in 1996 into Chase Bank. In 2001, ChaseBank was merged into JP Morgan Chase.


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property which Donna and her brothers inherited from their parents to line their pockets, wage a

proxy war to acquire Cooper Company, and fraudulently transferred the remaining assets of the

entities to the Banks and the companies controlled exclusively by the Debtors.

What makes this action so egregious, however, is that this conduct was done with the

willing and active participation of the Trustee of the Estates, Marc Stuart Goldberg, in violation

of virtually every obligation of a Trustee in Bankruptcy, by making fraudulent representations

and omissions to this Court, and the Court’s failure to supervise the Trustee, whom this Court at

one point said, had “run amuck” in this case. This Court has effectively given its approval to

Goldberg releasing himself from his egregious and possibly criminal conduct.

POINT III

DONNA STURMAN HAS CONCLUSIVELY

ESTABLISHED HER PROOF OF CLAIM FURTHER

ESTABLISHING THE DEROGATION OF THE TRUSTEE’S DUTIES

11 U.S.C. § 502. Allowance of claims or interests

(a) A claim or interest, proof of which is filed under section 501 ofthis title [11 USCS § 501], is deemed allowed, unless a party ininterest, including a creditor of a general partner in a partnershipthat is a debtor in a case under chapter 7 of this title [11 USCS §§701 et seq.], objects.47

(b) Except as provided in subsections (e)(2), (f), (g), (h) and (i) of

this section, if such objection to a claim is made, the court, after46 See Exhibit “K ” hereto. These internal loan documents of MHT, dated October 30, 1986, showed thatMHT knew Donna was an owner and partner of the partnerships and corporations, at Exhibit “Y,” well-

prior to almost all the loans made to the Debtors. 47 A properly executed and timely filed Proof of Claim will constitute prima facie evidence of thevalidity and amount of the claim, and, accordingly, the burden is on the objecting party to establish that

the claim should be disallowed or reduced. H.R. No. 95-595, 95th Cong., 1st Sess. 352 (1977), reprinted in

App. C Collier on Bankruptcy, Pt. 4(d)(i) (Mathew Bender 15th Ed. Rev. 11 U.S.C.§510(c) (1).


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notice and a hearing, shall determine the amount of such claim inlawful currency of the United States as of the date of the filing ofthe petition, and shall allow such claim in such amount.

A. The Court, the Trustee and His Counsel Have Allowed Donna’s Claims and are

Precluded from taking a contrary Position under Judicial Estoppel

This Court, commenting on the indisputable validity of Ms. Sturman’s claims in these

Estates, stated on November 10, 1998:

[T]he objection to Donna’s claims is ridiculous. Donna filed a claim

which was supported by so many documents that the Clerk’s Officerefuse (sic) to take them and required the mail bank (sic—should beMillbank, Tweed, my counsel) to retain them in order to reviewthem.48

The Trustee has offered nothing prima facie that overcomes the primafacie validity of the claim under the Bankruptcy Rules that the claim isvalid until such time (sic) you offered (sic) such evidence to overcomethe prima facie validity. Because (sic) 5502(a) (sic—should be§502(a)) of the claim is deemed allowed unless objected to. Once the

objection is filed then B.R. 3001 (f) says (sic) proof of claim is primafacie evidence, the case law is clear.

[S]imply saying we don’t like it is not overcoming the claim and I didreview the claim. And as I say, the file is quite evident that there weresignificant, substantial supporting documentation for that claim…

Without that claim being resolved there is no possibility that one canmove forward with a distribution today with the creditors.49

48 These documents were retained by Donna’s counsel, Millbank, Tweed which “served Otterbourg,Steindler, Houston & Rosen, P.C., attorneys for Marc Stuart Goldberg, Esq., the Trustee in this case with

the Proof of Claim, including all exhibits.”49 See also this Court’s comment that the job of the Trustee is “to determine who the creditors are”— something he never did. See Transcript at Exhibit “LL,” page 15 thereof, lines 12-17, at page 25,

footnote 43.


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See Transcript dated November 10, 1998, at pp. 7, line 3-25, and page 8, lines 1-13, at Exhibit

“EE” and Donna’s Proof of Claim for $20Million at Exhibit “FF.” Since it is the burden of the

Trustee once Donna stated her Proof of Claim, to rebut it, and he has never done so, Donna’s

Proof of Claim must be allowed. 11 U.S.C. §502 (b). Moreover, since there were no

Determinations of Fact and Law regarding Donna’s Proof of Claim, it must be allowed.50

This Court continued to recognize the validity of Ms. Sturman’s claims, as stated in the

December 7, 2001 Hearing:

I think that the Trustee has taken a thorough look at DonnaSturman’s likelihood of being able to construct the ConstructiveTrust claims, which were somewhat extensive.

I think that the Trustee has shown she would, in fact, end up with a$20 Million claim…

See Transcript dated December 7, 2001, at p.17, lines 17-24, at Exhibit “GG.”

Notwithstanding the foregoing, the Court later sanctioned the stripping of all of the assets

and property of Ms. Sturman in her approval in the collusive Bankruptcy and settlement

agreement which is void, and, in any event such Bankruptcy proceeding was dismissed pursuant

to 11 U.S.C. §349, and is thus no longer in effect. (See footnote “1,” supra.)

Even Mr. Spielberg, counsel for Marc Stuart Goldberg, the Trustee, stated in open Court,

on the record at that same Hearing:

“It’s clear to us that Donna seems to have a claim and a significant one.

50 Moreover, Donna was stayed from conducting any discovery in these Cases pending the resolutionof the motion against Chase.


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We felt that Donna should be, should receive a distribution becausefrankly she waited long enough with respect to her $20 million claim,

Judge. We have reserved for that .51

See Transcript of Trustee’s motion to object to the claims of Donna Sturman, dated

November 10, 1998, at pp. 21, line 9-10, and page 34, lines 6-22, at Exhibit “HH.”

It would be ridiculous, were it not so pathetically tragic, that, after the Trustee had milked

these Estates not for 2, not for 10, but for 20 years , keeping Ms. Sturman and her children in

poverty, and forced into bankruptcywithout any notice ,52 that the Trustee’ s own justif ication

for settli ng Donna’ s $20 mil li on claim was ironi call y his acknowledgment that it was

completely valid :

[H]is concern that Donna Sturman would be able or could besuccessful in her efforts to impose a constructive trust on all of the

assets in the Estates, therefore leaving nothing for attorneys’

fees, Trustee’s commissions or other Creditors.

51 It is almost eleven years ago that Mr. Spielberg made these statements and neither he nor Mr. Goldberghas ever retracted these statements or distributed plaintiff’s $20 million claim. It is clear that Mr.

Spielberg may have committed perjury in making the statement that the Trustee reserved $20Millionclaim since the proceeds of the sale of the entities Ms. Sturman owned and which were sold by Goldberg

were never segregated, as required by Rule 9027(i), or paid. (The purported, fraudulent and collusive

“settlement agreement” later executed by Mr. Goldberg and Mr. Nisselson, the Trustee illegally

appointed to administer her fraudulent bankruptcy, in which both trustees (Goldberg and Nisselson

exonerated each other from any liability—which is a clear breach of fiduciary duty—is discussed further

in this accompanying Memorandum of Law. Suffice it to say, for the moment, (1) there was no Hearing,

(2) no findings of fact or conclsusions of law, and (3) no notice to Ms. Sturman that she had been put into

a no asset Chapter 7 bankruptcy illegally without any findings of fact or conclusions of law that she was

indeed insolvent. (Given the knowledge of Goldberg and Nisselson that Ms. Sturman was owed

approximately $20 Million, her bankruptcy was a clear obstruction of justice, a continuation of the

bankruptcy fraud committed by the Trustee Goldberg and was nothing more than an attempt to conceal

similar breaches of fiduciary duty sanctioned by this Court and may, indeed, have been a violation of theBorah Act, 18 U.S.C. 155.) Moreover, as the Trustee of Ms. Sturman’s Estate, it was his responsibility

to determine whether the Petition was filed in bad faith, which he never did. See 11 U.S.C. §704 (b).52 As part of the continuing cover up of the Bankruptcy Fraud permeating these Cases, when Ms.Sturman brought actions against the Trustee and MHT, that their fraudulent conduct was about to be

exposed, she was put into an involuntary bankruptcy despite the fact that she was not insolvent, despite

the fact that the Petitioning Creditor split its claims into three attorneys in its own office, and despite the

fact that no notice was ever given to Ms. Sturman about the bankruptcy, the entire proceeding is a nullity

for these reasons and as demonstrated in 11 U.S.C.§349.


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See Transcript of Trustee’s motion to approve the settlement of Donna’s claims, dated December

7, 2001, at p. 5, lines 10-14, at Exhibit “II.” (Emphasis added.)

Similarly, the Trustee himself fully acknowledged the validity of Ms. Sturman’s claim.

As he testified on July 3, 2001:

Mr. Guarino: If Donna Sturman’s constructive trust theory were proved to be valid, what would that mean in terms of the impactupon the Estate?

Mr. Goldberg: It would be enormous.

Mr. Guarino: In what way?

Mr. Goldberg: As I understand it, Ms. Sturman asserts through herconstructive trust theory that she would be entitled to somewherein the neighborhood of 8 to 12 to $13 million53, predicated uponthe theory as equity, as it were of the brothers’ properties and that

if, in fact, Ms. Sturman were correct or her theory was proven,

it would be approximately $5 million in cash that existed at the

time of the filing of the bankruptcy cases would be a fund upon

which Mr. Sturman would be able to attach in connection with

her allowed constructive trust claim, fees which had been paidto professionals and disbursements which had been made to

creditors may be subject to disgorgement requests or

litigation.54

It would be absolutely enormous. Not to mention theobvious cost that would assumed by the estates, Ms. Sturman andothers in connection with that litigation, the time that would beinvolved.

Mr. Guarino: In fact, there might be disgorgement that would berequired; would there not?

Mr. Goldberg: I just testified to that.

53 In fact, Ms. Sturman’s claim has never been disputed by the Trustee, accordingly, since the Proof ofClaim is prima facie evidence of the Claim, it must be allowed. See 11 U.S.C. §502.54 See Exhibit “X”, supra, as to the source and ownership of this fund—it belongs to Donna Sturman.


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See Transcript of Trustee’s motion to approve the settlement Ms. Sturman’s claims, dated July 3,

2001, at pp. 35, lines 4-25, through page 43, at Exhibit “JJ” hereto.

There is no better characterization of these mishandled cases by a corrupt Trustee than the

famous quote of William E. Gladstone, the British Prime Minister for 14 years, “Justice delayed

is Justice denied.” These cases are in fact so old that the Trustee is no l onger on the U.S.

Tr ustee’ s Panel 55 —and yet, this Trustee who embezzled funds to the tune played by the banks

has been allowed by this Court to conti nue even now to collect and control purported assets of

the Estate without any oversight !56

This Court has failed to sanction the Trustee, and, in fact, his rewarded his misconduct:

by failing to remove the trustee or order him to be surcharged, even though, among other things,

(a) essential books and records of the debtors were kept in an uninsured building and destroyed

by arson57 —to the benefit of Manufacturers Hanover Trust Company (“MHT”) along with

55 One must ask oneself how Mr. Goldberg justifies his continued failure to resign as Trustee of theEstates since he is no longer on the Panel, and why, fourteen years after the discharge of the Debtors,

he has yet to close the Cases pursuant to his responsibility under 11 U.S.C. §704. I think the answer is

simple—he knows that the closing of the cases would allow for an immediate appeal of his conduct in

these cases, and his likely sanctioning by the Court.56 I would be remiss in my sense of duty to the system of Justice if I did not file a complaintcontemporaneously with this motion the Executive Office for United States Trustees, Criminal

Enforcement Unit (“Criminal Enforcement Unit”) in support of my request for a criminal investigation of

the facts and circumstances in connection with the involuntary Chapter 7 bankruptcy case filed against

Donna, as well as of those facts and circumstances in connection with the filing of the involuntary

Chapter 7 bankruptcy cases against the Sturman Brothers. I am respectfully requesting an investigation

by the United States Trustee and by the Criminal Investigation Unit because, based upon the defalcations

and corrupt practices in handling these Estates.57 While this Court opined that the Trustee’s failure to insure the property that held all the books andrecords of the Sturman Family Properties was improper, and in violation of 11 U.S.C. §704, “A Trustee

shall ….be accountable for all property received,” he was never surcharged for this tremendous loss. As

the Court stated at the Hearing on July 15, 1996:

“I do not understand why the property was not insured. I do not

know what loss the estate suffered by virtue of their (sic) not

being insurance on the property. I would have thought that


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Chemical Bank (“Chemical”), (which have since been merged into JP Morgan Chase) and other

creditors whose claims could have more easily been refuted through evidence which is now lost,

(b) the debtors were criminally convicted of providing falsified financial statements to their

lenders, after officers of MHT were granted immunity to testify in the brothers criminal trial, yet

the Trustee, MHT and others saw f it to permi t the debtors to be discharged , (c) debtor Bruce

Sturman transferred $3.5 million of assets to an inter vivos trust for the benefit of his wife in

1989, yet in settling his action to void the transfer the trustee, with the blessing of MHT, the

Trustee permitted the debtor's wife to retain a Park Avenue apartment worth at least $1.5

million58

while Ms. Sturman was left to struggle raising three children with no money in a studio

that was mandatorily Mr. Goldberg’s duty to insure that

property. I would have thought he could be surcharged for

failing to insure the property, and I am very troubled to see

from these papers that apparently at the time of the fire there

was no property insurance.” (Tr. at 16, Exhibit “KK ” hereto.)

Yet the Trustee was never surcharged in this case. Accordingly, since the Trustee has no books andrecords to dispute Donna’s rightful claim to the proceeds of her parents’ real estate business and has

taken a position that Donna is entitled to disgorgement in the amount of $7,866,145.10, the amount on

hand at the beginning of the cases, he should be judicially estopped from objecting thereto.

58 Indeed, in light of the conviction of the brothers for bank fraud, the Court inquired of the Trustee howBruce Sturman could possibly have received a discharge, and yet was allowed to retain the proceeds of a

fraudulently transferred co-op worth over $1.5 Million, as this Court stated:

What happened with the complaints objecting to the granting of the

discharge of Bruce Sturman?

Goldberg: It was settled Your Honor.

The Court: What happened to the allegations in there about the co-op?Goldberg: I don’t specifically recall. I know that the co-op remained a

property—remained the property of the Bruce Sturman family.

The Court: You don’t know whether you received any money in the

Estate?

Tr. at 37, lines 14-24, July 3, 2001, at Exhibit “LL”. Mr. Goldberg also let the statute of limitations

expire on a post-petition $700,000 transfer by Howard, as referenced in the Counterclaim by Chemical.

(See Exhibit “MM”.)


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apartment in the upper 90's on the East Side of Manhattan59; (d) the trustee failed to challenge

MHT’s invalid liens and stock pledges to it and failed to conduct any investigation at all

concerning the validity of its liens, (e) the trustee failed to reduce MHT’s proof of claim by the

fair market value of property upon which it foreclosed its mortgage, and (f) the trustee allowed

the statute of limitations to run on an action to recover a $700,000 post-petition transfer from

debtor Howard Sturman to MHT, and then “settled” the matter with the estates, not surprisingly,

receiving nothing of value. In short, the Trustee has been allowed to run amok in these cases

through negligence, greed and to protect MHT and other alleged creditors.60

After significant analysis of Ms. Sturman’s claims by the Trustee, he conceded that her

claims were indisputably valid; as stated by Leonard I. Spielberg, the Trustee’s counsel at a

Hearing in 2001:

[T]he Trustee has determined finally to reject the myopic view ofDonna Sturman’s claims that have prevailed for a decade. He hasconfronted the reality of the fact that Donna Sturman has asignificant claim and that claim is serious enough and large enoughand frightening enough to make a very substantial payment to her justified…there are substantial and meaningful and undeniable justifications for Donna’s claim.

She has presented and there is evidence and there areindications that in the period before the filing of these cases her

property interests were evaporated by her brothers. It appears

likely that the claim she makes that the $6 million or 5 or $6

million of cash that the Trustee came into possession of at the

beginning of the cases were proceeds of the liquidation of

Donna’s assets.61

59 In fact, Ms. Sturman has been subjected to at least 7 evictions and homelessness while the parties tothese proceedings have been unjustly enriched with the proceeds assets of her property.60 “The only thing necessary for the triumph of evil is for good men to do nothing.” Edmund Burke.61 As stated on the record by Glen Rice, Esq., a partner at Otterbourg, the amount of assets holding by theTrustee at the inception of the case was approximately $7,800,000.00. (See Exhibit “X”.)


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If that is so, we believe that you would permit Donna tomake a claim and prove a claim and prevail in a claim ofconstructive trust.

If that happened (sic) Donna would wipe out the estates.

There would be disgorgement and there would be mayhem in thefinal stages of these cases.

It has been shown that the Muriel Estate was evaporated,defrauded, emaciated and defalcated by her brothers. It is clear thatDonna has a prima facie case to take the entire Muriel Estate.

With respect to the administration of the estate and the potential for claims that Donna could make as a result of it, Iremind Your Honor that the Donna and Muriel Estates in whichDonna probably has a 100 percent interest … owned between 25

and 50 percent of a $16 million asset

62

which over ten years theyreceived zero return upon.

The Trustee is doing his job, in following Your Honor’sorder to run that property in derogation of the property rights of theDonna and Muriel estate. There can be no dispute to that.

[T]he argument that because Your Honor issued an orderthat gave the Trustee the right to run the property, he exculpatedthe estates from the claim of property rights is just absurd. It is

unconstitutional. It is an unlawful taking of her property

without compensation. You can’t do that. Nobody can dothat. She has a claim. We used her property without paying

her for ten years.

That claim, if this settlement is not approved, that claimwill be made here. That claim will be heard by Your Honor, and itworries me because it is real and it is clear.

What I ask you to focus on, Judge, is this: In addition to thefactors that are incumbent upon you to address, remember this: Interms of Donna’s constructive trust claim and the other

unliquidated claims she makes, there is no real question that shehas an entitlement and she deserves to be paid for them.

The constructive trust claims could wipe out the estate.

62 Mr. Spielberg is referring to Yorkville Associates, the partnership which owned five lots of real estateon East 86th Street in Manhattan.


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See Transcript of July 3, 2001, at pages 106-110, at Exhibit “NN.” (Emphasis added.)63 This Court repeatedly made clear to the Trustee in this case the proper scope of his duties,

which he never followed, and which this Court has never enforced:

The result is that the trustee always has the duty under the Code toturn over property to the true owner. This is not about trying tomake bucks for the law firm. It is not about trying to make bucksfor the trustee. It is not about trying to pay off the big creditors. Itis about trying to create an estate to be disbursed to whoever itrightfully belongs to.

See transcript of July 15, 1996, at page 15, Exhibit “OO.”

Thus the Trustee’s failures do not end there. The Trustee’s negligent failure to avoid

fraudulent transfers to the Banks; the Trustee’s failure to bar discharge of the indicted and

convicted Debtors; the failure to provide any adequate protection to Ms. Sturman for her 25%

ownership interest under §363 in the Properties sold, which the Trustee sold despite Donna’s

repeated objections to such sales; the failure of the Trustee to hold any Hearings, making findings

of fact and conclusions of law to allow such sales of fraudulently encumbered Properties; the

failure of the Trustee to take the deposition of a single Creditor of the Estate—not one bank was

ever asked a single question; the Trustee’s failure to sequester funds representing Donna’s

legitimate interest in non-debtor Property despite the overwhelming proof of her ownership

known by MHT and the Trustee; the Trustee’s allowed retention of his own law firms and other

non-disinterested attorneys and quid pro quo fee agreements; the Trustee’s failure to be

responsible for his breach of virtually every requirement of his obligations under 11 U.S.C. §

704, including his failure to return the Property to the true owner, Ms. Sturman.

63 These comments in open court fall under the doctrine of judicial estoppel which prevents a party fromasserting a factual position in a legal proceeding that is contrary to a position previously taken by him in

a prior legal proceeding … judicial estoppel protects the sanctity of the oath and the integrity of the


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In addition, this Court incomprehensibly approved a fraudulent bankruptcy of Ms.

Sturman—without any notice to her 64 —in order to settle her claims to the Properties in a

conspiracy involving the Trustee of these Estates and the Trustee of her purported bankruptcy

proceeding, Alan Nisselson.

POINT IV

SINCE THE COURT HAS FOUND DONNA STURMAN’S

INTEREST IN THE CASES TO BE HELD

AS A VALID CONSTRUCTIVE TRUST

SUCH ASSETS ARE NOT PART OF THE ESTATE

A. Property of the Estate.

The commencement of a case creates a bankruptcy estate. 11 U.S.C. § 541(a). The

Trustee has— in 20 years never held a heari ng or made any determination as to what the

proper ty of the Estate was, except what MHT wanted to be part of the Estate .

The estate is defined to comprise “all legal or equitable interests of the debtor in property

as of the commencement of the case,” which definition is supplemented by a listing of several

more specifically described categories of property interests. Id. § 541(a) (1)-(7). Nonetheless,

judicial process." Bates v. Long Island R.R. Co., 997 F.2d 1028, 1037 (2d Cir.), cert. denied, 510 U.S.

992, 126 L. Ed. 2d 452, 114 S. Ct. 550 (1993). 64 Bankruptcy Rule 9007 states that “[w]hen notice is to be given under these rules, the court shall

designate, if not otherwise specified herein, the time within which, the entities to whom, and the formand manner in which the notice shall be given. When feasible, the court may order any notices under

these rules to be combined.” Clearly, this Court has the authority to regulate notices. In Mullane v.

Central Hanover Bank & Trust Co., et al., 339 U.S. 306, 314-15 (1950) the Supreme Court stated

that the “fundamental requisite of due process of law is the opportunity to be heard [and that]

***[a]n elementary and fundamental requirement of due process in any proceeding which is to be

accorded finality is notice reasonably calculated, under all circumstances, to apprise interestedparties of the pendency of the action and afford them an opportunity to present their objections.”

Id.

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“although federal bankruptcy law determines the outer boundary of what may constitute property

of t

application.to.stay.closing.of.cases.10.29.09 (1) (1)

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