A bankruptcy trustee is asking a judge not to allow former investment adviser William F. Nicklin to discharge personal debts because he allegedly hid assets from his creditors.
Daniel J. Ventricelli, the trustee, filed an adversarial proceeding against Nicklin on Sept. 20 in U.S. Bankruptcy Court in Poughkeepsie.
Nicklin had made false declarations in a Chapter 7 liquidation case, he claims, “to conceal the existence of material assets.”
Nicklin’s attorney, Michelle Trier, responded in an email that the trustee’s complaint “relies on wholly unfounded and baseless allegations. Mr. Nicklin expects to prevail in court.”
Nicklin, of Newburgh, had once operated NSB Advisors LLC in Fishkill with as much as $1.2 billion in assets under management. The business failed in 2015.
He filed the Chapter 7 petition in January, declaring $10.3 million in assets and $16.4 million in liabilities. Now he works for Circle N Advisors LLC in Fishkill.
In Chapter 7 cases, an impartial trustee is appointed to administer the case and look out for the interests of unsecured creditors. Ventricelli is experienced in forensic accounting and fraud investigations, according to his profile with BDO, an accounting and advisory firm where he is managing director of the New York office.
He describes Nicklin as a “highly sophisticated investment adviser and securities trader” who’s aggressive trading strategy resulted in the loss of $40 million in six months in 2012.
He was trading on margin at C.L. King & Associates Inc., that is, borrowing money from the broker to buy securities.
When the value of securities in a margin account declines dramatically, the broker can require the investor to put more cash or securities in the account.
C.L. King made that demand, according to the bankruptcy complaint, and when Nicklin failed to do so the broker liquidated the account.
C.L. King got back $26.6 million but was still owed $13.1 million.
In 2016, the broker won an arbitration award for that amount, plus interest. In 2017, Supreme Court in Manhattan confirmed the award, then totaling $16.2 million.
Nicklin acknowledges the debt in his bankruptcy filing. The problem, according to Ventricelli’s complaint, is that he did not acknowledge significant assets.
C.L. King had hired the Seyfarth Shaw law firm to identify assets that could be used to satisfy the $16.2 million judgment. Seyfarth Shaw shared some of its findings with Ventricelli.
Seyfarth Shaw found that Nicklin had formed Riverlife Investments LLC in 2011, “to place certain property beyond the reach of his creditors,” Ventricelli alleges.
Assets worth millions of dollars were put into Riverlife for no consideration, Ventricelli stated. Nicklin also allegedly formed the William F. Nicklin Grantor Retained Annuity Trust, with himself as beneficiary, and transferred in a 45% interest in Riverlife “in an attempt to further protect his assets from creditors.”
The trustee says that the first round of bankruptcy schedules, filed in February, omitted a $35 million loan that Nicklin had made to Horsesmouth LLC, a web startup managed by his son. He also did not list shares of stock in four companies, according to the complaint, and a $200,000 loan to his son.
Amended schedules filed in May did list the Horsesmouth loan and stocks.
Ventricelli argues that the revised schedules do not negate “the falsity of the oath” attesting to the February schedules. He also states that Ventricelli has withheld bank statements regarding property transfers, “for the purpose of delaying or obstructing the trustee’s investigation.”
Therefore, the trustee says, bankruptcy court should deny Nicklin a discharge of his debts.