TV Star Found Guilty of Bankruptcy Fraud

People who filed bankruptcy petitions often lose sight of their responsibility to be honest in their statements to the court and to the bankruptcy trustee. Both the court and the trustee possess the power to impose civil fraud penalties on persons who make material misstatements to the court. In a recent order in a New York business bankruptcy case involving TV star Chris Laurita of “Real Housewives of New Jersey,” the trustee demonstrated the scope of this power.

Laurita caused his clothing firm Signature Apparel to file a bankruptcy petition in 2009. During the course of the lengthy proceeding, the bankruptcy trustee Anthony Labrosciano commenced a lawsuit against Laurita and his wife, Laurita’s brother and sister-in-law, and another brother for improperly using Signature Apparel cash to pay for private jets, lavish vacations and expensive cars.

Laurita’s brother and sister-in-law settled their portion of the claims in 2014 for $1 million. The remaining defendants refused to settle and continued the litigation through trial. Last week, the bankruptcy judge handed down an order finding Laurita and a management company, Iconix, liable for fraud, negligent misrepresentation, and tortious interference with contract for diverting assets belonging to Signature to his own use. The court also ruled that Laurita was liable for breach of his fiduciary duty, and Iconix was found liable for abetting Laurita’s breach of duty. The court also found that New Star, another company owned by Laurita, was liable for $1.8 million in damages for unjust enrichment. Another hearing will be necessary to determine the amount of damages owed by Laurita and his companies.

The Lauritas appear to have been dishonest in their testimony in the case. They claimed that they were insolvent, but Laurita returned to the cast of the TV program, and he and his wife were able to cure a default in the mortgage loan on their home. The trustee’s attorneys also cited “publicly available information” about the Lauritas remodeling their home and undergoing plastic surgery.