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No bankruptcy abuse by ex-mayor

March 16, 2011

Reversing her earlier decision, U.S. Bankruptcy Trustee Nancy Gargula in the Northern District of Indiana determined March 7 that former East Chicago Mayor Robert Pastrick’s income is not too high to qualify for Chapter 7 bankruptcy and his filing should not be considered to be an abuse of the process.

That decision comes in an ongoing legal battle between the ex-mayor and state of Indiana. The Indiana attorney general’s office is trying to collect a $108 million judgment issued last year against the former political titan in a racketeering judgment. The trustee ruled Feb. 7 that based on an initial review of documents, there was presumed abuse in Pastrick’s bankruptcy case filed in December. She had 30 days to file a motion to dismiss the Chapter 7 case or convert it to a category that required repayment, but she changed her stance after reviewing the case material and other documents filed since then.

Responding to the trustee’s finding, the AG’s office issued a statement saying this doesn’t change the state’s position that the full racketeering judgment isn’t dischargeable by bankruptcy. Details haven’t been finalized on what would happen to any funds collected in this case, spokesman Bryan Corbin said, but he noted the AG’s office routinely collects debts and judgment amounts on behalf of government clients and has a process for handling that money.

The $108 million judgment stems from a sidewalks-for-votes scheme that played out in the 1999 Democratic mayoral primary election, to which Pastrick and two of his top aides admitted. Last year, U.S. Senior Judge James Moody issued a ruling in State of Indiana and City of East Chicago v. Robert A. Pastrick, et al., No. 3:04-CV-506, ordering the $108 million in damages. That collection activity has been put on hold by these bankruptcy proceedings.

 

Rehearing: "Bankruptcy delays collection effort" IL Jan. 5-18, 2011

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