In a recent case involving a Colorado asset protection attorney, Boxer F2, L.P. successfully challenged the alter ego status of the attorney’s entities, leading to an in-depth analysis of alter ego in the asset protection context. The attorney, William Bronchick, had three entities targeted by Boxer – Bronchick & Associates, P.C., Bronchick Consulting Group, LLC, and Hasaki Property Holdings, LLC. Boxer obtained judgments against William in 2016 and sought relief against his entities to collect the debt.
William’s questionable transactions, such as improper loans between his entities, commingling of funds, and transfer of assets to evade creditors, led the court to find him as the alter ego of all three entities. The court also determined that William misused the entities to harm Boxer by avoiding payment. While Boxer was allowed to pierce the veil of Bronchick Consulting Group, LLC, the court protected Bronchick & Associates, P.C. and Hasaki from liability due to the potential harm to innocent parties like William’s ex-wife, Caroline.
Caroline, who was a nurse and co-owner of Hasaki, was deemed an innocent ex-spouse by the court, as she had no knowledge of William’s fraudulent activities. Her testimony played a crucial role in protecting her interests in Hasaki from being affected by the alter ego piercing. The court also recognized the potential harm to the clients of Bronchick & Associates, P.C., leading to the protection of that entity from veil piercing.
The case highlighted the importance of maintaining the integrity of entities in asset protection planning. Any irregular or improper transactions, commingling of assets, or lack of documentation can jeopardize the protection offered by entities. Furthermore, the case demonstrated the vulnerability of single-member LLCs in asset protection, as they are more susceptible to alter ego challenges due to unity of ownership and control.
Professional entities are not immune to creditor attacks, despite certain restrictions on ownership. Creditors can still access the income or assets of professional entities through various legal avenues. The case also underscored the challenges faced by innocent spouses in proving their lack of involvement in fraudulent activities, as Caroline had to defend her interests in court against the alter ego piercing.
Overall, the District Court’s decision in this case showcased the importance of proper entity structuring, documentation, and operation in asset protection planning. The outcome also serves as a reminder of the potential consequences of fraudulent or improper financial transactions when facing creditor challenges.
