Asset transfer before school's bankruptcy ruled illegal owner must return property

February 05, 1992|By Timothy J. Mullaney

A U.S. Bankruptcy Court judge has ordered the owner of a defunct chain of career training schools to return property worth more than $750,000 to its parent company after finding that he transferred the property to himself and his family shortly before the company filed for bankruptcy in 1990.

David Lawson, the owner of National Business School, was ordered to return a $650,000 commercial property in Gaithersburg and almost $133,000 to the school's parent company, Market Tire Education Services Inc., according to an order signed Monday by Bankruptcy Court Judge L. Edward Friend II in Rockville.

Mr. Lawson is the sole owner of Market Tire.

The court also authorized James P. Koch, a Baltimore attorney and the court-appointed trustee in the case, to sell the Gaithersburg property.

Market Tire Educational Services ran auto repair schools in Washington and on Hilton Avenue in Baltimore, said Michael Waller, a spokesman for Mr. Koch. The company also ran a law enforcement school in Washington, and Mr. Lawson's office was in Rockville.

The schools closed in late 1989 or early 1990, said Michael Tankersley, an attorney for Public Citizen Litigation Project in Washington, who represents former students at the Washington area schools in a class action suit filed against the U.S. Department of Education and others.

The suit claims the former students paid tuition for National Business School training with federally guaranteed student loans and were stuck with loan bills when the school closed before they completed their education. Other students represented in the suit allege their education was worthless and claim they were defrauded, Mr. Tankersley said.

The students seek cancellation of their loan obligations. Mr. Lawson and Market Tire are not defendants in that action.

The transfer of the real estate, a Gaithersburg tire store, to a partnership led by Mr. Lawson and his wife was designed to raise money to repay tuition to dissatisfied students, but they were never paid, Mr. Koch and Mr. Tankersley said.

Mr. Koch said Mr. Lawson converted company equipment, a Porsche and life insurance policies worth $67,000 to himself or his family. Judge Friend dismissed Mr. Koch's request to require Mr. Lawson to return an additional $182,000 he had transferred from the company to himself and $78,000 in payments to a bank creditor for land titled to Mr. Lawson personally, said Stephen A. Bogorad, Mr. Lawson's attorney.

"While a lot of money was paid out of the company, David Lawson also put a lot of money in [the company] and paid a lot of bills," Mr. Bogorad said. He said Mr. Lawson put $500,000 into Market Tire Educational Services in the months before the bankruptcy, personally and through another company he controls.

Market Tire Educational Services filed in August 1990 for court supervision under Chapter 7 of the U.S. Bankruptcy Code, which applies when a business owner plans to liquidate the company rather than restructure it. The company had more than $2 million in liabilities and virtually no assets at the time, Mr. Koch said.

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