Summary
In November 1992, H. Beatty Chadwick’s wife filed for divorce, and during an equitable distribution conference, Chadwick informed the court that he had transferred $2.5 million of the marital estate to satisfy a debt to a company in Gibraltar. However, Chadwick didn’t pay any debt and instead tried taking asset protection measures into his own hands. Inevitably, he failed miserably in this pursuit.
After discovering Chadwick’s fraudulent activity, the court froze his assets and ordered him to return the funds to an account under the court’s jurisdiction. Chadwick refused to comply, so in response, the court issued a warrant for his arrest. The following events go to show just how remarkable this case is by demonstrating the nearly unlimited power a court has to compel payment once they’ve thrown someone in contempt.
Chadwick fled the jurisdiction, and after a violent altercation with law enforcement, was arrested and thrown in jail. He immediately appealed but provided no evidence to prove that he truly had no control over the funds. The court showed him no sympathy, opting to leave him in contempt until he paid his debts.
After 14 long years, more than ten appeals filed, and even a battle with cancer, the court figured that another year in contempt wouldn’t persuade him to pay his debt, so Chadwick finally walked out of prison a free man at age 73. He proudly holds the U.S. record for “longest time in contempt.”
Critical Details and Longer Analysis
Chadwick’s Costly Mistakes
So, what were the specific mistakes that Chadwick made to land him in jail for 14 long and painful years?
When the court investigated his transfer to allegedly pay a debt overseas, they discovered that about forty percent of the funds were returned to an American bank account in Chadwick’s name, about forty percent of the funds were transferred to a Switzerland bank account in Chadwick’s name, and the remaining twenty percent had never actually been transferred. Because the accounts holding the funds were bank accounts in his own name, the court had no trouble finding that he had total control over them and could deposit them into the court’s escrow account at any moment.
Chadwick learned the hard way that courts have absolutely no problem leaving someone to rot in contempt until they pay their debt. For comparison, he spent more time in jail than some prisoners who were convicted of murder! The court’s position hinged entirely on one key point: Chadwick had control of the funds because they were sitting in bank accounts under his name, and as such, he also “held the keys to his jail cell” and could free himself by agreeing to transfer the money to the court.
He was completely immovable and maintained that he had no control of the funds and didn’t know where they were because they were (allegedly) used to pay off the debt. Nevertheless, all evidence pointed to the contrary, so he was blatantly lying to the court. Judges absolutely hate being disrespected, so the court had no problem giving Chadwick the U.S. record for spending the longest time in contempt.
The Illegality of Chadwick’s Actions
Moreover, everything that Chadwick did leading up to his contempt order was blatantly illegal. The funds he transferred were deposited into other accounts in his name, which clearly demonstrated his ability to control the withdrawal of those funds to pay his debts. What’s more, he transferred the funds after his wife filed for divorce and lied about his purpose for transferring them. These actions essentially told the court, “I’m doing this to defraud you!”
What We Would Have Done to Prevent This
Chadwick was a lawyer and presumably acquired his money legally and through hard work. It’s a shame that he spent 14 years behind bars burning money in legal fees by playing “chicken” with the court. A solid asset protection plan would have likely prevented this from happening.
Before the divorce, Chadwick should have known that something unanticipated would happen that could put his assets at risk. Disastrous events like this happen all the time. In fact, it’s not a matter of if they will occur, it’s a matter of when they will occur. Proper asset protection drastically reduces the impact of these painful events in the future.
