Legal troubles continue for Valparaiso businessman
BY TERESA AUCH SCHULTZ firstname.lastname@example.org March 2, 2014 9:56PM
Johnny Mathis Jr. is shown in the Livemercial offices in happier times. | Post-Tribune File Photo
Updated: April 4, 2014 6:12AM
A Valparaiso businessman is watiting to hear whether a lawsuit can proceed — a lawsuit that accuses him of trying to hide almost $1 million to avoid losing it through bankruptcy.
U.S. Bankruptcy Trustee Daniel Freeland filed the complaint in August 2012 against Johnny Mathis Jr., perhaps best known for his online video ad company Livemercial. The lawsuit claims that Mathis moved the money from one of his other companies, Livemercial Aviation, to another, CPA Warehouse, in order to keep the money from being taken during bankruptcy.
Livemercial Aviation, created to flip small airplanes into personal luxury aircraft, filed bankruptcy in 2010 after it failed to sell the first plane it renovated and fell behind on the $6.3 million loan used to buy the plane.
The plane was eventually repossessed, but Livemercial Aviation still had about $1.5 million in debt to other creditors. Freeland, assigned to oversee the bankruptcy case, has argued that Mathis has never adequately explained why he transferred $990,000 to one of his other companies shortly before Livemercial Aviation filed for bankruptcy.
Freeland filed a complaint in August 2012 against Mathis and CPA Warehouse. asking permission to order the return of the money, calling it a “fraudulent transfer.”
“The transfer was made with the actual intent to hinder, delay or defraud an entity to which the debtor was or became indebted,” the filing says, adding that the transfer also made Livemercial Aviation insolvent and the company received nothing of value in return.
The case has been stuck since then, however, because Mathis filed a motion to dismiss the complaint. One of his arguments is that Freeland waited too long to file it.
At issue is when Freeland officially became the trustee, which would start the clock on how long he had to file a complaint against Mathis.
U.S. Bankruptcy Judge J. Philip Klingeberger wrote in an order on Jan. 14 that the issue swings on whether Freeland became the official trustee at a creditors’ meeting on Aug. 30, 2011, which would mean his filing of the complaint on Aug. 31, 2012, was one day over the year deadline he had, or if he became trustee after that date.
Klingeberger ordered a hearing on the issue Feb. 7 but has still not issued a ruling.
Mathis’ attorney, George Galanos, said he did not want to comment on the case until the judge had ruled. Frederick Carpenter, who is acting for Freeland in the case, could not be reached for comment. Through his attorney, Mathis declined to comment.
Because they are still waiting to see if the case is dismissed, Mathis and CPA have not answered the allegations made by Freeland. However, Mathis has said in previous filings in the Livemercial Aviation bankruptcy that he had always been open about the transfer and never tried to hide it.
This is not the only legal problem Mathis is facing. Horseshoe Casino is suing him in Lake County Superior Court for $1.8 million the casino loaned him over a period of months in 2006 to gamble with.
Horseshoe originally pressed charges against him in Lake County for theft but dropped those charges in September 2012 after he paid back $531,000, which Lake County Prosecutor Bernard Carter said at the time covered expenses and taxes involved with the loan.
The casino filed suit a few months later, seeking to recoup triple the money he took, or $5.4 million.
In its lawsuit, Horseshoe claims that Mathis told the company he made $1 million a year in income from his business and had $10 million in business assets.
He originally asked for a loan of $200,000 but kept increasing the amount borrowed until November 2006, when the casino told him he had to make a payment before they would loan him more. He wrote a check for $200,000 that day — a check that eventually bounced, as did other checks he wrote, according to the lawsuit.
The company says in the suit that it believes the most money Mathis ever had in a bank account he used as collateral was $4,899.
Mathis has been representing himself in the case ever since Galanos filed a motion to withdraw, saying Mathis was not cooperating.
Ameristar Casino in East Chicago is also suing Mathis in LaPorte County for $209,200, although it is not clear what the debt is for. FirstMerit Bank is suing him, Livemercial and Livemercial Aviation in LaPorte to collect on a judgment from an Ohio court for $650,194.
He also faces criminal charges in LaPorte County, but has entered into a pretrial diversion program that could see those charges dropped. They stem from his arrest in February 2013 on a Class D felony charge of domestic battery. Prosecutors agreed last month to reduce that to a Class B misdemeanor battery and to dismiss the case entirely if he successfully completes six months of pretrial diversion.
Mathis was hailed by officials when he first brought Livemercial to Valparaiso more than a decade ago. The Society of Innovators named him one of their innovators in 2007.
However, Livemercial defaulted on its rent in 2011 and became inactive with the Indiana Secretary of State’s office in 2012. Another company named Livemercial USA was created in 2011 and lists Galanos has the incorporator. It was unclear if that business was connected in any way to the original Livemercial.
Mathis still refers to himself as CEO of Livemercial in emails. The company has a website, but all it says is: “Coming soon.”