The Morning Report
Get the news and information you need to take on the day.
Three days after a judge discharged a third bankruptcy of former Southeastern Economic Development Corp. Finance Director Dante Dayacap, his attorney sent a notice to the court.
The notice, filed Aug. 7, added four creditors to Dayacap’s list: San Diego’s Ethics Commission, Redevelopment Agency, city attorney and SEDC. The reason given was “lawsuit.”
Dayacap was a central figure in last year’s bonus scandal at the public redevelopment organization in which he, then-President Carolyn Y. Smith and other employees received more than $1 million in unauthorized funds. He left SEDC in November and filed for Chapter 7 liquidation bankruptcy in April.
Neither the city nor SEDC has filed suit against Dayacap so the agencies were mystified at their appearance as creditors.
“Why did they list us on the bankruptcy?” said city attorney spokeswoman Gina Coburn in an e-mail. “We do not have any idea.”
Stacey Fulhorst, executive director of the city’s Ethics Commission, would not confirm or deny an ethics investigation against Dayacap, citing the commission’s policies.
Bankruptcy experts said Dayacap could have listed the city agencies for a simple reason: to box out future action against him. If a bankruptcy lists creditors that could have claims arising from actions taken prior to the debtor’s filing, then a successful discharge could nullify those claims.
“It’s a wide defensive move,” said Scott Ehrlich, a professor at California Western School of Law. “You’ve been involved in dealings where people are likely to sue you and you file for bankruptcy to avoid all that.”
Some caveats. Certain governmental fines and penalties, such as those potentially imposed on Dayacap, could be exempt from the bankruptcy’s discharge. Also, Dayacap listed the four city agencies as creditors after his bankruptcy had been discharged. That lack of notification might give the agencies an opening they wouldn’t have had otherwise.
“The thing that troubles me is the timing,” said Arnold S. Rosenberg, an assistant dean at Thomas Jefferson School of Law.
Rosenberg added that an affected agency could ask the court if their claims had been discharged or seek to overturn the bankruptcy’s discharge.