Boston CEO's Bankruptcy Leads to Sale of Multi-Million Dollar Home

October 19, 2011,

IMG_4082_10192011.jpgA Boston bankruptcy judge authorized the sale of a home in Cape Cod in the bankruptcy case of David K. Drumm, an Irish-born former bank CEO who owes more than $14 million to creditors. The bankruptcy trustee expects to sell the property for $3.9 million, according to Bloomberg Businessweek. Drumm purchased the Chatham, Massachusetts house in 2008 for $4.6 million. He lists a property in Wellesley, Massachusetts, allegedly valued at $1.85 million, as his home address in court papers. The trustee will collect an additional $150,000 for personal property still located at the Chatham house. Drumm's case demonstrates the potential complexity of large bankruptcy matters.

The bankruptcy case is just one of several legal matters he faces. Drumm was the chief executive officer of Anglo Irish Bank, a Dublin-based bank that sent him to Boston in the 1990's to create an American base. After several years building the bank's business in the United States, he returned to Dublin in 2003 and became CEO of the bank in 2005. He substantially increased the bank's lending until the global credit crisis began in 2008. Once the crisis hit, the bank needed a guarantee of its deposit from the Irish government, and this led to the discovery of various irregularities in the bank's finances.

Drumm resigned as CEO in December 2008 in the wake of a scandal involving hundreds of millions of euros worth of loans allegedly made to bank directors. Multiple major investors sued the bank, alleging various acts of fraud. The Irish government nationalized the bank in 2009, leading it to be delisted from stock exchanges in Ireland and Great Britain. As of late 2010, Ireland estimated the cost of the bailout of the bank at about 29 million euros. The bank was merged into a new company in July 2011, called the Irish Bank Resolution Company.

Drumm filed for Chapter 7 bankruptcy in Boston in October 2010. In his petition, he declared debts totalling $14.2 million and assets totalling $13.9 million, which includes the two Massachusetts houses.

Anglo Irish sued Drumm in Dublin in August 2011, alleging failure to repay 8 million euros (about $11 million) in loans. Back in Boston, the bankruptcy trustee filed a complaint in September alleging that Drumm and his wife acquired the Wellesley house through a "sham trust," part of several transfers to Mr. Drumm's wife to put assets out of his creditors' reach.

A Chapter 7 bankruptcy would allow Drumm to keep some exempt property, but many of his assets can be sold by a court-appointed trustee to pay his creditors. Some unsecured debts can be discharged during the bankruptcy proceeding, but any liens such as a mortgage would survive the conclusion of the case. The trustee and the bankruptcy court must contend with the various claims, including the Dublin lawsuit and the allegations of fraudulent transfers to the wife, in liquidating Drumm's estate to pay his liabilities.

Boston bankruptcy attorney Dmitry Lev helps people through the process of Chapter 7 and Chapter 13 filings. For a free and confidential consultation, contact the firm through their website or at (617) 556-9990

Web Resources:

Guide to Chapter 7 Bankruptcy, United States Courts website

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Bankruptcy Laws - not stimulated by stimulus, Boston Bankruptcy Attorney Blog, April 10, 2009

The foreclosure that never was, Boston Bankruptcy Attorney Blog, February 11, 2009

Goodbye Second Mortgage! Boston Bankruptcy Attorney Blog, June 9, 2008