Court grants ex-ComputerLand CEO William Millard’s personal bankruptcy application

The founder and former chief executive of computer retail chain ComputerLand, William H. Millard, is undergoing personal bankruptcy proceedings in the Cayman Islands and the US.  

Mr. Millard and his wife, Patricia, obtained bankruptcy protection from the Cayman Islands Grand Court on 3 June, 2013, in an effort to address a tax judgment alleging they owe the Commonwealth of the Northern Mariana Islands $118 million in unpaid taxes and interest. 

The government of CNMI claims Mr. Millard, once listed as one of the richest people in the US, did not pay sufficient tax on the sale of his business in 1987, when he was a resident of the Northern Mariana Islands.  

In 1994, the government of the Northern Mariana Islands obtained from its local courts tax judgments against the couple. Since 2011, it attempted to enforce these judgments through US courts.  

The Millards, who in 1990 left Saipan, the island chain’s largest island, say they were not aware of the tax judgments against them until 2011. 

“Had we been aware of the [tax enforcement] proceedings we would have contested them,” Mr. Millard said in documents filed with the New York Bankruptcy Court. “Despite our efforts to challenge the default judgments there has not yet been any determination on the merits as to whether they are valid.” 

There are now seven separate enforcement proceedings pending in Florida and New York, which the Millards are defending.  

Court documents state the couple no longer has sufficient cash to pay for the accrued legal expenses. As a result, the pair has sought bankruptcy protection from the Cayman courts and are asking the New York court to protect their US assets and stay US court cases pending the Cayman Islands bankruptcy proceeding.  

In 2011, US media reported that Mr. Millard had allegedly disappeared in 1990 and that the “tax fugitive” been “tracked down” in the Cayman Islands with “help from a New York law firm and a small army of private investigators”. Mr. and Mrs. Millard, now 80 and 76 years old, moved to Cayman directly from Saipan more than 20 years ago. In July 2010, the Caymanian Compass published an article about the LifeStar Institute, a foundation launched and funded by Mr. Millard, which described him as a “long-time Cayman resident”.  

The ComputerLand retail chain founder explained in the New York court documents that he moved with his wife to CNMI in 1986 partly to take advantage of the Northern Mariana Territorial Income Tax Rebate, a tax incentive designed to entice US citizens to become residents of the islands. 

Mr. Millard stated he sold shares in his company in September 1987 for $76.8 million and that the couple had paid $4.7 million in taxes on the capital gains.  

One and a half years later, the commonwealth government claimed the tax payment was deficient and placed a lien on the assets and bank accounts of the Millards in the islands. According to Mr. Millard, his lawyer subsequently successfully challenged the lien and explained why no additional tax was due.  

“And as of 1990, as far as I am aware, the CNMI did not disagree with our position and had reversed its earlier stance,” Mr. Millard said. 

The Millards claim that they left Saipan in 1990 after their outspoken criticism of local corruption and their assistance to the Federal Bureau of Investigation in the matter had lead to death threats against them. 

“It did not take long for us to become aware of extensive corruption by public servants of the CNMI. We became vocal opponents to the corruption and we were contacted by the Federal Bureau of Investigation to assist them with its investigation into corruption within the CNMI government,” Mr Millard said in the court documents. “We cooperated with the FBI and this became public information both in the CNMI and in the United States; as a result of media reports confirming my assistance to the FBI, and willingness to testify before a grand jury, we became subject to significant harassment and threats of violence.”  

 

Personal bankruptcy  

Personal bankruptcy cases are rare in the Cayman Islands. There have been no more than half a dozen personal bankruptcy applications in the past 40 to 50 years and “it may well be the first time” a petition has been filed by the debtor, said Justice Andrew Jones in his judgment. 

The default judgments entered against the Millards for US$36.6 million have accrued to a total, including interest, of $118 million for the couple. If this principal liability is taken into account, the Millards say they are insolvent in that their net worth is less than the total debt allegedly owed. 

The bulk of their assets consists of shares in Cayman Islands-based investment holding companies. In addition to real estate in Cayman and Florida the Millards also have assets in Belgium and Switzerland, the court filings show. 

The purpose of the bankruptcy application in Cayman is to present a Chapter 15 bankruptcy petition to the US Bankruptcy Court to seek a temporary stay of the enforcement proceedings there.  

The Grand Court granted the petition and made an absolute bankruptcy order upon which the Millards’ assets are vested in the trustee in bankruptcy. The court appointed Ken Krys and Margot MacInnis as the trustee’s agents. They have already been appointed as the joint voluntary liquidators of the Millards’ investment holding companies.  

The official liquidators of the companies will realise some assets and declare a dividend of 100 cents in the dollar to ordinary creditors. The government of the Marianas will not be able to submit a proof of debt because foreign tax judgments are not enforceable in the Cayman Islands, the judgment said. 

“What, if any, action should be taken in respect of any property of the debtors located in the United States is a matter in respect of which I am not required to make any decision today,” Justice Jones wrote. 

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