For all intents and purposes, you could say Fred Pinneo got screwed. You may remember the case from a short while ago - the largest property seizure in Alaska's history for collection of child support payments yielded $115,000 cash, and was covered in most Anchorage media. In that coverage, Pinneo was portrayed as a `deadbeat dad,' who had left his family on welfare for nonpayment of an egregious amount of child support.In reality, Pinneo only owed $7,200. CSED, the Alaska State Child Support Enforcement Division, seized his assets, which included a one million dollar a year business, in direct violation of a court order and in violation of the automatic stay invoked by a bankruptcy filing. Furthermore, Pinneo was current on his child support payments until the time he broke his arm in seven places, was unable to work, and couldn't afford to pay the $1,800/mo. he owed.
"I'm tits up," says Pinneo, "CSED already ruined my reputation in the media. According to the April 20th (1994) agreement, [one lump sum] took care of everything. Yet without my knowledge, they illegally seized over 20 pieces of equipment - all the shop equipment, office equipment, everything. It was appraised at $250,000, and they knew I only owed $7,200. They just took it, and used it to get beneficial media exposure at my expense."
This Monday, May 22, the Federal Bankruptcy Trustee will file a lawsuit on Pinneo's behalf seeking sanctions against CSED for violations of bankruptcy laws and improper seizure. In a memo dated May 11, 1995, Michael Mills of Bankston and McCollum, who represents the Trustee, sent CSED a copy of the Motion for Sanctions "as a courtesy prior to filing."
Pinneo also plans to file a civil suit in the matter and says, "I'm not gonna quit until these people are brought into court on felony charges." Total damages could amount to millions of dollars if it were deemed the seizures were illegal, since he's lost two years' of business, and had his equipment sold for less than half of its value at auction - all because he was a few days late on a $7,200 payment.
CSED - Bill Collectors With a Bad Reputation
This isn't the first time CSED has mercilessly dicked with people. I think we all agree that fathers bear some responsibility for the children they create. But collecting money in a way that allows those fathers to continue living productive lives is also important. On numerous occasions, however, CSED has not lived up to these high standards.
Ken Kirk and Gary Maxwell are experts on CSED. Kirk is an attorney specializing in family law and litigating against CSED. Maxwell is a paralegal whose full-time job is dealing with CSED cases. In just a few years, this pair has seen hundreds of cases which indicate to them a pattern of unlawful behavior on CSED's part.
"It's CSED standard tactics to come up with a number and make you disprove it," says Kirk. He explains the complex web of scams that have been going on for years. One of the more significant - billing for back arrearages that are not legally collectable. "They don't let a little thing like the law get in their way," adds Maxwell, explaining that if 80% don't know their rights and pay, the 20% that challenge these bills are "just the cost of doing business."
Now, if you talk to CSED you'll get a different story. They say they have nothing but the welfare of the children at heart, and their mission is to bring `deadbeat dads' to justice. According to Elizabeth Vasquez, Asst. Attorney General, CSED is willing to accommodate its debtors with easy payment plans, though according to many former `deadbeat dads' I spoke with this was not an option for them. One example that hit close to home for me was Bob Finnegan, my collaborator who dealt with CSED a couple of years ago. They would not negotiate with Finnegan at all, even when he became unable to make his child support payments, and told him they didn't care about the burden that hefty payments he couldn't afford would place on him.
CSED says that Pinneo was a classic deadbeat, referring to allegations that he had a cocaine problem as well as other problems with the law, and that he had no intention of paying his debts to CSED. "This was not a premature seizure," says Vasquez, who worked closely on this case, "It was cleared through the Deputy and Director of CSED. All the facts were considered - not just what he owed, but also his intention to pay." Yet, as you'll soon see, she and the rest of the CSED staff did a poor job of justifying their actions in light of the facts and the law.
The Tale of the Pinneos
The tale of the Pinneos, their subsequent divorce settlement, and Fred's wild ride through child support hell and the bankruptcy court structure is long and involved. Financial figures, legal documents, and differing stories muddy the waters that define fact and fiction, leaving us in the murky realms of perception, obfuscation and argument. Pinneo came to Anchorage in the mid-70s with $100 in his pocket and the shirt on his back. He worked, saved up money, married Sharon Rookus (who, along with her attorney Alan Bailey, refused to comment for this article), and bought a house. As time went on, he bought a piece of snow removal equipment and began to plow under contract. A few years and a half million dollars of equipment saw A&A grow into the largest snow removal businesses in Anchorage.
Pinneo was a success story, and when he and his wife divorced, they spilt the stuff up. She got the house and a wad of cash, he got the machines and the office space. She got the kids, and he paid child support to the tune of $5,000/mo., a figure Fred says he was happy to pay, until one year the snow stopped falling.
A&A came out the next year in the red, and Pinneo suffered an injury which made him incapable of earning money, while at the same time costing a great deal to repair. He and Rookus resettled on April 20, 1994, the date things start to get confusing.
The Sordid and Complex Web of Facts, Laws, and Finances
The essence of the resettlement was this: Pinneo wasn't making as much money, and they agreed to reduce the amounts so Fred could continue to make payments. His child support was reduced to $1800/mo, and at the same time his previous child support, alimony, and property agreements were paid off in a lump sum. This left Fred on August 18th owing Rookus $5,000 on the property settlement, $7,200 in child support, plus about $18,000 more to cover AFDC payments made to Rookus in lieu of his lacking child support/alimony payments.
This is where one of our first big problems arises - nobody finds out about the modified agreement in time, and CSED still thinks Pinneo owes $130,000 based on the original 1993 divorce settlement. CSED takes Pinneo to court in an Order to Show Cause for contempt. Shortly before the trial, they are made aware of the agreement and agree in court to abide by its terms.
CSED made their seizure based entirely on the child support owed, which according to the April 20th Agreement, the Aug. 18th hearing, and the Feb. 13th Court order reversing CSED's decision to seize $130,000 worth of stuff, should definitely have been $7,200.
The seizure of $130,000 worth of equipment was made on Sept. 9th, 1994 with great media fanfare, and Pinneo declared Chapter 7 bankruptcy the next day. CSED based their justification on statements made during the April 20th hearing. The key phrase is that "any breach of this agreement will be deemed a material breach," meaning that it would invalidate the whole agreement.
Yet during both the April 20th and Aug. 18th hearings, the transcripts make clear that any changes to the amount Pinneo owed had to be authorized through the court first. On April 20th, Ford says that if for some reason Pinneo can't make the payments, "Our position would be that the matter would come back to Your Honor and Your Honor would make a determination whether there was a reason to modify Mr. Pinneo's child support." Bailey agreed, "That's fine, Your Honor." On Aug. 18th, Judge Reese himself clarified the importance of getting clearance through the court before CSED decided on a different amount:
VASQUEZ: So, there may be the additional issue of whether...
COURT: He doesn't have notice of what -- he doesn't have notice of that. What he has notice of is that you want $7200. That's what he has.
VASQUEZ: I understand. But, I mean in addition...
COURT: We're not setting a hearing today for something that may or may not come up.
VASQUEZ: Right, but...
COURT: If you want to supplement your motion and try to combine the hearing on some supplemented issues then you'll need to file the appropriate paperwork to do that.
VASQUEZ: That's fine
COURT: And give him plenty of notice of what it is.
Furthermore, the no-sale auction was conducted on Oct 1, after Pinneo had declared bankruptcy and just days before a scheduled court date on the matter. Unquestionably, the Oct. 10 court date would have been the most appropriate venue to deal with the matter.
Pinneo's excuse for why he didn't pay immediately is extreme - he maintains he wasn't allowed to. Pinneo had agreed to sell an ice grater to local businessman Carl Black for $8,000 and give the money to CSED to cover his child support debt. His attorney, Bill Ford, cleared the sale with CSED, and Inspector Nagle accepted the deal, but said the check would have to come straight from CSED. Pinneo says he sold the equipment and tried to pay Nagle in person. "I showed him the check, and he said `Go to hell. You have to pay me $130,000 cash or nothing to get your equipment back,'" says Pinneo. Nagle vehemently denies this allegation, saying instead he never heard from Pinneo until Ford called Nagle eight days before the court date on this issue, and two days before payment was due, to say he didn't know where Fred or the money was.
This was the breach - Fred hadn't been found and his money was two days overdue. And thus, reasoned CSED, Fred must owe $130,000 according to the terms of the original agreement. Bill Ford vehemently disagrees, saying, "All this about breaching the agreement is nonsense. From my point of view, we all agreed in court that Fred owed $30,000. If there was a material failure, Judge Reese said he'd make that determination." Reese never got the chance.
Larry Compton, Federal Bankruptcy Trustee of Pinneo's assets, was not happy about the seizure. "We were surprised they'd do what they did," he says, "They took it upon themselves to say [Pinneo breached] the modified agreement. But that's something a judge has to do; it's not automatic. That's why we believe CSED was wrong when they said $130,000."
Furthermore, says Compton, "When you file bankruptcy, all collection efforts are supposed to stop - it's called an automatic stay. CSED violated that. They already had the equipment at the time Fred declared bankruptcy, but they shouldn't have held an auction after he filed."
CSED was remarkably slow to reduce the amount that Pinneo owed in accordance with the court's rulings. During the Aug. 18th hearing, Vasquez said, "We were not aware at the time that this was filed that there was an agreement that was entered in front of the Court on April 20th of this year. I have asked Mr. Bailey to have that reduced to writing and have CSED incorporate into their accounting the terms of that agreement so that we have the correct numbers."
This was not done until a third court order reiterating that Pinneo owed only $7,200 was issued in February of this year. Nagle's excuse for why CSED failed to incorporate those figures into its accounting for a full nine months was, "Mr. Bailey did not reduce it to writing." CSED deliberately overlooked the order both in their accounting and in their decision to seize Pinneo's equipment, refusing to fix their accounting until another court order, this time in plainer language, crossed their desks Feb. 13th, 1995.
Whatever the reason for their delays, they should have acknowledged that Pinneo did not owe $130,000 but in fact owed $7,200 somewhere near the time that became true. Was CSED more concerned with money and media exposure than with honest dealings? "We're very flexible as far as getting people to pay us," says Vasquez, "We like to get paid, by that I mean CSED likes to get paid. CSED likes money."
When I asked Nagle and Petri if, in hindsight, they made the right decision, their response was tremendously evasive. "Knowing what we knew at the time?" Nagle asked me.
"No," I replied, "Knowing what you know now."
"Knowing what I knew at the time," said Nagle, "I'd do it the same way again. What I know now isn't relevant."
Who benefited from all of this? Pinneo estimated that if his equipment had not been seized, he would have made hundreds of thousands of dollars this year alone given the heavy snowfall - certainly enough to pay off his debts and settle things with his ex-wife and CSED. But, with the goose that lays the golden egg mercilessly slain, it seems like everybody but the lawyers lost - Pinneo, the state, his ex-wife, his children, and the state officials who took the risk of seizing his stuff illegally.
Though CSED officials alleged that Pinneo would have gone bankrupt without their seizure, Compton, whose job is to manage Pinneo's assets, said he believes "Pinneo would be thriving today if his stuff hadn't been seized."
Right now, Pinneo is trying to get his life back together and is negotitating with several law firms regarding his civil case. He recently moved into an apartment, leased a truck, and gained custody of his eldest daughter. "I've been ruined by those guys," says Pinneo, "I was a millionaire."
Freelance photojournalist R.S. Finnegan contributed immeasurably to this report.