Rathbun Realty, which managed nearly 800 properties in Tucson before losing its license in March, was ordered this week to pay $950,000 to creditors after filing Chapter 7 bankruptcy in September. A Chapter 7 filing — liquidation bankruptcy — allows the debtor to sell nonexempt property and transfer the proceeds to creditors.
Bankruptcy law determines who gets the first crack at that money: Those involved with administrative expenses of the estate — like attorneys, realtors and those involved in recovering estate assets — are first on the list of payouts After that comes company employees and then deposit-holders, including tenants and homeowners, said Isaac Rothschild, attorney for the Chapter 7 bankruptcy estate.
If the $950,000 judgment were paid in full, all creditors would likely get what they are owed. But that’s unlikely considering Rathbun’s resources, Rothschild said.
“It’s my anticipation that they just don’t have that many assets,” he said.
The bankruptcy settlement is the latest in a string of bad press for Rathbun and its owners.
In February, the Arizona Department of Real Estate revoked the licenses of designated brokers George Glover and Cassandra Arnold and their two companies — Rathbun Realty and Rathbun Property Management — in part due to “failure to keep records, perform accountings, respond to complaints and respond to the department’s request for documents.” Rathbun Realty President Bette Glover’s brokers licenses was revoked in 2006 for trust account irregularities.
That followed a cease-and-desist order from the Arizona Department of Real Estate in September 2012 for trust account irregularities.
Rathbun reported to the state last fall that an internal audit revealed their trust accounts were $1.8 million short, but they failed to respond to the state’s requests for records when the state tried to conduct its own audit, the cease-and-desist order said.
In August 2012, Rathbun filed a police report saying a former employee had embezzled money from its trust accounts that held rent and deposit payments that go to the company’s clients. At the time, Rathbun’s Bette Glover said the company was committed to paying back its clients. But soon after, Rathbun filed for Chapter 7 bankruptcy.
A criminal investigation into the embezzlement charges is still ongoing. The FBI is leading the inquiry and Tucson Police Department’s fraud unit is assisting, said Sgt. Chris Widmer, spokesman for the Tucson Police Department. FBI spokeswoman Jennifer Giannola said she could not comment on an ongoing investigation.
Adam Bleier, criminal defense lawyer for the Glovers, said his clients would not comment for this story.
Read the full story in Saturday's Arizona Daily Star.