Ex-mayor argues $108 million judgment can be discharged in bankruptcy

The ex-East Chicago mayor hit with a $108 million racketeering judgment because of public corruption wants a federal bankruptcy court to dismiss a civil complaint against him that questions whether the judgment is dischargeable under bankruptcy code.

In a brief filed earlier this week, former mayor Robert Pastrick contends that the Indiana attorney general’s adverse action doesn’t prove that he acted willfully or maliciously as required to make the multi-million dollar judgment nondischargeable.

On March 25, the state agency filed a 22-page complaint against Pastrick in the U.S. Bankruptcy Court for the Northern District of Indiana, alleging that five provisions of the federal bankruptcy law exempt this debt from being eligible for discharge through bankruptcy. This came in response to the 2010 judgment against Pastrick and his former aids, who admitted their roles in a “sidewalk for votes” scheme that funneled $24 million in public money to pay for sidewalks and concrete paving in exchange for votes in the city’s 1999 primary election. The AG’s office has been trying to collect that money for the past year, but Pastrick in December filed for bankruptcy to avoid paying the amount.

In the civil complaint, the AG’s office contends that Pastrick’s theft, abuse of power while in office, and federal racketeering means the $108 million can’t be dismissed through bankruptcy proceedings. The five counts spell out the arguments that the debt shouldn’t be discharged because of Bankruptcy Code sections 523(a)(6), 523(a)(4), 523(a)(7), 523(a)(13), and 523(a)(2)(A).

But Pastrick argues that bankruptcy code requires his conduct have been “willful” or “malicious,” and that isn’t the case here.

“There is a clear distinction between an act that is intentional and an act that is intentional and ‘malicious,’” the brief says. “The Plaintiff’s response did not address this distinction and relies on the findings and suggestion that Defendant’s actions were ‘intentional.’”

Pastrick also argues that he didn’t receive any financial benefit from the alleged activities, and that’s a requirement under bankruptcy code in classifying the debt as nondischargeable. He also points out the judgment was compensatory as well as punitive, and that it doesn’t include any specific restitution order so the debt can be written off.

“The mere allegations or findings of morally repugnant activity does not guarantee that any civil judgment resulting therefrom would qualify as nondischargeable,” Pastrick’s brief says.

How the court decides this issue of dismissal could determine how the underlying bankruptcy case proceeds against Pastrick, and ultimately how the AG’s office is able to pursue collecting the $108 million judgment.