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Dionne Warwick's NJ Bankruptcy Hits a Snag with IRS and Trustee

Posted on Jun 11, 2013

Dionne Warwick is in the news again as the IRS seeks to collect over $7 million in back taxes, as reported by the Wall Street Journal yesterday.  A search of the court docket shows that the IRS has made a motion, to be heard on June 17, to lift the automatic stay in the bankruptcy to allow them to go after two corporations in which they say Warwick has an interest or that are "alter egos" of the singer herself.

As it turns out, the IRS placed liens on two different business entities (Star Girl Productions, Inc., and KMBA Productions) in four different counties (one in NJ, two in California, and one in Florida) prior to the bankruptcy being filed. The only problem is that for the 1998 taxes, someone misplaced a decimal point and switched a number for the amount of the taxes owed, liening for $151,217.45 instead of $1,515,217.45.

So What Does the IRS Want?

The taxing authority's motion is to allow them to amend their liens to the proper amount and to collect them.  In addition, the IRS had levied, and come into the possession of, moneys owed to those corporations by third parties prior to the bankruptcy filing.  They make this motion to allow them to apply those funds to the back taxes owed.

Naturally, Ms' Warwick's attorney disagrees, quoted in the Journal article as saying in his opposition to the motion,

"Star Girl and KMBA simply handle the legal and administrative tasks associated with booking engagements for Warwick, . . a 'well-known signer [sic] and performer.'  The companies pay wages to Warwick, but she owns no ownership stake in them nor serves as an officer or director in them.

It Gets Worse

This, however, has not stopped the bankruptcy trustee from smelling money as well.  He has filed a notice with the court and creditors that he believes this to be an "Asset" case.  In other words, assets may well be available for seizure and liquidation to pay Ms. Warwick's debts.  So even if the IRS is right about these companies representing assets, they may not be able to keep all of the money.

I had previously stated that I thought that Ms. Warwick had the ability to pay back some of her debt; now it appears that she might be doing it involuntarily!  We will have to see what happens!

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Steven J. Richardson
Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.