Lashinsky v. Amphone (In re Amphone)

IN RE: SOMPHIEN AMPHONE Debtor.

IN RE: ILENE J. LASHINSKY, United States Trustee Plaintiff, v. SOMPHIEN AMPHONE, Defendant.

Case No. 18-10544

Adv. No. 18-5083

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF KANSAS

February 24, 2020

PUBLISHED

Chapter 7

MEMORANDUM OPINION

Courts freely grant chapter 7 discharges unless the debtor has failed to preserve or destroyed books, records, and papers from which their financial condition can be ascertained under § 727(a)(3)¹ or has failed to satisfactorily explain the loss of their assets under § 727(a)(5).² But, courts strictly interpret these and other § 727(a) objections to discharge before imposing bankruptcy's "death penalty" on a debtor.³ This debtor is a compulsive (and unsuccessful) gambler, but not a professional one. She is a home health care business-owner, registered nurse, wife, and mother of four children who made numerous, successive trips to casinos over the three-year period 2015-2017 and lost millions of dollars. She kept no real-time won and loss records and, only after filing chapter 7 in the spring of 2018 and the United States Trustee's (UST) commencement of this adversary proceeding, did she obtain casino internal records reflecting some of her gains and losses. She also provided some bank account statements reflecting deposits of gambling winnings and withdrawals to fund gambling activity or pay down markers. While her records might not withstand a tax audit, how she kept records was "justified under all the circumstances of the case" and therefore not a reason to deny her a discharge under § 727(a)(3). Because debtor has "satisfactorily" explained her losses to the Court, the UST's § 727(a)(5) objection to her receiving a discharge should be overruled.⁴

Facts

Background

Debtor Somphien Amphone ("Amphone") is a registered nurse who holds a bachelor's degree in nursing from Wichita State University. In 2006, she founded Healing Hands Health Care, LLC and owns 50% of its equity. Healing Hands is a Medicaid-certified home nursing provider and 90% of its patient base are Medicaid patients, It operates in a building Amphone owns. The company has a payroll of $45,000 per month and grossed over a million dollars in each of the two years prior to her bankruptcy. She previously owned and operated a similar agency in Florida, but shut it down in 2004 after her first husband became ill with leukemia. Amphone's administrator role at Healing Hands doesn't involve finance beyond her preparing the Medicaid billing, reviewing payroll, paying bills, and signing the company's tax return. The other 50% owner served as the Director of Nursing until her resignation in March of 2019. No contention is made that Amphone co-mingled her individual finances with Healing Hands or used the business revenue to fund her gambling activity.

Amphone lives with her current husband Dr. Alex Suh, her father Kay, her mother, and her four children (three from her first marriage).⁵ Dr. Suh is a practicing chiropractor. Amphone and her husband maintained separate financial accounts. He accompanied Amphone on most gambling trips but never gambled orwent on the floor and didn't know the extent of her gambling winnings or losses or her liability for markers.

Gambling History

Amphone says that while her first husband was in a Houston hospital, she diverted herself by visiting a nearby casino where she first acquired a taste for gambling that ripened into a compulsion. After he died in 2009, her gambling increased to an almost daily habit. Her compulsion consumed not only most of her children's money, but much of her own, causing her to dip into her savings account, borrow from friends and family, and to default on debts to casinos in Las Vegas, Kansas City, Baltimore, and other places. By 2016, her situation was out of control and by 2018, she was here—filing bankruptcy on March 30, 2018.

Prior to filing and faced with mounting losses and collection threats, she retained Samini Scheinberg L.C., a law firm in Newport Beach, California, on a fellow gambler's recommendation. If markers were presented and dishonored, she feared felony charges in Nevada that would lead to the loss of her nursing license and Medicaid certification for her Healing Hands business. She paid the Samini firm a $110,000 retainer on November 14, 2017 and another $55,000 on December 20, 2017⁶ Her relationship and transactions with the Samini firm were disclosed in her initial Statement of Financial Affairs (SFA).⁷ On December 4, 2019 Amphone amended her SFA to disclose an additional $10,000 payment to the Samini firm inOctober of 2017.⁸ At trial, Amphone could not clearly articulate what legal services she believed the law firm provided to her. The chapter 7 trustee filed an adversary proceeding to recover those funds either as state or federal law fraudulent transfers.⁹ The trustee recently settled that proceeding for $140,000.¹⁰

Amphone's gambling activity came to a head in October of 2017 while she was on a Las Vegas gambling trip to Caesar's Palace accompanied by her husband and children. By then she owed over $600,000 on markers between Caesar's in Las Vegas and Harrah's in Kansas City (also a Caesar's property) and she was trying to obtain loans to pay off the markers. Dr. Suh gave her an ultimatum to choose between gambling or her family and return home. Amphone chose to stay and gamble and her family left. By the next day, Amphone regretted her choice and returned home. Before leaving, she signed a self-exclusion document, signing herself out from all Caesar's properties. Upon returning home, Amphone began treatment for her gambling addiction.

Amphone offered the testimony of her "gambling counsellor" to establish that she is a compulsive or addicted gambler. Joan Briles-Kline holds a Master's degree in Clinical Social Work and has some bachelor's study in the area of family systems and life provisions. In 2002 Dr. Briles-Kline obtained the Kansas certification "Gambling Counsellor Level II" and testified that she had attended numerouseducational seminars about compulsive gambling. She began treating Amphone in October of 2017. Dr. Briles-Kline wasn't disclosed as an expert witness during discovery, and she didn't submit an expert report, but analogizing to a "treating physician," a court could allow and admit her testimony concerning her treatment and evaluation of Amphone, including her diagnosis and opinions incidental to that treatment.¹¹ The Court admits and considers Dr. Briles-Kline's testimony to this extent. She testified that she had treated Amphone on a regular basis for at least a year. Dr. Briles-Kline testified that Amphone met all nine diagnostic criteria for severe gambling disorder found in the DSM-5.¹² The presence of any four of these criteria in a person within a twelve-month period suggests an addiction—Dr. Briles-Kline identified all nine in Amphone. That Amphone is a compulsive gambler is shown by the frequency of her successive gambling trips, her betting volume, and the trouble casinos took to get her to their properties.

Much of this trial was devoted to detailing Amphone's numerous gambling trips, many underwritten by casinos who provided her with travel expenses, food, lodging, and entertainment. Amphone was a sought-after player because of her propensity to gamble and win (but more often lose) hundreds of thousands of dollars at a time. That made her a profitable "mark" for the casinos. They encouraged her with complimentary ("comped") airfare, expensive hotel rooms, World Series, NCAA Basketball Tournament, and NBA Finals tickets, and other blandishments. Amphone financed her play mostly with casino credit—markers—and her and her family's money (including the custodial money she held for her children). By the time she filed this case nearly $4.0 million, generated by Amphone's playing the mini-baccarat table game, had flowed through her bank accounts.¹³ At several properties, she had her own private table and could select her preferred dealer. She was permitted to bet as much as $15,000 a hand. She was well known at the casinos and didn't have to show her player's card to "clock-in" and use it.¹⁴

Beginning in January of 2015, Amphone took multi-day visits to the Harrah's properties in Kansas City, Lake Tahoe, Council Bluffs, and Rincon-San Diego; the Ameristar properties in Kansas City and St. Charles; Atlantis and Baha Mar in the Bahamas; the Horseshoe-Baltimore and Maryland Live in Maryland; Caesar's Palace and Treasure Island in Las Vegas; and the Seminole Tribe in Oklahoma.¹⁵ Many of these visits were made in rapid succession. Using Exhibit L, here are some examples. She spent 16 days at Harrah's North Kansas City between May 2 and July 17, 2015. Beginning December 4, 2015, she started at Caesar's-Las Vegas, went to Treasure Island the next day, then to the Kansas City Harrah's on December 8. The most telling example of her compulsion begins on June 2, 2017 at the Ameristar in Kansas City and concluding there on August 21, between which she traveled to the Bahamas (Baha Mar) once and to Las Vegas twice in under two months. Her final pre-petition binge started in Baltimore on September 3, 2017 and ended on October 14, including visits to the Horseshoe and Maryland Live in Baltimore, Caesar's Las Vegas (two separate trips), Treasure Island Las Vegas, and Kansas City, within less than six weeks. If Amphone was not hopelessly addicted to gambling between January of 2015 and October of 2017, she was deeply immersed in it. She gambled on more than 300 days over 34 months. Even after she "stopped" in 2017, she relapsed and resumed gambling in Kansas in late 2018 or early 2019 and continued to do so during the administration of this case.

Bank Records

Amphone maintained joint bank accounts with at least two of her sons. After her first husband died, she opened custodial accounts at Emprise Bank for monthly deposit of social security survivor's benefits payable to her sons as her late...