Following three months of legal wrangling, California bankruptcy judge Barry Russell has okayed a petition to put Jadelle Jewelry and Diamonds, the Beverly Hills, Calif.–based private jeweler known for its celebrity clientele, into Chapter 7.
Jadelle has been linked to convicted felon Jona Rechnitz and his wife Rachel—though in court papers Rachel is listed as Jadelle’s “managing member” and Jona as an “interested party.”
On April 6, three purported creditors of Jadelle filed a petition to force the company into Chapter 7. On May 1, Jadelle filed a motion to dismiss the petition, arguing that the petitioner’s claims were in dispute. Its attorneys also noted that there was an ongoing criminal investigation of the company, spurred by a complaint to the Beverly Hills Police Department by one of the petitioners, Victor Noval. While denying the Rechnitzes engaged in any wrongdoing, it argued that forcing the company to hand over records could potentially violate the couple’s Fifth Amendment right not to self-incriminate.
On May 19, the petitioning creditors asked the court for a trustee, arguing the company clearly needed an “independent fiduciary” to comb its books.
On June 10, the court ordered the Rechnitzes to file a document identifying Jadelle’s current creditors within seven days. When that didn’t happen, Russell officially denied the motion to dismiss and appointed Sam S. Leslie as Chapter 7 trustee.
On June 23, Jadelle’s attorney told the court that it was unable to supply the trustee with requested documents.
“The individual who has access to the information to prepare, and who would prepare, sign, and verify such schedules and statement has been advised by counsel…to decline to answer based on the Fifth Amendment privilege against self-incrimination,” he said.
Jadelle also appealed the court’s denial of its motion to dismiss and asked the judge to stay his order, pending its appeal. On Tuesday, Russell declined to do that, ruling that the Chapter 7 proceedings would go ahead.
In his memorandum, Russell accused Jadelle of “stonewalling in order to resist any and all efforts to provide vital information regarding its creditors.
“The record is clear,” he continued. “The petitioning creditors have millions of dollars of legitimate claims; given the debtor’s failure to disclose its information regarding all of its creditors, the total amount of the petitioning creditors’ claims may in fact be much larger.
“The trustee has the right to question the Rechnitzs, who are non-debtors, about all aspects of the debtor’s business,” he continued. “It will be up to the court to decide whether or not the Rechnitzs’ claims of their individual Fifth Amendment privilege against self-incrimination are valid privilege claims.”
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