Law Times

Page 4 July 10, 2017 • law Times www.lawtimesnews.com NEWS NEWS NEWS Criticized for 'seemingly unhampered' lifestyle Court refuses to discharge bankruptcy of former lawyer BY ALEX ROBINSON Law Times T he Ontario Superior Court has refused to discharge the third bankruptcy of a former Ottawa tax lawyer for failing to pay income tax. Master Natalie Champagne refused to grant Charles Roten- berg a discharge on the bank- ruptcy, finding he showed a "serious disregard for his obliga- tion" to pay income tax after his second bankruptcy. "The Bankrupt before me has enjoyed a good income and he has not paid his fair share of taxes which is unfair to the rest of the tax-paying public," Champagne said in the deci- sion, Rotenberg (Re), 2017. The master criticized Roten- berg, a former lawyer with Drache Rotenberg Buchmayer LLP, for doing "too little too late" to address his financial situation and for living a lifestyle that has "been seemingly unhampered by his third bankruptcy." Since his second bankrupt- cy, Rotenberg went travelling at least twice a year to the United States and also made a trip to Is- rael. His wife bought a $600,000 five-bedroom house in 2012 where the couple lives alone. While Rotenberg had said he spoke to his wife about selling the house, Champagne found "no steps had been taken to do that." She also noted that Rotenberg made one voluntary payment on his bankruptcy on the day the discharge motion was heard and contacted a trustee in bankrupt- cy the week before the motion was heard. In 2014, the Law Society of Upper Canada ordered Roten- berg to surrender his licence or have it revoked for misusing $200,000 funds he received in trust from a client. The Canada Revenue Agency, which was the largest creditor of his current bankruptcy, opposed discharging the bankruptcy, as Rotenberg brought on or con- tributed to the bankruptcy by "culpable neglect of his affairs." Called to the bar in 1980, Rotenberg was a tax lawyer at Rasmussen Starr Ruddy LLP from 1998 to 2004, before going on to join Drache Rotenberg & Buchmayer LLP, which later be- came Drache LLP. Rotenberg first filed for bank- ruptcy in 1990 and was later dis- charged from that bankruptcy in 1991. His second bankruptcy was in 1997 and was discharged in 1998. Rotenberg blames the first two bankruptcies on a cocaine addiction and said he has been clean since 1994. "Unfortunately, after my first bankruptcy, I continued to live in the addiction," he said in written comments. "This set of circumstances led to the second bankruptcy." Following the second dis- charge, Rotenberg failed to file tax returns and pay income tax on time, according to the de- cision, and by 2001, his arrears totalled more than $37,000. He entered an agreement to pay the CRA $1,800 a month, but he de- faulted 11 months later. In 2005, he started making payments on $122,066 in taxes that he owed from between 1998 and 2003. Rotenberg says there were "fi- nancial issues" at Drache Roten- berg & Buchmayer LLP that he could not resolve and claims he was generating the bulk of rev- enues for the firm while covering most overheard expenses. The partners agreed to dissolve in 2006 and later agreed to finalize terms in 2008, Rotenberg says. "Although I should have, in retrospect, simply closed the doors and let the chips fall, I struggled to keep the office go- ing and to keep the employees working," he says. Rotenberg says he was un- able to make the payments of the proposal after the second bank- ruptcy as he had health prob- lems from Nov. 2009 onwards, and he was unable to work again until May 2010. He then fell back into bank- ruptcy in 2011. In his third bankruptcy, his unsecured debt was $714,599. The CRA was owed $447,135, as the largest creditor, and the law society was owed $150,000 as the second largest creditor. Speaking generally, an LSUC spokeswoman says that when a lawyer files for bankruptcy, the law society files a proof of claim for any amounts they owe the regulator. This could include costs and fines ordered by a discipline tribunal, unpaid fees or amounts owed to the law so- ciety's compensation fund, she says. When he surrendered his li- cence, Rotenberg was ordered to pay the law society $10,000 in costs, which were payable once he was discharged from his cur- rent bankruptcy. The client in the discipline matter was also only able to retrieve $54,915 at the time of those proceedings. The trustee for the bankrupt- cy, Pascal Gagnon of Ginsberg Gingras & Associates Inc., says the LSUC's claim is private and confidential, but he confirms that it was following the disci- plinary decision. Rotenberg says the bankrupt- cy was primarily related to debts from the Drache LLP dissolu- tion and was not a tax-driven bankruptcy under the Bank- ruptcy and Insolvency Act. Gag- non says that Rotenberg's insol- vency was mainly due to debts with the CRA. Gagnon testified in the pro- ceedings that Rotenberg was un- co-operative and only provided a financial statement for his business when the bankruptcy first occurred. Since then, Ro- tenberg also failed to provide monthly income and expense statements or even regular yearly financial statements for his busi- ness since, the decision said. The trustee found that Ro- tenberg had $122,542 in surplus income in his third bankruptcy. Rotenberg made no instal- ment payments for income taxes owing for 2011, 2012 and 2013 and he filed his income tax re- turns for those years late. His taxable income was $177,491 in 2012, according to the decision, and $215,970 in 2013. The CRA argued that the dis- charge should be refused "due to the egregious circumstances of the third bankruptcy." In the proceedings, Roten- berg's lawyer asked for a condi- tional discharge that would have required him to pay 15 per cent of the debt. He would have also been required to get a court's permission for creditor protec- tion in the future. Rotenberg's lawyer argued that recent actions taken by Ro- tenberg to consult with a trustee and make a $2,000 payment of- fered a "scintilla of hope" that he was coming around to getting his finances in order. Champagne said she had no confidence Rotenberg would abide by a conditional discharge, and that granting such an order would be "an affront to the integ- rity of the bankruptcy system." She determined that the evidence Rotenberg presented demonstrated "a clear lack of insight" into his financial situ- ation and did not "speak of any concrete plans" he had to rectify his situation other than meeting with a trustee monthly. Champagne noted that while Rotenberg said his two first bankruptcies were due to a co- caine addiction, "he offers ab- solutely no explanation for his third bankruptcy or his failure to pay post-bankruptcy income tax." David Walters, a spokesman for the CRA, declined to com- ment on the specific case, but he generally said the agency "works with taxpayers and/or their trustee within the guidelines es- tablished by the Bankruptcy and Insolvency Act in order to reach a mutually acceptable compro- mise for debt owing." LT © 2017 Thomson Reuters Canada Limited 00244SZ-A87345-CE Start stronger. Finish faster. SECONDARY SOURCES ON WESTLAWNEXT® CANADA Confidently take on complicated matters and leverage the topical expertise from world-class authors, including practitioners, law professors, and judges, who know and shape the law to quickly get the answers you need. Explore what's new to Secondary Sources on WestlawNext Canada. westlawnextcanada.com/secondary-sources Although I should have, in retrospect, simply closed the doors and let the chips fall, I struggled to keep the office going and to keep the employees working. Charles Rotenberg

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