Judge dismisses many investors' claims in Armitage bankruptcy

A Santa Rosa bankruptcy judge has wiped away much of the $90 million in debt racked up by embattled former financial adviser Gary Armitage.

From credit card companies to investors who claimed Armitage defrauded them, hundreds of unsecured creditors saw their claims disappear Tuesday as Judge Alan Jaroslovsky granted Armitage’s request to be freed of the debts.

The ruling does not affect $4 million in debt secured by Armitage’s homes in Healdsburg and outside Redding.

“All of the people who were claiming that Gary Armitage owed them money, save the three adversary proceedings, have been discharged,” said Russell Marne, a San Rafael attorney representing Armitage.

An adversary proceeding is when a creditor challenges a debtor’s request to have their debts eliminated. Three such cases have recently been filed with the court. All contend their claims should not be eliminated because Armitage defrauded them.

Marne said the fact that so few adversarial claims were filed against Armitage’s bankruptcy estate speaks volumes about the difference between what people claim and what they can prove.

“There are a lot of people who made a lot of claims and accusations, but so far we have three adversarial proceedings. That’s all,” Marne said.

He said many of those who filed claims “never had a valid case.”

But Walnut Creek attorney Richard Miller, who filed one of the three cases, strongly disagreed. Many of the investors couldn’t pursue their claims because they have lost everything. They may have lacked the resources to pursue a case or had little hope of recovering anything from Armitage’s estate, Miller said.

“Many people have been reduced to being homeless because they’ve lost their life’s savings because of these actions,” Miller said.

And, while there may only be three such cases filed, that doesn’t mean few creditors are involved. In Miller’s case, approximately 120 plaintiffs claim losses in excess of $25 million.

The case may be over for the majority of the approximately 500 creditors in the case. But it is just beginning for Miller’s clients.

Miller said he intends to prove to the bankruptcy court that Armitage defrauded his clients out of millions. The court will conduct hearings, and if Miller prevails, his clients will win a financial judgment against Armitage that cannot be wiped away by bankruptcy.

While Armitage may have no assets now, such judgments last 10 years, can be attached to future earnings, and can be extended, Miller said.

Marne said Armitage intends to vigorously defend himself against the three claims.

He said Armitage was covered by an “errors and omissions” insurance policy, which he believed was underwritten by Lloyds of London.

Marne said he has requested the insurer pay to defend Armitage against the suits. He did not disclose the amount of the coverage.

Armitage and former partner Jeff Guidi shuttered their Santa Rosa firm AGA Financial last fall in the face of more than a dozen lawsuits alleging they defrauded their mostly elderly clients.