Bradley's Lazarus Lotto Goes to Court

Anyone who followed the fanfare leading up to this week's bankruptcy trial of Gary Bradley may have been disappointed after settling into one of the extra-firm wooden benches in U.S. Bankruptcy Court. Who would have thought that watching one of Austin's most colorful developers on the witness stand would be like watching proverbial paint dry?

But the slow, methodical pace of the trial is apparently the only way to travel in a bankruptcy case that is reviewing dozens of complex business transactions that may or may not hold the key to what attorneys for Bradley's creditors hope to prove – that Bradley hid millions of dollars in assets in an exempt trust before the developer filed for Chapter 7 in the summer of 2002.

If they succeed, U.S. Bankruptcy Judge Frank Monroe could order Bradley to repay the Federal Deposit Insurance Corp. and the IRS – that is, the taxpayers – some $80 million owed in failed loans and back taxes. Most of the debt, $75 million, is owed to the FDIC for loans Bradley took out to develop the Circle C Ranch subdivision in Southwest Austin. But if the judge agrees with Bradley's attorneys, who argue that the creditors' conspiracy theory is nothing more than hot air, the developer's debt could be erased.

Frank Ikard, the attorney for the creditors, spent most of Monday leading Bradley through a series of intricate financial maneuvers made in the years preceding his bankruptcy filing. Ikard tried to establish a money and paper trail leading directly to Lazarus Exempt Trust, created by Bradley's sister and controlled by a cousin. Bradley is the trust's sole beneficiary. The developer, in a soft, unruffled voice, denied his involvement in either the formation or the successful growth of the trust, which was created with just $1,000. But Ikard tried to prove otherwise at every turn, pointing out that the value of the trust shot upward in a short amount of time, thanks to several Bradley-related entities that had ties to Lazarus. "Have you ever in your history," Ikard asked, "seen an investment go from $1,000 to $54 million in 16 months?"

"I can't think of any," Bradley replied.

By Wednesday, Bradley was into his third day on the witness stand, providing more thorough – and animated – responses to questions directed by his bankruptcy attorney, Ray Battaglia.

The trial is expected to continue through next week. Based on Ikard's line of questioning early on, the attorney is focusing on key business entities connected with the trust, namely Phoenix Holdings, Streetman Homes, and a prime piece of property in Buda known as the A&M tract.