Taking Care of Business:

The Randy Previs Files

 

A four-part Island Times investigative series

By LIAM MORIARTY

 

Part Three: "Oh, what a tangled web we weave Ö"

Between 1980 and 1985 -- while he was in the midst of federal bankruptcy proceedings -- developer Randy Previs obligated himself for additional hundreds of thousands of dollars in loans and professional services in an effort to salvage his investment in a property on the shores of Lake Washington in Kirkland. His efforts to build Marina East, a 22-unit luxury condominium complex and marina, collapsed in a tangle of liens, foreclosures and lawsuits that led directly to his wife Katie Previs filing another bankruptcy in 1986, and Randy taking Chapter 7 protection again in 1990. When the dust finally cleared, creditors were left holding the bag for over $2 million.

 

Heís Baaaaack!

After Previs' Chapter 11 reorganization bankruptcy was changed to a Chapter 7 liquidation, he was in danger of losing his ownership in the Lake Washington property. He tried to buy it from his own bankruptcy estate in 1982, but the judge -- at the trustee's recommendation -- turned him down as a bad credit risk.

On Aug. 12, 1983, the property was sold to First Washington Development Inc.for $500,000 cash. First Washington Development was represented at the bidding by realtor Michael Neagle. Apparently, neither Judge Steiner nor trustee Warren Erickson was aware that FWD was a freshly-minted corporate entity owned and operated by Randy and Katie Previs.

How did a man in a liquidation bankruptcy raise half a million dollars cash to buy real estate? A wave of lawsuits that followed alleged that he did it by borrowing money and then failing to pay it back.

 

The 16 Percent Solution

For much of 1993, Previs -- along with a corporation called First Washington Financial, in which he also had an interest -- had been circulating an offering, soliciting investment in the Marina East project.

Just days before he bought the Lake Washington property back from his bankruptcy estate, Previs -- as First Washington Developers and as Previs Equipment Company -- received a loan of $675,000 from a group of investors. Several months later, another group of investors loaned Previs an additional $150,000.

The loans were secured by deeds of trust on the Lake Washington property, which the offering valued at $1.1 million. The investors were supposed to get 16 percent interest payments for a year, after which the principal of the loan was to be repaid in full.

But according to court records, Previs quickly defaulted on the loans. It was then that the lenders discovered the deed of trust that secured their investment didn't include all of the property the investment circular had promised. This, they said, lowered the value of the property, making it worth less than the amount of the loan they had made to Previs.

Both sets of investors sued; they had to get in line.

 

Lawsuit-O-Rama

In fact, legal action-wise, 1984 through 1986 was a very busy period for Randy and Katie Previs and their various enterprises. Randy was still working through his 1980 bankruptcy and Katie started her own in 1986. Thanks to a clot of lawsuits from creditors large and small, the Previses had ample opportunity to familiarize themselves with the inside of a number of courtrooms.

And while the creditors prevailed in nearly all these cases, few, in any, ever collected from the Previses.

 

 

 

 

 

 

 

 

Short and Sweet

Compared to Randyís 1980 bankruptcy nightmare, Katieís 1986 Chapter 7 and Randyís 1990 Chapter 7 bankruptcies were straightforward affairs, short and sweet. The official record of each runs less than 50 pages; the 1980 case nearly fills two cardboard storage boxes. The bankruptcies cleared up the loose ends left over from Randyís first case, as well as the fallout from the collapse of Marina East, not to mention a number of credit card, utility and telephone debts.

But while the later bankruptcies were simple, uncontested cases, they raise some questions of their own.

For instance, on the form where the bankruptcy debtor has to answer questions about his or her income and finances, Previs listed his 1989 income as $7,855. He stated that Katie brought in $13,000 during the same year.

But five months earlier, Previs stated in a sworn deposition in an unrelated lawsuit in San Juan County Superior Court that his 1989 income was $79,402.24

In another section of the bankruptcy filing, Previs stated that he had not been a party to any lawsuits that were still pending when he filed for bankruptcy. But Previs was, in fact, involved in a lawsuit in San Juan County at that time. Earlier that year, Previs had filed, as A&P Construction Company, against Oakley sunglass magnate Jim Jannard, claiming Jannard hadnít paid him fully for a road Previs built up to Jannardís Orcas Island home. The suit was filed on April 2, 1990 (more than seven months before Previsí Nov. 20 bankruptcy filing), and was dismissed by Judge Alan Hancock on Jan. 7, 1991 (six weeks after his Chapter 7 filing).

Previs claimed in another section of his filing papers that he was employed as a general manager and equipment operator by PED Investments (probably a typographical error; Previs most likely meant PEC Investments, another of his corporate entities). Previs listed PECís address as 19305 Olympic View Drive in Edmonds, his own home address. He also stated he hadnít been involved in any partnerships or engaged in any business in the previous six years, although court records show that Previs and several of his corporations had been active during that time.

Previsí pattern, as demonstrated in numerous court documents, has been to use various corporations that consist solely of him and Katie to act as cover for their business activities and personal finances. In a 1982 Bankruptcy Court examination, Randy conceded that Valley View Ranch Inc., Previs Equipment Company Inc. and he and Katie all shared a single bank account, with no delineation between their personal finances and those of the corporations.

Bankruptcy trustee Warren Erickson concluded at that time that, "All of Previs Equipment Companyís assets have been expended for the benefit of Randy and Katie Previs Ö"

Randy Previsí use of his corporate veils has gotten somewhat more sophisticated in the ensuing years. Itís often hard to tell where the Previses stop and their corporations begin. While corporate officers are legitimately protected from the liabilities of their companies, the Previsesí liberally-interpreted use of this legal doctrine does raise questions about whether they are misusing their corporations for their personal use.

 

 

Coming next week, March 2 Ö

Part Four: More of the same

More lawsuits, the Anacortes story and a curious land deal or two.

This article is copyright 1999 The Island Times. Reposted here with permission.