The trustee overseeing American Title Services’ bankruptcy alleges in a new lawsuit that the widow of its dead CEO, who committed suicide by nail gun, was complicit in a long-running embezzlement that netted their family more than $1.3 million.
Trustee John Smiley alleges Richard Talley and his widow and business partner, Cheryl Talley, 54, for years had used their company to “fund their own lifestyle, funneling hundreds of thousands of dollars a year to pay personal mortgages, credit cards and vehicle expenses,” as well as purchase property for other family members.
Smiley says the company’s bankruptcy is entitled to the money and filed the “claw-back” lawsuit on behalf of creditors.
The couple’s two children — a son and a daughter — are named as defendants because Smiley alleges a number of financial transfers were made in their names.
Cheryl Talley has denied in court filings any knowledge of her husband’s actions, and an insurance company involved in the case said she was not aware of the thefts.
Smiley alleges in his lawsuit that the Talleys used the title insurance company they founded in 2001 “to present the false illusion … as a successful title company throughout Colorado,” but that it and other companies the couple founded “were nothing more than fronts for a wide-ranging fraud.”
Although it was Richard Talley who embezzled the money, his widow “knew that (the family) were the recipients and beneficiaries of the theft and deception,” Smiley’s lawsuit alleges.
Though Talley said in a suicide note he’d been stealing company funds for at least seven years, the $1.3 million Smiley seeks is from the past four years, the lawsuit notes, and lists dozens of checks made out to Talley’s wife and children or their benefit.
Cheryl Talley’s attorney, Lee Kutner, did not offer any comment on Smiley’s allegations.
The lawsuit is the latest in Smiley’s efforts to recoup millions of dollars he said Richard Talley drained from the apparently successful company, mostly for himself but also to pay professional debts with other insurance companies he represented.
Smiley said Cheryl Talley knew as long ago as 2002, when Richard Talley filed for personal bankruptcy, that he had financial troubles.
In that bankruptcy, Talley listed debts that arose from a pair of business partnerships he had — G.C. Funding Inc. and Buycor Inc.
Records show his partners in those ventures — James Taylor and Jeffrey Parsley — each would plead guilty to separate federal fraud charges apparently unconnected to the businesses.
A third partner, William Krieg, would later become ATS’s controller and admit in the bankruptcy case that he knew of Talley’s embezzlement.
Taylor pleaded guilty to felony wire fraud in January 2013 — he had been on the run for more than five years — for his part in obtaining phony mortgages and was ordered to pay nearly $200,000 in restitution, U.S. District Court records show.
Parsley was disbarred as an attorney in Colorado after he pleaded guilty in 2005 to felony bank fraud tied to a phony mortgage he took on his parents’ home and pocketed the cash, records show.
Also, Smiley said Richard Talley in 2000 had transferred his interest in the couple’s home near Cherry Creek State Park to his wife, but didn’t reveal it to the bankruptcy court as is required.
Talley committed suicide Feb. 4, 2014, in the garage of the house because, according to a typed note, his years of financial fraud had been exposed and he feared prison.
. He had mailed a request to switch the beneficiary from ATS to his wife the day before he died. the federal court to determine who will get the cash. Smiley said in the claw-back lawsuit that ATS funds were also used to pay premiums on a life insurance policy for Cheryl Talley.
In June 2014, Cheryl Talley sold the couple’s house for $650,000, Arapahoe County property records show, then paid $365,500 months later for a home in east Denver, county records there show.
Smiley alleges funds from those transactions also belong to ATS’s bankruptcy and its creditors.
The trustee said Cheryl Talley additionally profited from her husband’s scheme by selling a pair of properties last year that had been owned by companies Richard Talley initially controlled — Peregrine Hollow and Swift Basin — and for which records show she took command after his death.
Smiley said Richard Talley also purchased property in West Lafayette, Ind., then transferred its title to his wife and children in mid-2013.
Smiley’s lawsuit is the latest in a number of revelations and twists that have surfaced since Talley’s suicide. against Title Resources Guaranty Co., a Texas insurance underwriter for whom Talley sold title policies, alleging it had unfairly ensured it would collect on Talley’s debts before other creditors by taking control of its books.
It was TRGC’s auditors who uncovered Talley’s wrongdoing. They were to meet with him the day he died.
TRGC filed its own lawsuit last year alleging it is still owed at least $2 million it said Talley misappropriated. A grand jury was impaneled after Talley’s death, but no charges were filed in that inquiry.
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saying escrowed funds due them from the sale of houses they owned were never sent to them.
David Migoya: 303-954-1506, dmigoya@denverpost.com or twitter.com/davidmigoya
