A Case of ‘Judgment-Proofing?’

He’s said all along that he’s looking for justice, not cash. Fred Goldman wants a jury to declare O.J. Simpson a killer--and any compensation he might receive for the murder of his son is incidental.

Indeed, if Goldman was motivated simply by dollars, he might long ago have dropped his wrongful-death suit.

That’s because Simpson, like anyone with access to good lawyers, may have been able to “judgment-proof” himself--protecting his assets with financial maneuvers that put the bulk of his wealth out of reach of the families of Nicole Brown Simpson, Ronald Lyle Goldman and any other potential creditor.

“There’s a whole variety of judgment-proofing strategies,” said Lynn M. LoPucki, a visiting law professor at UCLA and an expert in debtor-creditor law. “You can have insulated your property against your creditors . . . and still have your Lear Jet and your yacht.”

Legal experts speculated Tuesday that “judgment-proofing” may be behind Simpson’s failure to pay more than $685,000 in federal income taxes in 1994.

At first glance, Simpson’s tax delinquency looks like a major blunder. After all, the Internal Revenue Service recently attached a lien to his property, serving notice that the government could seize his house, cars or other assets to pay off the tax bill.

In fact, however, some lawyers said the IRS debt could be a shrewd move on Simpson’s part. By attaching a lien to the property, the IRS essentially gave the government first dibs on Simpson’s Brentwood estate.

If the victims’ families succeed in civil court and win a substantial judgment against Simpson, they would have to wait in line behind the government and any mortgage holders. Meanwhile, Simpson could keep living in his home by setting up a payment schedule with the IRS to retire his debt a little at a time, stringing out the process for years.

The Goldman and Brown families could eventually step in with a judicial order to seize and sell the house. Before pocketing proceeds, however, they would first have to pay off the IRS and the mortgage. They would still likely turn a profit, since the estate is worth an estimated $5 million. But legal analysts said the IRS’ lien could delay the whole process, stalling the plaintiffs’ recovery of funds and buying time for Simpson to remain in his house.

“There may have been a lawyer behind the whole IRS maneuver,” said Miami lawyer Art Giacosa, an expert in asset protection.

Simpson’s chief attorney in the civil case, Robert C. Baker, declined to comment on his client’s tax troubles or financial status.

And none of the lawyers opposing Simpson have suggested that he provoked the IRS lien as a strategy to hold off potential creditors. Indeed, sources close to Simpson’s defense have said he had to scramble to pay Baker several months ago--suggesting he may have a cash crunch and may have simply lacked funds to pay the tax bill.

Simpson spent an estimated $5 million to $6 million on his defense in the criminal case He also faces ever-mounting legal bills for his civil defense.

In the two years since his arrest, Simpson has raised money in various ways, from autographing football cards in his jail cell (which netted $200,000) to writing a book ($1 million) to selling the right to photograph his triumphant homecoming party ($450,000). Most recently, he took in an estimated $3 million for a video in which he proclaims his innocence.

Simpson’s wealth was estimated at $10 million before the criminal trial, but with his financial records under tight seal, it remains unclear how many assets remain beyond his home and his cars.

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If he does retain significant cash or investments, he could protect those from creditors (including, potentially, the Goldmans and Browns) by transferring them out of the United States, legal analysts said.

The most common strategy--often used by doctors fearful of malpractice suits--allows a wealthy individual to set up an offshore trust that only he can tap into, so he can make full use of his funds while shielding his assets from creditors.

Because such trusts are not registered in this country, it’s impossible to ascertain whether Simpson has one. One expert in offshore trusts said he could not imagine any lawyer or financial institution helping Simpson protect assets in the midst of such high-profile, emotional litigation.

Tax attorneys assisting him could be charged with conspiracy or ethical breaches for enabling Simpson “to outfox his creditors and deprive them of their legal right to collect,” said Ronald Rudman, an offshore trust lawyer based in Colorado. “There’s no fee in the world that would be worth the incredible legal hassle and expenses.”

California law prohibits transferring or concealing assets “with intent to defraud, hinder or delay” creditors from collecting their due. Violators can be punished with up to a year in jail and a $1,000 fine.

Still, even if a trust owner is convicted under that statute, his assets usually remain secure. Offshore banking laws tend to protect trusts ferociously. To attempt to pry out funds, creditors must wage a tough legal battle in the offshore jurisdiction, at enormous expense.

“You can imagine the cost of moving the whole litigation” to some far-off jurisdiction like the Cook Islands, about 1,900 miles from New Zealand, Giacosa said. Unable to foot such a bill, creditors may give up or accept a meager settlement--agreeing to take just 10 cents of every dollar they’re owed, for example.

With the potential savings so great, some analysts hypothesize that Simpson must have tried to stash away any cash he has left by setting up a so-called spendthrift trust in the Cook Islands, Gibraltar, the Cayman Islands, Belize or other offshore havens.

With foresight, they point out, he could have established a trust long before Goldman’s parents and Nicole Brown Simpson’s estate filed their wrongful-death suits against him. Creating a trust then--before he was involved in litigation but after he was named a murder suspect--would be an ethical and legal “gray area,” Giacosa said.

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LoPucki speculated that savvy lawyers would have suggested such financial maneuvers for Simpson early on.

“The vast majority of people involved in litigation [where damages] will exceed their resources . . . will judgment-proof themselves,” he said. “Lawyers will recommend it.”

Most offshore jurisdictions protect trusts from creditors seeking to collect on legal judgments, as long as the trust was established before the jury verdict came in. Some offshore havens only protect trusts that have been operational for a year or two before a verdict; others start shielding assets 24 hours after they have been deposited.

So if Simpson did set up a trust, “there may be nothing [his creditors] can do,” said Century City lawyer Steven L. Gleitman, an asset-protection expert.