On Sunday, the Daily Herald featured a profile of Sean Whalen, 32, the founder and CEO of Orem-based real estate startup Property23. In that profile, Whalen said that his company has bought and sold at least 4,000 foreclosed properties since 2008, and generated $18 million of revenue.
But since that profile appeared, several of Whalen's creditors have alleged that he owes them large sums of money. They have accused Whalen of fraud, claiming he filed for bankruptcy to avoid repayment while simultaneously making huge profits, and said that he has defaulted on numerous loans totalling more than $8.5 million.
Court records confirm that Whalen filed for Chapter 7 bankruptcy protection in August. The filing would theoretically liquidate his assets -- with the exception of his home and some personal possessions -- while freeing him from many of his financial obligations. According to attorney Benjamin P. Thomas, who represents a family-held business that loaned Whalen money in 2007, the filing is Whalen's way to skirt his responsibilities.
"He's trying to escape all of the debts he has," Thomas said, "including the judgment we have against him in excess of $700,000."
But Chapter 7 protection may not apply to some of Whalen's debts, Thomas believes, because debts incurred through fraud can be deemed non-dischargeable, or unable to be off-loaded through bankruptcy. According to Thomas, Whalen fraudulently misrepresented his financial statements and collateral when he obtained the loan.
Nathan Burdsal, an attorney who represents another one of Whalen's creditors, is also working to have his client's share of Whalen's debt deemed non-dischargeable. Burdsal said that while Whalen claims in his bankruptcy filing to have no assets, he has posted pictures of himself taking lavish vacations and frequently talks about the success of Property23.
"He has tried hard to push himself on the Internet," Burdsal said. "He has said his company has made millions and millions."
When asked about these allegations, Whalen didn't deny that he owed money, but said that in the past his creditors were burying him in paralyzing debt. He said that when the economy tanked, he was left with millions of dollars of investment debt. He tried to pay it back, he said, but his creditors all wanted their money at a time when he didn't have enough of it.
"I came up with a plan of how to pay them back," Whalen said. "The problem was that the other creditors wanted the exact same amount. They wouldn't take any less. I couldn't do it."
Whalen also claims his creditors don't understand the success that Property23 generates. He said that the company brings in a significant amount of gross revenue, but that its net profit is much lower.
Whalen said that he still wants to repay his creditors, despite the fact that his bankruptcy filing would legally liberate him from the obligation to do so. He said his creditors will just have to take his word that they will eventually get their money. In the meantime, he said, they should let him work and make a profit.
"I owe them money," Whalen said. "The only way for me to pay the money back is to make money, plain and simple."