You know what a stockbroker is and what he does for a living, right? A stockbroker recommends what stocks to buy and sell to his client, and he makes a commission on each purchase and sale of stock. They make a lot of money doing what they do because they get paid high salaries. But I bet you did not know that they also get a signing bonus in the form of a forgivable loan. For example, you graduated summa cum laude in Mathematics from Berkeley at the age of 12. Then you graduated with a PH.D. in rocket science at the age of 13 from Berkeley again. And finally, you just graduated from the Haas business school of Berkeley with an MBA and a PH.D in Mathematical Economics at the age of 14. You can literally figure out how much fuel it takes to travel around the world in a Prius in a nanosecond without a computer. So, Goldman Sachs offers you a starting salary of $800,000 and a signing bonus in the form of a forgivable loan in the amount of $400,000. The loan agreement provides that 25% of the loan will be forgiven for each year that you stay with the firm. You accept the job but after 6 months you decide that you would rather be a Shaolin monk. Before you leave for China, you file for bankruptcy relief to wipe out the $400,000 signing bonus loan. Your employer objects to the discharge of the loan saying that you had no intention of paying the debt because you left after 6 months. Who will win?

In Re Ricker, in November 2008, Oppenheimer & Co. Inc. hired Mr. Ricker as a stockbroker, and gave him a signing bonus in the form of a forgivable loan in the amount of $349,652. The loan agreement provided that 20% of the loan would be forgiven for each year that Mr. Ricker stayed with firm. If the debtor stayed for five years, then the entire loan would be forgiven. The debtor left Oppenheimer after 9 months. He filed for Chapter 7 relief in January 2010, after which Oppenheimer filed this adversary proceeding challenging the discharge of its claim pursuant to Section 523(a)(2), the fraud exception. Oppenheimer asserted that the debtor never intended to repay the loan. As evidence, the firm pointed to the fact that the debtor worked for four securities firms since 1998, accepted a forgivable loan from each one, and left without repaying the full loan. Debtor’s middle name was Solyndra. He repaid a negotiated amount on the first two loans, but paid nothing on the second two loans. Oppenheimer alleged that the debtor was engaged in a scheme of accepting a large loan, and then quitting once the loan proceeds were exhausted. The debtor told the court the specific reasons why he left each job. Those reasons generally involved disputes with management over the amount of his compensation or work rules. He said he left Oppenheimer because of health concerns. The bankruptcy court noted that if the debtor’s departure was part of a scheme to defraud Oppenheimer, then he would have stayed a few more months in order to collect his annual bonus and have 20% of his loan forgiven. The fact that he left when he did gave credence to his story. He court also noted that the debtor was the only witness. “While Oppenheimer disputed the credibility and weight of his testimony, Oppenheimer presented no testimonial or documentary evidence to contradict the substantive content of the debtor’s testimony. Thus, my findings ultimately turned largely upon my assessment of the debtor’s credibility, considered within the context of the burden of proof Oppenheimer bears in asserting a fraud claim under 523(a)(2),” the court said.