Marvin Davids Case

by David Osterman
March 1, 2001

Having looked into the Marvin Davids case records at the FACT site , I have the following comments:

1. Numeracy.

Numeracy is the facility of dealing with numbers, in the same way that literacy is the facility of using words. Judges seem to be terribly innumerate. So are journalists. I have often seen statements like: Gosh, the guy makes a million a year, surely he can afford a measly $10,000 / month to support his child [I'm paraphasing journalistic responses to the Thomas Baker case from a couple of years ago]. But that $10,000/month is $120,000/year (net of taxes) or about $240,000 (gross at the 50% margin tax-bracket)--- a quarter of the millionaire's income.

We have that happening in Marvin's case. Even if we suppose that the judge is completely correct, and that Marvin's income was $168,000/year, the ordered child support award (from the tables) of $2524/month (net of taxes) for 3 children (as his fourth child was deemed to be no longer a child, at age 22) and $3000/month spousal support, represent $3000*12 + (2524*12)/(1-0.26 [federal middle tax rate] * 1.44 [1 + .39 provincial tax-on-tax rate + .05 fed surtax rate]) = $36000 + $48414 = $84,414 yearly gross income equivalent to the wife (approximately).

This is MORE THAN HALF his IMPUTED income. No where in his reasoning does the judge indicate where the $3000/month alimony came from.

And yet, there's more: Marvin has to pay the mortgage on the house (that he doesn't live in), the tuition to university/beauty school (for the fourth child), orthodontic add-ons for the youngest child, etc. All these little additions (the $200/month orthodontic amount seems small but, times 12 months and doubled to account for income tax at the 50% marginal rate, makes it really $4800/year --- not so little), continue to reduce Marvin's income available for his own use.

Marvin also has to pay income tax. This fact seems to be ignored. But the worst omission is legal fees.

2. Legal Fees.

There is one huge legal taboo. While weird perversions of any kind are freely discussed in court, there is one massive exception: lawyers' fees. This is the most salient feature in the case, and yet not one word is mentioned until AFTER the case is settled, and only then, when court costs are assessed, does anyone breath a word about it.

Legal costs accumulate as the case goes on. Esther could mortgage the matrimonial home (which was in her sole name) and raise $350,000 to pay for lawyers (this based on the difference between the accessed value of the home and the current level of debt on the house). Marvin seems to have no similar collateral with which to raise funds ... and the judge admonished him for trying to borrow funds via mortgaging the family home. Marvin was thus forced to pay lawyers with his current income, make personal unsecured loans, or borrow from loved ones (his parents).

Both Marvin's and Esther's accounts of what is happening can be completely reconciled by adding legal costs into the basic equation.

Why was Marvin in arrears? Simple. He is paying his lawyer first. If he didn't, the lawyer would have quit, and then he'd be in the same pro se position that the appellant judge found "was his choice" to have poor or no legal advice.

Typically, legal costs increase at the same rate on both sides of the action. If lawyer 'A' writes a motion, then lawyer 'B' usually has to respond to it. Thus, it is not unlikely that Marvin's legal costs would be similar to Esther's.

If he paid about $200,000 over 39 months (which is the direct lawyer's fees paid by Ester according to the assessment), that's $5100 per month of after-tax earnings [about $105K gross]; which is more than the $4000 /month spousal/child support interrim-interrim order [$48K gross] plus mortgage costs [est. $1000/month = $20K]. In essence, lawyer's fees and support costs, when added together, exceeded his [imputed] income; he had NO money on which to live.

The judge states that the reason why the case dragged on (and hence cost so much), was that Marvin refused to settle. Well, he's right in that a long case costs more, but, who, in fact was dragging out the case. The judge assumes that Marvin was being uncooperative. He states (in the assessment of costs) that the case was (in the wife's lawyer's biased judgement!) very close to being settled several times in the first 2 years. Only once does he give any details about one of Esther's "reasonable" offers: $3000 /month child support (net of tax) and $2500 / month spousal (net of tax). Reasonable? If the judge had been numerate, he would have known that this offer was $113,000 gross income, leaving Marvin with $168K-$113K = $55,000 income (32% of his initial income). After two years of negociating, Esther was still demanding almost all his income (I haven't added on the tuition/dental/life insurance/mortgage costs that Marvin would also be paying, presumably).

The judge found that Marvin was "evasive" about his finances. It is obvious that Marvin had always been doing the form of income tax reduction common amongst the self-employed; e.g., he and Esther were paid exactly the same amount as "employees" of his (essentially) one-man firm (income splitting). Although none of these techniques is considered income tax evasion, they can be difficult to explain, particularly when company funds are being used for non-obvious purposes (e.g., donations to charity). The judge found Marvin's transference of customers from one company (owned 98% by Esther) to his new company to be done in bad faith ... and yet how could he live with the risk that his ex-wife could seize all his company's assets, his sole income, AT ANY TIME, if he did not!

And then there is the income tax itself. Some of these "complexities" in the self-employed world are income tax deference schemes. Marvin was short of money, to pay support, and to pay his lawyers. So he tried to reduce his income tax payable by classing personal expenses as business expenses. But, because he is not permitted to simply say "I HAD TO PAY MY LAWYERS", it looks instead like he is desparately trying to reducing his apparent income to avoid paying support. This is particularly apparent in the 1996 audit.

3. Pro Se

The Appellant judge is quick to say that the trial was not unfair. Marvin did not have legal counsel during the trial, because it was Marvin (according to the Appellant judge) who decide to fire his lawyer, and go pro se.

After 3 years with costs higher than income, with no fixed assets to secure loans, and having exhausted his loans from friends and family (which were deemed to be works of fiction by the original trial judge), it is apparent to anyone who has been through the process that Marvin was broke. It is likely that Marvin's lawyer required a retainer before proceeding into trial, and Marvin simply did not have the funds. No funds, no lawyer. Gross income of $168K, no legal aid.

4. Court Costs

The award of 70% of the Esther's legal costs to Marvin effective made it impossible for Marvin to recover. 70% of $290K is $203K. He had some $134K of various arrears (only $64K was support) as a result of the trial. He could not borrow (as indicated above) and his income of $168K less $85K current support and a higher income tax rate than what he had when married would leave him with very little net income (est. $55K) to pay down a $337K unsecured debt. Banks don't make this kind of a loan. Bankruptcy would not eradicate the debt either (since support arrears is not removed via bankruptcy).

The cloud of unhandlable debt probably destroyed his second marriage.

5. The Last Straw

Naturally, Marvin's second wife with one child could, on separation, demand $1228 /month child support (tabled amount on the previously imputed $168K /year gross income.) That works out to be something like $24K (gross). This would simply add to an unpayable debt. Having seen the court process once, he probably couldn't do it again.

Now, if he really had followed the court's order to have that $500,000 life insurance....