THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Wednesday, July 12, 1995 TAG: 9507120375
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY JUNE ARNEY, STAFF WRITER
DATELINE: NORFOLK LENGTH: Medium: 99 lines
When Joseph L. and Judy C. Houska filed for bankruptcy in September 1991, they professed to be living modestly in an elegant waterfront home. They estimated the value of their clothing, for instance, at $1,000.
Eleven months later, after their million-dollar house was destroyed by fire, the Houskas' fortunes had changed dramatically, based on claims they made to their insurance companies.
By August 1992, the contents of Judy Houska's closet were valued at $91,900 and included a $3,000 string of pearls and two mink fur hats worth $3,000. Joseph Houska had a closet full of designer ties valued at $4,827.50, a $995 cashmere overcoat and two pairs of Lauren alligator shoes worth $1,200. The value of the clothes and accessories in his closet: $48,155.50.
On Tuesday, after an FBI investigation, a federal grand jury indicted the Houskas on charges of fraud. The grand jury claimed that the Houskas misrepresented their assets in the bankruptcy petition.
The Houskas, who now live in San Diego, were indicted in U.S. District Court in Norfolk on two counts of bankruptcy fraud each. They are scheduled to be arraigned Aug. 30. Neither the Houskas nor their attorney could be reached for comment Tuesday.
The Houskas each face up to five years and a $250,000 fine on each count.
``We expect to prove that in filing their bankruptcy petition, the defendants deliberately omitted numerous items worth hundreds of thousands of dollars,'' Assistant U.S. Attorney Alan M. Salsbury said Tuesday. ``These items were listed in the inventory which the defendants filed in support of their fire insurance claims.''
The Houskas listed items valued at about $13,000 in bankruptcy papers filed Sept. 18, 1991. Their insurance claims listed a loss of $1.24 million for the house and about $647,000 for personal belongings. The indictments allege that the Houskas concealed items including art objects, antiques, jewelry, furniture, clothes, household goods and furnishings.
The couple's house, at 1333 Mockingbird Place on Birdneck Point, was gutted by fire at 3 a.m. on Aug. 7, 1992, while the owners were out of town. Joseph Houska was in India and Judy Houska was staying with family members in North Carolina.
The house, which they custom-built two years earlier, had been on the market for about two weeks for $1.6 million and had attracted several prospective buyers. The two-story house had five bedrooms and sat on 1 3/4 acres on Linkhorn Bay.
Virginia Beach fire investigators said at the time they believed that the fire was caused by arson, though no one has been charged. The case remains under investigation, fire investigator Kevin Newton said Tuesday.
After the fire, two insurance companies - United States Fidelity & Guaranty and American Bankers - refused to pay the claims and filed a civil suit alleging that the Houskas had inflated their losses.
A mistrial was declared in the civil case last month. The retrial, in which the insurance companies will ask the judge to declare them not liable, is scheduled for July 24.
Joseph Houska was a partner in PHP Associates, a development company that has filed for Chapter 11 bankruptcy protection. Judy Houska is the daughter of R. Wilson Chaplain, former owner of the defunct Kona Kai hotels at the Oceanfront.
The Houskas were in the midst of Chapter 7 bankruptcy liquidation at the time of the fire.
Also in August 1991, the Houskas suffered a financial blow when Sovran Bank, now NationsBank, won a court judgment of $1.8 million against PHP for a delinquent loan, court records show. The Houskas and others had guaranteed the loan.
The Houskas also were sued by several contractors for work on the house at Mockingbird Place, court records show. ILLUSTRATION: Photo
BETH BERGMAN/Staff
The Houskas' home on Linkhorn Bay burned in 1992.
Graphic
A partial listing of the items the Houskas claim in court papers
to have lost in the fire:
A $315 silver champagne bucket
A $3,000 pearl necklace.
An antique reproduction bachelor's chest valued at $22,969.
A $995 cashmere overcoat.
Two mink fur hats, $3,000.
A dozen custom Roman shades, $5,700
Two pairs of Lauren alligator shoes, $1,200.
From Joseph Houska's closet, 73 neckties valued at $4,827.50.
20 Royal Velvet bath towels from Bloomingdales, $360.
An $11,000 bronze and crystal chandelier in the dining room.
A framed oil portrait of Joseph Houska in the foyer, $3,500. An
oil painting of Judy Houska in the dining room, $4,000.
The contents of Joseph Houska's closet were valued at $48,155.50.
The contents of Judy Houska's closet were valued at $91,900. The
contents of the foyer were listed at $8,950.
KEYWORDS: INSURANCE FRAUD ARSON LAWSUIT by CNB