A Case Review of In re Marriage of Harnack
Steve Fanady has been held in the Cook County Jail since June 28, 2022. He was not charged with a crime and has not been convicted of one. He is held on civil contempt for failing to turn over 120,000 shares of CBOE stock, or $10 million, to his ex-wife.
The coverage reads like an offshore trust failure. It is not. The Belize trustee refused to comply with the Illinois court’s order on the ground that Fanady was acting under duress. The Illinois court never reached the trust assets.
The trust did exactly what an offshore trust is built to do. Fanady went to jail anyway — and the reason has almost nothing to do with the trust.
Key Points
- ⭐ The rule these cases actually establish: the structure must be funded before a claim exists and for a legitimate purpose. Everything else is secondary.
- The trustee refused to repatriate. That part of the structure worked.
- The court never had to reach the trust. The order required shares or $10 million.
- Self-created impossibility is not a defense — and Fanady created his in plain view.
- He moved assets mid-divorce, against restraining orders, to defeat his spouse. Timing and intent, both wrong.
- A spouse is not a creditor. This was not asset protection done badly. It was not asset protection.
What the Record Shows
Pamela Harnack married Steve Fanady in 2003 and filed for dissolution in 2008.
Fanady stopped appearing. A default judgment was entered finding he held approximately $7.3 million in assets, while Harnack suffered from health issues, had minimal income, and was unable to support herself.
His holdings included 280,000 shares of Chicago Board Options Exchange stock, determined to be part of the marital estate. The court awarded Harnack 120,000 of those shares.
She did not receive them.
The court’s own findings about his conduct
This is not characterization. This is the appellate court, describing the record:
“[Fanady’s] complete refusal to participate in the dissolution proceedings for more than 15 months, his attempts to evade service of process and his refusal to comply with the court’s orders regarding payment of maintenance and with its restraining orders and injunctions barring him from the transfer of any assets held by him or his enterprises.”
“…Fanady’s ‘attempts to evade the jurisdiction of the court and to defraud this court‘ as well as a Florida court, where he obtained a dissolution of marriage judgment under false pretenses.“
“…Fanady ‘forged a dissolution judgment in order to obtain a religious divorce‘ and attempted to ‘hide marital assets by selling one presumptively marital CBOE seat and hiding the money received in Switzerland and by transferring 120,000 presumptively marital shares‘ from partnership accounts.”
And the court’s summary of all of it:
“Fanady was the architect of his own predicament.”
He was also, separately, facing a breach of partnership action from his business partners. The CBOE interpleaded the stock it held so a court could sort out ownership.
The order, and the trust
On December 11, 2020, the court ordered Fanady to transfer 120,000 CBOE shares or the equivalent by December 18. He appealed and lost. The deadline passed with no transfer. Harnack filed a show-cause petition on December 30.
Fanady then disclosed the Belize trust.
He claimed it contained “everything he has ever owned.” He said he had no way to access its assets, though it paid his living expenses and legal fees. He described it as a blind trust — he did not know what was in it.
He sent a copy of the court’s order to the Belize trustee.
The Part Everyone Skips: The Trustee Refused
This is the fact that makes the case worth writing about, and almost every account of it leaves it out.
The Belize trustee refused.
On the ground that Fanady was acting under duress, the trustee stated it could not comply with any order from Fanady — much less turn assets over to the court or to Harnack.
That is the mechanism operating exactly as designed. A licensed foreign fiduciary, presented with a U.S. court order, declined to act because the order was issued against a person under compulsion.
The Illinois court had no way to reach the trustee. It never reached the trust assets. Harnack never collected from the trust.
On the structural question, Belize held.
So Why Is He in Jail?
Because self-created impossibility is not a defense
On February 9, 2021, the court found Fanady in indirect civil contempt, found he had the means to comply, and found his failure willful and contumacious. It ordered him committed until he transferred the shares or $10 million. A body attachment order issued the next day.
His argument on appeal was impossibility. That is the entire thrust of any offshore trust defense: the settlor has no rights to the assets, and the trustee is refusing.
The Appellate Court’s answer, on June 1, 2022:
“An alleged contemnor’s inability to comply with an order is a defense to contempt, but that defense is unavailable where the contemnor has voluntarily created the inability to comply.”
The court did not need to decide whether Fanady could actually reach the trust. The only question was whether he created the inability himself. He did — by establishing and funding the Belize trust.
Because the order gave him a second path
The contempt order required 120,000 shares or $10 million.
Read that carefully. The court did not order him to make the Belize trustee do anything. It ordered him to produce shares or money. Whether the trustee would cooperate was beside the point, and the court found he had the means either way.
And because the sanction was coercive, not punitive
“Fanady holds the ‘keys to his cell’ and may purge the contempt at any time, by simply complying with the order.”
The court noted it had a longstanding familiarity with Fanady’s behavior and found no abuse of discretion in concluding he would ignore a more lenient sanction.
He was committed on June 28, 2022. He remains there. A further appeal in 2025 IL App (1st) 240835 held the trial court did not err in finding his continued incarceration coercive rather than punitive, because he had not carried his burden of proving impossibility.
⭐ The Point Almost Everyone Misses
These structures do not create contempt exposure. Badly timed and badly motivated structures do. Two things determine which one you have, and you control both.
Read the contempt cases together and the same two facts show up every time.
Timing. Was the trust established and funded before a claim existed, or in response to one?
Intent. Was the purpose legitimate forward planning against claims that do not yet exist — or defeating a claim already in view?
Fanady failed both. He funded the trust while his divorce was pending, in violation of orders expressly barring asset transfers, for a purpose asset protection was never meant to serve. Not to shield his property from a creditor, but to keep his wife’s share of marital property away from her.
The court did not have to work hard to find self-created impossibility. He handed it to them.
Why the record looks completely different when it is done right
A trust funded years before any claim is not an answer to anything. There is no pending dissolution. No restraining order to violate. No creditor whose claim is being defeated. Nothing was created in response to a threat, because no threat existed.
That is a fundamentally different record for a judge to read, and it is the record that separates the cases where the defense had a chance from the many where it did not.
It is also not a guarantee, and I will not pretend otherwise. Some courts state the self-created impossibility doctrine broadly enough to reach any settlor who funded a trust at all. But the cases where it actually bit involved retained control, post-claim funding, or both — and in United States v. Grant, where control had genuinely been relinquished and the assets moved before the problem, the defense worked.
The version worth remembering
The trust is not what gets you held in contempt. What you did and when you did it is what gets you held in contempt.
Which means the two variables that matter most are the two nobody can fix later. Every other decision in this field — jurisdiction, trustee, drafting, structure — can be revisited. Timing and purpose are set the day you fund it, and they are the two things every one of these cases turns on.
Your Spouse Is Not a Creditor
This is a categorical distinction rather than a matter of degree. Fanady was not doing asset protection badly. He was not doing asset protection.
Asset protection means protecting your own property from the claims of third parties. A future tort claimant. A judgment creditor. A lender on a guarantee you signed. Someone who has, or may someday have, a claim against you personally.
A spouse asserting a marital property claim is not in that category.
Depending on the state, marital or community property is already partly hers. It is not an asset you own that a creditor is trying to reach. It is jointly owned property, and she is a co-owner asserting her interest in it.
You cannot protect what is not yours to protect.
That is why Harnack is not a close call. Moving 120,000 presumptively marital shares offshore was not shielding Fanady’s property from a creditor. It was taking his wife’s property and putting it somewhere she could not reach it. The Illinois court used a shorter word: he attempted to “hide marital assets.”
The legislatures agree, and they said so on purpose
Look at how the domestic asset protection trust statutes are drafted. Most of the states that authorize self-settled protection — the ones that went furthest to let a settlor shield assets from creditors — carve out divorcing spouses as exception creditors.
Those carve-outs are in the statutes themselves. They were not imposed by hostile courts. The legislatures most sympathetic to asset protection drew a line at spouses, because a spouse’s claim to marital property is not the kind of claim these structures were built to address.
When the friendliest statutes in the country say spouses are different, that is worth noticing.
What legitimate marital planning actually looks like
None of this means trusts and divorce cannot coexist. They can, and the tools are well established.
Prenuptial and postnuptial agreements, negotiated with disclosure and independent counsel on both sides. Trusts funded before the marriage. Third-party trusts — a trust created for someone rather than by them, which is why an inheritance held in a properly drafted continuing trust is treated differently than one received outright.
And in Riechers v. Riechers, 679 N.Y.S.2d 233 (Sup. Ct. Westchester Cty. 1998), a New York court examining a Cook Islands trust found it had been established “for the legitimate purpose of protecting family assets” — and still made an equalizing distribution award against the husband personally. The trust survived. The spouse was made whole from other assets.
That is the honest version of how this works. The structure is not a weapon against a spouse, and a court that concludes otherwise has a great deal of discretion and no reason to be generous.
Why this matters beyond Harnack
The reason to say this plainly is that the alternative reading damages the whole field.
Every case like this gets cited as evidence that offshore trusts are instruments for hiding assets. And in Fanady’s hands, that is exactly what it was. Defending him would be defending the caricature.
The better position is the accurate one: this was never asset protection. It was concealment of marital property, dressed in a structure built for something else. The trust performed. The purpose was illegitimate from the day it was funded, and everything that followed proceeded from that.
Timing and Intent, in One Sentence
Even the field’s most prominent skeptic of offshore planning — an attorney who has spent decades cataloguing where these structures fail — put it plainly in his own analysis of the case:
“Fanady is using his Belize trust not for any legitimate purpose, but to cheat his spouse. That was never the proper office of asset protection planning, and it is nothing like legitimate.”
“Fanady today sits in jail because he used his Belize trust to hurt Harnack.“
When the critic and the practitioner read a case the same way, that reading is probably right.
Where This Sits Against the Other Contempt Cases
Three cases. Three different failures. In all three, the structure held and the person did not.
Anderson — control. In FTC v. Affordable Media, LLC, 179 F.3d 1228 (9th Cir. 1999), the Cook Islands trustee refused the repatriation order, removed the settlors as co-trustees, and refused again when they tried to install replacements. The FTC later litigated in the Cook Islands and lost. The assets never came back. And the Andersons went to jail, because they had named themselves trust protectors and retained the power to override the duress declaration. They could still pick up the phone.
Harnack — timing and intent. The trustee refused and the assets stayed put. But he moved them mid-divorce, against restraining orders, to defeat his spouse’s claim. The impossibility was self-created before it was ever tested.
Solow — post-claim conduct. The trust held. The contempt finding arose from a post-verdict mortgage the debtor signed, not from the structure itself.
Three different ways to lose. The variable is never the jurisdiction.
The Honest Limits
Two criticisms of offshore planning are worth engaging directly, because both are serious and both come from people who know the case law better than most.
Offshore courts cannot protect you from contempt
This is true and it is not really disputed. Offshore courts will protect the trust and its assets. What they cannot do is protect the settlor from a domestic contempt remedy, because contempt runs against the person standing in the courtroom — not against a trustee three thousand miles away.
That is the real boundary of offshore planning. The Cook Islands cannot appear in Cook County on your behalf. Which is precisely why the control and timing analysis matters more than the choice of jurisdiction.
And the impossibility defense rarely works
Also true. By one experienced practitioner’s count, the defense has failed in roughly thirty cases and succeeded once. Anyone selling an offshore trust on the strength of the impossibility defense alone is selling a long shot.
But notice what those cases have in common. In case after case, the debtor either retained a lever, moved assets after a claim arose, or did both. The defense is not failing because offshore trusts do not work. It is failing because the people asserting it built too late, kept too much, or both — which is the same finding the Illinois court made about Fanady in one sentence.
The two critiques worth pushing back on
“Choice of jurisdiction has never mattered in a single case.”
On the narrow point — whether Cook Islands law produced a different litigation outcome than Nevis or Belize law would have — that is fair, and there is no case to the contrary.
But jurisdiction choices are not only about litigation strength. Belize is used for registration because its legislation provides no waiting period before protection attaches, and because it does not require a Belize trustee from inception — which is what makes offshore registration compatible with domestic administration. That is a timing and structural feature, not a claim that Belize courts are tougher than Cook Islands courts. Different question.
“Drafting has never made an appreciable difference.”
This one is too strong, and Anderson is the proof. The Andersons lost because their instrument let them serve as their own protectors. That is a drafting decision, and it determined the outcome. In United States v. Grant, the court identified an unrestricted power to remove and replace the trustee as a flaw in the structure — again, drafting.
The accurate version is that good drafting is necessary and not sufficient. It will not save a transfer made too late or a settlor who kept a lever. But bad drafting demonstrably loses cases, and the two most-cited contempt decisions in this field are both about provisions someone chose to include.
I break down what the Eleventh Circuit did with an offshore trust duress clause in In re Lawrence: when an offshore trust duress clause fails.
FAQs
Did the Belize trust fail?
No. The trustee refused to comply with the Illinois order on duress grounds, and the court never reached the trust assets. Harnack did not collect from the trust.
Then why is he still in jail?
Because the court found he had the means to comply and that he had created his own inability. Self-created impossibility is not a defense to contempt.
Did the order require the trustee to do anything?
No. It required Fanady to transfer 120,000 CBOE shares or $10 million. Neither depended on the trustee.
When were the assets moved?
While the dissolution was pending, and per the court’s findings, in violation of restraining orders barring transfers.
Can you use an asset protection trust against a spouse?
No, and that is the central error in this case. Asset protection shields your own property from third-party claims. Marital or community property is partly your spouse’s already — she is a co-owner asserting her interest, not a creditor. Most DAPT statutes carve out divorcing spouses as exception creditors for exactly that reason.
What is the legitimate way to plan around a marriage?
Prenuptial and postnuptial agreements with full disclosure and independent counsel, trusts funded before the marriage, and third-party trusts created for someone rather than by them.
Is this a criminal sentence?
No. It is coercive civil contempt. The appellate court held that Fanady “holds the keys to his cell” and may purge at any time by complying.
Does this mean offshore trusts do not work?
It means this one worked and the person did not. Offshore courts protect assets. They cannot protect a settlor from a domestic contempt remedy, because contempt runs against the person.
Would a Cook Islands or Nevis trust have changed the outcome?
On these facts, no. The failure was timing and intent, not jurisdiction.
How often does the impossibility defense work?
Rarely. It has failed in roughly thirty reported cases and succeeded approximately once. Every failure shares the same pattern: assets moved too late, control retained, or both.
The Bottom Line
The Belize trust held. The trustee refused. The Illinois court never touched the assets. And Steve Fanady has been in the Cook County Jail for more than four years.
The lesson is not that offshore trusts fail. It is that these structures only do their job when two conditions are met, and Fanady met neither.
Funded before a claim exists. Established for a legitimate purpose.
Get those two right and the contempt cases have very little to say about you. Get either one wrong and the strongest jurisdiction on earth will not help, because the court will not be looking at your trust. It will be looking at you.
And there is a third thing worth saying plainly, because this case is the clearest example of it in the reported law. A spouse is not a creditor. Marital property is not yours alone to protect. What Fanady did was not asset protection performed poorly — it was something else entirely, wearing the right clothes.
I spent the early part of my career on the plaintiff’s side of civil litigation. The structures that came apart came apart for the same two reasons every time: the debtor still controlled what he claimed to have given away, or he built it after the claim was already in view.
Fanady’s problem was the second one. Belize could not fix it, and it was never supposed to.
Structure before stress.
📞 For a confidential legal consultation, contact Bradley Legal Corp. at (888) 773-9399, or complete the intake questionnaire at btblegal.com.
By: Brian T. Bradley, Esq. — National Asset Protection Attorney
