Paul Flores ordered to pay more than $1.3 million to Kristin Smart family. Can he pay it?

Paul Flores was ordered to pay more than $ 1.3 million in restitution to Kristin Smart’s family to reimburse them for the costs they’ve incurred in the 28 years since her murder.

Restitution is a court order that requires those convicted of crimes to pay victims compensation for the expenses caused. It is a required part of the criminal court process in California, and it is ordered regardless of a defendant’s ability to pay.

Flores was ordered to pay roughly $351,000 plus interest in restitution on June 17 after an emotional hearing where the Smart family shared itemized reports of their expenses since Smart first disappeared from Cal Poly in 1996.

The interest is simple, the judge ruled, and begins at the time of the crime 28 years ago.

That brings the total restitution owed to the Smart family to about $1,334,404, according to a Tribune estimate.

Now that leaves the question, however: Will he be able to pay it?

Victims who are owed restitution could seek payment through assets belonging to a person convicted of a crime if there are no other forms of payment.

But according to his sentencing report Jan. 18 2023, Flores’ only asset was his home in San Pedro — which had a lien to pay his legal fees, of which he still owed more than $200,000 at the time — and a 1960 Chevy Bel Air truck with a salvage title.

He does not have a retirement account and has not had any income since he was arrested in April 2021.

Records show that on March 24, 2023 — two weeks after Flores was sentenced to 25 years to life for Smart’s murder — he sold his home to his parent’s family trust, meaning he had one less asset with which he could potentially pay the restitution.

As part of its Reality Check series, The Tribune investigated what happens when a person convicted of a crime sells their assets and what options the Smart family may have for being paid restitution.

Flores family establishes trust, put ownership of homes into it

There were three homes at the center of The Tribune’s investigation: Paul Flores’ house in San Pedro and the Arroyo Grande homes that belong to Susan and Ruben Flores, Paul Flores’ parents.

Paul Flores first purchased his house in San Pedro in February 2011, real estate documents from Los Angeles and San Luis Obispo County Clerk Recorder’s offices show. He borrowed $207,920 from Bank of America for the purchase.

That same year in May 2011, documents show, Susan and Ruben Flores establish the Flores Family Living Trust, which they placed the ownership of both their homes in.

A trust can help streamline the process of distributing assets after death without the need to go through probate court, Ann Wilson, partner at Carmel and Naccasha LLP law firm, told The Tribune. The law firm is not affiliated with the Smart case.

Most anyone can open a trust as long as they have some sort of asset to put in it, Victor Herrera, a partner at the same firm, said. The asset does not need to be high in value, he said, and it is possible for someone to open a trust while incarcerated.

Herrera said trusts need three things: A trustee, or person who manages the trust, beneficiaries, who benefit from the assets in the trust, and a corpus, or something to put inside the trust.

Trusts can be used for asset protection, Herrera said, but a trust does not protect assets from creditors unless it is an irrevocable trust. Assets must be placed in the irrevocable trust prior to any lawsuit or credit taken.

The key difference between the two types of trusts: Revocable trusts can be changed at any time, but an irrevocable trust can only change via court order or with approval of all the trust’s beneficiaries.

Revocable trusts, which is what the Flores family has, do not protect assets from creditors.

Creditors can go after assets in revocable trusts if the trustee is the person who is indebted to them, Herrera said, but not if the asset was transferred to a trust of someone who does not hold the debt.

Paul Flores sells San Pedro home after being sentenced to prison

Nothing much happened with any of the Flores homes until May 2021 — about a month after Paul and Ruben Flores were arrested in connection to Smart’s murder.

Ruben Flores’ home was taken out of the family trust on May 26, 2021, the documents showed, and Paul Flores established his personal living trust on May 28, 2021, to which he transferred the ownership of his San Pedro home.

Then, on June 30, 2021, Ruben and Susan Flores borrowed $197,500 from Wells Fargo, putting down Susan Flores’ Arroyo Grande home as collateral, the documents showed. That transaction was done through their shared family trust.

A month later, on July 30, 2021, Ruben Flores transferred ownership of his Arroyo Grande home back into his and Susan Flores’ trust, according to the documents.

The preliminary hearing for the case against the two Flores men began Aug. 2, 2021. It ended on Sept. 22, 2021.

On Sept. 27, 2021, Paul Flores placed a $400,000 lien on his San Pedro home, listing his attorney, Robert Sanger, as the beneficiary of the lien, documents showed, in order to pay Flores’ legal fees.

Little happened with the homes for about two years, until Ruben Flores was approved for a $2.35 million reverse mortgage loan on his house on Feb. 14, 2023 — about four months after he was acquitted on Oct. 18, 2022, of helping his son hide Smart’s body. Paul Flores was convicted of Smart’s murder by a separate jury the same day.

Susan Flores transferred Ruben Flores’ Arroyo Grande home back to Ruben as the sole owner on Feb. 17, 2023, documents show.

On Jan. 18, 2023, Paul Flores still owed more than $200,000 on the lien on his San Pedro house, according to his sentencing report.

According to California law, liens on assets must be resolved before any sales or resolved through a sale.

Paul Flores was sentenced to 25-years-to-life in state prison on March 10, 2023.

Two weeks later, on March 24, 2023, Susan and Ruben Flores purchased their son’s San Pedro house through their trust and borrowed $427,500 from American Pacific Mortgage Corporation for the sale, according to the documents.

It’s unclear how much of the sale went to pay off the lien placed on his home for the legal fees, and how much Paul Flores was able to keep from the sale.

Can you sell assets if under criminal investigation?

Hypothetically, the Smart family could have asked for money from Paul Flores’ San Pedro home if it was still in his trust in order to have their restitution paid, but now that it is in his parent’s trust, they cannot.

According to California Courts, judges can freeze assets prior to sentencing and then unfreeze them and order a defendant to use the assets to pay restitution with the assets.

None of the Flores family’s assets were frozen during the criminal trial, so the sale appears to be legal.

Victims of crimes also have the right to a “debtor’s examination,” which means a victim can require the convicted offender to come to court once a year to answer questions about income and assets.

People convicted of crimes who owe their victims restitution cannot escape the obligation, even if they file for bankruptcy.

According to the California Department of Corrections and Rehabilitation, Paul Flores will have to pay 50% of his prison wages and any money that is deposited to his account into the restitution he owes the Smart family.

This will occur throughout Flores’ prison sentence until restitution is paid in full. He can also make voluntary payments toward the restitution.

If he makes parole and is released from prison but still owes restitution to the Smart family, the debt will be referred to the California Franchise Tax Board for collection.

Denise Smart, Kristin Smart’s mother, told The Tribune after the restitution ruling the family would drop seeking any restitution in exchange for information that could lead to her daughter’s remains.

“The fact that withholding her and protecting their money is more important than anything else in their world is just heartbreaking for everyone our family,” Denise Smart said.

Harold Mesick, Flores lawyer, told The Tribune the Flores family do not have information on Kristin Smart’s location and declined the offered.

He declined to comment on this story on behalf of the Flores family.