Category Archives: Fraudulent Transfer

Aiding and Abetting Fraudulent Transfers

Aiding and Abetting Fraudulent TransfersAiding and abetting fraudulent transfers. Can a Trustee maintain an action against parties who were directly involved in the implementation of a fraudulent transfer, but were not the recipient of any of the fraudulently transferred property? Would it matter if the involved party were an attorney? It depends on where you are.

Two bankruptcy courts have addressed this issue and made contrary holdings, based on differing state law. In the case of In re Parker, 2009 WL205011 (Bkrtcy. E.D. N.Y.), Judge Eisenberg held that applicable New York law “does not recognize a cause of action against parties for aiding and abetting a fraudulent conveyance because …the parties were neither transferees of the assets nor beneficiaries of the conveyance.” Further, the status of one party as an attorney did not change this finding. The Trustee’s only remedy was avoidance of the transfer and recovery of the transferred property for the bankruptcy estate.

In the case of In re Restaurant Development Group, Inc. 397 B.R. 891 (Bkrtcy.N.D. Ill. 2008), Judge Schmitterer noted that Illinois courts recognize claims for conspiracy against attorneys where there is evidence of participation in a plan with their clients to commit fraud. Though acknowledging that other states, under their version of the Uniform Fraudulent Transfers Act, have not found and do not recognize aiding and abetting claims against non-recipients of fraudulent transfers: The Court found such liability under Illinois law. If you have a question about the liability of aiding and abetting fraudulent transfers you should seek the advice of an experience bankruptcy attorney.

For more information about Bankruptcy and aiding and abetting a fraudulent transfers  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Avoidance Action Timely Filed

Avoidance Action Timely FiledHow do you know if a Court would see an avoidance action timely filed? Here’s an example of a court’s process.

The order for relief was entered in debtor’s case on September 13, 2004. The trustee filed avoidance actions on September 13. 2006, seeking to avoid several transfers of real property and marketable securities that were made to debtor’s spouse. The spouse subsequently filed a motion to dismiss on the basis of the action being time-barred under § 546(a).  The bankruptcy court and district courts both overruled her dismissal motion.  The spouse then sought a ruling from the Eighth Circuit Court of Appeals, In re Raynor, 406 B.R. 375 (8th Cir. BAP2009).

The Eighth Circuit Court of Appeals likewise found that the avoidance action of the Trustee was timely filed under § 546(a) the court found that the specified avoidance actions “may not be commenced after the earlier of the later of 2 years after the entry of the order for relief.”

The Eighth Circuit Court of Appeals found that although the language was “inelegant,.. it was nevertheless unambiguous and included the 2-year anniversary date so long as the complaint was filed before midnight of that date.   Accordingly, the trustee’s avoidance action timely and not time-barred.

If you have questions about real property and securities transfers to a spouse when you are considering filing a bankruptcy, or if a transfer avoidance action timely filed – you should seek the advice of an experience bankruptcy attorney to discuss your options.

For more information about Bankruptcy and if an avoidance action timely filed – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Non-debtor Denied Jury Trial in Fraudulent Transfer

Non-debtor Denied Jury Trial in Fraudulent TransferWould a non-debtor denied jury trial in fraudulent transfer action? Here’s a story about one case in Georgia.

The Trustees of two related estates filed adversary proceedings against the individual debtor and his non-debtor spouse. The non-debtor spouse had filed no claims in the bankruptcy cases.

The Trustees alleged fraudulent transfers of the defendants’ personal residence for no consideration. The non-debtor spouse demanded a jury trial. The court held that she was not entitled to one. In re Prosser, 2008 WL 2388378 (Bankr. D. V.I. 2008).

The U.S. Supreme Court had held in GranFinanciera v. Nordberg, 486 U.S. 1054, 108 S.Ct. 2818 (1989) that the Seventh Amendment entitled a defendant to a jury trial when the defendant had not filed a proof of claim against the estate and when the plaintiff trustee was seeking to recover an allegedly fraudulent monetary transfer.

Here, however. the fraudulent transfer action was to recover estate property of which the non-debtor spouse had possession along with the individual debtor.

Thus, if a fraudulent transfer was established. the court had core jurisdiction over the issue of the return of estate property for the benefit of all creditors. With respect to the related turnover complaint, the relief sought by the Trustee was purely equitable and there was no right to a jury trial at all. In this case a non-debtor was denied jury trial in fraudulent transfer action. If you have a question a non-debtor denied jury trial in fraudulent transfer action, you should seek the advice of an experienced bankruptcy lawyer.

For more information about Bankruptcy and is a non-debtor denied jury trial in fraudulent transfer action – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Does Forfeiture of Real Estate Contract A Fraudulent Transfer

Does Forfeiture of Real Estate Contract A Fraudulent TransferDoes Forfeiture of Real Estate Contract a Fraudulent Transfer – Forfeiture of Real Estate Contract a Fraudulent Transfer.  Does the forfeiture of real estate contract a fraudulent transfer? Here’s a story about one case.

A Debtor entered into a real estate contract with his mother in 2004 to purchase from her an undivided one-half interest in approximately 155 acres of farm land. The original purchase price was $27.000. On May 3.2007, debtor transferred his interest by quitclaim deed to his mother. At the time. approximately $15,000 remained owing. Trustee’s undisputed valuation experts established the value of the property was approximately $300,000.

Debtor filed his Chapter 7 petition less than five months after the transfer and did not disclose the transfer or his prior interest in the property. The Trustee filed an adversary proceeding to avoid the transfer and moved for summary judgment.

Debtor opposed the motion asserting he had no interest in the property because he gave the deed in order to avoid a contract forfeiture. The court ruled in favor of the Trustee. In re Houston, 385 B.R. 268 (Bankr. N.D. Iowa 2008).

Judge Kilburg held that a forfeiture of a real estate contract could constitute a fraudulent transfer and here, where less than reasonably equivalent value was received, it was no less than constructively fraudulent.

Accordingly, summary Judgment for the Trustee was granted. In this case the Judge did find that a forfeiture of real estate contract constituted fraudulent transfer. If you have questions about transferring property prior to filing a bankruptcy, you should seek the advice of an experienced bankruptcy lawyer.

Does Forfeiture of Real Estate Contract a Fraudulent Transfer – for more information about Bankruptcy whether a forfeiture of real estate contract constituted fraudulent transfer  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Plea Agreement establish Ponzi debtors intent to defraud

Plea Agreement establish Ponzi debtors intent to defraudPlea Agreement establish Ponzi debtors intent to defraud – Does a plea agreement establish Ponzi debtors intent to defraud?

After filing for Chapter 7 relief, a Debtor was charged with crimes in connection with an alleged Ponzi scheme. Pursuant to a plea agreement, he subsequently pled guilty to the charges and was sentenced to prison . In the plea agreement, he admitted that he operated a Ponzi scheme over a lengthy period.

In a fraudulent transfer action , the Trustee sought to avoid transfers from the Debtor to investors, to the extent they exceeded the amount invested (“false profits”). The Bankruptcy Court granted summary judgment to the Trustee, finding that the Debtor’s guilty plea and plea agreement conclusively established that the Debtor had operated a Ponzi scheme from which the actual intent to defraud his creditors would be imputed. The District Court affirmed.

Further appeal was taken to the Ninth Circuit. In re Slatkin, 525 F.3d 805 (9th Cir. 2008). The Circuit Court also affirmed, finding that once the existence of a Ponzi scheme is established, payments received by investors as purported profits are deemed fraudulent transfers as a matter of law. The Circuit Court further noted that the Debtor was not a “stockbroker” under the Code and, therefore, the Trustee was not barred by §546(e). The Court also rejected the investors’ argument that the plea agreement should not have been admitted because it was hearsay. The Court found it to be admissible under Federal Rule of Evidence 807. The admissions in the plea agreement were more probative on issues of the Debtor’s intent to defraud than any other evidence the Trustee could procure. The interest of justice would be best served by its admission as evidence. Further. the plea agreement had the equivalent circumstantial guaranties of trustworthiness as a statement covered by Rules 803 or 804 . A plea agreement does establish a Ponzi debtor’s intent to defraud. If you have questions about a Ponzi scheme you should seek the advice of an attorney.

Plea Agreement establish Ponzi debtors intent to defraud – for more information about Bankruptcy and plea agreements establish a Ponzi debtor’s intent to defraud  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Ponzi Schemes in Bankruptcy

Ponzi Schemes in BankruptcyPonzi Schemes in Bankruptcy. How are Ponzi schemes in bankruptcy handled?

An example is in the case of In re Slatkin, 525 F. 3d 805 (9th cir. 2008). After filing for Chapter 7 relief, the Debtor was charged with crimes in connection with an alleged Ponzi scheme. Pursuant to a plea agreement, he subsequently pled guilty to the charges and was sentenced to prison.

In the plea agreement, he admitted that he operated a Ponzi scheme over a lengthy period. In a fraudulent transfer action, the Trustee sought to avoid transfers from the Debtor to investors, to the extent they exceeded the amount invested (“false profits”). The Bankruptcy Court granted summary judgment to the Trustee, finding that the Debtor’s guilty plea and plea agreement conclusively established that the Debtor had operated a Ponzi scheme from which the actual intent to defraud his creditors would be imputed. The District Court affirmed. Further appeal was taken to the Ninth Circuit.

The Circuit Court also affirmed, finding that once the existence of a Ponzi scheme is established, payments received by investors as purported profits are deemed fraudulent transfers as a matter of law. The Circuit Court further noted that the Debtor was not a “stockbroker” under the Code and, therefore, the Trustee was not barred by section 546(e). The Court also rejected the investors’ argument that the plea agreement should not have been admitted because it was hearsay. The Court found it to be admissible under Federal Rule of Evidence 807. The admissions in the pleas agreement were more probative on issues of Debtor’s intent to defraud than any other evidence the Trustee could procure. The interest of justice would be best served by its admission as evidence. Further, the plea agreement had the equivalent circumstantial guaranties of trustworthiness as a statement covered by Rules 803 or 804.

If you have questions about Ponzi Schemes in Bankruptcy you should seek legal counsel regarding your rights.

For more information about Bankruptcy and Ponzi Schemes  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.