Singh v, Singh (In re Singh)

Case Type:
Case Status:
BAP No. CC-17-1353-FLS (9th Circuit, Mar 14,2019) Not Published
For purposes of § 727(a)(2)(A), "property of the debtor" includes property held by the debtor's alter-ego. Thus, a debtor who used a corporation that conducted a Ponzi scheme in addition to legitimate business could properly be found to be the debtor's alter-ego, and funds that were deposited in and disbursed through that corporation's bank account could constitute property of the debtor's bankruptcy estate.
Procedural context:
The bankruptcy court denied Pradeep Singh's discharge under §§ 727(a)(2)(A) and (a)(4). Singh appealed, arguing that the bankruptcy court erred by determining that his corporation's transactions were attributable to him, personally, and that he was operating a Ponzi scheme. Singh also contended that the bankruptcy court erred in various adverse pretrial and evidentiary rulings.
Pradeep Singh, his wife Rindi Singh and his son were the shareholders of PradeepSingh Corporation, dbaSecure Vision Associates. SVA sold insurance, annuities and insurance based products. Pradeep was the president, CEO, CFO, and majority shareholder. Rindi was the secretary of SVA. Pradeep's son apparently was along for the ride. Beginning in 2001, SVA quit observing corporate formalities: no shareholder or director meetings, and no minutes (WHY DIDN'T THEY CONVERT TO A LIMITED LIABILITY COMPANY?). Pradeep was licensed to sell life and health insurance in California, but was not licensed to sell securities. From 2002 through 2014, Pradeep persuaded dozens of customers and others to make checks payable to SVA. Those individuals received notes payable at above-market interest rates. At trial, several of these customers testified that Pradeep was going to invest their money in the stock market or other ventures. Also at trial, the U.S. Trustee's expert testified that he not able to account for approximately $117,000 (apparently of the customer's money) that went into SVA's bank account. SVA conducted most of its business with American Equity Investment Life Insurance Company. In 2013, American Equity received complaints from consumers that Pradeep and SVA had solicited money from them. American Equity cautioned Pradeep that this conduct violated American Equity's company policies. American Equity terminated its business relationship with SVA in June 2014, as did another insurance company. Mr. Singh lost all commission-based income, and could no longer repay the promissory notes. Pradeep dissolved PradeepSingh Corporation in July 2014. Pradeep and Rindi Singh filed a joint chapter 7 petition in August 2014. In their bankruptcy schedules, the Singhs did not disclose loans that they allegedly made to SVA or prepetition payments that they received from SVA. Six individuals who loaned money to SVA filed adversary proceedings seeking denial of discharge under § 523. The U.S. Trustee then filed an adversary proceeding seeking to deny the Singhs a discharge under §§ 727(a)(2)(A), (a)(4), and (a)(5). The U.S. Trustee alleged that SVA was the Singhs' alter-ego, and that Mr. Singh solicited the loans (which the U.S. Trustee characterized as "investments") as part of a Ponzi scheme while SVA and the Singhs were insolvent. The U.S. Trustee further alleged the discovery of (i) undisclosed prepetition payments from SVA to Mr. Singh and (ii) bank accounts that had not been disclosed in the Singhs' bankruptcy case. The U.S. Trustee thus alleged that the Singhs had (1) transferred money to and from SVA with the intent to hinder, delay and defraud creditors, (2) made false oaths, and (3) failed to explain the loss of certain assets. After a five-day trial, the bankruptcy court exonerated Mrs. Singh, but found that Pradeep knowingly used funds received from new "investors" to pay amounts owed to prior "investors." The bankruptcy court also found that SVA became an alter-ego, not so much for the lack of corporate formalities, but because Mr. Singh's commission income declined. Thus, "[t]he existence of SVA because meaningless except as a tool to implement {Pradeep's] fraud." (Quoting the bankruptcy court's opinion.)
FARIS, LAFFERTY, and SPRAKER, Bankruptcy Judges

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