- 14-1154, 2015 WL 1020736
- Eighth Circuit affirmed bankruptcy court's finding that liens should be avoided as fraudulent conveyances because a sufficient number of the traditional badges of fraud were present to give rise to a presumption of fraud sufficient to grant summary judgment to the trustee. The Circuit declined to adopt the bankruptcy court's use of the Ponzi scheme presumption because the traditional badges were present and enough for the lower court to rule for the trustee. The Circuit stated that its ruling gives rise to no conclusion as to the validity of the Ponzi scheme presumption or its applicability in future cases. The court also affirmed the bankruptcy court's allowance of an affidavit from the trustee's forensic accountant, stating that because the defendants had the opportunity to depose the accountant, the spirit of Rule 26 was satisfied.
- Procedural context:
- Appeal from the United States District Court for the District of Minnesota.
- Case was part of Tom Petters's multimillion dollar Ponzi scheme. Polaroid, a company owned by Petters, gave liens to certain creditors. After Polaroid filed a chapter 11 petition, it filed a fraudulent conveyance action to avoid the liens. The case was converted to chapter 7 and the trustee took over the suit. The trustee filed for summary judgment arguing both the Ponzi scheme presumption of fraud and the traditional badges presumption. The bankruptcy court granted summary judgment on both grounds. It also allowed the trustee to use the affidavit of his forensic accountant in support of the motion for summary judgment. The district court affirmed the Ponzi scheme presumption and did not address the traditional badges. The Circuit affirmed the finding, using only the traditional badges.
- Riley, Wollman, and Bye
George Czaplinski v. Bank of America
Summarizing by Lars Fuller
3144 in the system
1 Being Processed