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Commercial Fraud Committee

Committees

Post date: Friday, April 03, 2015

Over the past several years, creditors, bankruptcy trustees and receivers have used § 548 of the Bankruptcy Code and the Uniform Fraudulent Transfer Act (UFTA) to “claw back” amounts paid to winning investors in a Ponzi scheme (i.e., payments made to investors greater than their investment).

Post date: Friday, April 03, 2015

A series of recent Tenth Circuit decisions illustrate the potential pitfalls defendants face in relying on the good faith and subsequent transferee defenses in fraudulent transfer avoidance claims.[1] In both cases, law firms were required to return fees they had undisputedly earned.

Post date: Friday, April 03, 2015

Section 548(c) of the Bankruptcy Code provides a defense to a party found to have received a fraudulent transfer: If the transfer is received for value and in good faith, the transferee may retain the property to the extent value was given in exchange.[1]

Post date: Wednesday, November 19, 2014

In the recent case of Securities Investor Protection Corp. v. Bernard Madoff Inv. Sec. (“Securities”), the Second Circuit ruled that § 550[1] of the Bankruptcy Code does not apply extraterritorially to allow avoidance of fraudulent transfers that occur entirely outside of the United States.[2] Securities involved the efforts of Irving H. Picard, the trustee appointed under the Securities Investor Protection Act (SIPA)[3] to recover funds transferred from Madoff Investment Securities LLC[4] to foreign “feeder funds,” which then transferred those funds to other foreign persons or entities.

Post date: Wednesday, November 19, 2014

Ponzi schemes are increasingly in the news. Recently, the FBI released information about an $18 million Ponzi scheme based out of Nashville, Tenn., in which three men involved in the Hanover Corp. pled guilty to securities fraud, money laundering and conspiracy.[1] In that scheme, the three men offered clients the opportunity to invest in Hanover through promissory notes bearing high interest rates. In this classic Ponzi scheme, Hanover promised that the money would be invested in stock options and startup companies.

Post date: Wednesday, November 19, 2014

Since the enactment of the Fraudulent Conveyances Act of 1571, the law has prohibited transfers designed to hinder, delay, or defraud creditors.[1] Likewise, aiding-and-abetting and conspiracy are well-established bases for civil liability. Business lawyers live and breathe these concepts.

Post date: Thursday, May 22, 2014

In a bankruptcy context, issues arising from the forced transfer of partnership or membership interests in a closely held business are a frequently encountered by the practitioner. The relevant focus is upon the value, or lack of value, given in consideration for the transfer of interest.

Post date: Thursday, May 22, 2014

The unfortunate aftermath of a Ponzi scheme is that it leaves investors fighting amongst themselves over what remains and the competing interests of the “net losers” (those who lost money beyond the initial investment) trying to recover some of their losses and the “net winners” (those who made a profit) trying to hold onto distributions they received.

Post date: Thursday, May 22, 2014

In Labourers’ Pension Fund of Central and Eastern Canada v. Sino-Forest Corporation[1], the Ontario court[2] approved Ernst & Young LLP’s (“Ernst & Young”) $117 million settlement relating to class action lawsuits commenced by jilted investors following the downfall of Sino-Forest Corporation (“SFC”), once the most valuable forestry company on the Toronto Stock Exchange.  The $9.2 Billion class action (which is ongoing against certain defendants) contains significant allegations of fraud that call into question SFC's reported asset values and revenues, as well as the practices of SFC's auditors, underwriters and consultants.

Post date: Thursday, May 22, 2014

Recently, the Bankruptcy Court for the District of Massachusetts ruled in In re Duplication Management, Inc., (Riley v. Countrywide)[1] that courts can shift the burden of production[2] to a defendant to quantify the value of indirect benefits purportedly received by a debtor accused of making a fraudulent transfer.[3] Duplication Management is notable not only in shedding light on what is meant by the “burden of production,” but also under what circumstances this burden might shift to a defendant.

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Ms. Melissa Davis, CPA, CIRA, CFE
Co-Chair
KapilaMukamal, LLP
Fort Lauderdale, FL
(954) 761-1011

Ms. Virginia Tate, CFE/CIRA/EA
Co-Chair
FAI International, Forensic Accounting & Investigations
Coeur D Alene, ID
(208) 765-5432

Mr. Ben A. Barnes
Communications Manager
Reid Collins & Tsai LLP
Dallas, Tx
(214) 420-8913

Mr. Walter F. McArdle, Esq.
Education Director
Spain & Gillon, LLC
Birmingham, AL
(205) 581-6295

Mr. Michael D. Napoli
Newsletter Editor
Akerman LLP
Dallas, TX
(214) 720-4300

Mr. Adam D. Crane
Special Projects Leader
HSM Chambers
George Town, Grand Cayman,
(345) 815-7364

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