Commercial Fraud Committee


Post date: Tuesday, June 09, 2015
Photo of Robert Loh, CFE, CIRA
Robert Loh, CFE, CIRA

In December 2014, attorneys and financial advisors serving both unsecured creditors’ committees and trustees watched as the Second Circuit expanded the “safe-harbor” provision available to defendants in certain clawback litigations. The safe-harbor provision was designed by Congress to protect certain securities and other transactions including “settlement payments” from avoidance actions. In 11 U.S.C. 546(e),[1] the Bankruptcy Code sets forth that a trustee may not avoid a transfer that was a settlement payment to (or for the benefit of) a broker or financial institution, or for a payment made in connection with a securities contract.

Post date: Tuesday, June 09, 2015

In a case of first impression, the U.S. Bankruptcy Court for the Northern District of Illinois recently held that loan payments related to a two-tiered securitization structure are protected from avoidance by 11 U.S.C. § 546(e). Specifically, in Krol v. Key Bank National Association (In re MCK Millennium Centre Parking LLC),[1] the court held that the debtor’s payments on a nondebtor affiliate’s loan, which had been transferred into a trust as part of a commercial mortgage-backed securitization, were made “in connection with a securities contract” under § 546(e) and, therefore, were not avoidable as preferential or constructively fraudulent transfers.

Post date: Tuesday, June 09, 2015

Two recent cases suggest that broadcasters who advertise a debtor’s fraudulent business may be vulnerable to § 548 claims. If the broadcaster received notice of the debtor’s fraudulent business practices, it may lack good faith. Yet a recent decision from the Fifth Circuit suggests that even if good faith exists, advertising that grew the debtor’s fraud does not provide reasonably equivalent value. In this first of two articles, good faith is addressed.

Post date: Friday, April 03, 2015

In this edition of the Commercial Fraud Committee Newsletter, we introduce a new feature: an interview with a Commercial Fraud Committee member. Our inaugural interviewee is Richard Lauter, Commercial Fraud Committee Chair. Rich is a partner at Freeborn & Peters LLP in Chicago, where he leads his firm’s Bankruptcy and Restructuring Group.

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
Photo of Daniel M. Anderson
Daniel M. Anderson

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.


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

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

Mr. Ben A. Barnes
Communications Manager
Kirkland & Ellis LLP
Dallas, TX
(214) 972-1748

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

Mr. Greg S. Schwegmann
Membership Relations Director
Reid Collins & Tsai LLP
Austin, TX
(512) 647-6100

Mr. John T. Farnum, Esq.
Newsletter Editor
Miles & Stockbridge PC
Washington, MD
(202) 737-9600

Mr. Nathaniel J. Palmer
Special Projects Leader
Reid Collins & Tsai LLP
Austin, TX
(512) 647-6107

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