by Brian Mahany
When creditors hear the word “bankruptcy,” most just throw up their hands, file a proof of claim and hope for the best. Aggressive creditors rights lawyers can sometimes still win on behalf of their clients, even in bankruptcy court. One of the more interesting frauds that got shot down comes from the Northern District of Ohio, In Re Perry. (Hat tip to Jay Adkisson for the case.)
In this case, family members of a closely held cattle business attempted to siphon off money from the company, knowing it was in financial straits. The business ultimately defaulted owing over $800,000 to a local bank that had provided financing. The owners of the business then also filed bankruptcy.
End of story? Not this time.
It turns out that the business transferred almost $50,000 to family members of the owners, Mr. & Mrs. Perry. Although Mr. Perry had worked at the business, the court noted that transfers to family members were subject to heightened scrutiny.
In this case, the transfers had no relationship to services performed and were more than normal. The checks were also written out-of-order and lacking in the normal paper trail. More ominously, they were not reflected on the Perry’s initial tax return.
Quoting an earlier case, the bankruptcy judge eloquently stated:
“Fraud is a generic term, which embraces all the multifarious means which human ingenuity can devise and which are resorted to by one individual to gain an advantage over another by false suggestions or by the suppression of truth. No definite and invariable rule can be laid down as a general proposition defining fraud, and it includes all surprise, trick, cunning, dissembling, and any unfair way by which another is cheated.”
In this case, no discharge for the responsible insiders. Whether or not the bank will collect is unknown but the court was not letting anyone walk away debt free.
Fraud cases are quite complex. Although most lawyers can obtain a judgment, it takes considerable specialized knowledge to find assets and defeat attempts to defraud legitimate creditors. If you are the victim of a large fraud, give us a call. Our asset recovery lawyers can help you recover your hard earned money. Already have a judgment but having trouble collecting? Have your lawyer call us. We still may be able to help.
Mahany & Ertl – America’s fraud recovery lawyers. Milwaukee, Wisconsin; Detroit, Michigan & Portland, Maine. Services nationwide. Brian is a member of the Board of Advisers of the International Association of Asset Recovery and licensed to practice law in multiple jurisdictions across the U.S.