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Seventh Circuit Reverses 'Inconsistent' District Court Fraudulent Transfer and Equitable Subordination Ruling
The U.S. Court Appeals for the Seventh Circuit held on Aug. 26, 2013, that an investment manager's “failure to keep client funds properly segregated” and subsequent pledge of those funds “to secure an overnight loan” to stay in business may have constituted: 1) a fraudulent transfer to the lender; and 2) grounds for equitably subordinating the lender's $312 million secured claim. In re Sentinel Management Group, Inc., 2013 WL 4505152, *1 (7th Cir. Aug. 26, 2013) (Sentinel II). Reversing and remanding the case to the district court for further litigation because of “inconsistencies” in that court's opinion, the Seventh Circuit found that the debtor-manager's “pledge of segregated funds as collateral for loans” was likely a fraudulent transfer based on an “actual intent to hinder, delay or defraud” creditors under Bankruptcy Code (Code) ' 548(a)(1)(A). Id. at *6.
The court stressed that a “good faith-for-value” defense by the lender on remand will be “very difficult because it will have to prove that it was not on inquiry notice of [the debtor's] possible insolvency.” Id. at *6-*7n.2. On remand, the lower court also must, because of “inconsistencies throughout” its opinion, “clarify ' exactly” what the lender knew and whether its “failure to investigate” the debtor was “reckless” or “deliberately indifferent.” Id. at *11.
The DOJ's New Parameters for Evaluating Corporate Compliance Programs
The parameters set forth in the DOJ's memorandum have implications not only for the government's evaluation of compliance programs in the context of criminal charging decisions, but also for how defense counsel structure their conference-room advocacy seeking declinations or lesser sanctions in both criminal and civil investigations.
The DOJ's Corporate Enforcement Policy: One Year Later
The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.
Use of Deferred Prosecution Agreements In White Collar Investigations
This article discusses the practical and policy reasons for the use of DPAs and NPAs in white-collar criminal investigations, and considers the NDAA's new reporting provision and its relationship with other efforts to enhance transparency in DOJ decision-making.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
A Lawyer's System for Active Reading
Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.