Home New Opinions Illinois Bankruptcy Court Permitting Recovery of Transfers Made for the Benefit of Debtor’s Controlling Shareholders

Illinois Bankruptcy Court Permitting Recovery of Transfers Made for the Benefit of Debtor’s Controlling Shareholders

0
0
Print

March 30, 2022, Illinois – The Bankruptcy Court for the Central District of Illinois has ruled in favor of Sheldon Stone, the trustee for the debtor International Supply Co. (ISCO), permitting avoidance and recovery transfers in the amount of $ 1,720,000 made from International Supply Co. to Citizens Equity First Credit Union (CEFCU) on behalf of Lee Hofmann. As per the trustee’s Complaint, Hofmann and his wife Rebecca Hofmann were Illinois residents and officers, controlling shareholders, and paid employees of ISCO. It is also alleged that this payment was “constructively fraudulent” and is brought specifically under a provision of the Illinois Uniform Fraudulent Transfer Act (“IUFTA”). The disputed issues were whether ISCO was “insolvent when the transfers were made or became insolvent by reason of the transfers” and whether ISCO received “reasonably equivalent value” for all or some portion of the transfers it made.

The Court analyzed expert testimony to determine ISCO’s solvency and found that ISCO was insolvent before, at the time of, and after the CEFCU transfers were made in August 2013. In determining whether the debtor received value in exchange of the transfer, the Court noted that “every action taken by ISCO for Mr. Hofmann’s benefit did more harm than good to ISCO” and “over time, ISCO came to be used as the personal piggy bank of its controlling shareholder Lee Hofmann.” The Court concluded that ISCO “received no value in exchange” for the two transfers it made to CEFCU totaling $1.72 million.

Stone v. Citizens Equity First Credit Union (In re Int’l Supply Co.), 2022 Bankr. LEXIS 865

FacebookTwitterLinkedInShare

onebowlinggreen.com