FRAUDULENT CONVEYANCES Nassau Academy of Law CLE Live ...

394 B.R. 721 Page 6394 B.R. 721, 50 Bankr.Ct.Dec. 192(Cite as: 394 B.R. 721)which MFS and FLI borrowed money from the defendant Bank Leumi USA ("BL"), Israel Discount Bank of Newbanks (other than Sovereign Bank) and then reconveyed York ("IDB"), Antwerpse Diamantbank, N.V. ("ADB,"the loan proceeds to the Fortgang Affiliates for inadequate and collectively, the "Pre-Petition Banks"). According toor no consideration. For many years prior to the Petition the Amended Complaint, the Pre-Petition Banks made theDate, the debtors engaged in independent lending relationships*727 with a number of financial institutions. 2003 and the Petition Date:following aggregate loans to Fabrikant between JanuaryThey included the defendants, J.P. Morgan Chase Bank,N.A. ("JPMC"), ABN AMRO Bank N.V. ("ABN"), Bankof America ("BOA"), HSBC Bank USA, N.A. ("HSBC"),------------------------------------------------------------------Amount ofPre-Petition BankObligation Incurred------------------------------------------------------------------JPMC $ 35,838,000------------------------------------------------------------------ABN $ 44,290,000------------------------------------------------------------------BOA $ 10,475,000------------------------------------------------------------------HSBC $ 12,075,000------------------------------------------------------------------BL $ 11,592,000------------------------------------------------------------------IDB $ 9,660,000------------------------------------------------------------------ADB $ 5,454,000------------------------------------------------------------------$129,384,000.00------------------------------------------------------------------( 32-33, 54, 61.)The loans were initially made on an unsecured basis. InOctober 2004, the Pre-Petition Banks took security interestsin all of the debtors' assets to protect themselves, andshift the detrimental effects of the fraudulent transfers tothe unsecured creditors. ( 47.) On January 13, 2006,MFS guaranteed the $8.5 million debt FLI owed to defendantsABN and BL. ( 34.) On that same day, FLI guaranteed$92 million of then existing obligations owed byMFS to the Pre-Petition Banks. This amount comprisedall of MFS' pre-existing obligations to the Pre-PetitionBanks during the two-year period preceding the PetitionDate. (Id. at 35.)During this same period--January 2003 to the PetitionDate--MFS advanced the net amount of $175.3 million tothe Fortgang Affiliates (the "Affiliate Transfers"). ( 27,40.) Fabrikant funded the transfers to the Fortgang Affiliates,at least in part, with the money borrowed from thePre-Petition Banks. ( 32.) MFS made many of the transfersprior to the date the Fortgang Affiliates repaid thePre-Petition Banks on account of their own loan obligations.( 23.) Similarly, the Fortgang Affiliates transferredsignificant sums back to MFS in advance of MFS' loanpay-down obligations to the Pre-Petition Banks. [FN3] (24.) However, MFS never came close to fully repaying itsdebts owed to the Pre-Petition Banks after January 2003.( 31.)FN3. The plaintiff alleges that MFS and theFortgang Affiliates transferred money back andforth on an "as needed" basis to clear up theirbalance sheets and fund their respective loan repayments.(See 23-24.)2. The Debtors and SPMIn a separate transaction on July 7, 2006, MFS and FLIbecame jointly and severally obligated to SPM in theamount of $32 million on account of MFS' purchase ofgold from SPM. [FN4] ( 32, 37.) At least $22 million© 2009 Thomson Reuters. No Claim to Orig. US Gov. Works.