Eve of Trial Settlement in Fraud Case

Eve of Trial Settlement in Fraud Case

October 24, 2018
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Bluestone Law recently obtained a significant settlement on behalf of its client, a leading European based lender, resolving a multiyear judgment enforcement matter. The case arose out of a breached $50 million credit facility provided to purchase mortgage loans. After the borrower defaulted on its loan obligations, it embarked on a sophisticated effort to continue operating via newly created shell entities with shuffled and revolving ownership arrangements. The firm was able to expose this scheme, seize accounts, and bring suit against a successor business, affiliated investors, and various co-conspirators in follow-on litigation. The civil litigation included counts for successor liability, fraudulent conveyance, alter ego/veil piercing, and reverse veil piercing, as well as the aiding and abetting and conspiracy claims against affiliated associates.

After exposing the scheme, the litigation team initially obtained a preliminary injunctive order requiring the successor entity to pay certain disputed funds to the court. While this significant relief was later overturned, it made clear to all parties that this fraudulent scheme wasn’t going to continue much longer.

The firm then successfully opposed a summary judgment motion from the successor entity and fraudulent transferees. The most contested issued in the motion was whether New Jersey law recognizes an actionable claim for reverse veil piercing (where the debt of a shareholder is imputed to the corporation). Judge Robert C. Wilson agreed with the firm’s position that even though no New Jersey court has imposed liability based on this claim, there’s no countervailing precedent that the claim cannot be applied.

After all ten counts survived summary judgment, and were to be decided at trial, a settlement was reached.

Bluestone Law remains at the forefront of creditor’s rights and asset recovery law in the U.S. and abroad. In addition to representing leading government agencies worldwide, the Bluestone team advises creditors and judgment holders of all types in tracing and executing on assets.