Bankruptcy — fraudulent transfers

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United States Court of Appeals For the Seventh Circuit

Civil

Bankruptcy — fraudulent transfers

The failure to keep client funds properly segregated is sufficient to show an actual intent to hinder, delay, or defraud.

“In particular, the district court appears to contradict itself regarding the extent of the Bank’s knowledge before Sentinel’s collapse. Approximately halfway through its opinion, the district court states, ‘[T]he evidence at trial revealed the Bank’s knowledge that Sentinel insiders were using at least some of the loan proceeds for their own purposes.’ Grede, 441 B.R. at 883. This statement indicates that the Bank of New York knew Sentinel was engaging in wrongful conduct before its collapse. In contrast, the district court later states, ‘I do find credible, if not at all admirable, the testimony of the Bank employees that they neither knew nor turned a blind eye to the improper actions of Sentinel.’ Id. at 894. If the Bank knew that Sentinel insiders were misusing the loan proceeds, then how could it be the case that bank employees ‘neither knew nor turned a blind eye to the improper actions of Sentinel’? The two factual findings, though in different parts of the opinion, make no sense when juxtaposed.”

Affirmed in part, and Reversed in part.

10-3787, 10-3990 & 11-1123 In re Sentinel Management Group, Inc.

Appeals from the United States District Court for the Northern District of Illinois, Zagel, J., Tinder, J.