Recovering Fraudulent Conveyances In Complex Chapter 11 Cases

A fraudulent conveyance is a transfer of property from a debtor to another party (often an insider or affiliate) for inadequate consideration, usually with the intent to move assets beyond the reach of legitimate creditors and frustrate their ability to recover on their claims.

Fraudulent conveyances can be identified and recovered in a wide range of circumstances, including commercial loan transactions, corporate equity or partnership transfers, and even leveraged buyouts. A bankruptcy trustee or debtor-in-possession (DIP) is permitted to recover the value of the property from the transferee for the benefit of the bankruptcy estate and creditors.

The Togut Firm takes a sophisticated approach to the analysis and pursuit of fraudulent conveyance claims to recover transfers that improperly impair the interests of creditors and other stakeholders in major Chapter 11 bankruptcy cases. Because exhaustive discovery frequently must supplement the detailed financial review that goes into the pleading of fraudulent conveyance claims, we will often allege several theories of recovery in the same complaint.

In the group of consolidated lawsuits that came to be known as the Enron MegaClaims litigation, the Togut Firm identified and helped pursue fraudulent conveyance claims worth billions of dollars against numerous banks that engaged in irregular loan and tax transactions with Enron Corporation prior to its bankruptcy case. We helped the Enron estate recover approximately $1.75 billion in cash and subordinate or disallow an additional $1.4 billion in bank claims against the debtor, which enhanced the distributions to other Enron creditors.

Our independence is both an essential feature of and a significant advantage in our recovery of fraudulent transfers and efforts to seek equitable subordination in the largest Chapter 11 cases. Because we have no ongoing relationships with financial institutions of any kind, our lawyers can pursue any lender if it appears that the lender acted in a manner harmful to the interests of the debtor, its unsecured creditors, or any other party in interest.