GEORGE RUSSELL CURTIS, SR. LIVING TRUST, GEORGE RUSSELL CURTIS, SR., BETTY CURTIS, Defendants-Appellants,
WILLIAM F. PERKINS, in his Capacity as Chapter 11 Trustee of International Management Associates, LLC and its affiliated debtors, Plaintiff-Appellee
Appeal from the United States District Court for the Northern District of Georgia. D.C. Docket Nos. 1:13-cv-02067-RWS; 08-bkc-06215-PWB.
For George Russell Curtis, Sr. Living Trust, George Russell Curtis, Sr., Betty Curtis, Plaintiffs - Appellants: Jonathan H. Fain, Jonathan H. Fain & Associates, PC, Atlanta, GA.
For WILLIAM F. PERKINS, in his Capacity as Chapter 11 Trustee of International Management Associates, LLC and its affiliated debtors, Defendant - Appellee: Colin Bernardino, Burleigh Lavisky Singleton, Atlanta, GA; John W. Mills, Barnes & Thornburg, LLP, Atlanta, GA.
Before ED CARNES, Chief Judge, HULL and ROSENBAUM, Circuit Judges.
George Russell Curtis, Betty Curtis, and the George Russell Curtis, Sr., Living Trust, who are the defendants in this adversarial proceeding, appeal the bankruptcy court's judgment, which allowed the bankruptcy trustee to avoid a $200,000 transfer from the debtor, International Management Associates (IMA), to the defendants. See 11 U.S.C. § § 544(b), 547(b), 548(a)(1)(A)--(B).
Kirk Wright ran IMA and its affiliates, which he claimed was a hedge fund but which looked like a Ponzi scheme. The defendants invested $500,000 with IMA from 2002 to 2006. Over that same period, they received $621,000 in disbursements from IMA. The last of those disbursements took place on January 10, 2006, when IMA transferred $200,000 to the defendants.
On March 16, 2006, the bankruptcy trustee, whom a Georgia state court had appointed as IMA's receiver, filed a voluntary petition to place IMA in bankruptcy. As part of that bankruptcy action, the trustee filed a series of adversary proceedings against IMA's investors, including the defendants. In those proceedings, he sought to avoid transfers that IMA had made to those investors shortly before being placed in bankruptcy. The bankruptcy court consolidated all those proceedings for the sole purpose of determining whether IMA was a Ponzi scheme. It held a consolidated hearing to take evidence on that question.
The trustee was the only witness at that hearing. He gave few details about the state of IMA's finances at the time he took control of it. He focused almost entirely on laying the foundation for his documentary evidence. He testified how he had seized IMA's files and, using his training as a certified fraud examiner, had " reconstructed" them to verify their accuracy.
According to the trustee's testimony, the day after the state court appointed him as receiver, he took possession of IMA's offices and their contents, most importantly IMA's documents. He immediately changed the locks and removed any means of remotely accessing IMA's electronic documents. He then worked with the FBI and the SEC to canvass national financial institutions for accounts in the name of either IMA or Wright. He subpoenaed the records of those institutions where he found IMA's accounts. He interviewed IMA's investors. With the help of an international accounting firm, he cross-checked IMA's own documents with those kept by the financial institutions and the investors. He also interviewed IMA's principals and its ...