Fraudulent transfers found in law firm's road to bankruptcy.


Byline: Pat Murphy

A bankruptcy trustee has received the green light to recover more than $1 million in cash and other property transferred by a Woburn law firm to a commercial lender prior to the commencement of the firm's involuntary Chapter 7 case.

In September 2014, four creditors including firm principal Steven A. Ablitt joined in filing an involuntary Chapter 7 petition against Connolly, Geaney, Ablitt & Willard. The Bankruptcy Court shortly thereafter entered an order for relief under Chapter 7 in the case of the Woburn home mortgage loan enforcement firm.

In 2016, the Chapter 7 trustee in the case, Boston attorney Stewart F. Grossman, filed an adversary complaint seeking to avoid as fraudulent transfers a series of transactions involving the transfer of cash, accounts receivables, and other property from CGA&W to defendants Durham Commercial Capital Corp. and Maasai Holdings, LLC.

On Feb. 27, U.S. Bankruptcy Court Judge Joan N. Feeney granted Grossman's motion for summary judgment, finding the trustee had established as a matter of law the elements for avoidance of fraudulent transfers.

In Grossman v. Durham Commercial Credit Corp., Feeney determined that while insolvent, CGA&W "transferred sums in the amounts of $198,100.22, $200,000.00, and $951,719.81 to Durham, that Durham failed to remit the sum of $626,699.15, and that the Debtor did not receive reasonably equivalent value in exchange for those transfers."

Durham is in the business of coming up with "creative solutions" for businesses that, despite being "creditworthy," are unable to qualify for "traditional bank loans," according to the New York company's website. In his complaint, Grossman alleged that Durham and Maasai, a New York LLC, are under "common ownership and/or control."

Grossman is a member of the bankruptcy practice group at Arent Fox and was represented in the adversary action by fellow Arent attorneys David J. Reier, Nicholas J. Nesgos and Adam J. Ruttenberg.

Credit Reier for unraveling a Gordian knot of complicated financial transactions in order to make the trustee's case that fraudulent transfers had occurred. Reier says the case was unique in that it didn't involve an insider of the debtor benefiting from the fraudulent transfers.

"We didn't have that at all here," he says. "What we had was a debtor engaging in transactions that made no rational economic sense."

In the end, the case came down to three separate sets of transactions.

According to court...

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