the next piece for argument is seventeen twelve sixty one u s department of labor versus michael harris when you're prepared you may proce mills was established in one thousand nine hundred fifty five it is the oldest private company in the state of minnesota until it ceased operations in two thousand and nine and my client held less than point three percent of the outstanding common stock of the company that some point ferryboat mills sponsored health plan and became the plan administrator that health plan contracted with health partners health insurance company to provide health benefits to its employees  pursuant to the agreement every two weeks the company withheld monies from their employees to be put towards the monthly health care premium the contract did not require require that these funds be segregated into a separate account rather a debit credit entry was entered on the general ledger as funds were received and withheld from the employee paychecks and as the monthly premium the debtors primary duty was to raise capital for this company he traveled quite a bit he's kept in touch with the c f o as to what bills needed to be paid and also had the opportunity to weigh in on who got paid funds in the account to pay the gene repayment same situation in favor worry they mail a fair worry check believe in there to be funds in the account as it turned out both of those checks were return helped partners contacted the company and stated that a wire in the amount of roughly fifty five thousand was needed by march thirty first or else the benefits would be terminated my client mr harris reached out to the health plan on march twenty six to see if you could get a extension as he was very worried about being able to wire that amount of money in such a short period time on march twenty seventh the day after my client made the plead to the health partners rep the company hired a chief restructuring officer in on march twenty seventh the rectory flexor board of director testified that mr harrison no longer had any financial controller for both mills affairs effective march twenty seventh although ultimately on march thirty first the company failed to wire the funds and the health benefits were canceled in all the employees  were went without health insurance issued today your honor is whether or not my client but the debt owed to the department of labor should be accepted from discharge under five twenty three  remit certain union funds to the union in through the course of business the principal of that company was unable to pay the union in there was an argument whether or not trust can not spring from the act from which the debt erodes in other words the for due sherry relationship must preexist the incident creating the contested debt and apart from him it is not enough that the trust relationship spring from the act from which the debt arose in hunter the failure to pay the fines there is no preexisting allege allegedly wrong that was complained of that is his failure to hold the money to satisfy the company's contributions doesn't treat the for do sherry duty any possible trust relationship between the principal and the funds could only  come into existence when he incurred some individual financial liability to the fines well the district court concluded recollect simply made a finding that the debtor in this case your client knew the funds committed to his trust or to the responsibility of the corporation of which he was the head and he had the financial capacity and ability to make choices about the priority of payment that i think there was above seventy thousand dollars in the account of fifty five years old for the health insurance premiums and facts consistent with the conclusion that he did have a fiduciary responsibility to handle those funds that belong to the employees in a manner that question with respect to the seventy thousand the record says that seventy thousand worth of bills were paid between may twenty sixth and may thirty first the record doesn't state that maybe some of these checks were written prior to my client's knowledge that he had t fifty five thousand some of these checks could have been written march twentieth march twenty fifth there is not nothing in the record to suggest that there is available seventy thousand without accounting for checks that have already been creating a priority putting personal needs or personal preferences above expectations of the employees and obligations to maintain their benefits  sixty thousand dollars of his personal funds from his homestead he had taken one paycheck in the first quarter of two thousand and nine he had thirty one thousand dollars in unremember zte expenses had he wanted to prioritize and in get his money paid back he certainly would've done many other things to cause it to be happen he testified in district court in i'll quote because i believe it goes to his  intent i have not been a fight i have not benefited from the nine remittance of health plan assets my wife as i have testified has a very bad back she gives therapy many doctors has to go to the maps clinic to get prescriptions written minister a by a monthly basis i believe she has other house health issues as well fortunately have not had any significant health issues myself so the consequence of him causing the health benefits to terminate directly impacted his wife and himself and he later testifies that they were unable to get insurance until obamacare was rolled out later that year so i believe another citing to the lack of intent would be that my client in may of two thousand and nine after the restructuring plan was turned down by the majority shareholder he insisted that the employees be reimbursed their contributions but the majority shareholder disagreed and caused the employees not to be reimbursed so in block a wrongful intent requires a culpable state of mind involving knowledge of or possibility my client then chose to have a fifteen hundred dollars credit card paid that was his personal credit card and again the main mechanism to fund the company had been  believe an interest only payment of twenty three thousand that was due on his heel lock the intent there was to keep the he locked from defaulting so that he could access additional funds if needed so again and the pain back that he  merely to keep the main funding source of the company alive in again this was back in two thousand and eight two thousand and nine when everything was crumbling around them my client had a puppy and five million dollar line of credit lined up which was cancelled by the bank in early part of march so again he believed he was bringing in twelve point five million dollars to keep the company afloat and keep all these employees it's i believe it's close to seventy thousand dollars with prejudgment provided first the district court did determine that there were over seventy thousand dollars worth of assets on march twenty sixth one mr harris called the insurer and learned that it was going to be cancelled on march thirty first  second the district would also determine that he had not lost control of the company on march twenty seventh he did have control through march thirty first and that is evidenced by his instructions to his  payments to benefit himself as opposed to removing the contributions to the insurer so i would like to go a little bit to talk about specifically what the district court held the federal district court  because the the facts there are really what the facts are for the bankruptcy court decision so in two thousand and fifteen a federal district court held after a three day bench trial that mr harris violated a wrestler when he took his employer's money and use those for corporate expenses the court explained that the employee's contributions to their health care plan which were withheld from their paychecks became plan assets under arrest upon the date of withholding after making credibility determinations the court held mr harris was the person of the company who was responsible for remitting those assets those plan assets to the health insurer and d d sign the checks and he had sole control over and finally the court determined that mr harris violated his fiduciary duty of loyalty to the to those plan assets in late march two thousand and nine when he used them to pay him self and other corporate creditors now that includes direct payments to his personal credit card account payments to his a payment to his wife's bank account and a payment to his home equity line of credit he did this even though he knew the insurance premiums were due by the end of march and he knew that he could have just as easily have paid the health insurer what was owed or given his employees their money back so based on this the court held him liable under arrest for the diverted plan assets plus prejudgment interest which was relationship under section five twenty three a four a must establish a trust race and impose trust like duties on the trust raised and those duties must have preexisted the alleged late march two thousand and finally the bankruptcy court determined mr harris acted with the requisite scienter necessary to committee file cation when he quote decided and quote to use the funds intrusted to him for other purposes including payments  employer contributions which generally do not create a section five twenty three a for fiduciary relationship and those involving employee contributions which which do so moving to mr harris his arguments in his brief we have three involving whether the relationship existed the fourth was whether he acted with requisite science or so mr harris had trust like responsibilities to those planned assets and there's also no question that those responsibilities began in january two thousand and i just report has already gone through the evidence has already gone through a three day trial made credibility determinations and found as much so the bankruptcy court job was to take those facts and apply them to the bankruptcy court to the bankruptcy standard five twenty and asked for payment by march thirty first at that moment he hangs up the phone now he has a choice to make because there's seventy thousand dollars in that general operating account where which was the current that they hear about  so stop a would we had was from the district court's findings of fact mr harris made a choice on march twenty sixth who is going to pay is going to pay the health insurer where is he going to pay himself and other corporate he shows himself and other corporate  employers entry into a contract with an employee benefit fund were planned assets once they became do the work court's decision in hunter belies that circumstance which it's stated it quite bluntly quote position that generally speaking unemployed unpaid employer contributions are not planted assets under risk but that is not the same for employee contributions that are withheld from employee paycheck according to our regulations that have been in bankruptcy court concluded a debtor had committed defalcation when he prioritized making payments to corporate creditors including himself over his obligation to remit employee contributions to resupplied that decision is correct it does it infer that  perhaps violating a duty of loyalty will always constitute the fall cation we are not asserting that here i think that that might conflict with both a bit but certainly in this case what we have is an intentional or at least  thank you with regards to judge nelson's finding out direct the court to paragraph twenty eight and i quote between march twenty sixth and march thirty one comma two thousand and nine comma in particular comma over seventy thousand was either transferred to other for boat mills accounts or was used to pay creditors and expenses and of quote so that does not mean that seventy thousand was in fact available it doesn't make mention that there might have been transactions before march twenty sixth that were already initiated that would've already had caused a part of that seventy thousand already have been spent so i believe it's an open question if there was in fact seventy thousand available to pay the health health plan in repotting boehm i want to talk about that please because that case involved an employer withholding two dollars and forty cents from their union employee paychecks and that amount was there and used by the company to pay other bills so same situation here that company used their union funds that was withheld from their employees to pay other bills and when the court ultimately determined that the owner did not commit defalcation the court reasoned reasoned as follows the debtor here was desperately attempting to prioritize his bills in order to eventually pay them all he did so while communicating about his problems with the union and worked it out to try to find dollars obligations this is not at all evidence that the debtor acted with a conscious disregard to a substantial and unjustifiable risk found that it wasn't a violation or it wasn't default cation certainly there's a risk that the funds dry up and the money the money cycle dries up it's always a these folks had no clue what was happening to their programs were being passed on i don't know i don't necessarily know if the union union employees knew that but i would say there was communication between the health