review pursuant to twenty eight u s c section one fifty seven c the district court entered the final judgment regarding the senior fellow chinese the district court's final judgment adopted all the bankruptcy courts propose propose transferred the substantive issue was whether there was any evidence to support the conclusion that the pi point five million dollars was still in jail sums bank account thirteen months later when the if so there's the second issue did the senior bell the chinese have control over the disposition of the money if in fact it was their thirteen months later the second set of issues were the relates to twenty four pieces of jewelry village chinese are not contesting the finding that the jewelry is property of the a state issue on appeal was the proper wording of the turnover order that set forth in paragraph nine the court's final judgment the first issue is what are the standards for turnover under section five forty two of the bankruptcy code it's axiomatic that property that has been transferred cannot be the subject of the turnover proceedings turn over proceedings are not the mechanism to adjudicate disputed property rights if property has been transferred prior to bankruptcy the appropriate relief is for a trustee to avoid the transfer and recover the value of the transfer of the property from the transferee not to seek recourse against the de these bedrock principles work specially recognized by both the bankruptcy court and the district court if there is a transfer there must be a fraudulent transfer case brought against the trial the transferee however the bankruptcy court and the district court both misapplied the appropriate legal standards the first issue that had to be addressed by the trial courts was was the five point five million dollar transfer send as the owner of its own bank account has the right to control the use of the funds in its bank and that has nothing to do with whether there's a connection between the senior ms no matter whether or not the india it is in india but there is no reason why an action can't be brought against a foreign national foreign entity with a lot of reasons but it is very difficult but that's beside the point mean really i think that we understand that this is where that's where the money is or was so this five and a half million dollars and that seems to be a major issue in this cases whether it's out of reach of this bankruptcy i think the major issue in the case for this particular point your honor is whether the five point five million dollars was still there thirteen months later ok i think that is to the crux of the issue day they said it is not i presume correct but it was the state's burden to show that it was both the bankruptcy court and district court properly looked to budget financial and usa diversified as controlling circuit precedent on the issue of transfer but then it misapplied the standards of those cases by the financial instruct the parties to transferee it has the right to put the money to its own purposes usa diversified amplifies the reasoning of bonded financial but it does not alter the underlying rule when it states that the transfer reclaims and entitle who controls iran earth may be relevant on whether the presumption is rebut but the presumption applies the district court erred when it looked to us a diversified and said that title to the money is what determines whether it has been transferred the correct interpretation is a claim of entitlement to the money and certainly j s sen had that significant evidence corroborates the rebuttable presumption jay assent is not a shell company it's not a trust it's not a self contained receptacle chinese it's an operating company it's been in business for years it's obtained working capital with loans from canary bank it's a bits corporate regulatory filings under the indian companies hundred fifty six it is a viable going concern it uses its bank accounts this is a critical distinction that distinguishes this case from in rate lawrence and the trustee could have done two things could have sued assent albeit difficult but i don't know that the difficulty is the determining factor it could have sought alternative claims for respect to both j s m and the senior bill the chinese and use that as a vehicle to adjudicate the property rights but that's not what it did your honor even if there was no transfer and this case could proceed as a turnover the turnover judgment against the village on this must be reversed because simply there was no evidence that  the money was still on the pass it thirteen months later the trick the trustee has the burden of proof on all issues in the church over case the first element is the property must be there there was no evidence that the money was still there thirteen months later if the money wasn't there you don't reach the issue of control there's no for an overreaction had no obligation to present evidence as to what became of the five point five million dollars that was the state's burden of proof the fact that the courts did not accept any of mr testimony does not alter the fact that this there is not alter the evidence three void whether he was real whether his testimony is given credit or not as to the reason why you made the transfer doesn't affect whether or not the money was there thirteen months later and there was no evidence to suggest there was the estates the state's evidence but that doesn't go to the issue of whether the money was there the money was actually received by j s and in july of two thousand and ten and there was no direct or indirect evidence as to what became of it thirteen months later the expert didn't go on to conclude that the money was there the expert only concluded that there was no consideration for the money and the money had not been returned to  conclusion reached by the trial court in the bankruptcy court went well beyond what the expert open right where your true see it when the expert didn't say anything about where it said had been returned it had not been returned from  we know it's either a jury assume or it's been spent who are in india correct and there is nothing to the contrary the fact that a financial statement doesn't show an increase in stated capital or an increase in shareholder loan doesn't really go to the issue of where did the money go was it used and the natural presumption is an operating business uses the money in its bank account and it wasn't the senior village charm his obligation to present evidence on that point the state representative makes a parking lot argument that jason was the parking lot for the j s for the s m is operating capital to conduct its business and they were clearly available to satisfy creditor claims so there's nothing to support the parking lot theory and it doesn't make sense clearly were guarantors of the loans to kineret bank and putting five point five billion dollars in a company whose debts they had guaranteed makes all the sense in the world so establish that the money was there i want to quickly go to the jewelry issue the jewelry issue the only question is what is the proper wording of the order the remedial order the proper wording is what the bankruptcy court put in footnote twenty eight remember when the case started there were two pieces of jewelry and a fund of the proper order which was articulated by the bankruptcy court was you turn over the jewelry if you if the jewelry is not available there the judgment will be satisfied in cash and the money in the district court registry can be used for that purpose but when the order came out or came down from the district court it could be read to mean that you must turn over either all twenty four pieces jewelry or cash equal to the value of that twenty of the twenty four pieces but not a combination and that's clearly not what was intended and given the packager was both cash and jewelry on deposit that is not the order that should be entered it should be what was the only the value was about one point three million for all of you or some it was in that range corrected stated in the opinion it's  and there was a cash deposit of seven or eight hundred thousand dollars in two pieces of jewelry i see my time  value of the shares which were given if however the debtor dilutes his own corporate interest in the energy and because of that dilution transferees transferees receives some of the ownership percentage which the debtor used t path but now the debtor has a reduced ownership percentage and it's pretty clear that the chapter seven trustee could either avoid the transaction and get the same percentage as the debt or used to have or give the transferees to pay back the market should additional shares as a result the state's ownership interest went from seventy percent to forty eight percent in a room in a news ownership interest increased now the trustee attempts to apply it back the focus should be on what states that the focus should be on what the state lost in that case there was a restructuring of a car dealership which reduced the ownership interest from the debtor from seventy five percent to forty three percent and the chapter seven and the big caps the court ruled were going to cancel and negate that restructuring and get the state back to seventy five percent commerce that impacted by the bankruptcy courts finding that the value given for those for that stock was seven million dollars but at the time the transactions happened just read up value that after considering the expert opinions at fifty seven million dollars so there's no valuation on what one hundred percent of the company is sport now we know the percentage ownership of the estate dropped from seventy percent to forty eight point four percent and that's a simple math calculation in the bankruptcy court did not do the calculation instead it focused on shares received by the transferee and that was the mistake  section five fifty eight is the remedies provisions and that controls and congress has decided how that is going to be applied the trustee going to cover from the initial transferee or from subsequent transferees and there are some defenses available to subsequent transfer which are not available to the national transferees the trustee under the bankruptcy court has no right to this sort of civil conspiracy and aiding and abetting action and then have and recover honor that those are state lo the fashion they don't arise under section five forty eight they might arise under section five forty four but even if you obtain an avoidance action under five forty four recoveries are still called the governed by section five fifty six section five fifty is clear  loans twenty nine million dollars of profit and transfer proceed by her then the bankruptcy court made a finding that under civil conspiracy and aiding and abetting theories they will both liable jointly and severally for any money just received and that just simply has no there's no obviously you know this is the for all of the store did they were supposed to be worth half a billion dollars in the u s to the parents and then with all of this dispersement from scattered in so many directions it's truly or think it was rushed for or used to see for the money and this is pretty hard to follow and that's what's the problem with this case and i think that seems to be with practice there's a ninth circuit decision elliott versus bush on which simply states that the legislative theory is cancellation not creation of liability there's other decisions after nine hundred seventy eight when the code was an act in which state there's a civil conspiracy aiding and abetting under illinois law which in this case did not happen it was merely a section by forty eight bankruptcy court files and conveyance action there's a lot of dispute whether the uniform prison transfer act or and state that case was incorrect and the u f t a does not have to provide for any sort of accessory liability recovery resource development was a bankruptcy court case and this district would state that there could potentially be an action under section because the u s d a provides equitable remedies these toward actions for money damages against non transferees are not accounted for the governing point of section five fifty yawners that's the only record provision which controls lastly i want to cover the up with hotel stocks the bankruptcy court issued a judgment on that for three hundred and ten thousand dollars  district court increased the judgment on appeal from the about these for an additional one point two six million dollars there is simply no evidence the bankruptcy court did not enter judgment on that even though it entered judgment against are going to know on a plethora of co found that there was no there is no evidence connecting the additional one point two million dollars and that comes from a subscription agreement from up with hotels which is an indian company which stated the following people received shares in the after hundred ten thousand dollars for which the bankruptcy court entered judgment but did not trace an additional one point two million dollars is the burden of proof is on the state to prove a problem conveyance and that burden was not satisfied and it was error by the district court to reverse the bankruptcy good morning mike it was howard rowan and i represent the bank of america as a state representative this appeal could serve as a massive fraudulent scheme by trying to trying to reduce damages but the bankruptcy court in the just record got it right and this court should affirm before addressing the defendant's argument specifically i want to make a few general points the first one of those in their briefs the defendant spurge you not to be distracted by supposedly irrelevant character assassination we have not assassinated their character the findings of the courts below did that and those findings about their character is relevant because under both bankruptcy law and fraudulent transfer a lot of intent and and bad intent is relevant the second point that i'd like to make is that throughout the appeal the defendants essentially ask you to reward them for the clever way in which they conducted their fraudulent scheme for example they admit they sent five and a half million dollars to a bank account in india control in the name of a company they control but they claim nothing can be done about it because it's overseas and it's hard to find evidence from there that's exactly why this court five years ago the baelish armies passed affirmed the baelish i mean passports to be taken so they would be in the united states and they would be subject to court orders even if the property was secreted overseas another example where the bell was sharma's want to be rewarded is they claim they should benefit because instead of giving those remarks stock to their children the four of them got together and caused the marked issue new stock to their children but as we showed america reefs to the defendants arguments are legally wrong the law does not give special dispensation to clever fraudulent schemes and it would be hard to imagine a wors precedent than to allow the defendants to invade their liability because of the clever way in which they conducted their affairs the third point i'd like to make concerns the alleged lack  the defense are wrong about that the record isp overwhelming supporting the findings of the bankruptcy court in the district court but that's no thanks to the defenders who forged documents destroy documents deliberately refused to produce evidence and then take the fifth let me start on them but it got me just follow up on that with the question understanding that you can draw a negative inference yes from all of those things is there other evidence besides the negative five million and let me let me just review that your honor because i think that's you know that steps are good question the first thing with respect to the five point five million is the bella shammy she never denied never denied sorry what they said in the trial court was you know that it's far away but they didn't they didn't deny that the money was in the account with respect to the five and a half the question is whether it was still controlled by the bell or chinese the bankruptcy court found that it was controlled by the baelish ami's the district court agreed and the evidence the evidence not just the adverse inference but the evidence confirmed there what was to issue phony reports about who owned the company develop shammy control that so so you have the fifth amendment and but but more important that you have really you know found it and then after that they they didn't dispute it what they did is they refused to produce any more documents showing what happened to the money and there's a description of that in the bankruptcy in the in the district court's opinion about how they were asked to produce documents in mr velshi refute refused he said it would be a waste of his time we did everything we could in light of the money being parked overseas in india we showed that it went there and that was undisputed and then we showed develop chinese continue to control it and the baelish ami's refused to produce evidence about where the money w instead they repeatedly lied first they said they didn't control the company but that turned out to be based on forged documents then they said the money was used to give them stock but admit they didn't get any stop so they dropped that then they said the money was used pay a loan but later they admitted ok it wasn't used to pay a loan and now what you heard from council today is well ok the money the five and a half million went into the account in mid two thousand and ten but how do we know it wasn't spent and the answer is we've shown everything we can show in light of the limits of the money being parked in india by showing that it went into the account and then develop shy means they had it within their power to show where the money went they control those records they control their company but they refused to do it instead they had these four lies t lies if the money really had been spent sometime between july two thousand and ten and argus two thousand and eleven when they filed for bankruptcy that would have been the into some other entities and they don't control that you know they would have to show that but i know that i guess that's what spent me i think that's what it means and there is zero evidence of that and is it more probably true that died in fact is i think it is beyond the reasonable doubt that if the money was no longer in control they would have been able to show that in a second and what they want you to do is they want you to reward them reward them in this court's precedent in the dexa case is the best example you don't worry about the place where they park the money if the court correctly found that the money is controlled by the  that there is overwhelming evidence that the money is controlled by the militia now let me go back to a room in a new and i want to talk about the item that's the biggest money that a room in a new raise and that's disjoint several liability of the first thing i have to say about that because they way that they did not raise this argument they make some arguments in the bank or in the district court but they were different arguments we've set them out in our brief and they were rejected correctly and they don't pursue them here they waived it and the rule in the seventh circuit like everywhere else is if you wave an argument it's gone you on appeal and that's limited to jurisdictional issues or section exceptional circumstances in the interest of justice and to renew said in their brief that the exceptional circumstances that they have a good argument but there's the bottom line is that arena new has joined the several argument was not made in the bankruptcy court it was not made in the district court so it's doubly waived they don't get to make it here and let me say one other thing the new jointly participated in the scheme to hide all of this money and most and much that went into their hands even if their joint and several argument was not waived it's wrong arena new are only liable for the money that actually went into their hands and therefore you can't have joint several wide or the problem with that argument is arena news counsel left out the third prong of section five fifty and i have it here the third prong i mean there's you there is liability or five fifty four initial transferees for subsequent transferees the third prong is for the entity for whose benefit such the money they all benefited that was the intent to keep the money in the family now renew said in their brief they didn't mention it here but they said in their brief that under section five fifty if you're a transfer  be liable as a beneficiary because the word or is in the steps you but that's contrary to the scheme of the code in the text of the bankruptcy code which says in section one hundred two clause five that when when the word and they're liable as intended beneficiaries and the way the code make sure there is no double counting is by applying something called the single satisfaction rule or would a new argue in their brief that a family can't be a beneficiary under section five fifty but this court held or otherwise in the boyer case which we cited this court held that the debtors family the wife and children were liable not because they were transferees but because they were beneficiaries because the whole point of the transfer was to keep the assets and i quote out of their creditors hands and devote them to the family's benefit unquote the velour shammy family could in the hands of the family a rule in the new benefitted here not just because of the money they individually got the property and stock the individually got but they benefited because the money was kept away from creditors and in the family and the bankruptcy code specifically imposes liability on intended beneficiaries and that's why the bankruptcy court the district court the right to impose choice supper a liability on a room and a nuke by the way there's a difference one difference important difference between the facts here and the facts in the boyer case in boyer the court held that the mother was liable for the entire amount transferred but the minor children were and they didn't participate in the scheme and here we have the opposite a room in a new are adults they have been found to have perpetrated deliberately this scheme so where is and boy are you had a limitation on liability for people who didn't participate the flip side is true here are the cases the lunar new site may mention in the argument they mentioned l b o it case in mack ace they don't support their argument because those cases dealt with defendants that didn't receive any of the transferred money and they were not intended beneficiaries and here of course we have the option to ruin and received millions of dollars and they were intended beneficiaries  in addition you know we've cited in our briefs and we haven't heard about this today under the jackson case in the eighth circuit another reason for joint several liability is when the money has been  gets best to trace all this money but what the jackson case says and seems right to me is when people are involved in a scheme and they come in the everything joined several  liability is appropriate you can let the conspirators deal with the problems of who pays what later in addition to section five fifty there's a second basis for joining several y bill of the under the code in that section five forty four a a written news counsel talked a lot about section five forty four b i want to focus on section five forty four a which is known as the strong arm clause in the it was arises a bankruptcy trustee to exercise all of the rights and powers that a judicial creditor would have the courts of appeals around the country including in this circuit in the victory of steel case have established that in five section five forty four e for a five four four forty four eight authorizes a bankruptcy trustee to bring state law claims in illinois and we've cited these that are in our brief in illinois those state law claims say that it limits section five forty four big but that's not true five forty four a did not in any way limit excuse me greed did not in any way limit what five forty four a allows the trustee to do new say that that only applies to a post lucrative post bankruptcy liquidation trustee but there's no basis for that five forty four a applies to the a state as well there's just no support for their assertion now because the greek case added the sign claims here provides an additional basis for affirming here wait and that's because bank of america it was the largest creditor and became the state representative if the estate knew that joint several liability was being challenged and a as a legal matter and therefore we needed to get assigned claims would very easy for bank of america to take its claim and assign it to the trustee we didn't do that because the issue hadn't been raised and if if this court allows the defendants to raise this waived argument or prejudice the last point on joint several liability arena to say that illinois law does not allow joint several liability for fraudulent transfer cases because it doesn't allow aiding and abetting your conspiracy they base that and we cited those starting page twenty nine of our brief what a routine to say and there were plenty brief is those cases that we cited don't count because they were decided on a motion to dismiss that argument answers itself if the if you can state to defeat a motion to dismiss an aiding and abetting or conspiracy claim than you know obviously we have a situation where the aiding invented conspiracy are proven and at this point it's uncontested they were the other big argument arena new make concerns the calculation of the v mark damages that were written or say you should focus not on the value of the stock that was transferred but instead on what they calculate to be good the dilution from initially written who said that the test here should be done on the written over standard in their reply brief they admitted the standard review is clear error expressly says the recovery should be either return of the property transferred or the value of the property is uncontested that the judgment was the value of the property the stock that or ruin a new receiver they got nine point three million dollars worth of stock each and that was the judgment and that alone is a good because a sufficient basis to affirm what the bank's court in the district court did they got oh they wasn't just some stock it was control and a routine news new calculation completely ignores the control premium which is recognized throughout the jur and the stock they held was diluted their put their what they paid was a combination of five million dollars and dilution if a rumor knew had been innocent they would have gotten credit for the five million in the dilution but the bankruptcy court is completely right the root don't get credit for it because they're not innocent this they perpetrated the fraud so they don't get credit for what they paid whether it's the five million or the dilution of their we talked for a second about the one point two five million what happened is one of the largest  and then there's this one a quarter million and there wasn't you couldn't trace it but it's not true that there's no evidence there's been a ton of evidence and what's the evidence are in a new took the fifth so there's an it in addition to that what a rumor new say of stead they say well six hundred seventy two thousand of the two and a quarter million is already recovered under count one ok it is i would say clearly more probably true than not but i would say beyond a reasonable doubt of course the money came from mom and dad and judge it and by the way the bankruptcy court didn't find we haven't proven our case look at the opinion the banks are just missed that you know is a very long opinion fifty five single spaced pages and he just missed it the district court fixed it which is what they should have done found that they still controlled it and we're down to turn it over there's nothing wrong nothing wrong with the court order the court order says return the  we don't have the children that's their problem it's not a basis for setting aside the judgment below so you know the bottom line here is the disk the bankruptcy court got it right the district court got it right there is no miscarriage of justice it would be a miscarriage of justice if the court were to allow the defendants to take advantage of their  scheme to try to defeat what the court below found and we were to guess one question on the bottom line just mostly curiosity how much money has been recovered because it one point and then bank was owed forty three million that that's that's actually that's a copy of your ira that's a complicated question the bank was so you know forty three million plus that was full that into the bankruptcy a state the  our company was sold for fifty million this is a bankruptcy a lot of that money got peeled off into a states and council and things like that  meese have paid and are in a new have you know paid themselves very well some of the money has been peeled off and if i'm not up to date on exactly what we have but there is a lot left to recover thank you very much right let me first get to the point which was respect counsel of the three parts of section by fifty initial transferee subsequent transferee or for the person or energy for whose benefit the transfer was made that provision has been looked into courts when a debt is paid which pays off and person who received the benefit of that cancellation of debt under the family if your even as a spouse by counsel not only can you recover from the guarantor you can recover from the guarantors life you can recover from the guarantor sonce you can recover from the grant towards uncles i don't know where that end but the point is that that exception is a narrow exception which comes into play when you pay off the debt which is guaranteed or when you ask the corporation to pay off another creditor to an insider owes a debt to it is this family enterprise theory does not have shares in the corporation to other family members were not involved secondly judge on the waiver point there have been cases there's a first circuit case robinson works as watt's detective agency cited under our brief in which section fifty was not even raised by  and they admitted that they could not trace the funds from which they perceive the ships in the bankruptcy court did make a finding on that particular count stating three hundred ten thousand dollars is recoverable the rasta status failed to sustain its burden to get it there was no motion to amend the judgement saying being cryptic or do you missed this particular one point three million dollars that was simply appealed and the district course reversal the bankruptcy court will waive the evidence who took the negative