the question is not whether or not there may be a high interest rate the question is whether it was reasonable versus permissible there's no question that it was reasonable and appropriate under these circumstances and there's no law to indicate it was unlawful impermissible so both the record and the law support these terms is customary in standard for these kinds of short term loans and one thing i've always wondered about these cases are to me but there's never been any any argument that there's somebody is just entitled years later long after in hindsight not not addressing the situation at the time which is what's required under the law rather than evaluating the notes for the reasonableness and enforceability at the time of the transactions but instead years later after the loans had been repaid and petters schemes came to light mr palmer day most and dr kind of those were dragged into this very complex and prolonged litigation they now face judgments not only for the interest that was paid but also double that on in terms of statutory interest even though they had nothing to do with the fraud they acted in good faith at all times and under minnesota law they not or what is hindsight hindsight is looking at it apart from the time the transaction took place at the very moment at the moment i mean you would agree that at the moment regardless of what your clients knew or understood it do you dispute that it was not a legitimate transaction that it was part of the ponzi scheme you know a fraud let's put aside the word ponzi because that gets caught up ponzi money that's a disputed issue but that is irrelevant as a matter of law for two dollars reasons st again you look at it at the time of the transaction that with the benefit of hindsight and that's a s established law in minnesota is when you have fraud by one party but the party seeking to enforce the agreement is innocent and i had no involvement in that prague whatsoever the contract isn't forcible mi support that and they've cited no case law that actually supports that proposition as creditors their claims are against p c i their claims are not against an innocent rd party who acted in good faith and entered into a lawful series example my clients were not acting in good faith and honestly then maybe they'd have an argument maybe they wouldn't but they don't have a right to come against my clients who acted in good faith and who gave reasonably equivalent value when you and weren't aware of this fraud and that's really the key here looking at minnesota law not only what sort of weirdness of fraud and there was not in our case but what's our active participation that's clear under minnesota law in order to avoid a contract for fraud you need more than just fraud by one party you need fraud active participation by the party seeking to enforce it with regard to your question about interest i come back  same response it's always going to be reasonably equivalent value because it offsets the debt completely dollar for dollar and there's nothing under minnesota law that makes these interest rates in permissible or inappropriate so there would not have been a reason whether it's a red flag or whatever word you might but again that's not our case because good flate faith is undisputed i've already ever size that  trustee is wrong as a matter of fundamental minnesota law they have misconstrued the minnesota supreme court's decision fan portions that they've cited to quote judge loken our table setting their case or their position that thin is actually decided this question when you've got transfers let's assume for purposes of this question that transfer by transfer was proven to be a part of the scheme and receiver one against alliance bank and one set against the respondents bank the procedural disposition of the alliance being cases where summary judgment so you had a record involving where the payments came and what the guilt the court held that that failed to state a cause of action and the court again in minnesota it's a very liberal pleading standard that the court did not allow for further pleading to say or to a as failing to state a claim across the board so that was evidence that the court was declining to adopt the pansy rule is what i would say it is it's a ponzi rule that when you have a patsy scheme legitimate you start out in a good illegitimate business and then it turns bad and then somewhere in the middle it it turns completely into a fraudster but but there's a myth your point your honor transfer by transfer analysis actually dispels further dispels the idea that fan adopted any kind of ponzi rule a transfer by transfer analysis looks at the parties to the agreement looks at the terms of the agreement and the circumstances and not only do i differ with the trustee but in fact they cannot demonstrate any anything other than that under the law minnesota has only adopted two exceptions or t circumstances where you can vote in a kind of tract as against public policy and the fraud circumstance requires more than just fraud by a ponzi scheme or it requires active participation by the other party and good morning your honor may please the court i'd like st just look and to address your question about the legal and for stability at the time the contracts were made nothing in minnesota law suggests that these contracts were legally enforceable at the time they were made rather longstanding minnesota case says that contracts that are used to defraud a rd party are void if it is in this context that the general marker in many of those cases and they're very fact specific and they don't in my i am read them all but they don't resemble this case there aren't very many and think that's the toughest case so if you take a look at george bends and sons that's a case that and forty ok got it and ok tell us how it's close to this one well in that case there were two friends who made an illegal contract to sell furniture between them to keep the property away from one of the friends wives in a divorce and the court said that that contract was illegal and void it didn't say only upon discovery and what basis in what and what litigation is between the parties because because it defrauded the wife that that contract was not specifically at issue in that case because they were talking about the nd time contract which was in forcible what we're talking diktat we're talking a very clear yes i haven't heard anything newspaper and to take to do that publication the newspapers and town colluded under contract have one newspaper put up a bid at the maximum price and then they would share in the profit and the court refused to force the county to engage in that activity because that contract was void as a fraud on a rd party and it was void at the time it was made just as these like it there has not been a court in minnesota that has decided it case on these exact facts because we don't have many ponzi scheme cases in minnesota luckily give me one word and apparently valid on i would almost say routine brown it was these exact facts the th circuit looked at the texas uniform fragile and transfers act and looked at the allen stanford ponzi scheme and said that those investment contracts were void at the time they were made they were void because they didn't feel reject th sit to make sure we're careful about what for and it said that in order to prove that a particular contract was associated with a ponzi scheme you had to make that proof on the facts of that particular transfer it said nothing about what you do there after what the law says about what happens to that contract once that's proven and so in light of finn once finals decided ted martin's who is our expert from pricewaterhouse coopers and his  know dozens of team members who had worked on this case for seven years went back and they did the work to do that transaction by transaction they combed through tens of millions of records and they looked at each specific transfer from palance into p c i and from p c i back to a palace and looked at the economic activity that was reflected in bank data that was reflected in p c i financial documents all these registers that deanna coleman kept been successful in their attempt to make it sound broader than it is and to make the district court's order sound rather than it that they haven't they haven't probably haven't read it is as candid as literally as i would well good guy said no i had a question let me ask you a question yeah as i understand what the district court did they did polsky i think is the name they did show up with somebody who said these renters interest rates were reasonable and that goes a good i'd like let me our ability to recover for victims of a fraud is absolutely critical to this case if we so there is no dispute that we proved that each and every one of these transactions was procured by and paid from the fraud that is beyond just a few and so the real question is what does it mean legally and what it means is that each and every one of those contracts and the payments they're on was void and that interest payments above princip faith argument rests on his idea that he was investing in very specific inventory that p c i would be buying from one company and selling to another and she would be funding the flow of them were some some of them were legitimate at least at least face painting not a single one of property most or chris has investments was in a legitimate inventory transaction that is proven beyond dispute it is critically that's what fran requires says show me transaction by that that is looking to expand needs more investors to expand its legitimate trains actions may or may not make misrepresentations you know in the sense of not specific the linkage sure and there were the lure of the lure is the same so to speak but not not every not every lawyer is as a fish chasing it sure of fraudulent inducement things numerous cases i mean what's wrong why why isn't that right because these contracts were the tool of the fraud the reason that no one discovered the fraud at the time that the contracts were made i because the notes reflected a real transaction when undergirding that was an absolute fraud and so the reason they couldn't be a nice phrase you know and it also happen gives him the power to on behalf of victims not have to pay out if there was reasonably equivalent value in good faith and one of the problems with the power reading of the law and their view of the law is that their view of the law they say that again and again promissory notes from the most that were being repaid not that reflected a real transaction not that weren't used as a tool of a fraud that's your bag you know that's just question be counsel just said that there's always going to be a reasonably equivalent value that's a quote where there's good faith in the facts of this case there's always going to be reasonably quibble about why i have that i have that term at all then i have that as an element of his affirmative defense if it means nothing beyond good faith it would mean the interest rate was way too much because reasonable to me means a reasonable interest rate reasonable return so you're out here talking minnesota law doesn't require it to be done here i'm saying that longstanding minnesota law says that as a matter of public policy contracts that are used to defraud a rd party are void and  it's a plug ability to these facts that last stands and it applies perfectly and friend does nothing to change it then says that the proof you used to get to that concept must happen on a transfer by transfer basis but that once you're in the law it bankruptcy laws when they found opinion says we're not doing bankruptcy here under the uniform act so there's no doubt that this would be easier if there were a contracts are are void because as a matter of public policy they are defrauding a rd party we as a society so opponents cite all these cases in which they recognize they're willing to concede that if they're illegal provisions within a contract those are void so how is that different from the contract itself being used as a tool of a fraud and being void there's no there's no distinction and they can't point to point and they don't point  and what the minnesota case law says is that in those instances those contracts are void the way that we order ourselves and that's why the george benson son's case does apply because even though it's an anti competitive case very they say as a matter of public policy we don't want there to be empty competitive behavior that harms the public it's not a stretch to say that we as a society believe that as a matter of public policy which should not a firm fraud on the public d a firm a firm these contracts would be to require the victims to pay a profit to the earlier in time investors because the entity itself had no money never my never mind me the question i as he contract i don't understand if these are if you really believe this is a void contract they would have an equitable claim they have why why there's any hesitation to turn them into losers they would have an equitable broadstairs they would have an equitable claim to the the amount that they paid but they wouldn't get zero dollars ten cents on the dollar a mushroom and they wouldn't buy back enough from everybody and in the grand scheme of going after hundreds upon hundreds of net winners and trying to if your honor the trustees council i think encapsulated the trustees argument it would be nicer if there was a ponzi statute there isn't if there was a ponzi statute then that would be an expression of minnesota policy instead what we have here from the trustee is the trustees expression of its own policy coming from federal law it is completely untethered from an unsupported by minnesota law and that's demonstrated by reliance on cases like george burns and she pursues tower in those cases it was collusion by both parties both parties to the agreement to a fraud a rd party we don't have that here and minnesota does not otherwise recognize a basis to avoid a contract for fraud or only one party is engaged in that fraud similarly there were alliance on g n p they rely on the th circuit decision in g m t and ignore the subsequent decision by the supreme court of texas which rejected that view and instead adopted expressly fell in line with then this was decided the g m b case by the supreme court of texas was decided subsequently subsequent to f january they were dealing with advertising services but whether it's goods or services there's no difference with financial services and lending we're talking about varying degrees of elements of an enterprise and we're talking this proposition and that there has to be a particular rule for ponzi schemes that invalidate contracts even as to good faith innocent parties who came for reasonably equivalent value so does the reasonably equivalent value what work does that do in response to your opposing counsel's description of your argument that once you've got good faith there's really not much more to talk about well what work is reasonably  quillan value doing here well in our case reasonably equivalent value is stablished by the enforceable note to the extent that they lacked a signature or there was some other failure that made the contract an enforceable for a legal reason you understand what i'm saying if if for example we were acting in good faith but the note wasn't signed by an authorized party then it would not it would not be reasonably equivalent value but here we've got a standard no properly entered into and at the time it was entirely enforceable and there is no basis to avoid it after the fact because one party was involved fraud i realize i'm out of time and i if if i may just briefly there was quite a bit of discussion and an assertion by the trustee that it's under spirited that all of these payments to my clients were from ponzi scheme money that is very c eyes intent as to each of the transfers with regard to her off the cuff reference that if i needed some money i might have called steve i mean that that is as incredible as any testimony and certainly a jury could reject that as beyond cavalier just another thing stated by a fraudster as to their reliance on martin's that is an expert report and he recognized that there was co mingling going on and he could not provide affirmative evidence that payments were made with funds he said the opposite he said i couldn't find any evidence showing that there was proper pretty much going on like any expert he should be crossed if in fact we get to that point we've got an absolute to fetch the reasonable equivalent value the french gives us a right to judgment as a matter of law but if for some reason the actual fraud case were to be tried those are entirely disputed issues thank your honour's thank you both counsel cases well are there really brief difficult