### IN THE UNI TED STAT ES COURT OFAPPEALS FOR THE FIF TH CIRCU IT

No. 10–20670

In the Matter of: IFS FINANCIAL CORPORATION,
Debtor

------------------------ ------------ GUILLERMO DE LA PENA STETTNER; MARIO VALVERDE GARCES; LUIS DE LA PENA; MARGARITA ISABEL DE LA PENA STETTNER; MARIA CRISTINA DE LA PENA; MARIA PAZ DE LA PENA, Appellants
v. W. STEVE SMITH, TRUSTEE, Appellee

------------------------ ------------------------ ------------------------ ------------------------ ------------ In the Matter of: IFS FINANCIAL CORPORATION,
Debtor

------------------------ ------------ W. STEVE SMITH, Appellee

v. GUILLERMO DE LA PENA STETTNER Appellant

------------------------ ------------------------ ------------------------ ------------------------ ------------ U n i te d S ta te s C o u rt o f A p p ea l s

F i ft h C i rc u i t 

### F I L E D Janu ary27 , 20 12 Lyle W . Cayce Clerk Case: 10-20670 Document: 00511739713 Page: 1 Date Filed: 01/27/2012No. 10–20670

In the Matter of: IFS FINANCIAL CORPORATION,
Debtor

------------------------ ------------ W. STEVE SMITH, Appellee

v. MARIO VALVERDE GARCES Appellant

------------------------ ------------------------ ------------------------ ------------------------ ------------ In the Matter of: IFS FINANCIAL CORPORATION,
Debtor

------------------------ ------------ W. STEVE SMITH, TRUSTEE, Appellee

v. LUIS DE LA PENA; MARGARITA ISABEL DE LA PENA STETTNER; MARIA CRISTINA DE LA PENA; MARIA PAZ DE LA PENA Appellants

Appeal from the United States District Court for the Southern District of Texas

Before GARZA, CLEMENT, and SOUTHWICK, Circuit Judges.

2 Case: 10-20670 Document: 00511739713 Page: 2 Date Filed: 01/27/2012No. 10–20670

EMILIO M. GARZA, Circuit Judge: In this bankruptcy appeal, Guillermo de la Pena Stettner, Mario Valverde Garces, Luis de la P ena, Margarita Isabel de la Pena Stettner, Maria Cristina de la Pena, and Maria Paz de la Pena (together, “Appellants”) appeal the district court’s affirmance of the bankruptcy court judgment of over $3 million in favor of Appellee W

. Steve Smith (“Smith”), trustee of IFS Financial Corporation’s ( “IFS”) estate. Their appeal centers on the district court’s finding t h a t I F S fraudulently transferred funds to the Appellants. We AFFIRM. I IFS and seventeen affiliated o r g a n izations (together with IFS, “Interamericas”) were debtors in a series of Chapter 7 cases. This appeal arises from eight collective adversary proceedings, which Smith as trustee brought against the Appellants for avoidance of fraudulent transfers under Chapter 5 of the Bankruptcy Code and Chapter 24 of the Texa s B u s i n ess and Commerce Code. Interamericas, base d i n The Woodlands, Texas, extended its operations internationally in the insurance, mortgage, and banking services industries. Many Interamericas entities did no more than temporarily stow stock in other Interamericas companies, among which were offshore shell companies created solely to channel money between investors and actively operating Interamericas organizations. Interamericas’ a c t ivi t i e s c e n t e r e d o n I F S

. At I nteramericas’ helm was the Pimienta family. Hugo Pimienta led Interamericas and acted as th e p ri m a ry d e c i s i on maker for many Interamericas entities in the United States. Along with his father, he exercised power of attorney over several Interamericas entities abroad. Even th o u gh th e dif

f e r e n t I n t e r a m e ri c a s c o m p a n i e s h a d s e p a r a t e corporate structures,

3 Case: 10-20670 Document: 00511739713 Page: 3 Date Filed: 01/27/2012No. 10–20670

a single advisory board based in T h e Woodlands—also dominated by the Pimienta family—oversaw all I n t e r americas operations and gave orders to Interamericas officers and managers. The a d v i sory board set interest rates, managed i n v estments, transferred money between Interamericas enterprises, and personal l y h a n dled the sale of assets. No company in Interamericas’ network operated independently o f this board. When the board was not meeting, it entrusted its full authority to Hugo Pimienta. I n teramericas’ investors were predominantly Mexican citizens. They reportedly deposited the i r contributions into one of three bank accounts in Texas: (1) account no. 137456 in the name of “Integra Bank” at Southwest Bank of Texas; (2) account no. 325716 in the name of “INV Capital” at Southwest Bank

o f T e x a s ; and (3) account no. 91538 also in the name of “INV Capital” a t Woodforest National Bank. The Integra and INV accounts serv e d a s the primary stream of funds into Interamericas; these accounts received over $270 million in funds from investors between December 1999 and O c t o b e r 2001. O t h er Interamericas entities also deposited over $163 million in funds i n t h e
same accounts during that period. Although investors we r e t o ld that their deposits took some distinct, individualized form—such as a certificate of deposit,
money market account, or bearer note—in reality, the Integra and INV accounts pooled all investor funds. To track investments in the different Interamericas companies placed in these accounts, Interamericas used a software program known a s the Portia system. The system generated sta t e m ents for investors that listed supposed investment activity, interest rates, maturity dat e s, and deposits and

w i th dr a w a l s . Interamericas Business Servi c e s , a n o th e r I nt e r a m e ri c a s c o m p a ny , p rovided administrative services for the system’s users. Investors apparently

4 Case: 10-20670 Document: 00511739713 Page: 4 Date Filed: 01/27/2012No. 10–20670

believed that their funds were hel d i n a bank by the name of Integra, rather than in an account under the name “Integra Bank” located in Texas. The organization named Integra Bank did in fact e x i s t

. Although operat ing out of a physical structure in Curaçao, where it was incorporated, Integra Bank lacked tellers and had little interaction with depositors. Integra Bank was independent from Interamericas only on paper. It is unclear what actual function Integra Bank provided. IFS promoters forwarded checks from 1 investors to IFS offices in The Woodlands, Texas, rather than to Integra Bank, for deposit into one of Interamericas’ three accounts. When investors wanted to

remove funds, they contacted IFS—not Integra Bank. Hugo Pimienta or other advisory board members approved all withdrawals. No one at Integra Bank had the independent authority to withdraw funds from the account held in its name. A s e ries of events from 1997 to 2002 led to Interamericas’ downfall, leaving IFS its only functional entity. First, i n l a t e 1 9 97, a failed merger led to philosophical differences between Hugo Pimienta and a group of investors from

a no n - I nteramericas company, GCM Corporation Limited (“GCM”). GCM withdrew from i t s r elationship with Interamericas and agreed to accept a $50 million note from another Interamericas company, Interamericas Financial Holdings Corporation ( “ IFH”). IFH soon defaulted on this note, however, and G C M s ued to enforce their agreement. IFS, IFH, and GCM reache d a compromise in Ma y 2 0 0 0 : IFS replaced IFH as the note’s obligor, and Blitz Holdings Corporation, another non-Interamericas company, repl a c e d GCM as the note’s payee. IFS restructured its d e b t , a n d GCM’s note increased to $70

The bank rup tcy cour t expla ined , “Inte ram eric as Com pani es paid ‘pr om ote rs ’ to so licit 1 inves tor s and enco urage inves tor s to ke ep thei r ass ets w ith the ente rp ris e. Promo ter s we re paid 0.10 -1. 00% per mo nth of tot al inves tm ents ret ained by Inter ame ric as Com pani es . . . . The pr om ote r com mi ss ion and interes t rat es we re to be paid fr om the operat ion of Inter ame ric as Com pani es ’ bus ines se s. ” In reIFS Fi n. Corp

. , 417 B.R. 419 , 429 (Bank r. S .D

. Tex. 2009)

. 5 Case: 10-20670 Document: 00511739713 Page: 5 Date Filed: 01/27/2012No. 10–20670

million in value. Over the next year, IFS paid Blitz $30 to $40 million out of the Integra account before ultimately defaulting. Blitz brought a series of lawsuits against IFS to recover the note’s balance. Over the course of Blitz’s litigation, all e v i d e nce suggests that the Interamericas companies were not operating as a financially stable or ethically

so u n d e n t e r p ri s e . D u ri n g that time, the advisory board removed funds belonging to IFS and Interamericas subsidiaries f r o m t h e Integra account and began loaning millions to IFS shareholders and insiders, including the Appellants. As IFS defaulted on obligations to GCM and Blitz, American Founders Life Insurance Company (“AFL”), an alleged fully-owned subsidiary of IFS, funneled approximately $40 million to IFS investors in the form of “Select Asset Loans,” whic h w e r e l o ans in name only; the money actually went to IFS. These loans served the purpose of s t reaming cash out of AFL and into IFS while buoying AFL’s balance sheet with the appearance of obligations from creditworthy investments. In late 1999, IFS sold AF L i n e x c h a nge for $49.5 million and 50,000 shares of stock in another Interamericas entity. In November 1999, IFS also negotiated the sale of Accubanc Mortgage, another allegedly fully-owned subsidiary of IFS, for $30 to $40 million. Most proceeds from the sales of AFL and Accubanc went through holding companies into the Integra account in Texas. By 2002, the advisory board had sold off most of Interamericas. O n ly IFS remained afloat. IFS filed for bankruptcy in 2002. The bankruptcy court appointed Smith to represent the IFS estate as its trustee. Smith filed over a hundred separate adversary procee d i n g s , including eight adversary proceedings against the Appellants, which the bankruptcy court consolidated. In t h e c o n solidated
pro c e e d i ngs against Appellants, Smith sought to avoid $3 million in transfers

6 Case: 10-20670 Document: 00511739713 Page: 6 Date Filed: 01/27/2012No. 10–20670

IFS made to the Appellants in Interamericas’ final years. Invoking Texas law through the federal bankruptcy code, see 11 U.S.C. § 544; T E X
. B U S

. & C O M
. C O D E AN N
. § 2 4

. 0 0 5, Smith claimed fraud, aiding and abetting fraudulent transfer s , a n d conspiracy. The bankruptcy court disallowed any claims based on veil-piercing or earmarking theories. After a series of overlapping trials and summary judgme n t m o t i ons, the bankruptcy court issued a final opinion in September 200 9

. T hat court found that the evidence supported trustee’s claims of fraudulent transfer against the Appellants and summarized its principal findings:

• The funds were paid out of an account legally titled in t h e name “Integra Bank,” but actually owne d and controlled by the Interamericas Companies.

• IFS, acting through its officers and agents, exercised exclusive control over the account.

• The funds were paid on account o f a n t ecedent debt but in furtherance of a fraudulent scheme.

• The [App e l l a n ts] knew or should have known of the fraudulent scheme. In re IFS Fin. Corp. , 417 B.R. at 427. Specifically, the bankruptcy court found that transfers to the Appellants

were fraudulent and awarded judgments totaling $3,131 ,315.20 against the Appellants. The Appellants appealed the bank r u p t c y court’s judgment to the district court. The district court affirmed. The Appellants now seek our review of the district court’s judgment. Appellants raise two issues for our review: (1) whether the district court erred in determining that IFS was the de facto owner of three bank ac c ounts through which its allegedly fraudulent transfers passed; and (2) irrespective of

7 Case: 10-20670 Document: 00511739713 Page: 7 Date Filed: 01/27/2012No. 10–20670

ownership, whether the district court erred in finding that Smith met his burden to establish fraudulent transfers. 2 II “We review a district court’s affirmance of a bankruptcy court decision by applying the same standard of review to the bankruptcy court decision that the district court applied.” B a r n e r v. Saxon Mortg. Servs., Inc. (In re Barner) , 597 F

. 3d 651, 653 (5th Cir. 2010) (citation and internal quotation marks o m i t t e d)

. Like the district court, we review factual findings for clear er r o r a nd legal conclusions de novo. In re Amco Ins. , 444 F.3d 690, 694 (5th Cir. 2006). “When the district court has affirmed the bankruptcy court’s findings, [the clear error] standard is strictly applied, and reversal is appropriate only when there is a firm conviction that error has b e e n committed.” Perkins Coie v. Sadkin (In re Sadkin) , 36 F.3d 473, 475 (5th Cir. 1994).

App ellant s requ es t our cons ide rat ion of a thir d iss ue: wh ethe r the d i st ric t cour t 2
err ed in det erm ining that the App ellant s we re pr ope r reli ef par tie s or we re IFS ins ide rs . We do not reac h the me rit s of eit her iss ue, ho we ver. Ou r revie w sho ws that App ellant s did not rais e the ques tio n of w h e t h e r t h e y we re reli ef def enda nts bef

ore the bank rup tcy cour t. We ther efo re do not add res s it now . See In re Ma rtin , 222 F. App ’x 360, 362 (5t h Cir. 2007) (c itin g In re Gi nther Trus ts , 238 F.3d 686, 689 & n. 3 (5t h Cir. 2001) (ho ldi ng that we wi ll not cons ide r any iss ues on appea l that w ere not rais ed before the bankru pt cy cour t) . And the ques tio n of wh ethe r Luis de la P e n a wa s an ins ide r aff ect s only the analys is of wh ethe r IFS had act ual inte nt to “hind er, del ay, or def raud” unde r § 2 4

. 0 0 5 of the Texas Busi nes s and Com me rce Code

. See T E X

. B U S & C OM

. C ODE AN N

. § 24.0 05(a )( 1), (b) (1)

. Becaus e we se par atel y conc lude in Part V, inf

ra , that IFS had the requ isi te intent based on I FS’s trans fer s to the Appe llant s at the sam e tim e it wa s facing liti gation , sub st antia l deb t, and attem pt s to liquid ate a large por tio n of its ass ets befor e fil ing for bank rup tcy, as well as evide nce of its over all fr audul ent st ruc tur e, and beca use the res olut ion of the ques tio n of wh ethe r Luis de la Pena is an ins ide r wo uld not dis plac e this analys is, we dec line to reac h this ques tio n on app eal. To the exten t the App ellant s dis put e Luis de la Pena’s ins ide r st atus for othe r reas ons , they have wa ived thos e argum ent by fail ing to brie f the m. See F E D

. R. AP P

. P. 28( a)( 9)(A); Al am edaFi lm s SA de CV
v. A uthors Rights R estor atio n Co rp ., Inc. , 331 F.3d472 , 483 n.34 ( 5th Cir. 200 3). 8 Case: 10-20670 Document: 00511739713 Page: 8 Date Filed: 01/27/2012No. 10–20670 III Section 544(b)(1) allows Smith as trustee to “avo i d a n y transfer of an interest of the debtor in property

. . . that is voidable under applicable law by a creditor holding an [allowable] uns ecured claim.” See 11 U.S.C. § 544(b)(1). 3 Section 550 outlines t h e r e m edy available to Smith if successful on his § 544 claim: he may recover, for the benefit of th e e s t a t e, property transferred fraudulently or, alternatively, the value of the property. Id. § 550. “Property of the debtor” under § 550 is “that property that would have been part of the estate had it not been transferred before the commencem e n t of the bankruptcy proceedings.” Begier v. I.R.S. , 496 U.S. 53, 58 (1990). “The trustee’s successor rights arise under federal law, but the extent of those rights depends entirely on applicable state law.” In re Moore , 608 F.3d at 260; see ASARCO LLC v. Americas Mining Corp. , 404 B.R. 150, 156 (S.D. Tex. 2 0 0 9 ) (“Trustees

. . . use § 544(b) as a conduit to assert state-law-based fraudulent-tra n sfer claims in bankruptcy.”). The bankruptcy court, district

co u r t , a n d parties all applied Texas law to Smith’s claim. We agree that application of Texas law is appropriate i n light of Texas’s dominant contacts with the disputed funds. See Southmark v. Grosz (In re Southmark) , 49 F.3d 1111, 1118 (5th Cir. 1995) (explaining that we apply the law of the state with the dominant contact with the funds).

This cour t rec entl y clar ifi ed the pur pos e of a § 544(b) clai m in In re Mo ore , 608 F.3d 3 253, 260 (5t h Cir. 2010) : “If an act ual, unse cur ed cre dit or can, on the dat e of the bank rup tcy, reac h prop ert y that the debtor has tra nsf err ed to a thir d par ty, the trust ee ma y use § 544(b) to st ep into the sho es of that cre dit or and ‘avoid ’ the deb tor 's tra nsf er. Altho ugh the caus e of act ion belon ged to one cre dit or, any pr ope rty the tru st ee rec overs beco me s es tat e pr ope rty and is divid ed pr o r ata amo ng allgene ral cre dit ors .” 9 Case: 10-20670 Document: 00511739713 Page: 9 Date Filed: 01/27/2012No. 10–20670

Chapter 24 of the Texas Business and Commerce Code allows creditors to avoid fraudulent transfers by debtors. Section 24.005(a) of the Code relevantly provides: A transfer made

. . . by a debt o r i s fraudulent as to a

creditor, whether the creditor’s claim aros e before or within a reasonable time after the transfer was made or the obligation was incurred, if the d e b t o r made the t r a n s f e r or incurred the obligation

. . . with actual intent to hinder , delay, or defraud any creditor of the debtor. So while Texas law standing alone does not permit Smith as IFS’s trustee to bring a fraudulent-transfer claim, § 554(b) allows Smith to avoid transfers on behalf of IFS’s bankruptcy estate if he shows that they are f raudulent under § 24.005. See In re Moore , 608 F.3d at 261 (“[S]uch claims become estate property once bankruptcy is under way by virtue of the trustee’s successor rights under § 544(b).” ( internal citations and quotation marks o m i t t e d) ). Smith as trustee bears the burden of establishing all e g e d f r a u du l e n t t r a n s f

e r s b y a p reponderance of the evidence. Jenkins v. Chase Home Mortg. Corp. (In re Maple Mortg., Inc.) , 81 F.3d 592, 596 (5th Cir. 1996). IV Appellants’ first claim on appeal turns on whether IFS “owne d” t h e Integra and INV bank accounts, such that these accounts are an “interest of the debtor in prope r t y . . . that is voidable under [Texas] law by a creditor holding

an [allowable] unsecured claim.” See 11 U.S.C. § 544 (b)(1). Applying Texas law, both the bankruptcy and district cour t s h e ld that these accounts were such interests based on what they termed IFS’s “de facto” ownership. We agree. Texas law b r o adly defines the property of a debtor to be “anything that
may be subject to [the deb t o r ’ s ] ownership.” T E X
. B U S

. & C O M
. C O D E AN N
. §

10 Case: 10-20670 Document: 00511739713 Page: 10 Date Filed: 01/27/2012No. 10–20670

24.002(2),(10). Appellants dispute the inclusion of the Integra and INV accounts in IFS’s estate as property subject to IFS’s ownership and specifically contest the district cou r t ’ s finding of IFS’s de facto, as opposed to legal, ownership on the basis of IFS’s control over the accounts. Appellants claim that the case law does not support the concept of control over bank accounts he l d in the name of another entity, particularly here, where IFS lacked signature authority over the accounts, an d n e i t her IFS nor Hugo Pimienta owned any interest or exercised any authority over Integra. Smit h d oes not dispute that IFS did not legally own the Integra or INV accounts; nor does he contest IFS ’ s l a ck of signatory authority over those accounts. He does not contend that IFS owned or held shares in Integra or INV,

or that IFS or anyone at IFS was an Integra officer, director, or employee. He agrees, moreover, that no formal document shows IFS’s authority over Integra or its accounts. But Smith asserts that these lack of formalities merely evince IFS’s intent to defraud by intentionally avoiding a paper trial which would allow creditors to easily identify its assets. Smith directs our focus to the fact that IFS

was Interamericas’ only operating company in its final years and, moreover, its

o n l y shareholder with any value. Based on this fact, Smith stresses tha t a n y money in the Integra and INV accounts was effectively IFS’s; IFS should not be able to evade full discharge of debts in this bankruptcy through an intentionally obscure organizational structure. The question Appe l l a n ts ask us to resolve—whether legal ownership is required to show that IFS owned the Integra and INV bank accounts, such that they form part of IFS’s bankruptcy estate—is a question of first impression. The scant case law within our grasp shows that in answering this question on appeal, control is more decisive than ownership. Guided by these principles, we hold

11 Case: 10-20670 Document: 00511739713 Page: 11 Date Filed: 01/27/2012No. 10–20670

t hat control may be sufficient to show ownership in what is ultimately a factbased inquiry that will vary according to the peculiar circumstances of each case. Texas law counsels that the legal t i t l eholder to a bank account is not always the owner of its contents. Silsbee State Bank v. French Mkt. Grocery Co. , 132 S.W. 465, 466 (Tex. 1910). To ascertain ownership, Texas law directs courts to look not to t he legal relationship between parties; rather, courts are to examine the individual facts of each case. Id. Reflecting this understanding, the Texas Supreme Court held that a depositor of funds to an account in his name

was not the owner of the funds where he deposited the funds as “agent” and an unknown third party withdrew the funds that same day. Id. “[T]he probative force of the facts” showed that the account’s owner was not the one “found in the full possession and control o f the money deposited.” Id. An unseen hand exercised actual control over the account. See id. Further, in the context of voiding preferential transfers under § 547 of the Bankruptcy Code, this court opined in Southmark v. Grosz (In re Sout h m a r k) , 49 F.3d 1111, 1116–17 (5t h C ir. 1995) that control over funds in an account is the predominant factor in determining an account’s ownership. Central to the dispute in Southmark was a payroll check drawn from an account in the debtor’s

name. Id. at 1113–14. The debtor legally owned the account, but the debtor and its parent and affiliate companies all commingled their funds in it. Id. Rather than focu s on the debtor’s legal title to the account, this court emphasized the debtor’s control over an account, explaining that “the primary consideration in determining if funds are property of the debtor’s estate is whether the payment of those funds diminished the resources from which the debtor’s creditors could have sought payment.” Id. at 1117. Ultimately, the “un f e t t e r e d discretion to

12 Case: 10-20670 Document: 00511739713 Page: 12 Date Filed: 01/27/2012No. 10–20670

pay creditors of its own choosing” supported the control requisite to Southmark ’s finding of ownership. Id. at 1116. 4 Although until now, the case law, emphasizing control over legal title, has left unanswered the question of whether le g al title, even though secondary to control, is a threshold requirement for ownership, the facts of this case illustrate

Altho ugh we ack now led ge that the bank rup tcy cour t did not allow Sm ith to pr oce ed 4 under earm a rkin g or v eil- pi ercin g th eor ies , the law unde rgird ing thes e theo ries is nevert heles s ins tru cti ve and lend s br o a d e r s upp ort to our hold ing. The earm ark ing doc tri ne als o e m p h a s i z e s cont rol, and echo es the Texas Sup rem e Court ’s earl y view of cont rol (or lack of cont rol) of an acc ount ’s tit le ow ner se en in Sil sbe e. The doc tri ne ack now led ges that fund s may be in a deb tor ’s acc ount yet outs ide of its c o n t r o l—an d ther efo re outs ide the reac h of the bank rup tcy es tat e. Cora l Petrol eum , Inc. v. Banque Pari bas -Lon don , 797 F.2d 1351, 1356 (5t h Cir. 1986) (Wh ere “‘a thir d per so n mak es a loan to a deb tor sp ecif ical ly to enable him to sat isf y the clai m of a des ignate d cre dit or, t he pr oce eds never beco me par t of the deb tor 's ass ets .’ ” (quo ting 4 C OLL IE R ON BAN KRU P T CY ¶ 547. 25 at 547 (101 –102) (15t h ed. 1986) ))

. Bank rup tcy cour ts wid ely acce ptthe earm ark ing doct rine “as a valid defe nse agains t a pr efe renc e claim , pr im aril y beca use the ass ets fr om the thir d par ty we re never in the cont rol of the debtor and ther efo re paym ent of thes e ass ets to a cre dit or in no wa y dim inis hes the deb tor 's es tat e.” Id. But this doc tri ne app lies narr ow ly. See id. The Fift h Circ uit rejec ted app l i c a t i on of this doc tri ne wh ere a deb tor had dis pos itive cont rol ove r l o a n p r o cee ds dep os ite d into its acc ount

. See Cai ll ouet v. Fir st Bank & Trus t (In re Etringe r Bake ri es, Inc.) , 548 F.3d 344 (5t h Cir. 2008)

. Altho ugh the deb tor clai me d he had rec eiv e d the loan to pay a sp ecif ic cre dit or, ther e wa s no st ipul atio n that the deb tor wo uld pay the cre dit or usi ng the fund s and, fur ther , the de btorwas free to main tain th e fund s unti l he in tent ionall y ac tedt o rele ase them to the cre dit or by w rit ing a chec k. Id. at350

. And the genera l pr incip le that a par ent com pany’ s ow ners hip of a sub sid iary doe s not equat e to abs olut e cont rol over that sub sid iary—thus , pr eclu ding the mec hanic al conc lus ion that ass ets belon ging to the sub sid iary may sat isf y the deb ts and liabil itie s of the par ent— is not abs olut e. See In re Sim s , 994 F

. 2 d 2 1 0 , 2 1 8 (5t h Cir. 1993)

. Wher e a par ent com pany dom inate s its sub sid iary to suc h an exten t that the sub sid iary is litt le mo re than the par ent’ s amb ling mar ionet te, and the “d irec tor s and st ock hold e r s util ize[] the cor por ate enti ty as a sha m to per pet uate a fr aud, ” we may find cont rol suf fic ient to rub out the art ifi cial bound arie s betw een par ent and sub sid iary. Id.; see Uni on Pac. Res

. Gr oup, Inc. v. Rh one- Poul enc , Inc. , 2 4 7 F

. 3 d 574, 586 n.33 (5t h Cir. 2011) (“ When exam ining clai ms of fr aud, cour ts can i g n o r e tec hnica liti es suc h as mul tip le layers of bus ines s enti tie s and look dir ect ly to the tru e par tie s in inte res t and cont rol. ”)

. In ass es sin g wh ethe r the bound ary betw een par ent and sub sid iary is suffi cien tly ins ubs tant ial, we oft en cons ide r wh ethe r (1) the sub sid iary ope rat es with gro ssly inad equat e cap ital ; (2) man agem ent ke eps dail y ope rat ions of the tw o cor por atio ns se par ate; (3) the s u b s i d i a r y o bse rves the bas ic cor por ate for mal itie s; and (4) the man agem ent of the sub sid iary act s in the com pany’ s bes t inte res t or tak es or der s fr om t he par ent. Id.

13 Case: 10-20670 Document: 00511739713 Page: 13 Date Filed: 01/27/2012No. 10–20670

why it should not be: regardless of its legal title, IFS had the ultimate power to transfer funds to others, who included the Appellants. That it obscured its power to transfer in an intentionally complicated corporate structure suggests that control is decisive, and that legal title is irrelevant where, as here, a debtor organization has taken care to mask its activities through fictional divisions. Both the bankruptcy and district courts’ conclusions of de facto ownership find support in the law and the evidence. Texas law and our Ban k ruptcy Code precedent navigate us toward the conclusion that control is the primary determinant of ownership of bank accounts such as those central to this appeal. Control over an account, and its contents, is central to assessing whether they are to form part of a bankruptcy estate. But in this necessarily fact-based inquiry, see Silsbee , 132 S.W. at 466, control, while primary, may not always be decisive, and legal ownership is not irrelevant. See In re Southmark , 49 F.3d at 1116–17. Where, as here, evidence of fraud and the debtor’s strict control are both strong, disputed legal ownership i s l e s s compelling. On the other hand, where evidence of fraud is weak, legal ownership might weigh heavier in our calculus. Although the Interamericas entities were separate and distinct, the facts support the district court’s and bankruptcy court’s findings that IFS dominated these subsidiaries to such an extent that the subsidiaries acted at IFS’s direction and that the directors and stockholders utilized the corporate entity as a sham to perpetuate a fraud. A single advisory board controlled all the Interamericas corporations. A single advisory board set interest rates on the investments on the three accounts, controlled how to invest the money, decided the selling price and date of sale of Interamericas entities, and decided when to transfer monies from Interamericas entities. The district court’s finding that IFS used the accounts as its gener a l o p e r a t i n g fund also finds support in the record. Thus,
14 Case: 10-20670 Document: 00511739713 Page: 14 Date Filed: 01/27/2012No. 10–20670

this record reflects that IFS exercised such control over these accounts that it had de facto ownership over these accounts, as well as the funds they contained. The lower courts’ findings of ownership are not clearly erroneous and, moreover, comport with precedent and our holding today. V Appellants’ second claim on appeal turns on whether Smith established a fraudulent transfer to the Appellants—specifically, whether Smith properly established a claim under 11 U.S.C. § 544. The bankruptcy and district courts held that Smith did. We agree. In affirming the bankruptcy court’s finding that the trans f e rs to Appellants could be avoided as fraudulent under Texas law, the district court stressed that IFS made transfers to the Appellants j ust as it was facing litigation, was burdened with substantial debt, and sought to liquidate a large portion of its assets before filing for ba n kr u p tcy. The bankruptcy court’s decision rests on nearly identical findings. Section 24.005(a)(1) of the Texas Business and Commerce Code defines a f r a udulent transfer to include a transfer made with actual intent to hi n d e r , delay, or defraud a creditor:

A transfer made or obligation incurre d b y a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or within a reasonable time after the transfer was made or the obligation was incurred, if the debtor made the trans f e r o r incurred the obligation

. .

. with actual intent to hinder, delay, or defr a u d a ny creditor of the debtor. The statute focuses on the transferor’s intent, rather than the transferee’s. See SEC v. Res. Dev. Int’l, LLC, 487 F.3d 295, 301 (5th Cir. 200 7) (“‘[T]he transferees’ knowing participation is irrelevant under the statute’ for purposes

15 Case: 10-20670 Document: 00511739713 Page: 15 Date Filed: 01/27/2012No. 10–20670

of establishing the premise (as opposed to liability for) a fraudulent transfer.”) (quoting Warfield v. Byron , 436 F.3d 551, 559 (5th Cir. 200 6)). To determine whe ther a transfer is made with the requisite intent, we may examine a number of factors, including w h e t h er (1) before the transfer was made, the debtor had been sued or threatened with suit; (2) the debtor removed

or concealed assets; and (3) the transfer occurred shortly before or shortly after

a substantial debt wa s i n c urred. T E X
. B U S & C O M
. C O D E AN N
. § 24.005(b). Evidence that a company operated as a fraudulent enterprise at the time of the transfer, mor e o v e r , may be sufficient to establish actual intent. See SEC, 487 F.3d at 301 (finding that evidence that the company operated as ponzi scheme sufficient t o e s t a b lish actual intent); see also Dean v. Davis , 242 U.S. 438, 444–45 (1 9 1 7 ) (noting that knowingly making a transfer that constitutes a fraudulent act is sufficient to find actual intent to defraud creditors). Appellants fail to raise any arguments that would merit reversal. Smith

more properly directs our attention to eviden c e s uggesting that IFS had the

ac t u a l i n tent to hinder, delay or defraud its creditors: (1) transfers to the Appellants were transfers to insiders; (2) IFS concealed its transfers through the use of Portia numbers in the place of investor names and the nature of the transfers; (3) IFS made the transfers during its dispute and litigation with Blitz and other pending litigation; (4) IFS transferred substantially all assets; (5) IFS concealed assets from Blitz and other creditors through its fraudulent scheme; (6) IFS did not receive reasonably equivalent value for t h e transfers to the Appellants; and (7) the transf e r s o c c u r red shortly before or shortly after IFS incurred its direct obligation to Blitz. For the reasons Smith raises, we find that this record supp o r t s t h e bankruptcy and district courts’ findings of fraudulent transfer. Specifically, IFS faced pending lawsuits and mounting debts just as it l i q u i d a ted nearly all
16 Case: 10-20670 Document: 00511739713 Page: 16 Date Filed: 01/27/2012No. 10–20670

Interamericas’ assets. T E X
. B U S & C O M
. C O D E AN N
. § 2 4

. 0 0 5(b)(4),(9),(10). Further, evidence that IFS operated as a fraudulent enterprise at the time of the transfers supports this finding of fraudulent intent. See SEC, 487 F.3d at 301. VI In sum, neither the bankruptcy court n o r d i s t rict court erred. We AFFIRM the district court’s affirmance of the bankruptcy court’s judgmen t in full.

17 Case: 10-20670 Document: 00511739713 Page: 17 Date Filed: 01/27/2012