Opinion ID: 2794605
Heading Depth: 2
Heading Rank: 1

Heading: 2001 Introduction to CARDS

Text: Honorable Michael J. Melloy, United States Circuit Judge for the Eighth Circuit, sitting by designation. 1 On January 21, 2014, Kipnis filed a Chapter 13 bankruptcy petition, which he converted to a Chapter 7 case on February 6, 2014. On May 1, 2014, the district court granted Barry Mukamal’s motion, as the Chapter 7 Trustee, to be substituted for Kipnis in the action. Kibler filed a Chapter 7 bankruptcy petition on January 13, 2015. On March 20, 2015, this Court granted Kenneth Welt’s motion, as the Chapter 7 Trustee, to be substituted for Kibler in the action. 2 Case: 14-11959 Date Filed: 04/17/2015 Page: 3 of 25 Plaintiffs are owners of Miller & Solomon General Contractors, Inc. (“M&S”), one of the largest general contractors in south Florida. In 1999, M&S lost over $3 million, which substantially reduced its working capital just as south Florida was entering a construction boom. Plaintiffs sought to increase M&S’s bonding capacity in anticipation of the construction boom, but were unable to secure the desired long-term financing from conventional bank sources. Michael DeSiato was both Plaintiffs’ and M&S’s accountant. In 2000, DeSiato was introduced to Roy Hahn of Chenery Associates, Inc. (“Chenery”), a financial and tax services boutique that developed and promoted CARDS transactions. DeSiato told Plaintiffs that CARDS was the type of financing that could increase M&S’s bonding capacity and provide tax benefits that would flow to Plaintiffs. Starting in 2000, Chenery and HVB marketed the CARDS strategy to Plaintiffs. Plaintiffs analyzed CARDS to determine whether implementing the strategy would allow M&S to participate in more construction projects. However, Plaintiffs did not examine the various steps in a CARDS transaction and neither Plaintiffs nor DeSiato fully understood the complicated procedures involved. Instead, Plaintiffs relied on the reputations of HVB and Sidley Brown & Wood LLP (“Sidley”), a law firm that had prepared an opinion letter representing CARDS as an economically substantive strategy that would pass IRS scrutiny. 3 Case: 14-11959 Date Filed: 04/17/2015 Page: 4 of 25