Opinion ID: 1379922
Heading Depth: 1
Heading Rank: 2

Heading: Ownership and Fraudulent Transfer Under the FDCPA

Text: To establish Poeta's liability for constructive fraudulent transfer under the FDCPA, the government was required to show that the judgment debtor Resnick: ma[de] the transfer ... without receiving a reasonably equivalent value in exchange for the transfer or obligation; [and] intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due. 28 U.S.C. § 3304(b)(1)(B)(ii). Resnick's payments to Poeta satisfied the first element because an illegal gambling obligation has no legal value. Under Illinois law, all obligations incurred through illegal gambling are null and void, and any such obligation may be set aside and vacated. Illinois Loss Recovery Act, 720 Ill. Comp. Stat. 5/28-1, 28-7. The second element was also satisfied because Resnick certainly should have believed that he was incurring debts beyond his ability to pay when he defrauded Universal of millions of dollars, in large part to feed his gambling habit. Poeta does not dispute these two elements, but he argues that Resnick made no transfer to him within the meaning of the FDCPA because Resnick never legally owned the (stolen) money he paid to Poeta. The FDCPA specifies that a transfer is not made until the debtor has acquired rights in the asset transferred. 28 U.S.C. § 3305(4). Poeta argues that since Resnick acquired the money through fraud, he was never the legal owner of any funds that he transferred from the Universal account. Therefore, the argument goes, section 3305(4) places Resnick's payments to Poeta outside the scope of the FDCPA, so that Poeta cannot be found liable on a fraudulent transfer theory. [2] The FDCPA's fraudulent transfer provisions are not written in terms of legal and rightful ownership. The key statutory inquiry here is whether Resnick had rights in the asset transferred. There is no doubt that Resnick fraudulently obtained the money he transferred to Poeta. His fraud does not mean that he lacked any rights in the money, including the power to transfer it. As a practical matter, he had full power to draw on the Universal account and to transfer the money to others. Resnick used this power to defraud the bank, but this power was obtained by observing the legal formalities. Poeta's assertion that Resnick was not a legal signatory is incorrectwhile Resnick skirted Universal's private rules for obtaining drawing authority, nothing in the record indicates that his drawing authority itself was illegal. It was his use of that authority that was criminal. We find that the requirement of rights in the asset transferred was satisfied here because Resnick had possession of the money he delivered to Poeta. The fact that the victims of the fraud had greater rights in the assets that were transferred does not work to shield Poeta from this collection effort. It would be odd to interpret the statute, enacted to provide a remedy for the benefit of one of those victims, to give greater rights to someone in Poeta's positiona bookie receiving stolen money from a criminalthan to others who receive money without giving adequate consideration in more innocuous circumstances. Although Resnick was not the legal and rightful owner of the funds transferred in the course of his fraudulent scheme, he had the legal right to draw on the account at Universal and the power to transfer the funds at issue, subject to the rights of victims to pursue remedies later. Resnick's transfers of money to Poeta fall within the scope of the FDCPA, and Poeta is liable to the government for the constructively fraudulent transfers. This court need not reach the district court's alternative theory of unjust enrichment.