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6500 Cherrywood Ln - Greenbelt, MD 20770 - Main Tel: 301-344-8018 map
101 W Lombard St Room 8530 - Baltimore, MD 21201 - Main Tel: 410-962-2688

Held, the creditor of a Chapter 7 debtor corporation had standing to sue on the claim in the bankruptcy court against the debtor and the debtor’s alter ego whose fraudulent misrepresentations on behalf of the debtor caused injury to the plaintiff and gave rise to the creditor’s claim. The plaintiff as trustee under certain indentures sued the insider and various corporations he owned or controlled, including the debtor, for misrepresentation, concealment by breach of duty to disclose and fraudulent conveyance. The Chapter 7 trustee consented to the suit and entered into an agreement with the plaintiff whereby the estate would share pari passu in any recovery against the insider. The bankruptcy court permitted the plaintiff to “pierce the corporate veil” because of the insider’s multiple fraudulent transactions between shell corporations which gave rise to the claim. The court awarded the plaintiff a $7M judgment against the insider.

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James F. Schneider