Bank of America, N.A. v. Veluchamy

In bankruptcy adversary action by creditor alleging that debtors had either hid or transferred bankruptcy estate assets to family and friends, Bankruptcy Ct. did not err in directing debtors to return $5.5 million to estate, where said funds had been transferred to Indian company one year prior to filing bankruptcy petition. While debtors argued that said transfer was legitimate because it reduced lines of credit for company that was controlled by debtors, Bankruptcy Ct. could find that said transfer was sham, where debtors failed to produce documentation to support their claim, and where there was no evidence that said company treated funds as reduction in lines of credit. Fact that Indian company was not party to instant adversary proceeding did not preclude Bankruptcy Ct. from making said finding where there was no evidence that Indian company took control over said funds. Also, Bankruptcy Ct. did not abuse its discretion in directing debtors’ children to turnover $18,577,954 based upon debtors’ instruction to company to issue stock to debtors’ children in effort to dilute debtors’ interest in said company and to divert assets to their children. While children argued that amount of turnover was erroneous, since it failed to focus on what estate lost in said transfer as opposed to what they had received, Bankruptcy Ct. had discretion to base turnover order on value of stock, and valuation method used was reasonable. Moreover, children did not otherwise challenge valuation of company prior to stock dilution.