Bank of America, N.A. ex rel. Estate of Veluchamy v. Veluchamy
551 B.R. 364
N.D. Ill.2015Background
- Veluchamy seniors guaranteed two LaSalle/Bank of America loans totaling $40 million; FDIC and IDFPR investigated Mutual Bank, leading to its closure in 2009.
- Bank of America, as estate representative, filed actions to recover on judgments totaling about $43 million and sought turnover of assets from the Veluchamys’ transfers.
- Senior Veluchamys allegedly fraudulently transferred $57,857,236 in cash and property to Arun and Anu and hid another $5.5 million, plus stock and jewelry, from creditors.
- Anu and Arun participated in transfers to India, the creation of Appu Hotels Limited, and receipt of stock, while asserting Fifth Amendment privilege when questioned.
- Jewelry with Farmers and later Chubb was insured, with 24 pieces allegedly owned by the Veluchamys and later contested under turnover.
- Judge Wedoff’s proposed findings were adopted, confirming turnover and liability against the siblings and others; Sonia Veluchamy was not found to be a transferee.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Sonia was a transferee under 11 U.S.C. 550 | Estate: Sonia received the $500,000 loan and 50,000 OBF shares as a debtor’s transferee | Sonia never received property or benefit and had no dominion over funds | Sonia not a transferee; Estate’s objection overruled |
| Whether $5.5 million routed to JSM in India is subject to turnover | $5.5M deposited into JSM’s account was fraudulent transfer to defeat creditors | JSM held funds; not shown to have taken title or benefited creditors | Turnover appropriate; JSM did not credibly prove title or proper disposition of funds |
| Whether the Jewelry schedule (including Diamond Flower Necklace) is double-counted | Jewelry items counted as assets of Veluchamys to be turned over | Diamond Flower Necklace purportedly counted twice | Not double-counted; schedule upheld and jewelry turnover affirmed |
| Whether Arun and Anu are jointly and severally liable for conspiracy and aiding and abetting | Arun and Anu were primary recipients and orchestrators of transfers | No explicit pleading for joint liability; argued lack of conspiracy evidence | Joint and several liability affirmed under Rule 54(c) and Illinois law; conspiracy proven by evidence and Fifth Amendment inferences |
Key Cases Cited
- Bonded Fin. Servs., Inc. v. European Am. Bank., 838 F.2d 890 (7th Cir. 1988) (transferees must have dominion over assets to be liable under turnover)
- USA Diversified Prods., Inc. v. Gateways 2, 100 F.3d 53 (7th Cir. 1996) (distinguishes transferees from possessors for turnover actions)
- In re Liebl, 434 B.R. 529 (Bankr.N.D. Ill. 2010) (co-conspirators jointly and severally liable in Illinois bankruptcy context)
- Lightspeed Med. Corp. v. Smith, 761 F.3d 699 (7th Cir. 2014) (negative inferences from Fifth Amendment assertions permitted in de novo review)
- Adcock v. Brakegate, Ltd., 164 Ill.2d 54 (Illinois Supreme Court 1994) (conspiracies proven by circumstantial and inferential evidence; explicit agreement not required)