Silverman v. United Talmudical Academy Torah Vyirah, Inc. (In Re Allou Distributors, Inc.)
446 B.R. 32
Bankr. E.D.N.Y.2011Background
- UDTA involved in massive six-year fraud at Allou Distributors, with transfers totaling nearly $30 million among Allou, UTA, and related entities.
- Congress (lender) and Kenneth Silverman (Chapter 7 Trustee) sue UTA for aiding/abetting fraud, aiding/abetting fiduciary breach, and conspiracy; claims tied to transfers post-2001 loan agreement.
- Plaintiffs allege Victor Jacobs and Arthur Meisels controlled the scheme; UTA participated through its officers, intermediaries, and donations/loans.
- UTA challenges claims as lacking knowledge and substantial assistance; seeks summary judgment on several DCL and Bankruptcy Code theories.
- Transfers include numerous direct/indirect payments and round-trips among Allou, UTA, and intermediaries, with significant implicated entities such as AMT, TTDY, Crystal Clear, and Cambridge Mercantile.
- Court granted partial summary judgment on some claims and denied on others, with civil conspiracy claim adjudicated separately.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Aiding and abetting fraud—knowledge and substantial assistance | Congress/Trustee alleges actual knowledge and substantial assistance by UTA | UTA contends no genuine dispute on knowledge or substantial assistance | Denied: triable issues remain |
| Aiding and abetting breach of fiduciary duty—knowing inducement | Plaintiffs contend UTA knew of fiduciary breaches and induced/participated | UTA asserts lack of actual knowledge and insufficient evidence of inducement | Denied: genuine disputes exist on knowledge and inducement |
| Civil conspiracy | Alleged independent acts and coordinated scheme with Jacobs/Meisels faction | Conspiracy claim duplicative of underlying aids/abet claims | Granted: claim dismissed as duplicative |
| Fraudulent transfers under DCL and Bankruptcy Code (claims Four-Nine) | Trustee seeks avoidance and recovery of numerous transfers; asserts DCL 276/273-275 and 548(a) | UTA challenges receipt/amounts, good faith, and timeliness; asserts repayment credits and equitable defences | Mixed: some transfers/grants denied, others allowed or left for trial; overall partial resolution with several issues precluded |
| Attorneys' fees under DCL 276-a | Trustee seeks fees for actual intent to defraud | Requires actual intent; UTA argues no basis | Denied: fees denied due to lack of proven actual intent |
Key Cases Cited
- Kaufman v. Cohen, 307 A.D.2d 113 (N.Y. App. Div. 1st Dep't 2003) (aid/abet and fiduciary breach standards in NY law)
- HBE Leasing Corp. v. Frank, 48 F.3d 623 (2d Cir. 1995) (value/intent distinctions in fraudulent transfer contexts)
- In re Sharp Int'l Corp., 403 F.3d 43 (2d Cir. 2005) (knowing participation and standard for aiding/abetting fraud and fiduciary breaches)