United States v. Badger, 818 F.3d 563

In 2004 the SEC obtained a consent judgment against George Badger for securities fraud requiring payment of $19.2 million (including $5.8M disgorgement); the government recovered only $6,548 by 2010.
The United States sued to declare four entities (ARDCO, Springfield, SB Trust, ARDCO Leasing) to be Badger’s alter egos so their assets could be used to satisfy the Consent Judgment (a reverse-piercing theory).
Complaint alleges Badger controlled and used these entities to hide assets: he managed investment accounts, directed trust and LLC operations, benefitted from trust payments, and used an LLC to provide personal vehicle.
The district court granted summary judgment for defendants, ruling Utah law does not recognize reverse-piercing and alternatively that the Federal Debt Collection Procedures Act (FDCPA) barred the claim as untimely.
The Tenth Circuit reviewed de novo, concluded Utah law may recognize reverse piercing under the alleged facts, and held the FDCPA does not bar enforcement of a disgorgement-based consent judgment. The case was reversed and remanded for further factual proceedings.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Utah law recognizes reverse-piercing/alter-ego to hold entities liable for an individual’s disgorgement judgment	Reverse piercing is a recognized variant of alter-ego doctrine; Utah appellate decisions and Utah Supreme Court dicta support its availability where corporate form is used to frustrate creditors	Cascade (10th Cir.) and other authority counsel against recognizing reverse piercing; defendants assert corporate formalities and innocent shareholders preclude it here	Utah law can recognize reverse piercing; the Tenth Circuit reversed district court and remanded for factual determination whether alter-ego elements are met
Whether the FDCPA governs and time-bars the government’s attempt to collect disgorgement from third-party entities	A disgorgement order is equitable (not a FDCPA “debt”); FDCPA therefore does not control enforcement of disgorgement or actions to reach alter-ego assets	Government is enforcing a money judgment (the consent judgment) and post-judgment FDCPA procedures apply, so the claim is time-barred	FDCPA does not apply to enforcement of disgorgement in this context (following Fifth Circuit precedent); summary judgment on FDCPA issue was affirmed in favor of government

Cascade Energy & Metals Corp. v. Banks, 896 F.2d 1557 (10th Cir. 1990) (refused reverse-piercing in that case and analyzed alter-ego limits)
Transamerica Cash Reserve, Inc. v. Dixie Power & Water, Inc., 789 P.2d 24 (Utah 1990) (Utah Supreme Court expressed conditional acceptance of reverse-piercing logic but declined to apply it on the facts)
Envirotech Corp. v. Callahan, 872 P.2d 487 (Utah Ct. App. 1994) (Utah Court of Appeals applied alter-ego principles to reach corporate assets in a judgment-avoidance scheme)
Jones & Trevor Mktg., Inc. v. Lowry, 284 P.3d 630 (Utah 2012) (adopted factors for alter-ego analysis derived from Colman)
SEC v. Huffman, 996 F.2d 800 (5th Cir. 1993) (held disgorgement is equitable and not covered by FDCPA debt definition)
SEC v. AMX Int’l, Inc., 7 F.3d 71 (5th Cir. 1993) (reaffirmed that consent-judgment disgorgement obligations are not FDCPA debts)
Floyd v. I.R.S., 151 F.3d 1295 (10th Cir. 1998) (described reverse-piercing concept)
Usery v. Fisher, 565 F.2d 137 (10th Cir. 1977) (distinguished equitable disgorgement-type relief from ordinary money judgments)