Williams v. Equitable Acceptance Corporation, 1:18-cv-07537

Background

Plaintiffs allege a Dealers–EAC scheme in which third‑party dealers sold essentially valueless student‑loan assistance and referred borrowers to Equitable Acceptance Corporation (EAC) to finance the ~$1,300 fees via high‑interest credit plans.
EAC issued Credit Plans (maxed‑out lines of credit at ~21% interest) and allegedly used those Credit Plans as collateral to obtain commercial loans from third‑party lenders; borrowers repaid EAC monthly.
Jeffrey Henn was EAC’s President/CEO and is alleged to have drafted the Master Dealer Agreement, recruited/approved Dealers, controlled payment terms and communications, and overseen scheme operations.
In December 2016 Jeffrey and Teresa Henn created revocable trusts and transferred Jeffrey’s business interests and jointly owned real property into those trusts; plaintiffs allege Jeffrey had notice of investigations before the transfers.
Procedural posture: plaintiffs filed a Second Amended Complaint asserting RICO, fraud, and fraudulent‑transfer claims. Court: EAC’s fraudulent‑conveyance claim (Claim 14) dismissed; Trust fraudulent‑transfer claims against the Henns (Claims 12–13) dismissed; RICO and fraud claims against Jeffrey survive; plaintiffs’ preliminary injunction denied.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1. Validity of fraudulent‑conveyance claim against EAC (Claim 14)	EAC’s commercial loans were part of a Ponzi‑style scheme; collateralizing Credit Plans and paying lenders shows intent to hinder, delay or defraud borrowers	Loans were legitimate commercial financing, not part of the fraud; plaintiffs fail to plead fraudulent intent or particularized facts under Rule 9(b)	Dismissed for failure to plead fraudulent intent; Ponzi presumption inapplicable
2. Fraudulent‑transfer claims against Henns’ trusts (Claims 12–13)	Transfers into trusts were intended to defeat creditor claims; Teresa’s co‑trustee role enabled unilateral disposition, effectuating a transfer	Trusts were revocable; settlor retains control so creditors can reach trust property; no intent to hinder creditors	Dismissed: revocable trusts’ corpus reachable by settlor’s creditors, so no fraudulent conveyance
3. Personal jurisdiction and venue over Jeffrey for RICO and fraud claims	Jeffrey had purposeful contacts with New York (communications with NY dealer, EAC business in NY); EAC’s contacts attributable to him	Henns challenged minimum contacts and venue	Jurisdiction and venue proper: plaintiff made prima facie showing of Jeffrey’s New York contacts and agency/control of EAC; due process satisfied
4. Plaintiffs’ motion for preliminary injunction (asset freeze / stop transfers)	Plaintiffs need injunction to prevent dissipation and preserve funds tied to alleged scheme; likely to succeed on merits of fraudulent‑transfer claims	Underlying fraudulent‑transfer claims failing or dismissed; federal courts lack free‑standing authority to order asset freezes absent statutory basis	Denied: plaintiffs cannot show likelihood of success on the merits; asset‑freeze relief not available absent viable fraudulent‑transfer claim

Key Cases Cited

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading must be plausible, not merely conceivable)
Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (applies plausibility standard to all civil actions)
In re Sharp Int'l Corp., 403 F.3d 43 (2d Cir. 2005) (payments to creditors after fraud may be mere preferences, not fraudulent transfers)
Ades‑Berg Inv'rs v. Breeden (In re The Bennett Funding Group, Inc.), 439 F.3d 155 (2d Cir. 2006) (describing Ponzi‑scheme characteristics that support a fraudulent‑intent presumption)
PT United Can Co. v. Crown Cork & Seal Co., 138 F.3d 65 (2d Cir. 1998) (civil RICO personal‑jurisdiction/venue principles)
Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (U.S. 1999) (federal courts lack freestanding authority to issue broad asset freezes absent statutory authority)