by Louis D. Giusto, Esq.
Its not the name of some cheesy 70s B movie, although it does sound catchy. Its the term used for a lawsuit to go after funds that were fraudulently transferred in the months preceding a bankruptcy filing by either a company or an individual.
These clawback lawsuits are particularly popular when a ponzi scheme is involved and the operator of the scheme had been paying employees bonuses or perks with the victims money. A case going on in Minnesota is the most recent example of a large scale movement to use clawback lawsuits to get victims some money back.
The court case involves Tom Peters who had been running a big time ponzi scheme that defrauded upwards of $3.5billion from investors. Lawyers feel that they can recover up to $1 billion of the funds for their victims and have been meeting together to hammer out a plan to go after the money.
The clawback lawsuits could be as high as 200 with most going after executives who had been receiving bonuses of up to $30,000. One of the big problems that these lawsuits could be facing is if these executives have spent their money. This could drastically reduce the amount that can be recovered from the lawsuits, but the attorneys have indicated that if they had spent the money then there would be room to negotiate.
This case serves as a prime example of how the bankruptcy system is set up to prevent fraud in the months leading up to the filing, because the clawback is there to fix the fraud. (Why can't more lawsuits have clever names like the "clawback?" It would lead to a reduction of people doing fraudulent things, "be careful or you might get the 'claw'," or "watch out the 'backbreaker' lawsuit could end your business.")
