Kathy Bazoian Phelps
Senior Counsel in Ponzi Scheme Litigation
and Bankruptcy Matters

Kathy is a senior business trial attorney with more than 30 years experience prosecuting and defending claims for high net worth clients involved in Ponzi scheme matters and in bankruptcy proceedings. Kathy’s practice includes recovering assets for clients in complex fraud cases under standard fee and alternative fee arrangements. She also handles SEC and CFTC whistleblower claims. Kathy also serves as a mediator in bankruptcy matters, in complex business disputes, and in matters requiring detailed knowledge about fraud or Ponzi schemes.

Kathy’s Clients in Ponzi Scheme Cases and Bankruptcy Matters
Equity Receivers
Bankruptcy Trustees
High Net Worth Investors
Debtors in Bankruptcy
Secured and Unsecured Creditors

Monday, June 17, 2013

New Florida Law May Protect Charities Against Ponzi Scheme Clawback Claims

Posted by Kathy Bazoian Phelps

   Last Friday, Florida Governor Rick Scott signed HB 95. This bill amends § 726.109 of the Florida Statutes by adding this broad defense to a claim to avoid a charitable contribution as a fraudulent transfer:
"The transfer of a charitable contribution that is received in good faith by a qualified religious or charitable entity or organization is not a fraudulent transfer[.]"   However, this broad protection for charitable contributions has several limits:
  • The defense only applies to a constructive fraudulent transfer claim.
  • A contribution by a natural person within 2 years before a bankruptcy or the filing of a lawsuit to recover the contribution is still a fraudulent transfer unless either:
    1. The transfer was consistent with the practices of the debtor in making the charitable contribution; or
    2. The transfer was received in good faith and the amount of the charitable contribution did not exceed 15 percent of the gross annual income of the debtor for the year in which the transfer of the charitable contribution was made.
  • The law applies only to transfers made after July 1, 2013.
   This may sound familiar because it is similar to a law enacted in Minnesota last year (see The Ponzi Scheme Blog of April 13, 2012, "Legislative Protection for Charities Caught by Ponzi Clawbacks" for a review of that law). The new Florida limits are also similar to the limits on the recovery of charitable contributions found in Bankruptcy Code § 564(a)(2).

   It will be interesting to see if other states follow the leads of Minnesota and Florida in protecting charities from fraudulent transfer claims.

   Florida HB 95 is here.

1 comment:

  1. I see this piece of legislation opening up a real can of worms. Who, and using what criteria, makes the determination whether or not a religious or charitable entity or organization is "qualified"? Further, why should any particular person or organization get a free pass while other equally victimized parties don't? All affected persons/entities should receive the same treatment. This is yet another example of lobbyists (who typically are former politicians) influencing our legislators to the benefit of a select few at the expense of many. This is not the way it should be in our society, and only serves to undermine trust in our political system.