API tools faq
paste
Advertisement
bitcoincat

cmpl

bitcoincat
Sep 5th, 2018
247
0
Never
Add comment
Not a member of Pastebin yet? Sign Up, it unlocks many cool features!
text 42.47 KB | None | 0 0
raw download clone embed print report
  1. COUNT I
  2. Civil Contempt 11 U.S.C. § 105(a)
  3. CBSG, Joseph McElhone, Gino Gioe
  4.  
  5. 327. The Trustee repeats and realleges the allegations of paragraphs 1 through 326 as though fully set forth herein.
  6. 328. The post-petition actions taken by CBSG, Mr. McElhone, and Mr. Gioe constitute willful violations of the automatic stay imposed by 11 U.S.C. § 362(a).
  7. 329. The automatic stay is a statutory injunction against efforts outside of bankruptcy to collect debts from a debtor who is under the protection of the bankruptcy court.
  8. 330. Pursuant to 11 U.S.C. § 105(a), this court:
  9.  
  10. may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.
  11.  
  12. 331. By their post-petition actions, CBSG, Mr. McElhone, and Mr. Gioe knowingly violated the automatic stay. CBSG was served with Notices of the Bankruptcy Cases on May 26, 2016. See Ex. EE, Notices.
  13. 332. By their post-petition actions, CBSG, Mr. McElhone, and Mr. Gioe willfully violated the automatic stay, a provision of title 11 of the United States Code and a court order, and abused the bankruptcy process by their aggressive collection efforts, including threats of violence against Ms. Hill and her family if Ms. Hill did not pay Network Salon’s pre-petition debts.
  14. 333. CBSG, Mr. McElhone, and Gino Gioe should be held in civil contempt.
  15.  
  16. WHEREFORE, Frances Gecker, not individually but solely in her capacity as Chapter 7 trustee of the bankruptcy estates of Anthia R. Hill and Network Salon Services, LLC, requests that the Court enter judgment in the Trustee’s favor and against Complete Business Solutions Group, Inc., Joseph McElhone, and Gino Gioe pursuant to 11 U.S.C. § 105(a) as follows:
  17. A. Holding Complete Business Solutions Group, Inc., Joseph McElhone, and Gino Gioe in civil contempt for their improper conduct and abuse of the bankruptcy process;
  18. B. Awarding the Trustee attorney’s fees and costs incurred in prosecuting the matter as sanctions for CBSG’s conduct;
  19. C. Holding CBSG, Mr. McElhone, and Mr. Gioe jointly and severally liable to the Trustee for her fees and costs incurred in prosecuting the matter; and
  20. D. Granting such other and further relief as this Court deems just and proper.
  21.  
  22. COUNT II
  23. Preferential Transfer 11 U.S.C. § 547(b) CBSG
  24. 334. The Trustee repeats and realleges the allegations of paragraphs 1 through 333 as though fully set forth herein.
  25. 335. Within ninety days prior to the Petition Date (the “Preference Period”), Network Salon transferred property in which it had an interest to or for the benefit of CBSG in the amount of at least $307,622.94 (the “90-Day Transfers”). A chart of the 90-Day Transfers made by Network Salon to CBSG is attached as Exhibit NN.
  26. 336. The 90-Day Transfers were made from and through the CBSG Account as payments on account of certain of the CBSG Agreements.
  27. 337. At the time the 90-Day Transfers were made, CBSG was Network Salon’s creditor under the CBSG Agreements.
  28. 338. The 90-Day Transfers were made to or for the benefit of a creditor of Network Salon and were made on account of an antecedent debt owed by Network Salon to CBSG.
  29. 339. The 90-Day Transfers were made while Network Salon was insolvent as Network Salon’s liabilities exceeded its assets at all times during the ninety-day period preceding the Petition Date. In addition, 11 U.S.C. § 547(f) mandates a presumption of Network Salon’s insolvency during the Preference Period.
  30. 340. Based on the Trustee’s investigation of Network Salon’s affairs, unsecured creditors will not receive a 100% distribution on their claims. Therefore, Network Salon’s payment of the 90-Day Transfers enabled CBSG to receive more than it would have received under chapter 7 of the Bankruptcy Code if Network Salon had not made the 90-Day Transfers, and CBSG received payment of its debt to the extent provided by the provisions of the Bankruptcy Code.
  31.  
  32. 341. The 90-Day Transfers are preferential transfers under 11 U.S.C. § 547(b).
  33.  
  34. 342. CBSG may have received additional preferential transfers that may be uncovered
  35.  
  36. later.
  37.  
  38. 343. The Trustee may avoid the 90-Day Transfers under 11 U.S.C. § 547(b).
  39.  
  40. 344. The Trustee may recover the 90-Day Transfers from CBSG under 11 U.S.C. § 550(a)(1).
  41. WHEREFORE, Frances Gecker, not individually but solely in her capacity as chapter 7 trustee of the bankruptcy estates of Network Salon Services, LLC and Anthia R. Hill, requests that the Court enter judgment in the Trustee’s favor and against CBSG, pursuant to 11
  42. U.S.C. §§ 547(b) and 550, as follows:
  43.  
  44. A. Avoiding and directing the return of the 90-Day Transfers from CBSG to the Trustee in an amount not less than $307,622.94, plus prejudgment interest and costs; and
  45. B. Granting such other and further relief as this Court deems just and proper.
  46.  
  47. COUNT III
  48. Actual Fraudulent Transfers, 11 U.S.C. § 548(a)(1)(A) CBSG
  49. 345. The Trustee repeats and realleges the allegations of paragraphs 1 through 344 as though fully set forth herein.
  50. 346. Beginning on September 22, 2015, the very date of the First LQD Loan Agreement, through the execution of the Seventh through Fifteenth CBSG Agreements, Network Salon incurred obligations within two years of the Petition Date (the “Fraudulent Transfer Period”).
  51. 347. In the Seventh CBSG Agreement, dated September 22, 2015, Network Salon incurred the obligation to pay CBSG $284,000 in 132 days in exchange for a $200,000 MCA.
  52.  
  53. 348. In the Eighth CBSG Agreement, dated October 21, 2015, Network Salon incurred the obligation to pay CBSG $483,361.69 in 136 days in exchange for a $345,272.64 MCA (of which $245,272.64 was earmarked to pay off prior debt to CBSG).
  54. 349. In the Ninth CBSG Agreement, dated November 19, 2015, Network Salon incurred the obligation to pay CBSG $236,040 in 100 days in exchange for a $168,600 MCA (of which
  55. $68,600 was earmarked to pay off prior debt to CBSG).
  56.  
  57. 350. In the Tenth CBSG Agreement, dated December 18, 2015, Network Salon incurred the obligation to pay $370,711.04 in 118 days in exchange for $264,793.60 MCA (of which
  58. $189,763.60 was earmarked to pay off prior debt to CBSG).
  59.  
  60. 351. In the Eleventh CBSG Agreement, dated January 26, 2016, Network Salon incurred the obligation to pay $498,945.80 in 125 days in exchange for $366,838.57 (of which $266,838.67 was earmarked to pay off prior debt to CBSG).
  61. 352. In the Twelfth CBSG Agreement, dated February 5, 2016, Network Salon incurred the obligation to pay CBSG $175,000 in 100 days in exchange for a $125,000 MCA.
  62. 353. In the Thirteenth CBSG Agreement, dated February 18, 2016, Network Salon incurred the obligation to pay CBSG $491,228.44 in 123 days in exchange for a $350,877.46 MCA (of which $250,877.46 was earmarked to pay off prior debt to CBSG).
  63. 354. In the Fourteenth CBSG Agreement, dated February 25, 2016, Network Salon incurred the obligation to pay CBSG $632,773.60 in 140 days in exchange for a $490,522.17 MCA (of which $419,522 was earmarked to pay off prior debt to CBSG).
  64. 355. In the Fifteenth CBSG Agreement, dated March 21, 2016, Network Salon incurred the obligation to pay CBSG $704,712.93 in 128 days in exchange for a $503,366.38 MCA (of which $403,366.38 was earmarked to pay off prior debt to CBSG).
  65.  
  66. 356. During the Fraudulent Transfer Period, in the Seventh through Fifteenth CBSG Agreements, Network Salon incurred the obligation to pay CBSG a total of $3,876,773.50 (the “Obligation”).
  67. 357. Knowing that the First LQD Agreement prohibited Network Salon from entering into any further MCA agreements, CBSG induced Network Salon to enter into the Seventh through Fifteenth CBSG Agreements with actual intent to hinder, delay, and defraud LQD, as well as Network Salon’s other MCA Providers, by concealing the transactions in the CBSG Account, opened at CBSG’s direction and held at BMO rather than at 5/3.
  68. 358. The Trustee may avoid the Obligation under section 548(a)(1)(A) of the Bankruptcy Code.
  69. 359. From September 22, 2015 through the Petition Date, CBSG received $1,238,846.65 from Network Salon (the “Actual Fraudulent Transfers”). CBSG debited a total of $896,944.97 from the CBSG Account and received an additional $341,901.68 from LQD. A chart of the Actual Fraudulent Transfers is attached as Exhibit OO.
  70. 360. The Actual Fraudulent Transfers were transfers of an interest of Network Salon in property.
  71. 361. The Actual Fraudulent Transfers were made within two years of the Petition Date.
  72.  
  73. 362. Knowing that the First LQD Agreement prohibited Network Salon from entering into any further MCA agreements, CBSG induced Network Salon to make the Actual Fraudulent Transfers from the CBSG Account, held at BMO rather than at 5/3, with the actual intent to hinder, delay, and defraud LQD, as well as Network Salon’s other MCA Providers, by concealing the Actual Fraudulent Transfers in the CBSG Account, opened at CBSG’s direction and held at BMO rather at 5/3.
  74.  
  75. 363. Pursuant to section 548(a)(1)(A) of the Bankruptcy Code, the Actual Fraudulent Transfers are avoidable. 11 U.S.C. § 548(a)(1)(A). The Actual Fraudulent Transfers are recoverable pursuant to section 550(a) of the Bankruptcy Code. 11 U.S.C. § 550(a).
  76. 364. CBSG may have received additional transfers from Network Salon that may later be discovered, avoided under section 548(a)(1)(A) of the Bankruptcy Code and recovered under section 550(a) of the Bankruptcy Code.
  77. WHEREFORE, Frances Gecker, not individually, but solely in her capacity as chapter 7 trustee of the bankruptcy estates of Network Salon and Anthia R. Hill, requests that the Court enter judgment in the Trustee’s favor and against CBSG, pursuant to 11 U.S.C. §§ 548(a)(1)(A) and 550(a), as follows:
  78. A. Avoiding the Obligation;
  79.  
  80. B. Avoiding and directing the return of the Actual Fraudulent Transfers to the Trustee in an amount not less than $1,238,846.65, plus prejudgment interest and costs;
  81. C. Granting such other and further relief as this Court deems just and proper.
  82.  
  83. COUNT IV
  84. Constructively Fraudulent Transfers, 11 U.S.C. § 548(a)(1)(B) CBSG
  85. 365. The Trustee repeats and realleges the allegations of paragraphs 1 through 364 as though fully set forth herein.
  86. 366. In the First CBSG Agreement, dated March 26, 2015, Network Salon incurred the obligation to pay CBSG $76,187.76 in exchange for CBSG’s payments to World Global and New Era in the total amount of $53,653. Network Salon did not receive any cash under the First CBSG Agreement.
  87.  
  88. 367. On information and belief, the First CBSG Agreement allowed CBSG to make daily debits of $865.76 from the Operating Account18.
  89. 368. From March 27, 2015 through April 22, 2015, CBSG took a total of $77,918 from Network Salon under the First CBSG Agreement. CBSG took nineteen daily cash payments from Network Salon, totaling $16,448.44, and then paid itself $61,470 when it entered into its next MCA agreement with Network Salon.
  90. 369. In the Second CBSG Agreement, dated April 22, 2015, Network Salon incurred the obligation to pay CBSG $186,687.40 in exchange for the $61,470 payoff and $70,000 in cash. The Second CBSG Agreement allowed CBSG to make 120 daily debits of $1,553.73 from the Operating Account.
  91. 370. On April 22, 2015, CBSG deposited only $69,401 to the Operating Account.
  92.  
  93. 371. From April 23, 2015 through July 3, 2015, CBSG took a total of $185,821.23 from Network Salon under the Second CBSG Agreement. CBSG took 51 daily cash payments from Network Salon, totaling $79,342.23, and then paid itself $106,479 when it entered into the Fifth CBSG Agreement on July 3, 2015.
  94. 372. In the Third CBSG Agreement, dated May 26, 2015, Network Salon incurred the obligation to pay CBSG $84,000 in exchange for $60,000 in cash. The Third CBSG Agreement allowed CBSG to make 100 daily debits of $840 from the Operating Account.
  95. 373. On May 27, 2018, CBSG deposited only $58,732 into the Operating Account.
  96.  
  97. 374. From May 29, 2015 through June 15, 2015, CBSG took a total of $84,915 from Network Salon under the Third CBSG Agreement. CBSG took ten daily cash payments from
  98.  
  99.  
  100.  
  101.  
  102.  
  103. 18 The document produced by CBSG is illegible.
  104.  
  105. Network Salon, totaling $10,080 and one cash payment of $915, and then paid itself $73,920 when it entered into the Fourth CBSG Agreement.
  106. 375. In the Fourth CBSG Agreement, dated June 15, 2015, Network Salon incurred the obligation to pay CBSG $187,488 in exchange for the $73,920 payoff of the Third CBSG Agreement and $60,000 in cash. The Fourth CBSG Agreement allowed CBSG to make daily debits of $1,874.88 for 100 days.
  107. 376. On June 15, 2015, CBSG made two deposits to the Operating Account, totaling only $58,732.
  108. 377. On information and belief, from June 16, 2015 through September 22, 2015, CBSG took a total of $221,360.94 from Network Salon under the Fourth CBSG Agreement. CBSG took 72 cash payments totaling 92,945.0819 from the Operating Account under the Fourth CBSG Agreement. On September 22, 2015, LQD paid CBSG $128,415.86 to pay off the Fourth CBSG Agreement.
  109. 378. In the Fifth CBSG Agreement, dated July 3, 2015, Network Salon incurred the obligation to pay CBSG $261,070 in exchange for the$106,479 payoff of the Second CBSG Agreement and $80,000 in cash. The Fifth CBSG Agreement allowed CBSG to make 110 daily debits of $2,373.37.
  110. 379. On July 3, 2015 CBSG deposited only $78,732 into the Operating Account.
  111.  
  112. 380. On information and belief, from July 6, 2015 through September 22, 2015, CBSG took a total of $299,828.55 from Network Salon under the Fifth CBSG Agreement. CBSG took 57 cash payments, totaling $86,342.76 from the Operating Account under the Fifth CBSG
  113.  
  114.  
  115. 19 CBSG appears to have temporarily adjusted the daily debit for the Fourth CBSG Agreement to $1,000 from July 14, 2015 through August 3, 2015 and to $937.44 from August 5, 2015 through September 4, 2015 and again from September 14-22, 2015. However, CBSG did not produce any ledger sheets or correspondence to explain the change, even though such documents and information would have been responsive to the Trustee’s Discovery Requests.
  116.  
  117. Agreement. 20 On September 22, 2015, LQD paid CBSG $213,845.82 to pay off the Fifth CBSG Agreement.
  118. 381. In the Sixth CBSG Agreement, dated September 3, 2015, Network Salon incurred the obligation to pay CBSG $140,000 in exchange for $100,000 in cash. The Sixth CBSG Agreement allowed CBSG to make 100 daily debits of $1,400 from the Operating Account. Ms. Hill also allowed CBSG to make debits from her Personal Account under the Sixth CBSG Agreement.
  119. 382. On September 3, 2015, CBSG deposited only $98,432 into the Operating Account.
  120.  
  121. 383. On information and belief, from September 8, 2018 through October 20, 2015, CBSG took a total of $142,875 from Network Salon under the Sixth Agreement. CSBG took 11 cash payments, totaling $15,400, from the Operating Account from September 8, 2015 through September 22, 2015 under the Sixth CBSG Agreement. After September 22, 2015, the date of the LQD Agreement, CBSG began making daily $1,400 debits from the CBSG Account. CBSG took 41 cash payments, totaling $58,875, from the CBSG Account under the Sixth CBSG Agreement and then paid itself $68,600 when it entered into the Ninth CBSG Agreement.
  122. 384. In the Seventh CBSG Agreement, dated September 22, 2015, the date of the LQD Agreement, Network Salon incurred the obligation to pay CBSG $284,000 in exchange for
  123. $200,000 in cash. The Seventh CBSG Agreement allowed CBSG to make 132 daily debits of
  124.  
  125. $2,251.52 from the CBSG Account.
  126.  
  127. 385. On September 23, 2015, CBSG deposited only $198,432 to the CBSG Account.
  128.  
  129.  
  130.  
  131.  
  132.  
  133.  
  134.  
  135. 20 CBSG appears periodically to have adjusted the debit amounts during the life of the Fifth CBSG Agreement. However, CBSG did not produce any ledger sheets or correspondence to explain the change, even though such documents and information would have been responsive to the Trustee’s Discovery Requests.
  136.  
  137. 386. From September 23, 2015 through October 21, 2015, CBSG took a total of
  138.  
  139. $284,000 from Network Salon under the Seventh CBSG Agreement. CBSG took 18 cash payments totaling $38,727.36 from the CBSG Account under the Seventh Agreement, and then paid itself $245,272.64 when it entered into the Eighth CBSG Agreement.
  140. 387. In the Eighth CBSG Agreement, dated October 21, 2015, Network Salon incurred the obligation to pay CBSG $483,381.69 in exchange for the $245,272.64 payoff of the Seventh CBSG Agreement and $100,000 in cash. The Eighth CBSG Agreement allowed CBSG to make 136 daily debits of $3,554.28 from the CBSG Account.
  141. 388. On October 21, 2015, CBSG deposited only $98,432 to the CBSG Account.
  142.  
  143. 389. From October 22, 2015 through January 27, 2016, CBSG took a total of
  144.  
  145. $501,646.05 from Network Salon under the Eighth CBSG Agreement. CBSG took 63 cash payments totaling $234,807.48 from the CBSG Account under the Eighth CBSG Agreement and then paid itself $266,838.57 when it entered into the Eleventh CBSG Agreement.
  146. 390. In the Ninth CBSG Agreement, dated November 19, 2015, Network Salon incurred the obligation to pay CBSG $236,040 in exchange for the $68,600 payoff of the Sixth CBSG Agreement and $100,000 in cash. The Ninth CBSG Agreement allowed CBSG to make 100 debits of $2,360.40 from the CBSG Account.
  147. 391. On November 20, 2015 CBSG deposited only $98,432 into the CBSG Account.
  148.  
  149. 392. From November 23, 2015 through December 21, 2015, CBSG took a total of
  150.  
  151. $237,000.40 from Network Salon under the Ninth CBSG Agreement. CBSG took 20 cash payments totaling $47,206.80 from the CBSG Account under the Ninth CBSG Agreement and then paid itself $189,793.60 when it entered into the Tenth CBSG Agreement.
  152. 393. In the Tenth CBSG Agreement, dated December 18, 2015, Network Salon incurred the obligation to pay CBSG $370,711.04 in exchange for the $189,793.60 payoff of the Ninth
  153.  
  154. CBSG Agreement and $75,000 in cash. The Tenth CBSG Agreement allowed CBSG to make 118 daily debits of $3,141.62 from the CBSG Account.
  155. 394. On December 21, 2015, CBSG deposited only $73,432 into the CBSG Account.
  156.  
  157. 395. From December 22, 2015 through February 18, 2016, CBSG took a total of
  158.  
  159. $373,550.64 from Network Salon under the Tenth CBSG Agreement. CBSG took 39 cash payments totaling $122,673.18 from the CBSG Account under the Tenth CBSG Agreement and then paid itself $250,877.46 when it entered into the Thirteenth CBSG Agreement.
  160. 396. In the Eleventh CBSG Agreement, dated January 26, 2016, Network Salon incurred the obligation to pay CBSG $498,900.45 in exchange for the $266,838.57 payoff of the Eighth CBSG Agreement and $100,000 in cash. The Eleventh CBSG Agreement allowed CBSG to make 125 daily debits of $3,991.20 from the CBSG Account.
  161. 397. On January 27, 2016, CBSG deposited only $98,432 into the CBSG Account.
  162.  
  163. 398. From January 28, 2016 through February 25, 2016, CBSG took a total of $495,346 from Network Salon under the Eleventh CBSG Agreement. CBSG took 20 cash payments totaling
  164. $79,824 from the CBSG Account under the Eleventh CBSG Agreement and then paid itself
  165.  
  166. $415,522 when it entered into the Fourteenth CBSG Agreement.
  167.  
  168. 399. In the Twelfth CBSG Agreement, dated February 5, 2016, Network Salon incurred the obligation to pay CBSG $175,000 in exchange for $125,000 in cash. The Twelfth CBSG Agreement allowed CBSG to make 100 daily debits of $1,750 from the CBSG Account.
  169. 400. On February 5, 2016, CBSG deposited only $123,432.00 into the CBSG Account.
  170.  
  171. 401. From February 9, 2016 through the Petition Date, CBSG took at least $64,750 from Network Salon under the Twelfth CBSG Agreement. CBSG took at least 37 cash payments totaling at least $64,750 from the CBSG Account.
  172.  
  173. 402. In the Thirteenth CBSG Agreement, dated February 18, 2016, Network Salon incurred the obligation to pay CBSG $491,228.44 in exchange for the $250,877.46 payoff of the Tenth CBSG Agreement and $100,000 in cash. The Twelfth CBSG Agreement allowed CBSG to make 123 daily debits of $3,993.73 from the CBSG Account.
  174. 403. On February 18, 2016, CBSG deposited only $98,432 into the CBSG Account.
  175.  
  176. 404. From February 19, 2016 through March 21, 2016, CBSG took a total of
  177.  
  178. $491,514.44 from Network Salon under the Thirteenth CBSG Agreement. CBSG took 44 cash payments totaling $88,148.06 from the CBSG Account and then paid itself $403,366.38 when it entered into the Fifteenth CBSG Agreement.
  179. 405. In the Fourteenth CBSG Agreement, dated February 25, 2016, Network Salon incurred the obligation to pay CBSG $632,773.60 in exchange for the $415,522 payoff of the Eleventh CBSG Agreement and $75,000 in cash. The Fourteenth CBSG Agreement allowed CBSG to make 140 daily debits of $4,519.81 from the CBSG Account.
  180. 406. On February 25, 2016, CBSG deposited only $73,432 into the CBSG Account.
  181.  
  182. 407. From February 26, 2016 through the Petition Date, CBSG took at least 25 cash payments totaling at least $112,995.25 from the CBSG Account under the Fourteenth CBSG Agreement.
  183. 408. In the Fifteenth CBSG Agreement, dated March 21, 2016, Network Salon incurred the obligation to pay CBSG $704,712.93 in exchange for the $403,366.38 payoff of the Thirteenth CBSG Agreement and $100,000 in cash. The Fifteenth CBSG Agreement allowed CBSG to make 128 daily debits of $5,505.57 from the CBSG Account.
  184. 409. On March 21, 2016, CBSG deposited only $98,432 into the CBSG Account.
  185.  
  186. 410. From March 22, 2016 through the Petition Date, CBSG took at least at least 8 cash payments totaling at least $44,044.56 from the CBSG Account under the Fifteenth CBSG Agreement.
  187. 411. From March 27, 2015 through the Petition Date, CBSG took at least $3,617,566.06 in cash and rollover debt from Network Salon.
  188. 412. From March 27, 2015 through the Petition Date, CBSG took at least $1,540,320.13 in cash from Network Salon (the “CBSG Constructively Fraudulent Transfers”). From March 27, 2015 through the Petition Date, CBSG debited at least $301,473.48 from the Operating Account. On September 22, 2015, CBSG received $341,901.68 from LQD. From September 23, 2015 through the Petition Date, CBSG debited at least $896,944.97 from the CBSG Account. A chart of the CBSG Constructively Fraudulent Transfers is attached as Exhibit PP.
  189. 413. From March 27, 2015 through the Petition Date, Network Salon received only
  190.  
  191. $1,299,917 in cash from CBSG.
  192.  
  193. 414. From March 27, 2015 through the Petition Date, Network Salon paid CBSG at least
  194.  
  195. $240,403.13 more in cash than it received in cash.
  196.  
  197. 415. Under the First through Fifteenth CBSG Agreements, Network Salon incurred obligations and transferred interests in its property to CBSG within two years of the Petition Date for which it received less than reasonably equivalent.
  198. 416. Network Salon was insolvent on the dates it incurred the obligations and made the CBSG Constructively Fraudulent Transfers.
  199. 417. Network Salon was engaged in business and transactions for which its remaining property was unreasonably small capital.
  200. 418. Network Salon believed that it would incur debts beyond its ability to pay as they matured.
  201.  
  202. 419. Pursuant to 11 U.S.C. § 548(a)(1)(B), the CBSG Constructively Fraudulent Transfers are avoidable as fraudulent transfers.
  203. 420. CBSG may have received additional constructively fraudulent transfers from Network Salon that may be uncovered later.
  204. 421. Pursuant to 11 U.S.C §550(a), the Trustee may recover any avoided CBSG Constructively Fraudulent Transfers from CBSG.
  205. WHEREFORE, Frances Gecker, not individually, but solely in her capacity as chapter 7 trustee of the bankruptcy estates of Network Salon and Anthia R. Hill, requests that the Court enter judgment in the Trustee’s favor and against Complete Business Solutions Group, Inc. under 11 U.S.C. §§ 548(a)(1)(B) and 550, as follows:
  206. A. Avoiding and directing the return of the CBSG Constructively Fraudulent Transfers to the Trustee in an amount to be determined at trial, but not less than $240,403.13, plus prejudgment interest and costs; and
  207. B. Granting such other and further relief as this Court deems just and proper.
  208.  
  209. COUNT V
  210. Constructively Fraudulent Transfers, 11 U.S.C. § 548(a)(1)(B) Fast Advance
  211.  
  212. 422. The Trustee repeats and realleges the allegations of paragraphs 1 through 421 as though fully set forth herein.
  213. 423. In the First Fast Advance Agreement, dated March 5, 2015, Network Salon incurred the obligation to pay Fast Advance $140,000 in exchange for Fast Advance’s payoff of Network Salon’s MCA debt to Knight, Capital Stack, and Yellowstone21 and an unspecified sum
  214.  
  215.  
  216.  
  217. 21 Although records of amounts Fast Advance paid to Knight, Capital Stack, and Yellowstone would have been responsive to the Discovery Requests, CBSG did not produce any. Nor did CBSG produce any records of communications with Ms. Hill regarding the payoffs.
  218.  
  219. in cash. The First Fast Advance Agreement allowed Fast Advance to make 88 daily debits of
  220.  
  221. $1,590 from the Operating Account.
  222.  
  223. 424. On March 6, 2015, Fast Advance deposited $25,854.82 into the Operating Account.
  224.  
  225. 425. From March 10, 2015 through May 4, 2015, Fast Advance took a total of $141,665 from Network Salon under the First Fast Advance Agreement. Fast Advance took 41 daily cash payments totaling $65,190 from the Operating Account and paid itself $76,475when it entered into the Second Fast Advance Agreement.
  226. 426. Fast Advance took $1,665 more from Network Salon than it bargained for in the First Fast Advance Agreement.
  227. 427. In the Second Fast Advance Agreement, dated May 4, 2015, Network Salon incurred the obligation to pay Fast Advance $177,039 in exchange for the $76,475 payoff of the First Fast Advance Agreement and $50,000 in cash. The Second Fast Advance Agreement allowed Fast Advance to make 80 daily debits of $2,212.98 from the Operating Account.
  228. 428. On May 4, 2015, Fast Advance deposited $48,832 into the Operating Account.
  229.  
  230. 429. From May 5, 2015 through August 14, 2015, Fast Advance took a total of
  231.  
  232. $202,991.01 from Network Salon under the Second Fast Advance Agreement. Fast Advance took 126 cash payments totaling $139,417.74 from the Operating Account and then paid itself
  233. $63,573.27 when it entered into the Third Fast Advance Agreement.
  234.  
  235. 430. Fast Advance took $25,952.01 more from Network Salon than it bargained for in the Second Fast Advance Agreement.
  236. 431. In the Third Fast Advance Agreement, dated August 14, 2015, Network Salon incurred the obligation to pay Fast Advance $131,002.58 in exchange for the $63,573.27 payoff of the Second Fast Advance Agreement and $30,000 in cash. The Third Fast Advance Agreement allowed Fast Advance to make 88 daily debits of $1,488.67 from the Operating Account.
  237.  
  238. 432. On August 14, 2015, Fast Advance deposited only $27,550.51 into the Operating Account.
  239. 433. From August 17, 2015 through September 22, 2015, Fast Advance took a total of
  240.  
  241. $145,889.28 in cash from Network Salon under the Third Fast Advance Agreement. Fast Advance took 26 cash payments totaling $38,705.42 from the Operating Account and then received
  242. $107,183.86 from LQD on September 22, 2015.
  243.  
  244. 434. Fast Advance took $14,886.70 more from Network Salon than it bargained for in the Third Fast Advance Agreement.
  245. 435. From March 5, 2015 through the Petition Date, Fast Advance took at least
  246.  
  247. $42,503.71 more from Network Salon than it had bargained for in the Fast Advance Agreements (the “Overpayments”).
  248. 436. From March 5, 2015 through the Petition Date, Fast Advance took at least
  249.  
  250. $490,545.29 in cash and rollover debt from Network Salon.
  251.  
  252. 437. From March 5, 2015 through the Petition Date, Fast Advance took at least
  253.  
  254. $350,497.02 in cash from Network Salon. From March 10, 2015 through September 22, 2015, Fast Advance debited at least $243,313.16 from the Operating Account. A chart of the debits made by Fast Advance is attached as Exhibit QQ. On September 22, 2015, Fast Advance received
  255. $107,183.86 from LQD.
  256.  
  257. 438. From March 5, 2015 through the Petition Date, Network Salon received only
  258.  
  259. $102,237.33 in cash from Fast Advance.
  260.  
  261. 439. From March 5, 2015 through the Petition Date, Network Salon paid Fast Advance at least $248,259.69 in cash than it received in cash (the “Fast Advance Constructively Fraudulent Transfers”).
  262.  
  263. 440. Under the Fast Advance Agreements, Network Salon incurred obligations and transferred interests in its property to Fast Advance within two years of the Petition Date for which it received less than reasonably equivalent value.
  264. 441. Through the Overpayments, Network Salon transferred interests in its property to Fast Advance within two years of the Petition Date for which it received less than reasonably equivalent value.
  265. 442. Network Salon was insolvent on the dates it incurred the obligations and made the Fast Advance Constructively Fraudulent Transfers, including the Overpayments.
  266. 443. Network Salon was engaged in business and transactions for which its remaining property was unreasonably small capital.
  267. 444. Network Salon believed that it would incur debts beyond its ability to pay as they matured.
  268. 445. Pursuant to 11 U.S.C. § 548(a)(1)(B), the Fast Advance Constructively Fraudulent Transfers, including the Overpayments, are avoidable as fraudulent transfers.
  269. 446. Fast Advance may have received additional constructively fraudulent transfers from Network Salon that may be uncovered later.
  270. 447. Pursuant to 11 U.S.C §550(a) the Trustee may recover any avoided Fast Advance Constructively Fraudulent Transfers from Fast Advance.
  271. WHEREFORE, Frances Gecker, not individually, but solely in her capacity as chapter 7 trustee of the bankruptcy estates of Network Salon and Anthia R. Hill, requests that the Court enter judgment in the Trustee’s favor and against Fast Advance Funding, LLC under 11 U.S.C. §§ 548(a)(1)(B) and 550, as follows:
  272. A. Avoiding and directing the return of the Overpayments in an amount not less than
  273.  
  274. $42,503.71, plus prejudgment interest and costs;
  275.  
  276. B. Avoiding and directing the return of the Fast Advance Constructively Fraudulent Transfers, including the Overpayments, to the Trustee in an amount to be determined at trial, but not less than $248,259.69, plus prejudgment interest and costs; and
  277. C. Granting such other and further relief as this Court deems just and proper.
  278.  
  279. COUNT VI
  280. Restitution of Overpayments Fast Advance
  281.  
  282. 448. The Trustee repeats and realleges the allegations of paragraphs 1 through 447 as though fully set forth herein.
  283. 449. The Fast Advance Agreements limited the amounts that Fast Advance could take from Network Salon to the “Receipts Purchased Amount” set forth in each Fast Advance Agreement.
  284. 450. Fast Advance was not contractually entitled to take the Overpayments.
  285.  
  286. WHEREFORE, Frances Gecker, not individually, but solely in her capacity as chapter 7 trustee of the bankruptcy estates of Network Salon and Anthia R. Hill, requests that the Court enter judgment in the Trustee’s favor and against Fast Advance Funding, LLC as follows:
  287. A. Directing the return of the Overpayments in an amount not less than $42,503.71, plus prejudgment interest and costs; and
  288. B. Granting such other and further relief as this Court deems just and proper.
  289.  
  290. COUNT VII
  291. Failure of Condition Precedent CBSG
  292.  
  293. 451. The Trustee repeats and realleges the allegations of paragraphs 1through 450 as though fully set forth herein.
  294.  
  295. 452. Each CBSG Agreement requires that: (i) Network Salon sell products and services
  296.  
  297. (ii) Network Salon receive payment for those goods and services from its customers; (iii) that the customers pay in the “manner provided in Section 1.1” of each Agreement.” (CBSG Agreements,
  298. § 1.10). The CBSG Agreements expressly condition CBSG’s right to payment on those three things and limit the source of payments to CBSG to “settlement amounts which would otherwise be due to Merchant from electronic check transactions.” (CBSG Agreements, § 1.1) (the “Limitation”).
  299. 453. The Limitation is a condition precedent to CBSG’s right to make debits to any Network Salon account (the “Condition Precedent”).
  300. 454. The CBSG Agreements do not permit CBSG to take MCA Proceeds from Network Salon. CBSG has judicially admitted that the CBSG Agreements do not permit CBSG to take MCA Proceeds from Network Salon. See Ex. I, Responses, Request to Admit No. 11.
  301. 455. The Limitation prevents CBSG from debiting funds deposited in Network Salon’s Accounts by, among other things, intra- or inter-bank transfers, wire transfers, paper checks, or cash.
  302. 456. At all times relevant, through its online access, CBSG knew that it was debiting funds deposited in Network Salon’s accounts by means other than electronic check paid by Network Salon’s customers for the sale of goods and services. CBSG was fully aware that it daily debited funds from, among other things, intra-bank and inter-bank transfers from other Network Salon accounts or the Personal Account, paper checks, ATM deposits, and cash.
  303. 457. At all times relevant, through both its online access and its relationship to Fast Advance, CBSG knew that it was debiting funds deposited in Network Salon’s accounts by MCA Providers, including, but not limited to, itself and Fast Advance.
  304.  
  305. 458. The Condition Precedent to CBSG’s right to debit the Operating Account fails in an amount to be determined at trial.
  306. 459. From September 17, 2015 through March 31, 2015 there were only eleven electronic check settlements in the CBSG Account. The electronic check deposits totaled only
  307. $16,490.87.
  308.  
  309. 460. From September 23, 2015 through March 31, 2015 CBSG debited $896,944.97 from the CBSG Account, even though it knew or should have known that there were only
  310. $16,490.87 in electronic check deposits.
  311.  
  312. 461. The Condition Precedent to CBSG’s right to debit the CBSG Account fails in the amount of $880,454.10.
  313. 462. At all times relevant, CBSG knew that the Condition Precedent had failed.
  314.  
  315. 463. Due to the failure of the Condition Precedent and its knowledge thereof, CBSG knowingly and tortiously initiated debits from the Operating Account and the CBSG Account.
  316. 464. Due to the failure of the Condition Precedent and its knowledge thereof, CBSG knowingly and tortiously took funds from the Operating Account in an amount to be determined at trial.
  317. 465. Due to the failure of the Condition Precedent and its knowledge thereof, CBSG knowingly and tortiously took funds from the CBSG Account in the amount of $880,454.10.
  318. 466. CBSG induced Network Salon to enter into the Seventh through Fifteenth CBSG Agreements to conceal them from Network Salon’s creditors and, thus, to commit fraud upon those creditors by siphoning funds from Network Salon through the CBSG Account.
  319. 467. Ms. Hill and Network Salon were damaged by CBSG’s knowing and tortious conduct and that damage contributed substantially to Network Salon’s failure.
  320.  
  321. 468. CBSG may have knowingly and tortiously taken additional funds from Network Salon that may be discovered later.
  322. WHEREFORE, the Trustee requests that the Court enter judgment in the Trustee’s favor and against CBSG as follows:
  323. A. Directing the return of all debits CBSG made from the Operating Account despite the failure of the Condition Precedent in an amount to be determined at trial;
  324. B. Directing the return of at least $880,454.10 debited by CBSG from the CBSG Account despite the failure of the Condition Precedent, plus prejudgment interest and costs;
  325. C. Assessing punitive damages against CBSG for its knowing and tortious conduct in the amount of at least $2,641,362.30 million; and
  326. D. Granting such other and further relief as this Court deems just and proper.
  327.  
  328. COUNT VIII
  329. Failure of Condition Precedent Fast Advance
  330.  
  331. 469. The Trustee repeats and realleges the allegations of paragraphs 1through 468 as though fully set forth herein.
  332. 470. Each Fast Advance Agreement is subject to the Limitation and the Condition Precedent. (Fast Advance Agreements, §§ 1.1 and 1.10).
  333. 471. The Fast Advance Agreements do not permit Fast Advance to take MCA Proceeds from Network Salon.
  334. 472. The Limitation prevents Fast Advance from debiting funds deposited in Network Salon’s Accounts by, among other things, intra- or inter-bank transfers, wire transfers, paper checks, or cash.
  335.  
  336. 473. At all times relevant, through its online access, Fast Advance knew that it was debiting funds deposited in Network Salon’s accounts by means other than electronic check paid by Network Salon’s customers for the sale of goods and services. Fast Advance was fully aware that it daily debited funds from, among other things, intra-bank and inter-bank transfers from other Network Salon accounts or the Personal Account, paper checks, ATM deposits, and cash.
  337. 474. At all times relevant, through both its online access and its relationship to CBSG, Fast Advance knew that it was debiting funds deposited in Network Salon’s accounts by MCA Providers, including, but not limited to, itself and CBSG.
  338. 475. The Condition Precedent to Fast Advance’s right to debit the Operating Account fails in an amount to be determined at trial.
  339. 476. At all times relevant, Fast Advance knew that the Condition Precedent had failed.
  340.  
  341. 477. Due to the failure of the Condition Precedent and its knowledge thereof, Fast Advance knowingly and tortiously initiated debits from the Operating Account.
  342. 478. Due to the failure of the Condition Precedent and its knowledge thereof, CBSG knowingly and tortiously took funds from the Operating Account in an amount to be determined at trial.
  343. 479. Ms. Hill and Network Salon were damaged by Fast Advance’s knowing and tortious conduct and that damage contributed substantially to Network Salon’s failure.
  344. 480. Fast Advance may have knowingly and tortiously taken additional funds from Network Salon that may be discovered later.
  345. WHEREFORE, the Trustee requests that the Court enter judgment in the Trustee’s favor and against Fast Advance Funding, LLC as follows:
  346.  
  347. A. Directing the return of all debits Fast Advance made from the Operating Account despite the failure of the Condition Precedent in an amount to be determined at trial;
  348. B. Assessing punitive damages against Fast Advance for its knowing and tortious conduct in an amount to be determined at trial; and
  349. C. Granting such other and further relief as this Court deems just and proper.
  350.  
  351. COUNT IX
  352. Restitution of MCA Proceeds CBSG
  353.  
  354. 481. The Trustee repeats and realleges the allegations of paragraphs 1through 480 as though fully set forth herein.
  355. 482. The CBSG Agreements do not entitle CBSG to Network Salon’s MCA Proceeds.
  356.  
  357. The CBSG Agreements purport to give CBSG a claim only to funds subject to the Limitation.
  358.  
  359. 483. Nevertheless, on account of the CBSG Agreements and on a regular basis, Ms. Hill left funds advanced by CBSG in the Operating Account and the CBSG Account or transferred other MCA Proceeds into the Operating Account or the CBSG Account to cover CBSG’s debits.
  360. 484. CBSG had no right to take MCA Proceeds.
  361.  
  362. 485. CBSG wrongfully took MCA Proceeds from the Operating Account in an amount to be determined at trial.
  363. 486. CBSG took at least $880,454.10 in MCA Proceeds from the CBSG Account.
  364.  
  365. 487. CBSG may have taken additional MCA Proceeds to be discovered later.
  366.  
  367. WHEREFORE, Frances Gecker, not individually, but solely in her capacity as chapter 7 trustee of the bankruptcy estates of Network Salon and Anthia R. Hill, requests that the Court enter judgment in the Trustee’s favor and against Complete Business Solutions Group, Inc. as follows:
  368.  
  369. A. Directing the return of all MCA Proceeds taken by Complete Business Solutions Group, Inc. from the Operating Account in an amount to be determined at trial;
  370. B. Directing the return of all MCA Proceeds taken by Complete Business Solutions Group, Inc. from the CBSG Account in the amount of at least $880,454.10, plus prejudgment interest and costs and;
  371. C. Granting such other and further relief as this Court deems just and proper.
  372.  
  373. COUNT X
  374. Restitution of MCA Proceeds Fast Advance
  375. 488. The Trustee repeats and realleges the allegations of paragraphs 1through 487 as though fully set forth herein.
  376. 489. The Fast Advance Agreements do not entitle Fast Advance to Network Salon’s MCA Proceeds. The Fast Advance Agreements purport to give Fast Advance a claim only to funds subject to the Limitation.
  377. 490. Nevertheless, on account of the Fast Advance Agreements and on a regular basis, Ms. Hill left funds advanced by Fast Advance in the Operating Account or transferred other MCA Proceeds into the Operating Account to cover Fast Advance’s debits.
  378. 491. Fast Advance had no right to take MCA Proceeds.
  379.  
  380. 492. Fast Advance wrongfully took MCA Proceeds from the Operating Account in an amount to be determined at trial.
  381. 493. Fast Advance may have taken additional MCA Proceeds to be discovered later.
  382.  
  383. WHEREFORE, Frances Gecker, not individually, but solely in her capacity as chapter 7 trustee of the bankruptcy estates of Network Salon and Anthia R. Hill, requests that the Court enter judgment in the Trustee’s favor and against Fast Advance Funding, LLC. as follows:
  384.  
  385. A. Directing the return of all MCA Proceeds taken by Fast Advance Funding, LLC from the Operating Account in an amount to be determined at trial; and;
  386. B. Granting such other and further relief as this Court deems just and proper.
  387.  
  388. COUNT XI
  389. Disallowance of Claims – 11 U.S.C. § 502(d) CBSG and Fast Advance
  390.  
  391. 494. The Trustee repeats and realleges the allegations of paragraphs 1 through 493 as though fully set forth herein.
  392. 495. CBSG and Fast Advance are recipients of preferential and/or fraudulent transfers, avoidable pursuant to sections 547 and 548 of the Bankruptcy Code and recoverable under section 550 of the Bankruptcy Code.
  393. 496. Neither CBSG nor Fast Advance has paid the amount of the preferential transfers and/or constructive and actual fraudulent transfers or turned over such property for which they are liable under section 550 of the Bankruptcy Code.
  394. 497. Pursuant to section 502(d) of the Bankruptcy Code, any and all claims of CBSG and Fast Advance against Network Salon must be disallowed until such time as they pay the Trustee the amount equal to the aggregate amount of all of the preferential Transfers and constructive and actual fraudulent transfers, plus interest thereon and costs.
  395. WHEREFORE, Frances Gecker, not individually, but solely in her capacity as chapter 7 trustee of the bankruptcy estates of Anthia R. Hill and Network Salon, requests that the Court enter judgment in the Trustee’s favor and against Complete Business Solutions Group, Inc. and Fast Advance Funding, LLC, pursuant to 11 U.S.C. § 502(d) as follows:
  396. A. Disallowing any claims that have been or may be filed by Complete Business Solutions Group, Inc. and/or Fast Advance Funding, LLC against Network Salon or Ms. Hill, pursuant to 11 U.S.C. § 502(d), until the Trustee has
  397.  
  398. recovered the preferential transfers and/or fraudulent transfers from Network Salon to the defendants; and
  399. B. Granting such other and further relief as this Court deems just and proper.
Advertisement
Add Comment
Please, Sign In to add comment
Advertisement
Public Pastes
Advertisement
We use cookies for various purposes including analytics. By continuing to use Pastebin, you agree to our use of cookies as described in the Cookies Policy.  OK, I Understand
Not a member of Pastebin yet?
Sign Up, it unlocks many cool features!