Tuesday, August 31, 2010

Bankruptcy Receiver Suit Against School for Ponzi Scheme Proceeds Moves Forward

As detailed in an opinion by federal District Court Judge Paul S. Diamond, the Receiver supervising the recovery of assets on behalf of investors defrauded by Joseph S. Forte in a Ponzi scheme has stated viable claims for recovery of over $900,000 from the Malvern Preparatory School.  The judge therefore denied the School's motion to dismiss the Receiver's Complaint.  While the School argued that it had received the contributions in good faith, and the complaint does not appear to have asserted otherwise, the judge determined it still might be "unconscionable" (as required under Pennsylvania law for an unjust enrichment claim) to allow the School to retain the contributions.  The judge also permitted two claims under the Pennsylvania Uniform Fraudulent Transfer Act to stand as well.  For more information and analysis of the case, including the financial hole the school apparently dug for itself - including borrowing $3.3 million to complete the project that Forte was helping finance - as a result, see this post by Jack Siegel on his blog.



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