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Fraudulent Transfer – Discovered

7th Circuit Court Seal

Continental Casualty Company v. Symons, et al.
7th Circuit Court of Appeals Citation: 14-2665, 14-2671 & 15-106

Decided: March 22, 2016

This fraudulent transfer case pits 2 insurance company’s – as well as the controlling family of the seller and their related businesses – against one another. despite some fancy footwork on the part of the sellers, the Court saw through the ruse to the heart of the deceit. The upshot: if it quacks like a duck then it probably is. To nobody’s surprise, fraudulent transfers were found and liability followed close behind.

Factual Background

IGF Insurance Company owed Continental Casualty Company more than $25 million for a crop-insurance business it bought in 1998. In 2002 IGF resold the business to Acceptance Insurance Company for approximately $40 million. Continental alleged in the District Court that IGF’s controlling family — Gordon, Alan, and Doug Symons — structured the sale so that most of the purchase price was siphoned into the coffers of other Symons-controlled companies rendering IGF insolvent. Specifically, Continental claimed that $24 million of the $40 million purchase price went to 3 Symons-controlled companies—Goran Capital, Inc.; Symons International Group, Inc.; and Granite Reinsurance Co.—for sham noncompetition agreements and a superfluous and over-priced reinsurance treaty. Continental, still unpaid, sued for breach of contract and fraudulent transfer.

In 1998 IGF bought Continental’s crop-insurance business at a price to be determined at either side’s option by the exercise of a put or call option. In 2001 Continental exercised its put option; under the contractual formula, IGF owed Continental $25.4 million. At that same time, IGF sold its business to Acceptance for $40 million. The Symons, who controlled IGF, structured the purchase price: $16.5 million to IGF; $9 million to IGF’s parent companies Symons International and Goran in exchange for noncompetition agreements; and $15 million to Granite, an affiliated Symons-controlled company, for a reinsurance treaty. Continental, still unpaid, sued for breach of contract and fraudulent transfer.

Procedural History

On June 4, 2001 IGF, IGF Holdings, and Symons International, filed suit in Federal Court alleging that Continental had misrepresented the profitability of the crop-insurance business. Continental responded on June 6 with a suit of its own for breach of contract based on nonpayment of the $25.4 million purchase price for the business. The actions were consolidated and Continental filed counterclaims for breach of contract and fraudulent transfer adding Goran, Granite Re, Pafco, Supe-rior, and Gordon, Alan, and Doug Symons as counterclaim defendants. The parties filed cross-motions for summary judgment. The judge granted summary judgment for Continental on the breach-of-contract claims and set the remainder of the case for trial. Following bench trial, Judge entered a 136-page order finding for Continental on its fraudulent-transfer and alter-ego claims. Judgment of $34.2 million was entered against Alan and Gordon Symons, IGF, IGF Holdings, Symons International, Goran, and Granite Re. An appeal followed.

7th Circuit Opinion

The 7th Circuit Federal Court of Appeals affirmed the finding of the District Court that Symons International was liable for the breach of its 1998 sale agreement. The Court also found Symons International Goran, Granite, and the Symons individually, liable as transferees under Indiana Uniform False Transfer Act; and the Symons liable under an alter-ego theory.

 

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