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Aug. 25 — The Golf Channel Inc. gets to keep $5.9 million it collected in exchange for running advertisements for what turned out to be the multi-billion dollar Ponzi scheme perpetrated by Allen Stanford ( Janvey v. The Golf Channel, Inc., 2016 BL 272349, 5th Cir., No. 13-11305, 8/22/16 ).
The United States Court of Appeals for the Fifth Circuit on Aug. 22 affirmed that the Golf Channel received the payments in good faith and gave reasonably equivalent value. The court, in a per curiam decision, based its ruling on a question of Texas law it had previously certified to the Texas Supreme Court — what showing is sufficient for a transferee to prove “value” as an affirmative defense under Texas' Uniform Fraudulent Transfer Act (TUFTA)?
At issue was $5.9 million paid by Stanford Bank International, Limited for advertising to recruit additional investors into its multi-billion dollar Ponzi scheme. Court-appointed receiver Ralph S. Janvey sued Golf Channel under TUFTA to recover the payments. There was no allegation that the Golf Channel knew of the bank's Ponzi scheme when it sold advertising space.
After the Fifth Circuit certified its question to the Texas court, the Texas high court said “value” under Texas' fraudulent conveyance statute does not depend on “whether the debtor was operating a Ponzi scheme or a legitimate enterprise,” as long as the services rendered would have been available to another buyer at market rates had they not been purchased by the scheme. Texas interprets “value” under TUFTA “differently than we have understood ‘value' under other states' fraudulent transfer laws and under section 548(C) of the Bankruptcy Code,” the Fifth Circuit said.
The Texas court determined that “Golf Channel’s media-advertising services had objective value and utility from a reasonable creditor’s perspective at the time of the transaction,” and they were reasonably equivalent in value to the fees paid, “even if the advertising services only served to deplete Stanford’s assets” by acquiring new investors, the Fifth Circuit said.
The Fifth Circuit accordingly affirmed the district court's summary judgment for the Golf Channel.
The court warned, however, that, in interpreting a federal statute or a statute from a different state, it was not bound by another state court’s interpretation of a similar or even identical state statute. The court noted prior cases in the circuit (not based on TUFTA) where furthering a Ponzi scheme was not for value as a matter of law.
Baker Botts, L.L.P., represented Ralph S. Janvey, in his capacity as court appointed receiver for the Stanford International Bank Limited.
Norton Rose Fulbright US, L.L.P., represented The Golf Channel, Inc.
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