[00:00:00] Speaker 01:
We're ready to take our fourth case of the day.

[00:00:02] Speaker 01:
Heffin versus Howell, 23-4116.

[00:00:07] Speaker 01:
Mr. Bolle.

[00:00:13] Speaker 03:
May it please the court, Matthew Bolle, to appear on behalf of Gretchen Howell and Leslie Howell, who respectively are appealing the two separate judgments that were entered against them.

[00:00:28] Speaker 03:
Now, this appeal involves not a single error, but a series of errors.

[00:00:34] Speaker 03:
More errors than I have time to address in the 15 minutes allotted to me.

[00:00:40] Speaker 03:
Frankly, more errors than you really had word limit ability to address to the extent I would have liked to in the brief.

[00:00:51] Speaker 03:
When the Howes were sued several years ago, they were concerned that they may not get

[00:00:59] Speaker 03:
a fair trial because the plaintiff in the action against them was appointed by the very judge that they would have to appear in front of to defend themselves.

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But they took solace in the thought that the rules of civil procedure and the rules of evidence would be applied appropriately and even-handedly.

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In its rush to grant judgment in favor of the receiver in this case, the lower court

[00:01:28] Speaker 03:
trampled those rights.

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The summary judgment ruling draws every reasonable inference and beyond in favor of the receiver and against the howls.

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The court relied on testimony that is not admissible in evidence to find the existence of a Ponzi scheme, specifically relying on testimony from witnesses that had no personal knowledge and therefore, because they lacked personal knowledge,

[00:01:59] Speaker 03:
were not competent to testify to the matters.

[00:02:01] Speaker 02:
Hadn't they been through the records?

[00:02:05] Speaker 03:
They had read documents.

[00:02:06] Speaker 02:
Sounds like personal knowledge.

[00:02:09] Speaker 03:
Let me address that, Your Honor.

[00:02:11] Speaker 03:
First of all, Mr. Hafen had not read the documents.

[00:02:16] Speaker 03:
He hired lawyers and accountants to review documents, and then they reported back to him their findings, and then he regurgitated those summarized findings in his report.

[00:02:28] Speaker 03:
But I suppose the question the court should ask is, what is personal knowledge?

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Is personal knowledge gained by reading a document?

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Is personal knowledge gained by listening to or reading a witness statement?

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Doesn't personal knowledge require a person to see with their own eyes, hear with their own ears, and perceive with their own perceptions the events?

[00:02:53] Speaker 02:
So what is the universe of people who meet those qualifications in this case?

[00:02:58] Speaker 03:
with respect to the funds they put into Rust Rare Coin and the funds that they received back, the house, with respect to the goings on at Rust Rare Coin, dozens of people, including Mr. Rust, his family members, and all those that were involved in the business enterprises of Rust Rare Coin.

[00:03:28] Speaker 03:
Any of those persons could have been called as a witness, Your Honor.

[00:03:33] Speaker 03:
Those same persons could have been called to an authenticated document.

[00:03:36] Speaker 02:
Those are unfriendly witnesses, right?

[00:03:41] Speaker 02:
I don't know if they were, would or would not be unfriendly.

[00:03:43] Speaker 02:
The universe can't be people who we like to testify.

[00:03:49] Speaker 03:
I think the universe is the people that have personal knowledge.

[00:03:52] Speaker 03:
Whether they're friendly or unfriendly, sometimes you're

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As a plaintiff, you're put in a position, or a defendant if you have an affirmative defense, of proving your case through the evidence of other persons, perhaps unfriendly witnesses.

[00:04:08] Speaker 03:
But it's only those persons who saw the event, heard the event, experienced the experience, can speak.

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Now, the documents could come into evidence.

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But the summary judgment ruling in this case was not premised on documents, where the court's interpretation of those documents

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Either it was a matter of law or a review of those documents drawing all reasonable inferences in favor of the House.

[00:04:34] Speaker 03:
It was the contrary.

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And this is illustrated, the lack of personal knowledge, Your Honors, is illustrated by the testimony that was given by Mr. Hathen's deposition that's called out in the opening brief.

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It's also called out by the testimony given by Mr. Strong

[00:04:57] Speaker 03:
and during his deposition.

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Mr. Shah was not deposed because the Howells didn't have the benefit of a report or statement in advance of the closing facts.

[00:05:11] Speaker 01:
What was your objection at the proceeding to this use of the expert reports?

[00:05:20] Speaker 03:
The objection was made in two ways, Your Honors.

[00:05:23] Speaker 03:
Both an objection was raised

[00:05:25] Speaker 03:
as to all three of these witnesses and the information contained in the reports in the summary judgment opposition itself, which Rule 56 requires.

[00:05:36] Speaker 01:
But in addition... Well, what was the objection?

[00:05:39] Speaker 01:
What did you say was wrong?

[00:05:41] Speaker 01:
Did you say this was hearsay, that we needed to have access to the documents before the summary of the documents can be admitted?

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objection, not whether there was objection made, but what was the gist of any objections that were made?

[00:06:03] Speaker 01:
The gist of the objections were that it was hearsay upon hearsay upon hearsay with respect to Mr. Haythorne.

[00:06:09] Speaker 01:
And what was the response to that?

[00:06:12] Speaker 03:
The response that the trial court made was that he was an expert

[00:06:17] Speaker 03:
and that his testimony was helpful to the court, not that it was a summary.

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And I don't know how Mr. Havens qualified to provide a summary where he didn't personally review documents or even the witness statements.

[00:06:28] Speaker 03:
In this case, his report regurgitated unsworn witness statements by persons that were interviewed by the FBI, by his legal team, and others that he didn't even participate in and that he didn't even read or listen to.

[00:06:43] Speaker 03:
But they were just described to him after the fact by his lawyers in a summary form.

[00:06:49] Speaker 01:
Then he regurgitated.

[00:06:51] Speaker 01:
So the judge treated Hafen himself as the expert?

[00:06:56] Speaker 03:
One of the two experts.

[00:06:57] Speaker 03:
The lower court treated both Mr. Hafen and Mr. Strong as experts.

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An objection was also raised as to Mr. Hafen that he didn't qualify as an expert.

[00:07:09] Speaker 03:
Now, I know Mr. Afer.

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And he is a very competent and accomplished trial attorney.

[00:07:13] Speaker 03:
And he could qualify as an expert, for instance, on the standard of care that an attorney should provide to his client before and after trial.

[00:07:23] Speaker 03:
What he is not is an expert in Ponzi schemes.

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I don't know that such a thing exists.

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That's the ultimate issue that the trial fact must decide.

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In contrast, Mr. Strong also

[00:07:38] Speaker 03:
qualified as an expert with respect to forensic accounting.

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And he was qualified to give opinions like insolvency, tracing of funds.

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But that is not what his report covers either.

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His report is substantially identical to Mr. Hafen's.

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And it simply summarizes facts of which neither Mr. Strong nor Mr. Hafen had personal knowledge and regurgitates them

[00:08:06] Speaker 03:
But that was not offered as a summary.

[00:08:08] Speaker 03:
Those reports were offered as expert testimony, and that is the context in which the court received them.

[00:08:17] Speaker 01:
But it was clear that the court was referring to Hafens as an expert.

[00:08:23] Speaker 01:
I believe so, Your Honor.

[00:08:24] Speaker 01:
This wasn't like a pleading seeking summary judgment and a summary of the evidence supporting summary judgment.

[00:08:34] Speaker 03:
No, it was an expert report, Your Honor, and the court accepted it.

[00:08:40] Speaker 03:
And if the court goes back and reads the ruling and looks at the citations that the lower court makes in support of it, summary judgment ruling with respect to the existence of the Ponzi scheme, you'll see that it's almost exclusively citations to Mr. Havens' report.

[00:09:03] Speaker 03:
I'm running short on time.

[00:09:05] Speaker 03:
I want to make sure I address your questions, but I do want to address at least two things in the argument today.

[00:09:13] Speaker 03:
First of all, Mrs. Howell is in a very different position than Mr. Howell.

[00:09:19] Speaker 03:
The evidence was very clear.

[00:09:21] Speaker 03:
The record is absolutely clear that Gretchen Howell was a loser.

[00:09:27] Speaker 03:
She put approximately $92,000 into Rustford Coin.

[00:09:32] Speaker 03:
She received back $22,000.

[00:09:34] Speaker 03:
So she lost $70,000.

[00:09:38] Speaker 01:
She was not a winner.

[00:09:39] Speaker 01:
I thought she was being held liable because the money owed by her husband, or the excess received by her husband, could be traced to property she has an interest in.

[00:09:53] Speaker 01:
So if he used $3 million of excess funds from the, I'll say alleged ponsy scheme at this point, then all that property,

[00:10:05] Speaker 01:
What was done with that money, which was build the home and buy the land, could be clawed back.

[00:10:15] Speaker 01:
And if she was a recipient of that, because he gave her half interest, it could be clawed back from her, not as an investor at all, but as a recipient of the funds that should be clawed back.

[00:10:33] Speaker 03:
The rationale the court gave in both its original summary judgment ruling and at the time it issued its decision on cross motions under Rule 59 was just what the court has articulated, which the lower court conceded that Gretchen Hall did not receive any direct transfers in excess of her contributions to rest her coin.

[00:11:01] Speaker 03:
Then the court looked at

[00:11:03] Speaker 03:
all of the transfers to lessen the aggregate without distinguishing on a transfer by transfer basis which ones are voidable under the Hotel Voidable Transactions Act, which is critical.

[00:11:16] Speaker 03:
And then without any tracing assumed because Gretchen was half owner of the house that she received half the benefit of any funds put into the house.

[00:11:31] Speaker 01:
And what's wrong with that reason?

[00:11:33] Speaker 03:
Several things.

[00:11:34] Speaker 03:
First of all, there's no admissible evidence of the exact amount that was put into the house.

[00:11:38] Speaker 03:
And the court has this in the record before you.

[00:11:40] Speaker 03:
But during his deposition, Mr. Howell was asked how much money he spent, how much money he paid to contractors.

[00:11:47] Speaker 03:
And he said he didn't know and he couldn't answer because he would be required to speculate.

[00:11:52] Speaker 01:
Did he say at least something?

[00:11:55] Speaker 03:
After several objections, he was clearly speculating.

[00:11:59] Speaker 03:
And the questions went threshold by threshold.

[00:12:03] Speaker 03:
The last one was more than three million, and he said, I believe so, which is equivocal.

[00:12:09] Speaker 03:
And it was clear from his prior testimony that he was speculating.

[00:12:13] Speaker 03:
But that's only the first problem.

[00:12:15] Speaker 03:
I thought he said between three and four.

[00:12:17] Speaker 03:
The question was between three and four, or more than three, less than four.

[00:12:24] Speaker 03:
And he said, I believe so.

[00:12:25] Speaker 03:
And the court went with the low amount.

[00:12:28] Speaker 03:
Yes.

[00:12:30] Speaker 03:
I believe that testimony is inadmissible because he was speculating, but that's only the first problem.

[00:12:36] Speaker 03:
There are multiple other problems.

[00:12:39] Speaker 03:
It requires drawing inferences against Gretchen to assume that a dollar spent by Mr. Howe on his home enriched Gretchen dollar for dollar.

[00:12:51] Speaker 02:
It also ignores time.

[00:12:53] Speaker 02:
Is that because the amount spent on the home is not necessarily the value of the home?

[00:12:59] Speaker 02:
Correct.

[00:13:00] Speaker 02:
That's what you're getting out there.

[00:13:01] Speaker 02:
In other words, if you build the nicest house in the neighborhood, it may not sell for what you sold, but what you paid.

[00:13:10] Speaker 03:
Exactly, Your Honors.

[00:13:11] Speaker 03:
I've personally seen a home built for $17 million, foreclosed on for $6 million, and foreclosed on a second time at under $4 million.

[00:13:20] Speaker 02:
So do you want a remand for an actual valuation at that time?

[00:13:24] Speaker 03:
I believe that that at a minimum is required, because the money judgment

[00:13:28] Speaker 03:
that's provided for under the Utah Avoidable Transactions Act must be based on the value of the asset transferred.

[00:13:38] Speaker 03:
Now, at the time of transfer, that's another point where we run into a critical problem, which is timing.

[00:13:47] Speaker 03:
Under the Utah Avoidable Transactions Act, each transfer must be looked at on its own merits.

[00:13:54] Speaker 03:
The Utah Act does not look at a series of transactions,

[00:13:57] Speaker 03:
focuses on each one, and it's very clear under the Act that if regionally equivalent value is given in good faith for a transfer, that transfer is not voidable.

[00:14:08] Speaker 03:
And the record in this case was clear that at least at the time the property was purchased, entitled in Gretchen Howell's name, the funds that Les had received from Rusper Coin were less than the funds that he put in.

[00:14:26] Speaker 03:
The cash transfer to him that allowed him to buy the home and his subsequent titling of the property in Gretchen's name is not political.

[00:14:37] Speaker 03:
On the record before us, we don't know when that line was crossed vis-a-vis the payment to contractors, how many of those payments to contractors in any amount came before or after that line was crossed.

[00:14:53] Speaker 03:
I'm nearing the end of my time, so I wanted just to make one point that I plan to make about the Ponzi presumption.

[00:15:01] Speaker 03:
There are several cases that the 10th Circuit has previously issued which acknowledge a Ponzi presumption.

[00:15:08] Speaker 03:
None of them are under Utah law or the Utah Avoidable Transactions Act.

[00:15:14] Speaker 03:
The Ponzi presumption is federal common law that is applied to state statutes.

[00:15:21] Speaker 03:
In short, it is an eerie guess.

[00:15:23] Speaker 03:
under Erie Railroad versus Tompkins.

[00:15:26] Speaker 03:
There is no Utah law that supports it.

[00:15:30] Speaker 03:
Its origins derived originally from federal bankruptcy cases.

[00:15:34] Speaker 03:
So then it was a federal common law doctrine applied to federal statutes.

[00:15:38] Speaker 03:
But as a federal common law doctrine applied to state statutes, it's improper.

[00:15:44] Speaker 03:
And this court's not bound by the prior precedent because of a significant change.

[00:15:49] Speaker 03:
The Utah Avoidable Transactions Act, which applies here, and which was not applied in any of those prior cases, clearly specifies the burden of proof to prove actual intent to hinder, delay, and defraud is on the plaintiff or the creditor.

[00:16:06] Speaker 04:
Can I just jump in there?

[00:16:08] Speaker 04:
Can you point out where you made that argument below?

[00:16:12] Speaker 03:
It was made in a breach, Your Honor, and I'll concede this.

[00:16:16] Speaker 03:
say to the lower court, you shouldn't apply the Ponzi presumption.

[00:16:23] Speaker 03:
I have found in my short years as an attorney that judges don't like when you tell them they're wrong.

[00:16:30] Speaker 03:
And you need to find another way to persuade them that perhaps what they've done in the past is incorrect.

[00:16:38] Speaker 03:
This lower court had issued written decisions adopting the Ponzi presumption.

[00:16:42] Speaker 03:
And it was clear to me a fat was the argument I made.

[00:16:45] Speaker 03:
she would have closed her ears and turned her mind off to the question.

[00:16:50] Speaker 03:
And so instead, I focused on the burden of proof under the statute.

[00:16:56] Speaker 03:
And we've called out in our briefs multiple places, both in the written briefs and during oral argument, in which I urged the lower court to apply the proper burden of proof

[00:17:12] Speaker 03:
and to put on the receiver the burden of proving each transfer was avoidable based on actual intent to hinder delaying the fraud.

[00:17:22] Speaker 04:
Thank you.

[00:17:24] Speaker 03:
Thank you, Counselor.

[00:17:25] Speaker 03:
I exceeded my time.

[00:17:26] Speaker 03:
Thank you.

[00:17:35] Speaker 00:
Good morning, Your Honor.

[00:17:36] Speaker 00:
Jeff Ball is on behalf of Jonathan O. Hafen.

[00:17:42] Speaker 00:
We're here before the court on a clawback action in which Mr. Hafen has sought the recovery of funds.

[00:17:48] Speaker 00:
As Judge Ide pointed out, the first issue they raised on the Ponzi presumption was not preserved below.

[00:17:56] Speaker 00:
In fact, throughout the briefing, it was assumed that once Mr. Hafen, the receiver, approved the existence of a Ponzi scheme,

[00:18:05] Speaker 00:
that all transactions therefore be presumptively fraudulent.

[00:18:10] Speaker 00:
And that's, in fact, what the defendants argued here.

[00:18:14] Speaker 00:
They said that the receiver failed to carry his burden of proof, improving the existence of a Ponzi scheme.

[00:18:20] Speaker 00:
But once that burden had been met, that all transactions were all transferred from them to be considered fraudulent.

[00:18:28] Speaker 00:
And that's supported not only by this court's case law, but in Doc Stader, Cornelius Miller,

[00:18:34] Speaker 00:
and Georgiolus, but also by the plain language of the Utah avoidable transactions.

[00:18:39] Speaker 04:
Counsel, can I just stop you there, though?

[00:18:41] Speaker 04:
Is opposing counsel correct that we have not recognized the presumption under Utah law?

[00:18:49] Speaker 00:
You have recognized the presumption under Utah law.

[00:18:52] Speaker 00:
In fact, Georgiolus, the court said under the UFTA, once it is established for a better act in its Ponzi scheme,

[00:19:00] Speaker 00:
that all presumptions are proved fraudulent.

[00:19:03] Speaker 00:
So this court held that it was under the Utah Fraudulent Transactions Act that the Ponzi presumption applied.

[00:19:11] Speaker 04:
So you disagree that we're in predictive territory here.

[00:19:16] Speaker 00:
Yes, we're under here case law.

[00:19:19] Speaker 00:
We're here under the Uniform Voidable Transactions Act, Utah's transaction, which this court's already held the Ponzi Presumption applies.

[00:19:28] Speaker 00:
In fact, I'm not aware of, and I guess this says a lot about Utah, I'm not aware of another Ten Circuit case from another state, other than Utah.

[00:19:37] Speaker 00:
Dockstader, Cornelius Miller, and Georgioulas, which this court's applied the Ponzi Presumption,

[00:19:43] Speaker 00:
all applied under the Utah uniform, either avoidable transfers act or avoidable transactions act.

[00:19:52] Speaker 02:
Does it matter which?

[00:19:53] Speaker 02:
Because the published opinion came with the statute that's now no longer in effect.

[00:19:58] Speaker 00:
It doesn't.

[00:19:59] Speaker 00:
The language there is similar.

[00:20:00] Speaker 00:
The only thing that I'm aware of a difference between the two statutes is sort of the burden of proof for avoiding it.

[00:20:09] Speaker 00:
Now, it's about buying preponderance of the evidence instead of clear and convincing evidence.

[00:20:13] Speaker 00:
And so now, I think, even more presumptively, given the burdens shift, I think it's even easier under the new statute.

[00:20:21] Speaker 02:
Easier, but first impression.

[00:20:28] Speaker 00:
Under the Germain language, I don't think it is first impression.

[00:20:31] Speaker 00:
Because I think other than that one issue, the language of the statute is the same.

[00:20:36] Speaker 01:
Are these statutes uniform acts?

[00:20:39] Speaker 00:
They are, Your Honor.

[00:20:40] Speaker 01:
Do you have any cases from other jurisdictions?

[00:20:43] Speaker 00:
I do not, Your Honor.

[00:20:45] Speaker 00:
Well, actually, there are.

[00:20:48] Speaker 00:
The Scholz v. Lehman case, I believe that the Fifth Circuit applies the Ponzi presumption.

[00:20:53] Speaker 01:
And that was under a state statute that was a uniform act?

[00:20:59] Speaker 01:
That's correct, Your Honor.

[00:21:01] Speaker 01:
Because, Tony, I think this is universal with uniform acts.

[00:21:06] Speaker 01:
But they have provisions saying you should try to interpret it the way other states do.

[00:21:11] Speaker 01:
Is that true of this statute?

[00:21:13] Speaker 00:
I'm not sure on that issue, Your Honor.

[00:21:15] Speaker 01:
I'd be surprised if it's not, but if so, that would give us additional guidance, depending on what the other states say.

[00:21:24] Speaker 00:
It does, Your Honor.

[00:21:26] Speaker 00:
So all federal circuits that I'm aware have applied the Ponzi presumption.

[00:21:32] Speaker 00:
There's a number of other cases that have applied the Ponzi presumption.

[00:21:35] Speaker 01:
Are they all cited in your brief?

[00:21:37] Speaker 00:
They are, Your Honor.

[00:21:39] Speaker 02:
What do we do with Galen Russ' guilty plea statement, admitting a Ponzi scheme, as I understand it?

[00:21:45] Speaker 00:
So I think it is relevant, Your Honor.

[00:21:48] Speaker 00:
The court below said that she didn't rely upon it.

[00:21:52] Speaker 00:
She noted it.

[00:21:53] Speaker 00:
She said that it was consistent with the other expert testimony relating to the Ponzi scheme.

[00:21:58] Speaker 00:
But she said she didn't rely upon it.

[00:22:01] Speaker 00:
If she did rely upon it, she was still entitled to rely upon it, and it would have been proper for her to do so, but she said that she didn't.

[00:22:08] Speaker 00:
But his admissions confirmed the fact that this was a Ponzi scheme, that he was defrauding investors out of millions of dollars.

[00:22:16] Speaker 00:
He was using other investor funds to pay prior investors.

[00:22:20] Speaker 00:
So that's what I think we should do with that statement, probably what the court below did.

[00:22:25] Speaker 00:
which is noted it's consistent with the other testimony, which yields me deciding not to rely upon it.

[00:22:31] Speaker 02:
Should it bear on the admissibility of the other testimony?

[00:22:35] Speaker 00:
I don't think it does, Your Honor.

[00:22:37] Speaker 00:
I think those are separate issues.

[00:22:39] Speaker 00:
And it's kind of worthless, doesn't it?

[00:22:42] Speaker 00:
Yeah.

[00:22:43] Speaker 00:
Going on to the admissibility of the other testimony, she relied upon Mr. Shaw, who was not an expert, who was just a fact witness based upon his review of the documents.

[00:22:55] Speaker 00:
And then she relied both upon Mr. Haytham and Mr. Strong's testimony that this was a Ponzi scheme.

[00:23:02] Speaker 00:
The court actually found that Mr. Haytham was an expert as it relates to Ponzi schemes.

[00:23:08] Speaker 00:
Mr. Strong and Mr. Hayden read numerous records.

[00:23:11] Speaker 00:
Mr. Strong did an analysis regarding insolvency.

[00:23:15] Speaker 00:
He had sufficient knowledge and sufficient basis upon which to make that testimony, and the defense in this case has not shown that that determination by the court of admissibility wasn't abuse of discretion, which is an appropriate standard in this case.

[00:23:31] Speaker 01:
Well, how was it admissible?

[00:23:33] Speaker 01:
Just because an expert can rely on any

[00:23:42] Speaker 01:
business records, etc.

[00:23:43] Speaker 00:
Yeah, so these would be admissible as business records.

[00:23:46] Speaker 01:
Was that offered and did the judge rule on that?

[00:23:49] Speaker 00:
I believe that the court did and it was ruled upon.

[00:23:54] Speaker 00:
She found that they were, she applied the principles to the facts.

[00:23:59] Speaker 00:
She found that he relied upon the appropriate evidence.

[00:24:02] Speaker 00:
There was no objection to the documents upon which they relied upon.

[00:24:07] Speaker 00:
There was no argument that the documents of Russ Barrett Coyne were inadmissible or hearsay.

[00:24:14] Speaker 00:
That was not made below.

[00:24:17] Speaker 01:
I understood opposing counsel to say that it was hearsay.

[00:24:24] Speaker 01:
That there was an objection to this hearsay.

[00:24:27] Speaker 00:
I don't believe that that objection was made below as far as the records that Mr. Strong reviewed in determining insolvency.

[00:24:35] Speaker 00:
I don't think that hearsay argument was made

[00:24:38] Speaker 01:
I gather that Mr. Haven also reported on interviews of people?

[00:24:44] Speaker 01:
He did, Your Honor.

[00:24:45] Speaker 01:
That's got to be hearsay.

[00:24:47] Speaker 00:
Well, it was an interview of Galen Rust himself.

[00:24:53] Speaker 00:
That was the only interview that he relied on?

[00:24:55] Speaker 00:
I believe that's the only interview that he relied upon were interviews of Galen Rust, the perpetrator of the Ponzi scheme, Your Honor.

[00:25:03] Speaker 01:
And why is that OK?

[00:25:05] Speaker 00:
That's a statement against interest that I think is admissible.

[00:25:09] Speaker 00:
We also have the subsequent then guilty plea.

[00:25:12] Speaker 01:
Did the judge make a determination that it was a statement against, it's got to be penal interest, doesn't it?

[00:25:17] Speaker 00:
It does, Your Honor.

[00:25:18] Speaker 00:
And we did make arguments below that his statement, and in particular the guilty plea, were admissible under Rule 803 and 807.

[00:25:28] Speaker 01:
But when the judge said she didn't rely on

[00:25:32] Speaker 01:
for a statement, did that include?

[00:25:35] Speaker 01:
Do you think that encompassed the statement that Mr. Hafen used?

[00:25:40] Speaker 00:
I think that was specifically to the guilty plea, Your Honor, and not the prior statement.

[00:25:52] Speaker 00:
One thing that the counsel raised in argument is he says that he doesn't know the exact time

[00:25:58] Speaker 00:
where the bindings cross between giving reasonably equivalent value.

[00:26:05] Speaker 00:
And he asked the court to remand for that determination.

[00:26:08] Speaker 00:
That burden, Your Honors, is upon the defendants under Utah Code 25-6-304.

[00:26:16] Speaker 00:
That once it's determined that a transfer is made with the intent to hinder the layer of fraud, the burden then shifts to the defendants to show

[00:26:26] Speaker 00:
both of they had reasonably equivalent value and that they took in good faith.

[00:26:31] Speaker 00:
And so where that line was crossed was the burden that the defendants had in this case, Your Honor, or Your Honors.

[00:26:47] Speaker 01:
Moving now.

[00:26:47] Speaker 01:
So if I'm understanding you, you don't dispute that a timing issue could be relevant.

[00:26:56] Speaker 01:
But you're saying it was the Halsberg, Mrs. Halsberg, to show that at the time the money was put into the home, he was still owed money.

[00:27:09] Speaker 01:
He had not profited from the scheme yet.

[00:27:13] Speaker 00:
Is that your position?

[00:27:15] Speaker 00:
So my position is it is their burden.

[00:27:17] Speaker 00:
My second position is that the facts of this case, while the property may have been purchased with funds,

[00:27:25] Speaker 00:
or at least that's their argument, is the property was purchased with funds for which reasonable equivalent value was given.

[00:27:31] Speaker 00:
I think it's undisputed, however, that the $3 million to $4 million that was used to build the home and construct the improvements on the property, that was made with net winnings.

[00:27:43] Speaker 00:
That was made with funds for which reasonable equivalent value had not been given by the Howells.

[00:27:50] Speaker 00:
unless specified that he spent more than $3 million to purchase the home, and that he only used funds from the Ponzi scheme to construct the home.

[00:28:03] Speaker 02:
Should we expect better, though, than a reluctant, equivocal, seventh time around, however many questions, maybe third, three or four million?

[00:28:13] Speaker 02:
Couldn't that be established?

[00:28:17] Speaker 00:
It could be established, Your Honor.

[00:28:19] Speaker 00:
And the party that had the evidence to establish it would be the defendants.

[00:28:24] Speaker 00:
Less knows how much.

[00:28:26] Speaker 01:
Nathan could have gotten an appraiser.

[00:28:30] Speaker 00:
Well, I think the question was how much was spent on the home, how much of the Ponson scheme funds were used to build the home, which Less said he spent more than $3 million, but less than $4.

[00:28:43] Speaker 00:
That evidence is in the, I think, sole custody and control of

[00:28:47] Speaker 00:
of the house.

[00:28:49] Speaker 00:
How much he spent.

[00:28:50] Speaker 00:
How much he spent.

[00:28:51] Speaker 01:
Is the value of the home irrelevant?

[00:28:55] Speaker 00:
I think it largely is, Your Honor, because what we're talking about here is we're talking about the transfer to less owl, which he then used to build the home.

[00:29:04] Speaker 00:
And so the fraudulent transfer here isn't the value of the home.

[00:29:08] Speaker 00:
It's the in excess of $3 million that less received

[00:29:14] Speaker 00:
in excess of his time.

[00:29:15] Speaker 01:
So if he is $3 million to build the home, and the home would only have a fair market value of $1.5 million, could she still be on the hook for $3 million?

[00:29:27] Speaker 00:
She would be on the hook for half of what he spent, the $1.5 million.

[00:29:33] Speaker 01:
Even though that's twice as much as her share of her interest in the home, you would

[00:29:43] Speaker 00:
First of all, this is something that we don't need to get into, but Arizona is a community property state.

[00:29:50] Speaker 00:
I think she gets the full value that was spent under that.

[00:29:55] Speaker 00:
Second, yes, because what we're talking about here is the transfers that are available here.

[00:30:00] Speaker 00:
It's the transfers to Les Al of that $3 million, which she then used for her benefit.

[00:30:06] Speaker 02:
That's one of the transfers to Les, but the other one is to Gretchen.

[00:30:10] Speaker 02:
And that wasn't at the same time.

[00:30:13] Speaker 02:
And so why don't you have to, by the words of the statute, why don't you have to establish what the value was at the time of the transfer to Gretchen?

[00:30:21] Speaker 00:
Because the value of it is the money that he spent on her behalf.

[00:30:25] Speaker 02:
Well, what if they had a housing crash?

[00:30:28] Speaker 02:
And by the time that he transferred it to Gretchen, the house was only worth $1 million.

[00:30:34] Speaker 00:
Yeah.

[00:30:34] Speaker 00:
I think the saying is, and let me just sort of flip the hypothetical, that if Galen Russell would have paid the contractors directly,

[00:30:42] Speaker 00:
If you would have paid $3 million to the contractors directly, Les and Gretchen would still be on hook for that full $3 million, even if they didn't receive the full benefit of it, because that was what was paid on their behalf.

[00:30:55] Speaker 00:
That was the transfers that the statute talks about, both an immediate transfer and then also on somebody on whose behalf the transfer was paid.

[00:31:03] Speaker 02:
But you're treating it like Les and Gretchen received a transfer on the same date, and they didn't.

[00:31:10] Speaker 02:
Les transferred to Gretchen later.

[00:31:12] Speaker 02:
And so my question again is, what if by the time Les transferred it to Gretchen there had been a housing crash and was only worth $1 million?

[00:31:20] Speaker 02:
Do you still say that you could get $1.5 million against her?

[00:31:23] Speaker 00:
Yes, Your Honor.

[00:31:23] Speaker 02:
How can that be?

[00:31:24] Speaker 00:
Because it's what was transferred on her behalf.

[00:31:27] Speaker 00:
It was the money that was transferred for her benefit, the more than $3 million.

[00:31:32] Speaker 00:
Well, what's transferred?

[00:31:33] Speaker 00:
It's not a transferring of the house.

[00:31:35] Speaker 00:
It's not a transferring in half interest.

[00:31:37] Speaker 00:
in a property, it is the transferring of the value of the money that was then used to build the home.

[00:31:45] Speaker 00:
And so that's what the transfer is.

[00:31:47] Speaker 00:
It's not that he said, hey, I built this home.

[00:31:50] Speaker 00:
I'm now going to transfer half a million dollars, half of this interest to you.

[00:31:54] Speaker 00:
It's, I'm transferring $3 million on your behalf to construct the home.

[00:32:00] Speaker 02:
What if we put it all in the bank and he spent two million of it and then he transferred the balance?

[00:32:05] Speaker 02:
She'd only be responsible for the half million, right?

[00:32:08] Speaker 02:
of the remaining $1 million in the account before you spent the rest.

[00:32:13] Speaker 00:
But that's not the fact here.

[00:32:15] Speaker 02:
It's pretty close.

[00:32:16] Speaker 02:
I mean, if a house goes down in value to $1 million by the time Gretchen gets any share of it, I don't see how you can say her value is $1.5 million.

[00:32:26] Speaker 00:
She had the interest in the home when the money was spent for the improvements on the home.

[00:32:31] Speaker 02:
What's the timing?

[00:32:32] Speaker 02:
Was the transfer to Gretchen how many

[00:32:36] Speaker 02:
weeks, days, months after the home was completed?

[00:32:41] Speaker 00:
It was before the home was completed, Your Honor, that the property had been titled in her name as community property.

[00:32:49] Speaker 00:
And so when the money was spent by Wes, that's when the transfer occurred, is when he spent the money.

[00:32:57] Speaker 00:
So she already had to have interest.

[00:32:58] Speaker 00:
She already had to have interest when he built the home.

[00:33:02] Speaker 02:
But we still don't know what the value was.

[00:33:04] Speaker 02:
And you'll agree that

[00:33:06] Speaker 02:
you can build a home for more than what you're going to be able to sell it for.

[00:33:10] Speaker 02:
Agreed.

[00:33:11] Speaker 02:
So why does it have to not go back and somebody say, you're right, it's not worth $3 million.

[00:33:16] Speaker 02:
In fact, it's worth $5 million.

[00:33:18] Speaker 00:
Because what was transferred to her was the $3 million to build that home.

[00:33:22] Speaker 02:
OK.

[00:33:25] Speaker 00:
Thank you, Your Honor.

[00:33:26] Speaker 01:
Thank you.

[00:33:27] Speaker 01:
Did we go over this?

[00:33:29] Speaker 01:
Yes.

[00:33:30] Speaker 01:
OK.

[00:33:33] Speaker 03:
So I haven't signed the values on clarification.

[00:33:35] Speaker 01:
You may wait one thirty seconds.

[00:33:40] Speaker 03:
More than anything, I just want to clarify this.

[00:33:41] Speaker 03:
In the prior precedents from the Tent Circuit, the Circuit Court of Appeals has applied the Ponzi presumption to the Utah Uniform Fraudulent Transfer Act as a prior statute.

[00:33:53] Speaker 02:
We have an unpublished, though, that applies to Uniform Voidable Transfer Act.

[00:33:58] Speaker 02:
You have an unpublished?

[00:34:01] Speaker 02:
I wasn't aware of that.

[00:34:02] Speaker 02:
I'll be proved wrong.

[00:34:04] Speaker 03:
That's my understanding.

[00:34:05] Speaker 03:
I'm probably wrong.

[00:34:05] Speaker 03:
Your clerks are probably sharper on Westlaw than me.

[00:34:10] Speaker 03:
That's the only point I wanted to make here.

[00:34:12] Speaker 03:
I just wanted to clarify.

[00:34:13] Speaker 03:
Thank you.

[00:34:15] Speaker 01:
Thank you, counsel.

[00:34:16] Speaker 01:
Case is submitted.

[00:34:17] Speaker 01:
Counselor excused.