Innocent Meridian Mortgage investors were unpleasantly surprised to receive a letter from the K&L Gates law firm demanding that they repay interest and dividends they may have received from their Meridian investments as long ago as 2004. One of our clients received such a letter, which threatened to sue him for the amount of his entire Meridian investment unless he agreed to repay more than $90,000 in dividend payments that he received – and cashed – in good faith. We are defending him against that claim. According to the Seattle Times, 182 investors received that letter. Investors should not agree to make any payment until they have consulted with a lawyer who can explain their rights.
Meridian investors have defenses in response to the Meridian trustee’s demands. Here are some of them:
Statute of Limitations. The claims may be time barred by the applicable statute of limitations. The statutes can be complicated, but under the federal Fraudulent Transfer Act, the trustee can only avoid a transfer that “was made or incurred on or within 2 years before the date of the filing of the [bankruptcy] petition.” The Meridian petition was filed in July, 2010. Under Washington’s Uniform Fraudulent Transfer Act, which may also apply, the claims against investors must be brought “within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant.” Most of the payments to investors were made more than four years ago. Under the Washington law, then, the question is whether the trustee “could reasonably have discovered” fraud at Meridian Mortgage more than one year ago. Certain bankruptcy statutes may affect the application of the statutes of limitation.
Pre-Ponzi Scheme Payments. The fraudulent transfer laws only apply to transfers made to investors if the company is acting as a Ponzi scheme. Unless the trustee can prove that payments to you were made while Meridian was operating as a Ponzi scheme, your payments are not subject to any fraudulent transfer claims.
Good Faith Defense. Additionally, many Meridian investors also are entitled to consider and present the “good faith defense,” which is recognized by Washington law, and says that if an investor acted in good faith and exchanged reasonably equivalent value for their investment and return, they are not subject to the trustee’s clawback.
No investor should rely on this short article to fully inform them of their rights on a complicated legal matter. Your defenses will depend on your individual circumstances. This is meant to provide some helpful background on the legal controversy to those investors without legal counsel. Our firm, with help from our Washington counsel, are speaking with investors facing claims by the Meridian trustee. Contact us for a free initial consultation about joining our Meridian Investor Group.