Judge Lewis A. Kaplan
Priore controlled ICP Asset Management and other entities (collectively ICP). The Securities and Exchange Commission charged them with improper transactions defrauding collateralized debt obligations known as the Triaxx CDOs of tens of millions of dollars. Priore allegedly transferred homes in Westchester County and Martha’s Vineyard, Mass., to certain trusts for which relief defendant Smyers was trustee. Priore knew of the SEC’s threatened securities fraud charges and his awareness of potential exposure to millions of dollars in liability. Rejecting his claim that the SEC’s complaint failed to state a claim under the Fair Debt Collection Procedures Act (FDCPA), the court denied Smyers dismissal from the complaint. Case law supports the proposition that an FDCPA claim lies against a transferee. Further, the court rejected Smyers’ argument that he was not a proper defendant because there was no debt owing to the government. Reading §3304(d) and other FDCPA provisions together, the court found the SEC had a “claim” against Smyers, who was thus a “debtor” under the act. Also, cases applying the FDCPA concur that fraudulent transfer claims are properly asserted against a defendant even though the underlying claim is disputed.
