William C. Rand


Leveraged Buyout, Kaiser Steel, Fraudulent Conveyance, Section 546(e)


This Comment considers whether, in spite of the Kaiser Steel decision, a bankruptcy trustee should be able to recover a fraudulent conveyance made to a stockholder's brokerage account in the form of a Leveraged Buyout (LBO) Payment. The Comment summarizes the Kaiser Steel opinion and questions the court's interpretation of the prior case law. The Comment then explains why an LBO payment to a stockholder's brokerage account should not qualify as an exempt "settlement payment" under section 546 (e) and thus should be rcoverable as a fraudulent conveyance under section 548. The Comment assumes that such a payment is recoverable as a fraudulent conveyance from the initial transferee of such payment, and considers whether the initial transferee is the stockholder or the stockbroker who accepted the payment into the stockholder's account. The Comment concludes that section 546(e) should be construed to allow recovery from a stockholder of a fraudulent conveyance made in the form of an LBO payment. It also concludes that a bankruptcy trustee, or a debtor in possession, should be permitted to recover an LBO payment from a stockholder but not from a stockbroker who merely functions as an innocent conduit in the LBO payment process.



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