Kapila sues HSBC Bank over fraudulent transfers

Soneet Kapila has filed this complaint against HSBC Bank USA over what he says was the fraudulent transfer of more than $5-million in loan proceeds borrowed by Trans Continental Television Productions to Lou Pearlman's personal HSBC account, where it paid off an overdraft of the same amount. The loan was supposed to be for production of "Breaking the Band."

The complaint contains a number of interesting allegations, including that HSBC allowed Lou Pearlman to overdraw his personal account by $5.3-million and that HSBC made the loan to TC TV Productions in January 2007, AFTER the state had already sued, claiming the Trans Continental savings program involved the sale of illegal securities. Kapila says this was a preferential transfer in that the money from TC TV Productions was used to pay off HSBC's own advance after Pearlman and the TC companies were insolvent. The theory is that once TC TV got the money, it should have been used for the benefit of all its creditors instead of being transferred to Pearlman's personal account.

HSBC Bank declined to comment.

Update: Here is my story from Thursday's paper.

Here is Kapila's latest trustee's letter to creditors.

Comments

My ex wife took my house in our divorce. Somehow HSBC gave her a 1st and 2nd mortgage totalling approximately 380k on her 65k income.

How she qualified still amazes me a year later...

how many other banks transfered eisa funds to pearlman. it seems he was able to get millions without showing the ability to make payments. Try to get a mortgage or loan without showing the ability to make payments.

Diane, no...you are wrong

had the bank not forwarded the second $5 million, then would only have been out the original $5 million, not $10 million as you are claiming

"The bank is out 5 million instead of 10 million which means they have come out ahead of what it should have been"

lou is a parasite. I'm sure one of is mantras was 'find the loopholes". He preyed upon people, looked for and exploited the weaknesses in both people and institutions. He could not have gotten as far as he did otherwise.If the banks weren't lazy,lax and complicit.Once again,they'll make up for losses through their customers and fees. There were evasive maneuvers by lou and the banks to keep their own interests going and someone has to keep unravelling each instance and each deal to get at the heart of it.Good move. Keep going.

[dianne]

The bank is out 5 million instead of 10 million which means they have come out ahead of what it should have been

[Ricardo]

Sounds like Soneet Kapila is on the right track. HSBC knew exactly what it was doing, and that it was inappropriate to do it. Let's hope that Mr. Kapila is successful in his lawsuit, in that's about the only way we're ever going to see a penny of the money Pearlman embezzled. What I want to see is the "schedule" for disbursement, should that kind of money get into Mr. Kapila's hands. You can be sure that the "big guys", (banks, etc) will want to be paid first. We need to be very diligent in this area.

HSBC won't want to litigate and drag their name through the mud.

We'll have a settlement on this. Speaking of settlement did our buddy Greg McDonald settle with Kapila??

dianne, your scenario still nets the bank a negative $5 million.

These actions must have been made in order to transfer the loan from a non-secured loan over to a secured loan, or over to a loan that would have a higher probability of getting paid.

[dianne]

The bank came out ahead,because,they would have also lost this 5 million,had it not been transfered to lou's personal acct.The bank knew exactly what it was doing....Even though they knew they were comitting a crime....

"Breaking the Band"?

More like "Breaking the Bank".

If HSBC loaned money to pay of a loan or overdraft, how do they come out any further ahead by collecting on one and losing out on the other?

I just asked my bank for a $5 million personal overdraft and they said no.