                        UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT


In Re: SOUTHERN TEXTILE KNITTERS,      
                           Debtor.


ANDERSON & ASSOCIATES, PA,
                        Appellant,
                and
ROBERT F. ANDERSON, Trustee,
                Trustee-Appellant,
                 v.
SOUTHERN TEXTILE KNITTERS DE
HONDURAS SEWING INCORPORATED,
         Party in Interest-Appellee,      No. 01-2369

                and
SAMUEL H. SIMCHON; LEVY SIMCHON;
REBECCA SIMCHON; ODED SIMCHON;
OLD FORT INDUSTRIAL PARK LLC;
HAVA SIMCHON; BAY ISLAND
SPORTSWEAR INCORPORATED,
               Creditors-Appellees,
                and
SOUTHERN TEXTILE KNITTERS OF
GREENWOOD, INCORPORATED,
                  Debtor-Appellee.
                                       
2                In Re: SOUTHERN TEXTILE KNITTERS



In Re: SOUTHERN TEXTILE                 
KNITTERS OF GREENWOOD,
INCORPORATED,
                              Debtor.


ANDERSON & ASSOCIATES, PA,
                        Appellant,
                and
ROBERT F. ANDERSON, Trustee,
                Trustee-Appellant,
                 v.
SOUTHERN TEXTILE KNITTERS DE
HONDURAS SEWING INCORPORATED,                     No. 02-1365
         Party in Interest-Appellee,
                and
SAMUEL H. SIMCHON; LEVY SIMCHON;
REBECCA SIMCHON; ODED SIMCHON;
OLD FORT INDUSTRIAL PARK LLC;
HAVA SIMCHON; BAY ISLAND
SPORTSWEAR INCORPORATED,
               Creditors-Appellees,
                and
SOUTHERN TEXTILE KNITTERS OF
GREENWOOD, INCORPORATED,
                  Debtor-Appellee.
                                        
          Appeals from the United States District Court
         for the District of South Carolina, at Anderson.
               Margaret B. Seymour, District Judge.
       (CA-00-3426-8-24, BK-98-7203-W, CA-01-312-8-24)
                      Argued: September 23, 2002
                      Decided: January 16, 2003
                  In Re: SOUTHERN TEXTILE KNITTERS                   3
Before WILKINSON, Chief Judge, TRAXLER, Circuit Judge, and
 Claude M. HILTON, Chief United States District Judge for the
       Eastern District of Virginia, sitting by designation.



Affirmed in part, reversed in part, and remanded by unpublished per
curiam opinion.


                             COUNSEL

ARGUED: Henry Flynn Griffin, III, ANDERSON & ASSOCIATES,
P.A., Columbia, South Carolina, for Appellants. Robert L. Widener,
MCNAIR LAW FIRM, P.A., Columbia, South Carolina, for Appel-
lees. ON BRIEF: Michael M. Beal, MCNAIR LAW FIRM, P.A.,
Columbia, South Carolina, for Appellees.



Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).


                             OPINION

PER CURIAM:

   Anderson & Associates, P.A. and Robert F. Anderson (collectively
"Trustee") filed suit as Trustee in bankruptcy against Samuel Sim-
chon and multiple related parties (collectively "Defendants") who had
all been connected to Southern Textile Knitters, Inc. ("Debtor")
before its bankruptcy. Trustee argued that Defendants had fraudu-
lently misappropriated large sums of cash and inventory from Debtor
while they were in control of its activities. The bankruptcy court
rejected Trustee’s major substantive claims, found in favor of Trustee
on certain minor counts, and sanctioned Trustee’s counsel for improp-
erly maintaining certain claims without sufficient foundation. The dis-
4                 In Re: SOUTHERN TEXTILE KNITTERS
trict court upheld the bankruptcy court’s decision. We affirm in part
and reverse in part.

                                   I.

   Debtor was incorporated in October 1988. Its principal business
was the manufacture and sale of T-shirts. From the date of incorpora-
tion, it was a closely held corporation with the sole ownership stake
split between the company’s president, Samuel Simchon, his father
Levy Simchon, his mother Rebecca Simchon, and his brother Oded
Simchon; those four also made up the Board of Directors. Samuel’s
sister Hava Simchon was a commission salesperson but did not serve
as an officer or director.

   Historically, Debtor was a very successful company. During FY
1995, Debtor had a net income of $2.3 million on $20.8 million in
revenues, with assets exceeding liabilities by $2.8 million. In the
wake of NAFTA, however, Debtor’s competitors began to move off-
shore to take advantage of cheap labor. By 1996, virtually all of them
were offshore, and the resulting shift in industry cost structure led to
a serious downturn in Debtor’s financial situation. After an attempt
in late 1995 to subcontract some operations to a Mexican manufac-
turer failed, Debtor’s shareholders decided, on the advice of Ameri-
can and Honduran counsel, to create a Honduran corporation which
would sew cut parts into finished goods. Southern Textile Knitters de
Honduras, Inc. (STKH) was formed in March 1997, with Samuel
owning 99% of the shares and Levy owning the remaining 1%.
Debtor paid all of STKH’s operating costs and also shipped sewing
equipment and inventory to STKH, retaining title to both. In return,
STKH provided sewing services to Debtor at cost. STKH was con-
tractually obliged to pay Debtor $3,000 per month for the sewing
equipment, but that rent was never paid. Debtor saved at least
$600,000 by using STKH, lowering its net sewing costs by approxi-
mately half.

  In October 1997, Debtor transferred its 1/3 equity interest in Excel
Dyeing and Finishing, Inc. ("Excel") to Samuel as a bonus. The Excel
shares had been purchased for $75,000 and were valued in September
1997 at $107,000. In addition to the bonus, Samuel also received
$141,000 in salary during Debtor’s final year of solvency.
                  In Re: SOUTHERN TEXTILE KNITTERS                  5
   Debtor’s financial situation continued to deteriorate, however. By
FY 1997, its revenues had fallen to $13 million and it was operating
at essentially no profit. In June 1998, Debtor’s principal lender,
SouthTrust Savings, terminated Debtor’s line of credit because of
continued deterioration in Debtor’s financial condition. Bay Island
Sportswear, Inc. (a corporation 100% owned by Samuel) subse-
quently purchased SouthTrust’s outstanding claim on Debtor’s assets,
which Samuel had personally guaranteed. And Samuel began to per-
sonally infuse cash into Debtor so that it could continue to operate.
Relying on the advice of counsel, Samuel purchased products from
Debtor and resold them to Debtor’s customers when he was able to
do so. However, Debtor did not reduce the inventory listed on its
books to reflect these sales, so the inventory remained listed as an
asset on Debtor’s books. Samuel then formed Southern Textile Knit-
ters of Greenwood, Inc. (STKG) with himself as sole shareholder. He
transferred all the inventory he purchased from Debtor to STKG and
used STKG as the vehicle to sell the purchased products to Debtor’s
existing customers. The inventory that Samuel purchased was identi-
fied and physically segregated from Debtor’s remaining inventory,
but was not moved from Debtor’s warehouses. STKG closed down
soon after it sold all of the products Samuel purchased from Debtor.
In total, this maneuver gave Debtor an $850,000 cash infusion essen-
tially straight from Samuel’s pockets.

   Despite these maneuvers, Debtor was unable to reverse its financial
position. After negotiations for debt restructuring failed, creditors
filed an involuntary petition for relief under Chapter 7 of the Bank-
ruptcy Code. Debtor consented to the relief sought in September
1998. Schedules filed by Debtor during the bankruptcy proceedings
indicate that Debtor was insolvent at that time by roughly $2 million.
Debtor also had $2.4 million less inventory on hand than Trustee’s
analysis of the books suggested should be present.

   Robert F. Anderson was appointed as Trustee in September 1998
and has served as Trustee since that time. In January 1999, Trustee
filed this lawsuit. After being amended twice, Trustee’s complaint
named the following defendants: Samuel, Levy, Rebecca, Oded,
Hava, Renee Simchon (Samuel’s wife), STKG, STKH, Excel, Center
Pointe Construction (a corporation 100% owned by Renee), Old Fort
Industrial Park (a corporation 96% owned by Samuel), and Bay
6                 In Re: SOUTHERN TEXTILE KNITTERS
Island. Trustee sought the following relief: (1) turnover of assets pur-
suant to 11 U.S.C. § 542; (2) avoidance of preferential transfers under
11 U.S.C. § 547; (3) avoidance of fraudulent transfers under 11
U.S.C. § 548; (4) avoidance of post-petition transfers pursuant to 11
U.S.C. § 549; (5) damages for breach of fiduciary duty; (6) piercing
the corporate veil; (7) damages for aiding and abetting; (8) damages
for conversion; (9) avoidance of fraudulent transfers under S.C. Code
§ 27-23-10; (10) damages for civil conspiracy; (11) subordination of
claims; (12) accounting of assets; (13) payment of rent due by STKH;
and (14) payment of money owed by Hava.

   The charges against Hava were tried separately, and the bankruptcy
court granted judgment in favor of Hava in March 2000. In January,
March, and April 2000, the bankruptcy court dismissed all causes of
action against Levy, Rebecca, Oded, Renee, Center Pointe, Old Fort,
and Bay Island. On July 19, the bankruptcy court dismissed all
remaining causes of action which required Debtor to have been insol-
vent before July 31, 1998. On July 29, the bankruptcy court granted
judgment under Rule 52 in favor of the remaining defendants — Sam-
uel, STKH, and STKG — on all remaining charges except three. It
found in favor of Trustee on the claims for turnover of the equipment
used by STKH, conversion of the equipment used by STKH, and rent
due for the equipment used by STKH. It therefore required Defen-
dants to return the sewing equipment from STKH and pay the accrued
rent. The district court affirmed the bankruptcy court on all counts,
holding that the bankruptcy court’s application of the wrong legal
standard on some of the claims was harmless error.

   On August 18, the bankruptcy court fined Trustee’s counsel $1,000
for failing to withdraw Trustee’s claim against Old Fort. On Novem-
ber 21, the bankruptcy court fined Trustee’s counsel $750 for pursu-
ing claims that required insolvency before July 31, 1998 as a
necessary element. The district court upheld these sanctions in two
separate rulings.

                                  II.

   The district court’s decision is reviewed de novo. In re Weiss, 111
F.3d 1159, 1166 (4th Cir. 1997). We review the bankruptcy court’s
findings of fact for clear error and its conclusions of law de novo. Id.
                   In Re: SOUTHERN TEXTILE KNITTERS                     7
                                   III.

   Trustee brings claims against Samuel, Levy, Rebecca, Oded,
Renee, STKG, and STKH under several causes of action involving
fraud or unfairness, including breach of fiduciary duty, aiding and
abetting a breach of fiduciary duty, and fraudulent transfer under S.C.
Code § 27-23-10 and 11 U.S.C. § 548(a)(1)(A). As discussed by the
bankruptcy court, all of these claims involve at their core the allega-
tion that Defendants’ behavior in this case was improper. See In re
Southern Textile Knitters, Inc., 2000 WL 33709685 (Bankr. D.S.C.
July 27, 2000). Thus, if the bankruptcy court was correct that none of
Defendants defrauded Debtor or dealt with it in even an arguably
improper fashion, none of these claims can stand. We therefore
review that finding.

                                   A.

   Trustee’s contentions of fraud and unfair dealing center on his
characterization of a series of transactions between Debtor, Samuel,
STKG, and STKH as fraudulent or bad-faith transfers from Debtor to
insiders. Trustee points specifically to the transfer of inventory and
operating funds to STKH, the sale to Samuel and STKG of inventory
from Debtor’s warehouses, and the payment of a salary and stock
bonus to Samuel.

    Trustee contends that these transfers must be avoided as fraudulent.
See 11 U.S.C. § 548(a)(1)(A) (2002) (transfers completed within one
year of the bankruptcy petition may be avoided if made "with actual
intent to hinder, delay, or defraud any entity to which the debtor was
. . . indebted"); S.C. Code § 27-23-10(A) (2002) ("Every . . . transfer
. . . [made] for any intent or purpose to delay, hinder, or defraud cred-
itors . . . must be deemed . . . to be clearly and utterly void"). He also
argues that they constituted a breach of fiduciary duty. See S.C. Code
§ 33-8-300(a) ("A director shall discharge his duties . . . in good faith
. . . [and] in a manner he reasonably believes to be in the best interests
of the corporation and its shareholders."). And he contends that the
fraudulent nature of these transfers justifies piercing the corporate veil
so that creditors can pursue their claims directly against the individual
Defendants. See Parker Peanut Co. v. Felder, 20 S.E.2d 716, 720
(S.C. 1942) ("Where . . . the corporate fiction is urged for fraudulent
8                  In Re: SOUTHERN TEXTILE KNITTERS
or perverted purposes, the courts may properly disregard it and look
to the responsible human beings . . . who compose the corporation
and are hidden behind the juristic screen.") (citations omitted).

   The bankruptcy court, however, held that the key decisions chal-
lenged by Trustee were made by Defendants as part of a bona fide
effort to save Debtor in the face of rapidly changing market condi-
tions. The bankruptcy court’s finding was based on a careful, exten-
sive, credibility-based review of testimony and evidence presented by
the parties. We see no clear error in this finding and therefore affirm
the trial court’s rejection of the fraudulent transfer and breach of fidu-
ciary duty charges, as well as its refusal to pierce the corporate veil.

   The court found that Debtor temporarily transferred inventory to
STKH for assembly into salable finished goods and sent equipment
and cash to STKH to cover the local costs of that assembly. This was
simple and straightforward production outsourcing; as the bankruptcy
court noted, "[t]he transfer of inventory and operating funds to STKH
appear[s] to be a result of Debtor’s attempt to move its sewing opera-
tion off-shore to reduce its costs" and stay competitive with other T-
shirt manufacturers. In re Southern Textile Knitters, 2000 WL
33709685, at *20. Indeed, STKH lost $180,000 on $635,000 in reve-
nues during 1998, and its liabilities were greater than its assets at the
end of that year. It was not clearly erroneous for the bankruptcy court
to hold that these transactions were proper.

   Similarly, the bankruptcy court did not commit clear error in hold-
ing that the sale of inventory to Samuel and STKG was a stopgap
effort to generate cash to keep the company afloat. The bankruptcy
court specifically held that "the transfer of inventory to [Samuel] and
STKG [was] an attempt [to] pay down SouthTrust’s loan . . . and to
aid Debtor during its financial downturn," and further that "STKG
ultimately purchased the inventory and sold it to third parties at no
profit." (emphasis added). In re Southern Textile Knitters, 2000 WL
33709685, at *20. And like STKH, STKG also "lost considerable
amounts of money during its short existence." Id. at *11. These find-
ings were sufficient to justify the bankruptcy court’s conclusion that
the inventory sales were not improper.

  Finally, the court did not clearly err in its conclusion that Samuel’s
yearly salary and bonus — less than $250,000 for the head of a $13
                  In Re: SOUTHERN TEXTILE KNITTERS                   9
million company which had historically been very profitable — repre-
sented good faith "compensation and bonus for his services." Id. at
*20.

                                  B.

   Trustee claims that, even failing a finding of fraudulent behavior
with respect to any of the specific challenged transactions, there is
nonetheless a smoking gun proving that major impropriety took place:
$2.4 million in inventory vanished from Debtor’s books without
explanation. That this inventory was misappropriated is apparent, he
claims, from the application of simple arithmetic. On July 31, 1998,
there was $3.7 million of inventory listed on the books. But after
Trustee was appointed in September 1998, he found only $1.3 million
of inventory on hand when he liquidated the stock. Thus, Trustee
argues, Defendants misappropriated roughly $2.4 million in inventory
that simply vanished from the books without a trace.

   The bankruptcy court’s careful analysis of the facts, however, dem-
onstrates that Defendants sufficiently explained the $2.4 million dis-
crepancy. See In re Southern Textile Knitters, 2000 WL 33709685, at
*12-15. The bankruptcy court noted that $200,000 of the alleged gap
was attributable to the fact that Defendants’ accounting method val-
ued some categories of inventory differently than did the accounting
method used by Trustee in September. Trustee’s misidentification of
some of the inventory as yarn or griege goods rather than as individ-
ual piece goods which have a higher value accounted for $205,000 of
the discrepancy. A further $1,790,000 of the inventory gap was due
to the fact that the inventory actually sold to Samuel had erroneously
been left on the books even after Debtor actually received payment
for that inventory. Between $100,000 and $200,000 more of the gap
was accounted for by a collection of damaged inventory left in the
warehouse but not included in the September accounting. And any
remaining discrepancy was accounted for by the fact that some
20,000 pounds of yarn had not yet been liquidated when the Septem-
ber accounting took place, and also by the fact that Debtor made some
sales of inventory after the July 31 accounting.

  Defendants have thus adequately accounted for the discrepancy
between their figures and Trustee’s figures. There is no inventory gap,
and no smoking gun.
10                 In Re: SOUTHERN TEXTILE KNITTERS
                                   C.

   Trustee further claims that the bankruptcy court used the wrong
burden of proof in resolving the claims of breach of fiduciary duty
and fraudulent transfer. Trustee argues that the findings discussed
above should therefore not be insulated by the "clearly erroneous"
standard of review. See In re K & L Lakeland, Inc., 128 F.3d 203, 206
(4th Cir. 1997); Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1526-
27 (4th Cir. 1984).

   Ordinarily, the plaintiff bears the burden of proof with claims such
as those brought by Trustee. Under S.C. Code § 33-8-310, however,
the burden of proving the fairness of a conflict of interest transaction
(one in which a director of the corporation has a direct or indirect
interest) lies on the party seeking to defend the transaction. The bur-
den of proof can be shifted back to the party challenging the transac-
tion in one of two circumstances: if the transaction was ratified by a
majority of the disinterested directors, or if it was ratified by a major-
ity of the disinterested shareholders. S.C. Code § 33-8-310 (2002).
Since Debtor’s directors ratified the transfers challenged here, the
bankruptcy court held that the burden was shifted back to Trustee to
prove that the transfers were fundamentally unfair.

   This ruling was incorrect. By the terms of S.C. Code § 33-8-310,
the transfers challenged in this case were not approved by a disinter-
ested board because the members of that board were Samuel’s imme-
diate family. See id. at comment 5 (stating that a director should be
viewed as interested if he or his family members have a financial
interest in the transaction). Under South Carolina law, the burden
should therefore have remained on Defendants. This means, Trustee
asserts, that the bankruptcy court’s findings of fact are not insulated
from review by the clearly erroneous standard, since the court did not
actually find by a preponderance of the evidence that Defendants’
actions were fundamentally fair.

   With respect to the transfers to STKG, the transfers to STKH, and
Samuel’s compensation, however, the bankruptcy court did in fact put
the burden on Defendants to prove the underlying fairness of the
transactions. It is true that, in its analysis of the breach of fiduciary
duty claim, the court erroneously placed the burden on Trustee. How-
                   In Re: SOUTHERN TEXTILE KNITTERS                      11
ever, in its separate analysis of the fraudulent transfer claims, the
bankruptcy court clearly put the burden on Defendants. It specifically
noted that the "burden of proof rests with Defendants to meet the
requirements" of proving the bona fides of these transactions. In re
Southern Textile Knitters, 2000 WL 33709685, at *19. And the fraud-
ulent transfer claims hinged on precisely the same underlying factual
events as the fiduciary duty claims: the STKG transfers, the STKH
transfers, and Samuel’s compensation. On each of these counts, plac-
ing the burden on Defendants to prove their case, the bankruptcy
court found that their behavior was fair and in good faith. Id. at *20-
22 (holding that conveyances "were [not] intended to defraud credi-
tors"). Thus, the court did make the factual findings critical to its fidu-
ciary duty analysis under the correct burden of proof — even if only
in another section of its opinion.

  We are also satisfied that a different burden of proof would not
have affected the lower court’s rejection of Trustee’s allegation that
$2.3 million dollars of inventory is unaccounted for.

   To begin with, it is certain that the court would have found that
$1.8 million of that alleged gap was appropriately accounted for
under either burden of proof. In its separate Findings of Fact, applica-
ble to every section of its opinion, the court found that "the sales of
inventory from Debtor to [Samuel] were not reflected in Debtor’s
books and records by a respective reduction in inventory" even
though Debtor received full payment from Samuel for those transfers.
Id. at *8. Its subsequent discussion of the alleged $2.3 million gap
explicitly relied on that earlier and separate finding: since the inven-
tory sold to Samuel "had not been removed from the inventory num-
bers carried on Debtor’s books and records," the July 31 figures on
which Trustee relies are overstated by the amount at which that inven-
tory was valued — roughly $1.8 million dollars.1 Id. at *12.
  1
   Trustee argues that Samuel’s payment of $850,000 for this inventory
demonstrates fraud in itself. However, the bankruptcy court noted that
the discrepancy between the two values was due to the average cost basis
of Debtor’s accounting on its books. In re Southern Textile Knitters,
2000 WL 33709685, at *12 n.11. More important, the bankruptcy court
also found (in a section of its opinion where it had clearly placed the bur-
den on Defendants) that Samuel resold the inventory to Debtor’s existing
customers "at no profit." Id. at *20 (emphasis added). This was sufficient
evidence for the court’s conclusion that Samuel’s purchase of the inven-
tory was not made in bad faith. Id.
12                In Re: SOUTHERN TEXTILE KNITTERS
   With respect to the remaining $500,000 in allegedly missing inven-
tory, it is apparent from both the logic of Defendants’ explanation and
from the overall context of the bankruptcy court’s rulings that the
bankruptcy court would have given equal credence to Defendants’
careful and logical explanation of the facts under any burden of proof.
In more than five lengthy rulings on charges relating to Defendants’
behavior during Debtor’s final year of existence, the bankruptcy court
judge rejected every single specific allegation of fraud or unfair deal-
ing. It did so both when the burden was on Defendants and when the
burden was on Trustee. It did so with heavy reliance on judgments
about witness credibility and demeanor, an aspect of fact finding
which appellate courts are particularly ill equipped to second-guess.
If the bankruptcy court had harbored questions about the alleged $2.3
million gap, it is difficult to imagine that it would have found Defen-
dants credible in their arguments on every single other count, as it
obviously did. Ultimately, it is clear to this court that the bankruptcy
judge believed Defendants to have been motivated by a sincere desire
to save their family business from ruin; this sense pervades the Find-
ings of Fact as well as the court’s specific Findings of Law.

                                  IV.

   Trustee further brings a claim of constructive fraud under both S.C.
Code § 27-23-10(A) and 11 U.S.C. § 548(a)(1)(B), challenging the
transfer of inventory and operating funds to STKH, the transfer of
inventory and business to STKG, and the transfer of a salary and
bonus to Samuel. We address each statutory ground in turn.

                                   A.

   Under § 27-23-10, more commonly known as the Statute of Eliza-
beth, an action lies for constructive fraudulent transfer if (1) debtor
makes a transfer but does not receive "valuable consideration" in
return; (2) debtor was indebted to the plaintiff at the time of transfer;
and (3) debtor does not have sufficient property to pay his debt to
plaintiff in full. Future Group, II v. Nationsbank, 478 S.E.2d 45, 48-
49 (S.C. 1996). If all three conditions are met, the transfer will be set
aside as a fraudulent conveyance. Id. Since the transfers at issue here
were made to members of the family, Defendants have the burden to
establish "both a valuable consideration and the bona fides of the
                  In Re: SOUTHERN TEXTILE KNITTERS                   13
transaction by clear and convincing testimony." Windsor Props., Inc.
v. Dolphin Head Constr. Co., 498 S.E.2d 858, 860 (S.C. 1998) (cita-
tions omitted).

   Noting that the "burden of proof rests with Defendants" to meet
these requirements, the bankruptcy court held that Defendants had
established by clear and convincing evidence that each transfer was
reciprocated with valuable consideration. In re Southern Textile Knit-
ters, 2000 WL 33709685, at *19 (citing Windsor Props., 498 S.E.2d
at 861). That conclusion was sufficiently supported by the evidence.
As discussed above, Debtor received $850,000 in desperately-needed
emergency capital in exchange for the inventory it sold to Samuel.
The fact that Samuel then sold this inventory at no profit to Debtor’s
existing customers is sufficient to support the conclusion that the
price he paid was the market price. Similarly, the shipments of money
and inventory to STKH were compensated by STKH’s sewing those
goods into finished parts. Indeed, the STKH outsourcing saved
Debtor roughly half of what its costs would have been in the United
States — a profitable exchange for Debtor by any measure. Id. at *9.
And the district court’s conclusion that Samuel’s services as President
of Debtor were consideration for his salary and stock bonus was also
reasonable in light of Samuel’s position with the company, Debtor’s
size, and Debtor’s historic success.

   Thus, since these transfers were supported by valuable consider-
ation, they may not be set aside under the Statute of Elizabeth.

                                  B.

   Under 11 U.S.C. § 548(a)(1)(B), a transfer by Debtor of any inter-
est in property may be avoided if two elements are satisfied. First,
Debtor must have "received less than a reasonably equivalent value
in exchange for such transfer." 11 U.S.C. § 548(a)(1)(B) (2002). Sec-
ond, the transfer must either have been made while Debtor was insol-
vent, or have itself rendered Debtor insolvent. Id. The district court
rejected Trustee’s claims under this statute because it held that Debtor
had been solvent through July 31, 1998.

  Because this finding was not clearly erroneous, we affirm. The evi-
dence presented by George DuRant, Trustee’s expert witness, tended
14                 In Re: SOUTHERN TEXTILE KNITTERS
to establish that Debtor was solvent as of July 31, 1998. He cited
Debtor’s internal financial statements from June 30, 1998 which
showed Debtor to be solvent at that time, and he did not suggest that
anything happened during July to change that status. This was suffi-
cient evidence to support the bankruptcy court’s finding.

                                   V.

   Trustee also seeks to avoid the transfers of inventory and business
to Samuel and STKG as preferential transfers under 11 U.S.C.
§ 547(b). That statute is intended to promote the "prime bankruptcy
policy of equality of distribution among creditors" and to "discour-
age[ ] creditors from attempting to outmaneuver each other in an
effort to carve up a financially unstable debtor." In re Barefoot, 952
F.2d 795, 797-98 (4th Cir. 1991) (citations omitted). It allows a
trustee in bankruptcy to avoid any transfer:

     (1) to or for the benefit of a creditor;

     (2) for or on account of an antecedent debt owed by the
     debtor before such transfer was made;

     (3) made while the debtor was insolvent;

     (4) made—

       (A) on or within 90 days before the date of the filing of
     the petition; or

        (B) between ninety days and one year before the date of
     the filing of the petition, if such creditor at the time of such
     transfer was an insider; and

     (5) that enables such creditor to receive more than such
     creditor would receive if—

       (A) the case were a case under chapter 7 of this title;

       (B) the transfer had not been made; and
                  In Re: SOUTHERN TEXTILE KNITTERS                    15
        (C) such creditor received payment of such debt to the
      extent provided by the provisions of this title.

11 U.S.C. § 547(b) (2002). The district court rejected this claim based
on its finding that Debtor had been solvent until at least July 31, 1998.
We affirm on different grounds.

   Section 547(c)(1) provides an exception to this general rule of pref-
erential transfers. Courts may not use § 547 to avoid any transfer
which was intended to be part of a "contemporaneous exchange for
new value given to the debtor" and which actually was "in fact a sub-
stantially contemporaneous exchange." 11 U.S.C. § 547(c)(1) (2002).
"New value" is defined as any "money or money’s worth in goods,
services, or new credit." 11 U.S.C. § 547(a)(2) (2002). This rule
makes sense for two reasons: it encourages business partners to con-
tinue doing business with troubled debtors (potentially enabling them
to avoid bankruptcy altogether), and it does not adversely affect other
creditors because Debtor’s estate receives new value in exchange for
the money or property it gives up. In re Jones Truck Lines, 130 F.3d
323, 326 (8th Cir. 1997).

   This exception applies to the inventory transfers from Debtor to
Samuel. The bankruptcy court explicitly found that Samuel "pur-
chase[d] products from Debtor for cash in an effort to alleviate Debt-
or’s cash flow problem." In re Southern Textile Knitters, 2000 WL
33709685, at *6. It held that Samuel and Debtor, on the advice of cor-
porate counsel, intended the cash purchases to be payments for an
immediate property exchange rather than temporary loans. Id. at *6-
8. This finding was based on the trial court’s assessment of witness
credibility, and it was not clearly erroneous. The transfers of inven-
tory to STKG and Samuel therefore may not be avoided under 11
U.S.C. § 547(b).

                                  VI.

   Trustee further challenges the bankruptcy court’s ruling that pay-
ments made to Hava did not violate the Statute of Elizabeth’s prohibi-
tion on transfers made "for any intent or purpose to delay, hinder, or
defraud creditors." S.C. Code § 27-23-10(A) (2002).2 He argues that
  2
   Trustee does not challenge the bankruptcy court’s ruling that, in the
absence of fraud, South Carolina law does not require employees to
16                In Re: SOUTHERN TEXTILE KNITTERS
the bankruptcy court should have required Hava to prove by clear and
convincing evidence that she gave valuable consideration in exchange
for her salary. We agree, and therefore remand this issue to the bank-
ruptcy court for a determination of that issue under the proper burden
of proof.

   When considering transfers to a family member under the Statute
of Elizabeth, "the burden of proof shifts to the transferee to prove
both that valuable consideration was exchanged between the parties
and the bonafides of the transaction." In re Haddock, 246 B.R. 810,
816 (Bankr. D.S.C. 2000). Furthermore, "[e]ach must be established
by clear and convincing evidence, not mere preponderance of the evi-
dence." Id.; see also Windsor Props., 498 S.E.2d at 860. In this case,
the bankruptcy court stood this cause of action on its head and placed
the burden of proof on Trustee to prove his case rather than on Hava
to disprove it by clear and convincing evidence. This was reversible
error.

   Defendants respond that the court would have reached the same
result under the correct burden of proof. We decline to make that
assumption, particularly because of the very large gap between the
burden of proof that should have been applied and the burden of proof
that was actually applied. Our hesitation to do so is reinforced by the
existence of evidence which, depending on the bankruptcy court’s
credibility assessment, could have supported a verdict for Trustee on
this claim.

   In particular, Hava’s pre-trial deposition could give rise to the
inference that she did not do any real work for Debtor during the
years that she was receiving a paycheck. For example, the following
exchange took place during her deposition:

     Q: [D]uring 1997, I guess, was the last full year that
        Southern Textile Knitters was in the business; how
        many presentations would you say you made?

repay unearned commissions unless they have specifically agreed to do
so. See McConnell v. Banker, 169 S.E. 842, 843 (S.C. 1933).
            In Re: SOUTHERN TEXTILE KNITTERS              17
A: I don’t recall.

Q: Approximately?

A: I don’t recall.

Q: Was it less than 10?

A: I don’t recall.

Q: Could it be less than 10?

A: I don’t recall.

Q: And do you recall how many telephone contacts you
   made during 1997?

A: I do not recall.

Q: Approximately?

A: I have no idea.

Q: Was it less than a hundred?

A: I do not recall.

....

Q: All right, who was your supervisor during 1997?

A: I believe it was Al Bollinger, but I’m not a hundred
   percent sure."

....

Q: All right, and during 1997, how many times did you
   talk to Mr. Bollinger, if at all?

A: I do not recall.
18                In Re: SOUTHERN TEXTILE KNITTERS
     Q: Well, would you generally talk to him once a month,
        or once a week or every day; how — how frequently
        would you talk to him?

     ....

     A: I don’t recall.

     Q: Do you know any of the other salesmen that worked at
        Southern Textile Knitters during 1997?

     A: I think Jean Price, but she’s the only one that I recall.

     ....

     Q: All right, during 1997, how many sales meeting [sic]
        would you say you attended?

     A: I don’t recall.

     ....

     Q: In 1997, how many clients did you have, how many
        customers?

     A: I don’t recall.

     Q: Approximately?

     A: I don’t recall.

     Q: Would you say it’s more than 10 or less than 10?

     A: I don’t recall.

     Q: Who was your best customer during 1997?

     A: I don’t recall.
                   In Re: SOUTHERN TEXTILE KNITTERS                     19
     Q: Do you know the names of any of your customers dur-
        ing 1997?

     A: I don’t recall.

   Similar concerns apply to the bankruptcy court’s assessment of
other evidence and testimony at Hava’s trial. At the time her employ-
ment was terminated, it appears that Hava had received advances on
future commissions larger than any other sales representative — argu-
ably a year and a half of as-yet unearned pay. Testimony from that
trial could support the conclusion that Hava was one of only two sales
representatives who even received any advances on future commis-
sions. She apparently kept no paper records of her daily activities as
sales representative for Debtor. And her highly specific testimony on
direct examination at trial about her responsibilities, customer con-
nections, and activities as sales representative could be seen as incon-
sistent with her earlier inability to remember even the most basic
details about her job.

   On remand, the bankruptcy court may well still decide in favor of
Hava. This issue, after all, turns on questions of credibility, intent, and
other subjective factors which the trial court is in a far better position
to assess than we are. But the gap between requiring clear and con-
vincing evidence from Hava that she acted properly and requiring
Trustee to prove that she acted improperly is too large for us to
ignore.

                                   VII.

   Trustee further contends that the bankruptcy court was wrong to
dismiss on summary judgment the contention that Bay Island’s claim
on Debtor’s assets should be equitably subordinated. We decline to
reverse the bankruptcy court on this ground.

   A creditor’s claim can generally be subordinated under 11 U.S.C.
§ 510(c) if three circumstances are satisfied: (1) the claimant engaged
in inequitable conduct; (2) that conduct injured other creditors; and
(3) subordination is consistent with other bankruptcy law. In re ASI
Reactivation, Inc., 934 F.2d 1315, 1320 (4th Cir. 1991); see also U.S.
20                In Re: SOUTHERN TEXTILE KNITTERS
v. Noland, 517 U.S. 535, 538-39 (1996) (holding that § 510(c) was
intended to incorporate existing doctrine of equitable subordination as
exemplified by In re Mobile Steel Co., 563 F.2d 692 (5th Cir. 1977)).

   Trustee suggests three grounds on which Bay Island’s claim should
be equitably subordinated. We reject each of them. First, he argues
that Bay Island initially submitted an excessive claim on Debtor’s
estate before revising it downwards to an acceptable figure. But the
bankruptcy court held that the reduction of Bay Island’s claim did not
demonstrate prior inequitable behavior, since Bay Island had openly
explained that the higher figure included certain funds in which
STKG had a claim. In re Southern Textile Knitters, Inc., No. 98-
07203-W, slip op. at 3 (Bankr. D.S.C. Jan. 5, 1999). Second, Trustee
argues that because Samuel had personally guaranteed the SouthTrust
claim, giving equal priority to Bay Island’s claim would grant Samuel
a windfall. In support of this argument, Trustee cites In re Psychiatric
Hosp. of Hernendo, Inc., 207 B.R. 276 (Bankr. M.D. Fla. 1997). The
insider’s claim was partially subordinated in that case, however,
because he had purchased a creditor’s claim for 25% of its value and
sought to collect on the entire claim — not because he had also pur-
chased the creditor’s separate claim on his own assets. Id. at 281-82.
South Bay, by contrast, seeks only to recover what it actually paid.
Third, Trustee argues that Samuel’s conversion of sewing equipment
to STKH qualifies as inequitable conduct sufficient to justify subordi-
nation. However, the bankruptcy court did not view Samuel’s conduct
as sufficient to support a finding of inherent unfairness under fidu-
ciary duty analysis. We are not inclined to disturb its judgment.

   In the final analysis, there simply is no injury to Debtor’s other
creditors here. Bay Island merely stands in the shoes of SouthTrust:
it can receive only what SouthTrust could have received. We decline
to reverse the bankruptcy court’s refusal to equitably subordinate Bay
Island’s claim.

                                 VIII.

   Trustee argues that Samuel should be personally responsible for the
unpaid rent on the sewing equipment that was temporarily transferred
from Debtor to STKH. Trustee, however, does not contend that Sam-
uel was a party to the rental contract between STKH and Debtor;
                  In Re: SOUTHERN TEXTILE KNITTERS                    21
indeed, the trial court’s order makes it clear that "the rent [is] owed
by STKH." In re Southern Textile Knitters, 2000 WL 33709685, at
*17 (emphasis added). And for the reasons discussed in Part III, we
decline to pierce the corporate veil with respect to any of the compa-
nies involved in this case. We therefore hold that Samuel may not be
held personally liable for the unpaid rent.

                                  IX.

   The bankruptcy court also sanctioned Trustee’s counsel for two
separate aspects of his conduct during the litigation. Trustee appeals
those rulings. We review each ruling in turn.

   A bankruptcy court’s order of sanctions may be overruled if it is
an abuse of discretion. It is an abuse of discretion for a trial court to
"base[ ] its ruling on an erroneous view of the law or on a clearly
erroneous assessment of the evidence." Cooter & Gell v. Hartmax
Corp., 496 U.S. 384, 405 (1990).

                                   A.

   The bankruptcy court sanctioned Anderson & Associates for its
failure to withdraw Trustee’s claims against Old Fort under 11 U.S.C.
§ 547, 11 U.S.C. § 548, and S.C. Code § 27-23-10. The sanctions
were based on the court’s holding that Rule 9011 of the Federal Rules
of Bankruptcy Procedure requires affirmative, formal withdrawal of
any claims which, though proper when made, later turn out to have
no evidentiary basis.

   Rule 9011(b)(3) requires all "representations to the court" either to
"have evidentiary support" or to be "likely to have evidentiary support
after a reasonable opportunity for further investigation." Fed. R.
Bankr. P. 9011(b)(3). The bankruptcy court noted that Trustee’s
claims against Old Fort were "not initially frivolous" and that Trustee
"refrain[ed] from making any arguments or presenting any evidence"
about those claims at any point during the trial. In re Southern Textile
Knitters, Inc., 2000 WL 33709686, at *8 (Bankr. D.S.C., Aug 18,
2000). Indeed, apparently the only representation made by Trustee
after he discovered that his fraudulent transfer claims against Old Fort
22                 In Re: SOUTHERN TEXTILE KNITTERS
had no basis was the following: "We’re not aware of any transfers to
Old Fort . . . . The only [claim] that’s left [to be litigated], as far as
I know, as far as Old Fort, is the accounting." And the only claim
against Old Fort listed in Trustee’s Pre-Trial Order was a request for
an accounting. Trustee’s Jan. 12, 2000 Pre-Trial Order at 6-13, In re
Southern Textile Knitters, Inc., No. 98-07203-W (Bankr. D.S.C.
2000).

   Thus, the claims were neither improper when filed nor affirma-
tively reiterated once their lack of evidentiary support became clear.
Rather, the sanctions were levied because Defendants "fail[ed] to
withdraw the allegations despite a knowledge of a lack of evidentiary
support." In re Southern Textile Knitters, 2000 WL 33709686, at *10.
Imposition of sanctions therefore hinges on the theory that Rule 9011
requires litigants to formally withdraw claims which were proper
when made, but turn out during the course of litigation to have an
insufficient evidentiary basis. The plain text of the rule forecloses this
theory.3 "Presenting to the court" is carefully defined in the rule; it
includes "signing, filing, submitting, or later advocating" a meritless
position. Fed. R. Bankr. P. 9011(b). It does not include failing to for-
mally withdraw a meritless position.

                                   B.

   The trial court also sanctioned Trustee’s counsel for its pursuit of
claims against Samuel for preferential transfer under § 547 and fraud-
ulent transfer under § 548(a)(1)(B). Specifically, it sanctioned Trust-
ee’s decision to pursue those claims despite the fact that a necessary
element of each is Debtor’s insolvency at the time of the challenged
  3
    Nor do the cases decided under revised Rule 9011 that were cited by
the bankruptcy court support this theory. Both involved litigants who
affirmatively argued positions which they knew or should have known
to be meritless at the moment they argued them. See Turner v. Sungard
Bus. Sys., 91 F.3d 1418, 1420, 1422 (11th Cir. 1996) (lawyer explicitly
"told the court that he had evidence to support" plaintiff’s only claim
even though he "knew from the moment he began representing Plaintiff
that his claim was meritless"); Young v. Corbin, 889 F. Supp. 582, 586
(N.D.N.Y. 1995) (plaintiff "defaulted on his obligation under Rule 11 by
submitting to the court a frivolous lawsuit").
                  In Re: SOUTHERN TEXTILE KNITTERS                    23
transfers. The trial court based this ruling on two findings: first, that
Trustee’s counsel knew and conceded that Debtor had been solvent
at least through July 31, 1998; second, that the challenged transfers
all took place before that date.

   The bankruptcy court stated that George DuRant, Trustee’s expert
witness, unequivocally and directly testified that he believed Debtor
had been solvent up to at least July 31, 1998. If this were accurate,
it might provide sufficient basis for the court’s discretionary decision
to sanction Trustee’s counsel. However, it is not. DuRant explicitly
stated that he did not prepare a report on insolvency. His exchange
with Defendants’ counsel on cross-examination is instructive in this
regard:

    Q: And in this case it was your intent to prepare a report
       to the trustee that dealt with solvency, wasn’t it?

    A: I was asked to.

    Q: And you looked at the solvency issue, didn’t you?

    A: There you go, he asked me to, but I didn’t do that.

    Q: You didn’t look at it?

    A: No, I didn’t prepare a report on insolvency.

    ....

    Q: Okay. You are an expert on insolvency but you are not
       going to tell the Court whether or not this company was
       solvent at any time, is that correct?

    A: That’s correct.

DuRant’s testimony is straightforward: whatever his subsequent dis-
cussion of assumptions surrounding his calculations of misappropri-
ated inventory, he took no position on the specific date that Debtor
became insolvent. The bankruptcy court was clearly erroneous to hold
otherwise.
24                In Re: SOUTHERN TEXTILE KNITTERS
   The bankruptcy court also stated that "the parties [both] reported
that there was no dispute as to the fact that the transfer of the salary
and Excel stock to [Samuel] took place while Debtor was still sol-
vent." In re Southern Textile Knitters, Inc., No. 98-07203-W (Bankr.
D.S.C. Nov. 21, 2000), slip op. at 20. This was also error. Defense
counsel did represent to the court that "there is no dispute that [these
two transfers] occurred before July 31st." And Trustee’s counsel did
state at the same hearing that "all the salary payments were made
prior to July 31st, . . . as was [the transfer of] Excel stock." But the
parties’ agreement that the transfers occurred before July 31st is in no
sense equivalent to a concession by Trustee that Debtor had been sol-
vent up until that date. Trustee agreed that bankruptcy court was cor-
rect about the date of the transfer, but did not concede that Debtor had
been solvent on that date.4 The bankruptcy court erred in holding oth-
erwise.

   Since the sole basis for these sanctions was the erroneous conclu-
sion that Trustee’s counsel knew (or should have known) and con-
ceded that Debtor was insolvent prior to July 31, 1998, we reverse the
bankruptcy court’s order and dismiss Defendants’ motion for sanc-
tions with prejudice.

                                  X.

   In sum, we reverse the district court’s order dismissing the claims
of fraudulent transfer under S.C. Code § 27-23-10(A) against Hava
Simchon. We also reverse the imposition of sanctions against Ander-
son & Associates. We affirm the district court’s dismissal of all other
claims.

   The judgment of the district court is affirmed in part, reversed in
part, and remanded for further proceedings consistent with this opin-
ion.

                                  AFFIRMED IN PART, REVERSED
                                      IN PART, AND REMANDED
  4
   It is notable in this regard that Defendants do not even contest this
point on appeal.
