                                In the

    United States Court of Appeals
                 For the Seventh Circuit

Nos. 10-1203, 10-1227 & 10-1238

W ACHOVIA S ECURITIES, LLC,
                                                      Plaintiff-Appellee,
                                    v.

B ANCO P ANAMERICANO , INC., et al,

                                               Defendants-Appellants.


               Appeal from the United States District Court
          for the Northern District of Illinois, Eastern Division.
               No. 04 C 3082—Virginia M. Kendall, Judge.



     A RGUED S EPTEMBER 22, 2010—D ECIDED M ARCH 21, 2012


    Before M ANION, T INDER, and H AMILTON, Circuit Judges.
  T INDER, Circuit Judge. To recoup about $1.9 million in
margin debt from a group of businessmen once dubbed
“The ‘Bad Boys’ of Chicago Arbitrage,” 1 Wachovia Securi-
ties raised veil piercing and fraudulent transfer claims.
That was shrewd because this is a particularly compelling


1
  See Greg Burns, The ‘Bad Boys’ of Chicago Arbitrage,
BusinessWeek, Aug. 5, 1996, available at http://www.
businessweek.com/1996/32/b34876.htm.
2                         Nos. 10-1203, 10-1227 & 10-1238

case for both given that the district court’s generally
undisputed findings—a convoluted web of entities, in-
sider transactions, and sham loans all designed to avoid
financial responsibility—soundly supported the claims.


                 I. Factual Background
   Appellants Leon Greenblatt, Andrew Jahelka, and
Richard Nichols embrace a “three men and a telephone”
business style. These purported business minimalists
own Loop Corp. (also an appellant) as a closely-held
corporation for their real estate holdings. Loop incorpo-
rated in South Dakota in 1997 with $1,000 in paid-in
capital and maintains its principal place of business in
Illinois. Greenblatt (Loop’s corporate secretary) owns
50% of Loop. Jahelka (Loop’s president) owns 30%. And
Nichols (Loop’s treasurer) owns 20%. Appellant Banco
Panamericano, Inc. also incorporated in South Dakota
and lists Illinois as its principal place of business. A
Greenblatt family trust owns Banco. Greenblatt is
Banco’s sole officer, director, and employee.
  A focus of this appeal is a $9.9 million line of credit
Banco gave Loop on January 3, 2000. In exchange, Loop
gave Banco a blanket lien over Loop’s assets (once
totaling an estimated $32 million) at a 12% interest rate.
A promissory note and a security agreement documented
this transaction. Greenblatt signed for Banco and Jahelka
signed for Loop. On the same day, a handful of Loop
subsidiaries entered into a participation agreement on
the line of credit through which they (and other entities
Nos. 10-1203, 10-1227 & 10-1238                             3

associated with the Loop owners) advanced $3 million
to Loop. This arrangement gave the subsidiaries senior
secured creditor status over Loop’s assets. Greenblatt
signed for Banco and the participants and Jahelka
signed for Loop. As Greenblatt admitted at trial, the now-
creditor subsidiaries also functioned as collateral for
the funds they loaned Loop.
  Later that year, Greenblatt’s clerk David Neuhauser,
at his boss’s direction, opened a Prudential Securities
margin account in Loop’s name. As Wachovia is Pruden-
tial’s successor-in-interest, we will discuss this account
as though it was always a Wachovia account. Loop
used the account to buy shares in Health Risk Manage-
ment, Inc. (HRMI) on margin. Yet on May 22, 2001, the
NASDAQ halted trading in HRMI.2 The value of Loop’s
HRMI stock plunged prompting Wachovia to issue
a margin call on Loop’s account. Wachovia liquidated
Loop’s account, but a $1,885,751 debt remained. The
Banco-Loop line of credit also matured at the end of 2001
and Loop defaulted. Instead of enforcing the loan’s terms
or attempting to collect, in 2002 Banco extended and
expanded the line of credit to Loop. Greenblatt testi-
fied that loaning Loop more money maximized “the



2
  According to the district court, Neuhauser purchased HRMI
stock on the open market at Greenblatt’s direction through a
number of brokerage accounts. Wachovia Secs., LLC v. Jahelka,
586 F. Supp. 2d 972, 1004 (N.D. Ill. 2008). One of Neuhauser’s
jobs was assisting Greenblatt with an investment strategy
involving HRMI. Id.
4                         Nos. 10-1203, 10-1227 & 10-1238

value of Loop’s assets.” Banco advanced Loop money
into 2004. The district court placed the current loan
balance at $16 or $17 million and about $1 million in
interest.
  Meanwhile, Loop’s debt to Wachovia went unpaid.
Greenblatt did not let Loop use the Banco loan to
repay Wachovia, citing the loan’s terms, but in reality,
the terms were quite broad. Greenblatt testified that the
loan’s terms covered buying HRMI stock but later
claimed that its purchase was a “cost” and that the
margin debt was “financing.” When given the note’s
language stating that the loan’s purpose included “re-
payment of prior indebtedness . . . or other purpose
approved by” Banco, Jahelka acknowledged that the
terms did not require Banco’s approval to use the funds
to repay debt. Loop also invested $518,338 in Internet-
based golf tee time reservation company EZ Links.
In addition, Loop moved its real estate assets to Loop
Properties, of which Loop owns 10% with the remainder
held by Scattered Corp. (owned by the Loop owners).
Loop gave $386,550 to Banco, $20,000 to Resource Tech-
nology Corp. (owned by Rumpelstiltskin, which in turn
was owned by the Loop owners), $2,000 to Scattered,
$20,000 to Telegraph Properties (a Loop subsidiary), and
$15,775 to Loop Telecom LP (an entity related to Loop).
Appellants claimed these payments reduced Loop’s
debt to Banco on a dollar-for-dollar basis, but the
district court rejected this claim when appellants failed
to produce admissible or reliable evidence to support
the theory. Loop paid Nichols and Jahelka $210,500
in “compensation” but never issued W-2 forms or other-
Nos. 10-1203, 10-1227 & 10-1238                          5

wise reported the payments yet managed to issue W-2
forms to Loop’s other employees. Loop originally
dubbed payments to the Loop owners as a “return of
equity,” but without explanation or documentation
started calling the payments “compensation” after the
HRMI stock collapse.
  Wachovia initiated arbitration (pursuant to the terms
of the brokerage agreement) against Loop in 2003 and
also named Neuhauser, Jahelka, Nichols, and Greenblatt
(in addition to Loop) as individual respondents who, in
turn, sued Wachovia in Illinois state court to enjoin
the arbitration against them individually. Wachovia
removed this suit to federal court on a diversity juris-
dictional basis, answered the complaint, and filed counter-
claims. Wachovia dropped the individual respondents
from the arbitration proceeding and the district
court realigned the parties with Wachovia as plaintiff
and the Loop-related parties as defendants. In 2005,
Wachovia obtained an arbitration award against Loop,
which was reduced to a $2,478,418 judgment. The
district court granted defendants summary judgment
on some of Wachovia’s claims, Wachovia Secs., LLC v.
Neuhauser, 528 F. Supp. 2d 834 (N.D. Ill. 2007), and held
a bench trial in January 2008 on the remainder of
Wachovia’s claims that resulted in the court piercing
Loop’s corporate veil and finding Greenblatt, Nichols,
and Jahelka personally liable on the judgment. The
court also voided as fraudulent transfers Banco’s lien
over Loop’s assets, Loop’s “compensation” payments
to Jahelka and Nichols, and certain Loop payments to
6                            Nos. 10-1203, 10-1227 & 10-1238

EZ Links, and ordered appellants to pay Wachovia’s
fees and costs. Wachovia, 586 F. Supp. 2d at 1025-26.3


                         II. Analysis
  Because the district court held a bench trial, Fed. R. Civ.
P. 52(a)(6) requires us to leave findings of fact untouched
“unless clearly erroneous.” We review legal conclusions
de novo. See Cerros v. Steel Techs., Inc., 288 F.3d 1040,
1044 (7th Cir. 2002).


A. Veil Piercing
   In diversity cases, we look to the substantive law of the
state in which the district court sits, Erie R. Co. v. Tompkins,
304 U.S. 64, 78 (1938), including choice of law rules,
Klaxon Co. v. Stentor Elec. Mfg., 313 U.S. 487, 496-97 (1941).
Illinois applies the law of the state of incorporation for
veil piercing claims. E.g., Retzler v. Pratt & Whitney Co.,
723 N.E.2d 345, 354 (Ill. App. Ct. 1999); see also Judson
Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 529
F.3d 371, 378 (7th Cir. 2008). Yet appellants did not
address choice of law until appearing for trial after
four years of litigating this case. By waiting all that
time while asserting Illinois law in their briefs to the
district court, appellants acquiesced to Illinois law. See
Lott v. Levitt, 556 F.3d 564, 568 (7th Cir. 2009) (waiver



3
  We compliment the district court’s thorough and exhaustive
opinion in this matter.
Nos. 10-1203, 10-1227 & 10-1238                                   7

prevents this “very type of gamesmanship” of seeking a
“free peek at how” a dispute shakes out); Muslin v.
Frelinghuysen Livestock Managers, Inc., 777 F.2d 1230, 1231
n.1 (7th Cir. 1985) (waiting until “a late point in” the
litigation waived objecting to choice of law); Int’l Adm’rs,
Inc. v. Life Ins. Co., 753 F.2d 1373, 1378 (7th Cir. 1985)
(finding it “manifestly unfair and inappropriate, absent
compelling reasons . . . to disapprove” of a court’s choice
of law when neither party objected); Casio, Inc. v. S.M. & R.
Co., 755 F.2d 528, 530-31 (7th Cir. 1985) (parties func-
tionally stipulated to the law by not objecting); Restate-
ment (Second) of Conflicts of Law § 136(2) cmt. h (when
neither party refers to foreign law “in the pre-trial stages,”
the court “will usually decide the case” under local
law). As the time to press the choice of law issue passed
long before the start of trial, appellants waived objecting
to the district court’s application of Illinois law.4
  Corporations exist separately from their owners. Labor-
ers’ Pension Fund v. Lay-Com, Inc., 580 F.3d 602, 610 (7th
Cir. 2009) (citing Fontana v. TLD Builders, Inc., 840 N.E.2d
767, 775 (Ill. App. Ct. 2005)). The corporate veil allows
an entity’s investors to limit their liability and thus en-


4
  The district court also found South Dakota’s veil-piercing law
“substantially the same” as Illinois’s law, and that where it
diverged, it didn’t change the result. We agree and given the
evidence supporting the court’s findings, we also do not see
how the differences “change the outcome.” Int’l Adm’rs, 753
F.2d at 1376 & n.4; see also In re Air Crash Disaster, 644 F.2d 594,
605 & n.2 (7th Cir. 1981) (a conflict must actually exist for
choice of law to matter).
8                          Nos. 10-1203, 10-1227 & 10-1238

courage investment. Id. Yet courts may pierce a corpora-
tion’s veil and hold the individual investors per-
sonally liable for the underlying claim if the corporate
form “is used as a cloak or cover for fraud or illegality,
to work an injustice, to defend crime, or to defeat an
overriding public policy, or where necessary to achieve
equity.” 18 Am. Jur. 2d Corporations § 57 (footnotes omit-
ted). Illinois law permits veil piercing when two
separate prongs are met: (1) “there must be such unity
of interest and ownership that the separate personalities
of the corporation and the individual” no longer exist;
and (2) “circumstances must be such that adherence
to the fiction of separate corporate existence would sanc-
tion a fraud or promote injustice.” Hystro Prods., Inc.
v. MNP Corp., 18 F.3d 1384, 1388-89 (7th Cir. 1994)
(quoting Van Dorn Co. v. Future Chem. & Oil Corp., 753
F.2d 565, 569-70 (7th Cir. 1985)). For the first prong,
Wachovia had to make a “substantial showing” that
Loop was in fact “really a dummy or sham for” its
owners. Judson, 529 F.3d at 380 (quoting Rosier v. Cascade
Mountain, 855 N.E.2d 243, 251 (Ill. App. Ct. 2006)).
  Appellants’ appeal rests not on showing clear error in
the district court’s copious findings detailing appellants’
extraordinary abuse of the corporate form but on
an attempt to recharacterize various transactions and
relationships with Loop’s related entities as somehow
legitimate. They portray the court’s findings as a mis-
representation of their nontraditional, but admittedly
relaxed corporate culture and structure, that functioned
innocently and efficiently until the Wachovia margin
debt arose. Appellants’ attempt to rehabilitate the legiti-
Nos. 10-1203, 10-1227 & 10-1238                            9

macy of the business practices underlying the district
court’s veil piercing findings fails. The findings under-
lying the district court’s decision to pierce Loop’s
corporate veil show an utter abuse of the corporate
form. Their financial shell game leaves us quite satisfied
with the district court’s decision to apply the veil
piercing remedy. The district court’s findings regarding
the complete unity of interest and ownership between
Loop and its owners paint in stark detail a general disre-
gard of Loop’s separateness from its owners that opened
a floodgate of fraud and injustice that blindly adhering
to Loop’s separate existence would sanction.
  The district court structured its findings on the first
prong around the factors Illinois courts consider to de-
termine whether a unity of interest and ownership
exists: inadequate capitalization; failing to issue stock;
failing to observe corporate formalities; failing to pay div-
idends; corporate insolvency; nonfunctioning corporate
officers; missing corporate records; commingling funds;
diverting assets to an owner or other entity to creditor
detriment; failing to maintain an arm’s-length relation-
ship among related entities; and whether the corporation
is a mere façade for a dominant owner. Fontana,
840 N.E.2d at 778. No single factor is determinative. See
In re Estate of Wallen, 633 N.E.2d 1350, 1357 (Ill. App.
Ct. 1994).
  Appellants argue that the district court clearly erred
in finding Loop inadequately capitalized. No one
disputes Loop’s $1,000 paid-in capital but appellants
argue the court ignored evidence showing an additional
10                         Nos. 10-1203, 10-1227 & 10-1238

$10 million Loop received at its inception. Adequacy of
capitalization compares “the amount of capital to the
amount of business to be conducted and obligations
to be fulfilled.” Fiumetto v. Garrett Enters., Inc., 749
N.E.2d 992, 1005 (Ill. App. Ct. 2001). Without adequate
capitalization, “a corporation becomes a mere liability
shield, rather than an independent entity capable of
carrying on its own business.” Id. Adequate capitalization
exists when a corporation has sufficient equity without
considering loaned funds or encumbered assets. Laborers’
Pension Fund, 580 F.3d at 612. “Shareholders are
generally expected to invest some money . . . if they
want the benefit of limited liability.” Id. We needn’t
dwell on this factor because appellants ignore that the
district court made an unfavorable evidentiary deter-
mination against them on this issue. Appellants staked
their capitalization claim on a one-page summary docu-
ment purportedly supporting a funding basis of $10
million. The district court deemed the documentary
basis of that claim unreliable, lacking a foundation, and
“another example of the Defendants’ manipulation of
records to support their trial position.” Wachovia, 586
F. Supp. 2d at 992. Even if the document “had a modicum
of evidentiary value as to Loop’s actual initial capitaliza-
tion, it fails to disclose the extent to which” Loop’s assets
“were pledged as security for another obligation.” Id.
at 993. Appellants do not contest any of these findings
so we have nothing to review, although we note that
forms signed by Greenblatt and Jahelka under penalties
of perjury and filed with the Illinois Secretary of State
from 1999 to 2002 put Loop’s capitalization at $1,000.
Nos. 10-1203, 10-1227 & 10-1238                          11

So even if at certain times Loop had additional assets
(and it apparently did given Loop’s subsequent diversion
of assets to related entities), the Banco line of credit
encumbered them and Loop held itself out as thinly
capitalized.
   Regarding the related issue of Loop’s insolvency, appel-
lants claim that Loop was solvent before the HRMI
stock collapse. Perhaps this is true, but it does nothing
to refute the district court’s finding that “Loop’s assets
were looted after it incurred its margin debt.” Id. at 1002.
The district court cited evidence that others paid Loop’s
legal fees and Loop’s owners could not testify about
its solvency. Loop’s accountant testified that Loop
relied on Banco for money and could not operate
without the Banco line of credit. Loop’s counsel also
represented that Loop was a “dead company.” Id. at
1002 & n.22, 1020. Loop may have maintained solvency
until the HRMI stock it purchased on margin collapsed
but that only marked the point at which Loop share-
holders started raiding the company of its assets. Appel-
lants point out that there was a lack of evidence that
Loop shareholders looted corporate coffers “to indulge
a fancy lifestyle complete with extravagant houses,
fancy cars, and other such luxuries.” Jahelka & Nichols
Br. 49. Wachovia didn’t have to prove that Loop’s money
was drained to support fancy lifestyles. The district
court found that Loop paid nearly $1.2 million to
insiders or related entities. The court also found that
Loop’s compensation to Jahelka and Nichols was
abnormal and off the books. There was no error in the
court’s finding that Loop diverted its assets to its share-
12                         Nos. 10-1203, 10-1227 & 10-1238

holders and related entities after incurring its debt to
Wachovia. Id. at 1006-07.
   Appellants try to excuse the post-Wachovia debt plun-
dering of Loop’s assets as paying down the Banco loan.
But the district court rejected the claim that Banco gave
Loop dollar-for-dollar credit on the transfers. Appellants
try to justify their failure to provide admissible and
reliable evidence on the dollar-for-dollar credit theory
on the basis that they went to trial thinking the issue
was settled. Yet Greenblatt testified that a document
supporting the dollar-for-dollar credit theory existed, not
that the issue was settled. The district court, finding
that appellants “magically” produced this document
after trial, struck it under Fed. R. Civ. P. 37(b)(2)(A)(ii)
(failure to comply with a court order) and 37(c)(1)(C)
(failure to disclose). Id. at 988. The court went on to
find that even if it considered the document, it was unre-
liable because Greenblatt prepared it based on unspec-
ified Banco records, his notes, and “other financial docu-
ments.” Id. The district court found the document “ques-
tionable based on Greenblatt’s incentive to create a docu-
ment to support his trial testimony” after Wachovia
effectively attacked it. Id. Greenblatt’s demeanor also
supported the court’s decision: “His flippant, conde-
scending air in response to legitimate fact-finding ques-
tions further convince[d] the Court that he was inten-
tionally evading the truth.” Id. at 989. The district court
also noted that Loop’s one-time accountant contra-
dicted Greenblatt’s testimony and that Greenblatt was
“an inherently incredible witness.” Id. Appellants’ unpre-
paredness at trial does not excuse attempting to support
Nos. 10-1203, 10-1227 & 10-1238                            13

Greenblatt’s incredible testimony with a document they
unquestionably failed to produce in discovery and
which turned out to be “highly questionable.” Id. at 988.
The court’s finding, that Greenblatt’s “flippant, conde-
scending air in response to legitimate fact-finding ques-
tions” suggested “he was intentionally evading the
truth,” is based on his credibility and demands “even
greater deference . . . for only the trial judge can be
aware of the variations in demeanor and tone of voice
that bear so heavily on the listener’s understanding of
and belief in what is said.” Anderson v. City of Bessemer
City, 470 U.S. 564, 575 (1985) (citing Fed. R. Civ. P. 52(a)).
Excuses about what the appellants thought was settled
are insufficient to overcome these findings.
   We move on to more uncontested findings appellants
try to recharacterize. Appellants claim that Loop’s lack
of corporate minutes and accounting records; failure to
file timely tax returns (and sometimes not at all),
comply with Loop’s bylaws, or require its attorney and
accountant to record their time; and waiting until the end
of the year to decide the accounting treatment for
various transactions, among much else, didn’t “over-
whelmingly establish[] that Loop failed to observe corpo-
rate formalities.” Wachovia, 586 F. Supp. 2d at 994. Appel-
lants contest these findings’ relevance. Yet the absence
of formalities triggered the fraud or promotion of injustice
we will discuss shortly. See Sea-Land Servs., Inc. v. Pepper
Source, 993 F.2d 1309, 1313 (7th Cir. 1991). Loop’s failure
to conform to its bylaws enabled Greenblatt’s domination
of Loop’s decision-making and Loop’s failure to keep
an arm’s-length relationship with related entities. The
14                           Nos. 10-1203, 10-1227 & 10-1238

absence of proper corporate records related to the
absence of documentation as to Loop’s capitalization, the
Banco-Loop loan, and the transfers to related entities.
These findings paint a detailed picture of shareholders
failing to respect the corporate form.
  Appellants argue that the district court ignored the
internal affairs doctrine. See generally Citizens Elec. Corp. v.
Bituminous Fire & Marine Ins. Co., 68 F.3d 1016, 1019
(7th Cir. 1995) (internal affairs doctrine is “a choice-of-law
principle calling for resort to the law of the firm’s place
of incorporation”); 805 ILCS 5/13.05 (prohibiting Illinois
from regulating foreign corporations’ internal affairs);
Restatement (Second) of Conflict of Laws § 307 cmt. a (1971)
(shareholders expect to have the state of incorporation’s
law used to determine corporate liability). Even assuming
South Dakota corporations may operate with this degree
of looseness, this doctrine doesn’t provide appellants
with a defense because if Loop’s owners actually relied
on South Dakota law, we would expect them to raise
choice of law earlier. And many of the laws upon
which appellants rely were enacted in 2005, long after
the actions in question occurred. See S.D. Codified Laws
§§ 47-1A-732; 47-1A-732.5; 47-1A-1601. Appellants cite
Torco Oil Co. v. Innovative Thermal Corp., 763 F. Supp. 1445,
1451 (N.D. Ill. 1991) (Posner, J., sitting by designation),
where it was noted that an owner of a “start-up” company
naturally financed “the operations of the fledgling enter-
prise out of the assets of his other corporations without
creating a meticulous paper record.” Yet Torco found
such informalities supported a finding on the first prong
of the veil piercing test, noted that it couldn’t pierce the
Nos. 10-1203, 10-1227 & 10-1238                            15

corporate veil on that alone, went on to consider evidence
of “fraud or injustice,” and found that “in spades.” Id.
  We will too in a moment, but there’s more on the first
prong. Jahelka and Nichols argue that they testified to
their involvement in Loop and that they met regularly
as shareholders. But nowhere do they show how they
meaningfully used their 50% stake in Loop or where
the district court went wrong finding that “Greenblatt’s
control over Loop’s other officers and employees rendered
them nonfunctioning.” Wachovia, 586 F. Supp. 2d at 1003.
They also do not explain how Greenblatt could have
been anything but Loop’s dominant shareholder because
Greenblatt-controlled Banco financed Loop’s operations.
Jahelka and Nichols point out that the district court’s
finding that they “knowingly assisted [Greenblatt] in
his efforts to improperly shield Loop from its creditors,” id.
at 1005 n.26, contradicts the court’s finding that Jahelka
and Nichols were nonfunctioning. The contradiction
is superficial. The culpability shared by Jahelka and
Nichols is immaterial in determining whether the share-
holders had a unity of interest and ownership. The share-
holders, by failing to act as they would in a truly independ-
ent corporation, enabled the fraud or injustice. On the
other side of this issue, appellants fail to show where
the district court clearly erred finding that Greenblatt
functioned as Loop’s dominant shareholder. Greenblatt
refused to allow Loop to use proceeds from the Banco-
Loop loan to pay Wachovia; at Greenblatt’s direction,
Loop’s accountant falsely held himself out as Loop’s vice
president and Banco’s assistant vice president; and
16                         Nos. 10-1203, 10-1227 & 10-1238

Greenblatt had Neuhauser trade HRMI stock on various
brokerage accounts.
  On the district court’s arm’s-length relationship
findings, appellants point out that a secured insider loan
“is not wrongful per se.” In re Lifschultz Fast Freight, 132
F.3d 339, 345 (7th Cir. 1997). Of course it’s not, but the
district court supported its finding with much more. This
was hardly a typical insider loan given Banco’s sale of a
$3 million participation interest to various Loop sub-
sidiaries. Perhaps there were legitimate tax reasons for
Loop’s subsidiaries to loan Loop money through a
related entity’s line of credit while at the same time
serving as collateral for the underlying loan, but this
does not mean the district court clearly erred finding
that this arrangement effectively “resulted in Loop con-
tributing the funds (via its subsidiaries) that Banco
would then turn around and lend back to Loop.”
Wachovia, 586 F. Supp. 2d at 986. The mere existence of
a legitimate tax basis or another justification for the
arrangement doesn’t undercut the district court’s finding
that the Banco-Loop loan served as “a vehicle to avoid
Loop’s creditors by ensuring that all of Loop’s assets
were fully encumbered by a blanket lien in favor of
Greenblatt, the dominant shareholder of both Banco and
Loop.” Id. The district court was quite justified in high-
lighting this transaction in determining whether Loop
maintained an arm’s-length relationship among related
entities. Appellants also do not contest that Loop shared
office space, equipment, and telephone and fax numbers
with related entities. Loop moved employees between
related entities, altered their titles, and had other related
Nos. 10-1203, 10-1227 & 10-1238                                17

entities provide them with health benefits. Loop also
loaned about $2.2 million in 2001 to South Beach, which
is owned by NOLA, LLC. NOLA’s members are the
fathers of Greenblatt, Nichols, and Jahelka. Greenblatt
manages NOLA through another related entity, Teletech.
South Beach loaned the $2.2 million to NOLA to buy
HRMI stock. After HRMI collapsed, Loop sold the loan
to Scattered (owned by the Loop owners) for $100,000
but Scattered never tried to collect.5 Given this ap-
parent shell game, the district court did not clearly err
in finding that Loop failed to maintain an arm’s-length
relationship among related entities.
  We are quite confident that the district court’s findings
supported the court’s conclusion that Wachovia main-
tained a unity in interest and ownership between Loop
and its owners so we move to the court’s finding that
adhering to their “separate identities would ‘sanction a
fraud or promote injustice.’ ” Hystro Prods., 18 F.3d at 1390
(quoting Van Dorn, 753 F.2d at 565). This prong requires
“something less than an affirmative showing of fraud,”
but “something more than the mere prospect of an unsatis-
fied judgment.” Id. (quoting Sea-Land Servs., Inc. v. Pepper
Source, 941 F.2d 519, 522-23 (7th Cir. 1991). Illinois law



5
  We discussed this transaction in In re South Beach Securities,
Inc., 606 F.3d 366, 378 (7th Cir. 2010), where we found Greenblatt
“evasive and at times incredible” and that “his orchestration of
a scheme aimed at a palpable misuse of bankruptcy, raise[d]
serious ethical and perhaps legal concerns.” We ordered
Greenblatt to show cause why we should not sanction him. Id.
18                         Nos. 10-1203, 10-1227 & 10-1238

endorses veil piercing to avoid unfair enrichment, permit-
ting the creator of a liability and cause of the inability
to meet that liability to escape responsibility, and most
apt to this case, allowing a corporation “to keep assets
in a liability-free corporation while placing liabilities
on an asset-free corporation.” Id. (citing cases).
   Adhering to Loop’s separate corporate existence
would allow Loop’s shareholders to leave Wachovia
holding the bag for Loop’s failed HRMI investment. The
Loop shareholders used their web of corporations to
avoid their responsibilities to Wachovia by ensuring
that Loop would not have sufficient funds to pay their
debts. Adhering to Loop’s corporate form would
sanction an attempt by Loop’s shareholders to set up “a
flimsy organization to escape personal liability.” Laborers’
Pension Fund, 580 F.3d at 611. Appellants argue that
Wachovia knowingly assumed the same risk as Loop that
the value of the stock would decline. But Loop did not
share any risk because Loop shuttled its assets elsewhere
and a secured inside lender (Banco) encumbered what-
ever remained. As the district court found, Loop’s shell
status, the Banco-Loop line of credit, and its representa-
tions on the margin account created the false appearance
of a company capable of covering potential losses on
that account.
  Appellants argue that Wachovia, as a voluntary
creditor, must prove actual fraud, citing Tower Investors,
LLC v. 111 East Chestnut Consultants, Inc., 864 N.E.2d 927,
942 (Ill. App. Ct. 2007). But Tower Investors assumes “the
parties possess a total understanding of all of the transac-
Nos. 10-1203, 10-1227 & 10-1238                         19

tions involved.” Id. The party in Tower Investors seeking
to pierce a corporation’s veil knew of and uniquely bene-
fited from the arrangement. Id. Here, Wachovia in no
way benefited from Loop’s arrangement with Banco and
did not know that Loop’s assets were encumbered by
Banco, that Loop’s source of funding was tightly con-
trolled by one of its owners, and that Loop would drain
itself of its assets when third-party debts arose. Loop
created an appearance of a company capable of covering
losses but meanwhile, the Banco loan (extended after
Loop incurred the margin debt) encumbered its assets. By
Greenblatt’s own admission, Loop would generally not
“pay lower classes of creditors.” Wachovia, 586 F. Supp. 2d
at 1012. Thus, the Banco loan preemptively and inten-
tionally shielded any debt Loop incurred in the course
of its business. If Loop’s corporate shield was not
pierced, its shareholders would be rewarded for using
an insider loan to block payment of a debt while
diverting money to themselves and related entities.
Appellants fail to show clear error in the district court’s
finding that Loop’s owners designed its corporate form
and the Banco-Loop loan arrangement to enable Loop to
do substantial business without sufficient capital to pay
its debts. We affirm the district court’s piercing of
Loop’s corporate veil.


B. Fraudulent Transfers
  In finding Banco’s 2002 blanket lien over Loop’s assets
a fraudulent transfer, the district court found sufficient
20                        Nos. 10-1203, 10-1227 & 10-1238

evidence of both actual and constructive fraud under
Illinois’s Uniform Fraudulent Transfer Act (UFTA), 740
ILCS 160/5(a). Wachovia, 586 F. Supp. 2d at 1015-16. Yet
because Wachovia disclaimed making a case on any-
thing other than actual fraud we will only examine
the actual fraud findings.
  Banco argues that it held two blanket liens in Loop’s
assets, one established by the 2000 transaction and
another by the 2002 agreement. Yet reading the 2002
transaction as anything other than an extension of the
2000 agreement with the same blanket lien would be a
fundamental misconception of the arrangement. The
2002 agreement “consolidated, amended and restated”
the 2000 “guaranty and security agreement” as described
in the 2002 security agreement’s caption. The 2002 agree-
ment continued the lien created by the 2000 transaction
and extended it to cover the new funds Banco loaned
Loop under the same line of credit. In targeting the
2002 transaction as fraudulent, Wachovia claimed that
Loop made the transfer “with the actual intent to defraud
Wachovia and hinder or delay” its collection of Loop’s
margin debt. The 2002 transfer by its terms subsumed
the obligations from the 2000 transaction. Cf. Schwinder
v. Austin Bank of Chi., 809 N.E.2d 180, 189 (Ill. App. Ct.
2004) (when a contract is modified or amended by a
later agreement, a suit to enforce the agreement “must be
brought on the modified agreement and not on the origi-
nal”); In re Cole, No. 07-80542, 2007 WL 3302112, at *2
(Bankr. C.D. Ill. Nov. 6, 2007) (refinancing or an addi-
tional loan “involved a renewal of the prior note and a
continuation of the security interest in the” collateral);
Nos. 10-1203, 10-1227 & 10-1238                              21

In re Tardy, 18 B.R. 36, 37 (Bankr. C.D. Ill. 1982); (if “a note
is renewed on a debt, the security interest thereon is not
changed unless there is some showing of intent to the
contrary” or the parties “formed a new agreement”);
Cmty. Bank of E. Peoria v. Meister Bros., Inc., 299 N.E.2d
589, 592 (Ill. App. Ct. 1973) (five notes were intended “as
a single, related transaction” and the “general rule is
that where a note is given merely in renewal of
another note and not in payment, the renewal does not
extinguish the original debt nor change the debt except”
to postpone repayment (internal quotation marks omit-
ted)). Banco’s 2002 transaction with Loop merely extended,
under, as we shall see, quite suspicious circumstances,
the same blanket lien over Loop’s assets asserted in 2000.
  A debtor makes a transfer or incurs an obligation that
is fraudulent as to a creditor when done “with actual
intent to hinder, delay, or defraud any creditor of the
debtor.” 740 ILCS 160/5(a)(1). Wachovia had to prove
Loop’s actual intent by clear and convincing evidence.
See Hofmann v. Hofmann, 446 N.E.2d 499, 506 (Ill. 1983).
To determine “actual intent,” the district court con-
sidered the factors listed in 160/5(b), known as “badges
of fraud,” Lindholm v. Holtz, 581 N.E.2d 860, 863 (Ill. App.
Ct. 1991), to see whether a sufficient number gave “rise
to an inference or presumption of fraud,” Steel Co. v.
Morgan Marshall Indus., Inc., 662 N.E.2d 595, 602 (Ill. App.
Ct. 1996).
  Appellants argue that the “badges of fraud” used by
the district court to give rise to an inference of actual
fraud were inapplicable or insufficient to raise the fraud
22                          Nos. 10-1203, 10-1227 & 10-1238

presumption. See 740 ILCS 160/5(b). The district court
found that Wachovia proved five: (1) Loop incurred
the obligation to Banco shortly before or after Loop in-
curred its substantial debt to Wachovia; (2) the loan was
between insiders; (3) Loop retained possession or control
of the property; (4) the transfer was of most of Loop’s
assets; and (5) Loop was insolvent or became insolvent
shortly after the transfer. Wachovia, 586 F. Supp. 2d at 1015-
16. Appellants argue that badge (3) does not apply
because Loop did not retain possession or control of the
property transferred in the 2002 transaction. Yet appel-
lants also argue that “Loop always remained the title
owner of all of its assets before and after the granting
of either lien.” Banco Br. 31. Either way, appellants say
nothing of the district court’s finding that Greenblatt’s
status as a 50% owner of Loop and sole owner of Banco
gave him effective control over Loop’s assets before and
after the 2002 transfer. Wachovia, 586 F. Supp. 2d at 1016.
Banco argues that badge (4) does not apply because
Loop’s assets were not transferred; as just noted,
appellants argue that Loop remained the owner of the
assets before and after the transaction. But a “transfer”
under the UFTA includes the “creation of a lien or other
encumbrance.” 740 ILCS 160/2(l). By increasing and
extending Loop’s line of credit with Banco, the 2002
transaction allowed Banco to maintain and extend its
lien on substantially all of Loop’s assets. Given these
badges of fraud, along with the attendant circumstances,
the district court had more than an adequate basis to
find an inference of Loop’s fraudulent intent. See Alan
Drey Co. v. Generation, Inc., 317 N.E.2d 673, 679 (Ill. App.
Nos. 10-1203, 10-1227 & 10-1238                          23

Ct. 1974); see also Brandon v. Anesthesia & Pain Mgmt.
Assocs., 419 F.3d 594, 600 (7th Cir. 2005) (badges of fraud,
like symptoms of a disease, “are not additive”). Banco
argues that the district court’s ruling threatens to keep
small business owners from lending to entities in
which they own an interest. Yet the district court’s
findings show that this case rests on a rather extra-
ordinary attempt to prevent creditors from collecting on
a debt, a circumvention of the principle that when a
business fails, shareholders are paid last. E.g., Lasday v.
Weiner, 652 N.E.2d 1198, 1201 (Ill. App. Ct. 1995) (share-
holders “are last in line” in a distribution from a
dissolved corporation).
  Regarding the other transactions found fraudulent, the
district judge stated near the end of trial that she would
not rule “on any fraudulent transfer that was not
charged in” Wachovia’s complaint. Thus, the court’s
finding that Loop’s $518,338 payment to EZ Links was
fraudulent was error as confirmed by Wachovia’s coun-
sel at argument. Wachovia also did not allege that Loop’s
payments to Jahelka and Nichols were fraudulent. Yet
because appellants did not raise this issue in their
opening briefs, they waived any argument on this rul-
ing. See Clarett v. Roberts, 657 F.3d 664, 674 (7th Cir.
2011) (argument addressed in two sentences in opening
brief deemed waived); Citizens Against Ruining the Env’t
v. EPA, 535 F.3d 670, 675 (7th Cir. 2008) (raising argu-
ment in reply “does not give an adversary adequate
opportunity to respond”).
24                         Nos. 10-1203, 10-1227 & 10-1238

C. Attorneys’ Fees
  We give a district court’s fee decision great deference
because of the court’s familiarity with the case. Spegon v.
Catholic Bishop of Chi., 175 F.3d 544, 551 (7th Cir. 1999).
In Illinois, a party who prevails on a veil-piercing claim
may recover their fees if the underlying contract
provides for a fee award. See Fontana, 840 N.E.2d at 783-
84. Such is the case here and the district court found
Loop and its owners liable for Wachovia’s fees.
   Appellants argue that the district court improperly
shifted the burden to them to prove unreasonableness.
Wachovia submitted a detailed fee petition and supported
it with two affidavits and more than 190 pages of docu-
mentation. Once the petitioning party provides evidence
of the proposed fees’ reasonableness, the burden shifts
to the other party to demonstrate the award’s unreason-
ableness. Cf. Spegon, 175 F.3d at 554-55 (discussing
hourly rates). Appellants have not countered Wachovia’s
adequate showing. Appellants argue that the fee order
contravenes a district court order that they would only
pay fees related to the veil piercing claim. Yet the
district court also found that common facts formed the
basis of similar legal theories. Behavior raising fraudulent
conveyance claims prompts veil piercing claims, Robert
Charles Clark, Corporate Law § 2.4 (1986), and this case is
no exception. For example, one of the UFTA-challenged
transactions was the Banco-Loop line of credit. This
transaction was central to Wachovia’s veil-piercing
claim. Wachovia also reduced its petition by $140,000
to remove unrelated entries. Appellants’ argument that
Nos. 10-1203, 10-1227 & 10-1238                        25

Wachovia unreasonably lumped time entries together
is refuted by Wachovia’s submission of 114 pages of
billing records with each task accounted for and itemized.


                    III. Conclusion
  We A FFIRM the district court’s order piercing Loop’s
corporate veil, voiding Banco’s lien over Loop’s assets
and the compensation payments to Jahelka and Nichols,
and granting Wachovia’s attorneys’ fees and costs but
V ACATE the voiding of Loop’s payments to EZ Links.




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