Business Law

Georgelas v. Desert Hill Ventures, Inc. (10th Cir.)

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The following is a case update written by Adam A. Lewis, Senior Counsel, Morrison & Foerster LLP, analyzing a recent decision of interest:


In Georgelas v. Desert Hill Ventures, Inc., 45 F. 4th 1193 (10th Cir. 2022) (“Georgelas”), the United States Tenth Circuit Court of Appeals (the “Tenth Circuit”), held that in granting the plaintiff summary judgment on her fraudulent conveyance claims the District Court incorrectly concluded that the administrator of an entity engaged in a Ponzi scheme did not give reasonably equivalent value for his salary because he was per se enabling the scheme and that the Ponzi scheme proprietor’s payment to a contractor to modify the administrator’s home to accommodate the health of the latter’s wife was a transfer for the benefit the administrator.

Geogelas can be found here


Roger Bliss ran a multimillion-dollar Ponzi scheme through Bliss Enterprise (“Enterprise”), offering stock investments to patrons. He only invested a some of the funds he raised (and lost some of that) and diverted the rest to his own use. Bliss hired David Hill, who owned Desert Hill (together with Hill, the “Defendants”) to be the administrator of Enterprise. Hill essentially ran all aspects of the office. Though he distributed reports and materials that Bliss used in his scheme, there is no stated evidence in the record to show whether Hill knew what was going on. Bliss paid Hill a salary for the five years he worked for Enterprise, compensating Hill either directly or through Desert Hill. Bliss also paid a contractor to modify the house Hill owned to accommodate Hill’s wife, who had developed crippling amyotrophic lateral sclerosis (“ALS”).

The SEC brought an action against Bliss for stock fraud in the District Court, which agreed that Enterprise was a Ponzi scheme. The District Court eventually appointed Tammy Georgelas as receiver to try to collect and augment the Enterprise/Bliss estate for the benefit of the defrauded investors. Georgelas sued the Defendants under the Utah Fraudulent Transfer Act (the “UFTA”) to avoid and recover the salary paid to Hill or Desert Hill and for the money Bliss paid the contractor for the improvements to Hill’s home. The UFTA allows the plaintiff to avoid and recover a transfer (or its value) that meets certain criteria from anyone to whom or for whose benefit it was made. An affirmative defense under the UFTA is that the transferee took in good faith and for “reasonably equivalent value.” The Defendants claimed in defense that Hill provided reasonably equivalent value to the creditor estate by the actual work he performed for his salary. In addition, he asserted that the payments to the contractor were neither to him nor for his benefit. He also disputed that Georgelas had proven Enterprise to be a Ponzi scheme.

Georgelas argued that the salary paid to Hill was per se not for reasonably equivalent value because Hill’s work was in furtherance of the Ponzi scheme and that the contractor payment was for his benefit because it improved his home and made life with his ailing wife easier. The District Court granted the summary judgment motion and (the record below reflects) final judgment.

The Defendants appealed, although they abandoned the issue of whether Georgelas had proved a Ponzi scheme. The appeal also did not consider the question of good faith because Georgelas did not seek summary judgment on it. The Tenth Circuit reversed, remanding to the District Court for further proceedings.


The issues the Tenth Circuit faced were the reasonably equivalent value and benefit questions. The court began by noting that it reviews summary judgment motions de novo, drawing all reasonable inferences from the record in favor of the respondent.

Reasonably Equivalent Value

On this issue, the Tenth Circuit began by observing that Georgelas did not assert that there was anything untoward about the amount of compensation Hill got for the work he did, meaning that the estate was not diminished by the payments. Implying that no one would try to recover payments to Enterprise’s janitor for the work he did, the Tenth Circuit suggested that the law should treat Hill’s salary as administrator no differently. It acknowledged a line of cases (sometimes called the “referral fee exception”) that authorize recovery from an employee who helped solicit Ponzi scheme investments, however innocently, but indicated that it probably would decline to adopt those cases, relying on others, including lower courts in the Circuit, that reject that approach. But it concluded that it did not have to deal with the exception because there was no evidence that Hill was, in fact, soliciting investments; all the record showed he was doing, at most, was essentially the administrative or clerical tasks of maintaining Enterprise’s website and mailing out materials that did solicit business. On that score, the court rejected Georgelas’s theory that Hill’s activities were ‘“intimately intwined”’ with those solicitations on the grounds that the concept was too indefinite.

Contractor Payment

The Tenth Circuit made short work of Georgelas’s claim that the payments made to the contractor for modifications to Hill’s house were for Hill’s benefit. The fundamental problem with Georgelas’s case, the court said, is that she introduced no evidence on the subject, either regarding the home value or the benefit to Hill of accommodating his wife’s ALS. The only evidence was Hill’s contrary declaration that the improvements, which accorded with the Americans with Disabilities Act, were for his wife’s benefit.


This case is perhaps an example of a plaintiff relying on the “aura” of her case to make it instead of carefully preparing and introducing evidence on each element of the cause of action. Did the plaintiff think the result would be obvious based on the egregious nature of the Ponzi scheme and the hovering SEC in the background? The plaintiff’s oversights are so eminent that one is tempted to think she expected the admirable cause she was serving (trying make Ponzi scheme victims whole) to carry the day for her.

The opinion generates lots of questions. Here are just some examples. Was this the right result? Based on the record as reported by the Tenth Circuit, yes. But what should have been the result if Hill knew or even suspected he was aiding a Ponzi scheme (and given his responsibilities for financial reporting, one must ask how could he not know)? Would the Tenth Circuit have been more receptive to the referral fee exception? Perhaps Hill would himself have been a primary target of the SEC proceeding for aiding and abetting. Finally, to what extent was the ALS of Hill’s wife a factor in the Tenth Circuit’s finding grounds to reverse the judgment? After all, there is and must be life in the law; it cannot always be mechanical. In any case, the reversal did not end the case; it did not amount to summary judgment for the Defendants. 

These materials were authored by Adam A. Lewis, Senior Counsel, Morrison & Foerster LLP, a member of the ad hoc group, with editorial assistance by Meredith Jury, (bankruptcy judge, C.D. Cal. (Ret.)), a member of the ad hoc group. Thomson Reuters holds the copyright to these materials and has permitted the Insolvency Law Committee to reprint them. This material may not be further transmitted without the consent of Thomson Reuters.

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