BMO Harris Bank, N.A. v. Richert

ORDERED.

Dated: July 21, 2021

Hun xf SZ

aren S. Jennemann

United States Bankrupt nde

UNITED STATES BANKRUPTCY COURT

MIDDLE DISTRICT OF FLORIDA

ORLANDO DIVISION

www.flmb.uscourts.gov

In re )

)

Dwight Donald Richert and ) Case No. 6:19-bk-00179-KSJ

Holly Berry Richert, ) Chapter 7

)

Debtors. )

‘“C(‘;‘OCONC*”;

)

BMO Harris Bank, N.A., )

)

Plaintiff, )

)

VS. ) Adversary No. 6:19-ap-00260-KSJ

)

Dwight Donald Richert, )

)

Defendant. )

Se)

MEMORANDUM OPINION

FINDING DEBT NOT DISCHARGEABLE

Debtor and Defendant, Dwight Richert, is a self-reliant and confident

businessman who started an accounts receivable factoring company called Richert

Funding, LLC (“R/Funding”). Debtor was the 100% owner and made every

important operational decision for R/Funding. Its largest customer was A.B.L. Farms

(“ABL”), a watermelon broker. Over a short period, ABL’s debt to R/Funding

climbed from $50,000 to over $8 million. When ABL acknowledged it could not pay

its debts, Richert colluded with ABL’s insiders to convince Plaintiff, BMO Harris

Bank, N.A. (“BMO”), to lend ABL almost $5 million, most of which was used to pay

R/Funding’s debt. BMO approved this loan justifiably relying on the intentionally

false representations made by Richert—that ABL’s accounts receivable were current

and plentiful, and that the BMO loan would pay R/Funding in full.

After ABL’s watermelon business spectacularly failed in less than one year, just

as Richert anticipated, BMO suffered a multimillion-dollar loss which they argue in

this adversary proceeding is attributable to Richert’s back-room manipulations and

direct lies and is not dischargeable in this Chapter 7 bankruptcy case under §

523(a)(2)(A), (4), and (6) of the Bankruptcy Code.1 I agree that under § 523(a)(2)(A)

Richert remains liable to BMO and will enter a nondischargeable judgment against

him for the amount of $6,068,896.68, plus post-judgment interest.

Richert Loans ABL $8 million

Richert owned 100% of R/Funding, an accounts receivable factoring business,

and made every important decision for the business.2 The factoring business gives

businesses with limited financial histories and big cash needs a way to operate,

1 All references to the Bankruptcy Code refer to 11 U.S.C. § 101, et. seq.

2 Trial Tr. vol. 1, 104:10-16. The trial occurred on February 8 and 9, 2021. The trial transcript was filed on

February 23, 2021. Doc. No. 75 (vol. 1); Doc. No. 76 (vol. 2). All “Doc. No.” citations refer to pleadings filed

in Adversary Proceeding 6:19-ap-00260-KSJ unless otherwise noted.

optimistically to bridge the gap between imminent failure and profitability. R/Funding

was a typical factoring company buying customers’ accounts receivable (i.e., invoices)

at a discount3 and advancing a percentage of the face value of the invoice to the client.

When each invoice is paid, R/Funding receives the payment, subtracts a fee, and then

sends the remaining balance to the client.4 Generally, factoring accounts receivable is

one of the most expensive ways to borrow monies.

Debtor was involved in every aspect of R/Funding’s operations. R/Funding

had few employees, including Bart Garbrecht, Vice President of Sales, and Laura

Jessee, all of whom reported directly to Richert. Debtor made every significant

decision for R/Funding.5

In 2011, Garbrecht got a tip to call ABL as a potential client.6 ABL was a

wholesale watermelon broker buying watermelons from producers and selling them to

larger retailers.7 Two brothers ran ABL—Aaron Letsinger was the owner and

President of ABL;8 “Danny” Letsinger was Vice President and managed ABL’s daily

operations.9 As will become more important in ABL’s collapse, Danny Letsinger also

owned a separate company, Southern Melon Distributors, Inc. (“Southern Melon”),

3 Trial Tr. vol. 1, 33:1-6.

4 Bart Garbrecht Dep. 6:24-7:20.

5 Trial Tr. vol. 1, 104:17-105:13, 163:15-21.

6 Dwight Richert Dep. 75:10-76:13. The customer lead originated from a BMO relationship manager, Brian

Wickman. Mr. Wickman referred ABL to the Debtor and R/Funding. Trial Tr. vol. 1, 69:21-70-3, 71:19-22.

7 Trial Tr. vol. 1, 33:12-19, 70:4-12.

8 Trial Tr. vol. 1, 75:22-24; Pl.’s Ex. 3, at 12, 13.

9 Doc. No. 35-1, at 2; Doc. No. 41, at 3.

an affiliate of ABL that purchased and sold watermelons to ABL and other

companies.10

Garbrecht convinced the Letsinger brothers to factor ABL’s accounts

receivables with R/Funding. In October 2011, R/Funding and ABL signed their first

Factoring and Security Agreement (the “2011 Factoring Agreement”).11 R/Funding

took an ownership interest in ABL’s accounts receivables and a security interest in the

business’s other collateral.12 Under the agreement, R/Funding also provided ABL

with other financing including purchase order funding and grower advances.13

R/Funding properly perfected its ownership interest in the purchased accounts and its

first priority security interest in all collateral by filing a UCC-1 Financing Statement.14

So, in 2011, R/Funding owned all of ABL’s accounts receivable and had a first

position blanket lien on its other assets. R/Funding also performed accounting services

for ABL keeping financial records on ABL’s receivables, essentially acting as the “back

office.”15 R/Funding (not ABL) would create reports tracking the creation and

collection of ABL’s receivables, including preparing critical aging reports.16 These

aging reports determined how much R/Funding would advance to ABL and reflected

10 Doc. No. 35-1, at 3; Doc. No. 41, at 4.

11 Trial Tr. vol. 1, 107:21-109:6; Pl.’s Ex. 3.

12 Trial Tr. vol. 1, 109:7-16; Pl.’s Ex. 3, at 2. The fees associated with the agreement included factoring fees,

misdirect payment fees, missing notation fees, out-of-pocket expenses, and possible late charge fees. Trial Tr.

vol. 1, 109:23-110:6; Pl.’s Ex. 3, at 6.

13 Trial Tr. vol. 1, 172:5-11. A purchase order is a commitment from a company to buy a product or service. For

purchase order funding, R/Funding would give ABL enough money to fund a customer’s purchase order. For

a grower advance, R/Funding would extend funds to ABL, which they then extended to watermelon growers

(farmers) “for seed, plowing, water, irrigation, [and] harvesting.” Trial Tr. vol. 1, 172:12-16, 173:4-12.

14 Def.’s Ex. 2.

15 Dwight Richert Dep. 126:7-14; Trial Tr. vol. 1, 165:16-166:8.

16 Trial Tr. vol. 1, 34:24-35:5, 168:18-169:3; Danny Letsinger Dep. vol. 1, 58:25-60:7.

outstanding invoice amounts, the advance date, and the age of the invoice.17 As we

will learn later, in September 2014, R/Funding falsified the information on these aging

reports it prepared to convince BMO to lend monies to ABL.

R/Funding initially advanced $50,000 to ABL,18 but that amount soon swelled;

by July 2014, ABL owed R/Funding over $8 million.19 Because R/Funding kept

ABL’s financial records and controlled ABL’s cash flow,20 Richert also knew ABL was

failing and could not repay this huge debt of $8 million.

Richert knew ABL was not collecting its accounts receivable promptly.21

Receivables should typically be collected within 30 days; however, the average age of

ABL’s receivables was 37 days old and only 19-20% were collected within 30 days; it

also appeared that most receivables “were not valid [i.e., collectible].”22 On July 9,

2014, Danny Letsinger directly told Richert that ABL was “flat broke.”23

Richert rightfully was concerned ABL could not repay R/Funding. ABL was

financially failing, perhaps in part due to the cost of borrowing monies from

R/Funding. Richert told the Letsinger brothers he would “help” them be more

successful by getting a conventional line of credit from a traditional lender.24 ABL

started exploring refinancing options, including getting a loan from BMO.25 From

17 Trial Tr. vol. 1, 36:3-15, 169:4-18.

18 Dwight Richert Dep. 76:4-13.

19 Trial Tr. vol. 1, 110:13-16.

20 Matthew Chapman Dep. 43:24-44:24.

21 See Trial Tr. vol. 1, 47:13-51:9.

22 Trial Tr. vol. 1, 47:13-51:9.

23 Trial Tr. vol. 1, 110:13-112:1.

24 Dwight Richert Dep. 135:13-25.

25 Danny Letsinger Dep. vol. 1, 77:11-78:25.

there, ABL and Defendant concocted a well-planned and executed scheme to make

sure that ABL received a loan that would repay R/Funding some (but not all) of these

amounts due.

Richert Colludes with ABL to Convince BMO to Extend Loan

In late 2013, Brian Wickman, the BMO officer who originally referred ABL to

R/Funding, resumed talks about BMO extending a loan to ABL.26 Wickman started

ABL’s application process for a $5 million loan from BMO in early 2014.27 Richert

coached Danny Letsinger through these conversations with BMO’s representatives so

ABL could get enough money for a “partial pay-down” to R/Funding.28 Richert was

laser focused on getting ABL fresh capital, primarily to pay R/Funding.

At first, BMO turned downed ABL’s loan request. Although Wickman and

David Maraman, Wickman’s supervisor and a regional BMO manager, recommended

the ABL loan,29 Gary Nowak, a credit manager for BMO, said “no.”30 Maraman

challenged this answer going directly to Nowak’s supervisor, Jack Yong, BMO’s

senior credit manager for business banking, for approval.31 Yong agreed with Nowak.

BMO rejected ABL’s first loan application.32

26 Trial Tr. vol. 1, 71:6-16, 71:23-72:3.

27 Trial Tr. vol. 1, 72:2-3.

28 See Dwight Richert Dep. 133:13-134:10.

29 Trial Tr. vol. 1, 92:18-93:3; Gary Nowak Dep. 20:23-21:2, 22:2-23:19.

30 Trial Tr. vol. 1, 93:4-10; Gary Nowak Dep. 16:24-17:3, 22:13-24.

31 Trial Tr. vol. 1, 93:11-19; Gary Nowak Dep. 22:13-24; Jack Yong Dep. 5:6-9.

32 Trial Tr. vol. 1, 93:20-25; Jack Yong Dep. 21:7-13.

Yong, however, suggested the parties explore another financing option using a

Small Business Administration (“SBA”) loan, where the federal government would

guarantee 75% of the loan.33 ABL agreed to pursue a SBA loan.

Richert directly assisted in this process. He or his staff at R/Funding worked

with ABL to ensure ABL’s financial information on this second loan application

appeared more positive. This is the step where Richert went from merely coaching the

Letsinger brothers, hoping to get R/Funding repaid, to actively falsifying the

information that he, R/Funding, and ABL gave to BMO. Richert realized ABL

needed to show BMO a rosier financial future to get the new money; Richert delivered

this sunnier package, as I will discuss in the next section, and Yong/ BMO ultimately

approved the loan.34

Richert Falsified ABL’s A/R Aging Reports to Deceive BMO

BMO agreed to lend ABL about $5 million as an asset-based loan taking ABL’s

accounts receivable (“A/R”) as collateral.35 In an asset-based loan, a borrowing base is

the floor for how much money a lender will loan a company based on the value of the

collateral.36 Newer A/R are worth more than older, disputed, or uncollectible A/R.

So, the accuracy of the information about a borrower’s A/R (as certified by the

borrower) is critical to determine how much money a lender advances.37 Aging reports

33 Jack Yong Dep. 13:1-8; Trial Tr. vol. 1, 94:1-13.

34 Trial Tr. vol. 1, 94:4-13.

35 Trial Tr. vol. 1, 81:24-82:7.

36 Trial Tr. vol. 1, 27:8-17.

37 Trial Tr. vol. 1, 23:17-28:17; David Maraman Dep. vol. 1, 93:17-95:3.

help lenders verify the computation on the borrowing base certificate and assess

whether the A/R qualify as eligible collateral.38

To get BMO’s approval for the loan, ABL had to establish its borrowing base

through aging reports listing outstanding A/R and that its customers were timely

paying these invoices. Richert and his staff at R/Funding prepared these aging reports

for ABL, and, without doubt, Richert and his people manipulated ABL’s aging reports

to present BMO with a more promising financial picture for ABL than existed.

Danny Letsinger told Wickman that R/Funding would prepare the aging

reports BMO needed because R/Funding had the most up-to-date and accurate

information.39 Two aging reports were provided to BMO: one dated September 22,

2014,40 prepared by R/Funding; and one dated September 30, 2014, whose origin is

unclear but was based on the aging report of September 22, 2014.41

I note that on the same day R/Funding was preparing the fictitious aging reports

for BMO, Richert was telling Danny Letsinger to apply incoming customer payments

to older disputed invoices rather than to the current invoices the customer agreed was

due.42 The effect of this deception is to make ABL’s overall A/R appear more current

and valuable when calculating the borrowing base for BMO’s anticipated loan.

38 See Trial Tr. vol. 1, 74:7-75:4.

39 Trial Tr. vol. 1, 74:13-20.

40 Trial Tr. vol. 1, 74:7-16; Pl.’s Ex. 9; Pl.’s Ex. 10.

41 Trial Tr. vol. 1, 97:24-98:10; Matthew Chapman Dep. 91:18-96:5, 99:8-12, 113:16-114:16.

42 Pl.’s Ex. 11.

Using the aging report of September 30, 2014, 43 BMO prepared its borrowing

base certificate and agreed BMO initially would lend ABL $4,557,192.44 The amount

was calculated by valuing 80% of eligible A/R not over 120 days.45 Therefore, by

manipulating the application of customer payments to older disputed A/R, ABL

increased the amounts of monies BMO agreed to lend to ABL. This would “overstate”

and “denigrate the quality of the aging report” by removing a receivable that is

potentially “in dispute or is not valid with the customer and will never get paid.” 46

Richert understood this impact when he told Danny Letsinger to do just that on

September 22, 2014.47

Both aging reports, however, contain other suspicious “errors.” As to the

September 22 aging report, several A/R were “rebilled” or “re-aged”—where an

existing A/R was replaced with a new one to give it a more current due date to

purposefully overstate the value and quality of the A/R.48 This re-aging was prohibited

by BMO, and based on the credible testimony of BMO’s expert, there is no legitimate

purpose for re-aging.49 The aging report also included A/R subject to setoffs, which

43 Trial Tr. vol. 1, 97:15-19. Matthew Chapman Dep. at 99:1-7; David Maraman Dep. vol. 1, 186:4-18.

44 Matthew Chapman Dep. at 99:1-7.

45 Trial Tr. vol. 1, 61:1-4; Pl.’s Ex. 1.

46 Trial Tr. vol. 1, 44:11-20.

47 Trial Tr. vol 1, 45:3-4, 46:21-23. This type of manipulation was evidenced by an email exchange that took

place on September 14, 2014 between Jessee, a R/Funding employee, and Richert; Jessee asked, “Not sure how

much you want to have applied to items over 60 & how much to apply to [GRS] Brokerage.” Pl.’s Ex. 18; see

also Trial Tr. vol. 1, 45:5-46:23.

48 Trial Tr. vol. 1, 38:21-39:11.

49 David Maraman Dep. vol. 2, 753:17-755:4; Trial Tr. vol. 1, 44:5-10.

was prohibited by BMO.50 And, the aging report included advances to growers which

BMO did not consider a qualified A/R.51

Although there were differences between the two aging reports, the September

30 report appears to rely on the September 22 report “with some adjustments.”52 The

“errors” or misrepresentations cited above appear in both reports.

And, because R/Funding, as ABL’s backroom, maintained the financial

records for ABL’s A/R and typically prepared its reports, I specifically conclude that

Richert and R/Funding directly assisted ABL in preparing both fictitious aging reports

that paint a much sunnier financial picture than existed at ABL. Richert had a clear

interest in making sure that ABL received the largest loan possible from BMO to pay

ABL’s debt to R/Funding. Richert directly manipulated ABL’s A/R on the aging

reports by intentionally overstating the value and currency of ABL’s A/R to convince

BMO to lend more money to ABL.

Richert Mispresented BMO’s Loan Would Completely Payoff ABL’s Debt to R/Funding

As a condition to the BMO loan, ABL had to pay R/Funding in full, and

R/Funding had to release any security interest in ABL’s collateral.53 Richert

understood this requirement.

50 Trial Tr. vol. 1, 47:1-7. A “setoff” is when a customer has lent money or has an invoice that it could use to set

off the amount they are owed against that receivable. Trial vol. 1, 30:19-31:12.

51 Trial Tr. vol. 1, 47:8-12.

52 Trial Tr. vol. 1, 61:17-21. The discrepancies included some accounts being re-aged from the September 22 to

the September 30 report. See David Maraman Dep. vol. 1, 185:3-194:8.

53 Trial Tr. vol. 1, 79:6-19, 82:25-83:4; Pl.’s Ex. 1 ⁋⁋ 3.1, 5.9.

When the loan closed, on October 22, 2014, ABL owed R/Funding and its

sister company, GRS Brokerage,54 approximately $5.4 million. Danny Letsinger told

Richert BMO would only pay R/Funding $3.89 million, about $1.4 million short of

the total due. Richert was pleased to accept the “payoff,” knowing it did not fully pay

R/Funding and understanding that BMO would not have made the loan if Richert

were truthful. R/Funding was so eager to receive the money from BMO he or

Garbrecht would contact Danny Letsinger up to fifteen times a day to check on the

status of the payoff.55 They were desperate to get the $3.89 million from BMO.

Richert and the staff at R/Funding intentionally deceived BMO in confirming

the $3.89 million payment would pay R/Funding in full. On October 20, 2014, two

days before the loan closing, Garbrecht spoke with Sean Dudley, BMO’s attorney, and

told him that the payoff amount of $3.89 million “would be fine.”56 Dudley then sent

Garbrecht an email with a draft payoff letter.57

Yet, that same day, Garbrecht was telling ABL how R/Funding could “settle

up” the remaining balance due after receiving the $3.89 million from BMO. Garbrecht

sent Danny Letsinger an email stating that the current “payoff [to R/Funding] is

$4,886,610.48” and that “[a]fter [BMO] wire hits tomorrow, I will recalculate and

Dwight [Richert] will settle invoices and give you an amount for the note, along with

54 Trial Tr. vol. 1, 135:11-16; Pl.’s Ex. 12; Pl.’s Ex. 13; Pl.’s Ex. 14. In 2012, Defendant became a majority owner

in GRS Brokerage; in 2014, Garbrecht and Danny Letsinger became part owners. Dwight Richert Dep. 79:25-

80:22. GRS Brokerage brokered trucking relationship for companies, including ABL, that needed to get its

products from the grower to the retailers. Trial Tr. vol. 1, 190:13-19.

55 Danny Letsinger Dep. vol. 1, 119:21-120:23.

56 Bart Garbrecht Dep. 130:2-131:3.

57 Pl.’s Ex. 15; Trial Tr. vol. 1, 129:24-130:10.

weekly payments.”58 So, before the loan ever closed and without telling BMO, Richert

already was working on arrangements for ABL to pay the balance still due to

R/Funding.

On October 21, 2014, the day before the BMO loan closing, Wickman at BMO

sent Garbrecht an email stating: “We will be sending you a wire for the full

[$]3,890,000. This pays you off in full correct?”59 Before responding, Garbrecht

emailed Richert, who was vacationing in Italy.60 Richert sent Garbrecht a carefully

worded, intentionally misleading response to forward to BMO stating: “Yes, we agree

to the amount to release UCC and letter of redirection.”61 Notably, Richert omitted

stating that BMO’s payment would pay R/Funding in full.

Richert also reviewed BMO’s Loan Payoff Agreement saying it looked “fine”

to him.62 At Richert’s specific direction,63 Garbrecht signed and delivered to BMO the

Loan Payoff Agreement stating, in part, that R/Funding’s loan to ABL “including but

not limited to all principal, interest, fees, costs and expenses, has been repaid and

satisfied in full.”64 This was a total and complete lie. ABL still owed R/Funding and

GRS over $1.4 million. And BMO would never have extended this loan if they knew

of this remaining debt. Richert knowingly made false and misleading statements to

58 Pl.’s Ex. 14.

59 Trial Tr. vol. 1, 78:10-79:12; Pl.’s Ex. 16.

60 Trial Tr. vol. 1, 181:4-19.

61 Trial Tr. vol. 1, 125:8-127:22; Pl.’s Ex. 16; Pl.’s Ex. 17.

62 Trial Tr. vol. 1, 129:2-131:14.

63 Bart Garbrecht Dep. 140:22-141:7; Trial Tr. vol. 1, 132:7-20.

64 Pl.’s Ex. 18; Trial Tr. vol. 1, 80:24-83:2.

induce BMO to extend the loan to ABL.65 Upon receiving the payoff, Richert told

Garbrecht: “We did real good!”66

On October 22, 2014, ABL and BMO executed a credit agreement for up to $5

million (“First Credit Agreement”) and a related security agreement.67 As part of the

initial advance of $4,557,192 and under the Loan Payoff Agreement, R/Funding

received the promised $3.89 million.68

R/Funding did file a UCC-3 and cancel its lien against ABL’s A/R under the

2011 Factoring and Security Agreement.69 Garbrecht, at Richert’s direction, also sent

ABL’s customers a letter70 notifying them of the release of their lien on ABL’s A/R

and stating ABL “will no longer be factoring their invoices.”71 Richert signed this letter

confirming his continuing scheme to deceive BMO insofar as Richert had no intention

of severing ties with ABL. As discussed in the next section, R/Funding and ABL

already had agreed to a secret deal, undisclosed to BMO, to allow R/Funding to

continue to factor ABL’s A/R after BMO made its loan.

Richert Hid a Secret Factoring Agreement from BMO

65 At his deposition, Richert stated that these actions were done while taking Ambien, likely to deflect the

inference he was acting with fraudulent intent. Dwight Richert Dep. 162:5-18. I find this explanation

implausible. Richert repeatedly had the opportunity to tell BMO the actual amount ABL owed R/Funding, and,

at every chance, he lied.

66 Trial Tr. vol. 1, 136:4-6.

67 Trial Tr. vol. 1, 26:15-27:17; Pl.’s Ex. 1; Pl.’s Ex. 19. On October 23, 2104, BMO perfected its security interest

in ABL’s assets, including all accounts receivable, by recording a UCC financing statement. Pl.’s Ex. 24.

68 Pl.’s Ex. 21.

69 Trial Tr. vol. 1, 182:12-20; Def.’s Ex. 7.

70 Trial Tr. vol. 1, 182:16-20; Def.’s Ex. 8.

71 Def.’s Ex. 8.

In August 2014, a couple of months before the BMO loan closed, Richert

personally emailed Danny Letsinger saying: “I do not know how to get comfortable

with having my personal money out to you and only receiving a second position in

terms of collateral.”72 Richert then offered to continue his financing of ABL if the

entire Letsinger family would pledge their personal assets, stating: “I could continue

to be your source of funding, I just need more of a comfort level at the end of the day

and below are some thoughts.” Among those “thoughts” was a “[n]ew Factoring

[A]greement and personal guaranties from your father, brother and wife, and yourself

and Sharon.”73

On October 15, 2014, one week before the BMO loan closed, and without any

disclosure to BMO, R/Funding and ABL agreed to a secret, second Factoring and

Security Agreement (the “2014 Factoring and Security Agreement”).74 By now,

R/Funding knew it would receive $3.89 million from BMO, and ABL would still owe

R/Funding and GRS $1.4 million.75 This unpaid balance was rolled into the new

agreement as a term-loan with an 18% interest rate.76 The 2014 Factoring and Security

Agreement was almost identical to the 2011 Factoring and Security Agreement,

including R/Funding’s agreement to continue factoring ABL’s A/R and to receive a

security interest in all of ABL’s collateral.77 And, as earlier discussed, this time, the

72 Pl.’s Ex. 8; Trial Tr. vol. 1, 112:3-113:6, 114:10-14.

73 Pl.’s Ex. 8; Trial Tr. vol. 1, 113:8-114:4.

74 Pl.’s Ex. 4.

75 Trial Tr. vol. 1, 135:11-16; Bart Garbrecht Dep. 148:18-24.

76 Trial Tr. vol. 1, 139:13-19; Pl.’s Ex. 7, at 3; Bart Garbrecht Dep. 128:1-7, 148:18-24.

77 Trial Tr. vol. 1, 123:20-23; Pl.’s Ex. 4; see also Pl.’s Ex. 3.

debt was personally guaranteed by Aaron and Danny Letsinger, along with their father

and Danny Letsinger’s wife.78

Starting on October 29, 2014, one week after the BMO loan closed, R/Funding

began collecting $27,500 every week from ABL in repayment for the $1.4 million still

owed.79 In November 2014, R/Funding told its lender, Platinum Bank, that while

“ABL did close on a line,” R/Funding was “still funding certain deals” and felt “when

the season cranks back up they [ABL would] have a larger need for factoring.”80

R/Funding also listed ABL’s invoices in the aging report it sent to Platinum Bank after

the BMO loan closed.81

So, for R/Funding business continued as usual after receiving the $3.89 million

from BMO. R/Funding continued to factor ABL’s A/R, as reflected in the financial

information sent to Platinum Bank. R/Funding collected over $100,000 every month

from ABL, and now had the personal guarantees of the Letsinger family as further

security under the 2014 Factoring and Security Agreement. BMO had no knowledge

this secret deal existed.

Richert Fashions a Spot Factoring Scheme

In March 2015, Richert encouraged Danny Letsinger to seek an additional $1

million credit line from BMO.82 Richert knew BMO was not interested in R/Funding

78 Dwight Richert Dep. 124:7-125:22; Pl.’s Ex. 6, at 5-9.

79 Trial Tr. vol. 1, 137:13-16; 148:1-6.

80 Pl.’s Ex. 25. During this period, Richert Funding had a line of credit with Platinum Bank; in exchange for

certain pledged assets, it was able to borrow a revolving facility up to $8 million. Trial Tr. vol. 1, 140:18-22.

81 Trial Tr. vol. 1, 147:7-25; Pl.’s Ex. 31; Dwight Richert Dep. 34:4-35:16, 180:21-182:23.

82 Trial Tr. vol. 1, 149:9-15.

remaining a “subordinated lender”;83 however, ABL was R/Funding’s “largest

commission.” He told Danny Letsinger they were “partners,” and he wanted to

continue funding.84 So, in April 2015, Richert sent ABL a special factoring rate sheet

that included an interest rate of 1% for “spot factoring” for a period of one to seven

days.85 Neither ABL nor Richert told BMO about this new factoring arrangement.

So, Richert, who is trying to get an extra million from BMO, simultaneously is

offering his ABL “partner” the atrocious deal of factoring its A/R for 1% per week,

equivalent to 52% per year. The only beneficiary of this increased funding was

R/Funding.

On May 8, 2015, BMO executed a seasonal line of credit agreement with ABL

for $1 million (the “Second Credit Agreement”).86 After receiving these new borrowed

monies from BMO, on May 11, ABL wrote checks to R/Funding totaling

$1,432,825.87 In total, R/Funding received monies from BMO totaling $5,322,825.

Between June and August 2015, R/Funding continued to “spot factor” ABL’s

invoices.88 And between October 2014 and August 2015, R/Funding advanced over

$9.5 million to ABL.89 During this period, ABL paid R/Funding over $10 million.90

ABL’s operations soon collapsed under the weight of its debts to R/Funding.

83 Dwight Richert Dep. 120:12-121:6.

84 Trial Tr. 114:5-14; Pl.’s Ex. 8.

85 Trial Tr. vol. 1, 149:16-150:1. This 1% interest equates to 52% annum. Trial Tr. vol. 1, 34:14-16.

86 Trial Tr. vol. 1, 77:18-78:3; Pl.’s Ex. 2 at 1-49. A security agreement was also executed that day. Pl.’s Ex. 2,

at 49-56.

87 Trial Tr. vol. 1, 53:17-19.

88 Dwight Richert Dep. 69:6-19; Pl.’s Ex. 6 ⁋ 10; Trial Tr. vol. 1, 149:16-150:1.

89 Trial Tr. vol. 2, 270:22-271:18.

90 Trial Tr. vol. 1, 55:1-8; Trial Tr. vol. 2, 270:3-271:10.

ABL’s Check Kiting Scheme and Collapse

In August 2015, BB&T Bank, which had a lending relationship with Danny

Letsinger’s company, Southern Melon, discovered an ongoing check kiting scheme

between ABL and Southern Melon.91 The two Letsinger companies were writing

checks against each other’s accounts and depositing them back and forth between the

two banks—BB&T and BMO—to have sufficient funds to pay the checks from each

account.92 BMO was alerted to the check kiting scheme; ABL’s accounts were frozen.93

Due to overdrafts, ABL’s account was left in an over-advance position of

approximately $2.5 million.94 ABL stopped paying R/Funding.95 The business closed.

On September 8, 2015, BMO sent a notice of default to ABL under the First

and Second Credit Agreements.96 A few days later, on September 22, 2015,

R/Funding recorded (for the first time) its UCC Financing Statement perfecting its

blanket lien on ABL’s assets, including its A/R, under the secret 2014 Factoring and

Security Agreement.97

Richert kept his lien secret from BMO until after ABL’s business closed and

BMO had declared a default. Richert later stated that the UCC financing statement

was filed “inaccurately” and withdrew it;98 Richert’s explanation is not credible. He

91 Trial Tr. vol. 1, 86:23-87:21, 99:24-100:10, 249:9-25.

92 Trial Tr. vol. 1, 87:15-21, 240:9-244:2.

93 Trial Tr. vol. 1, 87:2-14.

94 Trial Tr. vol. 1, 204:2-13; Pl.’s Ex. 35-9.

95 Trial Tr. vol. 1, 154:17-24. ABL already had stopped making the weekly payments of $27,500 in the spring.

Trial Tr. vol. 1, 148:1-16.

96 Pl.’s Ex. 35-10.

97 Pl.’s Ex. 34; Trial Tr. vol. 1, 157:10-158:9.

98 Dwight Richert Dep. 63:23-64:11.

intentionally kept the lien secret from BMO and always intended to preserve

R/Funding’s secured position in ABL’s collateral based on the 2014 Factoring and

Security Agreement.

Richert Funding then sued Aaron Letsinger in Florida state court and, in federal

district court, sued Danny Letsinger and the other guarantors of the 2014 Factoring

and Security Agreement.99 In these complaints, Richert stated that “[b]etween June

17, 2015, and August 10, 2015, ABL offered for sale and Richert [Funding] purchased,

all of ABL’s rights, title and interest in and to ABL’s accounts receivable by making

purchase price advances to ABL.”100

Richert later dismissed the lawsuits “at the advice of counsel” because “there

was a long line of people in front of [R/ Funding] to make claims that had secured

positions, and [R/Funding] had no secured position.”101 Ultimately, Richert probably

realized, by filing the lawsuits and the UCC Financing Statement, he was admitting

his misrepresentations to BMO. He finally may have realized the consequences of his

deceit but that does not alter my conclusion that Richert knowingly misrepresented

ABL’s remaining indebtedness to R/Funding and the quality of ABL’s A/R.

Post-Default Litigation and Bankruptcies

99 Trial Tr. vol. 1, 154:25-156:2; Pl.’s Ex. 5; Pl.’s Ex. 6.

100 Trial Tr. vol. 1, 154:17-157:9; Pl.’s Ex. 5 ⁋ 16; Pl.’s Ex. 6 ⁋ 10.

101 Dwight Richert Dep. 69:25-70:4.

On September 30, 2015, in related litigation in federal district court,102 BMO got

a stipulated consent judgment against ABL for $12,168,589.45 (the “BMO

Judgment”).103 So, in less than one year after the BMO loan to ABL closed on October

22, 2014, ABL agreed to a judgment against it of over $12 million. Of that amount,

R/Funding received $5,322,825.

In November 2015, BMO separately sued Richert, R/Funding, and

Garbrecht.104 BMO alleged fraud, fraudulent inducement, civil conspiracy to commit

fraud, conversion, civil conspiracy to commit conversion, tortious interference, and

unjust enrichment.105 Before any judgment was entered, this litigation was stopped by

the automatic stay imposed in two bankruptcy cases106—one filed against R/Funding

and the other filed by Richert and his wife.

In the first bankruptcy proceeding, creditors filed an involuntary Chapter 7

liquidating petition against R/Funding in October 2018.107 Richert and his wife then

individually filed for Chapter 11 bankruptcy in January 2019.108 The two cases were

102 Compl., Evergreen Farms & Produce, LLC v. ABL Farms, Inc., No. 1:15-cv-3171-MLB (N.D. Ga. Sept. 9, 2015),

ECF No. 1.

103 Pl.’s Ex. 37; J. in Favor of BMO, Evergreen Farms & Produce, LLC v. ABL Farms, Inc., No. 1:15-cv-3171-MLB

(N.D. Ga. Sept. 5, 2018), ECF No. 527.

104 Compl., BMO Harris Bank, N.A. v. Richert Funding, LLC, No. 1:15-cv-03886-MLB (N.D. Ga. Nov. 6, 2015),

ECF No. 1.

105 Id.

106 Order, BMO Harris Bank, N.A. v. Richert Funding, LLC, No. 1:15-cv-03886-MLB (N.D. Ga. Jan. 30, 2019),

ECF No. 211.

107 Involuntary Pet. Under Chapter 7, In re Richert Funding, LLC, No. 6:18-bk-06276-KSJ (Bankr. M.D. Fla.

October 11, 2018), ECF No. 1.

108 Voluntary Pet. Under Chapter 11, In re Richert, No. 6:19-bk-00179-KSJ (Bankr. M.D. Fla. Jan. 10, 2019),

ECF No. 1.

substantively consolidated, and Richert’s individual case was converted to Chapter 7

under 11 U.S.C. § 1112(a).109

BMO’s Claims

BMO filed this adversary proceeding seeking a monetary judgment and

determination of non-dischargeability under § 523(a)(2)(A), (4), and (6) of the

Bankruptcy Code.110 “Section 727 of the Bankruptcy Code provides that a debtor in a

chapter 7 case shall receive a discharge from all of his debts which arose before the

date of the order for relief, unless one of the specified conditions set forth in that section

is present.”111 Section 523 contains exceptions to the general discharge, and § 523(a)

“sets forth several categories of debts which are excepted from the discharge.”112

Plaintiff must prove non-dischargeability under § 523(a) by a preponderance of the

evidence.113

BMO’s claims against Richert remain pending and are unliquidated. BMO

timely filed its Proof of Claim 27-1 relying on the BMO Judgment—$12,631,462.55.

But Richert was not a party in the litigation against ABL. Therefore, because the debt

109 Order Granting Mot. to Convert Case to Chapter 7, In re Richert, No. 6:19-bk-00179-KSJ (Bankr. M.D. Fla.

Sept. 25, 2019), ECF No. 168. Discharge as to Debtor was entered in January 2020. Discharge of Debtor, In re

Richert, No. 6:19-bk-00179-KSJ (Bankr. M.D. Fla. Jan. 23, 2020), ECF No. 170.

110 Doc. No. 1. At the trial on February 8 and 9, 2021, Colin James McClary, Wickman, Richert, Dawn Sparr,

and Scott Michael Bouchner testified, and the parties submitted exhibits. Defendant objected to Plaintiff’s

Exhibit 30; however, the Court overrules the objection. Additionally, the parties have filed

deposition designations of Richert, Garbrecht, Danny Letsinger, Yong, Nowak, Maraman, and Matthew

Chapman. Defendant objected to portions of the depositions of Defendant, Garbrecht, and Danny Letsinger.

Doc. No. 61. The bulk of Defendant’s objections relate to relevancy and lack of foundation. The Court concludes

the testimony is relevant, the proper foundation was laid and will overrule Defendant’s objections in toto.

111 In re Thompson, 207 B.R. 7, 9 (Bankr. M.D. Fla. 1996).

112 Id.

113 See Grogan v. Garner, 498 U.S. 279, 291, 111 S. Ct. 654, 661 (1991); see also Fed. R. Bankr. P. 4005.

against Richert (if any) is not liquidated, this Court “must necessarily determine

liability and damages in order to establish the underlying debt.”114

“Debt” is defined as “liability on a claim,” § 101(12), and “claim” is defined as

a “right to payment,” § 101(5)(A). For § 523(a)(2)(A), “debt” means liability on “an

enforceable obligation.”115 “Whether a debt exists is determined by looking to

applicable law, frequently state law. . . . To establish the validity of the debt under §

523(a)(2)(A), the claimant must establish that the debtor is liable on an enforceable

obligation under applicable law, nothing more nor less.”116 And courts have

recognized that “a bankruptcy court has the authority to liquidate a state law claim

and enter a monetary judgment against a debtor when deciding if that

claim/judgment is non-dischargeable in a debtor’s bankruptcy case.”117

BMO Fails to State a Claim Under § 523(a)(4) or (6)

114 Stanbrough v. Valle (In re Valle), 469 B.R. 35, 43 (Bankr. D. Idaho 2012); accord Drummond v. Freeland (In re

Freeland), 360 B.R. 108, 129 (Bankr. D. Md. 2006).

115 Cohen v. de la Cruz, 523 U.S. 213, 218, 118 S. Ct. 1212, 1216 (1998).

116 Hatfield v. Thompson (In re Thompson), 555 B.R. 1, 8-9 (B.A.P. 10th Cir. 2016). Here, the choice of law is murky:

ABL and R/Funding were Florida corporations; BMO is a national banking association with its principal place

of business in Illinois; some of the underlying events took place in Georgia; and the First and Second Credit

Agreements state the agreement would be governed by “the laws of the State of Florida.” “Under the diversity

jurisdiction approach, bankruptcy courts borrow from the ‘law applicable in diversity cases to hold that the

forum state’s choice of law rules are imposed on bankruptcy adjudications where the underlying rights and

obligations are defined by state law.’” Dzikowski v. Friedlander (In re Friedlander Cap. Mgmt. Corp.), 411 B.R. 434,

441-42 (Bankr. S.D. Fla. 2009) (quoting Marine Midland Bank v. Portnoy (In re Portnoy), 201 B.R. 685, 697 (Bankr.

S.D.N.Y. 1996)) (citing In re Eagle Enters., Inc., 223 B.R. 290, 292 (Bankr. E.D. Pa. 1998)). Because this Court

sits in Florida, Florida’s choice of law rules governs the choice of law issue here. A court need only undertake a

complete choice of law analysis if a true conflict exists. Tune v. Philip Morris Inc., 766 So. 2d 350, 352 (Fla. 2d

DCA 2000). A “false conflict” exists when “the laws of different states are (1) the same, (2) different but would

produce the same outcome under the facts of the case, or (3) when the policies of one state would be furthered

by the application of its laws while the policy of the other state would not be advanced by the application of its

laws.” Id. Because a false conflict is present, the Court chooses to apply the law of the forum state, Florida.

See Fioretti v. Mass. Gen. Life Ins. Co., 53 F.3d 1228, 1234 n.21 (11th Cir. 1995).

117 Farooqi v. Carroll (In re Carroll), 464 B.R. 293, 312 (Bankr. N.D. Tex. 2011) (citing cases from several Circuit

Courts recognizing this proposition), aff’d sub nom. Carroll v. Farooqi, 486 B.R. 718 (N.D. Tex. 2013); accord Old

Republic Nat’l Title Ins. Co. v. Vermilio (In re Vermilio), 457 B.R. 854, 862 (Bankr. M.D. Fla. 2011).

BMO’s arguments that a dischargeable debt exists under § 523(a)(4) or (6) of the

Bankruptcy Code fail. Under § 523(a)(4), BMO argues Richert’s actions amount to

embezzlement or larceny. “Larceny is the fraudulent taking and carrying away of the

property of another with intent to convert such property to his use without the consent

of another.”118 Embezzlement is the fraudulent appropriation of property by a person

to whom such property has been entrusted or into whose hands it has lawfully come.119

Under § 523(a)(6), BMO argues Richert’s actions amount to conversion. To establish

a claim for conversion, a plaintiff must prove: “(1) an act of dominion wrongfully

asserted, (2) over plaintiff’s property, that is (3) inconsistent with plaintiff’s ownership

therein.”120

These claims fail for the same reason—lack of standing. ABL (not BMO) paid

the disputed monies to Richert and R/Funding. ABL “owned” and controlled the

monies. BMO held a security interest for repayment but had transferred the funds to

ABL under the two loans. “[A] mere lien or security interest does not rise to the level

of ownership sufficient to support a claim under § 523(a)(4)’s embezzlement

118 Synod of S. Atl. Presbyterian Church v. Magpusao (In re Magpusao), 265 B.R. 492, 498 (Bankr. M.D. Fla. 2001)

(citing Faw v. Wiles (In re Wiles), 166 B.R. 975, 980 (Bankr. M.D. Fla. 1994)).

119 In re Wiles, 166 B.R. at 980. “Claims for embezzlement and larceny are similar; the primary difference is that

with embezzlement, the defendant initially acquires the property lawfully, while larceny requires that the funds

originally come into the defendant’s hands unlawfully.” Julian v. Taylor (In re Taylor), No. 8:15-ap-684-CED,

2016 WL 116331, at *2 (Bankr. M.D. Fla. Jan. 11, 2016) (citing Alternity Cap. Offering 2, LLC v. Ghaemi (In re

Ghaemi), 492 B.R. 321, 325 (Bankr. D. Colo. 2013)).

120 Brown v. Vega (In re Vega), No. 6:10-ap-00299-KSJ, 2014 WL 2621118, at *4 (Bankr. M.D. Fla. June 12, 2014)

(quoting Bar-Am v. Grosman (In re Grosman), No. 6:05-ap-328-KSJ, 2007 WL 1526701, at *16 (Bankr. M.D. Fla.

May 22, 2007)).

provision.”121 And the conversion elements “emphasize dominion wrongfully asserted

of plaintiff’s property inconsistent with plaintiff’s ownership.”122

Here, the alleged misappropriation concerns funds BMO lent to ABL.

Conceivably, ABL could assert claims for larceny, embezzlement, or conversion. But

BMO lacks standing to claim Richert unlawfully took, embezzled, or converted the

money it provided to ABL.123 BMO voluntarily transferred the monies to ABL and, by

doing so, lost the ability to pursue its claims under § 523(a)(4) and (6) of the Bankruptcy

Code. But, as I will discuss next, BMO succeeds on its claim under § 523(a)(2)(A) of

the Bankruptcy Code.

Legal Standard Under § 523(a)(2)(A)

Under § 523(a)(2)(A), a debtor cannot discharge a debt to the extent the debt is

obtained by “false pretenses, a false representation, or actual fraud.”124 To prevail, a

plaintiff must establish, by a preponderance of the evidence, the traditional elements

of common law fraud, including (1) the defendant made a false representation with

the purpose and intent to deceive the plaintiff; (2) the plaintiff relied on the

misrepresentation; (3) the reliance was justified; and (4) the plaintiff sustained a loss

as a result of the misrepresentation.125 Because the elements and evidence necessary to

121 Kraus Anderson Cap., Inc. v. Bradley (In re Bradley), 507 B.R. 192, 200 (B.A.P. 6th Cir. 2014) (quoting Hulsing

Hotels Tenn., Inc. v. Steffner (In re Steffner), 479 B.R. 746, 766 (Bankr. E.D. Tenn. 2012)).

122 In re Vega, 2014 WL 2621118, at *5.

123 Id.; see also White v. Whittle (In re Whittle), 449 B.R. 427, 430 (Bankr. M.D. Fla. 2011).

124 11 U.S.C. § 523(a)(2)(A).

125 SEC v. Bilzerian (In re Bilzerian), 153 F.3d 1278, 1281 (11th Cir. 1998); Fuller v. Johannessen (In re Johannessen), 76

F.3d 347, 350 (11th Cir. 1996); Avren v. Daniel (In re Daniel), 613 B.R. 374, 379 (Bankr. M.D. Fla. 2020); see also

Field v. Mans, 516 U.S. 59, 73-75, 116 S. Ct. 437, 445-46 (1995) (holding that § 523(a)(2)(A) requires justifiable

rather than reasonable reliance).

prove fraud under state law are substantially similar to those under § 523(a)(2)(A),126

with a few exceptions which will be addressed, a plaintiff who proves all elements of

§ 523(a)(2)(A) also has proven liability for the fraud.127

To prove an intent to deceive, “the debtor must be guilty of positive fraud, or

fraud in fact, involving moral turpitude or intentional wrong, and not implied fraud,

or fraud in the law, which may exist without the imputation of bad faith or

immorality.”128 Actual fraud precluding discharge “consists of any deceit, artifice,

trick, or design involving [the] direct and active operation of the mind, used to

circumvent and cheat another—something said, done or omitted with the design or

perpetrating what is known to be a cheat or deception.”129 An analysis determining

fraudulent intent often “depends largely upon an assessment of the credibility and

126 Under Florida law, “[t]he essential elements of common-law fraud are: (1) a false statement of fact; (2) known

by the person making the statement to be false at the time it was made; (3) made for the purpose

of inducing another to act in reliance thereon; (4) action by the other person in reliance on the correctness of the

statement; and (5) resulting damage to the other person.” Gandy v. Trans World Comput. Tech. Grp., 787 So. 2d

116, 118 (Fla. 2d DCA 2001). Similarly, “[t]he elements of fraudulent misrepresentation and fraudulent

inducement are: (1) a false statement concerning a material fact; (2) the representor’s knowledge that the

representation is false; (3) an intention that the representation induce another to act on it; and (4) consequent

injury by the party acting in reliance on the representation.” Moriber v. Dreiling, 194 So. 3d 369, 373 (Fla. 3d

DCA 2016).

127 See Gulf Coast Endoscopy Ctr. of Venice, LLC v. DeMasi (In re DeMasi), 542 B.R. 13, 28-29 (Bankr. M.D. Fla.

2015) (recognizing that the main difference is that under state law the plaintiff does not need to prove reliance

to prevail on an intentional misrepresentation claim, whereas claims under § 523(a)(2)(A) require justifiable

reliance); In re Vega, 2014 WL 2621118, at *2 (citing St. Laurent v. Ambrose (In re St. Laurent), 991 F.2d 672, 676

(11th Cir. 1993)) (“Indeed, in other contexts, the Eleventh Circuit has determined that the elements of §

523(a)(2)(A) and Florida common law fraud are nearly identical.”); see also Gronewoller v. DM Cap., Inc. (In re

Mascio), No. 06-cv-01780-PSF, 2007 WL 3407516, at *3-4 (D. Colo. Nov. 13, 2007) (concluding that bankruptcy

court’s findings on the plaintiff’s § 523(a)(2) claim were equivalent to a ruling that the debtor was liable to the

plaintiff under Colorado law for false representation and qualified as a “debt” for purposes of § 523(a)).

128 FTC v. Juravin (In re Juravin), 623 B.R. 343, 346 (Bankr. M.D. Fla. 2020) (quoting Schweig v. Hunter (In re

Hunter), 780 F.2d 1577, 1579 (11th Cir. 1986)).

129 Id. (alteration in original) (quoting Conseco v. Howard (In re Howard), 261 B.R. 513, 517 (Bankr. M.D. Fla.

2001)).

demeanor of the debtor.”130 Because a debtor rarely admits fraudulent intent, courts

look at the totality of circumstances to make that determination.131

A bankruptcy court also may look to the recklessness of a debtor’s behavior

under the totality of the circumstances.132 “Reckless disregard for the truth or falsity of

a statement combined with the sheer magnitude of the resultant misrepresentation may

combine to produce the [inference] of intent [to deceive].”133 Ultimately, it is the

plaintiff’s burden of proof to prove intent to deceive by a preponderance of the

evidence.134

Initially, I easily conclude Richert is responsible for all actions of R/Funding

and its employees.135 “In an action for misrepresentation, a principal is liable for the

fraud of his agent while acting in the scope of his authority, and this principle of law

is fully applicable to corporations.”136 As Richert testified, he owned 100% of

R/Funding. He was involved in every aspect of the business. He made all relevant

decisions. All employees, including Garbrecht, reported directly to him.137 Richert and

130 J. Thompson Invs., LLC v. Soderstrom (In re Soderstrom), 524 B.R. 835, 841 (Bankr. M.D. Fla. 2015) (quoting

Rasch v. Shamar (In re Shamar), No. 6:11-ap-00231-ABB, 2012 WL 1569565, at *5 (Bankr. M.D. Fla. May 2,

2012)); see also Equitable Bank v. Miller (In re Miller), 39 F.3d 301, 305 (11th Cir. 1994).

131 In re Miller, 39 F.3d at 304.

132 Id. at 305.

133 Id. (second alteration in original) (quoting Foote & Davies v. Albanese (In re Albanese), 96 B.R. 376, 380 (Bankr.

M.D. Fla. 1989)).

134 Grogan, 498 U.S. at 289-91, 111 S. Ct. at 661.

135 See Agribank, FCB v. Gordon (In re Gordon), 293 B.R. 817, 825-26 (Bankr. M.D. Ga. 2003) (quoting Love v. Smith

(In re Smith), 98 B.R. 423, 426 (Bankr. C.D. Ill. 1989)) (“Many courts have found that fraud committed by an

agent would render a debt nondischargeable as to a debtor-principal under § 523(a)(2). A debtor who has not

himself made any false representation may be responsible for the fraud of an agent acting within the scope of

that agent’s authority.”).

136 Taco Bell of Cal. v. Zappone, 324 So. 2d 121, 123 (Fla. 2d DCA 1975), quoted in Cavic v. Grand Bahama Dev. Co.,

701 F.2d 879, 885 (11th Cir. 1983).

137 Trial Tr. vol. 1, 104:10-105:13.

R/Funding are inextricably intertwined. Nothing happened at R/Funding without

Richert’s approval.

Richert also personally directed and participated in the fraud perpetuated on

BMO. Richert prepared and executed the 2011 and 2014 Factoring and Security

Agreements.138 He authorized advances to ABL and other clients.139 He directed

Garbrecht to send Wickman the falsified September 22 aging report and was

responsible for accepting the $3.89 million “payoff” from BMO fully knowing the

amount did not repay R/Funding in full.140 Richert convinced ABL to execute the

2014 Factoring and Security Agreement but kept all of this information secret from

BMO, not recording the UCC Financing Statement until after BMO declared a default

against ABL. Richert orchestrated the spot factoring arrangement, forcing ABL into

its check kiting scheme that eventually led to the business’ demise. Richert was “the

captain of the ship, with not only direct oversight but regular operational involvement

in every aspect of the business relevant to this fraud, and with full knowledge of the

financial benefits reaped from the fraud.”141

In many ways, ABL was as much a victim of Richert’s fraud as BMO. And,

although ABL, and not Richert, is the obligor on the loans; this is not a bar. BMO

alleges that Defendant caused it damages by inducing it, through fraud, to make the

138 Bart Garbrecht Dep. 42:17-43:15, 61:17-63:4.

139 Bart Garbrecht Dep. 43:16-23.

140 Trial Tr. vol. 1, 126:4-25.

141 FTC v. Resin (In re Rensin), 597 B.R. 177, 183 (Bankr. S.D. Fla. 2018), aff'd sub nom. Rensin v. FTC, 604 B.R.

917 (S.D. Fla. 2019).

loan to ABL. Under this theory, BMO may seek “damages for money it lost because

of [Defendant’s] personal fraud—harm which is compensable under state law.”142 The

Court agrees. Richert was the master conductor behind this fraud all designed to

maximize payments to R/Funding to the detriment of ABL and of BMO.

Richert’s Fraudulent Misrepresentations Induced BMO to Lend Monies to ABL

BMO has proven by a preponderance of the evidence Richert intended to

deceive it. Richert lied as needed to convince BMO to lend ABL over $4 million of

which $3.89 million was paid to R/Funding. ABL informed Defendant that BMO was

limiting the “payoff” amount to $3.89 million,143 which was about $1.4 million less

than what ABL owed.144 Instead of informing BMO of the deficit or forgiving the

balance of ABL’s debt, Richert accepted the $3.89 million, knowing he would continue

to collect the balance from ABL in an increasingly aggressive way.

In response to a clear email asking whether the $3.89 million would pay

R/Funding “in full,”145 Richert responded, “Yes, we agree to the amount to release

UCC and letter of redirection.”146 Defendant never disclosed to anyone at BMO that

ABL still owed R/Funding $1.4 million. Nor did Richert tell BMO about the 2014

142 Associated Mortg. Corp. v. Weaver (In re Weaver), 579 B.R. 865, 904 (Bankr. D. Colo. 2018); cf. Nicholson v. Kellin,

481 So. 2d 931, 936 (Fla. 5th DCA 1985) (recognizing that if corporate personnel disclosed some facts, they

were under a duty to do so in a nonnegligent or nonfraudulent fashion); Atl. Sec. Bank v. Adiler S.A., 760 So. 2d

258, 259 (Fla. 3d DCA 2000).

143 Bart Garbrecht Dep. 112:10-20, 132:14-133:12; Dwight Richert Dep. 132:19-25.

144 Trial Tr. vol. 1, 135:11-16; Pl.’s Ex. 12; Pl.’s Ex. 13; Pl.’s Ex. 14.

145 Trial Tr. vol. 1, 78:10-79:12; Pl.’s Ex. 16.

146 Trial Tr. vol. 1, 125:6-127:22; Pl.’s Ex. 16; Pl.’s Ex. 17.

Factoring and Security Agreement executed a week before BMO closed the loan with

ABL, indicating he intended to continue collecting the undisclosed balance due.147

Richert also made affirmative misrepresentations by manipulating the age and

other aspects of the September 22 aging report submitted by R/Funding to BMO. The

misrepresentations misstated the age of ABL’s A/R and were made to induce BMO

to increase the loan’s borrowing base, inflate the monies lent to ABL and then paid to

R/Funding. Richert intentionally altered the report to include paid off accounts, aged

accounts that had been “recycled” to appear current, and fake accounts.148

Richert had ample motive to convince BMO to loan money to ABL. Because

R/Funding kept ABL’s financial records, acting as ABL’s “back office,”149 Defendant

knew ABL was not collecting its A/R promptly.150 Defendant knew Danny Letsinger

was “flat broke.”151 Richert saw a way to get paid by fraudulently telling BMO rosy

“lies” about the quality and currency of ABL’s A/R to induce BMO to lend ABL

monies—primarily to put BMO’s money into R/Funding’s coffers.

Although BMO more heavily relied on the September 30 aging report (received

directly from ABL), BMO used September 22 aging report (prepared by R/Funding

with intended false information) to assess potential collateral.152 And the September

22 aging report was the basis “with some adjustments” to the September 30 report.153

147 Trial Tr. vol. 1, 135:11-21, 137:17-138:6.

148 See Trial Tr. vol. 1, 37:14-51:9.

149 Dwight Richert Dep. 126:9-17; Trial Tr. vol. 1, 165:16-166:8.

150 Trial Tr. vol. 1, 47:13-51:9.

151 Trial Tr. vol. 1, 110:13-112:1.

152 Trial Tr. vol. 1, 74:7-75:4.

153 Trial Tr. vol. 1, 61:17-21

Additionally, Danny Letsinger testified that ABL kept track of collections by using

“rebate reports or collection reports or reporting from [R/Funding] showing what was

being paid, what was being credited off, and then we would use aging reports that we

got from them.”154 So, the false information supplied to BMO on the quality of ABL’s

A/R originated from Richert and R/Funding. And Richert and his staff intentionally

gave BMO false information.

Richert also knew he needed to lie to BMO about how much remained due to

R/Funding after the initial BMO loan. Richert got an estimate of how much BMO

would lend to ABL in September 2014, and he knew this was over $1 million less than

ABL’s debt to Richert-related companies.155 Rather than tell BMO about the deficit,

Defendant carefully worded a response to BMO’s question of whether the $3.89

million would pay him “off in full.”156

Immediately after getting this large payment from the BMO loan, however,

Richert started collecting $27,500 a week from ABL to pay back the $1.4 million deficit

at an 18% interest rate.157 BMO never knew of this side agreement. Nor did ABL’s

customers because R/Funding told them in a letter it “will no longer be factoring

[ABL’s] invoices.”158 Yet, Richert simultaneously told its own lender, Platinum Bank,

that R/Funding would continue “funding certain deals” and they would continue

154 Danny Letsinger Dep. vol. 1, 59:2-5.

155 Dwight Richert Dep. 132:19-25.

156 Trial Tr. vol. 1, 78:10-79:12; Pl.’s Ex. 16.

157 Trial Tr. vol. 1, 137:13-16; 148:1-6; Bart Garbrecht Dep. 128:1-7, 148:18-24.

158 Pl.’s Ex. 22.

factoring ABL’s A/R when the “season crank[ed] up.”159 Richert continued to use

ABL’s invoices on the aging reports it sent to Platinum Bank. 160

Richert tries to explain his deceit to BMO of not disclosing the 2014 Factoring

and Security Agreement or the continued factoring relationship between ABL and

R/Funding saying, he “didn’t know what [BMO] would want to know.”161 Richert is

a sophisticated businessman specializing in factoring A/R, a complex, aggressive

financial model. He knew that no asset-based lender would permit “business as usual”

after extending a loan collateralized by the same A/R that R/Funding was factoring.

Richert’s testimony is not credible.

“[S]ilence or fraudulent concealment can be a basis for fraud but only where

there is a legal or a moral duty to speak or when an inquiry left unanswered would be

intentionally misleading.”162 And “[s]ilence or concealment as to a material fact can

constitute false pretenses,” within the meaning of the dischargeability exception.163

BMO rightfully asked ABL and R/Funding about its borrower’s (ABL’s) loans

and obligations. Both ABL and Richert lied to BMO about their recently executed

2014 Factoring and Security Agreement, the $1.4 million deficit, and that ABL and

159 Pl.’s Ex. 25.

160 Trial Tr. vol. 1, 147:7-25; Pl.’s Ex. 31; Dwight Richert Dep. 34:4-35:16, 180:21-182:23.

161 Trial Tr. vol. 1, 135:20-21; see also Bart Garbrecht Dep. 148:15-17 (stating that he never told Wickman about

the 2014 Factoring and Security Agreement because “he didn’t ask about it”).

162 Becks v. Emery-Richardson, Inc., No. 86-6866-CIVGONZALEZ, 1990 WL 303548, at *42 (S.D. Fla. Dec. 21,

1990) (citing United States v. Prudden, 424 F.2d 1021, 1032 (5th Cir. 1970)).

163 Taylor v. Wood (In re Wood), 245 F. App’x 916, 918 (11th Cir. 2007) (quoting FCC Nat’l Bank v. Gilmore (In re

Gilmore), 221 B.R. 864, 872 (Bankr. N.D. Ala. 1998)). “False pretenses differs from false representation or actual

fraud only in that: (a) the plaintiff may prove either the defendant’s intent to deceive the plaintiff or the

defendant’s reckless indifference for the truth; and (b) rather than a false representation, the plaintiff may prove

the defendant committed ‘any intentional fraud or deceit practiced by whatever method in whatever manner.’”

In re Rensin, 597 B.R. at 185 (quoting In re Wood, 245 F. App’x at 918).

R/Funding intended to continue their factoring arrangement, after BMO extended its

loan. I specifically find Richert made these misrepresentations with full knowledge of

BMO’s restrictions barring ABL from continuing to do business with R/Funding,164

but lied because he was desperate to get the $3.89 million from BMO. And, at least at

one point, Richert admitted he knew BMO was not interested in R/Funding staying

in as a “subordinated lender.”165 His actions were deceitful and intended to

“perpetrat[e] what [was] known to be a cheat or deception.”166

Richert continued to benefit from BMO’s continued lending relationship with

ABL. In March 2015, ABL asked BMO for an additional $1 million line of credit from

BMO.167 Richert received most (if not all) of this additional funding. Garbrecht even

says: “Perfect, Payable to Richert.”168

Richert rightfully notes he did cancel R/Funding’s security interest in ABL’s

assets by withdrawing its UCC Financing Statements in October 2014, terminating

R/Funding’s secured position for a short time. But he renewed this secured position

almost immediately after BMO declared a default against ABL in September 2015. He

also sued Aaron and Danny Letsinger and the other family guarantors under the

hidden 2014 Factoring and Security Agreement stating that “[b]etween June 17, 2015

and August 10, 2015, ABL offered for sale and Richert purchased all of ABL’s rights,

164 Trial Tr. vol. 1, 182:21-183:5.

165 Dwight Richert Dep. 120:12-121:6.

166 In re Juravin, 623 B.R. at 346 (quoting In re Howard, 261 B.R. at 517).

167 Trial Tr. vol. 1, 149:9-15.

168 Pl.’s Ex. 30.

title and interest in and to ABL’s accounts receivable.”169 This demonstrates that,

despite his statements to the contrary, by entering into the 2014 Factoring and Security

Agreement, Richert intended to preserve a security interest in ABL’s collateral and

never intended to comply with BMO’s Loan Payoff Agreement to “[t]erminate[] and

release[] all pledges, guarantees, security interest, liens, mortgages and other

encumbrances granted to Richert [Funding].”170

I specifically find Richert orchestrated a complex symphonic scheme working

behind the scenes and through his staff and the ABL principals with the sole intent to

deceive BMO into lending ABL monies, primarily to benefit Richert.171 The totality of

the circumstances show Richert made material misrepresentations to BMO intending

to deceive the bank.172

BMO Relied on Richert’s Misrepresentations

BMO affirmatively relied on Richert’s misrepresentations, as proven by the

testimony of Wickman and the other BMO employees. BMO relied on Richert’s

statements about the woefully short $3.89 million “payoff” and was deceived into

believing R/Funding would no longer be factoring A/R for ABL.173 BMO relied on

Defendant’s statements regarding ABL’s outstanding debt in assessing ABL’s

169 Trial Tr. vol. 1, 155:4-158:9; Pl.’s Ex. 5; Pl.’s Ex. 6; Pl.’s Ex. 34.

170 Pl.’s Ex. 18.

171 See In re Miller, 39 F.3d at 305.

172 The Court also concludes that these facts support a finding that Defendant made false statements concerning

material facts that Defendant knew to be false, with the intention that BMO would act upon it. See Moriber, 194

So. 3d at 373 (discussing the elements of fraudulent misrepresentation under Florida law).

173 Trial Tr. vol. 1, 80:17-23, 85:9-19.

indebtedness and whether ABL could repay BMO.174 Specifically, Wickman testified

that, in evaluating whether BMO should extend the loan to ABL, he relied on the

statements in the loan payoff agreement and the email from Garbrecht.175

Additionally, BMO relied on the September 22 aging report to assess potential

collateral.176 BMO relied on the statements of Defendant because R/Funding acted as

ABL’s “back room” and, based on its factoring relationship with ABL, had control of

ABL’s cash flow.177

BMO also has established justifiable reliance by a preponderance of the evidence.

The Supreme Court has determined that justified reliance, not merely reasonable

reliance, is the appropriate standard of reliance under a § 523(a)(2)(A) false

representation claim.178 Most of the case law discussing justifiable reliance focuses on

when a plaintiff has a duty to investigate a defendant’s misrepresentation; “put

differently, when one in the plaintiff’s position should have been alerted to the

misrepresentation.”179

Richert argues that, because BMO rejected ABL’s prior loan applications, the

bank could not have justifiably relied on Richert’s statements. Richert argues BMO

should have seen “red flags” in ABL’s loan application alerting the bank to check for

inaccuracies.

174 Trial Tr. vol. 1, 80:1-7.

175 Trial Tr. vol. 1, 91:21-25.

176 Trial Tr. vol. 1, 74:7-75:4.

177 Matthew Chapman Dep. 33:13-35:4, 43:24-44:24.

178 Field, 516 U.S. at 73-75, 116 S. Ct. at 445-46.

179 In re Soderstrom, 524 B.R. at 843.

“Justification is a matter of the qualities and characteristics of the particular

plaintiff, and the circumstances of the particular case, rather than of the application of

a community standard of conduct to all cases.”180 A creditor is only required to make

an investigation beyond the representations given where “under the circumstances, the

facts should be apparent to one of his knowledge and intelligence from a cursory

glance, or he has discovered something which should serve as a warning that he is

being deceived.”181 Justifiable reliance does not require that the creditor prove that it

acted consistent with ordinary care and prudence.182 As the Eleventh Circuit has

stated:

It is only where, under the circumstances, the facts should be apparent to

one of [plaintiff’s] knowledge and intelligence from a cursory glance, or

he has discovered something which should serve as a warning that he is

being deceived, that he is required to make an investigation of his own.183

That BMO might have further investigated and discovered the falseness of

Richert’s and ABL’s representations is not a bar to a fraudulent misrepresentation

claim.184 BMO’s representatives testified that the bank followed procedures in the

normal course of business, and it rightly assumed its client, ABL, was honest.185 A

bank does not have to test the honesty (or dishonesty) of a loan applicant if no obvious

incongruity or ambiguity exists.

180 Field, 516 U.S. at 70-71, 116 S. Ct. at 444 (quoting Restatement (Second) of Torts § 545A cmt. b (1976)).

181 Id. at 71, 116 S. Ct. at 444 (quoting W. Prosser, Law of Torts § 108, at 718 (4th ed. 1971)).

182 Eisinger v. Zito (In re Eisinger), 304 B.R. 492, 499 (Bankr. M.D. Fla. 2003) (quoting Skull Valley Band of Goshute

Indians v. Chivers (In re Chivers), 275 B.R. 606, 622 (Bankr. D. Utah 2002)).

183 City Bank & Trust Co. v. Vann (In re Vann), 67 F.3d 277, 283 (11th Cir. 1995) (alteration in original) (alteration

omitted) (quoting W. Page Keeton, Prosser & Keeton on Torts § 108, at 752 (5th ed. 1984)).

184 See Field, 516 U.S. at 70-71, 116 S. Ct. at 444.

185 David Maraman Dep. vol. 1, 44:2-15, 170:22-172:3, 404:11-18.

For example, Wickman saw no ambiguity in the carefully worded and false

email from R/Funding agreeing to the short $3.89 million payoff. He asked a direct

question whether the BMO loan would pay R/Funding in full and got a direct (but

false) answer of “yes.”186 BMO had no obligation to investigate further and was

justified in relying on this answer.

BMO also justifiably relied on accuracy of the representations in the September

22 aging report prepared by R/Funding.187 BMO had no obligation to separately “test”

the quality of the information. BMO had no duty to ask for further information and

had no reason to suspect that the report was anything other than an accurate reflection

of ABL’s aging report.

The standard in Field only requires investigation if a plaintiff knows any facts

that would have made the representation false from a cursory glance or that they had

discovered something that would have demonstrated the falsity of the statements.188

Nothing in the record suggests that BMO was on notice of any dishonesty or triggered

a need for further investigation into the veracity of the statements made by Richert or

ABL. Rather, the evidence supports a conclusion that Richert concocted his scheme

deliberately to trick BMO into relying on his misrepresentations, all to benefit

R/Funding and himself. BMO’s reliance is justified under the circumstances.

Damages

186 Trial Tr. vol. 1, 80:8-23; Pl.’s Ex. 16; see also David Maraman Dep. vol. 1, 360:22-362:12.

187 David Maraman Dep. vol. 2, 750:13-755:4.

188 See Ershowsky v. Freedman (In re Freedman), 431 B.R. 245, 260-61 (Bankr. S.D. Fla. 2010), aff'd, 427 F. App’x

813 (11th Cir. 2011).

Having concluded Richert intentionally misled BMO to extend the loan to

ABL, the focus turns to damages. Under § 523(a)(2)(A) of the Bankruptcy Code and

Florida law, Richert is liable for BMO’s pecuniary loss.189

“The harm suffered by the victim of an intentional misrepresentation ordinarily

(a) is the necessary consequence of the victim’s reliance on the misrepresentation and

(b) is commensurate with some benefit obtained by the person making the

misrepresentation.”190 Florida has two standards for the measurement of damages in

an action for fraudulent misrepresentation: the “benefit of the bargain” rule and the

“out-of-pocket” rule; “[e]ither may be used to do justice as the circumstances

demand.”191

However, looking at the Restatement (Second) of Torts, by analogy, which

follows Florida law,192 a plaintiff is limited to out-of-pocket damages when “the

plaintiff has not entered into any transaction with the defendant but has suffered his

pecuniary loss through reliance upon the misrepresentation in dealing with a third

person.”193

[W]hen the financial position of a third person is misrepresented for the

purpose of inducing the recipient to extend credit to him . . . the loss for

which the plaintiff can recover is that suffered because of the third

person’s inability to meet the credit extended to him. If the third person

pays nothing, the loss recoverable is the entire amount of the credit

189 See Generac Power Sys., Inc. v. Dato (In re Dato), 410 B.R. 106, 111 (Bankr. S.D. Fla. 2009) (citing Palmacci v.

Umpierrez, 121 F.3d 781, 786 (1st Cir. 1997); Restatement (Second) of Torts § 525); see also Restatement (Second)

of Torts § 549.

190 Southstar Equity, LLC v. Lai Chau, 998 So. 2d 625, 633 n.2 (Fla. 2d DCA 2008).

191 Nordyne, Inc. v. Fla. Mobile Home Supply, Inc., 625 So. 2d 1283, 1286 (Fla. 1st DCA 1993).

192 Id.

193 Restatement (Second) of Torts § 549 cmt. g.

extended. If the third person pays in part, the loss recoverable is the

residue remaining unpaid by him.194

“In applying this measure of damages, courts have awarded the amount loaned to the

third party, minus any payments received on the loan, but refused to award interest at

the rate provided in the loan.”195 This is exactly the case here.

BMO has proven that it was damaged by Richert’s misrepresentations—BMO

would not have lent ABL any monies without Richert’s deceits. “A plaintiff, as the

fourth and final element, must establish a causal link between the debtor's

misrepresentation and the resulting loss sustained by the plaintiff.”196 BMO specifically

and justifiably relied on Richert’s statements in the loan payoff agreement and the

email from Garbrecht confirming the loan would pay R/Funding in full.197

Because BMO would not have lent ABL any monies without these

misrepresentations, BMO initially was damaged by $3.89 million, the amount BMO

lent to ABL under the First Credit Agreement directly paid to R/Funding. BMO’s

damages increased when, due to Richert’s misrepresentations that R/Funding was no

longer factoring ABL’s A/R under the Second Security and Factoring Agreement,

194 Restatement (Second) of Torts § 549 cmt. a.

195 In re Weaver, 579 B.R. at 906 (citing First Nat’l Bank of Durant v. Trans Terra Corp. Int’l, 142 F.3d 802, 811 n.28

(5th Cir. 1999); Citizens State Bank v. Shearson Lehman Bros., Inc., 874 F. Supp. 307, 309 (D. Kan. 1994))

“Awarding the contractual rate of interest would give the lender the benefit of its bargain rather than its out-of-

pocket loss.”).

196 Phillips, Mille & Costabile Co. v. Shusteric (In re Shusteric), 380 B.R. 58, 66 (Bankr. M.D. Fla. 2007) (citing Fugate

v. Stevens (In re Stevens), No. 8:02-ap-589-PMG, 2003 Bankr. LEXIS 1950, at *18-19 (Bankr. M.D. Fla. Sept. 12,

2003)).

197 Trial Tr. vol. 1, 91:21-25.

BMO lent an extra $1 million seasonal line of credit to ABL.198 R/Funding received

100% of this payment also. Richert, acting out of self-interest, fraudulently induced

BMO to lend ABL the entire $4.89 million, which went directly to R/Funding.

BMO may have its out-of-pocket loss measured as the amount loaned less any

amount paid on that debt. The principal amount remaining under the First Credit

Agreement (as of the date BMO first sought repayment from Defendant) is

$3,742,403.67; the principal amount remaining under the Second Credit Agreement is

$1,000,000.00. Therefore, the total damages incurred by BMO because of Richert’s

fraud is $4,742,403.67.

BMO asks for a judgment against Richert for the $12,168,589.45 BMO

Judgment against ABL. I reject this argument finding the BMO Judgment is not

relevant to determining the damages BMO suffered due to Richert’s fraud.199

BMO also is not entitled to recover interest accruing under the First and Second

Credit Agreements. BMO had no agreement directly with R/Funding or Richert.

Therefore, BMO cannot collect interest accruing under these credit agreements

198 As Maraman, a representative for BMO testified, BMO “would never have made the loan, the million dollar

loan, had [it] known that those proceeds were going to be going outside of ABL and our organization.” David

Maraman Dep. vol. 2, 603:4-8.

199 First, Defendant is not liable for the indemnification for the PACA claims. See Dade Cty. Sch. Bd. v. Radio

Station WQBA, 731 So. 2d 638, 642 (Fla. 1999) (recognizing Florida courts require a special relationship between

the parties for common law indemnification to exist). Second, because Defendant’s liability to BMO is

established in torts, he is not liable for the indemnification and reimbursement of BMO’s attorney’s fees and

expenses. Restatement (Second) of Torts: Damages § 914 (“The damages in a tort action do not ordinarily

include compensation for attorney fees or other expenses of the litigation.”). Third, as to ABL’s overdrafts, these

overdrafts were done on ABL’s commercial account with BMO and were separate and apart from the loan.

Because there is not a causal link between Defendant’s misrepresentations and these over-advances, Defendant

is not liable.

because this would employ the “benefit of the bargain” measure of damages. And

Defendant was not a party to that bargain.200

BMO, however, is awarded prejudgment interest at the applicable statutory

rate.201

A determination of whether to award any prejudgment interest requires

consideration of equities including such factors as the merits of the

underlying action, whether the amount of defendant's liability could have

been determined at the outset, the causes of any delays in bringing the

case to resolution, and the avoidance of punitive measures.202

Where there is no controlling federal statute, “the choice of a rate at which to set the

amount of prejudgment interest is . . . within the discretion of a federal court.”203 Under

Florida law, “[w]hen a verdict liquidates damages on a plaintiff’s out-of-pocket

pecuniary losses, the plaintiff is entitled to prejudgment interest at the statutory rate

from the date of such loss.”204 Here, because it is unclear when BMO first demanded

200 See In re Weaver, 579 B.R. at 906 (citing First Nat’l Bank of Durant, 142 F.3d at 811 n.28; Citizens State Bank,

874 F. Supp. at 309).

201 The general rule under Florida law is that “a plaintiff is entitled to prejudgment interest as a matter of law.”

SEB S.A. v. Sunbeam Corp., 476 F.3d 1317, 1320 (11th Cir. 2007).

202 Nordberg v. ARAB Banking Corp. (In re Chase & Sanborn Corp.), 127 B.R. 903, 923-24 (Bankr. S.D. Fla. 1991)

(citing Osterneck v. Ernst & Whinney, 489 U.S. 169, 176, 109 S. Ct. 987, 991 (1989); Blau v. Lehman, 368 U.S. 403,

414, 82 S. Ct. 451, 457 (1962); Osterneck v. E.T. Barwick Indus., Inc., 825 F.2d 1521, 1536 (11th Cir. 1987); Parker

Towing Co. v. Yazoo River Towing, Inc., 794 F.2d 591, 594 (11th Cir. 1986); Bergquist v. Anderson-Greenwood Aviation

Corp. (In re Bellanca Aircraft Corp.), 850 F.2d 1275, 1281 (8th Cir. 1988); Fryman v. Century Factors, Factor for New

Wave (In re Art Shirt Ltd.), 93 B.R. 333, 341-42 (E.D. Pa. 1988)).

203 IBT Int’l, Inc. v. Northern (In re Int’l Admin. Servs.), 408 F.3d 689, 710 (11th Cir. 2005).

204 Greenberg v. Grossman, 683 So. 2d 156, 157 (Fla. 3d DCA 1996) (citing Argonaut Ins. Co. v. May Plumbing

Co., 474 So. 2d 212 (Fla. 1985); Underhill Fancy Veal, Inc. v. Padot, 677 So. 2d 1378 (Fla. 1st DCA 1996); Machado

v. Foreign Trade, Inc., 478 So. 2d 405 (Fla. 3d DCA 1985), disapproved on other grounds, Cheek v. McGowan Elec.

Supply Co., 511 So. 2d 977 (Fla. 1987)).

payment from ABL, prejudgment interest will accrue from the date BMO filed the

lawsuit seeking payment from Defendant,205 November 6, 2015.206

Prejudgment interest is calculated using Florida’s interest rate effective at the

time of entitlement207 (4.91% on November 6, 2015) applied against the assessed

damages of $4,742,403.67. The daily interest rate is .01341530%.208 The number of

days between November 6, 2015, and July 21, 2021 (the date of this judgment) is 2,085

days. Multiplying $4,742,403.67 by the daily interest rate (as a decimal) of

.0001341530 is $636.21.209 The daily interest multiplied by 2,085 days is

$1,326,493.01.210 That amount ($1,326,493.01) added to the base damages

($4,742,403.67) totals $6,068,896.68.

Further, this Court awards post-judgment interest on the total judgment amount

of $6,068,896.68 from the date the judgment is rendered until the date the judgment is

satisfied. For post-judgment interest, federal law governs.211 The federal post-judgment

interest rate is governed by 28 U.S.C. § 1961(a), which sets the rate at the weekly

average 1-year constant maturity Treasury yield for the calendar week preceding the

date of the judgment. According to the Federal Reserve Statistical Release H.15, the

205 See Vellef v. Control-O-Fax Corp., 682 So. 2d 1243, 1244 (Fla. 5th DCA 1996).

206 Compl., BMO Harris Bank, N.A. v. Richert Funding, LLC, No. 1:15-cv-03886-MLB (N.D. Ga. Nov. 6, 2015),

ECF No. 1.

207 See IberiaBank v. Coconut 41, LLC, 984 F. Supp. 2d 1283, 1300 (M.D. Fla. 2013), aff’d, 589 F. App’x 479 (11th

Cir. 2014) (discussing framework for prejudgment interest in Florida).

208 https://www.myfloridacfo.com/Division/AA/LocalGovernments/Historical.htm (last visited July 20,

2021).

209 The full number is $636.20767954151.

210 The full number is $1,326,493.011844048.

211 See Boston Old Colony Ins. Co. v. Tiner Assocs., 288 F.3d 222, 234 (5th Cir. 2002).

average 1-year constant maturity Treasury yield for the week ending July 16, 2021 was

0.08%.212 Post-judgment interest shall accrue at the statutory rate of 0.08% from the

date of judgment.

Conclusion

BMO has proven the elements of § 523(a)(2)(A) by a preponderance of the

evidence. Defendant, Dwight Richert, is liable to BMO for a non-dischargeable fraud

judgment for $6,068,896.68, plus post-judgment interest. A separate Final Judgment

shall be entered contemporaneous with this Memorandum Opinion.

###

Attorney Michael Nardella will serve a copy of this order on interested parties who are

non-CM/ECF users and file a proof of service within 3 days of entry of the order.

212 https://www.federalreserve.gov/releases/h15/ (last visited July 20, 2021).