Ehrenberg, Chapter 7 Trustee v. Williams, an individual,

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FILED @ ENTERED

JUL 23 2026

CLERK U.S. BANKRUPTCY COURT
Central District of Califomia
BY gonzalez DEPUTY CLERK

UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
LOS ANGELES DIVISION

In re:
626 HOSPICE, INC.,

Debtor(s).

HOWARD EHRENBERG, Chapter 7
Trustee,

Case No.: 2:22-bk-12904-WB
Chapter: 7

Adversary No.: 2:24-ap-01108 -WB

MEMORANDUM OF DECISION

Plaintiff(s),
VS.
Date: September 30, 2025
CLEO TSOLAKOGLOU WILLIAMS,| Time: 2:00 PM
an individual, Location: 255 E. Temple Street
Courtroom 1375
Defendant(s). Los Angeles, CA 90012
INTRODUCTION

This adversary proceeding arises in the bankruptcy case of 626 Hospice, Inc.

(“Debtor”), a Medicare and Medi-Cal hospice provider whose principal, Gladwin

AUTHENTICATE

INFORMATIPN

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Gill (“Mr. Gill”), systematically diverted Debtor’s reimbursement income over
several years. Plaintiff, Howard Ehrenberg, Chapter 7 Trustee (“Trustee”), moves
for summary judgment1 against Defendant Cleo Tsolakoglou Williams
(“Defendant” or “Williams”) to avoid and recover $299,500 in transfers (the
“Four-Year Transfers”) as fraudulent transfers under 11 U.S.C. §§ 544(b), 548 and
California Civil Code §§ 3439.04(a), 3439.05, 3439.07.2
The Four-Year Transfers were payments made to Defendant in connection
with the sale of her medical practice, Asclepion Family Medical Group
(“Asclepion”), to Boston Medical Center, Inc. (“BMC”), an entity controlled by
Mr. Gill. The payments were not funded by the purchaser identified on the
Purchase Agreement, BMC, but were funded from money that Mr. Gill and his
daughter, Natasha Gill (“Natasha”), had misappropriated from Debtor’s
reimbursement income. Debtor received no interest in Asclepion and no value of
any kind in return.
Defendant opposes the motion primarily on the grounds that she acted in
good faith and provided reasonably equivalent value for the payments she
received. In support of her opposition, she submitted several declarations. For the
reasons set forth below, the declarations are legally insufficient to raise a genuine
dispute of material fact. The undisputed record establishes that Defendant received
payments from entities that had no contractual obligation to pay her, which would
have placed a reasonable person in her position on inquiry notice that something
1 The Trustee’s motion states that this Court has jurisdiction to make recommendations to the
District Court. That procedure is not necessary here, as both parties have consented to this
Court’s entry of a final judgment and/or order in this adversary proceeding. See Joint Status
Report (docket no. 5).
2 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code,
11 U.S.C. §§ 101-1532, “Rule” references are to the Federal Rules of Bankruptcy Procedure,
“Civil Rule” references are to the Federal Rules of Civil Procedure, “LBR” references are to the
Local Bankruptcy Rules of the United States Bankruptcy Court for the Central District of
California (“LBR”), and “CC” references are to the California Civil Code.
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was amiss. Her failure to investigate why that was the case precludes a
determination of good faith. The value she provided, her Asclepion shares and
goodwill, went to BMC, an entity controlled by Mr. Gill, and not to Debtor, whose
funds were used to make the payments.
For the reasons set forth below, the Court determines that the Trustee has
established both actual and constructive fraudulent transfers and that Defendant
has failed to raise a genuine dispute of material fact as to good faith and reasonably
equivalent value. The motion for summary judgment is therefore granted.
A. Debtor and its Medicare/Medi-Cal Operations
Debtor was formed on May 16, 2011 and entered into a Provider Agreement
with the U.S. Department of Health and Human Services (“HHS”) on October 28,
2014. That agreement authorized Debtor to provide hospice care services,
including routine home care, continuous home care, and inpatient respite care, and
to submit invoices to HHS for reimbursement. Reimbursements were administered
by the National Government Services (“NGS”), an administrative contractor for
HHS. Medicare reimbursements were subject to an annual year-end review to
determine whether payments exceeded a cap established by the Code of Federal
Regulations, and any overpayment was required to be returned upon notice from
the NGS.
In May 2018, Mr. Gill, through a company he controlled and managed called
American Academy of Palliative Care Services, Inc., acquired Debtor. At all times
thereafter, Mr. Gill exercised control over Debtor directly or through his family
members, his daughter, Natasha, who served as Debtor’s Chief Financial Officer,
and his wife, Amelou Gill. Debtor’s primary bank account was a Citibank account
(ending 4716). Medicare reimbursements were wired to that account.
B. Gill Family Scheme
On April 5, 2019, NGS sent Debtor its first overpayment notice, stating that
Debtor received a Medicare overpayment of $149,100.09 for the year ending
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September 30, 2018 and was required to return those funds. Debtor did not appeal
that determination. Rather than comply, Mr. Gill and Natasha commenced a
scheme to divert the overpayments. Within twenty days after this first overpayment
notice, on April 25, 2019, Mr. Gill opened a Bank of America checking account
(ending 1578) in the name of California Hospice (“California Hospice”), a
California corporation he formed in June 2018. California Hospice had no
operations, no employees, and no expenses, and it did not even have a bank
account prior to April 2019. Another Bank of America account (ending 3756) was
opened in the name of California Hospice on May 7, 2019.
Over the next three years, Mr. Gill and Natasha diverted 113 Medi-Cal
reimbursement checks that were made payable to “626 Hospice, Inc.,” totaling
approximately $1.2 million, into the California Hospice accounts rather than
Debtor’s account (ending 4716). Medicare reimbursements that were wired
directly into Debtor’s account (ending 4716) were transferred out through checks
payable to California Hospice and other entities controlled by the Gill family. Mr.
Gill and Natasha used the diverted funds for their own personal use and to acquire
other businesses.
Additional overpayment notices followed: June 5, 2020 ($565,818.82);
December 3, 2020 ($31,562.18); March 30, 2021 ($575,233.00), August 6, 2021
($43,312.66), October 29, 2021 ($55,566.68), April 5, 2022 ($522,177.07), and a
final one on June 7, 2022 ($858,644.93). Debtor repaid only a fraction of what was
owed to HHS.
C. Asclepion Sale
Defendant was the sole owner of Asclepion, a medical practice that she
operated for over 20 years. In 2020, Mr. Gill negotiated to purchase Defendant’s
interest in Asclepion. On March 9, 2020, the Defendant signed a Purchase
Agreement, and on April 23, 2020, Mr. Gill signed the Purchase Agreement,
pursuant to which BMC agreed to purchase Defendant’s 100% interest in
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Asclepion and all its assets for $250,000. BMC was the sole purchaser and party
obligated under the Purchase Agreement. Debtor was neither a party to, nor
mentioned in, the Purchase Agreement.
On April 30, 2020, Defendant and Mr. Gill, on behalf of BMC, entered into
an Addendum to Purchase Agreement (“Addendum”), and on May 4, 2020, they
entered into a Share Interest Transfer Agreement, stating that the parties intended
that Defendant’s 100% interest in Asclepion was to be transferred to “Boston
Medical Center, a California corporation.” Mr. Gill never transferred any interest
in Asclepion to Debtor. The Trustee does not know who currently possesses an
interest in Asclepion.
Despite BMC clearly being obligated under the agreement as purchaser,
Defendant received funds for the sale via checks drawn on Debtor’s account
(ending 4716), a check drawn from California Hospice’s account (ending 3756),
and a number of cashier’s checks drawn from California Hospice’s accounts
(ending 3756 and 1578).
After completing the sale, Defendant continued to provide medical services
to Asclepion. Defendant claims, through her supplemental declarations, that she
entered into an Associate Medical Director Agreement with St. Francis Palliative
Care, which Defendant states she was later informed was one of Debtor’s DBAs,
effective August 1, 2020, pursuant to which she provided part-time medical
services and received compensation. The date of that agreement, the amount of
compensation, and the earnings statements were provided by Defendant in her
declaration and exhibits; they were not established by the Trustee. Defendant
claims to have received either $15,000 or $18,000 for those services; the amount
varies between her declarations, as discussed below. This discrepancy is
immaterial.
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D. Bankruptcy Filing and Adversary Proceeding re The Four-Year
Transfers
On May 25, 2022 (the “Petition Date”), Debtor filed a voluntary petition
under Chapter 11, which was later converted to Chapter 7. HHS filed a proof of
claim, asserting that by the Petition Date, it is owed more than $2.2 million. Debtor
reported no cash, no material assets, and no accounts receivable as of the Petition
Date.
The Trustee commenced this adversary proceeding on May 8, 2024 by filing
a complaint against Defendant. The claims for relief included the following: Claim
1: Avoidance of Four-Year Transfers as Intentionally Fraudulent Transfers
pursuant to 11 U.S.C. § 544(b) and California Civil Code §§ 3439.04(a)(1) and
3439.07; Claim 2: Avoidance of Four-Year Transfers pursuant to 11 U.S.C. §
544(b) and California Civil Code §§ 3439.04(a)(2), 3439.05 and 3439.07; Claim 3:
Avoidance and Recovery of Two-Year Transfers as Intentionally Fraudulent
Transfers pursuant to 11 U.S.C. § 548(a)(1)(A); Claim 4: Avoidance and Recovery
of Two-Year Transfers as Constructively Fraudulent Transfers pursuant to 11
U.S.C. § 548(a)(1)(B); and Claim 5: Recovery of Transfers or the Value Thereof
pursuant to 11 U.S.C. § 550. Thereafter, the Trustee filed this motion for summary
judgment or in the alternative partial summary adjudication. The motion relied in
part on Defendant’s failure to respond to Requests for Admissions, which resulted
in all requests being deemed admitted under Civil Rule 36(a)(3). The Defendant
filed a motion for relief from the deemed admissions, which the Court granted. The
Trustee’s motion thereafter proceeded on the documentary evidence and
declarations.
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The Trustee seeks to avoid and recover the Four-Year Transfers, totaling
$299,500, all made during the four-year period prior to the Petition Date as
follows:
• $19,000 of transfers of funds from Debtor’s account (ending 4716) –
Between November 6, 2020 and May 6, 2022, 19 transfers of $1,000
each were made from Debtor’s Citibank account (ending 4716) directly
to Defendant. These transfers are listed in the Declaration of Steven F.
Werth (“Werth Declaration”) by date and amount. However, no bank
statements for this account (ending 4716) were submitted. Defendant
does not specifically deny or address these transfers; she does state that
she was not an initial transferee of any funds from Debtor. Defendant
Declaration (docket no. 27) ¶ 7.
• $30,000 check drawn from California Hospice’s account (ending
3756) – On January 29, 2021, Mr. Gill made a check in the amount of
$30,000 from the California Hospice account (ending 3756) and paid it to
Defendant. The memo line on the check states “as agreed.” The check
does not have any reference to Debtor, 626 Hospice, Inc.
• $250,000 of cashier’s checks drawn from California Hospice’s
accounts (ending 1578 and 3756) – Between March and July 2020, Mr.
Gill caused five cashier checks to be drawn from California Hospice’s
accounts (ending 1578 and 3756) and delivered to Defendant:
- $75,000 (March 9, 2020 from account (ending 3756), bearing the
name “Nexgen Stem Cell Therapy”);
- $50,000 (April 24, 2020 from account (ending 1578), bearing the
name “California Hospice Management”);
- $25,000 (May 4, 2020 from account (ending 1578) bearing the
name “California Hospice Management”);
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- $50,000 (July 10, 2020 from account (ending 1578) bearing the
name “California Hospice Mgmt”). Defendant does not deny or
address this transfer; and
- $50,500 (July 20, 2020 from account (ending 1578) bearing the
name “California Hospice Management Group, Ltd.” Defendant
does not deny or address this transfer.
The dates of the cashier’s checks approximately correspond to the payment
dates specified in the Purchase Agreement and Addendum. There are no references
to Debtor, 626 Hospice, Inc., on the cashier’s checks.
Defendant’s own declarations assert that she received an additional payment
of $30,000 on March 19, 2021 drawn from a BMC account (ending 0458) and that
she received a total of $210,000 and is still owed $40,000 under the Purchase
Agreement. These assertions appear only in Defendant’s declarations and are not
part of the Trustee’s claims. The Court therefore does not address the BMC
payment, which is outside the scope of the Four-Year Transfers as defined by the
Trustee.
The Trustee has established, through bank records and the Werth
Declaration, that the funds for the cashier’s checks and Debtor’s account (ending
4716) were traceable to the diverted HHS overpayments. Debtor received no
interest in Asclepion; Mr. Gill never transferred any interest or shares in Asclepion
to Debtor.
JURISDICTION
This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334.
This Court has authority to hear this matter pursuant to 28 U.S.C. §§ 151,
157(b)(2).
DISCUSSION
Summary judgment is appropriate when “the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
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matter of law.” Civil Rule 56(a), incorporated by Rule 7056. In assessing the
summary judgment record, a court must draw all reasonable inferences in favor of
the non-moving party but “[c]onclusory, speculative testimony in affidavits and
moving papers is insufficient to raise genuine issues of fact and defeat summary
judgment.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007).
The non-moving party cannot simply rely on contestations of motive or intent,
where those issues are contested merely by conclusory allegations or improbable
inferences. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S. Ct. 2505,
91 L. Ed. 2d 202 (1986) (“If the evidence is merely colorable or is not significantly
probative, summary judgment may be granted.” (internal citations omitted));
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct.
1348, 89 L. Ed. 2d 538 (1986) (parties opposing summary judgment “must do
more than simply show that there is some metaphysical doubt as to the material
facts”).
The Trustee, as the moving party, has the burden to show that no genuine
issue of material fact exists for trial, but in meeting this burden, the moving party
does not need to negate the opponent’s claim. Celotex Corp. v. Catrett, 477 U.S.
317, 322-323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); In re Agric. Rsch. &
Tech. Grp., Inc., 916 F.2d 528, 533 (9th Cir. 1990).
Defendant, as the nonmoving party, has the burden of proof on her
affirmative defenses to create a triable issue. In meeting this burden, she must
provide admissible evidence to create a triable issue as to her affirmative defenses
of good faith and reasonably equivalent value. In re Agric. Rsch. & Tech. Grp.,
Inc., 916 F.2d 528, 533 (9th Cir. 1990) (“Once the moving party meets this burden,
the non-moving party must designate ‘specific facts showing that there is a genuine
issue for trial.’…In cases where the non-moving party bears the burden of proof at
trial with respect to a material fact, the party opposing the motion is required ‘to
make a showing sufficient to establish the existence of an element essential to that
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party’s case, and on which that party will bear the burden of proof at trial.’ A mere
scintilla of evidence is not sufficient to withstand the motion.”) (citing Celotex
Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265
(1986) and Anderson v. Liberty Lobby, 477 U.S. 242, 252, 106 S.Ct. 2505, 2512,
91 L.Ed.2d 202 (1986)).
“A conclusory, self-serving affidavit, lacking detailed facts and any
supporting evidence, is insufficient to create a genuine issue of material fact.”
F.T.C. v. Publ'g Clearing House, Inc., 104 F.3d 1168, 1171 (9th Cir. 1997), as
amended (Apr. 11, 1997) (citing Hansen v. United States, 7 F.3d 137, 138 (9th
Cir.1993) and United States v. One Parcel of Real Property, 904 F.2d 487, 492 n. 3
(9th Cir.1990)).
A. Trustee’s Standing Under § 544(b)
Section 544(b) allows the trustee to step into the shoes of a creditor who
could, as of the date of the bankruptcy petition, avoid the transfer under state law.
See In re Acequia, Inc., 34 F.3d 800, 807 (9th Cir. 1994) (a trustee’s § 544(b)
power is dependent on whether a creditor existed at the time the transfers were
made that still had a viable claim against the debtor at the time the debtor filed
bankruptcy). Thus, before invoking California’s Uniform Voidable Transactions
Act, the Trustee must establish the existence of an actual unsecured creditor whose
claim existed at the time of the challenged transfers and who could have avoided
those transfers under applicable state law.
Here, the Trustee has satisfied that requirement. The undisputed evidence
establishes that HHS held unsecured claims against Debtor arising from Medicare
overpayments that predated the challenged transfers. Beginning on April 5, 2019,
HHS, through its administrative contractor, NGS, issued a series of overpayment
determinations requiring Debtor to repay improperly received Medicare
reimbursements. Additional overpayment notices followed throughout 2020, 2021,
and 2022, and HHS ultimately filed a proof of claim in this bankruptcy case
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asserting an unsecured claim exceeding $2.2 million. Those overpayment
obligations arose before and during the period in which the challenged transfers
were made. Accordingly, HHS was an actual unsecured creditor whose claim
existed at the time of the challenged transfers and remained allowable on the
Petition Date. The Trustee therefore has standing under § 544(b) to assert those
state-law fraudulent transfer claims.
Having established the Trustee's standing under § 544(b), the Court turns to
whether the challenged transfers are avoidable as actual and constructive
fraudulent transfers under California law and the Bankruptcy Code.
B. Actual Fraudulent Transfer
The Trustee’s first claim seeks avoidance of the Four-Year Transfers
pursuant to CC § 3439.04(a)(1), made applicable through § 544(b). The Trustee’s
third claim seeks avoidance of those transfers occurring within two years of the
Petition Date pursuant to § 548(a)(1)(A). Both claims seek avoidance of transfers
made “with actual intent to hinder, delay, or defraud” a creditor of the debtor.
Because actual fraudulent intent is often established through circumstantial
evidence, CC § 3439.04(b) lists eleven non-exclusive factors that courts consider
in determining actual intent under CC § 3439.04(a)(1). These are referred to as
“badges of fraud,” which include whether Debtor retained possession or control of
the property transferred after the transfer, whether the value of the consideration
received by Debtor was reasonably equivalent to the value of the asset transferred,
and whether Debtor was insolvent or became insolvent shortly after the transfer
was made. CC § 3439.04(b). The Trustee has the burden of proof by a
preponderance of the evidence. CC § 3439.04(c).
Here, there is no genuine dispute as to the element of actual fraud.
Defendant does not challenge that the transfers from Debtor were made with actual
fraudulent intent. Defendant received a series of transfers from Debtor’s account
(ending 4716) and California Hospice accounts (ending 1578 and 3756) for the
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purchase by BMC, owned by Mr. Gill, of Defendant’s medical practice. The
Trustee has established that the money in those accounts belonged to Debtor. He
has shown that Mr. Gill established the California Hospice accounts for a shell
entity immediately after the first Medicare overpayment notice and that Mr. Gill
and Natasha immediately began transferring Debtor’s reimbursement income from
Debtor’s account and directly depositing Debtor’s checks into the California
Hospice accounts (ending 1578 and 3756). This scheme of siphoning money away
from Debtor continued for over three years with the Gill family diverting 113
checks totaling $1.2 million. This scheme was executed through multiple Gill-
controlled entities and transfers to multiple accounts to try to conceal the source of
the funds. The Court determines the Trustee has established that the transfers were
made from Debtor to the California Hospice accounts (ending 1578 and 3756)
without reasonably equivalent value and they made Debtor insolvent. Debtor
received no value in exchange for the Four-Year Transfers. Further, Mr. Gill used
Debtor’s funds to purchase Asclepion for his company BMC. Debtor did not
receive any interest in Asclepion or any other benefit from the sale.
Furthermore, Debtor’s insolvency is not genuinely disputed, and Defendant
does not challenge insolvency. Defendant merely states that she did not detect that
BMC, Mr. Gill, or anyone else associated with her sale of Asclepion was insolvent
or likely to become insolvent. Trustee has established that Debtor became
insolvent from the inception of the scheme. Indeed, as of the time of the first
overpayment notice, the Gill family began depleting Debtor’s accounts while
overpayment repayment obligations continued to accrue with each subsequent
notice. Mr. Gill and Natasha depleted Debtor of its assets and made it impossible
for Debtor to repay the overpayments. The overpayments amounted to over $2.2
million by the Petition Date, while Debtor, as reported by Natasha, had no cash, no
material assets, and no accounts receivable by the Petition Date.
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As a result, the Court determines the Trustee has established that the
transfers of money from Debtor were made with actual intent to hinder, delay, or
defraud creditors and therefore has established actual fraud.
C. Constructive Fraudulent Transfer
The Trustee’s second claim under CC §§ 3439.04(a)(2) and 3439.05, made
applicable through § 544(b), and the fourth claim under § 548(a)(1)(B), seek
avoidance of constructively fraudulent transfers. A transfer may be avoided as
constructively fraudulent if the transfer was made without receiving reasonably
equivalent value in exchange for the transfer and Debtor was insolvent at the time
or became insolvent as a result of the transfer or was engaged in or about to engage
in a transaction for which the remaining assets of Debtor were unreasonably small
in relation to the transaction. The Trustee bears the burden of proof by a
preponderance of the evidence. CC §§ 3439.04(c) and 3439.05(b).
Here, again, there is no dispute as to insolvency. Furthermore, the Trustee
has shown that Debtor did not receive reasonably equivalent value in exchange for
the transfers. Debtor received nothing for the transfer of its funds to the California
Hospice accounts. Nor did it receive any value for the transfer of its funds from its
own accounts or the California Hospice accounts to Defendant.
As a result, the Court determines the Trustee has established that the
transfers of money from Debtor were made while Debtor was insolvent or became
insolvent as a result and Debtor did not receive reasonably equivalent value in
exchange and therefore Trustee has established constructive fraud.
D. Trustee may Recover from Defendant, as Defendant Failed to Show
Good Faith or that She Gave Reasonably Equivalent Value for the
Transfers.
Trustee may recover the property transferred or the value of such property
from the initial transferee or a subsequent transferee. 11 U.S.C. § 550(a) and CC §
3439.08(b)(1). A subsequent transferee may have a defense to recovery of the
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transfer if the transferee took for value, in good faith and without knowledge of the
voidability of the transfer. 11 U.S.C. § 550(b); CC § 3439.08(b)(1)(B). The burden
of proving the defenses is upon the transferee, here the Defendant. CC §§
3439.08(f)(1), (g).; In re Agric. Rsch. & Tech. Grp., Inc., 916 F.2d 528, 535 (9th
Cir. 1990); In re AVI, Inc., 389 B.R. 721, 736 (B.A.P. 9th Cir. 2008). Whether
Defendant is the initial transferee or a subsequent transferee affects her available
defenses.
Here, the Trustee argues that Defendant is the initial transferee pursuant to
In re Walldesign, Inc., 872 F.3d 954 (9th Cir. 2017) based on the Trustee’s
assertion the Gills used Debtor’s money for their own benefit.
In Walldesign, the company’s principal opened a secret bank account in the
debtor company’s name, deposited the debtor’s funds into the account, and later
misdirected those funds to pay for his personal expenses without first depositing
the funds into his own bank account or otherwise taking legal control of the
money; the money moved from the debtor to the third parties for the principal’s
benefit. The unsecured creditors committee brought an adversary proceeding to
recover funds from entities who were paid from the debtor’s secret account for
property and services provided to the principal. The defendants argued they were
subsequent transferees entitled to the “safe harbor” provisions of § 550(b)(1). The
Ninth Circuit held that since the money came directly from the debtor’s bank
account to the defendants, although orchestrated by the principal for his own
benefit, the defendants were initial transferees of the payments and thus were not
entitled to the statutory safe harbor provisions for subsequent transferees.
Walldesign at 967-968.
Here, unlike in Walldesign, Defendant received the majority of the transfers
from non-debtor accounts. To the extent the funds were paid from non-debtor
sources, the Defendant is a subsequent transferee of such funds. The Court will
now analyze each of the transfers in this context.
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1. $19,000 transfers of funds from Debtor’s account (ending 4716) –
Defendant as initial transferee
The Court determines that the Trustee has established that Defendant is the
initial transferee with respect to the 19 transfers of $1,000 each, from November 6,
2020 through May 6, 2022, drawn from Debtor’s Citibank account (ending 4716),
totaling $19,000. The checks were drawn directly from an account in Debtor’s
name to Defendant. The Werth Declaration identifies each transfer by date and
amount. Werth Declaration ¶¶ 49-50. Defendant’s declarations do not mention
these transfers. She neither denies receiving them nor addresses these transfers in
any way. Her declaration merely vaguely states that she was not an initial
transferee of any funds from Debtor. The Court determines that the Defendant’s
self-serving declaration does not create a dispute of material fact. Defendant has
not controverted the testimony that the funds came from Debtor’s account. Trustee
has established that these transfers were made to Defendant as the initial transferee.
As a result, Defendant is liable as an initial transferee for these transfers.
2. $30,000 check drawn from California Hospice’s account (ending
3756) and $250,000 of cashier’s checks drawn from California
Hospice’s accounts (ending 1578 and 3756) – Defendant as
subsequent transferee
With respect to the other transfers, the single check in the amount of
$30,000, dated January 29, 2021, drawn from California Hospice’s account
(ending 3756), and the five cashier’s checks totaling $250,000, drawn between
March and July 2020, from California Hospice’s accounts (ending 1578 and 3756),
bearing the names “NexGen Stem Cell Therapy” and “California Hospice
Management Group, Ltd.,” the Court determines that Defendant was a subsequent
transferee of those funds that she received from non-debtor accounts.
Section 550(b)(1) provides a safe harbor defense for subsequent transferees:
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The trustee may not recover under section [1] (a)(2) of this
section from—
(1) a transferee that takes for value, including satisfaction
or securing of a present or antecedent debt, in good
faith, and without knowledge of the voidability of the
transfer avoided. 11 U.S.C. § 550(b)(1) (emphasis
added).
“[T]here is no precise definition of good faith, but courts look to what the
transferee objectively ‘knew or should have known’ rather than examining what
the transferee knew from a subjective standpoint... Transferees also have a duty to
investigate if there is sufficient information to put the transferee on notice that
something is wrong.” In re AVI, Inc., 389 B.R. 721, 736 (B.A.P. 9th Cir. 2008)
(internal citations omitted); see also In re Agric. Rsch. & Tech. Grp., Inc., 916 F.2d
528, 535–36 (9th Cir. 1990). It is Defendant’s burden to show good faith and
reasonably equivalent value.
With respect to good faith, Defendant argues she had no idea the money was
Debtor’s money since the entities on the cashiers’ checks were not Debtor. The
Trustee argues that Defendant was at least on inquiry notice that something was
amiss because the cashier’s checks were not issued by BMC, the purchaser of her
practice. The cashier’s checks Defendant admits to receiving were drawn from
accounts bearing the names “NexGen Stem Cell Therapy” and “California Hospice
Management” or some derivative, which are entities that were not parties to the
Purchase Agreement. The $30,000 check from account (ending 3756) was in the
name of another entity, California Hospice, also not a party to the Purchase
Agreement.
Defendant argues that the cashier’s checks from NexGen Stem Cell Therapy
and California Hospice Management Group, Ltd. did not have any reference to
Debtor. Defendant Supplemental Declaration (docket no. 44) ¶¶ 4-8. She
misunderstands; the inquiry notice was not whether the checks identified 626
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Hospice but rather why non-buyer entities were paying for her practice when they
were not purchasers of the practice.
Defendant also argues that NexGen Stem Cell Therapy could not have been
involved in a Medicare/Medical fraud because it was a separate medical practice
that did not do any Medicare or Medi-Cal billing but only accepted patients that
paid in cash, credit card, or check. Defendant Supplemental Declaration (docket
no. 44) ¶ 17. Again, Defendant misses the point. The relevant inquiry was why
NexGen was funding the purchase of her medical practice, when it had no
connection with the transaction.
As noted above, the Court must determine good faith, not based on the
subjective understanding of the Defendant, but on an objective standard.
Defendant fails to address this standard, relying simply on her contention that she
had no idea that the money belonged to the Debtor. Defendant is a licensed
physician who was seeking to sell her established medical practice of 20 years.
The Court concludes that it was not objectively reasonable for Defendant to
proceed with the transaction in good faith when the source of the vast majority of
the purchase price was from entities that were not involved in the transaction.
Defendant’s self-serving response regarding good faith does not satisfy her burden
and does not create a genuine issue of material fact. F.T.C. v. Publ'g Clearing
House, Inc., 104 F.3d 1168, 1171 (9th Cir. 1997), as amended (Apr. 11, 1997) (“A
conclusory, self-serving affidavit, lacking detailed facts and any supporting
evidence, is insufficient to create a genuine issue of material fact.”); Hansen v.
United States, 7 F.3d 137, 138 (9th Cir.1993) (“When the nonmoving party relies
only on its own affidavits to oppose summary judgment, it cannot rely on
conclusory allegations unsupported by factual data to create an issue of material
fact.”).
Even if Defendant could establish good faith, the defense fails as a matter of
law because Defendant has failed to establish that value was given to the transferor
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in exchange for the payments. Defendant argues that she provided value to BMC
because the patient list and goodwill that was transferred to BMC as part of the
sale was “adequate reasonably equivalent value.” Defendant Supplemental
Declaration (docket no. 44) ¶ 13. Defendant misses the point. The inquiry is
whether the transferor, here California Hospice and Next Gen, received value for
the transfers. They did not.
Defendant acknowledges that she did not intend to provide value to Debtor
or anyone other than Gladwin Gill and BMC stating that “primarily most of my
dealings with BMC was through its principal, Gladwin Gill…at no point was the
sale of my medical practice, Asclepion, intended to have any relationship to the
Corporate Debtor, 626 Hospice.” Defendant Supplemental Declaration (docket no.
44) ¶ 2.
Defendant attempts to establish value by reference to payments for medical
services that she provided to St. Francis Palliative Care, a hospice facility owned
by Debtor and by reference to a payment of $30,000 on March 19, 2021, drawn
from a BMC account. However, these items do not establish that she gave
reasonably equivalent value for the transfers at issue. With respect to the payments
for services rendered, she was paid wages by ADP, a payroll service. This does
not establish reasonably equivalent value for the transfers at issue. Further,
Defendant does not explain how the $30,000 payment from BMC constitutes value
for transfers from other entities.
The Court determines that Defendant has failed to meet her burden for the
safe harbor defense, as she has failed to show she took the money for value, in
good faith, and without knowledge of the voidability of the transfer.3
3 With respect to knowledge of the voidability of the transfer avoided, Defendant states in her
declaration that she did not have notice concerning the voidability of the checks she received
from third parties, Boston Medical, NexGen Stem, and California Hospice Management.
Although Defendant makes this self-serving, conclusory statement, even if true, it does not help
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In summary, the Trustee has established the Four-Year Transfers are
avoidable as both actual and constructive fraudulent transfers. He is entitled to
recover their value from Defendant under § 550(a). Defendant is an initial
transferee as to the checks that came from Debtor’s Citibank account (ending
4716). Defendant is the subsequent transferee of the check and cashier’s checks
from California Hospice’s accounts (ending 1578 and 3756), but she failed to show
any of the defenses under § 550(b)(1) are met here.
CONCLUSION
For the reasons stated above, Plaintiff’s Motion for Summary Judgment is
granted. Judgment shall be entered in favor of Plaintiff, Howard Ehrenberg,
Chapter 7 Trustee, and against Defendant, Cleo Tsolakoglou Williams, in the
amount of $299,500 as follows:
1. Claim 1: Avoidance of Four-Year Transfers as Intentionally
Fraudulent Transfers pursuant to 11 U.S.C. § 544(b) and California
Civil Code §§ 3439.04(a)(1) and 3439.07 – all Four-Year Transfers
totaling $299,500 are avoided as intentional fraudulent transfers pursuant
to 11 U.S.C. § 544(b) and California Civil Code § 3439.04(a)(1).
2. Claim 2: Avoidance of Four-Year Transfers pursuant to 11 U.S.C. §
544(b) and California Civil Code §§ 3439.04(a)(2), 3439.05 and
3439.07 – all Four-Year Transfers totaling $299,500 are avoided as
constructive fraudulent transfers pursuant to 11 U.S.C. § 544(b) and
California Civil Code §§ 3439.04(a)(2) and 3439.05.
3. Claim 3: Avoidance and Recovery of Two-Year Transfers as
Intentionally Fraudulent Transfers pursuant to 11 U.S.C. §
548(a)(1)(A) – those Four-Year Transfers that occurred within two years
in her defense, as the “and” in the statute requires that all three elements for the defense must be
shown, and Defendant has failed to show value and good faith.
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prior to the Petition Date totaling $149,500 are avoided as intentional
fraudulent transfers pursuant to 11 U.S.C. § 548(a)(1)(A). Those transfers
are the $50,000 cashier’s check dated July 10, 2020, the $50,500
cashier’s check dated July 20, 2020, the $30,000 check drawn from
Account (ending 3756) dated January 29, 2021, and the 19 transfers of
$1,000 each from Debtor’s account (ending 4716) made between
November 6, 2020 and May 6, 2022, totaling $19,000.
4. Claim 4: Avoidance and Recovery of Two-Year Transfers as
Constructively Fraudulent Transfers pursuant to 11 U.S.C. §
548(a)(1)(B) – those Four-Year Transfers that occurred within two years
prior to the Petition Date totaling $149,500 are avoided as constructive
fraudulent transfers pursuant to 11 U.S.C. § 548(a)(1)(B). Those transfers
are the $50,000 cashier’s check dated July 10, 2020, the $50,500
cashier’s check dated July 20, 2020, the $30,000 check drawn from
Account (ending 3756) dated January 29, 2021, and the 19 transfers of
$1,000 each from Debtor’s account (ending 4716) made between
November 6, 2020 and May 6, 2022, totaling $19,000.
5. Claim 5: Recovery of Transfers or the Value Thereof pursuant to 11
U.S.C. § 550 – the Trustee is entitled to recover $299,500 from
Defendant pursuant to 11 U.S.C. § 550(a).
//
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Judgment will be entered against Defendant, Cleo Tsolakoglou Williams, in
the amount of $299,500, plus interest at the applicable post-judgment rate from the
date of entry of judgment.
A separate judgment consistent with this decision will be entered.
###
Date: July 23, 2026
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