Shearson Lehman Hutton, Inc. v. Walter Wagoner, Jr., Trustee

CARDAMONE, Circuit Judge:

After opening an account with a leading brokerage firm, the principal, by his actions, proved the truth of the old adage— that the cost of keeping one’s friends does not lie in what one does for them, but in what one refrains from doing to them. Here the principal sold worthless notes and loan agreements to fellow church members, and used the proceeds to make stock trades in the name of his wholly-owned corporation, which subsequently went bankrupt.

Among the issues we must decide is whether the trustee in bankruptcy, standing in the corporation’s shoes, is attempting…