When the economy dives, frauds come to light (or, in Warren Buffett’s often-quoted more colorful language, “It’s only when the tide goes out that you learn who’s been swimming naked”).
Therefore, today’s published Minnesota Court of Appeals decision broadening the reach of veil piercing beyond a corporation’s shareholders, officers, executives, or employees to reach any person who used the corporate form in perpetrating a fraud will likely be invoked more than a few times in days to come.
“Because veil piercing is grounded in equity and intended to prevent abuse of corporate protections, we hold that a district court may pierce the corporate veil to impose personal liability against any party who disregards the corporate form, regardless of whether the party holds an ownership interest in the entity. Here, the investors presented substantial evidence that the [individual defendants] were personally involved in the ownership, management, and operation of the entities” (personally involved in ownership when, by definition, no personal involvement in ownership?).
Equity Trust Company Custodian FBO Heather Eisenmenger IRA, Respondent, vs. Joseph A. Cole, Respondent, Jim W. Abbott, Respondent; Geoff Thompson, Appellant; Progressive Home Services Inc. d/b/a Investment Properties of Minnesota, et al., Defendants, Case No. A08-1681.