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Saturday, July 22, 2006
Ind. Decisions - Commentary on the 7th Circuit's Monon ruling
A federal appeals court has ruled against two former top Monon Corp. executives who came up with a creative argument for why they should not have to repay millions of dollars taken in corporate fraud: Lenders should have known something was wrong and therefore not fallen for the fraud. Prosecutors said the two tricked three lenders into loaning the company money so they could finance lavish lifestyles while the cargo trailer maker slid toward bankruptcy in the 1990s.
“Telling the truth is cheap,” wrote Judge Frank Easterbrook, “while nosing out deceit is expensive. Requiring all lenders, investors and so on to investigate every representation made to them would be extravagantly wasteful.”
So be warned. “Let the buyer beware” is a good business practice but a poor defense for cheaters.
Posted by Marcia Oddi on July 22, 2006 08:25 AM
Posted to Ind. (7th Cir.) Decisions