Texas appeals court denies bank recovery on $29m Ponzi-linked loan guarantee

A Texas appeals court has upheld a trial court ruling that leaves PlainsCapital Bank unable to recover money from a $29 million loan guarantee. The case involved a fraudulent fuel investment business that was later exposed as a Ponzi scheme.

The decision, issued on November 6 by the Texas Fifth Court of Appeals in Dallas, upheld a judgment from the 134th Judicial District Court of Dallas County. PlainsCapital Bank had tried to enforce personal guarantees signed by four wealthy businessmen after a commercial loan to a fuel trading company went into default.

Although the appeals court found that the guarantors had legally given up their right to use contract defenses, it ruled that the bank had not provided enough evidence to support the amount of money it wanted to recover. As a result, the bank received no financial recovery.The origin of the fuel financing arrangementThe dispute began with a complicated commercial loan designed to fund fuel trading operations.