Diamond

MEMORANDUM *

I.

Debtor Automotive Distributing for the Farwest (“ADF”) was formed by Peter Osborne in 1994 when he acquired the auto-parts division of Bo-Den, Inc. This transaction was financed by a loan from Bank of America (“B of A”). In October 1994, and in conjunction with obtaining the B of A loan, ADF obtained $1 million in inventory and accounts receivable from Daytona Ignition Products, another company owned by Osborne. ADF needed the funds to convince B of A to lend it money.

One year later, B of A decided to terminate its loan to Osborne and demanded that he pay off the $2.6 million balance. Osborne obtained the funds to pay off the loan from various people including his parents, Tom and Eva Jeffers, and a family *547 friend, Vivian Vicondo. These funds were placed in a trust account and applied to the B of A loan.

A few months later, in early 1996, ADF obtained a $4.5 million line of credit from Deutsche Financial Service Corporation (“DFSC”). Between January 31, 1996 and September 3, 1996, Osborne used this money to pay down the monies borrowed to pay off the B of A loan. These payments went to Osborne’s parents and/or their creditors and totaled $2,710,950.

On…