Full opinion text
MEMORANDUM OPINION AND ORDER VIRGINIA M. KENDALL, District Judge. Defendant Loop Corp. (“Loop”) traded stock on margin using an account at Prudential Securities Incorporated (“Prudential”). Stip. ¶ 2. Plaintiff, Wachovia Securities, LLC (“Wachovia”) is Prudential’s successor in interest. Id. On May 22, 2001, the stock collapsed resulting in a $1.9 million debt. Wachovia subsequently obtained an NYSE Arbitration Award, which was reduced to judgment against Loop in the amount of $2,478,418.80. Stip. ¶ 17,18; PTX 38. Seven years later, the debt remains unpaid and Wachovia contends that Defendants Andrew A. Jahelka (“Jahel-ka”), Richard O. Nichols (“Nichols”), and Leon A Greenblatt, III (“Greenblatt”) looted Loop by transferring its assets to themselves, insiders, and related entities, which made it impossible for Wachovia to collect. Dk. 319 at 3. Wachovia now seeks to hold Jahelka, Nichols, and Greenblatt jointly and severally liable for the obligations of Loop, as the alter ego of Loop, under the doctrine of piercing the corporate veil (Counts II and IV) and seeks all remedies available under the Illinois Uniform Fraudulent Transfer Act, 740 ILCS 160/5(a)(l) (“UFTA”) against Loop, Banco Panamericano (“Banco”), Loop Properties, Inc. (“Loop Properties”), and Scattered Corp. (“Scattered”) (Counts VII through X). Wachovia also seeks actual costs and attorneys fees incurred since September 22, 2005 through the date of judgment. PROCEDURAL HISTORY On November 29, 2007, this Court denied Wachovia’s Motion for Summary Judgement as to Neuhauser and Green-blatt with respect to Count I and granted summary judgment in favor of Neuhauser, Jahelka, Nichols, and Greenblatt with respect to Counts I and VI. Additionally, the Court granted in part and denied in part Neuhauser, Jahelka, Nichols, and Green-blatt’s Motion for Summary Judgment as to Counts II through V. Specifically, the motion was denied as to Loop, Greenblatt, Jahelka, and Nichols; granted as to Loop and Neuhauser; and granted as to NOLA, LLC and Neuhauser, Jahelka, Nichols, and Greenblatt. Finally, the Court denied Banco, Loop Properties, and Scattered’s Motion for Summary Judgment as to Counts VII through X brought under the Illinois Uniform Fraudulent Transfer Act. From January 7, 2008 to January 16, 2008, the court conducted a bench trial to resolve the remaining claims. After listening to the testimony presented by both parties and reviewing the documents entered into evidence at trial, the following constitutes the Court’s findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52. FINDINGS OF FACT AND CONCLUSIONS OF LAW I. Background A. The Parties Wachovia is a banking and financial lending institution. Stip. ¶ 2. Defendant Loop is a small, closely-held company owned by Defendants Greenblatt, Jahelka, and Nichols, or their respective family trusts or estate planning entities. (Stip-¶ 19). Loop’s respective ownership interests are: Greenblatt (50%), Jahelka (30%), and Nichols (20%). Id. Jahelka is Loop’s President, Nichols is it’s Treasurer, and Greenblatt was the company’s Secretary. Id.; Tr. Vol. 4-B, Pg. 168. On September 28, 2000, Neuhauser, acting on behalf of Loop and at Greenblatt’s direction, opened a margin account at Wa-chovia in the name of “Loop Corp.” Stip. ¶ 13. Loop’s account was used exclusively to acquire shares of stock in Health Risk Management, Inc. (“HRMI”) on margin. Stip. ¶ 15; PTX 37. On May 22, 2001, the NASDAQ halted trading in HRMI and the value of the Loop account at Wachovia fell into a debit balance. Stip. ¶ 16. As a result, Defendants’ Loop account incurred a margin debt of $1,885,751.44 resulting almost entirely from holdings in HRMI. Id.; Stip. ¶ 17. Although Wachovia subsequently obtained an NYSE Arbitration Award which was reduced to a judgment against Loop in the amount of $2,478,418.80, Loop has not paid the judgment. Stip. ¶ 17,18; PTX 38. After the margin debt came due, Loop transferred over a million dollars in assets and made a number of payments to its shareholders and companies such as Ban-co, Resource Technology Corporation (“RTC”), H & M Partners, EZ Links, Scattered, 200 West Partners, Telegraph Properties, and Loop Telecom, LP. PTX 26. B. The Companies Greenblatt, Jahelka, and Nichols either own, operate, or have an interest in a web of corporate entities including Loop, Scattered, Banco, and Loop Properties and operate them out of a suite of interconnected offices on the seventh floor of a building located at 330 South Wells in Chicago (the “Wells Building”). Loop was incorporated in South Dakota on September 12, 1997 as a wholly-owned subsidiary of Rumpelstiltskin USA, Corp. (“Rumpelstiltskin”). Tr. Vol. 4-B, Pg. 170; PTX 1. Loop maintains its registered office in Suite 711 of the Wells Building. Stip. ¶ 20. Loop was “spun off’ from Rumpelstiltskin to Greenblatt, Nichols and Jahel-ka with the same 50%, 30%, and 20% ownership structure. Tr. Vol. 4-B, Pg. 171; Tr. Vol. 5B, Pg. 147-149. The “spin off’ documents were purportedly a part of Loop’s corporate records — records that Greenblatt was responsible for maintaining as Loop’s Secretary. Tr. Vol. 4-B, Pgs. 168,171-173. Defendant Banco is a South Dakota corporation with its principal place of business in adjoining Suite 718 of the Wells Building. Stip. ¶ 32. Banco is wholly-owned by one of Mr. Greenblatt’s family trusts. Id.; Tr. Vol. 4-B, Pg. 188. Green-blatt is the sole officer, director and employee of Banco. Id. Defendant Scattered was also incorporated under South Dakota law and operates out of Suite 711 (the same Suite as Loop) of the Wells Building. Stip. ¶ 9. Like Loop, Scattered’s owners are Greenblatt (50%), Jahelka (30%), and Nichols (20%). Stip. ¶ 54; Tr. Vol. 4-B, Pg. 186. Greenblatt’s 50% share of Scattered is held by the same family trust that owns Banco and the trustee of that trust is Defendant Nichols. Tr. Vol. 4-B, Pg. 186. Defendant Loop Properties is an Illinois corporation operating out of Suite 711 of the Wells Building. Stip. ¶ 8. Loop Properties is owned 90% by Scattered and 10% by Loop. Tr. Vol. 4-B, pg. 185. In addition to Loop, Greenblatt owns and controls a number of related companies, and operates them out of the seventh floor of the Wells Building. RTC is owned 100% by Rumpelstiltskin. Tr. Vol. 4B, pg. 190. RTC’s address is “c/o Scattered Corp.” Id. Rumpelstiltskin, in turn, is owned by Greenblatt (50%), Jahelka and Nichols (collectively 50%). Tr. Vol. 4-B, Pg. 191. Rumpelstiltskin’s address is “c/o Elizabeth Sharp,” who was employed as the in-house counsel for Loop before she became the in-house counsel for Loop Properties and then finally (and currently) the in-house counsel of Scattered. Id. Even though Elizabeth Sharp (“Sharp”) is currently employed as in-house counsel for Scattered, she is also Rumpelstiltskin’s attorney. Tr. Vol. 4B, pg. 192. Chiplease, Inc. (“Chiplease”) is 100% owned by one of Greenblatt’s family trusts — the same trust that owns Banco — and according to Green-blatt, the address of Chiplease is “wherever you [i.e., Greenblatt] happen to be.” Tr. Vol. 4B, pg. 192. Repurchase Corp. (“Repurchase”) is 100% owned by another one of Greenblatt’s family trusts, and Greenblatt is solely responsible for the day-to-day operations of that company. Tr. Vol. 4B, pg. 192. South Beach Securities, Inc. (“South Beach”) operates out of Suite 718 of the Wells Building. (PTX 50). South Beach is wholly owned by ÑOLA, LLC (“ÑOLA”). Tr. Vol. 5-A, Pg. 53. According to NOLA’s bankruptcy filings, the address of South Beach is “300 South Wacker, Suite 1700,” which is the address of the Robinson, Curley & Clayton law firm, defense counsel for Banco and Scattered in this litigation. PTX 48. NOLA operates out of Suites 711 and 718 of the Wells Building. PTX 44, 45, 46; PTX 75, pg. 2. NOLA’s members are the Individual Defendants’ fathers. Tr. Vol. 5-A, Pg. 53. NOLA’s manager was Tele-tech Systems. Id. Teletech operates out of Suite 711 of the Wells Building and its lone officer and employee is Greenblatt. Tr. Vol. 5-A, Pg. 53; PTX 70. EZ Links is owned, at least partially, by Loop. PTX 26. According to Michael May (“May”), Loop’s former in-house accountant who is now employed by Scattered, EZ Links is providing the health care benefits for Scattered’s employees. Stip. ¶ 29. Because many of the Court’s findings of fact and conclusions of law pertaining to the piercing issues concern Greenblatt’s credibility and Banco’s loans to Loop, the Court will address these matters prior to discussing the factors under the piercing claims. II. The Court’s Findings Regarding Defendant Leon Greenblatt and the Banco-Loop Loans A. Banco’s Loan to Loop On January 3, 2000, Loop obtained a $9.9 million line of credit from Banco. Stip. 33; PTX 19-20. Loop executed a promissory note payable to Banco and entered into a security agreement with Ban-co as part of the loan. Id. Greenblatt signed the agreement on behalf of the lender (Banco) and Jahelka signed on behalf of the borrower (Loop). Id. The Ban-co loan was secured by a lien against all of Loop’s assets. Id. Although Loop’s bylaws state that the Board of Directors must authorize such a loan by a written resolution, Jahelka did not recall ever seeing a written resolution and no such resolution was produced in this case. PTX 2, Art. V, § 2; Tr. Vol. 3A, pg. 5; Tr. Vol. 5A, pgs. 18-19. 1. The terms of the Banco-Loop loan were designed to shield Loop from its creditors. i. Greenblatt’s dual status as lender and borrower Greenblatt’s dual status as lender (i.e., 100% owner of Banco), and borrower (i.e., 50% owner of Loop), created a conflict of interest. Greenblatt admitted that his dual status affected his decision-making as lender, although he claimed that it somehow did not affect his decision-making as borrower: Q: Did you And that your dual status as 50 percent owner of Loop Corp. and as the lender ever influenced your decisions as a lender? A: Yes. Q: And did you ever find that your status-your status as a 50 percent owner of Loop Corp. and the lender ever influenced your decisions as the 50 percent owner of Loop? A: No. Tr. Vol. 5A, pg. 65. Accordingly, Green-blatt’s dual status as a lender and borrower created a clear conflict of interest that was conveniently ignored by the Individual Defendants and had a significant negative impact on the negotiation of the loan, its terms, its enforcement, and Loop’s third-party creditors. ii. The non-existent Banco-Loop “negotiation” Despite having a clear conflict of interest, Greenblatt “negotiated” the terms of the loan. Banco is owned by Greenblatt’s family trust and Greenblatt is its only employee. During the negotiation process between Loop and Banco, Jahelka and Nichols represented Loop and Greenblatt represented Banco. Tr. Vol. 3A, p. 32-33; Tr. Vol. 4B, pg. 216. Greenblatt was also a 50% shareholder of Loop. Tr. Vol. 3A, pg. 32. Neither side was represented by counsel. Tr. Vol. 3A, p. 34-35. As Banco’s only employee, Greenblatt did little if any due diligence before deciding to loan Loop $9.9 million. “Banco”— a.k.a. Greenblatt — did not receive a loan application from Loop nor did it obtain a title commitment; Greenblatt did not perform a formal appraisal of Loop’s assets, but instead performed an “off-the-cuff’ valuation. Tr. Vol. 4B, pgs. 218-218. According to Greenblatt, he was qualified to appraise Loop’s assets prior to entering into the loan because he believes himself to be an expert in the commercial real estate industry. Id. Jahelka confirmed that Banco did not require Loop to provide Banco with any documentation prior to Banco agreeing to make the loan because Greenblatt, as a 50% owner of Loop, would have already been familiar with its financial condition. Tr. Vol. 3A, pg. 40. Although Banco obtained a blanket security interest over all of Loop’s assets, Greenblatt did not obtain a personal guarantee from Loop’s shareholders when it made the loan. According to Greenblatt, “Banco considers personal guarantees essentially worthless.” Tr. Vol. 5A, pg. 19. Jahelka did not know why Greenblatt, on behalf of Banco, didn’t asked for the personal guarantees of the shareholders. Tr. Vol. 3A, pg. 55. Although the loan and security agreement referenced a number of schedules that were to be attached as exhibits to the loan, there were no schedules attached to any of the loan documents produced as exhibits in this case and Jahelka did not know whether any such schedules were prepared. Tr. Vol. 3A, pg. 59. Jahelka and Nichols’ due diligence was non-existent. Jahelka could not recall asking Banco for a lower interest rate nor did he recall any discussions between himself, Nichols, and Greenblatt regarding pledging collateral. Tr. Vol. 3A, pgs. 37-38. When asked why Loop agreed to give Ban-co $32 million in collateral to secure a $9.9 million line of credit, Jahelka testified that Banco gave Loop the best terms available to it at the time. Loop, however, does not possess any documentation reflecting applications to any other banks or lenders other than Banco. Tr. Vol. 3A, pgs. 39-40. Greenblatt conceded that his status as the 100% owner of Banco (the lender) and 50% owner of Loop Corp. (the borrower) allowed him to streamline the due diligence process, granting funds to Loop far quicker than they would have received from an arm’s length lender. Tr. Vol. 4B, pg. 219-220. (“It is absolutely true that the knowledge that I had enabled Loop to skip a large portion of the process that it would have had to have gone through at a regular commercial bank or savings and loan or other insurance company or similar type lender.”) With Greenblatt negotiating the terms of the loan agreement as the sole owner of the lender and as a 50% shareholder of the borrower, the terms of the loan agreement enabled Greenblatt, Nichols, and Jahelka to remain liquid while blocking Loop’s third-party creditors from collecting their judgment. Banco’s loan agreement effectively shielded Loop from its creditors and was drafted carefully to ensure that Greenblatt controlled Loop from the date of the loan forward. The Banco-Loop loan granted Banco a first-position security interest over all of Loop’s assets, including its operating subsidiaries, partnership interests, inventory, accounts, general intangibles, as well as all proceeds and products of any of those interests. PTX 19, pg. 13, § 4.1. Pursuant to Loop’s note, interest would accrue at the rate of 12% per year, and the maturity date of the note was December 31,2001. PTX 20. The terms also placed Banco, and thus Greenblatt, in a position of power over Loop’s assets. Jahelka admitted that Loop’s pledge of $32 million in collateral to Banco, was regardless of whether Loop owed Banco a $1 or $10 million. Tr. Vol. 3A, pg. 43. Despite having pledged $32 million worth of real estate to collateralize the line of credit, Loop did not have complete access to the funds to do with them as Loop pleased. Tr. Vol. 3A, pg. 44. Conveniently, the parties’ guaranty and security agreement states that the relationship between Loop and Banco is “solely that of borrower or guarantor and lender,” and disclaims any fiduciary responsibilities by Banco. PTX 19, pg. 28, § 10.4. Nevertheless, Greenblatt conceded at trial that he owed fiduciary duties to Loop Corp. and Loop’s shareholders, which created a conflict of interest for him, when he testified as follows: Q: And didn’t you owe fiduciary duties to Loop Corp. and to Loop Corp.’s shareholders at the time that this loan document was entered into? A: Yes. There’s no question of that. Q: Okay. And then you didn’t think it was a conflict of interest for you to be the 50 percent owner of Loop Corp. owing fiduciary duties to Loop and its shareholders while at the same time representing Banco, the lender in this transaction? A: That’s not the case. There definitely was some conflict in interest. Q: Okay. Yet you went through with the loan anyways? A: Mr. Jahelka and Mr. Nichols approved the loan on behalf of Loop without my determination as part of the judgment. Tr. Vol. 5A, pg. 25. Nichols admitted that he had to get Greenblatt’s approval to make distributions even prior to the time that Loop defaulted on Banco’s loan: Q: Why would you need to get your lender’s approval to make a distribution to yourself before May of 2001? A: It is just something that I just did. Q: Well didn’t you have control over your own company at that time? Weren’t you allowed as shareholders and officers and directors to pay yourselves what you wanted to? A: Well, to the extent that there was a draw down from Banco’s line, I would always go to Mr. Greenblatt for just — if nothing else, to let him know that we are drawing down on that line. Tr. Vol. 4B, pgs. 140-141. Perhaps recognizing the impact of his testimony, Nichols subsequently changed his answer. Tr. Vol. 4B, pgs. 141-145. When asked whether after May of 2001 Banco had to approve all of Loop’s payments to third-parties, Nichols responded “not all payments, no.” Tr. Vol. 4B, pg. 159. Q: When you say you viewed it that way, were you ever a party to a conversation with anybody representing Banco, where Banco said to you or Mr. Jahelka that every payment, whether it is compensation or to a third party creditor, must be approved by Banco? A: I do recall conversations with Banco which provided Banco with that level of oversight. Q: So Mr. Greenblatt would tell you who you could and could not pay? A: He definitely had oversight. Q: Well, did he have the final say as to who could and could not be paid? A: Given his status as the senior secured lender, yeah. Tr. Vol. 4B, pg. 160. The fact that the Individual Defendants enforced and ignored the terms of the Banco-Loop loan agreement at Green-blatt’s behest is proof that the loan was a sham transaction designed to put Green-blatt in control of Loop’s assets. The evidence showed that the terms favoring Ban-co’s priority lien over Loop’s assets were enforced but other terms, such as terms favorable to third-party creditors, were ignored. For example, Loop did not provide Banco with financial information pertaining to it on a regular or quarterly basis even though Section 5.3 of the Banco loan required it to do so. Tr. Vol. 3A, pg. 58. Similarly, Banco did not require Loop to provide it with unqualified audited consolidated financial statements prepared by an independent Certified Public Accountant even though it was required by Sections 6.1 and 6.2 of the guaranty and security agreement. PTX 19, Pgs. 16-17. Tr. Vol. 5-A, pg. 22. At trial, Greenblatt explained that Banco did not require audited financial information because he was already aware of Loop’s financial condition by virtue of his status as a 50% owner: Q: And Banco really wouldn’t need to obtain this information, because, you know, you’re the owner of Ban-co and you’re also a 50 percent owner of Loop Corp. and you’d already know this information, correct? A: Banco wouldn’t require an audit, because Banco is aware that the — the manner in which the financial statements were constructed and is aware that it was constructed properly. Q: And Banco’s aware of that fact because you happen to be the 50 percent owner of Loop Corp., right? A: Yes. Tr. Vol. 5A, pg. 24. On the other hand, Banco enforced Section 7.6 of the loan agreement which prohibited Loop from making distributions to its shareholders without Banco’s approval. Jahelka explained that the process for obtaining Banco’s approval consisted of Ja-helka, Nichols and Greenblatt meeting to discuss making a distribution and Green-blatt consenting to that distribution on Banco’s behalf. Jahelka testified that when Greenblatt wanted a distribution, he, as Loop’s 50% shareholder, would ask himself, as Loop’s lender if it was okay and he would tell himself yes. Even Jahelka was at a loss to explain the logistics of how Greenblatt, as a 50% shareholder, was able to ask Greenblatt, as Banco’s only employee, for approval to make a distribution to himself. Tr. Vol. 3A, pgs. 60-61. Of course, there is nothing documenting Greenblatt’s decision to permit Jahelka and Nichols to distribute money to themselves from Loop’s coffers. Tr. Vol. 3A, pg. 60. 2. The Banco Loan shielded Loop from creditors such as Wachovia The Banco loan documents provided very little restriction on the use of proceeds. Loop was permitted to use the proceeds from the Banco loan for start-up costs, “projects” — which were defined as “the projects operated by Loop and its Subsidiaries” — and costs “already incurred.” PTX 19, Pg. 21, § 7.15; Pg. 7, § 1.1; Tr. Vol. 5A, pg. 75. According to Greenblatt, Loop’s investment in HRMI via its margin account at Wachovia constituted such a “project.” Tr. Vol. 5A, pg. 76. But when a margin debt came due on the Wachovia account, Greenblatt refused to allow the Banco funds to be utilized to pay the debt. Greenblatt rationalized his decision by claiming the initial purchase of the HRMI stock was a “cost” and the margin debt incurred in the account was “financing.” Tr. Vol. 5-A, Pg. 95. Greenblatt’s refusal to allow Loop to repay the debt and Loop’s assent to Banco’s refusal occurred in spite of the clear language of the loan documents which permitted the proceeds of the loan to be used for repayment of prior indebtedness. When asked about this particular loan term, Jahelka acknowledged: “As I read this term, it would appear that is does not require Banco’s approval for payment of prior indebtedness.” Tr. Vol. 3A, pg. 51. While Banco refused to allow Loop to use the proceeds of the loan to pay down its margin debt, it was quite comfortable with Loop “investing” in related companies such as EZ Links: Q: And in that transaction Banco allowed Loop to use the proceeds of that sale as opposed to funneling those proceeds up to Banco and paying off the loan, right? A: Yes. That was — to the extent there were proceeds, Banco made its decision to allow Loop to keep the proceeds and fund probably EZ Links at the same time. I don’t really recall, but, yes, if we allowed them to keep the proceeds, Banco would not have to make any further advances. Tr. Vol. 5A, pg. 47. Moreover, Banco was quite comfortable allowing Loop to divest collateral on its loan with Banco’s approval so long as it involved other Greenblatt-related entities. For example, Loop transferred its ownership interests in the real estate partnerships to Loop Properties with Banco’s knowledge and consent. Tr. Vol. 5A, pg. 44. In 2001, Loop defaulted on Banco’s loan. Stip. ¶¶ 35-37. When Loop defaulted, Banco didn’t enforce the loan agreement by sending a written notice of default demanding payment or filing suit against Loop or seeking foreclosure. In fact, Ja-helka did not know of any actions taken by Banco since May 2001 to enforce its rights under any loan agreement with Loop. Tr. Vol. 3A, pg. 70-74. Instead, Banco decided to lend Loop an additional $17 million and add 12% interest onto the loan amounting to $1 million year. Stip. 35-37; Tr. Vol. 5A, pg. 96-98; Tr. Vol. 3A, pg. 70-74. Greenblatt elected to extend an additional $17 million to Loop in lieu of foreclosing on the $9.9 million because he felt it would “maximize the value of Loop’s assets.” Tr. Vol. 5B, pgs. 106-109. Consequently, the current balance on Loop’s loan to Banco is approximately $16 to $17 million, with perhaps an additional $1 million in interest. Tr. Vol. 4B, p. 191. May testified that Loop did not pay off the Banco line in full at the end of 2003 and that Banco made additional advances to Loop as late as 2004. Tr. Vol. 1-B, Pg. 220. In summary, Banco chose to loan additional money to a company in default rather than use the proceeds from the sale of Loop’s assets to pay Loop’s debts to creditors like Wachovia. On this issue, Green-blatt flippantly testified that he would never advance funds to Loop in order to pay off Loop’s margin debt with Wachovia because “[fit’s not Banco’s general practice to make advances on troubled debt to pay under — to pay lower classes of creditors.” Tr. Vol. 5A, pgs. 128. Based on the foregoing, the Court finds that the Loop-Ban-co Loan Agreement was devised to keep Greenblatt in control of Loop’s assets and to avoid paying Loop’s creditors. 3. Loop’s failure to maintain arm’s length relationships among related entities Banco’s participation in the Loop loan is evidence of Loop’s failure to maintain arm’s length relationships among related entities. First, Banco and Loop are related entities in that they share a common owner — Greenblatt. Additionally, the evidence at trial showed that Banco sold a $3 million participation interest in the Loop loan to a number of “participating entities,” including Old Colony Properties, Telegraph Properties, 200 West Properties and H & M Partners. PTX 21, Tr. Vol. 5A, pgs. 93-95. Greenblatt signed the participation agreement on behalf of Banco and the participants. Id., Tr. Vol. 5A, pg. 92. Old Colony Properties, Telegraph Properties, 200 West Properties and H & M Partners are Loop’s subsidiaries. Id. In other words, Loop’s subsidiaries contributed $3 million to assist Banco in funding the $9.9 million to Loop and Loop subsequently pledged its interest in the participating entities to Banco as collateral to secure the loan. Id.; PTX 21, PTX 19. According to Greenblatt: Q: So the participants here, the participating entities, they’re not only participants in the loan, but they are themselves the collateral securing the loan, right? A: It’s true that they’re participants, and it’s true that they’ve pledged collateral for the loan. Q: Well, they themselves are the collateral, right? A: Yes. Tr. Vol. 5A, pg. 94-95. By entering into participation agreements with subsidiaries of the borrower, which also happened to be pledged as collateral, Greenblatt effectively created a complex lending structure that ultimately resulted in Loop contributing the funds (via its subsidiaries) that Banco would then turn around and lend back to Loop. As a result, control over the funds and use of the pledged assets remained effectively unchanged. Accordingly, this Court finds that the Banco loan was nothing more than a vehicle to avoid Loop’s creditors by ensuring that all of Loop’s assets were fully encumbered by a blanket lien in favor of Greenblatt, the dominant shareholder of both Banco and Loop. 4. Greenblatt’s Testimony Regarding Banco-Loop Loan Documents Review of Banco’s loan statements to Loop was critical to the Court’s analysis of piercing the corporate veil. Wachovia claimed that after Loop’s margin debt became due, Loop, at Banco’s direction, diverted its assets to other related entities such as Scattered, EZ Links, Telegraph, and Loop Telecom rather than pay its creditors. Defendants argued Loop’s post-debt transfer of assets was an attempt to avoid its creditors because Banco gave Loop “dollar-for-dollar” credit on the Banco line in exchange for the transfers. Wachovia, not surprisingly, requested documentation that would reflect Banco’s purported “dollar-for-dollar” credit since no such documentation had been produced in discovery. During Wachovia’s case in chief, Green-blatt testified that Banco sent either monthly or quarterly loan statements to Loop but that he didn’t have them because he didn’t know their whereabouts. Tr. Vol. 5A, pp. 30-31. Apparently, “Loop” searched for the loan statements but couldn’t find them. Tr. Vol. 5A, p. 71. When questioned by defense counsel, Greenblatt was more cooperative and testified that the loan statements were also a part of Banco’s books and records and that it would have maintained those records for three years or as long as the IRS required it keep them. Tr. Vol. 6A, pp. 85-88. When asked whether he destroyed the records as opposed to not being able to find them, Greenblatt stated, “It was my testimony that I couldn’t find them, but also that I testified that I wasn’t required to keep them that long.” Id. When asked, “Well, regardless of whether you’re required to keep them, you did not destroy them, did you?” Greenblatt replied, “I have no recollection.” Id. Regarding Ban-co’s potential destruction of key evidence Greenblatt stated: Q: Okay. So it is possible that you would have destroyed the Banco Pa-namericano loan statements to Loop Corp. in 2000, 2001, 2002? [objections omitted] A: There’s no way that I would have destroyed them in 2000, 2001, or 2002. If they were destroyed, which could have been the case because we don’t keep records longer than the IRS requires to keep them, they would have been done in 2004. Q: Okay. And were you aware in 2004 that a lawsuit had been filed against Loop and Banco Panamericano? A: Yes. Q: Okay. So you wouldn’t have destroyed them after the lawsuit was filed, would you? A: You know, I have no idea what I would have done then. But the — if I knew they were to be kept for a lawsuit, I certainly wouldn’t have been destroying them. But you didn’t even subpoena — you didn’t even ask for them. A: Well, sir, I’m not sure I understand your testimony. Is it your testimony that you may have thrown out documents after 2004 under the assumption that they weren’t asked for? A: No. [portion omitted] Q: Now, do you recall whether or not those documents related to the loan statements that would have gone to Loop on a monthly or quarterly basis or a yearly basis, whether those were destroyed? A: It’s our general operating procedure not to keep records longer than the IRS requires us to keep them. I don’t particularly recall whether they were destroyed or not. Q: Okay. Is it possible they were [destroyed]? A: Yes. Tr. Vol. 6A, pp. 86-88. The next day, Greenblatt insisted that counsel had not previously asked about Banco’s loan “statements,” but had in fact asked him about Banco’s loan “invoices.” Q: Okay. So is it your testimony today that when you said last week that you couldn’t find the loan statements that reflected those credits, is it your testimony that those loan statements do exist? A: I think you’re asking me about something different than you asked me last week. No— <3? You asked me last week about whether I sent invoices reflecting the loans, and this [morning] you’re asking me about the loan statement. <j No, sir. I will tell you that you were specifically asked last week: Was there a loan statement that was sent to Loop that reflected the credits given to it by Banco on a dollar-by-dollar basis? You stated that there was, and then you stated that you couldn’t find them. So that’s the question that I’m following up on this morning. <y That’s not what I’m talking about. i> Okay. c© You asked me about invoices that I sent to Loop versus statements of Loop’s balance on the loan. i> Okay. Well, the record will reflect what it reflects. <© Tr. Vol. 6A, pp. 90-91. Then, Greenblatt testified that the “loan statements” — which he referred to as the loan balance — were in fact in Banco’s possession but hadn’t been produced because Wachovia didn’t ask for them. Tr. Vol. 6A, p. 92. After the bench trial, documents supporting Defendants’ dollar-for-dollar defense magically appeared. Greenblatt produced the documents — this time calling them Banco’s “ledger” along with an affidavit in support of their admission. Dk. 362, Ex. A. Banco’s “ledger” was located four years after the lawsuit was filed and after the conclusion of the trial. Green-blatt’s affidavit and Banco’s “ledger” are stricken pursuant to Federal Rule of Civil Procedure 37(b)(2)(A)(ii) and 37(c)(1)(C). Greenblatt’s counsel was forced to concede — despite his client’s testimony to the contrary — that Wachovia asked for the entirety of Banco’s financial records via requests for production 92 through 102. And despite counsel’s arguments in their post-trial submission briefs, the propriety of the Banco-Loop loan has been at issue since Wachovia filed its First Amended Complaint. Dk. 362, p. 3; Dk. 52. In short, Banco’s loan statements fall within the purview of Wachovia’s discovery requests and should have been produced. Banco’s failure to do so until after trial merits striking the “exhibits.” Green-blatt’s affidavit is also stricken on the basis that it was filed post-trial and without leave of court giving no opportunity to Wachovia for cross-examination. Nevertheless, even if this Court agreed to consider Banco’s never-before-seen miracle documents, this Court deems them unreliable. First, the exhibit consists of a self-described electronic and computerized ledger maintained by “Banco.” The entries on the document were made by Greenblatt personally or under his “direct supervision” and are based on unspecified “Banco records,” “Greenblatt’s own notes,” and “other financial documents.” Banco Memo. Ex. A, p. 3. Greenblatt’s self-serving, eleventh-hour fabrication cannot fix his inconsistent testimony at trial. Moreover, Greenblatt only made the entries “periodically” or “usually quarterly” though “sometimes there may have been a longer time between the transactions and the entries.” Greenblatt only attests that the ledger is “a printout of the computerized, electronic ledger as it existed at the time of trial” and not that it accurately reflects the payments and credits on the loan. Id. Moreover, Greenblatt admits that the ledger has not been audited. Id. The document lacks foundation, is hearsay, is unauthenticated, and is highly questionable based on Greenblatt’s incentive to create a document to support his trial testimony after that testimony was effectively attacked at trial. Greenblatt’s credibility is not rehabilitated by his admission that the 2000 and 2001 “loan statements” that “formed the basis for his deposition and trial testimony have been discarded.” Dk. 362, Ex. A. It is important to note that Greenblatt’s demeanor on the stand supports this Court’s decision to strike his post-trial exhibit. His flippant, condescending air in response to legitimate fact-finding questions further convinces the Court that he was intentionally evading the truth. It comes to no surprise to the Court that Michael May’s (“May”) testimony contradict’s Greenblatt’s. May is Loop’s former in-house accountant who is currently employed by Scattered and has done work for several Greenblatt entities. He testified that he was responsible for keeping track of the amount owed on the Banco line of credit and that Loop did not receive loan statements from Banco. Tr. Vol. IB, p. 236. In summary, the Court finds that the Banco-Loop loans were designed to fraudulently shield Loop from its creditors by placing Greenblatt in control of Loop’s fully encumbered assets. The Court also finds Leon Greenblatt to be an inherently incredible witness. Based on the foregoing, the Court finds that Banco failed to produce admissible evidence that Banco gave Loop “dollar-for-dollar” credit for Loop’s transfers of assets made after its debt to Wachovia was incurred and that the Banco-Loop loans are proof that Loop’s corporate veil should be pierced. III. Piercing the Corporate Veil to reach Greenblatt, Nichols and Ja-helka A. Choice of Law After four years of litigating, extensive briefing, including nine months of briefing on the Defendants’ Motions for Summary Judgment, Defendants appeared for the bench trial and, for the first time, argued in their opening statements for the application of South Dakota law to the piercing the corporate veil claims. Wacho-via opposed Defendants’ sudden reliance on South Dakota law to the Court’s conclusions of law, but doesn’t deny that South Dakota law is applicable. Instead both parties agreed to compromise by applying the facts of the case to both Illinois and South Dakota law at trial and in their submission papers to the Court and the parties agreed that Illinois and South Dakota law are substantially similar. Id; see also (Tr. Vol. 7 A at 10:14-16). Remarkably, Defendants have argued that Illinois law applies to the piercing claims since they filed their motions for summary judgment in October 2006. Over the next nine months, the parties flooded the docket with motions and briefs and continued to assert that Illinois law applied to Wachovia’s piercing claims. On November 29, 2007, the Court ruled on the Defendants’ Motions for Summary Judgment granting them in part and denying them in part. Dk. 319. In the Court’s Memorandum and Opinion Order, the Court applied Illinois law on the issue of piercing the corporate veil because both parties cited Illinois law in their briefs. Id. In October 2007, Defendants submitted their answer to Wachovia’s proposed findings of fact and conclusions of law and, once again, cited Illinois law as being applicable to the piercing claims. Dk. 307. Then, on January 4, 2008 the parties appeared for a pretrial conference. The Court’s Memorandum and Opinion Order was discussed at length and neither party raised the choice of law issue. A mere three days later, Defendants appeared for the bench trial and disclosed, for the first time, that South Dakota law applies to the piercing claims. Defendants provided no explanation for their failure to address the choice-of-law issue earlier in the proceedings. Rather, when the Court inquired as to the parties’ sudden shift in applicable law, Loop’s counsel stated: Q: And did you present that in your motion for summary judgment? I don’t recall you arguing any South Dakota law in your motion for summary judgment. A: I was not involved in that. Tr. Vol. 7A, pg. 14-16. In Defendants’ post-trial position papers, they devote one paragraph to the matter of South Dakota law as being appropriate for the piercing claims without providing further explanation as to why the parties failed to address the matter prior to trial. Del Pos. Paper Corp. Veil, p. 2. Defendants have waived any objection to the application of Illinois law to the piercing claims by failing to address the choice-of-law issue earlier in the proceedings. See Muslin v. Frelinghuysen Livestock Managers, Inc., 777 F.2d 1230, 1231 n. 1 (7th Cir.1985) (noting that acquiescence to court’s choice of law amounts to waiver ... objection to such choice). Despite the fact that both parties, citing Stromberg Metal Works v. Press Mechanical, 77 F.3d 928 (7th Cir.1996), appear to agree that South Dakota law governs the piercing claims, the same parties acquiesced in the application of Illinois law for four years. See Casio, Inc. v. S.M. & R. Co., 755 F.2d 528, 530-31 (7th Cir.1985) (“parties can within broad limits stipulate the substantive law to be applied to their dispute, and that is what we deem them to have done here by not objecting to the district judge’s application of the substantive law of Illinois to their dispute.”); accord International Adm’rs v. Life Ins. Co., 753 F.2d 1373, 1376 (7th Cir.1985). Thus, Defendants are deemed to have waived any objection to application of Illinois law which may have been available. Nevertheless, the Seventh Circuit has held that efforts to “pierce the corporate veil” are governed by the law of the state of incorporation, see Kern v. Chicago & Eastern Illinois R.R., 6 Ill.App.3d 247, 250-51, 285 N.E.2d 501, 503-04 (1st Dist.1972), and Loop was incorporated in South Dakota. See Stromberg, 77 F.3d at 933. Accordingly, the Court will apply Illinois law on the basis of the parties’ waiver consistent with its November 20, 2007 Memorandum and Opinion Order, but will also briefly address South Dakota law since it is substantially the same. B. Piercing the Corporate Veil under Illinois Law In general, “[a] corporation is a legal entity that exists separately and distinctly from its shareholders, officers, and directors,” Fontana v. TLD Builders, Inc., 362 Ill.App.3d 491, 298 Ill.Dec. 654, 840 N.E.2d 767, 775 (2005), and parties related to a corporation are normally not subject to corporate liabilities. See Dimmitt & Owens Fin., Inc. v. Superior Sports Prods., Inc., 196 F.Supp.2d 731, 738 (N.D.Ill.2002). However, an exception to this rule exists when an “individual or entity uses a corporation merely as an instrumentality to conduct that person’s or entity’s business.” Fontana, 298 Ill.Dec. 654, 840 N.E.2d at 775-76. In such situations, the corporate veil of limited liability may be “pierced” and the individual held liable for the underlying cause of action. Sea-Land Servs., Inc. v. Pepper Source, 941 F.2d 519, 520 (7th Cir.1991) (quoting Van Dorn Co. v. Future Chem. & Oil Corp., 753 F.2d 565, 569-70 (7th Cir.1985)). “[P]iercing the corporate veil” is an equitable remedy designed to prevent those who fail to respect a corporation’s separate legal existence from hiding behind the corporation to avoid liability for their wrongdoing. Fontana, 298 Ill.Dec. 654, 840 N.E.2d at 776; see also Dimmitt, 196 F.Supp.2d at 738. A party seeking to pierce the corporate veil must demonstrate that: (1) there is “such unity of interest and ownership” between the individual and the corporation “that the separate personalities of the corporation and the individual ... no longer exist;” and (2) the circumstances are “such that adherence to the fiction of separate corporate existence would sanction a fraud or promote injustice.” Hystro Prods., Inc. v. MNP Corp., 18 F.3d 1384, 1388-89 (7th Cir.1994). To determine whether the “unity of interest and ownership” between an individual and a corporation is such that the corporate fiction should be disregarded, courts consider the following factors: “(1) inadequate capitalization; (2) failure to issue stock; (3) failure to observe corporate formalities; (4) nonpayment of dividends; (5) insolvency of the debtor corporation; (6) non-functioning of the other officers or directors; (7) absence of corporate records; (8) commingling of funds; (9) diversion of assets from the corporation by or to a shareholder; (10) failure to maintain arm’s length relationships among related entities; and (11) whether the corporation is a mere facade for the operation of the dominant shareholders.” Dimmitt, 196 F.Supp.2d at 738; see also Fontana, 298 Ill.Dec. 654, 840 N.E.2d at 778; accord Hystro, 18 F.3d at 1389. The court’s task is to decide whether these factors, taken as a whole, demonstrate that the corporation is actually the alter ego of the individual, no one factor is determinative. See Dim-mitt, 196 F.Supp.2d at 738. 1. Inadequate Capitalization Wachovia proved that Loop was inadequately capitalized at its formation. A court will find a corporation to be undercapitalized only when it “has ‘so little money that it could not and did not actually operate its nominal business as its own.’ ” Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 529 F.3d 371, 379 (7th Cir.2008); citing Firstar Bank, N.A. v. Faul Chevrolet, Inc., 249 F.Supp.2d 1029, 1041 (N.D.Ill.2003) (quoting Browning-Ferris Indus. of Ill., Inc. v. Ter Maat, 195 F.3d 953, 961 (7th Cir.1999)). According to Loop’s Annual Reports filed with the Illinois Secretary of State and prepared under penalty of perjury by Greenblatt and Jahelka, Loop was capitalized with $1,000 of paid-in capital. PTX 7-12. This is also confirmed on the Application for Authority to Transact Business that Loop filed with the State on June 15, 1998. PTX 4, pg. 4. Loop’s share certificates also confirm that 25,000 shares of the company were issued with a par value of $0.04 per share (i.e., $1,000). Defendants contend that Loop was actually infused with more than $10 million worth of investments in stock and real estate at the time it was incorporated. The only support the Defendants have for this contention is Greenblatt’s testimony and the missing documents allegedly prepared during the Rumpelstiltskin to Loop “spin off’ (the “spin-off documents”). Greenblatt was responsible as Loop’s corporate secretary to keep and maintain the purported “spin-off’ documents; yet, now he is unable to locate them. Tr. Vol. 4B, pgs. 172-173; see also, PTX 98, Pg. 6. Because these documents were undoubtedly in Loop’s, and specifically Greenblatt’s, control and neither party produced them, an unfavorable evidentiary presumption arises and the Court may infer that the documents either never existed, or if they did, would have shown negative financial standing. See, e.g., Dimmitt, 196 F.Supp.2d at 738; (“An unfavorable evidentiary presumption arises if a party, without reasonable excuse, fails to produce evidence which is under his control.”); see also McCracken v. Olson Cos., Inc., 149 Ill.App.3d 104, 102 Ill.Dec. 594, 500 N.E.2d 487, 492 (1986) (when there is a failure to produce a legitimate explanation as to the unavailability of business records, it can reasonably be inferred that those documents would have revealed the corporations’ poor financial standing). Having been “unable” to locate the purported documents supporting the Individual Defendants’ assertion that Loop was adequately capitalized, Defendants introduced a one-page summary document prepared by May, Loop’s accountant, as evidence that Loop was infused with $10 million of assets at its formation. PTX 98. May created Exhibit 98 after discovery closed for the purpose of preparing Loop’s expert witness, Craig Green, CPA. Tr. Vol. 1A, pg. 120; PTX 98, Pg. 6. The document lists a number of real estate and stock investments that were purportedly transferred to Loop on September 12, 1997 which total in excess of $10 million. PTX 98, pg. 6. The document does not identify the basis for the valuations of the investments, identify the source of the investments, or describe the method by which the assets were transferred into Loop. Id. No back-up documentation used to create PTX 98 was ever introduced. May admitted that he prepared PTX 98 without ever seeing any source documents that would have verified that the investments were in fact transferred to Loop. Tr. Vol. 1A pg. 125, Vol. IB, pg. 133. Instead, May’s belief that the assets were transferred into Loop is based entirely upon the word-of-mouth of Loop’s shareholders: Jahelka, Nichols and Greenblatt. Thus, May had no first-hand knowledge of this purported initial capitalization and admitted that he was simply “instructed by the shareholders that the transfer did take place.” Id. May testified during his deposition that he did not know whether Loop had, in fact, received $10 million of paid-in-capital at the time it was formed. Id., pg. 123. Accordingly, the Court finds that PTX 98, May’s “list” is unreliable and lacks foundation. It is another example of the Defendants’ manipulation of records to support their trial position. Defendants’ contention that Loop was infused with $10 million in capital is controverted by documents introduced in evidence at trial; namely, Loop’s filings with the Secretary of State. PTX 4. According to Greenblatt, PTX 4 is a certificate of authority to transact business that Loop filed with the Illinois Secretary of State. Tr. Vol. 4B, pg. 175. Greenblatt signed this form on June 11, 1998 in his capacity as Loop’s Secretary. Id., pg. 176, PTX 4, pg. 4. Section 10 of PTX 4 required Loop to provide an estimate as to the total value of all property of the company: 10(a) Give an estimate of the total value of all property of the corporation for the following year: 10(b) Give an estimate of the total value of all property of the corporation for the following year that will be located in Illinois: PTX 4, Pg. 4, (emphasis added). In response to both inquiries, Mr. Greenblatt recorded “$1,000” — not the $10 million worth of assets that were supposedly infused into Loop when it was incorporated on September 12, 1997, just nine months earlier. Greenblatt was unable to explain the discrepancy: Q: Okay. And then you will see down in Section 10A and 10B it asks you to give an estimate of the total value of all the property of the corporation for the following year, and it lists, $1,000. Do you see that? A: Yes. Q: Why doesn’t it list $10 million worth of value of property held by Loop Corp.? A: Because I believe that includes the definition of property in Illinois, and that was all that there was. Q: Okay. Well, I will agree with you that that is what section B says, “Give an estimate of the total value of all the property of the corporation for the following year that will be located in Illinois,” but section A isn’t so limited. So, I guess I am wondering why it is that $10 million isn’t listed there? A: I have no idea. Tr. Vol. 4B, pg. 179. Even if Exhibit 98 had a modicum of evidentiary value as to Loop’s actual initial capitalization, it fails to disclose the extent to which the real estate assets were encumbered by mortgages, or whether the other investments were pledged as security for another obligation. PTX 98, pg. 6. “The consideration of whether a corporation is adequately capitalized is based on the policy that shareholders should in good faith put at the risk of the business unencumbered capital reasonably adequate for the corporation’s prospective liabilities.” Fontana, 298 Ill.Dec. 654, 840 N.E.2d at 779; citing Fiumetto v. Garrett Enterprises, Inc., 321 Ill.App.3d 946, 255 Ill.Dec. 510, 749 N.E.2d 992 (2001). In fact, Greenblatt admitted that he did not know if the real estate assets that were purportedly transferred into Loop on the date of its incorporation — which comprises the bulk of the $10 million worth of the initial capital contribution identified in PTX 98— were encumbered by mortgages. Tr. Vol. 4B, pg. 181. With respect to the assets and securities that were allegedly transferred into Loop in order to initially capitalize it, Jahelka testified that those are no longer owned by Loop; that he did not recall when they were liquidated; and does not know why Loop didn’t produce any corporate records that reflect the sale of those securities. Tr. Vol. 4B, pg. 113. The only credible evidence of Loop’s actual capitalization at the time of its inception are the filings that show capitalization of $1000 of paid-in-capital. In fact, the only source of Loop’s funds seems to be the fully encumbered “loans” from Ban-co. There was no evidence at trial that Loop was capable of operating its nominal business without help from Banco, and therefore, it was inadequately capitalized. See Judson, 529 F.3d at 379. In fact, May testified that Loop depended upon Banco for financing and to continue its operations and investments: Q: Okay. And is it your understanding that Loop Corp. was dependent upon financing from Banco in order to operate? A: They relied on Banco to increase their investments. Q: Okay. And without that funding from Banco, Loop Corp. couldn’t operate and it couldn’t increase those investments; is that right? A: Yes. In other words, the evidence at trial showed that Loop was operating on $1000 paid-in-capital even though it was engaging in acquiring millions of dollars of HRMI stock on margin with third-party institutions such as Wachovia. 2. Failure to Issue Stock Wachovia also proved that Loop failed to issue stock for valuable consideration. Loop issued stock to its shareholders at the time of its inception and its share certificates confirm that 25,000 shares of the company were issued, with a par value of $0.04 per share (i.e., $1,000). PTX 1. However, Wachovia argued at trial that Loop’s shares were not given to the Individual Defendants in exchange for proper consideration. Once again, the Individual Defendants pointed to the alleged Rumpelstiltskin “spin off’ records as proof that consideration was given to Loop in exchange for the Individual Defendants’ shares. As previously discussed, Loop was responsible for maintaining those records and the Defendants failed to produce them. Thus, Wachovia is entitled to an adverse inference in its favor on this issue. See, Berlinger’s Inc. v. Beefs Finest, Inc., 57 Ill.App.3d 319, 14 Ill.Dec. 764, 372 N.E.2d 1043, 1048 (1978); see also, McCracken, 102 Ill.Dec. 594, 500 N.E.2d at 492. On this basis, the Court infers that Loop’s share certificates were worth nothing more than the value of the paper on which they were printed. 3. Failure to Observe Corporate Formalities The evidence overwhelmingly established that Loop failed to observe corporate formalities. In fact, formality was the exception and not the rule for the Individual Defendants in Greenblatt’s web of companies. Loop’s directors, officers, and shareholders (Greenblatt, Jahelka, and Nichols) failed to adhere to Loop’s ByLaws, failed to prepare and maintain corporate records, failed to file income taxes, and failed to observe formalities when they distributed money to the directors, officers, and shareholders and in their dealings with other Greenblatt-controlled entities. i. Failure to adhere to Loop’s ByLaws The Court finds that the Individual Defendants failed to adhere to Loop’s Bylaws. Article III of Loop’s By-Laws established the corporate governance standards for directors. PTX. 2, pg. 5. According to Section 2 of Article III, Loop was required to have at least one director, but not allowed to have any more than two directors: Section 2. Number, Tenure and Qualifications. The number of directors of the corporation shall be not less than one (1) and not greater than two (2). Each director shall hold office until the next annual meeting of shareholders or until his/her successor shall have been elected and qualified. Directors need not be residents of Illinois or shareholders of the corporation. Id. Loop had three directors — Greenblatt, Nichols and Jahelka. Stip. ¶ 19; Tr. Vol. 2B, pg. 208. When confronted by Wacho-via’s counsel on the issue, Jahelka, Loop’s President, testified that he could not recall whether the officers or directors of Loop ever amended that provision. Id. Secretary of State filings contradict the Individual Defendants’ testimony at trial and at their depositions on this issue because Loop’s application filed with the Illinois Secretary of State identifies Kevin Werner and Leigh Rabman as directors in addition to the Individual Defendants. PTX 4, Pgs. 3, 5; Neuhauser Resp. 56.1(b) ¶2. Thus, according to Loop’s Illinois application, Loop had five directors — three more than the By-Laws allowed. Jahelka never saw any resignations by any of the directors and testified that if such resignations did exist he would have expected them to be in Loop’s “corporate minute book.” Tr. Vol. 2-B, Pg. 206-210. Accordingly, Wachovia proved that the Individual Defendants were operating Loop in contravention of the company’s own ByLaws regardless of whether they had three or five directors. Additionally, Loop’s By-Laws established that the directors “shall hold office until the next annual meeting of shareholders” (PTX 2, Art. Ill, § 2, Pg. 5) and that an annual meeting of the shareholders shall be held on the second Wednesday in March of each year at 10:00 a.m. PTX 2, Art. II, § 1. However, Jahelka testified that no meeting between the shareholders was ever determined to be the “annual meeting.” Tr. Vol. 2B, pg. 206-210; Tr. Vol. 3A, pg. 76. Accordingly, Wachovia proved that the Individual Defendants were operating Loop in contravention of the company’s own By-Laws by failing to hold an annual meeting of the shareholders. Loop’s By-Laws also state that no loan should be contracted on behalf of the corporation and that no evidence of indebtedness shall be issued unless authorized by a resolution of the Board of Directors. Ja-helka did not recall ever seeing a written resolution and Greenblatt admitted he had no reason to dispute that Loop’s directors decision to borrow the $9.9 million was not documented in any formal board resolution. PTX 2, Art. V, § 2; Tr. Vol. 3A, pg. 5; Tr. Vol. 5A, pgs. 18-19. Defendants’ failure to produce a formal resolution documenting the Banco loan allows this Court to infer an unfavorable evidentiary presumption. See, e.g., Berlinger’s, 14 IlLDec. at 767, 372 N.E.2d at 1048; see also McCracken, 102 IlLDec. 594, 500 N.E.2d at 492; (when there is a failure to produce a legitimate explanation as to the unavailability of business records, it can reasonably be inferred that those documents would have revealed the corporation’s poor financial standing). It seems that the only time a formal resolution occurred was when Loop entered into transactions with entities that were not controlled, owned, or managed by Greenblatt, Jahelka, or Nichols. See DTX 11, 100 (the only resolutions produced at trial). Though Defendants argue that Loop’s By-Laws did not require that informal actions taken by agreement of the shareholders be documented in minutes, Loop’s By-Laws required consent in writing should the shareholders wish to undertake informal action without a meeting and there was no evidence that Loop’s shareholders obtained such consent in writing. PTX 2, Art. II, § 14, pg. 4. When formal meetings were required by the By-Laws, such as the annual meeting, Wachovia introduced evidence that no such meetings ever took place. Moreover, the Court finds that the transactions at issue, such as Loop’s loan from Banco, Loop’s payments to the Individual Defendants, and Loop’s post-debt, transactions were not “informal” actions that would not require records of votes, minutes, or resolutions. Therefore, the Court finds that Loop failed to observe corporate formalities by adhering to its own By-Laws. Finally, Loop failed to prepare and maintain corporate records documenting compensation and/or distributions to shareholders. Tr. Vol. 3A, pg. 62. ii Failure to Prepare and Maintain Corporate Records Loop’s Corporate Minute Book and Loop’s Meeting Minutes Loop’s By-Laws specifically reference keeping minutes of the shareholders’ and Board of Directors’ meetings “in one or more books provided for that purpose.” PTX 2, Art. IV, § 9, pg. 8. At trial, testimony regarding the existence or whereabouts of Loop’s corporate “minute book” was a game of implausible deniability and finger-pointing. In short, though it was undisputed that Greenblatt was responsible for maintaining Loop’s corporate records as its Secretary, no corporate minute book or notes of meetings were produced at trial and the Individual Defendants’ testimony was either that key documents were lost, were given to corporate counsel, or were never prepared in the first instance. Nichols’ testimony regarding the existence of notes from Loop’s shareholders’ meetings was impeached. When asked at trial whether it was “fair to state that you don’t recall any notes taken in any officer or director meetings ...” Nichols said, “No.” Yet, at Nichols’ deposition, he testified that he didn’t recall notes being taken at the officer’s and director’s meetings. Tr. Vol. 4B, pg. 134. Subsequently, Nichols testified that a corporate red book, a red binder that purportedly contained Loop’s corporate records and “some meeting minutes,” existed at one time. Tr. Vol. 4B, pg. 137. Nichols hasn’t seen the red book since 1998 or 1999 and believes that it was lost when the law firm that incorporated Loop, Gulcher & Gulcher, shipped boxes of documents from its offices to a location that Nichols did not identify during testimony. Id. According to Nichols, any subsequent corporate records would have been kept by in-house counsel, Elizabeth Sharp (“Sharp”). Id. Of course, that testimony was also impeached by Nichol’s deposition testimony at which time he stated, that he did not know where minutes of Loop’s meetings where kept if they existed. Tr. Vol. 4B, pg. 136-137. Jahelka also pointed the finger at Sharp stating that she maintained Loop’s minute book, which incidentally, he “hope[s]” contains the resignations of Loop’s mystery directors, Werner and Rabman and the resolutions of the Board of Directors for the Banco loans. Tr. Vol. 2B, pg. 208-10, Tr. Vol. 3A, p. 6. As for Greenblatt, he testified that Freeborn & Peters kept the Rumpelstiltskin “spin off” documents but his testimony was impeached by his deposition testimony; namely, that he did not know where Loop’s records were kept. Tr. Vol. 4B, pgs. 172-76. May testified that he never saw Loop’s corporate “minute book” which