Piercing the Corporate Veil Local farmers in Manchester, Iowa, decided to build an ethanol plant. The farmers and other investors invested $3,865,000 and formed Northeast Iowa Ethanol, LLC (Northeast Iowa), to hold the money and develop the project. The project needed another $20 million, for which financing needed to be secured.
Jerry Drizin formed Global Syndicate International, Inc. (GSI), a Nevada corporation, with $250 capital. Drizin formed GSI for the purpose of assisting Northeast Iowa to raise the additional financing for the project. Drizin talked Northeast Iowa into transferring its money to GSI, and the money was placed in a bank in south Florida to serve as security for a possible loan. Drizin commingled those funds with his own personal funds. Through an array of complex transfers by GSI, the funds of Northeast Iowa were stolen. Some funds were invested in a worthless gold mine and other worthless investments.
Plaintiff Northeast Iowa sued Drizin for civil fraud to recover its funds. Drizin defended, arguing that GSI, the corporation, was liable but that he was not personally liable because he was but a shareholder of GSI. The plaintiffs alleged that the doctrine of piercing the corporate veil applied and that Drizin was therefore personally liable for the funds. Who wins? Northeast Iowa Ethanol, LLC v. Drizin, Web 2006 U.S. Dist. Lexis 4828 (United States District Court for the Northern District of Iowa)