Key Points

  • The Seventh Circuit affirmed the district court's adoption of a special master's finding that about $1.5 million in previously escrowed funds belonged to judgment debtor Steven Ivankovich under the Illinois citation statute.
  • A special master's factual findings made after an evidentiary hearing are reviewed for clear error, while his legal conclusions and findings made without a hearing are reviewed independently.
  • A special master in Illinois supplementary proceedings may trace funds through entities that are not before the court.
  • Determining in a citation proceeding whether a third party holds a debtor's assets is not reverse corporate veil piercing, and Illinois Supreme Court Rule 277(f) does not require an express finding that justice requires an extension.
  • Ivankovich's own appeal was dismissed for lack of standing because he identified no injury personal to him.

The U.S. Court of Appeals for the Seventh Circuit on Tuesday upheld a special master's finding that about $1.5 million once held in a lender's escrow account belonged to judgment debtor Steven Ivankovich, not to the limited liability companies that claimed it. The ruling leaves the money available to creditors holding an unpaid default judgment of roughly $4.5 million against him.

Judge Scudder wrote the opinion for a panel that also included Chief Judge Brennan and Judge Taibleson. The court rejected every challenge raised by a group of Ivankovich-linked companies whose names all begin with "Pilgrim," and it dismissed Ivankovich's own appeal for lack of standing.

The decision holds that a special master tracing a debtor's assets may follow money through companies that are not parties, and that his findings after an evidentiary hearing are reviewed only for clear error, a deferential standard. It also holds that an Illinois proceeding to locate a debtor's own property is not reverse veil piercing, a maneuver that would make a company liable for its owner's debts. Limiting the inquiry to the entities in court "would handicap a Special Master's ability to follow a paper trail in complex financial transactions that may be choreographed to obscure reality," Judge Scudder wrote.

The dispute grew out of unpaid loans that plaintiffs Zhu Zhai Holdings Limited and Peter Pui Tak Lee made to entities whose repayment Ivankovich guaranteed. After he "ignored the litigation," the district court entered the default judgment, and the Seventh Circuit affirmed it in 2022.

To collect, the plaintiffs used Illinois citations to discover assets. In January 2022 they issued one to Walker & Dunlop, which had lent about $97 million to two Ivankovich companies bearing the Alliance name to buy Florida and Texas properties. The lender had escrowed about $1.5 million for taxes and insurance.

When the Florida properties sold in April 2022, the proceeds paid off the loans and left about $35 million more. Walker & Dunlop would normally have released the escrow to the borrower, but because of the pending citation it froze the funds. The two Alliance companies and five Pilgrim companies intervened, asserting that the money was theirs.

Facing "a chorus of objections," the district court in the Northern District of Illinois, with Judge Sharon Johnson Coleman presiding, "made the wise decision to appoint a Special Master," Judge Scudder wrote. It named retired U.S. Magistrate Judge Sidney I. Schenkier. Ivankovich's estranged wife, Jeanette Ivankovich, also intervened, claiming a superior interest in at least $600,000, the amount of child and spousal support he had failed to pay.

After five months of discovery and a two-day hearing, Schenkier found that the escrow would have gone into the same Alliance account that received the Florida sale proceeds. Tracing those proceeds, he found that Ivankovich moved tens of millions of dollars into accounts of two other LLCs and paid more than $2.8 million in personal expenses from them, including a credit card, a tennis club membership, rent on a family residence, his yacht and his divorce lawyers. Schenkier concluded that Ivankovich would have exercised "complete dominion" over the escrowed money as well.

Schenkier also found that "a lack of credibility permeated [Ivankovich's] testimony." Ivankovich, he wrote, "was repeatedly evasive, combative or flippant, and exhibited a level of disrespect for the process that the Special Master rarely has seen in his 46 years of involvement in the legal profession." Judge Coleman adopted the report in an August 7, 2025, order.

The panel reviewed Schenkier's legal conclusions independently but his factual findings only for clear error, reasoning that "where credibility determinations are central to factual findings, clear error review more appropriately reflects the deference necessary to preserve the value of evidentiary hearings."

The Pilgrim companies argued that Schenkier exceeded his assignment, improperly examined two nonparty companies, Glencoe Family Dwelling LLC and A&O Family LLC, and ignored that the escrow was needed for taxes and insurance on Texas properties the Pilgrim companies still own. The panel found the appointment order broad and held that the Pilgrim companies had cited no authority confining a special master to the entities before him. Once the loans were repaid, the court said, Ivankovich could have spent the escrow on the Texas properties or anything else. "This power of choice—exercised completely by Ivankovich, without objection from the Pilgrim LLCs—is precisely what led the Special Master to determine that the previously-escrowed funds belonged to Ivankovich," Judge Scudder wrote.

The court also rejected the veil-piercing objection. Under Illinois law, the opinion explained, supplementary proceedings ask only whether the debtor or a third party holds the debtor's assets. "Had the Special Master allowed reverse corporate veil piercing, full liability for the default judgment would have transferred from Ivankovich to the Pilgrim LLCs—putting the LLCs on the hook for roughly $4.5 million," Judge Scudder wrote. "That is not what happened here."

The panel likewise upheld the district court's repeated extensions of the citation proceedings. Illinois Supreme Court Rule 277(f) limits asset freezes to six months but permits extensions "as justice may require." The Pilgrim companies faulted the court for never saying so, but the panel held that "any supposed magic-words requirement finds no support in Illinois law or our understanding of proper applications of Rule 277(f)."

Ivankovich's separate appeal failed at the threshold. Claiming the funds as his own would only let the plaintiffs collect the money, the panel said, so asserting such a stake "would, in essence, be asking us to affirm the district court's decision, an unusual request from an appellant."

The panel credited Judge Coleman and Schenkier with handling the case "with great care and patience." It rested its jurisdiction on her November 14 order, which refused to halt disbursement and approved an agreement by the plaintiffs and Jeanette Ivankovich to split the funds equally. With the affirmance, that order and the equal split stand.