It’s rarely pleasant for a businessman to have his personal affairs splashed across the front page of the New York Times business section.

But it has to be particularly unsettling for the businessman when he is already the target of numerous civil lawsuits and, quite possibly, a criminal prosecution.

Frankly, I’ve never understood the reasoning of lawyers who advise their clients at the center of such a litigation firestorm to transfer assets to their family members. Fuld and his wife are reportedly quite wealthy, so maybe they have legitimate estate planning reasons for Fuld to transfer his interest in a multi-million dollar home to his wife for nominal consideration.

But Fuld is also subject to numerous civil lawsuits in connection with the Lehman Brothers meltdown. Those lawsuits seek hundreds of millions in damages, and the company’s officers and directors’ insurance likely will not come close to covering those damages. Thus, the fact that Fuld is transferring a valuable interest in an asset to his wife for nominal consideration at this particular time will be of more than passing interest to the plaintiffs in those lawsuits.

Inasmuch as Fuld is the only person in his family who has any civil liability in those lawsuits, why subject other family members to possible fraudulent transfer liability?

Similarly, in the unlikely — but certainly possible — event that Fuld’s litigation problems force him into a personal bankruptcy case, why take the risk that his legal right to a discharge of personal liability for claims against him would be denied because of the transfer to his wife?

However, beyond the civil liability concerns, the main reason that Fuld should not have engaged in this type of transfer under his particular circumstances is simply that it looks bad. Real bad. Not only to potential creditors, but more importantly, to prosecutors who will make the decision on whether to indict Fuld. And, most importantly, to jurors who will decide Fuld’s fate.

For example, remember the criminal case against former Enron chairman, Ken Lay? The prosecutors conceded (bragged?) afterward that it was a very weak case. So, rather than focus on the supposed criminal conduct, the prosecutors hammered away on Lay’s indiscrete use of his personal line of credit with the company. As noted in my concluding post on the seventeen-week trial:

[I]f there was a defining moment in the trial that sealed the defendants’ fate, then it likely came in Week Fourteen during Task Force prosecutor John Hueston’s cross-examination of Lay over the use of his company line of credit.

Although Lay’s line of credit was legal and the company disclosed his use of it in accordance with applicable law, Lay’s repayment of the large draws on the line with Enron stock at a time when he was encouraging employees and the market to buy company stock was an apparent contradiction that the jurors could easily grasp.

Similarly, Lay’s decision to draw down $1 million on the line five days before Enron’s bankruptcy [to help pay off the mortgage on Lay’s condominium] was a disastrous decision for the defense. Although done on advice of counsel, Lay’s last-minute draw as the company was sinking into insolvency looked so bad that reference to that testimony by leaders of the jury during deliberations was probably enough to seal any wavering non-leader juror’s view on whether to convict.

If Fuld is indicted, then you can rest assured that prosecutors will bring his recent transfer to his wife to the attention of the judge during proceedings over the amount of his bond pending trial. And although the transfer has nothing to do with the probable criminal charges against Fuld (i.e., violating the obligation to throw in the towel), prosecutors will try to use it anyway to make him look tricky in the eyes of jurors.

You see, such a transfer plays right into the real presumption these days in business crime prosecutions — Fuld is wealthy and his company collapsed, so he must be guilty of some crime in connection with his company’s demise.

Sadly, being proven greedy is often enough to be convicted of a crime.