Frequently Asked Questions

The Receiver continues to receive a significant volume of questions from investors by email, at hearings, and through our 800 number. While we cannot answer every question we receive for a variety of reasons, we would like to address some of the more frequently asked questions here.

June 24, 2010 FAQ

Question 1: Has the plea agreement specifically helped your office in locating assets? If so, how?

As of today, the answer to this Questions is no. Earlier this year, representatives of the Receiver sat down with Trevor Cook for a lengthy interview concerning what he did with investors’ money. Cook confirmed that he sent the investors’ money to Crown Forex, JDFX, Mesa Holdings, JP Fund Services, Capricorn, Oxford Global Managed Futures Fund, various Panamanian entities, various other Swiss entities, and a number of offshore gambling accounts. In short, Cook corroborated what we already knew and confirmed some details that were previously only our suspicions.

After the meeting, Cook signed numerous releases, waivers and powers of attorney appointing the Receiver as his legal representative concerning various accounts that he or his companies held around the globe. These releases were notarized under the Hague Convention standards and served on the various institutions were the accounts were opened requesting information about the accounts, their balances and transactions histories. The use of notarized releases, waivers and powers of attorney are important because although the Receiver, pursuant to Chief Judge Davis’ orders, controls the assets of Cook and his various entities in the United States, the Receiver and the underlying orders from Judge Davis are not recognized in another country without an order from that country’s court. Obtaining such an order in another country can be costly, difficult, and in some cases, impossible to obtain.

The Receiver is hopeful that with the notarized releases, waivers and powers of attorney signed by Cook, we will be able to more effectively search for offshore funds without having to incur the cost of separate court proceedings, unless warranted by the facts. We are planning a follow-up interview with Cook before he is sentenced.

Question 2: In your own opinion (not to be considered legally binding in any way), do you consider Trevor Cook has cooperated with the letter and intent of the plea agreement? My understanding from your quoted comments is that he has merely corroborated what you have discovered.

See the answer to 1 above. The letter and, what we believe to be the intent, of the plea agreement is that Cook is to be fully cooperative with us in identifying and repatriating investors’ funds. Cook has answered the questions we posed to him and signed the releases we presented to him. However, he has not led us to any new or significant assets.

Cook’s basic claim is that the bulk of the money was sent to Crown Forex and is presumably now lost due to its insolvency. This story does not make sense to us, given the SEC’s investigation, as disclosed in the public record, and the vast amounts of money that seemingly have vanished into offshore banking, trading, and gambling institutions. Moreover, Cook’s past behavior of recklessly spending investors’ money, sending it all over the world, and trying to hide the remainder in violation of the Court’s Asset Freeze Orders, is indicative of his mindset in this matter.

Question 3: In a recent email, Fred Abrams alluded approvingly of your activity concerning the Crown Forex issue. Please elaborate as much as possible in that regard.

The Receiver had a lengthy call with Mr. Abrams at the request of the investors. Our discussion centered on the Receiver’s public efforts to repatriate funds from Switzerland and other countries and whether Mr. Abrams could be of assistance in these efforts. The Receiver is appreciative of Mr. Abrams’ offer of assistance and is evaluating, in consultation with Chief Judge Davis, where Mr. Abrams could be of most use to the Receivership.

As we explained to Mr. Abrams, shortly after being appointed last fall, the Receiver began working with Swiss counsel to repatriate investor funds that were sent to Crown Forex and any other Swiss institutions where investor money may have been sent. Specifically, the Receiver is working with two highly reputable law firms in Switzerland. One set of Swiss counsel is pursuing a claim for $66 million in the Crown Forex bankruptcy case. The Receiver is using the other set of Swiss counsel to interface with a variety of Swiss financial institutions and government officials in pursuit of investor funds. For example, the Receiver has uncovered a $1 million account in Cook’s name at UBS bank in Switzerland. That account has been frozen by the Swiss criminal authorities under suspicion of money laundering. Our Swiss counsel is our liaison with the bank and Swiss criminal authorities to ensure that those funds are ultimately repatriated to the investors. We also are working with Swiss counsel to identify any additional funds in Switzerland through the releases, waivers and powers of attorney that Cook has signed.

We will continue to follow up on credible leads in Switzerland, and elsewhere, as warranted by the facts and anticipated costs.

Question 4: Would it not be possible to reveal the farce of the plea agreement by simply asking Trevor Cook if he has shared everything and then being able to disclose one area he has not been truthful? (So far, no one wants to touch this one--but it is worth a try.)

If we find areas in which Cook has not been truthful, we will make that known to the Court.

Question 5: Is the recovery effort affected once Cook is sentenced? If so, how?

Possibly. After sentencing, Cook has no incentive to cooperate with the Receiver unless he believes the government will seek to further reduce his sentence based on that cooperation. We cannot speak for the government and cannot speculate on whether that is a possibility.

Question 6: If Cook doesn’t explain where the money went, will you and the prosecutor still vouch that he was cooperative? It doesn’t seem right that he can refuse to disclose where the money went, serve 20 years or so, and leave prison a millionaire! We all know how good he is at hiding assets overseas.

See the answers 2 and 4 above. We cannot speculate on what the prosecutor or the government will do.

Question 7: I can’t believe he will only get 25 years for ruining the lives of so many! What would need to happen in order for him to serve more than 25 years?

The Receiver had no involvement whatsoever in the criminal charges, the plea negotiations, or the agreement that was ultimately reached between Cook and the government. The criminal charges filed against Cook constrain the amount of time that Cook can receive. As charged, Cook cannot be sentenced beyond 25 years.

For Cook to receive a sentence longer than 25 years, two things must happen:

1. the Court would have to reject the plea agreement; and

2. the government would have to obtain an indictment that charged Cook with crimes that carry maximum sentences greater than 25 years.

Question 8: What is the total amount of investor losses reported?

In connection with Cook’s guilty plea, the United States Probation Officer has sent out requests for victim impact and financial loss statements and will be compiling a list of victims and the amount of loss. The Receiver has not determined the total amount of losses; however the SEC’s complaint stated losses of at least $139 million. We anticipate that the final number arrived at by Probation will be greater than $139 million.

Question 9: Do you expect this to increase?

See the answer to 8 above.

Question 10: What is your low end estimation of recovery?

The largest current investors’ assets are a claim in the Crown Forex bankruptcy in Switzerland, claims against various individuals and entities in Panama, and claims in the United States against Mesa Holdings and Ed Baker. In addition, the Receiver will be making claims to “clawback” money received preferentially by others from Cook or in excess of their investments. We are pursuing these assets in a manner that is as efficient and cost effective as possible and are hopeful that these efforts will produce additional financial restitution to investors. Nevertheless, we cannot speculate about the outcome of any particular claim or asset, how long resolution will take, or what it will cost.

In addition to the legal claims, Cook made a number of investments using investors’ money in a variety of closely held entities and financial institutions for which the present value is unknown. These include, among others, JDFX, JP Fund Services, Capricorn and Mesa Holdings. Here again, we are working to maximize the value of these investments for return to the investors although we cannot speculate at this time about what that value will be.

As of June 23, 2010, after taking into account all legal fees and expenses incurred by the Receiver including those submitted to the Court on June 23, 2010, the Receiver has approximately $4 million in cash (this amount does not include the $1 million at UBS in Switzerland).

Question 11: What is your estimation of when these recovered funds will be returned to investors?

The Receiver is still engaged in litigation in the United States, Panama, and Switzerland, with additional “clawback” litigation anticipated. Ultimate distribution of the funds will be controlled by the Court, likely through the United States Probation Office. Given the ongoing nature of the efforts to recover the assets in litigation, there is a possibility that more than a single round of distribution may be ordered by the Court.

Currently, Cook is set to be sentenced on July 26, 2010. It is common at sentencing hearings for the Court to Order restitution to the victims as identified by the United States Probation Office. As to the amount and timing of restitution and the specific handling of claims, we cannot speculate.

Question 12: What is happening with the case?

Our web site provides the most current information concerning the Receiver’s public activities in the case. It contains the Receiver’s public filings and relevant Court Orders in the civil case brought by the SEC and CFTC case, as well as relevant filings and Orders from the criminal case. We have also provided links to the Court’s and the U.S. Attorney’s web sites about the case. To protect the integrity of our ongoing investigation, we cannot make public all of our current efforts, however we make every effort to make our work as transparent as possible.

June 29, 2010 FAQ

Thank you for your continued questions. Because we do not want to compromise our investigation, we cannot disclose exactly what we have done, where we have looked and to whom we have spoken. Nevertheless, we have endeavored to answer questions that deal with the most common lines of inquiry submitted by you. We have selected actual and representative questions that have been submitted to us as a means to convey information to you.

Our priority is to locate and return the money that you lost in this Ponzi scheme, and we are focusing all our resources directly on those tasks. As we informed many of you, we are committed to being as transparent as possible about our work; however, we cannot use up our very limited resources responding to questions. We will do our best to continue providing you with information on a regular basis through our motions, receiver reports and statements in open Court, and in response to your questions in this Q & A format. We anticipate being able to respond to your questions in this Q&A format on a roughly monthly basis.

Question 13: My husband and I were investors through Bo Beckman and without our knowledge Trevor Cook. Mr. Beckman, when represented by Andy Luger, had told us that they had been able to trace our investment to Crown Forex SA. Are you planning to inquire from Mr. Beckman or Mr. Luger about investors’ money that can be traced to Crown Forex SA?

We have interviewed Mr. Beckman about his involvement in this matter and are continuing our investigation into his role. Beyond that, we cannot disclose the details of our investigation. As discussed in answers to previous questions and in earlier Receiver Reports, we have filed a claim with the Swiss liquidators responsible for the Crown Forex liquidation for approximately $66 million on behalf of Receivership entities. The Swiss liquidators are evaluating all such claims and we await their decision. The liquidators have not provided us with any information other than that they are evaluating all claims.

Question 14: You have subpoenaed 250 people and at last count we heard you have interviewed about 50. When will we learn who is on the subpoena list and who has been interviewed? Thanks.

We have served the Court’s Orders on over 400 financial institutions. We also have served subpoenas on approximately 250 individuals and institutions. We have also interviewed numerous individuals. We cannot at this time release the details of who we have served and interviewed, although more details on these activities will be made public in our final report to the Court. As noted above, disclosing such information at this point would compromise our ongoing investigation.

Question 15: Were most of the “preferred clients” who got their money back in June mostly Dale Madison clients?

No. As stated in our prior court filings most of the “preferred clients” were investors recruited by Cliff Berg.

Question 16: Concerning Gary Saunders, granted he likely has few assets in the US by virtue of the $400K lien on his house and the recent selling of his Porsche in favour of a less expensive car. However, there is a $2.1M discrepancy between the amount sent to him and the amount that was forwarded to Panama for the casino investment (your accounting in your receiver report). Why not at least sue him for the accounting of that $2.1M; could it not lead to assets overseas potentially? It is reported he went to Saxo Bank in London in October/November 2009 to obtain money for the project. Could he not be a knowledge source for overseas assets? Ed Baker was not a relief defendant either, yet you have gone after him for $3.8M.

We have interviewed Mr. Saunders about his involvement in this matter and are continuing our investigation into his role. Beyond that, we cannot disclose the details of our investigation.

In general, our decision to pursue any legal claim requires careful consideration and weighing of the following four factors:

1. the amount of any potential recovery;

2. the chances of actually collecting that amount;

3. the chances of succeeding in proving the claim in court;

4. the amount in investor funds that will be used up in pursuing, proving and collecting on the claim.

If we legally pursued every person or entity who played a role in Mr. Cook’s Ponzi scheme, we would very quickly use up all investor funds. We cannot do that and have to be very judicious in our decisions.

Question 17: Do you know if there are any plans for the Judge or DOJ to order a lie detector test?

We cannot comment on either the Court’s or Department of Justice’s plans in this regard. We have recommended to the government that it submit Mr. Cook to a lie detector test prior to his sentencing on July 26, 2010 for the purposes of locating assets

Question 18: Does he (Receiver/Court) plan to make public the investors and amount of $$$ lost?

See answer to Question 8. Our understanding is that Judge Rosenbaum will make public a list of victims and the amount of loss in the criminal case.

Question 19: I understood that there are 584 (approximately) true investors. The amount of investors comes from records recovered from Mary's computer, but many of those investors had closed their accounts previously to the scheme going down. Have the closed accounts been investigated so far as legitimate closures or pay outs for special people?

See answer to Question 18. We believe that there are a few hundred more investors than the 584 who lost money in this Ponzi scheme.

We are tracing the money in and out of Receivership accounts to ensure that only those investors who actually lost some or all of their principal receive restitution. We also are investigating whether any individuals received any money back as “interest” or received some sort of financial benefit, whether any individuals were tipped off about the SEC investigation or had their accounts cashed out as a result of the investigation, and the circumstances of individuals who cashed out their accounts before the scheme fell apart and the amount that the received in relation to the amount that they put in.

August 12, 2010 FAQ

Question 20: Why could there not be a distribution of possibly six to seven million to investors who have been waiting for one to occur. It seems to me that the amount seems to get smaller because of your fees. The fees are seemingly very regular but discovery of additional funds has not occurred.

The timing and amount of any distribution will be directed by the Court. I have no control over when and how much to distribute. However, there are several parts of this question where I can elaborate.

First, the Receivership estate is not getting smaller. Rather, it is currently at least twice as large as it was when the Receivership began—and this includes all expenses and fees. Moreover, additional funds are being added regularly to the estate.

Second, fees are being paid on a regular basis because there are many employees who have been working tirelessly on behalf of the investors. These employees need to be paid. They have done a tremendous amount of hard work locating, retrieving and liquidating assets. You can see some, but certainly not all, of that hard work reflected in assets that are continuously located and added to the Receivership estate and in the substantial court filings made to date that are all aimed toward that same end. In addition, the people on my team have worked at a discounted rate throughout the Receivership and continue to do so.

Third, the Receivership’s fees and expenses are scrutinized by the SEC, CFTC and the United States Attorney’s office on a monthly basis and are approved by the Court only after full and careful review of a highly detailed billing and expense records. These detailed records cannot be made public because they set forth with specificity the Receiver’s ongoing efforts. Details of our ongoing efforts must remain confidential because public disclosure could compromise our investigation and, consequently, our ability to recover assets for victims. We are as transparent as possible in detailing everything we can in our publicly filed motions to the court concerning the retrieval and liquidation of assets, claims against third-parties and requests for payment of fees and at the hearings on those motions. You can be assured that if the Receivership were not adding value, the Court would not allow it to continue or approve any payment for our efforts.

Fourth, more than half of the total expenses to date have nothing to do with my fees. They have to do with paying investigators, computer specialists, tax experts, accountants, forensic experts, appraisers, security guards, insurers, auctioneers, warehouse personnel, contractors, trade creditors, lawyers, web designers, and management companies, to name a few. The expenses also relate to hiring the necessary personnel to help us locate and repatriate assets in foreign lands such as Panama, Canada, and Switzerland. All of these expenditures have been essential to my mandate of locating, preserving, and returning assets to investors.

Lastly, the six or seven million that you speak of would be only two to three million without our efforts.

Question 21: We, who are in the lawsuits against Entrust and possibly Associated [Bank], originally brought claims against Entrust before the CFTC/SEC enforcement actions and before the Receivership was established. Jack [Harper, an attorney for some of the investors,] met with the SEC, CFTC, and you (the Receiver) to discuss your position as it related to any claims we would be pursuing against Entrust, Associated Bank, etc. After Jack received assurances from the you, the SEC, and the CFTC that the stay in the federal case did not impact our right to pursue private lawsuits against these organizations or people who you would not be pursuing, and there would not be any claim against any money we were able to obtain, we decided to join in the lawsuit. We have invested a lot of time and thousands of dollars with the understanding that any possible proceeds would have no impact on anything we would obtain from the receivership. Since we are hearing the opposite now, could you please explain to me what happened to change this. Was there a misunderstanding in the beginning? Did circumstances change? Did you get some new information that changed your position on this?

There was obviously a misunderstanding from the beginning. My position has not changed from the start of the Receivership and there has been no change in circumstances.

I believe that under the law you are entitled to restitution in an amount equal to, but in no event greater than, your actual loss. And, in cases such as this where there is not enough money to pay all the victims in full, the amount of restitution will be proportional to your actual loss.

To the extent that you recover any amount, that amount is no longer a loss. Therefore, you would not be entitled to restitution for what you have already recovered. This is the law and has been the law of restitution for ages. See 18 U.S.C. § 3664(j)(2) (“Any amount paid to a victim under an order of restitution shall be reduced by any amount later recovered as compensatory damages for the same loss by the victim in any [Federal or State civil proceeding]”). I would not and could not agree to anything different.

As I told Mr. Harper when we met at the start of the Receivership, the stay in the SEC and CFTC cases did not impact your right to pursue a private lawsuit against Entrust and Associated Bank. Because such a lawsuit would not impact the Receivership estates, I told Mr. Harper that the Receiver had no objection to any investors pursuing private actions against these entities. However, I never told Mr. Harper that any money that you might recover through a private lawsuit would not be deducted from your claim for restitution from the Receivership.

Indeed, this issue never came up in our discussions. Given that the law of restitution is well-settled and crystal-clear that a victim is entitled to restitution but only up to the amount of the actual loss suffered and no more, there was no reason for Mr. Harper and I to be discussing what would happen if there was a recovery.In my mind, it has always been that if investors recover outside of the Receivership then they have reduced their loss by the amount of the recovery. In other words, investors cannot make a claim to the Receiver where they otherwise have recovered for the same loss.

If you succeed in your private lawsuit against Entrust and Associated Bank, you undoubtedly will keep the money that you would recover. You would not share it with the other victims. Therefore, unless you are willing to share the money that you recover with all the victims of the fraud, then your claim for restitution must be reduced by what you keep.

Also, it is worth noting again that the foregoing is my view on the law of restitution and how distributions should be calculated. However, I am not your attorney and am not advising you as such. Ultimately, questions concerning the size and timing of any distributions will be decided by the Court.

Question 22: I am one of those unfortunate people victimized by the Cook Kiley scam. They have stolen most of my life savings and at 64 years old I will never be able to recover from this. Our attorney Jack Harper of Messerli and Kramer has advised us that you have accumulated $6.7 million and could make a partial distribution if so inclined. You would be helping me and I suspect many others more than you could imagine if you would agree to do a partial distribution.

The decision to make a partial distribution is not mine to make. The Court will decide when to make a distribution. Nonetheless, I will certainly pass along your circumstances and concerns to the Court.

Question 23: To the extent that a client incurs expenses/fees in pursuing a third-party claim, will these expenses be offset against the amount of the third-party recovery as measured by the Receiver?

No. An investor who chooses to engage his or her own attorney for purposes of recovering from the fraud is liable for his or her own attorney fees and costs.

Question 24: If the answer to No. 23 is “no,” how will the expenses incurred in pursuing third-party claims be factored into the distribution analysis?

See above. An investor’s expenses incurred in pursuing third-party claims will not be factored into the distribution analysis.

Question 25: Will the offset be 100%, or will the Receiver consider a smaller percentage offset as part of the distribution plan?

The offset will be 100% of any recovery.

Question 26: If our clients do not recover the full amount of their investments from third-parties, and the amount of recovery plus the pro rata distribution from the Receiver do not “make the client whole” with respect to their loss, will an offset still be taken?

Yes.

Question 27: What is the Receiver’s position with regard to investors who have unresolved third-party claims at the time the Receiver makes the final distribution?

Those investors will be paid their pro-rata share but such investors will be under obligation to return the amount distributed to them up to the amount recovered from any third party.

Question 28: How does the sentencing of Trevor affect your investigation and recovery efforts?

It is unlikely to have any significant effect. To date, Mr. Cook has not disclosed any significant assets that were unknown to us.

Question 29: Because of this latest interesting discovery, people are getting creative ideas about where he might have hidden other assets. Was Trevor questioned about additional hidden assets at other places Since they came from the Investment Rarities and other gold coin businesses, how do we not know they have not hidden assets similarly dozens of times in different places?

Mr. Cook has been extensively questioned about all assets that we are aware of and whether he had any hidden assets anywhere and with anyone around the world. He claimed that there were no hidden assets anywhere. However, recently, he disclosed hidden assets ($200,000 in cash and about $200,000 in silver and gold coins) that his brother was hiding. There is no way for us to know whether there are more hidden assets.

Question 30: Was the secret passageway in the mansion searched? Was it searched behind the walls with some type of scanner?

Yes. An extensive manual search was conducted but, given our limited resources, and continual cost-benefit analysis, we have not engaged in any type of search that we had no reason to believe would yield results. We had no reason to believe that a search of the mansion with scanners would have uncovered any hidden assets.

Question 31: Cook gave Gary Saunders $9.8 million to purchase the Panama Bay land yet the sellers of the land received only $7.7 million, according to the 3rd Status Report of the Receiver. Can clawbacks be used to get back from Saunders his $2.1 million ill gotten gain? Or, as minimum can the discovery process of a Summary Proceeding be used to extract from Saunders a verifiable accounting as to the $2.1 million?

Mr. Saunders and the whereabouts of the $2.1 million are still under investigation and we cannot comment further at this time.

Question 32: Was Cook asked in the lie detector test about approximately $44 million separate from investor money (the alleged corporate profits that Kiley told me about and Cook told others about?)

We cannot respond to questions concerning any lie detector test because we did not administer any such test. Those questions should be directed at the United States Attorney’s Office and the FBI.

Question 33: Was Cook tested about CFX SA, the Fased payment, etc.?

See the response to Question 32.

Question 34: Have you interviewed Beckman? Allegedly he and Cook hated each other. Could he not have some incriminating evidence?

We have interviewed Beckman. He is still under investigation and we cannot comment further at this time.

Question 35: How does Cook’s performance in the lie detector test affect his plea bargain?

We are not a party to the plea bargain and cannot comment on Cook’s performance or its effect on the plea bargain. That is an issue for Judge Rosenbaum to decide. The plea agreement required Cook’s cooperation with the Receiver in recovering assets. If asked by the Court to comment on the record, I will do so.

Question 36: I have heard Kiley and Mahmoud were not cooperative in their interview. Have they given any helpful information to you or any of the agencies such as the FBI?

Mr. Kiley invoked his Fifth Amendment rights when we tried to interview him. He has not provided any helpful information. Mr. Mahmoud was subpoenaed for documents and interviewed. We cannot make any further comment at this time. Any questions concerning whether government agencies (such as the FBI) have received information should be directed to the U.S. Attorney’s Office or the agency directly.

Question 37: Prosecutor Joe Dixon said at the meeting July 12 that once Cook is sentenced, there would likely be a restitution order and a partial reimbursement. Since the summary actions against the preferred clients for $7.4 million and other recent developments, can you speak about the likelihood of a disbursement and an approximate amount?

I cannot. Chief Judge Davis and Judge Rosenbaum will decide if a partial disbursement will be made, when it will be made, and the amount (if any).

Question 38: What has been discovered of the relation of Crown Forex SA and CGI Forex?

We do not have any jurisdiction outside the United States so we cannot subpoena either Crown Forex or CGI Forex to learn of their relationship. In addition, the Swiss liquidators have not provided us with any information or documents from Crown Forex so we have no means of ascertaining the relationship between the two companies. From evidence received from Receivership entities, it appears both Crown Forex and CGI were being run by the same people and as part of the same group of companies.

Question 39: What is the status of the investigation in Mauritius concerning Basel Financial owned by the same consortium as Crown Forex SA albeit sans Cook? Because of the connection, how might it help us?

See the response to Question 38. We have no jurisdiction outside the United States. Although we cannot comment specifically on Basel Financial, we have received requests from government agencies regarding our knowledge of various entities outside the United States and have given our complete cooperation in hopes that additional money can be recovered for Cook’s victims.

Question 40: It is up to Judge Rosenbaum to decide, but could you give an opinion of how Cook’s recent performance with the lie detector might affect his plea or what your recommendation to judge Rosenbaum might be?

No. Judge Rosenbaum has been kept fully informed of the scope and details of Cook’s interaction with the United States Attorney’s Office and with us. If Judge Rosenbaum requests my opinion on the record, I will provide it. Otherwise, I have no comment.

Question 41: Would it benefit your investigation if the sentencing were further delayed and if others were charged?

At a certain point, there is nothing further to be gained by delaying Cook’s sentencing. As to charging others, that is not within the area of my responsibilities and I do not want to speculate on who might be charged and how that might impact our investigation.

Question 42: What is the status of James Pieron of JDFX/IB Tech of whom Cook invested $15 million and who held the partner stock? What about the other European brokerages who have been identified as holders of registry funds?

James Pieron has put JDFX into liquidation claiming that the adverse publicity surrounding Cook has destroyed his business. We are investigating this matter further and evaluating our options. As to the other European brokerages, we have no jurisdiction outside the United States. At our request, Cook executed general powers of attorney to further our ability to repatriate foreign assets. We have received information and documents from some foreign institutions and are still in the process with others.

September 23, 2010 FAQ

Question 43: Do we yet know the potential benefits ARIF [Association Romande des Intermédiaires Financiers—a self-regulated non-profit private rights association in Geneva, Switzerland dedicated to the prevention and the fight against laundering] registration and Swiss regulation might have for our matter?

No. We are still waiting for the Swiss Liquidators of Crown Forex SA to provide us with information regarding the $66 million claim submitted to them on behalf of UBS Diversified. To date, we have received no information from the Swiss Liquidators. Until we receive information, there is nothing that we can provide to ARIF.

As we mentioned in our previous answers, we do not have jurisdiction outside the United States. Accordingly, we cannot compel any person or entity outside the United States to comply with our requests.

Question 44: Was there any applicable insurance in connection with Crown Forex?

We do not know. We have not received any documents whatsoever from Crown Forex, S.A. including any that might relate to any insurance that it may have had.Nonetheless, any possible claims for insurance or other compensation are premature until the claim with the Swiss liquidators has been decided.

Question 45: Why is the interim distribution set at $2,250,000 rather than the full amount of $5,427,265? My thought, along with most other victims, was to get OUR money back before it is all used up on fees, etc. That doesn't seem to be the case. So far the victims have gotten $0.00. Expenses and fees incurred to date are $2,281,519. Does that seem fair?

The interim distribution is designed to provide some measure of relief for victims before the Receivership is concluded and a final distribution is made.

Those working on behalf of the Receivership have added value to the Receivership and it is fair that they receive reasonable compensation for their efforts. When the Receivership began there was only approximately $1.9 million cash available for all the victims. Today there is $5,427,256 in cash. That is a net gain of $3,627,256.

The net gain does not include other substantial amount of work that the Receivership staff has been done on behalf of the victims. This other work includes tracking down additional Receivership assets, filing motions to retrieve and liquidate those assets, litigating in Panama, working with U.S. Probation, the FBI, the IRS, the SEC and CFTC, helping investors submit and substantiate claims for restitution, and preparing for an interim distribution. The Receiver, his staff, and his vendors, continue to work at a discounted rate to minimize the burden on the investors to the extent possible. In some cases, the Receiver has been able to secure critical services to the Receivership at no cost whatsoever.

The interim distribution alone is more than the $1.9 million that would have been available but for the Receivership. The interim distribution is $2,250,000 in civil restitution plus $362,700 in criminal restitution, for a total of $2,612,700. (The $362,700 available for criminal restitution is a Receivership asset that Chief Judge Davis has authorized to be used for criminal restitution.)

If the entire $5,427,256 is distributed now as you suggest, there would be no money left to fund the clawback actions against those who received preferential treatment, the clawback actions against the mortgage companies, the Panama litigation, the retrieval of money from Switzerland, the sale of the Canadian property and the retrieval of those assets, or the orderly and equitable distribution of money to the more than 800 victims in this fraud. A full distribution will end the Receivership immediately and end any chances of recovering the preferential payments, the Panamanian assets, the Canadian assets or the Swiss funds, which in turn are worth somewhere between $5 to $10 million.

Please note that any victim is free, at any time, to ask Chief Judge Davis to terminate the Receivership.

Question 46: Trevor Cook hired and paid a team of lawyers 100's of thousands of dollars to defend himself with victims' money. Why isn't that being clawed back? Why is it any different than clawing back salaries, commissions, etc. as stated in the 5^th receiver report?

The Court decided this issue in January 2010 and ruled that the lawyers had earned the money and were entitled to keep it.

Question 47: How is the clawing back of commissions going to work if the Sales Rep received more in commissions than he or she "invested" with Cook? Are you going to sue the Sales Rep for the full amount of the commissions? Can the Sales Rep avoid paying this back by declaring bankruptcy? What if the sales rep claims he or she spent the money and can't pay it back? What steps will you take to prevent him or her and others like him from hiding money?

As stated in our answer to Question 16, the Receiver's actions are governed by the Court's Orders and a cost benefit analysis on a case-by-case basis. Unless we can foresee a net gain for the Receivership estates, we will not take legal action on a given matter. In short, our mandate is to maximize the recovery for the victims. At a minimum, the Receiver will make adjustments to any claims submitted by sales representatives (or others who received money or other benefits from the Receivership entities) to reflect the Receivership assets they have already been paid. The Receiver cannot advise what sales representatives may or may not do other than to reiterate that they, like every other individual or entity with Receivership assets, are governed by the Court's Orders.

Question 48: Trevor Cook had key associates or plausibly, accessories, co-conspirators and accomplices, who have yet to be charged, even a year after news of the crime hit the press.Now that Cook has been sentenced, is it plausible that the investigation will wind down due to lack of resources, leaving Cook's associates free to bank our money or assets purchased with our money? For example, the Receiver is aware of an alleged accessory to Cook's crime, who holds an interest in foreign land purchased in or around 2008 using funds mostly, if not entirely traceable to Cook. Purportedly, in 2008, this individual did not have sufficient personal assets to purchase such a real estate interest, leaving us to suspect that his real estate interest must have been a gratuity from Cook in return for that individual's complicity. No individual should be allowed to walk away with ill gotten gains or assets racked up by helping Cook secure investors to fleece, launder money, or by other wrongful acts. That is not just or equitable. If the Receiver cannot or will not pursue such assets, could the Receiver suggest a way for the public to do so?

As stated in the answer to Question 47, the Receiver is governed by the Court's Orders and a cost-benefit analysis in everything we do. Some meritorious claims cannot reasonably be pursued because the cost of litigation would outweigh any potential recovery. Other meritorious claims have not been pursued because, although there is a potentially high judgment, it would probably not be collectible. We understand investors' frustrations on these points—and share them.We would like to ensure that no one be allowed to gain from this fraud, no matter how small the gain. However, we must remain focused on our goal of maximizing recovery for the victims and leave pursuit of wrongdoers and ill-gotten gains to the government authorities.

At some point which likely will be in the next year or so, we will have exhausted the claims that make sense for us to litigate. At that point, the Receiver will ask Chief Judge Davis to terminate the Receivership. The public can thereafter continue to urge the SEC, the CFTC and the United States Attorney's Office to pursue charges or claims against any of Cook's associates and assets that might still exist.
 

October 20, 2010 FAQ
 

Question 49:  On the FAQ page of your site you mention a $66 million claim submitted on behalf of UBS in the Swiss bankruptcy of Crown Forex.  How would the payment of this claim affect the victims of this case?  Furthermore, when are these claims supposed to be paid or rejected?
 

We have inquired, but have yet to receive information from the Swiss authorities about how or when they will process the claim.
 

Question 50:  You state that you are actually only going after $5 to $10 million more? How did we go from $66 million to $5mm?
 

As explained in Question 49, the $66 million figure relates to the claim that UBS submitted in the Swiss bankruptcy of Crown Forex.  Because that claim is being handled in confidence by the Swiss government, we do not have any estimation of whether that claim will be recognized or if so, in what amount.  We are not optimistic about the chances of any recovery on the $66 million claim pending before the Swiss liquidators and therefore have not included it in any of our projections.

The $5 to $10 million referenced in response to Question 45 relates to actions where we have information or control.  Specifically, the $5 to $10 million includes our estimated returns on the clawback actions in Chief Judge Davis' Court, as well as the litigation in Panama, sale of the Rainy Lake property in Canada, and expected return of approximately $1 million the Receiver found at an account Cook held at UBS in Switzerland.
 

Question 51:  Why do you keep saying we have no jurisdiction outside of the US?  Haven't you hired overseas lawyers to work on our behalf? Is there anybody (i.e. FBI) that WOULD have jurisdiction outside of the US?
 

We cannot impose American laws on foreign countries.  Each country is a sovereign nation and has its own laws and procedures.  There is no court, governmental agency or law enforcement agency in the United States that has any jurisdiction in a foreign country.  There are a number of mutual assistance treaties in which one government can ask another government for help.  But these are merely requests and cannot be mandated.  In addition, these requests take years and perserverance to yield results.

We have asked for the assistance of foreign authorities but are at their mercy as to if, when, and how they will help and the extent of any help that they might offer.  Our overseas lawyers are assisting our efforts in Panama, Canada, and Switzerland, but they cannot compel anyone to comply with our requests unless we have a good faith factual and legal basis to (1) invoke the mutual assistance treaties in place in their respective countries or (2) file a lawsuit under the laws of their respective countries as was done in Panama and Canada.

If we were to hire overseas lawyers to follow-up on every possible lead, hunch, or speculative tip that we have received, we would very quickly deplete all the assets of the Receiver Estate.  We have hired overseas lawyers only where we have identified specific and existing assets and where we believe we have a good chance of recovery, such as, in Panama, Canada, and Switzerland.
 

Question 52:  I am writing after reading Dan Browning's recent article in the Star Tribune on October 18, 2010.  I sent a completed form and documents to Justin Delfino in Chicago and also completed a separate claim to you via certified mail.  The documents sent to you included copies of bank cashier checks, other checks and bank documents to substantiate the amount I actually deposited with Pat Kiley.  I have not heard anything back from you indicating that my claim has been accepted/verified, is lacking documentation, is incomplete, or is inaccurate in any way with respect to the amount that I demonstrated that I had deposited.  In the article it is stated that out of 1,200 investors...the Receiver has only verified claims so far for 668 victims, with losses totaling $142 million.

In light of the fact that it appears you will be asking Chief Judge Davis to set a deadline of January 14 for investors to file a claim, and that many investors have filed incomplete claims and others failed to account for withdrawals, how do we know if our claim has been accepted/verified or if you need additional documentation to clarify any possible irregularities before the possible cut-off date?
 

As soon as the Court approves the interim distribution and the procedures for claim processing and final accounting, which we expect to be in early November 2010, we will send out letters to all known investors.  The letters will inform investors whether they will be receiving an interim distribution and, if so, the amount of their recognized claim and the amount of the pro-rata interim distribution that they will receive.

In the meantime, please feel free to contact us by telephone on the Receiver hotline (local: 612-436-9664, toll free: 877-316-6129) or email (info@cookkileyreceiver.com) to confirm that we have all the information from you that is necessary to process your claim.  

 

Question 53:  I am interested in entering into an agreement with you for a finder's fee for all bank accounts found in foreign countries held by any of the individuals involved in the Oxford Global Ponzi Scheme, including but not limited to:  Cook, Kiley, Beckman, Durand, Saunders, etc.  I am requesting 10% of all monies found by me and returned to the USA by you for disbursement to the victims.  Are you willing to consider this offer?

 

Unless you actually find a foreign account that we are not aware of and you actually provide substantial assistance in successfully returning the funds in that account to us in the United States, then your offer has no value to us.  If you are able to locate such an unknown account and you in fact substantially assist us in successfully repatriating the money to the Receivership, then we would be willing to pay a finder's fee of no more than 3%.

 

Question 54:  If I am an investor who worked for Cook and received some form of compensation or other benefit from Cook, will I get an interim distribution?

 

No.  We are in the process of adjusting your claim to take into account the amount of cash or other benefits that you have already received from Cook.  After your claim is adjusted, we will notify you of our determination and provide you with an opportunity to be paid out based on that amount or contest our determination.

In the final accounting, all investor claims will be adjusted to ensure that everyone, employee or not, receives an equal pro rata share in proportion to the amount that they have actually lost.

 

Question 55:  Henry Mahmoud, at the hearing, told an investor that it was still possible to Cook to communicate with one of his minions concerning transfer of funds to further hidden locations.  Is this true?  What steps have been taken to prevent such happening?
 

We do not and cannot know the veracity of such statement.  Cook is under Court Order to disclose and return all assets.  It is our understanding that all telephone calls to and from the jail are monitored.  However, there is no way to prevent Cook from communicating with the outside world.  Not all of his constitutional rights are terminated by his imprisonment.

 

Question 56:  At the hearing Kiley compared our matter to the REFCO theft, where he alleges ultimately most of the money was found in an offshore bank in Pakistan.  What credence do you place in this possibility?

None.

Question 57:  Please confirm how my share of recovered assets will be determined.

The final amount you will receive cannot be determined yet, but reasonable estimates of your percentage are possible. The general formula we will follow is:

Until the final accounting is completed, we cannot say exactly what the total amount of all recognized claims will be, but it will likely be somewhere between $150 to $160 million.  With this estimate, investors should be able to get an approximate calculation of their percentage of the total recovery.

November 29, 2010 FAQ

Question 58: Why are you not optimistic about the potential recovery of the $66 million Crown Forex claim?

The Swiss authorities took over and are liquidating Crown Forex SA because it was insolvent and incapable of paying its creditors.

Question 59: How many times and in what manner have you contacted the Swiss Liquidators regarding the $66 million claim?

We have attempted on many occasions to contact the Swiss Liquidators by correspondence, telephone and personal contact through two different sets of Swiss counsel that we have retained to assist us in Switzerland. The liquidators have treated the Crown Forex SA bankruptcy as highly confidential and have not shared any substantive information with us. They informed us that they could not provide us with any information until such time as they had completed their claim review process. Once that process is completed, they will draw up and publish a schedule of accepted claims. They said that this process will take time measured in months.

The most recent information we have is that the liquidators are preparing to finalize the inventory of assets and liabilities of Crown Forex SA. The draft inventory will then be submitted for approval to the Swiss financial market authority, FINMA. Once approved by FINMA, each deemed creditor of Crown Forex SA will be informed if its claim has been accepted or rejected. Creditors whose claims have been rejected by the liquidators will have a right to sue the bankruptcy estate to overturn this rejection.

The inventory of claims will be made available to all creditors, which will also have a possibility to challenge other creditors’ claims, but not to the general public.

These next steps are expected to happen in 2011.

Question 60: Since you have been unsuccessful in securing even a response from the Swiss liquidators handling the $66 million Crown Forex claim (i.e. how they will evaluate the claim, when the claim will be decided, etc.) perhaps we can help. If you provided us with the contact info for the liquidators we could all contact them every day until they responded. Perhaps having the ‘faces behind the names’ would compel them to respond.

The Swiss liquidators contact information can be found at http://www.crownforex.info.†‡

Question 61: “There are a number of mutual assistance treaties in which one government can ask another government for help. But these are merely requests and cannot be mandated. In addition, these requests take years and perseverance to yield results.” Have we made these requests? If the receivership is not pursuing these assistance treaties, we would like to know how to do it and who to contact so that we can pursue and once the receivership is terminated.

Requests under a mutual legal assistance treaty, or MLAT, can only be made by one government to another government. Because the Receiver is not part of the government, he cannot make an MLAT request. We understand, however, that the United States Attorney’s Office has made an MLAT request to the Swiss authorities. For more information, please direct your inquiries to the United States Attorney’s office at 612-664-5600.

We have requested the SEC’s Office of International Affairs (“OIA”) to formally request the Swiss Authorities to assist us in our investigation and to help repatriate any assets that are found in Switzerland. OIA has made this request and we are awaiting a response from the Swiss authorities.

Question 62: What are the tax consequences of the distribution checks for those investors who had the money in IRAs? The IRS directed us to publication 202-45, and it appears that IRS may treat the distribution checks as disbursements from the IRA accounts and, for anyone under the age of 59.5 years, charge a 10% penalty on the distribution checks from the Receiver. To ensure that the distribution is not a taxable transaction and avoid the 10% penalty, can we rollover our distribution to another eligible retirement plan within 60 days of the distribution?

The Receiver cannot provide any tax advice related to your investment or any distribution made from the Receivership. Please consult your tax advisor regarding the tax consequences of these issues.

The IRS has regional offices that may be able to assist you. A list of IRS regional offices can be found at http://www.irs.gov/localcontacts/index.html.†‡ Also the IRS has a Taxpayer Advocate Service that may be able to help you. For more information please visit http://www.irs.gov/advocate/index.html.†‡

Question 63: We recently received the interim civil and criminal restitution distribution checks for the loss suffered by us due to the actions of Cook and others. Thank you for your efforts on our behalf. We are confused about the status of Associated Bank. Are some of its assets frozen and available for the receivership? If so, how, how much, and what is the status of the receivership claim against Associated Bank? We were not able to find any of this information in your latest accounting report. If large amounts of money were at the bank, and the bank might have played a role in the fraud, why was Associated Bank not named as a "relief defendant'? We see from your earlier FAQ that there is a separate private lawsuit involving some of your claimants and the bank. What is your understanding of the nature of those claims, and why are those claims not subject to your receivership? Thank you for all of your assistance.

No deposits remain at Associated Bank. Although approximately $100 million flowed through the accounts that Cook and others opened at Associated Bank, only $970,000 was found in those accounts at the time that the Court entered its asset freeze order in November 2009. The Receiver seized the $970,000 and those funds became part of the interim civil distribution.

The SEC and the CFTC brought the two civil lawsuits that created the receivership. Those agencies were the ones who named the “Relief Defendants” in the lawsuits. The Receiver had no say in who was named as a Relief Defendant.

The private lawsuit brought by certain investors against Associated Bank is based on a theory that the bank was negligent and owed a duty to those investors in handling the accounts that Cook and others opened at the bank and used to perpetuate the fraud. The Receiver is not part of and has no role in this lawsuit.

In the meantime, the Receiver’s investigation into Associated Bank is ongoing and, as such, we cannot comment further on this matter.

 

December 16, 2010 FAQ
 

Question 64:  Do you know whether the IRS will in certain circumstances allow fraudulent losses of IRA funds to be deducted from income for tax calculations?
 

Please see our answer to Question 62.  The IRS issued guidance concerning treatment of losses arising from ponzi schemes that can be found at the following sites:

The IRS Commissioner identified revenue rulings and procedures related to Ponzi schemes at: http://www.irs.gov/newsroom/article/0,,id=205374,00.html.
Embedded in the foregoing link are links to the actual revenue ruling:  http://www.irs.gov/pub/irs-drop/rr-09-09.pdf; and the revenue procedure:  http://www.irs.gov/pub/irs-drop/rp-09-20.pdf.


We urge investors to consult either a tax advisor or contact the IRS directly about tax issues stemming from your investment or any distribution from the Receivership that you may receive.
 

Question 65:  Do you know whether I can write-off the entire amount of my investment (in or outside of an IRA) for tax purposes and treat your distribution as ordinary income?
 

Please see our answers to Questions 62 and 64.

 

Question 66:  From a tax standpoint, do we take the loss against our taxes now or do we wait in the event we will receive reimbursement?
 

Please see our answers to Questions 62 and 64.

 

Question 67:  I was an IRA account holder at Entrust and I called the IRS and they said that the distribution checks would be a "distribution" from my IRA and therefore, since I am not 59 ½ years old, there would be an additional 10% penalty.  They said that the receivership would issue 1099-R's and that the IRS would get copies.  On my 1040 form, why can't I treat the distribution as "other income," especially if you will not issue any 1099-R's for these checks?

Please see our answers to Questions 62 and 64.
 

Question 68:  Are the accounts and assets Jason Beckman has in MN, TX, FL and any other states, frozen?

Beckman is not a defendant or a relief defendant in the two civil cases, SEC v. Cook, et al. and CFTC v. Cook, et al. However, to the extent Beckman is in the possession, custody or control of any Receivership assets, they are subject to the Court's Asset Freeze Order and belong to the Receivership.
 

Question 69:  Where do you stand on pursuing Kiley's situation on what he has embezzled from us?

The SEC is proceeding in its civil case against Kiley, SEC v. Cook, 09-cv-3333 (D.Minn.), which is the same case in which the Receiver was appointed. The Receiver has already seized property from Kiley and to the extent additional assets are located in his name, those will be seized as well.
 

Question 70:  Is he still in the country or where does he presently live?

The Receiver understands that Kiley presently lives in Minnesota.  He has appeared before Chief Judge Davis on a number of occasions.
 

Question 71:  Should someone put this in front of the news media, Fox News for instance, to see if their investigative department can do something about this as they have with other folks by putting the embezzlement in front of the public?

This matter has received extensive media coverage in the Twin Cities and also national coverage by CNN and the New York Times.
 

Question 72:  Obviously the distribution from the Cook settlement was a joke compared to what we had invested.  Is this all we will receive?

No.  We acknowledge that the interim distribution was small compared to your investment. We understand, and share, your frustration and are doing our best to maximize recovery while minimizing expenses.  We anticipate that there will be another distribution in the future.
 

Question 73:  Shouldn't Millennium Trust and Entrust have some monetary responsibility in this situation as they were the custodians and collected fees?

We cannot advise any investor about potential claims they may have against third parties such as Millennium Trust and Entrust,  We are presently analyzing our options with respect to providers such as Millennium Trust and Entrust. Our course of action with regard to these entities will be guided by a cost-benefit analysis as discussed in response to previous requests.
 

Question 74:  Is has been reported that Jason Beckman has been driving a Maserati in his neighborhood. Is this the same Maserati sold by Trevor Cook?

We do not know what car Beckman is driving around his neighborhood.  Cook sold a Maserati to a local dealer on October 20, 2009.  The dealer had no notice of Cook's fraud and paid fair value for the car.  By the time Receiver was appointed, the car had been sold by the dealer to a third party.  Since being appointed, the Receiver has taken possession, custody and control of all known assets that Cook had, presumably, including the money paid by the dealer for the Maserati.
 

Question 75:  I was reading the article about the lawsuits filed in the Bernie Madoff case, and I was wondering in the Trevor Cook case, if there is a deadline for filing against alleged possessors of registry assets? Also, after looking at the SEC's Proposed Case Management Plan for Pat Kiley, are all fourteen disclosures, etc, open to the public, or are they closed hearings?

The statute of limitations applicable to the Receiver's claw-back actions is six years from the Receiver's discovery of the facts leading to the claw-back claim.  In contrast, the applicable statute of limitations in the Madoff case was two years.

We don't understand the remainder of the question, specifically what is meant by the 14 disclosures.  All hearings and filings in this case are public.
 

Question 76:  Investors are aware of the limitations of the Receiver's jurisdiction as mandated by the appointment order.  However, other receiverships have jurisdiction to sue foreign entities, and custodial institutions both here and abroad in wide ranging claw back actions. The Receiver obviously has some jurisdiction in Panama and we appreciate the comment in the lastes FAQ #63 concerning Associated, "Receiver's investigation into Associated Bank is ongoing." Do you foresee a time when the Receiver's mandate could be expanded to that comparable to the Madoff, Petters, Hecker cases?

Our mandate is broad and international in scope.  However, as stated in response to Question 16, our decision to pursue any legal claim requires careful consideration and weighing of the following four factors:

     1.     the amount of any potential recovery;
     2.     the chances of actually collecting that amount;
     3.     the chances of succeeding in proving the claim in court;
     4.     the amount in investor funds that will be used up in pursuing, proving and collecting on the claim.

If we filed a lawsuit against every person or entity that played a role in, or benefitted from, Cook's Ponzi scheme, then we would very quickly use up all investor funds.  We cannot do that and have to be very judicious in our decisions.

Filing international lawsuits requires retaining foreign counsel, getting the Receivership Orders in this case and the Receiver recognized in a foreign jurisdiction, and then completing the typical litigation process in that country.  Given the limited resources available to the Receiver, and balancing the four factors discussed above, the Receiver is only pursuing litigation in Panama at this time.
 

Question 77:  According to reports, one of the areas in which Trevor Cook has not cooperated is PFG Best. Per the Hlavcek declaration, "approximately $46 million was transferred to accounts held by PFG Best, Inc. for the purpose of trading in futures and foreign currencies" [Hlavcek p. 20]. It is later stated that, "All but $12,208 of the remaining $35.3 million was lost in trading by Cook." However, Exhibit 12 of the SEC exh 21 that purports to detail activity concerning this entity is merely an incomplete list of withdrawals with some deposits listed. Where could one obtain a comprehensive and accurate statement of all activity including any alleged trading?  There are those who allege the "losses" are merely withdrawals. Have you interviewed Nolan Schiff?  Would not his collected fees be subject to claw back?  Have you interviewed investors who claim their money was moved out of PFG into other institutions such as CFX SA?  How do we know that there are not substantial receiver assets associated with this entity?

Our investigation into the activities of Cook, others, and the Receivership entities at PFG Best is still ongoing and we cannot comment further at this time.
 

Question 78:  Our understanding of the impending FINRA arbitrations with Beckman is that if the plaintiffs win, settlement assets will come from the insurance and assets of the sponsoring companies, one of which is Western International Securities, and that the settlements received will reduce the plaintiff's claims with the receivership in the amount received.  Is this correct and is there other possible impact on the receivership other than this reduction in claim?
 

At this juncture we are not privy to the terms of any settlements that Mr. Beckman may have entered into in the FINRA arbitrations.  However, to the extent that investors recover for their losses in this Ponzi scheme in another forum, their claims to the Receiver will be reduced by the amount of their recovery.
 

Question 79:  I would like to challenge the Receiver's recognized claim amount that was detailed in recent correspondence to me.  Do I need to file the challenging affidavit with the Court or any of the government agencies?
 

Not at this time.  In the Court's November 1, 2010 Order, Chief Judge Davis approved a claim finalization procedure whereby the Receiver informs each victim of his or her recognized claim amount and provides 30 days for them to accept or challenge that amount.  If the investor chooses to challenge, the affidavit and supporting documentation must be submitted to the Receiver in the first instance, not the court.  If the Receiver and challenging investors are not able to resolve the difference, a process will be put in place for judicial resolution.

 

January 17, 2011 FAQ
 

Question 80:  What legal proceedings not involving the Receiver are you aware of with allegations stemming from the scheme?
 

We are aware of the following legal proceedings:



Grad et al. v. Associated Bank
 

Filed:                              October 27, 2009
Venue:                           Wisconsin Circuit Court, Brown County
Cite/Docket No.:             09-cv-2949
Status:                           Dismissed, Pending Appeal
Plaintiffs:                        Herman Grad, Marya Grad, Keith Gillam, Murielle Vendette Gillam, Ivan Velev, Maia Veleva
Defendant:                     Associated Bank
Appeal:                          Wisconsin Court of Appeals, District 3 (10-ap-1461)



In re Mack et al.

Filed:                              November 15, 2010
Venue:                            Arizona Corporation Commission
Cite/Docket No.:             S-20768A-10-0463
Status:                           Open
Plaintiff:                          Arizona Corporation Commission
Defendants:                   Joseph Mack and Helen Marie Mack d/b/a Secure Retirement Solutions, Mack Financial Group, LLC, 
                                      Darin Whittington and Gina Whittington


McDonald et al. v. Entrust Group, et al.

Filed:                              February 2, 2010
Venue:                           Minnesota District Court, Hennepin County
Cite/Docket No.:             27-cv-10-2253
Status:                           Open
Plaintiffs:                        Louise Beatty, Timothy Beatty, Gunvant Bhatt, David Bratt, Mark Cobb, Allen Collins, James Devito
                                      Craig Engel, Stephen Flemmons, William Fravel, Karen Gladstone, Bonnie Gloth, Harry Grusche,
                                      Sandy Grusche, Curtis Harvey, Dan Haynes, Diann Haynes, Edward Hemenway, Robert Herr,
                                      Edith Hoeppner, Shirley Jacobs, Joseph Kalina, Donald Kincaid, Karl Kokotan, Stephen Laube,
                                      Donald Lindberg, Thomas Los, Joan McDonald, Phillip McDonald, Michael McGonnell, Paul Migliorelli,
                                      Jacquelyn Miller, Russell Miller, Donald Moran, David Nielsen, Barry Owens, Robert Pajor,
                                      Mary Patterson, Michael Patterson, Jerome Reynolds, Robert Roiger, Robert Roof, Greg Rutter,
                                      Gordon Schepke, Kathlyn Schepke, David Smith, Dwight Smith, Edgar Stephenson, 
                                      Linda Stephenson, Mark Sticha, Ronald Stolpman, Lawrence Treiber, Daryl Vossler, 
                                      John Walencik, Stanislaw Zukowski
Defendants:                  Entrust Midwest LLC, The Entrust Group

Steinberg v. Entrust Midwest et al.

Filed:                             January 18, 2010
Venue:                          Northern District of Illinois
Cite/Docket No.:           10-cv-332
Status:                          Open
Plaintiff:                         Ronald Steinberg
Defendants:                  Entrust Midwest, LLC, The Entrust Group, Inc.



In re NRP Financial

Filed:                             September 24, 2009
Venue:                           FINRA
Cite/Docket No.:            09-05297
Status:                          Noted as settling on October 6, 2010 for $50,000


In re Western International Securities

Filed:                             September 14, 2010
Venue:                           FINRA
Cite/Docket No.:            10-03946
Status:                           Pending


In re NRP Financial and Western International Securities

Filed:                             May 1, 2010
Venue:                           FINRA
Cite/Docket No.:            10-01907
Status:                           Pending


In re Western International Securities

Filed:                             November 17, 2009
Venue:                           FINRA
Cite/Docket No.:            09-06587
Status:                          Arbitration Pending


In re Oxford Private Client Group

Filed:                             September 9, 2009
Venue:                           FINRA
Cite/Docket No.:            UNKNOWN
Status:                           Pending


 

May 26, 2011 FAQ

Question 81: In light of all the money that has been dissipated by the alleged perpetrators such as Beckman et al, and the fact that the FINRA settlements have been escrowed, why cannot the Receiver file a motion to escrow the preferred clients’ funds until the outcome of the upcoming trial?

The Receiver will not comment on pending litigation.

Question 82: How much money is currently in escrow concerning the current FINRA settlements?

We have been informed by the lawyers for the FINRA Claimants that the amount in escrow is approximately $3.4 million.

Question 83: What is the status concerning the proposed settlement with Ed Baker’s insurance company?
 

Chief Judge Davis approved the Receiver’s Miller-Shugart Agreement with Mesa and Ed Baker by Order dated March 15, 2011. Pursuant to the agreement, Mesa stipulated to the entry of judgment against it and in favor of the Receiver in the amount of $1MM, plus costs, fees and interest. Ed Baker also stipulated to the entry of judgment against him and in favor of the Receiver in the amount of $500,000, plus costs, fees and interest. The Court in the Hennepin County Action entered judgment against Mesa and Baker and in favor of the Receiver on March 22, 2011.

Pursuant to his rights under the Miller-Shugart agreement, the Receiver filed suit against Baker and Mesa’s insurer, Arch Insurance Company, on May 20, 2011. In that case, which is titled Zayed v. Arch Ins. Co., 11-cv-1319 (D. Minn.), the Receiver seeks, among other things, an award for all damages sustained as a result of Arch’s breaches of contract with Mesa and Baker, including but not limited to the amount of the judgments entered against them in the Hennepin County Action and attorneys’ fees.
 

Question 84: Can you give an update on Crown Forex SA?

We are still awaiting the liquidators’ decision on the claims filed on behalf of receivership entities. We will provide further information when we receive it. In other words, there is essentially no change or updates to report since our responses to Questions 3, 38, 42, 43, 44, 49, 50, 51, 58, 59, 60 and 61.

In the meantime, we filed a motion for an order for rule to show cause against Charles Hendrickson. The details can be found on our website under “Receiver Filings” here.
 

Question 85: Following the May 23 hearing with Kiley, do you intend to interview him again? Aren’t there some limits to the allowable use of the Fifth Amendment in civil cases? How does that bear on Kiley pleading the fifth previously at your office?

We do not presently intend to interview Mr. Kiley. Given his public statements and court filings professing, and continuing to profess, his innocence and complete lack of knowledge concerning the Ponzi Scheme or the whereabouts of the millions of dollars that were stolen from investors, we do not believe that an interview would produce any results of benefit to the investors to justify the expense of preparing for and interviewing him. In addition, he previously asserted his Fifth Amendment privilege when we tried to seek information from him. Should the SEC and CFTC depose him, we will submit our questions at that time.
 

Question 86: If the escrowed $3.4 million comes into the registry, will you make another interim distribution?

If the Receiver prevails on his current motion to prevent the distribution of the $3.4 million to the FINRA Claimants, that amount will be frozen and it will not be distributed until such time as the Receiver or the investors’ class as a whole (as described in our motion papers) prevail on, or settle, their claims against NRP and Western.

On a related note, if and when we receive the $1.2 million that are being held by the Swiss authorities, we will ask the Court for permission to allow us to distribute that amount in another interim distribution.
 


 

June 24, 2011 FAQ
  

Question 87:  From the criminal information filing related to Chris Pettengill, were any registry funds placed in R.C.G.F. (Resolute Capital Growth Fund) that might be recovered?
 

We are investigating this issue, but chances of recovery seem very unlikely.  It appears Resolute Capital Growth Fund, a fund based in the British Virgin Islands, was liquidated years ago.

 

Question 88:  In light of the recent recovery from Switzerland and your comment in the filing, when can we expect another interim disbursement?

 

We plan to file a motion seeking permission from the Court to distribute the Swiss funds in the next few weeks

 

Question 89:  According to my understanding, the Receiver and Mr. Harper are still interested in the Associated Bank matter.  What possibilities do you foresee in regard to this?

 

We consider Associated Bank to be an ongoing investigation and cannot comment further at this time.

 

Question 90:  What is your assessment of the Swiss "DEPOSIT PROTECTION SCHEME" [iv] in relation to recovery at Crown Forex?  Why is this matter taking so long?

 

We do not know why the litigation of Crown Forex is taking this long.  We are looking into the deposit protection scheme mentioned, but do not believe it is likely to result in significant, if any, recovery because of the CHF 100,000 per client limit.  Though many clients were told that they had individual accounts at Crown Forex, we do not believe that to be the case.  We hope to learn more upon learning the liquidators' decision on the Receiver's pending claims.

 

Question 91:  If I give you information that leads to a substantial recovery, will you consider paying a finder's fee?

 

We continue to receive variants of this question, which is addressed in response Frequently Asked Question 53, and the answer has not changed.  While we welcome tangible information not already known to us that would result in additional recovery, we believe that any such recovery should equally benefit the entire class of victims.  We cannot favor one person over any other.  As such, in the appropriate set of circumstances, we are willing to consider asking the Court to allow reasonable compensation for substantive work or information that in fact brings overall value to the receivership.
 

Question 92:  Can you provide an accounting as to where the investors' money went?

The SEC provided a full accounting in the Scott Hlavacek Declaration in Support of Plaintiff's Ex Parte Motion for Asset Freeze, Appointment of Receiver, and Other Emergency Relief. Click here to see the Hlavacek Declaration.

 

August 17, 2011 FAQ
  

Question 93: When will Pettengill’s name be added to the receivership estates? When do you plan to interview him?
 

Neither the SEC nor the CFTC has filed a civil lawsuit against Pettengill seeking to impose a receivership over him or his assets. Although Pettengill is not named in the three pending civil receivership cases, the Court’s Receivership Orders in those cases are broad enough to encompass any asset in Pettengill’s custody, possession or control that can be traced to the Receivership Estates or to any Receivership asset. In addition, criminal forfeiture provisions will apply in the context of the criminal case against him.  

Question 94: In light of the following quote in the Star Tribune, what is being done to investigate the possibility that falsified accounting and trading records were used to hide assets?

“An IRS criminal investigator working on the case has reviewed a set of e-mails between Cook and some unidentified cohorts in which they discussed trades, fund transfers, meetings and "falsification of financial records," Rice said. At least one of the e-mail accounts ends with the Internet domain name theoxfordpcg.com , she said -- an account associated with Beckman's firm.”

Article by: DAN BROWNING , Star Tribune, June 16, 2010
http://www.startribune.com/business/96398139.html?page=3&c=y

Though Beckman and his company were only recently added to the Receivership, we have been investigating his involvement with Cook and their joint activities from the beginning of the Receivership in November 2009. Thus, we have been aware that Cook and his cohorts used the domain theoxfordpcg.com to send emails relating to trades, fund transfers, meetings, and ‘falsification of financial records.’ We reviewed the numerous seized computers and boxes of paper records for leads and have given copies of all them to the various government agencies investigating Cook and his cohorts. The result of the FBI’s and IRS’s investigation into this and related issues is the criminal cases that were filed against Pettengill, Beckman, Kiley, and Durand.  

Question 95: What are the statute of limitations guidelines concerning FINRA claims that might be brought in our matter? According to a Texas attorney the limit in Texas is only 2 years for negligence claims and 3 years for fraud claims. Are the limits different in our venue and how might various statutes of limitations affect our matter? What is the discovery rule date (terminus ad quem) for our potential FINRA claims?

We cannot provide any legal advice regarding any potential claims that any investor may bring against any third party, whether through the court systems, FINRA or otherwise. We suggest that you contact a lawyer who can analyze your specific situation and advise you of the applicable statute of limitations and other issues.  

Question 96: I have heard that some investors have filed or settled their FINRA claims, but that such claims or settlements have been stayed or enjoined. Should I wait to bring my FINRA claim until sometime later?  

Again, we cannot provide legal advice regarding claims that any investor may have, whether through the court system, FINRA or otherwise, and suggest contacting a lawyer to analyze your specific situation. Please note that the Court’s Receivership and Asset Freeze Orders enjoin investors from commencing or continuing any lawsuit or proceeding (including FINRA arbitrations) if those lawsuits or proceedings may in any way affect a Receivership asset.

However, the Order Continuing Appointment of the Temporary Receiver in the CFTC’s case, 09-cv-3332, does state that “actions may be filed to toll any applicable statute of limitations.” (See Docket No. 96 at IV.A.) Accordingly, it is the Receiver’s position that an investor may file a FINRA claim (or any other type of lawsuit) so long as the filing is solely for the purposes of tolling any applicable statute of limitations. We suggest you discuss this matter with your attorney to determine if, how, and when you should proceed.  

Question 97: We were appreciative of your advocacy but justifiably disappointed in previous adverse rulings concerning attorney fees. In the case of H. N. Mahmoud, the grand jury indictment stated that the funds transfer to Mahmoud for $100K constituted wire fraud on the part of Mr. Kiley [grand jury indictment, p. 23]. Do you think in light of that you will be able to recover those funds in a cost effective manner? 

We have not yet decided whether to attempt to recover that money wired to Mr. Mahmoud. As with all such decisions, we will carefully balance the potential recovery against the amount it would take to recover the money and our belief on whether the Court would order the money returned under the specific circumstances of the transfer.  

Question 98: Exclusions from the upcoming interim disbursement included one or more FINRA claimants. Have any of the current FINRA claimants received settlements that have not been escrowed? What is the status of FINRA activity? 

On April 29, 2011, the Receiver filed a motion to enjoin the distribution of $3.4 million in settlement funds that were secured through a FINRA arbitration by Dale and Ann Woodbeck, David Dent, Justin Bussler, Laura Owen, Ronald Bisson, Sr., Anne E. Quiggle, Susan R. Gorman, Evangeline M. Olson, Charlotte Olson and the Charlotte J. Olson Family Trust, the Charlotte J. Olson Charitable Remainder Trust. The settlement money is being held in escrow pending Chief Judge Davis’s decision on the Receiver’s motion. The next hearing on that issue is scheduled to take place before the Court on September 16, 2011, at 8 a.m. We are not aware of any additional settlement payments to these individuals.  

Question 99: Are the owners and principals of Crown Forex SA such as Ibrahim Hasanian and Shadi Swais living in countries that have extradition agreements with the U.S.? 

We do not know the current whereabouts of Hasanian and Swais. 

Question 100: How many total claimants are there? What is the amount of claimed losses? How much is a particular distribution? How much more will be recovered? How much cash does the Receivership have on hand?  

We file status reports on the Receivership that address these and other issues of interest approximately every 60 days and direct all interested people to those reports, all of which are available on the Receivership’s website. In addition, the most recent claim and distribution information can be found on the filings section of the website.

There are a total of 725 recognized claimants with losses equaling $158,879,471.06. As of August 2, 2011, the Court has approved the distribution of, and the Receiver has distributed or caused to be distributed, $3,814,479.96 on a pro rata basis. This translates to approximately 2.5 cents for every dollar lost to the fraud.  

Question 101: Statements and statutes in the complaint indicate the Justice Department claims they intend to “seek forfeiture of any other property of said defendants up to the value of the above forfeitable property.” (U.S. v. Beckman et al). However, to this point, there has been little if any cooperation on their part with the civil recovery, an example being the Swiss magistrate who travelled to the U.S. to interview Cook unbeknownst to the Receiver until after his departure. The Justice Department has alluded to a practical wall of separation between the criminal prosecution and the civil recovery that seems at odds with this statement in the U.S. v. Beckman et al complaint. Could you please explain the practical legalities of this seeming incongruity? 

No. This question concerns various statements that the Justice Department has purportedly made and it should be addressed to the Justice Department. Please note, however, that the Justice Department has fully cooperated with, and is continuing to fully cooperate with, the Receiver to the extent allowed by law. This cooperation has been from the inception of the Receivership, and has provided substantial and invaluable assistance to the Receiver in fulfilling the Court’s mandate.  

 

October 12, 2011 FAQ
 

Question 102: I would expect no objection to Judge Davis' approving the motion to hire subcontractors on contingency; but would it help to have a group of investors present to show support for the Receiver's motion? We had a dozen or so for the last hearing date that was rescheduled.  

All are welcome to attend. The purpose of the hearing is to present the credentials of our chosen counsel. Please note that there will not be any discussions of any future plans, potential claims, third parties, or non-public information.
 

Question 103:  Will there be a detailed explanation of the Receiver's plans and does Judge Davis plan to entertain questions from the audience? I assume the 2004 CVRA applies to this hearing as well.  

There will be no explanation of the Receiver's plans. Also, we do not anticipate that Chief Judge Davis will entertain questions from those in attendance.  The CVRA (Crime Victims' Rights Act) only applies to criminal cases and does not apply to civil cases such as the receivership cases.
 

Question 104:  Will impending statute of limitation concerns be addressed?  

No. Given that the applicable statutes of limitations vary based on the types of claims that are being asserted, we recommend that investor victims consult with their own counsel on such matters.
 

Question 105:  How many firms will present plans at this hearing?  What third-party entities will be discussed?  

Two sets of attorneys will be presented; no third-party entities will be discussed.
 

Question 106:  Could you please forward the files from current cases being litigated by the contingency fee attorneys who the Receiver is proposing?  

We are not going to post or distribute files or materials relating to other cases not involving the Receivership. Information on other cases is available from public sources such as Pacer.
 

Question 107:  Why has the court system or you or whoever allowed the FINRA matter hearing to be continually postponed-now to a point past the statute of limitations to pursue the matter in federal court?  If this is not an important issue, shouldn't you or someone at least explain why it isn't?  I am not a FINRA attorney, but why postpone the hearing past this date?  

The District of Minnesota has one of the busiest dockets in the nation.  In this instance, Chief Judge Davis has had back to back, multi-week trials, including a terrorism trial, which necessitated rescheduling the Receiver's motions.  The Receiver does not believe that the new hearing date will negatively impact any Receivership claims that he will bring in the future.  If you have concerns about statute of limitation issues relating to your own claims, we urge you to consult a lawyer.  Please see our answer to FAQ 96 for additional information.

 

 

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