An involuntary bankruptcy was filed by two noteholders Deborah Kurtin and Suzanne Farley at the suggestion of Wild Bill McGrane. Turns out Barney by disclosing all of millions in commissions he due on the sale of REL property is not legally bankrupt.
His lawyer is seeking attorneys’ fees and costs against Kurtin and Farley.Declaration re attorneys fees They could use your support at the hearing set for 1pm tomorrow Tuesday June 5, 2012. 6-5-12@1 calendar
In order dis
Another outstanding former employee of Walter Ng is charged with 9 felony counts. (Walter taught them well)
Its all part of the LaMorinda Bermuda Investment Triangle.
http://genevafundcarlmiller.wordpress.com/
Today May 30, 2012 Carl Millers Preliminary hearing was continued to Wednesday July 18, 2012 in Department 1 Contra Costa Superior Court. Reason: Public Defender was not ready.
George Orwell’s book, “Animal Farm” may be analagous to 1,500 noteholders trying to sort through all the issues in the Plan. ”Are Some Animals More Equal Than Others?”
“At the Meetings Snowball often won over the majority by his brilliant speeches, but Napoleon was better at canvassing support for himself in between times. He was especially successful with the sheep.”
The Officail Committee of Noteholders is backing the Plan. They will be sending you their endorsement letter. However some people are raising a questions about “conflict of interest” in the Committee backing a plan that for all inent and purpose gives up essentially the right to go after $120,000,000.00 in “claw back” recovery, favor a very small minority of noteholders who got out while the getting was good. What is being discussed is contained in page 25 of the Plan. 4th Amended Plan Settlement Alternative Triggered By Acceptance of the Plan (3) (c)
In exchange for the foregoing agreements, the REL Class 8 Claims shall be deemed Allowed under the Plan as follows:(a) for Noteholders in the amount set forth in the Debtors’ amended Schedules of Assets and Liabilities for each Noteholder, minus 50% of the cash paid to that Holder after the Exchange Transaction, but in no event in an amount less than zero, in final settlement of any Cause of Action that may exist to recover payments made after the Exchange Agreement to any Noteholder and/or to seek disallowance of any REL Class 8 Claim based on the existence of payments that are recoverable or avoidable as set forth in Bankruptcy Code § 502(d);
To analyize whether is a good deal for you or good for the noteholders as a whole you need to examine Exhibit B contained is Docket 779 Exhibits to 2nd Amended Disclosure I tried to get a discussion of this point started on the Bar-K Bolg at: http://barkinvestors.wordpress.com/2012/03/20/whats-the-latest/comment-page-2/#comments but it got lost in hue and cry trying to get the 4th Estate to take notice.
The four young pigs who had protested when Napoleon abolished the Meetings raised their voices timidly, but they were promptly silenced by a tremendous growling from the dogs. Then, as usual, the sheep broke into “Four legs good, two legs bad!” Chapter VI Animal Farm
So I thought I would republish here together with a submission from Attorney Robert Brower. A quick look at Exhibits to the Disclosure Statement raise a few questions.
Does this mean if you are in the 17% you made out? And if you’re in the .7% your really made out? But if you didn’t get a post-exchange distribution you are in the 83% that gives the 17% a pass? That’s not how it Special Master Picard did it in the Madoff case. What Were The Trade Off’s For Giving Up “Claw Back” Rights? Are Some Animals More Equal Than Others?
Committee & REL negotiations over “Claw Back” Provision
After I posted the information and numbered questions above Robert Brower sent his own analysis of Exhibit B, Docket 779 If you want to download and print Brower’s comments click here or read below: _Blog_post_Exhibit_B
SHERRATT RIECHER
After first posting Mr. Brower’s comments below, I did some more research on the creditors committee and found that Sherratt Riecher didn’t just get the $295,500.00 distribution as reported in Exhibit 3 Hugh Ray two compainies he controls MCG Investments and Dynamic Development according to Pages from Exhibits to 2nd Amended Disclosure higlighted MCG got $1,659,937.37 and Dynamic Development got $1,406,984.27. In total Sherratt Riecher got $3,362,421.64 !
ROBERT BROWER’S GUEST COMMENTS
I have read the May 17, 2012, Equitatus post concerning Exhibit B, the list of investors whose “net cash out” exceeded $10,000 after November 1, 2007. Equitatus used the information in Exhibit B without questioning the validity of that data.I decided to run a test to determine if the information stated in Exhibit B was accurate and reliable.
I have read the May 17, 2012, Equitatus post concerning Exhibit B, the list of investors whose “net cash out” exceeded $10,000 after November 1, 2007. Equitatus used the information in Exhibit B without questioning the validity of that data. I decided to run a test to determine if the information stated in Exhibit B was accurate and reliable.
For the test, I used a chart prepared by DSI to demonstrate that 6 out of the 10 voting members of the Committee had net cash out exceeding $10,000 after November 1, 2007. This chart is found at document No. 825, Exhibit 3. [The chart is is No. 825-4, page 2.] Exhibit 3 Hugh Ray On the DSI chart, the total net cash out to Committee members is stated as $3,355,019.40.
I felt that if DSI, with its extensive staff and knowledgeable experts, did not correctly interpret the data in Exhibit B, then it would be unlikely for any ordinary investor to draw a valid conclusion from Exhibit B in order to help that investor cast a vote “for” or “against” the plan.
My conclusion is this: the information presented in Exhibit B is not accurate and it is not reliable. It is also misleading.
Here are a few examples.
First, Exhibit B and the DSI chart reflect that Dixon Collins received net cash out of $157,292.11 from account COL040. This is false. The true facts are that Dixon Collins transferred the entire account balance of COL040, his trust account, to another account, his pension account COL041. He received no cash out and he is not subject to claw back. This mistake indicates to me that whoever prepared Exhibit B had faulty underlying data.
Second, there is a significant omission error concerning Gene Rapp, a preferred investor. The DSI chart has two net cash out accounts for Gene Rapp, RAP020 for $100,000 and RAP015 for $100,000. There is however one withdrawal not mentioned in either Exhibit B or the DSI chart. On January 22, 2008, Gene Rapp withdrew $670,000 from another account he controls, North American Financial, RAP025. This withdrawal was transferred as a deposit to B-4 Partners account, 00-007, as part of a $2,000,000 secured loan to B-4. The failure to include this Gene Rapp withdrawal on Exhibit B represents to me that whoever prepared Exhibit B did not understand that Gene Rapp’s withdrawal, even if he lent the $670,000 to B-4 Partners, would still be a net cash out for him and subject to claw back.
Third, there is a significant omission traceable to the Fong family of investments. Exhibit B and the DSI chart report $1,908,532.00 net cash out from Steve Fong’s account FON030. Exhibit B also reports Steve Fong’s brother, Tim Fong, has net cash out of $1,883,096. To validate those numbers, I had to confirm the net cash out for account FON016, Gifford and Vivian Fong. Exhibit B has the net cash out for that account as $881,818. That number is $1,000,000 short. The Fongs withdrew the additional $1,000,000 from FON016 on August 6, 2008. They immediately deposited it in Mortgage Fund ’08, account 08FON00, and withdrew $1,000,000 from MF ‘08 the same day.
I had heard about this scheme or trick before. If an R.E. Loans preferred investor wanted a certain amount money out of an R.E. Loans account, Walter Ng would recommend that he or she transfer that amount to MF ’08 and then immediately withdraw that amount from MF ’08. This skirted the Wells Fargo line of credit and the preferred “old” investor was paid with “new” investment money in MF ’08. The MF ’08 investor(s) never knew. Regardless, the failure to include this $1,000,000 withdrawal on Exhibit B represents to me that whoever prepared Exhibit B did not understand that a withdrawal, even if it was deposited into MF ’08 for payment from MF ‘08, would still be a net cash out and subject to claw back.
Fourth, Exhibit B and the DSI chart reflect that Edwin Blue received net cash out of $450,000 from account BLU015. The account record, however, shows 11 withdrawals of $50,000 totaling $550,000. $100,000 may not mean much in the greater scheme of things but the error reflects on the failure of Exhibit B to accurately depict the correct amounts of the net cash out.
Fifth, Exhibit B and the DSI chart reflect that Sherratt Reicher received net cash out of $295,500 from account HUD010. Apparently DSI did not know that Sherratt Reicher is also the investor for account MCG030, MCG Investments and Holdings. For that account, Sherratt Reicher received $1,659,937.37 net cash out. This discovery proves that the information in Exhibit B is too simplified, making it difficult to see related entities and interconnected transactions.
My test revealed that Exhibit B has significant errors, especially errors of omission. In addition, the information provided in Exhibit B lacks enough detail to be meaningful. Collectively, Exhibit B is not accurate, not reliable and misleading.
Finally, the DSI estimate of the Committee’s financial interest in the claw back issue ($3,355,000) is too low. The correct value is closer to $10,000,000.
REL, Macinack & the Official Noteholders Committee Want Your Vote!
If REL and the Committee made such an error as to just the Committee Members how can you trust the rest of Exhibit B? Lets go back into the records we have and show how the 00.7% Ran Away With Your Money.
If you are following the discussion on the Bar-K blog you would have see Attorney Robert Brower’s postings one of which is set forth below:
“I am an attorney licensed to practice law in California. I represent several R.E. Loans and Mortgage Fund ’08 investors. I am familiar with the operation of R.E. Loans and Mortgage Fund ’08. I have reconstructed the Ponzi-like transactions between the two funds. I have read the proposed plan of reorganization and the accompanying documents. I have tested Exhibit B, the net cash out transfers after the Exchange Agreement, and determined that, in my opinion, it is not accurate, not reliable and misleading. In my judgment, based upon all of the above, the proposed plan of reorganization does not provide investors in the two funds treatment consistent with their legal entitlement.
I further believe that rejection of the proposed plan would most likely lead to a result more favorable to the investors as a whole. I am therefore urging all of my clients to reject the proposed plan.”
This is not a solicitation to vote one way or the other for or against the Plan. This is First Amendment Fair Comment & Personal Opinion
Alice Through the Looking Glass Even though the Plan and Disclosure Statement totals thousands words it really doesn’t say in plain English what you are buying. It’s like buying that proverbial pig in a bag that once opened turns out to be something completely different. Shame on the Ng’s and Wiseborn for taking you poor people down this wicked rabbit hole! Is the Plan really what appears to be? It a little reminiscent of Alice in Wonderland?
While the Duchess sang the second verse of the song, she kept tossing the baby violently up and down, and the poor little thing howled so, that Alice could hardly hear the words.
Here! you may nurse it a bit, if you like!’ the Duchess said to Alice, flinging the baby at her as she spoke. ‘I must go and get ready to play croquet with the Queen,’ …
Alice caught the baby with some difficulty, as it was a queer- shaped little creature, and held out its arms and legs in all directions, ‘just like a star-fish,’ thought Alice. The poor little thing was snorting like a steam-engine when she caught it…
If I don’t take this child away with me,’ thought Alice, ‘they’re sure to kill it in a day or two: wouldn’t it be murder to leave it behind?’ She said the last words out loud, and the little thing grunted in reply . ‘Don’t grunt,’ said Alice; ‘that’s not at all a proper way of expressing yourself.’
The baby grunted again, and Alice looked very anxiously into its face to see what was the matter with it. There could be no doubt that it had a very turn-up nose, much more like a snout than a real nose; also its eyes were getting extremely small for a baby: altogether Alice did not like the look of the thing at all. ‘
‘If you’re going to turn into a pig, my dear,’ said Alice, seriously, ‘I’ll have nothing more to do with you. Mind now!’
Alice was just beginning to think to herself, ‘Now, what am I to do with this creature when I get it home?’ when it grunted again, so violently, that she looked down into its face in some alarm. This time there could be no mistake about it: it was neither more nor less than a pig, and she felt that it would be quite absurd for her to carry it further.
So she set the little creature down, and felt quite relieved to see it trot away quietly into the wood. ‘If it had grown up,’ she said to herself, ‘it would have made a dreadfully ugly child: but it makes rather a handsome pig, I think.’
It is more what the Plan doesn’t say than what it does that may be important. As with life there are often times more questions than answers.
One thing I discovered about the plan is that it is like the game they show on Diamond Vision at the A’s game, hiding the baseball under the ball cap while the caps move about.
Disclaimer: The following are not all of the documents relating to the development of the Plan over the last three months.
The Plan has been revised at least 4 times since when it was first filed in February 2, 2012. Plan 1
Each iteration of the Plan was accompanied by a Disclosure Statement with Exhibits. Disclosure Statement 1
With some of the Disclosure Statements Exhibits were filed with the court. Exhibits to Disclosure Statement One of the more interesting Exhibits were the ones supporting the Second Amended Disclosure Statement the contained the list of who got $$$ money from the date of the Exchange to the last payment made to a noteholder. Exhibits to 2ndAmended Disclosure compare this with the list of who is on the Official Committee of Noteholders Amended Creditor Committee
The Second Amended Plan attempted to trade your rights against Wells Fargo for $3,000,000. 2nd Amended Plan
Fast forward to the Third Amended Plan 3rd Amended Plan and Disclosure Statement Red line of 3rd Amended Disclosure Statement
Many of the Disclosure Statements were “rednlined” so you could track the changes. I am not going to post these here. Exhibits to the 3rd Amended Plan Ex to 3rd amended plan.
The 4th Amended Plan is the one the court is having mailed to you. 4th Amended Plan
I am posting the red line of the 4th Disclosure Statement. 4th Amended Disclosure Redline
Here are a few of the questions the Plan raises. Again, there may be no clear answers:
Why is the Cat grinning? Maybe he’s part 38 people who in the top 00.7%
Wells Fargo Capital Finance a defendant in the Oakland Class action case is represented John Garda from the law firm of K&L Gates with offices in 23 US cities and 17 foreign countries. http://www.klgates.com/
Wells co-defendant Greenberg Traurig is represented by Jay Pomerantz of Fenwick & West of San Francisco, Mountain View and Seattle. http://www.fenwick.com
K&L Gates is at the center of another corporate fraud case with similar accusations being made against Greenberg Traurig.
A Pennsylvania appeals court on Monday revived the Le-Nature’s Inc. liquidating trustee’s $500 million malpractice suit against law firm K&L Gates LLP for failing to uncover during its internal investigation the massive fraud that brought the company down and landed its CEO in prison.
The appeals court held that the trial court was wrong when it said there had been no attorney-client relationship between Le-Nature’s, K&L Gates and accounting firm Pascarella & Wiker LLP, also a defendant in the case. The trial court also erred in finding the defendants could not have harmed the company because it was already insolvent, the appeals court said. Read the decision KL Decision (3)
“The fact of Le-Nature’s insolvency does not negate the harm allegedly resulting from K&L Gates’s professional negligence,” the appeals court said.
The trustee did not target K&L Gates for deepening Le-Nature’s insolvency, the appeals court said, but sought traditional tort damages for Le-Nature’s increased liabilities, decreased asset values and losses caused by the firm’s professional negligence.
K&L Gates and Pascarella & Wiker are on the hook for giving Le-Nature’s a clean bill of health despite numerous red flags in a 2003 investigation called for by a special committee of independent directors appointed after a number of senior financial managers resigned over their suspicions of fraud. (Sound like Greenberg Traurig?) The firms allegedly ignored critical clues, including the warnings of the former financial managers who raised concerns about CEO Gregory Podlucky’s dubious bookkeeping and rampant misrepresentations, according to the lawsuit.( Sound like Walter Ng and Armanio Mckenna?)
The appeals court said that K&L Gates’s negligence proximately caused injury to Le-Nature’s since it had been retained to investigate exactly the type of fraud it overlooked and affirmatively represented that no fraud existed, causing the company, already suspicious of fraud, to relax its vigilance.
The trial court had held that there was no attorney-client relationship between K&L Gates and the company because the firm’s contract was with the special committee, not with Le-Nature’s, and K&L Gates was retained solely to protect the interests of investors.
The appeals court disagreed, saying that Le-Nature’s clearly considered K&L Gates to be working in the interests of the entire company. According to the appeals court, the law firm showed through its actions that its duty extended beyond the special committee, as when it shared the results of its report first with the board and with CEO and fraudster Podlucky, who was not part of the special committee.
Marc S. Kirschner, the trustee charged with liquidating Le-Nature’s, said the decision was a major victory for the Le-Nature’s liquidating trust.
“The court made clear that when a law firm holds itself out as an expert in corporate fraud investigations, it owes a fiduciary duty as well as contractual duties to the full board for the benefit of the corporation as a whole. And the court made the important, appropriate determination that firms like K&L Gates cannot escape liability for tort damages it causes simply because those very damages drove the company into bankruptcy,” Kirschner said.
Hector Torres of Kasowitz Benson Torres & Friedman LLP, lead counsel representing the trustee, said the decision would allow them to seek recovery for the benefit of the liquidating trust.
“Reinstatement of the suit, including each of the claims we asserted, permits us now to bring the defendants to trial, at which we expect to hold the defendants fully accountable for their role in causing more than half a billion dollars in damages suffered by Le-Nature’s,” he said.
Le-Nature’s imploded in 2006 and was forced into bankruptcy after the alleged accounting fraud surfaced.
Four former executives — including Podlucky — and a company outsider were indicted in September 2009 in connection with the scheme. ( OK so it took 3 years from the bankruptcy to indict them. The clock is ticking Walter)
Podlucky was handed a 20-year prison sentence in October on charges of fraud, tax evasion and money laundering.
( Ng’s Are you paying attention? better go to CostCo and buy a couple of dozen toothbrushes)
Robert Brower filed a motion in the Texas Bankruptcy Court seeking relief from the automatic stay. Relief From Stay
