Securities and Exchange Commission v. Nadel et al

Filing 1181

STATUS report The Receiver's Eighteenth Interim Report (11/1/14 - 4/30/15) by Burton W. Wiand. (Attachments: # 1 Exhibit A - Standardized Fund Accounting Report, # 2 Exhibit B - Receivership Assets Sold or Otherwise Disposed, # 3 Exhibit C - Chris Moody's Assets, # 4 Exhibit D - Neil Moody's Assets)(Morello, Gianluca)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.

Case No. 8:09-cv-0087-T-26TBM

ARTHUR NADEL;
SCOOP CAPITAL, LLC;
SCOOP MANAGEMENT, INC.
Defendants,
SCOOP REAL ESTATE, L.P.;
VALHALLA INVESTMENT PARTNERS, L.P.;
VALHALLA MANAGEMENT, INC.;
VICTORY IRA FUND, LTD.;
VICTORY FUND, LTD.;
VIKING IRA FUND, LLC;
VIKING FUND, LLC; AND
VIKING MANAGEMENT, LLC,
Relief Defendants.
____________________________________/
THE RECEIVER’S EIGHTEENTH INTERIM REPORT
Receivership Information and Activity from November 1, 2014 through April 30, 2015.
Gianluca Morello, FBN 034997
Michael S. Lamont, FBN 0527122
Maya M. Lockwood, FBN 0175481
WIAND GUERRA KING P.A.
5505 West Gray Street
Tampa, FL 33609
T: [phone]
F: [phone]
Attorneys for Receiver, Burton W. Wiand

TABLE OF CONTENTS

INTRODUCTION ...........................................................................................................................1 
BACKGROUND .............................................................................................................................3 
I. 

Procedure and Chronology. .................................................................................................3 

II. 

Overview of Findings. .........................................................................................................5 

ACTIONS TAKEN BY THE RECEIVER ......................................................................................6 
III. 

Securing the Receivership Estate. ........................................................................................6 
A. 

Securing and Recovering Receivership Funds. .......................................................6 
1. 

B. 
IV. 

Recovery of Tax Refunds. .......................................................................... 7

Receivership Accounting Report. ............................................................................7 

Asset Analysis and Recovery...............................................................................................8 
A. 

Expansion of Receivership to Include Additional Entities. .....................................8 
1. 
2. 
3. 
4. 
5. 

B. 

Recovery of Real Property. ....................................................................................14 
1. 
2. 
3. 

C. 

Laurel Mountain Preserve, LLC; Laurel Preserve, LLC; and Laurel
Mountain Preserve Homeowners Association, Inc. .................................... 9 
Guy-Nadel Foundation, Inc. ..................................................................... 10 
Viking Oil & Gas, LLC. ........................................................................... 11 
Summer Place Development Corporation. ............................................... 11 
Quest Energy Management Group, Inc. ................................................... 12

Fairview, North Carolina. ......................................................................... 15 
Sarasota, Florida (La Bellasara). ............................................................... 16 
Marshfield, Vermont. ................................................................................ 17

Recovery of Other Items. .......................................................................................17 
1. 
2. 

Deficiency Judgment and Promissory Note. ............................................. 18 
Miscellaneous Items.................................................................................. 18

D. 

Recovery of Assets from the Moodys. ...................................................................18 

E. 

Litigation. ...............................................................................................................20 
1. 

Recovery of “Investment” – Related Transfers from Investors. ............... 20

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TABLE OF CONTENTS

a.
2. 
3. 
4. 

Cases Referred to Arbitration……………………………………25

Litigation Against Anne Nadel. ................................................................ 28 
Receiver’s Litigation Against Wells Fargo............................................... 29 
Receiver’s Litigation Against Rowe ......................................................... 30

V. 

Claims Process. ..................................................................................................................32 

VI. 

Overview of Remaining Assets. ........................................................................................35 
A. 
B. 

Remaining Clawback Litigation. ...........................................................................37 

C. 

Settlements and Outstanding Judgments. ..............................................................38 

D. 
VII. 

Remaining Properties and Other Assets. ...............................................................36 

Litigation involving Wells Fargo. ..........................................................................39 

The Next Ninety Days. ......................................................................................................39 

CONCLUSION………………………………………………….…………………….……........40

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INTRODUCTION
Burton W. Wiand, the Court-appointed Receiver for the Receivership Entities as
defined herein, hereby files this Eighteenth Interim Report (the “Report”) to inform the
Court, the investors, and others interested in this Receivership, of activities from November
1, 2014 through April 30, 2015 as well as the proposed course of action.1 As of the date of
filing this Report, the Court has appointed Burton W. Wiand as Receiver over the following
entities and trust:
a)

Defendants Scoop Capital, LLC (“Scoop Capital”) and Scoop Management,
Inc. (“Scoop Management”) (which, along with Arthur Nadel, are
collectively referred to as “Defendants”);

b)

Relief Defendants Scoop Real Estate, L.P. (“Scoop Real Estate”); Valhalla
Investment Partners, L.P. (“Valhalla Investment Partners”); Victory IRA
Fund, Ltd. (“Victory IRA Fund”); Victory Fund, Ltd. (“Victory Fund”);
Viking IRA Fund, LLC (“Viking IRA Fund”); and Viking Fund LLC
(“Viking Fund”) (collectively referred to as the “Hedge Funds”);

c)

Relief Defendants Valhalla Management, Inc. (“Valhalla Management”),
and Viking Management, LLC (“Viking Management”) (which, along with
Scoop Capital and Scoop Management, are collectively referred to as the
“Investment Managers”); and

d)

Venice Jet Center, LLC; Tradewind, LLC; Laurel Mountain Preserve, LLC;
Laurel Preserve, LLC; Laurel Mountain Preserve Homeowners Association,
Inc.; Marguerite J. Nadel Revocable Trust UAD 8/2/07; Guy-Nadel
Foundation, Inc.; Lime Avenue Enterprises, LLC; A Victorian Garden Florist,
LLC; Viking Oil & Gas, LLC; Home Front Homes, LLC; Traders Investment
Club; Summer Place Development Corporation; Respiro, Inc.; and Quest
Energy Management Group, Inc.

The foregoing entities and trust are collectively referred to as the “Receivership Entities.”

1

Although this Interim Report covers the period from November 1, 2014 through April
30, 2015, where practicable, the Receiver has included information in his possession through
the date of the filing of this Report.

1

The Receiver was appointed on January 21, 2009. By January 26, 2009, the Receiver
established an informational website, www.nadelreceivership.com.

The Receiver has

updated this website periodically and continues to update it with the Receiver’s most
significant actions to date; important court filings in this proceeding; and other items that
might be of interest to the public. This Report, as well as all previous and subsequent
reports, will be posted on the Receiver’s website.
Overview of Significant Activities During this Reporting Period
During the time covered by this Interim Report, the Receiver and his Professionals
engaged in the following significant activities:


Continued to pursue litigation for the recovery of false profits (and in some cases,
all transfers) from investors (i.e., from “Profiteers”) and engaged in efforts to
collect on judgments obtained in connection with litigation; 



As of May 28, 2015, the Receiver has reached 159 agreements to settle with
Profiteers and non-profit organizations in the amount of $25,674,831.09 and
obtained 18 judgments against Profiteers in the amount of $6,364,671.90, for a
total combined amount of $32,039,502.99 (plus additional non-cash assets);2



Engaged in activities to collect on the Rowe Judgment in the amount of
$4,028,385.00, which has resulted in the recovery of $2,695,790.30 on this
judgment as of May 28, 2015;



Prevailed on the Receiver’s opposition to Branch Banking and Trust Company’s
(“BB&T”) motion for turnover of net sale proceeds of $267,720.59 from the sale
of a residential property located in Fairview, North Carolina. BB&T filed a notice
of appeal of this decision;



Reached an agreement and obtained Court approval to sell a residential property
located in Sarasota, Florida for $2,300,000.00 which resulted in net proceeds of

2

This amount does not include a judgment in the amount of $4,028,385.00 the
Receiver obtained against Don and Joyce Rowe and certain of their affiliated entities (the
“Rowe Judgment”).

2

approximately $2,147,993.69 after payment of commissions and other costs
associated with the sale. These proceeds presently are being held in a separate
account;


Pursued litigation against Wells Fargo to recover damages and fraudulent
transfers relating to the bank’s activities in connection with the Ponzi scheme
underlying this case and have appealed the court’s adverse summary judgment
ruling;



Maintained Receivership funds in appropriate accounts. As of May 28, 2015, the
total funds in all Receivership accounts are approximately $10,721,650.62, which
includes $2,803,646.58 being held in reserves for objections in the claims process
and $2,229,463.15 being held in escrow until a claim to these funds is resolved,
but does not include the combined amount of $2,415.714.28 in proceeds from the
sale of two properties which presently are being held in separate accounts;



Continued to operate ongoing businesses, and where possible, enhance the value
of those businesses resulting in the generation of $400,249.96 in gross business
income; and



Generated $27,874.98 in interest/dividend income; $131,456.50 in third-party
litigation income; and $40,020.00 in other income.

The above activities are discussed in more detail in the pertinent sections of this
Interim Report.
BACKGROUND
I.

Procedure and Chronology.
Defendant Arthur Nadel (“Nadel”) was the Hedge Funds’ principal investment

advisor and an officer and director of Scoop Management and sole managing member of
Scoop Capital. On January 21, 2009, the Commission filed a complaint in this Court
charging the Defendants with violations of federal securities laws. In this proceeding, the
Commission alleged that Nadel used the Investment Managers to defraud investors in the
Hedge Funds from at least January 2008 forward by “massively” overstating investment
returns and the value of fund assets to investors in these funds and issuing false account

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statements to investors. The Commission also asserted that Nadel misappropriated investor
funds by transferring $1.25 million from Viking IRA Fund and Valhalla Investment Partners
to secret bank accounts. The Court found the Commission demonstrated a prima facie case
that the Defendants committed multiple violations of federal securities laws. On August 18,
2010, the Court entered a consent Judgment of Permanent Injunction and Other Relief
against Nadel which permanently enjoined Nadel from further violations of the antifraud
provisions of the federal securities laws and ordered Nadel to disgorge ill-gotten gains and
pay prejudgment interest (Doc. 460).
On January 21, 2009, the same day the Commission filed its complaint, the Court
entered an order appointing Burton W. Wiand as Receiver for the Investment Managers and
Hedge Funds (the “Order Appointing Receiver”).

(See generally Order Appointing

Receiver (Doc. 8).) Between January 27, 2009, and May 24, 2013, the Receiver sought and
successfully obtained the expansion of the Receivership to include: Venice Jet Center, LLC;
Tradewind, LLC; Laurel Mountain Preserve, LLC; Laurel Preserve, LLC; Laurel Mountain
Preserve Homeowners Association, Inc.; the Marguerite J. Nadel Revocable Trust UAD
8/2/07; the Guy-Nadel Foundation, Inc.; Lime Avenue Enterprises, LLC; A Victorian Garden
Florist, LLC; Viking Oil & Gas, LLC; Home Front Homes, LLC; Summer Place
Development Corporation; Traders Investment Club; Respiro, Inc.; and Quest Energy
Management Group, Inc. These entities will hereinafter be referred to collectively as the
“Additional Entities.” (Docs. 17, 44, 68, 81, 153, 172, 454, 911, 916, and 1024.)
On April 28, 2009, Nadel was indicted on six counts of securities fraud, one count of
mail fraud, and eight counts of wire fraud. On February 24, 2010, Nadel pled guilty to all

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counts in the indictment. On October 21, 2010, Nadel was sentenced to 14 years in prison.
Nadel died in prison on April 16, 2012.
II.

Overview of Findings.
The Receiver discovered that from 1999 through 2008, approximately $330 million

was raised in connection with over 700 investor accounts on behalf of one or more of the
Hedge Funds by Nadel and his entities, Scoop Management and Scoop Capital; by the rest of
the Fund Managers; and by Neil and Christopher Moody (the “Moodys”) through the offer
and sale of securities in the form of interests in Hedge Funds as part of a single, continuous
Ponzi scheme. As discussed in prior Interim Reports, Nadel grossly overstated the trading
results of the Hedge Funds. Despite significantly lower, and typically negative yields (i.e.,
trading losses), Nadel, the Moodys, and the Fund Managers falsely communicated to
investors and potential investors, through monthly “statements,” Hedge Funds’ “Executive
Summaries,” and other methods, that investments were generating positive returns and
yielding between 10.97% and 55.12% per year. For most years, they falsely represented the
investments were generating returns between 20% and 30%.
To perpetrate and perpetuate this scheme, Nadel caused the Hedge Funds to pay
investors “trading gains” as reflected on their false monthly statements. The funds used to
pay these trading gains were not generated from trading activities; rather they came from new
or existing investors. Nadel further caused the Hedge Funds to pay tens of millions of dollars
in fees. Those fees were based on grossly inflated returns, and thus, were improperly and
wrongfully paid. The negative cash flow of the Hedge Funds made the eventual collapse of
Nadel’s scheme inevitable.

5

As mentioned above, on February 24, 2010, Nadel pled guilty to all counts in the
indictment relating to this scheme and on October 21, 2010, was sentenced to 14 years in
prison. For a more detailed overview of the Receiver’s findings, please refer to the Ninth
Interim Report.
ACTIONS TAKEN BY THE RECEIVER
Since his appointment on January 21, 2009, the Receiver has taken a number of steps
to fulfill his mandates under the Order Appointing Receiver. For additional efforts of the
Receiver, please refer to prior Interim Reports.
III.

Securing the Receivership Estate.
A.

Securing and Recovering Receivership Funds.

During the time covered by this Interim Report, Receivership funds were held at Bay
Cities Bank in a non-interest bearing operating account and two variable interest rate money
market accounts. As of May 28, 2015, the total funds in all Receivership accounts are
approximately $10,721,650.62, which includes $2,803,646.58 being held in reserves for
objections in the claims process and $2,229,463.15 being held in escrow until a claim to
these funds is resolved, but does not include the combined amount of $2,415.714.28 in
proceeds from the sale of two properties which presently are being held in separate accounts.
The Receiver continues to review the appropriate action to take with respect to Receivership
funds in light of the current state of the economy. If appropriate and in the best interests of
the Receivership, he will move the funds into other interest-bearing accounts and/or revenuegenerating investments.

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1.

Recovery of Tax Refunds.

The Receiver has sought to obtain tax refunds owed to certain insiders based upon
taxes paid in prior years on nonexistent trading profits, periodic taxes paid on anticipated
income that was never earned, and/or overpayment of taxes as a result of loss of investment.
As a result of these efforts, the Receiver has recovered a total sum of $3,777,343.60 in tax
refunds from Form 1045 Applications for Tentative Refund (“Form 1045”) for carryback
losses on behalf Marguerite Nadel, Chris Moody, Neil Moody, and Sharon Moody. The
Receiver also submitted a tax return for Arthur Nadel seeking the return of approximately
$2,393,250.00. The Receiver sought and received authorization from the Court to execute
and submit this return and receive any tax refund payable to Nadel (Docs. 1097, 1100 and
1105). This tax return was selected for an exam some time ago, but the exam has not
occurred yet. The Receiver’s representative has been in repeated contact with the Internal
Revenue Service in an effort to expedite the process as much as possible.
The Receiver also recovered two tax refund checks totaling $1,261,359.33 from Mrs.
Nadel as a result of improperly filed documents with the IRS on behalf of a Receivership
Entity. Including these two refund checks, the total amount the Receiver has recovered from
federal tax refunds to insiders is $5,038,702.93. For more detailed information regarding the
Receiver’s efforts to recover tax refunds, please refer to the Ninth Interim Report.
B.

Receivership Accounting Report.

Attached as Exhibit A to this Interim Report is a cash accounting report showing the
amount of money on hand as of November 1, 2014 less operating expenses plus revenue
through April 30, 2015. This cash accounting report does not reflect non-cash or cash-

7

equivalent assets. Thus, the value of all property discussed in Section IV below is not
included in the accounting reports. From November 1, 2014 through April 30, 2015, the
Receiver received $400,249.96 in business income from ongoing operations of some
Receivership Entities;3 $27,874.98 in interest/dividend income; $131,456.50 in third-party
litigation income; and $40,020.00 in other income.4 (Ex. A.)
Since the inception of the Receivership through April 30, 2015, the Receiver received
$7,125,576.98 in business income from ongoing operations of some Receivership Entities;
$2,066,501.32 in cash and securities; $1,006,356.25 in interest/dividend income;
$7,146,143.58 in business asset liquidation; $120,000.00 in personal asset liquidation;
$67,873,733.01 in third-party litigation income; and $7,192,956.79 in other income.
IV.

Asset Analysis and Recovery.
A.

Expansion of Receivership to Include Additional Entities.

As noted above, the Receiver sought and successfully obtained the expansion of the
Receivership to include the Additional Entities. The Receiver’s investigation revealed that
the Additional Entities were purchased and/or funded with money derived from Nadel’s
fraudulent investment scheme. The following discussion of the Additional Entities includes
a description of assets the Receiver has acquired as a result of the businesses’ inclusion in the
Receivership. Assets, including Additional Entities, which have been sold or otherwise
3

The income numbers provided in this and the following paragraph are gross figures
and do not include any offset for business operations costs or any other expenses.
4

The “other income” includes: a $20.00 witness fee for a subpoena; and $40,000
withdrawn from the Jackson National Life annuity which was obtained in connection with
the Rowe Judgment.

8

disposed of are identified on the attached Exhibit B. Exhibit B includes a description of the
asset, any known encumbrances related to the asset, the disposition of the asset, and the
amount received from the sale of the asset, and/or the amount of debt waived in connection
with the disposition of the asset. For more information regarding assets identified on Exhibit
B, please refer to prior Interim Reports. Assets which have not been sold or otherwise
disposed of are discussed below.
1.

Laurel Mountain Preserve, LLC; Laurel Preserve, LLC; and
Laurel Mountain Preserve Homeowners Association, Inc.

Laurel Preserve, LLC (“Laurel Preserve”), holds title to approximately 420 acres
near Asheville, North Carolina intended for the development of home-sites (the “Laurel
Mountain Property”). On February 11, 2009, the Court expanded the Receivership to
include Laurel Mountain Preserve, LLC, Laurel Preserve, and the Laurel Mountain Preserve
Homeowners Association, Inc.

Since the Receiver’s appointment as Receiver of these

entities, he has taken control of them and is working on marketing for sale the Laurel
Mountain Property. This property currently does not generate any income. The Laurel
Mountain Property encompasses 29 lots, including 23 estate-sized and 6 cottage-sized lots.
There is also a cabin home on this property that, according to the Buncombe County Property
Appraiser, is valued at $294,000 (as of August 22, 2014). The Laurel Mountain Property’s
infrastructure is fully developed: infrastructure and utilities are in place and are fully
functional. The Laurel Mountain Property has two known encumbrances.
encumbrance is a $360,157.37 loan from BB&T Bank.
$1,900,000 interest only loan from Wells Fargo.

9

The first

The second encumbrance is a

For more information regarding the Laurel Mountain Property, please visit
http://www.laurelmountainpreserve.com. Parties interested in purchasing this property should
contact:
Greg Palombi
Asheville Real Estate Network
15 Larchmont Road
Asheville, North Carolina 28804
Phone: [phone]
Email: [e-mail]
2.

Guy-Nadel Foundation, Inc.

The Guy-Nadel Foundation, Inc. (the “Foundation”), is a Florida non-profit
corporation Nadel formed in December 2003 for “charitable, educational and scientific
purposes.” The Foundation was funded with proceeds of Nadel’s scheme. On March 9,
2009, the Court expanded the Receivership to include the Foundation. Since the Receiver’s
appointment as Receiver of the Foundation, he has taken control of it and has been marketing
the real property owned by the Foundation.
North Carolina Parcels
The Receiver has possession and control of approximately eight lots that are
essentially adjacent to each other and to the Laurel Mountain Property. The Receiver is
currently marketing this property with the Laurel Mountain Property. Parties interested in
purchasing this property should contact the Receiver directly.
Thomasville, Georgia Parcels
Additionally, the Receiver has possession and control of two small undeveloped lots
in Thomasville, Georgia (collectively referred to as the “Lots”). The first lot is a .12 acre
parcel located at 211 Church Street (the “Church Street Lot”) that was purchased by the

10

Foundation in December 2006 for $4,000. In 2014, the Thomas County Board of Tax
Assessors assigned the Church Street Lot a taxing value of $2,224. The second lot is a 1.17
acre parcel located on North Stevens Street (the “North Stevens Street Lot”) that was
purchased by the Foundation in January 2008 for $24,000. In 2014, the Thomas County
Board of Tax Assessors assigned the North Stevens Street Lot a taxing value of $10,342.
Parties interested in purchasing the Lots should contact the Receiver directly.
3.

Viking Oil & Gas, LLC.

Viking Oil & Gas, LLC (“Viking Oil”) is a Florida limited liability company formed
in January 2006 by the Moodys to make personal investments in an oil and gas venture.
Viking Oil was funded with proceeds from Nadel’s scheme. On July 15, 2009, the Court
expanded the Receivership to include Viking Oil. (Order, Doc. 153.) The funds invested in
Viking Oil were used to purchase an investment interest in Quest. Between February 2006
and April 2007, through Viking Oil, the Moodys invested $4 million to fund a working
interest in Quest. As discussed in Section IV.A.5, below, the Receiver has expanded the
Receivership to include Quest.
4.

Summer Place Development Corporation.

Summer Place is a Florida company that was purchased by Clyde Connell in
December 2005 and from whom Nadel, through Scoop Capital, purchased a fifty-percent
ownership stake with total payments of $63,204.99 to Mr. Connell. In April 2009, the
Receiver replaced Nadel as Director, Secretary, and Treasurer of Summer Place and Scoop
Capital’s shares in Summer Place were transferred to the Receiver. The Receiver attempted
to sell his fifty-percent ownership with no success. In April 2012, Mr. Connell and Juanita

11

Connell, the only other Summer Place shareholders, relinquished their interest in Summer
Place and transferred their membership units to the Receiver in exchange for the Receiver’s
agreement to pay them one-half of the net proceeds from the sale of assets owned by Summer
Place.
Summer Place owns a six-acre parcel in Bradenton, Florida, which has no known
liens or encumbrances. Summer Place was originally created to build thirty affordable home
sites on this property. However, due to the decline in the market for affordable housing, no
development ever occurred. Summer Place has had no operations for several years and
currently generates no income. Taxes on the property are approximately $3,000 a year. On
September 11, 2012, the Receiver filed a motion asking the Court to expand the Receivership
to include Summer Place (Doc. 909). The Court granted this motion on September 12, 2012
(Doc. 911). The Receiver sought the expansion of the Receivership to include Summer Place
so that he could market and sell the six-acre parcel of land. Parties interested in purchasing
this property should contact:
Ben Bakker
Michael Saunders & Company
100 South Washington Blvd.
Sarasota, Florida 34236
Phone: [phone]
5.

Quest Energy Management Group, Inc.

Quest is an oil and gas exploration and production company based in Texas. Paul
Downey was its Chief Executive Office, and his son Jeff Downey was its Chief Operating
Officer (collectively the “Downeys”).

The Moodys, through Viking Oil, used scheme

proceeds of $4 million to fund Quest. Through Valhalla Investment Partners, L.P., the

12

Moodys funneled an additional $1.1 million to Quest in exchange for a promissory note from
Quest and the Downeys to Valhalla Investment Partners. To try to preserve Quest’s value for
the benefit of the Receivership estate and, ultimately, for defrauded investors in Nadel’s
scheme, on March 21, 2013, the Receiver moved to expand the Receivership to include
Quest (Doc. 993). The Court granted this motion on May 24, 2013 (Doc. 1024). The
Receiver has filed three Interim Reports on Quest (Docs. 1054, 1117, and 1145) (all three
Interim Reports are collectively referred to as the “Quest Reports”).
On November 20, 2014, the SEC filed an enforcement action in the U.S. District
Court for the Northern District of Texas against the Downeys and John M. Leonard, and
individual who helped the Downeys raise money. See S.E.C. v. P. Downey et al., Case No.
1:14-cv-185 (N.D. Tex.). The SEC asserted claims against the Downeys for their violations
of the anti-fraud provisions of the federal securities laws in connection with their activities on
behalf of Quest.
On November 12, 2014, the Court granted the Receiver’s motion for leave to retain
WhiteHorse Partners, LLC (“WhiteHorse”), a boutique advisory firm based in Nashville,
Tennessee, to market and assist the Receiver with the sale of Quest. WhiteHorse is familiar
with the oil and gas industry and has marketed and sold companies (or is currently marketing
and in the process of selling) similar to Quest. For more information regarding WhiteHorse,
please refer to the Receiver’s Third Interim Report on Quest. WhiteHorse has been marketing
Quest for sale and has not yet received any viable offers which reflect the reasonable market
value of Quest.

13

Since the expansion of the Receivership to include Quest, the Receiver has and will
continue to maintain a separate accounting of revenues and expenses for Quest. The
Receiver has been able to grow Quest’s revenues since that time and therefore, he believes
Quest will likely generate sufficient revenues to cover its expenses. The Receiver currently
believes that the assets and potential value of Quest is significantly less than the outstanding
balance of investors’ investment amount in Quest. If, however, the Receiver is able to
generate sufficient funds from the sale of Quest’s assets, he will conduct a separate claims
process to deal with the claims of investors and other creditors of Quest. Should that occur,
the Receiver will assert a claim on behalf of Viking Oil and Valhalla Investment Partners,
L.P. Any monies recovered as a result of that claim could be distributed to current claimants
with allowed claims.
For more information regarding Quest, the Receiver’s investigation of it, and the
Receiver’s proposed course of action, please refer to the Receiver’s Quest Reports, which are
available on the Receiver’s website.
B.

Recovery of Real Property.

In addition to the assets discussed in conjunction with the expansion of the
Receivership in Section IV.A, the Receiver has also recovered a number of other assets,
some of which continue to be valued, assessed, and otherwise analyzed for liquidation,
disposition, or other action. Again, assets which have been sold or otherwise disposed of are
identified on the attached Exhibit B.

14

1.

Fairview, North Carolina.

On March 30, 2009, the Court granted the Receiver’s motion for possession of
property located in Fairview, North Carolina (the “Fairview Property”) (Doc. 100). The
Fairview Property had one known encumbrance: a loan with BB&T on which there was a
remaining principal balance of approximately $248,941.73.

BB&T, however, failed to

submit a timely proof of claim form for the loan, despite receiving notice of the claims
process and filing a claim related to another encumbered Receivership property.

On

November 17, 2014, the Receiver filed a verified motion to approve the sale of the Fairview
Property (Doc. 1150). On November 18, 2014, the Court granted the motion in its entirety
(Doc. 1151). In pertinent part, the Order approved the sale of the Fairview Property for
$287,500.00 and approved the Receiver’s request to allow him to hold the proceeds in trust
until the dispute between the Receiver and BB&T was resolved. On November 21, 2014, the
Receiver received the net amount of $267,720.59 from the sale of the property after payment
of commission and normal closing costs.
On March 5, 2015, BB&T filed a motion for turnover of the sale proceeds of the
Fairview Property (Doc. 1159). In part, BB&T contended that it was not required to submit a
Proof of Claim Form to protect its lien because it was a secured creditor and the Receiver
was on notice of the lien. The Receiver filed an opposition to this motion on March 23, 2015
(Doc. 1163). The parties also filed a reply brief and a sur-reply brief. On April 15, 2015, the
Court entered an order denying BB&T’s motion and directing the release of the sale proceeds
to the Receiver (Doc. 1174). On May 12, 2015, BB&T filed a notice of appeal of this
decision (Doc. 1178).

15

2.

Sarasota, Florida (La Bellasara).

On January 28, 2010, the Court granted the Receiver’s motion (Doc. 324) for
possession of property located at 464 Golden Gate Point, Unit 703, Sarasota, Florida (the
“Bellasara Property”) (Doc. 327). The Bellasara Property is a residential condominium unit
in a building called La Bellasara. On or about May 23, 2006, Neil Moody as Trustee of the
Neil V. Moody Revocable Trust purchased the Bellasara Property for $2,160,000. The
Bellasara Property has two known encumbrances: a primary mortgage loan in the amount of
$956,000 and a home equity line of credit from Wells Fargo with an initial balance of
$880,000. The primary mortgage loan from MSC Mortgage, LLC was assigned to Wells
Fargo soon after Moody’s purchase of the Bellasara Property and subsequently assigned in
2009 to Bank of America. The primary loan is currently serviced by Wells Fargo.5 Neither
bank ever filed a claim in the Receivership relating to either of the two loans. The Receiver
is also aware that La Bellasara Condominium Association, Inc. has asserted that it is owed
approximately $154,626.30 in unpaid condominium assessments.

The condominium

association also did not file a claim in the Receivership.
On April 15, 2015, the Receiver filed a verified motion to approve the sale of the
Bellasara Property (Doc. 1174). On April 29, 2015, the Court granted the motion in its
entirety (Doc. 1177). In pertinent part, the Order approved the sale of the Bellasara Property
for $2,300,000 and approved the Receiver’s request to allow him to hold the proceeds in trust
until the disputes between the Receiver and the banks and the condominium association are
5

Counsel for Wells Fargo has represented that, as of April 8, 2014, the amount due on the
primary loan was $1,325,431.52 and the amount due on the second loan was $936,358.60.

16

resolved. The Receiver believes that the sale price, which is consistent with several recent
appraisals, represents a fair and reasonable price for the Bellasara Property. On June 1, 2015,
the Receiver received the net amount of $2,147,993.69 from the sale of the property after
payment of commissions and normal costs associated with the sale. As noted above, the
Receiver presently is holding these proceeds in a separate account.
3.

Marshfield, Vermont.

The Receiver obtained two adjacent parcels of real property located in Marshfield,
Vermont at 3343 U.S. Route 2 and 3353 U.S. Route 2 (collectively the “Vermont
Properties”) in connection with the settlement of litigation against Nadel’s daughter-in-law,
Anne Nadel. Nadel purchased the 3343 Property on September 3, 2004 for $122,000 and
purchased the 3353 Property on July 29, 2005 for approximately $56,884. There is a tax lien
on the properties in the amount of approximately $49,710, which the Receiver intends to
satisfy upon the sale of the properties.

Parties interested in purchasing the Vermont

Properties should contact:
Matt Lumsden
William Raveis/BCK Real Estate
18 Railroad Street
Essex Junction, VT 05453
Phone: [phone]
Facsimile: [phone]
Email: [e-mail]
C.

Recovery of Other Items.

The Receiver has recovered various other items, including vehicles, jewelry,
promissory notes, and stock. Any of these items which have been sold or otherwise disposed

17

of are identified on the attached Exhibit B. For more information regarding these items and
their disposition, please refer to prior Interim Reports.
1.

Deficiency Judgment and Promissory Note.

The Receiver has a deficiency judgment against the former owner of a condominium
who had executed a promissory note payable to Mrs. Nadel. The Receiver foreclosed on the
condominium and obtained a deficiency judgment in the amount of $99,963.37. The
Receiver recorded this judgment and is attempting to collect on it. (See Exhibit B for
information regarding the disposition of the condominium.)
As mentioned above in Section IV.A.5, the Receiver also has a promissory note from
Quest and the Downeys to Valhalla Investment Partners in the amount of $1,100,000. Quest
made monthly interest payments on this note through January 2013.
2.

Miscellaneous Items.

The Receiver recovered a myriad of other items that he may be able to sell, including
a variety of furniture, artwork, sculptures, fixtures, computers, and miscellaneous supplies.
The Receiver will make reasonable efforts to maximize the amount he is able to recover from
the possible sale of these items.
D.

Recovery of Assets from the Moodys.

The Receiver’s investigation revealed that a significant portion of activities of certain
Hedge Funds should have been managed and directed by the Moodys. Together, the Moodys
received approximately $42 million in fees from certain Receivership Entities.6
6

For information regarding the enforcement action instituted against the Moodys,
please refer to the Fourteenth Interim Report and prior Interim Reports.

18

Chris Moody cooperated with the Receiver in connection with the turnover of all of
his assets. On January 19, 2010, Chris Moody gave the Receiver a power of attorney which
allowed the Receiver to effectuate the transfer of most of his assets without any direct
participation from Chris Moody. The Receiver met with Chris Moody, confirmed the assets
he owned, and reviewed in detail Chris Moody’s interests and liabilities in those assets.
Neil Moody initially did not cooperate with the Receiver. Accordingly, the Receiver
instituted an action against him individually and in his capacity as Trustee of the Neil Moody
Revocable Trust and the Neil Moody Charitable Foundation. On January 6, 2011, the
Receiver reached an agreement with Neil Moody to settle claims brought by the Receiver
against him and his related entities. The Court approved this settlement on February 23,
2012 (Doc. 754). For more information regarding this settlement, please refer to the Twelfth
Interim Report.
Meaningful assets the Receiver has identified for Chris Moody are delineated on the
attached Exhibit C. Neil Moody’s meaningful assets are identified on the attached Exhibit
D. Where possible, Exhibits C and D provide the percentage of interest acquired or purchase
price and the status or disposition of the asset. The Receiver is continuing to evaluate these
assets and will take appropriate actions as he determines are in the best interests of the
Receivership. Entities in which the Receiver believes he may have a viable interest or
potential for meaningful recovery have been put on notice of the Receiver’s interests and
rights.

19

E.

Litigation.

In January 2010, the Receiver filed 134 lawsuits seeking approximately
$71,096,326.43. The lawsuits sought (1) the recovery of false profits from investors; (2) the
recovery of transfers from Receivership Entities to Neil and Sharon Moody, Donald and
Joyce Rowe, and certain of their affiliated entities;7 (3) the recovery of other transfers, such
as commissions, from other individuals and/or entities;8 and (4) the recovery of certain
charitable contributions made with scheme proceeds.9 The Receiver also initiated litigation
against Holland & Knight,10 Wells Fargo Bank, and Anne Nadel.
1.

Recovery of “Investment” – Related Transfers from Investors.

As discussed in Section III.C above, the Receiver determined that some purported
investor accounts received monies in an amount that exceeded their investments. These
purported profits were false because they were not based on any trading or investment gain,
but rather were fruits of a Ponzi scheme that consisted of commingled funds of new and

7

The Receiver has resolved the action against Neil and Sharon Moody and related
entities through settlement. For more information regarding these settlements, please refer to
the Tenth and Twelfth Interim Reports.
8

In January 2010, the Receiver initiated lawsuits against three individuals to recover
transfers received as commissions or “compensation.” The Receiver resolved these matters
for the total amount of $152,121.09.
9

All actions the Receiver brought against non-profit organizations have been amicably
resolved by settlement agreements. For more information regarding these actions and their
resolution, please refer to the Twelfth Interim Report and prior Interim Reports.
10

The Receiver settled this matter for the payment of $25,000,000 to the Receiver in
exchange for a broad release of claims and a bar order. After deducting fees and costs
attributable to counsel, on November 8, 2012, the Receiver collected $18,232,983.59 from
this settlement.

20

existing investors.

The Receiver discovered approximately $35 million in such “false

profits.” In consultation with the Commission, the Receiver concluded that, in the best
interests of the Receivership Entities and the investors as a whole, these inequitable
distributions should be recovered and distributed in an equitable manner among Claimants
holding legitimate and allowed claims (as determined by the claims process).
As of May 28, 2015, the Receiver has reached 159 agreements to settle with
Profiteers and non-profit organizations in the amount of $25,674,831.09 and obtained 18
judgments against Profiteers in the amount of $6,364,671.90 for a total combined amount of
$32,007,002.99 (plus additional non-cash assets).11

The Court has approved all of the

settlements. The only actions which remain pending are those in which the defendants
appealed the Court’s decisions in favor of the Receiver and the appellate court remanded for
a determination of prejudgment interest. These actions are discussed below.
In January 2010, the Receiver initiated 121 lawsuits against Profiteers seeking to
recover total false profits of approximately $32,755,269.13 (“January 2010 Cases”).12 The
complaints set forth claims for unjust enrichment and fraudulent transfers pursuant to
Florida’s Uniform Fraudulent Transfer Act (“FUFTA”).

From May 25, 2011 through

11

This includes $127,114.23 which was awarded to the Receiver in an arbitration
proceeding encompassing two clawback cases. The defendants paid the Receiver the entire
amount awarded while the Receiver’s motion to confirm the award was pending before the
Court. This also includes a judgment in the amount of $6,477.30 for attorneys’ fees and
costs which the Receiver obtained against a profiteer in connection with his frivolous
objections to the Receiver’s determination of claims he submitted in the claims process.
12

In September 2010, the Receiver filed 12 additional actions against Profiteers who
invested with Traders’ “accounts.” All of these cases have been resolved. For more
information regarding these matters, please refer to prior Interim Reports.

21

September 28, 2012, the Receiver filed Omnibus Motions for Summary Judgment
(“Summary Judgment Motions”) in all January 2010 Cases then pending. Beginning on
November 29, 2012 and continuing through January 11, 2013, the Honorable Magistrate
Judge Mark A. Pizzo entered Reports and Recommendations on the Summary Judgment
Motions in the January 2010 cases (collectively the “Report and Recommendation”). See,
e.g., Wiand v. Dancing $, LLC, Case No. 8:10-cv-0092-EAK-MAP (M.D. Fla.), Doc. 121.
The Magistrate Judge recommended the Summary Judgment Motions be granted and found
that (1) Nadel operated the Hedge Funds and Traders as a Ponzi scheme at the time he made
the transfers to the defendants, and (2) the transfers to the defendants were made with the
actual intent to hinder, delay, or defraud any creditor of Nadel as required by FUFTA. The
Magistrate Judge further recommended that judgments be entered in favor of the Receiver.
See, e.g., id.
The Receiver filed limited objections to the Report and Recommendation only to the
portion which declined to award prejudgment interest. See, e.g., Wiand v. Diana Cloud, Case
No. 8:10-cv-150-T-17MAP (M.D. Fla.), Doc. 72.13 The defendants also filed objections to
the Report and Recommendation, to which the Receiver responded. On January 23, 2013
and March 7, 2013, the District Court Judge entered orders adopting the Report and
Recommendation in its entirety. The Court directed that the clerk enter judgments against
13

Diana Cloud filed a petition for relief under Chapter 7 of the Bankruptcy Code on
April 11, 2014. The Receiver filed a proof of claim for the full amount of the judgment,
$763,539.83, plus post-judgment interest. On May 3, 2015, the bankruptcy court disallowed
priority status for the claim but allowed the claim as a general unsecured claim in the amount
of $764,834.30. The Receiver will continue to actively pursue the protection and recovery of
funds in this bankruptcy proceeding.

22

the defendants in these matters for a total combined amount of $2,832,354.12.14 Judgments
have been entered and the Receiver is proceeding with collection efforts as appropriate.
Defendants in three matters where judgments were entered against them appealed the
entry of the judgments: Lee; Dancing $; and Meeker. (See Lee, Doc. 171; Dancing $, Doc.
131; and Meeker, Doc. 150). The Eleventh Circuit has issued decisions in all three of these
matters. In each case, the Eleventh Circuit affirmed the District Court’s grant of summary
judgment in favor of the Receiver and reversed its denial of the Receiver’s request for
prejudgment interest for abuse of discretion. The Eleventh Circuit remanded the decisions to
the District Court to determine whether equitable considerations as set forth in Blasland,
Bouck & Lee, Inc. v. City of N. Miami, 283 F.3d 1286 (11th Cir. 2002), justify denying or
reducing a prejudgment interest award in light of Florida’s general rule that prejudgment
interest is an element of pecuniary damages.
In Dancing $, the trial court entered an order on October 2, 2014 directing the parties
to submit memoranda and supporting materials addressing the Blasland factors and whether
any equitable considerations justify denying or reducing the award of prejudgment interest.
The parties submitted memoranda on October 16 and 17, 2014. On March 27, 2015, the
Magistrate Judge issued a Report and Recommendation awarding the Receiver prejudgment
interest from the date the Receiver filed his action against Dancing $. On April 10, 2015, the
14

See Cloud, Case No. 8:10-cv-150-T-17MAP, Doc. 76 (awarding $763,539.83);
Dancing $, Case No. 8:10-cv-0092-EAK-MAP, Doc. 128 (awarding $107,172.11); Wiand v.
Lee, Case No. 8:10-cv-210-T-17MAP (M.D. Fla.), Doc. 169 (awarding $935,631.51); Wiand
v. Morgan, Case No. 8:10-cv-205-T-17MAP (M.D. Fla.), Doc. 130 (awarding $380,369.00);
Wiand v. Meeker, Case No. 8:10-cv-166-T-17MAP (M.D. Fla.), Doc. 145 (awarding
$645,641.67).

23

Receiver filed an objection to the Report and Recommendation because the Receiver believes
he is entitled to prejudgment interest on his successful claims from the date of each
fraudulent transfer – not the date of the complaint as the Report and Recommendation
concluded. The District Court has not entered a ruling on this matter yet.
The defendant in Meeker filed a petition for rehearing en banc in the Eleventh Circuit
on October 6, 2014. The appellate court issued an order denying this petition on November
13, 2014 and entered the opinion as the judgment of the court on November 24, 2014. A
status conference was held on April 16, 2015 before the Magistrate Judge regarding the
appellate court’s mandate on the issue of prejudgment interest. The status conference was
adjourned to allow the parties to discuss the possibility of reaching a settlement. The parties
are engaging in settlement negotiations.
In Lee, the parties participated in a mediation conference before Magistrate Judge
Porcelli aimed at resolving the prejudgment issue as well as an impleader action brought
against Ms. Manon Sommers-Lee. The impleader action seeks to recover a residence which
was funded with proceeds Mr. Lee obtained as a result of Nadel’s scheme and is now in the
possession of Ms. Sommers-Lee (the “Lee Property”). The parties were unable to reach a
resolution at this mediation. The parties mediated this matter again on December 1, 2014
and again were unable to reach an accord. On November 14, 2014, the Court entered an
order directing the parties to submit memoranda on prejudgment interest and file any motions
for summary judgment regarding the impleader action dispute by December 12, 2014. On
February 2, 2015, Vernon Lee filed a petition for relief under Chapter 7 of the Bankruptcy
Code. On March 20, 2015, the Magistrate Judge for the District Court held a status

24

conference to discuss the effect of Vernon Lee’s bankruptcy on the Vernon Lee Trust and
Manon Sommers-Lee. The Court determined to administratively close the case due to the
bankruptcy. The Receiver is proceeding with this matter before the bankruptcy court. On
March 18, 2015, the Receiver filed a motion to dismiss the bankruptcy. This motion was
denied on May 1, 2015.

On May 5, 2015, the Receiver filed a proof of claim for

$1,391,269.41 representing the full amount of the judgment plus interest. On April 10, 2015,
the Receiver filed an objection to Vernon Lee’s claim of exemption. A hearing on this
objection has been scheduled for May 19, 2015. On May 8, 2015, the Receiver filed a
complaint objecting to the discharge and seeking an equitable lien or a constructive trust on
the Lee Property.
a.

Cases Referred to Arbitration.

In 24 of the January 2010 Cases, defendants – all of whom received false profits –
filed motions to compel their cases to arbitration. The Receiver vigorously opposed these
motions. The Receiver opposed arbitration because by enforcing the purported arbitration
agreements in the “investment contract” at the heart of Nadel’s scheme, those documents
would be allowed to oust this Court’s “complete jurisdiction and control” over Receivership
property in favor of numerous separate private arbitrators in Florida, New York, and Illinois.
The Receiver argued that result directly contradicted the purpose of this Receivership and
would be costly and inefficient. Specifically, the arbitrations (1) would require payment of
costly administrative and arbitrator fees, not to mention the Receiver’s fees and costs
incurred pursuing these actions in numerous different forums; (2) would have the inherent
risk of inconsistent decisions because the cases would be heard before various arbitrators; (3)

25

would significantly hinder the Receiver’s ability to use the appellate process to correct
arbitrator errors due to the limited review of arbitration decisions; and (4) would delay and
extend the Receivership and distribution of funds to victims. In other major receiverships,
courts followed the arguments of the Receiver refusing to enforce similar illegal purported
contracts. See, e.g., In re Randy, 189 B.R. 425, 441 (Bankr. N.D. Ill. 1995) (enforcing such
contracts “would only help finish what [the wrongdoer] ... long ago started, which is,
defrauding many innocent investors”). Despite the Receiver’s opposition, the Court ordered
the cases to arbitration. The Receiver filed seven arbitrations (corresponding to 19 clawback
cases previously filed in court). All of the arbitrations have been resolved.15
Despite well-reasoned decisions in two other arbitration matters, as predicted the
Receiver has encountered an arbitrator decision in favor of Profiteers based on arguments
lacking legal merit, thus resulting in inconsistencies, inequities, and increased expense in
pursuing the arbitrations. Specifically, in Wiand, as Receiver v. Roberta Schneiderman and
Robert D. Zimelis, as Co-Executors of the Estate of Herbert Schneiderman and Roberta
Schneiderman, individually, Case No. 33 512 00315 12 (AAA), the arbitrator rendered a
Final Order and Award before the final hearing without any basis in law or fact resulting in a
grave inequity.

In Schneiderman, the arbitrator refused to hear pertinent and material

15

The Receiver settled four arbitrations (corresponding to 13 clawback cases) for the
total amount of $2,486,290.01. The Receiver also settled another claim involving one of the
arbitration respondents pre-arbitration for the total amount of $1,465,000.00. These
settlement amounts are included in the total settlement amount provided in Section IV.E.1
above. Arbitration awards were entered in three other arbitration cases. For a discussion of
these awards, please refer to the Receiver’s Seventeenth Interim Report and prior Interim
Reports.

26

evidence and found that the Receiver’s fraudulent transfer and unjust enrichment claims were
time barred by certain probate statutes because they were not filed within two years of
nonparty Herbert Schneiderman’s death. This decision is completely contrary to clear law
that these probate statutes do not apply to claims that arise after a decedent’s death. As this
Court previously explained in this very Receivership, a fraudulent transfer claim arises at the
time of the transfer. The respondents did not receive the pertinent fraudulent transfer until
more than nine months after Mr. Schneiderman’s death. If this Award is allowed to stand,
the respondents will be the first individuals allowed by a tribunal to retain false profits.
The Receiver filed a motion to lift the stay and vacate this arbitration award on
August 1, 2013 (Doc. 61). On January 10, 2014, the United States Magistrate Judge issued a
Report and Recommendation denying the motion to vacate (Schneiderman, Doc. 70). The
Magistrate Judge found that the Receiver was unable to prove any of the very limited
grounds for vacating an arbitration award and overcome the strong presumption that
arbitration awards cannot be disturbed.

This award and the recommendation that the

Receiver’s motion to vacate be denied exemplify the Receiver’s grave concerns noted above
about referring these matters to arbitration. The Receiver filed objections to this Report and
Recommendation. On February 21, 2014, the District Court Judge entered an order adopting
the Report and Recommendation (Schneiderman, Doc. 73). On July 14, 2014, the Receiver
filed a Motion for Permission to Prosecute Appeal to proceed with an appeal of two orders in
this action: (1) the order compelling the matter to arbitration and (2) the order denying the
Receiver’s motion to vacate the arbitration award (Doc. 1128).

The Receiver and his

attorneys agreed to pursue the appeal at a reduced flat fee which provided a considerable

27

savings to the Receivership. The Court granted the Receiver’s motion on July 16, 2014
(Doc. 1129). The appeal was fully briefed and oral argument was held on January 27, 2015.
On February 10, 2015, the Eleventh Circuit Court of Appeals affirmed the judgment of the
district court. On February 24, 2015, the Receiver filed a petition for rehearing en banc and
petition for rehearing. On March 2, 2015, Receiver, Ralph S. Janvey, appointed by the U.S.
District Court for the Northern District of Texas as Receiver over the Stanford Financial
Group, submitted a motion for leave to appear as amicus curiae in support of the Receiver
and included an amicus curiae brief. This motion was granted on April 7, 2015. The District
Court in that Receivership had denied motions to compel the Receiver to arbitrate. The
appellate court denied the petition for rehearing on April 8, 2015.
2.

Litigation Against Anne Nadel.

An investigation by the Receiver revealed that Nadel purchased the Vermont
Properties entirely with investor funds unlawfully obtained through his fraudulent scheme
and transferred title to them to his now deceased son and his wife, Anne Nadel. (See Section
IV.B.3 infra for a description of these properties.) Ms. Nadel refused to voluntarily transfer
title to the Receiver. On November 7, 2012, the Receiver sued Ms. Nadel for the recovery of
these properties. Wiand v. Anne Nadel, Case No. 8:12-cv-2532-SDM-TGW (M.D. Fla.). On
July 9, 2013, the Receiver filed a motion to approve a settlement agreement between him and
Ms. Nadel (Doc. 1035). The settlement agreement provided, in pertinent part, the Receiver
would pay Ms. Nadel $10,000.00 according to a set payment schedule and an additional
$1,500 for payment of outstanding real property taxes on the Vermont Properties and in
return for these payments, Ms. Nadel will transfer title to the properties to the Receiver. The

28

Court approved the Receiver’s motion on July 9, 2013 (Doc. 1036). Subsequently, however,
the Receiver learned that a material representation made by Ms. Nadel as consideration for
the settlement agreement relating to liens on those properties was not accurate in that there
was an additional significant tax lien. The Receiver is working with Ms. Nadel to address
that matter.

In the meantime, however, Ms. Nadel has vacated the properties and the

Receiver is in possession of them.
3.

Receiver’s Litigation Against Wells Fargo.

The Receiver retained the law firm of James, Hoyer, Newcomer, & Smiljanich
(“James Hoyer”) to pursue litigation against Wells Fargo and Timothy Ryan Best, Nadel’s
relationship manager with the bank. On February 13, 2012, James Hoyer, on behalf of the
Receiver, instituted an action against Wells Fargo and Timothy Best seeking to recover
damages in excess of $168 million relating to the bank’s close and extensive relationship
with the Ponzi scheme underlying this Receivership.16 The parties engaged in extensive
motion practice. For more information regarding motions and other procedural history,
please refer to the Receiver’s Seventeenth Interim Report and prior Interim Reports.
16

Wells Fargo is pursuing a claim and other purported interests it believes it has to
Receivership property. As part of those efforts, Wells Fargo has aggressively interfered with
the Receivership. For example, it has sought to bypass the claims process, alter it, take
property away from the Receivership, petition another court for relief without informing this
Court or the Receiver, and delay the Receiver’s interim distribution. It also sought to
disqualify the Receiver and his counsel from this Receivership. The Court denied the
disqualification efforts in their entirety after concluding that the Receiver and his counsel
acted appropriately. On January 17, 2013, the Court entered an order stating that it would
defer ruling on Wells Fargo’s motion for determination that it did not have to file claims
regarding its purported interest in Receivership property, or alternatively, for permission to
file late claims, pending the outcome of the Receiver’s case against Wells Fargo and Timothy
Ryan Best (Doc. 955).

29

On June 10, 2014, the defendant filed a motion for summary judgment seeking
judgment in its favor on all claims remaining against it. The Receiver opposed this motion
and also filed a renewed motion for partial summary judgment on June 10, 2014. The
Receiver’s motion sought summary judgment on the following: (1) Nadel operated a Ponzi
scheme through the Hedge Funds from 1999 through January 2009; (2) every transfer of an
asset Nadel made was made with the actual intent to hinder, delay, or defraud creditors as
required by FUFTA; (3) because Nadel operated the Hedge Funds as a Ponzi scheme, each of
the Hedge Funds and Nadel were insolvent; (4) the in pari delicto defense is not available to
the defendant because individuals who invested in the Hedge Funds were innocent
stakeholders; and (5) the remaining affirmative defenses should be decided in the Receiver’s
favor because the defendant failed to plead any facts in support of the defenses. On February
9, 2015, the District Court granted summary judgment in favor of Wells Fargo on all counts.
This unexpected ruling has a significant impact in limiting the Receiver’s claims against
Wells Fargo. On March 10, 2015, the Receiver filed a motion to prosecute an appeal of this
decision due to the nature of the ruling and the impact it would have on the Receivership to
the detriment of innocent victims (Doc. 1162). On March 27, 2015, the Court granted the
Receiver’s motion to appeal this decision (Doc. 1167). The Receiver filed his initial brief on
April 27, 2015. Wells Fargo’s response brief is due June 8, 2015.
4.

Receiver’s Litigation Against Rowe

The Receiver sued Donald Rowe, individually (“Rowe”) and as Trustee of the Wall
Street Digest Defined Benefit Pension Plan (“Plan”), Joyce Rowe, and Carnegie Asset
Management, Inc. (“CAM”) (collectively “Rowe Defendants”) to recover sums received

30

from the Receivership Entities. The Receiver and the Rowe Defendants entered into a
settlement agreement, which was approved by the court on February 5, 2013 (Doc. 963). As
part of that settlement, the Rowe Defendants consented to entry of a joint and several
judgment in the amount of $4,028,385.00, the Rowe Judgment, which was entered by the
Court on February 25, 2013 (Rowe, Doc. 124).17
After entry of the Rowe Judgment, the Receiver conducted discovery in aid of
execution and learned that the Rowe Defendants made blatant efforts to shed their assets by
transferring them to third parties with the intent to hinder the Receiver’s collection efforts.
To recover those fraudulently transferred assets, the Receiver filed a motion to commence
proceedings supplementary and to implead the third parties who received these assets. As a
result of these efforts, through various settlements the Receiver recovered $2,284,063.11, and
personal property with an approximate value of $10,000,18 and an annuity with a value of
$326,338.24 (as of March 31, 2015).

The Receiver also obtained final judgments of

garnishment in the total amount of $60,778.70, which have been paid in full. For more
information regarding these settlements and judgments, please refer to the Receiver’s
Fifteenth and Sixteenth Interim Reports.
On October 15, 2013, the Receiver also directed a writ to MetLife Investors USA
Insurance Company (“MetLife”) to garnish an annuity the Rowes purchased from MetLife.

17

For more information regarding the Rowe litigation and settlement please refer to the
Thirteenth Interim Report and prior Reports.

18

The Receiver sold some of this property through auction and received the net amount
of $1,146.00 from these sales. The Receiver is working on selling the remaining property.

31

The Receiver and Joyce Rowe filed cross motions for summary judgment in March 2014.
On July 11, 2014, the court granted summary judgment in favor of Mrs. Rowe. On July 16,
2014, the Receiver filed an emergency motion to stay dissolution of the writ pending an
appeal of the July 11, 2014 Order, which the court granted. On July 24, 2014, the Receiver
filed a notice of appeal. The Receiver filed a motion for permission to pursue this appeal on
August 15, 2014 (Doc. 1136), which the Court granted on August 19, 2014 (Doc. 1137). The
Receiver filed his initial brief on November 14, 2014. The appellee’s response brief was
filed on December 11, 2014 and the Receiver filed a reply brief on January 12, 2015. Oral
argument is scheduled for the week of July 27, 2015.
The Receiver also seized a 2007 Lexus LS from Donald Rowe and recovered
$24,605.25 from the sale of the Lexus. As of May 12, 2015, the Receiver has recovered a
total of $2,695,790.30 on the Rowe Judgment.19

The Receiver will continue pursuing

collection of the Rowe Judgment and make every reasonable effort to collect as much as
possible. However, the Receiver anticipates that it will be difficult to fully satisfy this
judgment.
V.

Claims Process.
On April 20, 2010, the Receiver filed his Motion to (1) Approve Procedure to

Administer Claims and Proof of Claim Form, (2) Establish Deadline for Filing Proofs of

19

This amount includes the value of the annuity obtained in connection with the
Receiver’s settlement with the Hardin Trust. The value of the annuity is $326,338.24 as of
March 31, 2015. The Receiver took $40,000 as a distribution from this annuity on April 24,
2014 and an additional $40,000 on April 13, 2015 and will continue to take the maximum
distribution allowed without incurring a penalty.

32

Claim, and (3) Permit Notice by Mail and Publication (Doc. 390) (“Claims Motion”), which
the Court granted on April 21, 2010 (Doc. 391). Pursuant to the Court’s Order, any person or
entity who failed to submit a proof of claim to the Receiver so that it was actually received
by the Receiver on or before September 2, 2010, the Claim Bar Date, is barred and precluded
from asserting any claim against the Receivership or any Receivership Entity.
The Receiver received 504 claims, of which 478 claims were submitted in connection
with 473 investor “accounts”20 (“Investor Claimants”). The Receiver also received 26
claims from other purported creditors (“Non-Investor Claimants”) (Investor Claimants and
Non-Investor Claimants are collectively referred to as “Claimants”), including two claims
from taxing authorities. On December 7, 2011, the Receiver filed his Motion to (1) approve
determination and priority of claims, (2) pool Receivership assets and liabilities, (3) approve
plan of distribution, and (4) establish objection procedure (“Claims Determination
Motion”) (Doc. 675). The Receiver recommended that $131,308,943.50 in Investor Claims
and two tax lien claims be allowed. On March 2, 2012, the Court granted the Claims
Determination Motion except with respect to a claim submitted by Wells Fargo (the “March
2 Order”) (Doc. 776).21

20

In reality, Nadel and the Receivership Entities did not maintain separate investor
accounts. Nevertheless, for ease of reference they are referred to as “Investor Accounts.”

21

The Court reserved ruling on that claim and on several motions and objections filed
by Wells Fargo and, in some instances, its affiliate TRSTE, Inc., relating to that claim and
other purported interests in Receivership assets. (See Docs. 689, 690, 718, 719, 740.) As
noted above, on January 17, 2013, the Court entered an order deferring ruling on Wells
Fargo’s motions pending the outcome of the Receiver’s case against Wells Fargo. (See
Section IV.E.3 above and Doc. 955.)

33

The objection procedure proposed by the Receiver in the Claims Determination
Motion and adopted by the Court allowed each Claimant twenty days from receipt of notice
of the March 2 Order to serve the Receiver with a written objection to the determination of
the Claimant’s claim and/or claim priority and to object to the plan of distribution. The
deadline to serve any objections was March 28, 2012. The Receiver received objections
relating to 23 claims. These objections were raised by twelve Claimants, four of whom have
multiple claims. The Receiver has been working on the resolution of these objections. As of
the filing of this Interim Report, objections relating to 15 claims have been resolved. (See
Claim Nos. 157, 444, 445, 449, 450, 462, 463, 464, 465, 466, 467, 471, 476, 483, and 504).
On April 27, 2012, the Receiver filed a motion seeking the approval of (1) a first
interim distribution of $25,994,012.73 on a pro rata basis; (2) establishment of reserves of
$1,789,268.46 for claims for which timely objections were received and for Wells Fargo’s
and TRSTE, Inc.’s purported interests in Receivership assets and the Receivership estate; and
(3) approval of revisions to certain claim determinations previously submitted by the
Receiver and approved by the Court in the Claims Determination Motion (Doc. 825). The
Court overruled a limited objection filed by Wells Fargo and granted the Receiver’s motion
in its entirety on May 7, 2012 (Doc. 839).
On November 14, 2012, the Receiver filed a motion seeking the approval of (1) a
second interim distribution in the amount of approximately $22 million on a pro rata basis;
(2) revisions to certain claim determinations previously submitted by the Receiver and
approved by the Court; (3) an increase in reserves of $1,327,793.22; and (4) the release of

34

reserves in the amount of $197,951.10 (Doc. 945). The Court granted the Receiver’s motion
in its entirety on November 16, 2012 (Doc. 946).
On November 6, 2013, the Receiver filed a motion seeking the approval of (1) a third
interim distribution of $5,000,000.00 on a pro rata basis; (2) an increase in reserves of
$246,488.43; and (3) the release of reserves in the amount of $615,746.25 (Doc. 1085). The
Court granted the Receiver’s motion in its entirety on November 22, 2013 (Doc. 1087).
On April 10, 2014, the Receiver filed a Motion to Approve Fourth Interim
Distribution and Increase Certain Reserves (Doc. 1113). The motion sought the approval of
(1) a fourth interim distribution of $5,000,000.00 on a pro rata basis, representing an
additional recovery of 3.81% of the Allowed Amount of claims receiving a distribution at
that time, bringing the total recovery to 44.37% of the Allowed Amount of these claims and
(2) an increase in reserves of $253,793.83. The Court granted the Receiver’s motion in its
entirety on April 24, 2014 (Doc. 1114). All interim distribution checks have been mailed to
Claimants holding claims which were determined to be entitled to participate in the interim
distributions and have been negotiated.22
VI.

Overview of Remaining Assets.
As of May 28, 2015, the total funds in all Receivership accounts are approximately

$10,721,650.62, which includes $2,803,646.58 being held in reserves for objections in the
22

Claim Number 391 is not allowed to participate in any distributions of Receivership
assets until and if all Class 1 Claims receive 50% of their Allowed Amounts. Because the
interim distributions have provided a combined recovery of 44.37% to such Class 1 Claims,
this claim was not entitled to participate in the interim distributions. Accordingly, the
amounts apportioned to Claim Number 391 were not distributed and reverted to the
Receivership.

35

claims process and $2,229,463.15 being held in escrow until a claim to these funds is
resolved, but does not include the combined amount of $2,415.714.28 in proceeds from the
sale of two properties which presently are being held in separate accounts. The Receiver has
submitted a tax return on behalf of Art Nadel seeking a refund in the amount of
approximately $2,393,250.00.
As discussed above, the Receiver has already distributed a total of approximately $57
million to Claimants with Allowed Claims which were entitled to receive distributions,
representing a total recovery of 44.37% of the Allowed Amounts for those claims. The
Receiver is diligently working on recovering more funds in the hopes to make additional
distributions to these Claimants. To accomplish this, the Receiver is (1) managing and
attempting to sell the remaining properties and other miscellaneous assets currently held by
the Receivership; (2) pursuing pending litigation against clawback defendants; (3) continuing
to collect on outstanding settlement agreements and engaging in collection efforts on
judgments obtained in connection with litigation; and (4) continuing to pursue litigation
against Wells Fargo.
A.

Remaining Properties and Other Assets.

The Receiver is in possession of essentially five properties which remain to be sold.
Of these five properties, one of them is heavily encumbered by liens from two institutions in
the combined amount of approximately $2,260,157. Given the decline in property values in
recent years, the amount the Receiver anticipates he will be able to recover from sale of this
property may not greatly exceed the amount of the encumbrances. As discussed above in
Section IV.B.1, the Receiver contested BB&T’s attempt to obtain proceeds of the sale of the

36

Fairview Property and prevailed against this attempt before the District Court. BB&T has
appealed this decision, which the Receiver will vigorously oppose. Also, as mentioned
above, the Receiver is contesting Wells Fargo’s claim to properties and may contest other
asserted liens. The ultimate recovery obtained from the sales of these properties will be
contingent upon the outcome of these asserted liens.
The Receiver also has possession of various miscellaneous assets which include
artwork, furniture, and the like. While the Receiver is attempting to maximize the recovery
from the sale of these assets, he does not anticipate any significant recovery (i.e., in excess of
$20,000). The Receiver is also diligently working on evaluating, managing, and selling
various assets obtained from the Moodys. The Receiver expanded the Receivership to
include Quest, a Texas oil and gas company. As stated in Section IV.A.5 above, the
Receiver believes that the oil well leases held by Quest have potential value and may be sold
for the benefit of investors and other creditors (see also Doc. 1145). The Receiver is
marketing Quest and will continue to operate it in an effort to preserve and maximize its
value until it is sold.

The Receiver acquired the Moodys’ interests in various other

companies. However, from the Receiver’s research it appears that many of these companies
are no longer in business and thus, the interests in these companies have little to no value.
For more information regarding these interests, please refer to Exhibits C and D.
B.

Remaining Clawback Litigation.

The Receiver has resolved the vast majority of the clawback cases brought against
Profiteers and non-profit organizations. All clawback cases which were pending in district
court and arbitration have been resolved. As previously mentioned, three Profiteers in cases

37

before the district court filed appeals of the judgments awarded against them. The judgments
against these three Profiteers total $1,688,445.29. As discussed above, in all three of these
appeals the appellate court affirmed the Court’s granting of summary judgment in favor of
the Receiver and reversed and remanded the Court’s denial of prejudgment interest. Please
refer to Section IV.E.1 for a detailed discussion of these three matters.
C.

Settlements and Outstanding Judgments.

As noted above, as of May 28, 2015, the Receiver has settled 159 cases brought
against Profiteers and non-profit organizations for the total amount of $25,674,831.09. The
Receiver has collected $25,722,333.35 on these settlements and no amounts remain to be
paid.23 The Receiver also has obtained 18 judgments against Profiteers and non-profit
organizations for the total amount of $6,364,671.90.
$2,903,536.70 of the total judgment amount.

The Receiver has collected

As noted above, three Profiteers owing

judgments totaling $1,688,445.29 filed appeals of the judgments awarded. In each of these
appeals, the appellate court affirmed the Court’s granting of summary judgment in favor of
the Receiver and reversed and remanded the Court’s denial of prejudgment interest. The
Receiver also has a judgment against the Rowe Defendants in the amount of $4,028,385.00.
To date, the Receiver has recovered $2,695,790.30 on this judgment including the value of an
annuity the Receiver obtained in connection with a settlement with a third party who received
funds fraudulent transferred by the Rowes. (See Section IV.E.4 above.) The value of this
annuity is $326,338.24 as of March 31, 2015. The Receiver is proceeding with collection
23

The total amount collected includes $47,502.26 in interest which was paid in connection
with settlement payments which were paid over time.

38

efforts on the outstanding judgments as appropriate. While the Receiver is hopeful that he
will recover funds on the majority of these judgments, the Receiver anticipates that it will be
difficult to fully satisfy them.
D.

Litigation involving Wells Fargo.

The Receiver instituted this action against Wells Fargo and Timothy Best seeking to
recover damages and fraudulent transfers in excess of $168 million relating to the bank’s
close and extensive relationship with the Ponzi scheme underlying this case. As noted above,
Wells Fargo is pursuing a claim and other purported interests it has to Receivership property.
To that end, Wells Fargo filed several motions and objections in connection with the claims
process.

The Court has deferred ruling on Wells Fargo’s claims motions pending the

outcome of the Receiver’s litigation against Wells Fargo. On June 10, 2014, the parties filed
motions for summary judgment. On February 9, 2015, the District Court granted summary
judgment in favor of Wells Fargo on all counts. This unexpected ruling has a significant
impact in limiting the Receiver’s claims against Wells Fargo. On March 10, 2015, the
Receiver filed a motion to prosecute an appeal of this decision due to the nature of the ruling
and the impact it would have on the Receivership to the detriment of innocent victims (Doc.
1162). On March 27, 2015, the Court granted the Receiver’s motion to appeal this decision
(Doc. 1167). The Receiver filed his initial brief on April 27, 2015. Wells Fargo’s response
brief is due June 8, 2015.
VII.

The Next Ninety Days.
The Receiver will proceed with the claims process by continuing to address the

remaining objections.

39

The Receiver will proceed with pending litigation and collection efforts. He will
continue to thoroughly consider and review any settlement offers and engage in settlement
negotiations. The Receiver will make every effort to reach compromises that are in the best
interests of the Receivership Entities and the investors.
The Receiver will continue to pursue the recovery of tax refunds where possible, and
will continue to attempt to locate additional funds and other assets. If appropriate, the
Receiver will institute proceedings to recover assets on behalf of the Receivership Entities.
The Receiver will also continue the operations of all ongoing businesses of the
Receivership Entities to maintain and, if possible, enhance their value. The Receiver will
continue to market properties for sale and entertain offers for purchase.
CONCLUSION
Creditors and investors in the Receivership Entities are encouraged to periodically
check the informational website (www.nadelreceivership.com) for current information
concerning this Receivership. The Receiver and his counsel have received an enormous
amount of emails and telephone inquiries and have had to expend significant resources to
address them. To minimize those expenses, creditors and investors are strongly encouraged
to consult the Receiver’s website before contacting the Receiver or his counsel. However,
the Receiver continues to encourage individuals or attorneys representing investors who may
have information that may be helpful in securing further assets for the Receivership estate or
identifying other potential parties who may have liability to either the Receivership estate or
investors directly either to email [e-mail] or call Jeffrey Rizzo at 813-3475100.

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Dated this 4th day of June, 2015.
Respectfully submitted,
s/Burton W. Wiand
Burton W. Wiand, Receiver
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on June 4, 2015, I electronically filed the foregoing with
the Clerk of the Court by using the CM/ECF system.
s/Gianluca Morello
Gianluca Morello, FBN 034997
[e-mail]
Maya M. Lockwood, FBN 0175481
[e-mail]
WIAND GUERRA KING P.A.
5505 West Gray Street
Tampa, FL 33609
T: [phone]
F: [phone]
Attorneys for the Receiver, Burton W. Wiand

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