Securities and Exchange Commission v. Nadel et al
STATUS report The Receiver's Nineteenth Interim Report (5/1/15 - 10/31/15) 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
SECURITIES AND EXCHANGE
Case No. 8:09-cv-0087-T-26TBM
SCOOP CAPITAL, LLC;
SCOOP MANAGEMENT, INC.
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,
THE RECEIVER’S NINETEENTH INTERIM REPORT
Receivership Information and Activity from May 1, 2015 through October 31, 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: (813) 347-5100
F: (813) 347-5198
Attorneys for Receiver, Burton W. Wiand
TABLE OF CONTENTS
Procedure and Chronology. .................................................................................................3
Overview of Findings. .........................................................................................................5
ACTIONS TAKEN BY THE RECEIVER ......................................................................................6
Securing the Receivership Estate. ........................................................................................6
Securing and Recovering Receivership Funds. .......................................................6
Recovery of Tax Refunds. .......................................................................... 7
Receivership Accounting Report. ............................................................................8
Asset Analysis and Recovery...............................................................................................9
Expansion of Receivership to Include Additional Entities. .....................................9
Recovery of Real Property. ....................................................................................15
Laurel Mountain Preserve, LLC; Laurel Preserve, LLC; and Laurel
Mountain Preserve Homeowners Association, Inc. .................................. 10
Guy-Nadel Foundation, Inc. ..................................................................... 11
Viking Oil & Gas, LLC. ........................................................................... 12
Summer Place Development Corporation. ............................................... 12
Quest Energy Management Group, Inc. ................................................... 13
Fairview, North Carolina. ......................................................................... 15
Sarasota, Florida (La Bellasara). ............................................................... 16
Marshfield, Vermont. ................................................................................ 17
Recovery of Other Items. .......................................................................................18
Deficiency Judgment and Promissory Note. ............................................. 18
Other Securities ......................................................................................... 19
Recovery of Assets from the Moodys. ...................................................................19
Recovery of “Investment” – Related Transfers from Investors. ............... 21
TABLE OF CONTENTS
Litigation Against Anne Nadel…………………………………………..27
Receiver’s Litigation Against Wells Fargo............................................... 27
Receiver’s Litigation Against Rowe ......................................................... 29
Claims Process. ..................................................................................................................32
Overview of Remaining Assets. ........................................................................................36
Remaining Clawback Litigation. ...........................................................................38
Settlements and Outstanding Judgments. ..............................................................38
Remaining Properties and Other Assets. ...............................................................37
Litigation involving Wells Fargo. ..........................................................................40
The Next Ninety Days. ......................................................................................................40
Burton W. Wiand, the Court-appointed Receiver for the Receivership Entities as
defined herein, hereby files this Nineteenth Interim Report (the “Report”) to inform the
Court, the investors, and others interested in this Receivership, of activities from May 1,
2015 through October 31, 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:
Defendants Scoop Capital, LLC (“Scoop Capital”) and Scoop Management,
Inc. (“Scoop Management”) (which, along with Arthur Nadel, are
collectively referred to as “Defendants”);
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”);
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
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.”
Although this Interim Report covers the period from May 1, 2015 through October
31, 2015, where practicable, the Receiver has included information in his possession through
the date of the filing of this Report.
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 December 1, 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 19 judgments against Profiteers in the amount of $6,382,396.02, for a
total combined amount of $32,057,227.11 (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 $2,895,907.72 on this
judgment as of December 1, 2015;
Reached and obtained approval of a settlement agreement with Branch Banking
and Trust Company (“BB&T”) which provides that the Receiver pay BB&T
$10,000 to resolve an appeal it filed and its claim to any portion of the sale
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”). However, this amount does include a judgment for prejudgment
interest in favor of the Receiver in the amount of $17,724.12 which the Receiver has
appealed because he believes the Receivership is entitled to a greater amount. See Section
IV.E.1 below for more information regarding this judgment and the appeal.
proceeds of property located in Fairview, North Carolina with the remainder of
the sale proceeds – $257,720.59 – going to the Receivership;
Redeemed 36,000 shares of First America Bank Corp. (“First America”)
pursuant to the terms of merger between First America and HCFB Holding
Company for the total amount of $288,000.00;
Obtained $13,610.94 in funds from three bank accounts which previously had
Pursued an appeal of the court’s adverse summary judgment ruling in 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, oral
argument was set for January 26, 2016, but it was canceled by the Court and the
order said it would be rescheduled, but to date it has not been;
Maintained Receivership funds in appropriate accounts. As of December 1, 2015,
the total funds in all Receivership accounts are approximately $13,293,498.10,
which includes $2,803,646.58 being held in reserves for objections in the claims
process and $4,377,456.84 being held in separate accounts until a claim to these
funds is resolved;
Substantially prepared a motion seeking the approval of a fifth interim
distribution in the amount of $3,000,000 on a pro rata basis which the Receiver
intends to file with the Court in the near future;
Continued to operate ongoing businesses, and where possible, enhance the value
of those businesses resulting in the generation of $308,048.10 in gross business
Generated $32,850.98 in interest/dividend income; $287,500 in business asset
liquidation income; $294,765.88 in third-party litigation income; and $301,610.94
in other income.
The above activities are discussed in more detail in the pertinent sections of this
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
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
counts in the indictment. On October 21, 2010, Nadel was sentenced to 14 years in prison.
Nadel died in prison on April 16, 2012.
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.
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
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.
Securing the Receivership Estate.
Securing and Recovering Receivership Funds.
During the time covered by this Interim Report, Receivership funds were held at
Centennial Bank (formerly known as Bay Cities Bank) in a non-interest bearing operating
account and two variable interest rate money market accounts. As of December 1, 2015, the
total funds in all Receivership accounts are approximately $13,293,498.10, which includes
$2,803,646.58 being held in reserves for objections in the claims process and $4,377,456.84
being held in separate accounts until a claim to these funds is resolved. 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.
On August 4, 2015, the Receiver filed a motion for possession of certain bank
accounts controlled by Arthur Nadel and partial modification of asset freeze (Doc. 1188).
The Receiver sought this relief to close three bank accounts in the names of Arthur Nadel and
the Clark-Nadel Revocable Trust held with Wells Fargo Bank which were frozen by the
Court after the collapse of Nadel’s scheme. These accounts held a combined balance of
$13,610.94. Because the accounts were frozen and not titled in the name of a Receivership
Entity, Wells Fargo informed the Receiver that it required an order from the Court modifying
the asset freeze to permit it to release the money in the accounts to the Receiver and close the
accounts. The Court granted the Receiver’s motion on August 4, 2015 (Doc. 1189). The
Receiver received the full amount of the funds on August 19, 2015.
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 amended tax returns 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 these returns and receive any tax refund payable to Nadel (Docs.
1097, 1100 and 1105). The Receiver has been informed that the IRS has completed its audit
review of these returns and that questions it had were resolved in favor of the Receiver. It is
the Receiver’s understanding that the IRS is continuing to review the matter to determine the
final amount of the refund. Because of various issues regarding the amended returns, the
precise amount of recovery is unknown, however, the Receiver believes it will exceed
$1,400,000.00 and may exceed $2,500,000.00.
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.
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 May 1, 2015 less operating expenses plus revenue through
October 31, 2015. This cash accounting report does not reflect non-cash or cash-equivalent
assets. Thus, the value of all property discussed in Section IV below is not included in the
accounting reports. From May 1, 2015 through October 31, 2015, the Receiver received
$308,048.10 in business income from ongoing operations of Receivership Entities;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.
$32,850.98 in interest/dividend income; $287,500.00 in business asset liquidation income;
$294,765.88 in third-party litigation income; and $301,610.94 in other income.4 (Ex. A.)
Since the inception of the Receivership through October 31, 2015, the Receiver
received $7,433,625.08 in business income from ongoing operations of some Receivership
Entities; $2,066,501.32 in cash and securities; $1,039,207.23 in interest/dividend income;
$7,433,643.58 in business asset liquidation; $120,000.00 in personal asset liquidation;
$68,168,498.89 in third-party litigation income; and $7,494,567.73 in other income.
Asset Analysis and Recovery.
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
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
The “other income” includes: $288,000.00 for the redemption of 36,000 shares of
First American Holdings Corp. and $13,610.94 obtained in funds which were previously
B, please refer to prior Interim Reports. Assets which have not been sold or otherwise
disposed of are discussed below.
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.
The second encumbrance is a
$1,900,000 interest only loan from Wells Fargo.
For more information regarding the Laurel Mountain Property, please visit
http://www.laurelmountainpreserve.com. Parties interested in purchasing this property should
contact the Receiver directly.
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
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.
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.
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
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
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:
Michael Saunders & Company
100 South Washington Blvd.
Sarasota, Florida 34236
Phone: (941) 724-8009
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
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.
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.
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.
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.
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.
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). 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). On July 28, 2015, the Receiver
filed a motion to approve a settlement agreement reached between him and BB&T (Doc.
1186). In pertinent part, the settlement agreement provides that the Receiver agrees to pay
$10,000 to BB&T to resolve BB&T’s pending appeal and its claim to any portion of the sale
proceeds for the Fairview Property. The Court approved the settlement agreement on July
28, 2015 (Doc. 1187). The Receiver has deposited the remainder of the sale proceeds –
$257,720.59 – into the Receivership accounts.
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.
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
resolved. 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.
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,
Counsel for Wells Fargo 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.
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:
P.O. Box 96
Cabot, VT 05647
Phone: (802) 563-6000
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
of are identified on the attached Exhibit B. For more information regarding these items and
their disposition, please refer to prior Interim Reports.
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.
The Receiver obtained 36,000 shares of First America from Neil Moody in
connection with his turnover of assets discussed in Section IV.D below. On May 5, 2015,
First America Bank Corp. was acquired by HCFB Holding Company. The plan of merger
provided for approximately $33 million for all outstanding shares of First America. The
consideration per share was $8.00. This was an all cash tender with no other options. On
June 5, 2015, the Receiver redeemed the shares held by the Receivership for the total amount
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.
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
For information regarding the enforcement action instituted against the Moodys,
please refer to the Fourteenth Interim Report and prior Interim Reports.
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
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
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.
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
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.
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.
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.
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
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 November 30, 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 19
judgments against Profiteers in the amount of $6,382,396.02 for a total combined amount of
$32,057,227.11 (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
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 and
a judgment for prejudgment interest in favor of the Receiver in the amount of $17,724.12
which, as discussed below, the Receiver has appealed because he believes the Receivership is
entitled to a greater amount.
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.
complaints set forth claims for unjust enrichment and fraudulent transfers pursuant to
Florida’s Uniform Fraudulent Transfer Act (“FUFTA”).
From May 25, 2011 through
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
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. On October 13, 2015, the Receiver received a distribution check in the
amount of $79,399.31 representing 10.38% of the Receiver’s claim in this bankruptcy. On
November 9, 2015, the Receiver received an additional and final distribution of $1,444.21 on
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
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 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.
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
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
$ in the amount of $17,724.12. On April 10, 2015, the 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. On June 23, 2015, the District
Court Judge entered an order adopting the Report and Recommendation. The Receiver filed
a motion for permission to prosecute an appeal of this order pro bono because the dollar
amount at issue is relatively small, but the Receiver believes the partially unfavorable
precedent set by the order is significant and warrants appellate review (Doc. 1202). The
Court granted the Receiver permission to prosecute the appeal (Doc. 1203). On July 28,
2015, the Receiver filed a notice of appeal.
The Receiver’s initial brief was filed on
September 15, 2015.
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. On June 12,
2015, the Receiver filed a motion to approve a settlement agreement between him and the
defendant (Doc. 1182). The settlement agreement provides that the defendant will pay a total
amount of $25,000.00, which will be paid in accordance with a set payment schedule, to
satisfy the judgment and all pending issues. In reaching this agreement, the Receiver’s
primary consideration involved the financial circumstances of the defendant. The Receiver’s
discovery revealed that the defendant has few, if any, assets with which to satisfy the
Judgment. The Court entered an order approving this settlement agreement on June 12, 2015
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
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. 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. On November 20, 2015, the Receiver filed a motion
for summary judgment with respect to entitlement to the Lee Property. No ruling has been
issued on this motion.
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
Court approved the Receiver’s motion on July 9, 2013 (Doc. 1036). Ms. Nadel has vacated
the properties and the Receiver is in possession of them.
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.15 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.
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
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).
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 the initial brief on
April 27, 2015. Wells Fargo filed its response brief and the Receiver filed a reply brief. Oral
argument was scheduled for January 26, 2016. On October 29, 2015, the appellate court
canceled the oral argument and stated that it would be rescheduled at a later date. It has not
been rescheduled yet.
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
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).16
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 $10,000,17 and an annuity with a value of
$285,309.66 (as of September 30, 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.
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
For more information regarding the Rowe litigation and settlement please refer to the
Thirteenth Interim Report and prior Reports.
The Receiver sold this property through auction and received the net amount of
$1,146.00 from these sales.
appeal of the July 11, 2014 Order, which the court granted. With approval from this Court,
on July 24, 2014, the Receiver timely filed a notice of appeal of the denial of his summary
judgment motion to the Court of Appeals for the Eleventh Circuit. Oral argument was set to
take place on July 29, 2015. On July 27, 2015, the Receiver filed a motion to approve a
settlement agreement between the parties to this matter (Doc. 1184). In pertinent part, the
settlement agreement provides, that the Rowe Defendants will pay $200,000 from either the
proceeds of a mortgage on their homestead or from the MetLife Annuity to resolve the
dispute over the MetLife Annuity and the Defendants’ remaining obligations under the Rowe
Judgment. In reaching this agreement, the Receiver’s primary considerations involved the
financial circumstances of the Defendants, the risk of litigation, and additional expenses to
the Receivership Estate. The Rowe Defendants represented and warranted that they do not
have sufficient non-exempt assets to satisfy the remaining amount owed under the Judgment.
The Court entered an order approving the settlement agreement on July 27, 2015 (Doc.
1185). On July 28, 2015, the parties filed a joint motion to dismiss the appeal, which was
granted. On September 1, 2015, the Receiver received payment of $200,000 from the
The Receiver also seized a 2007 Lexus LS from Donald Rowe and recovered
$24,605.25 from the sale of the Lexus. As of December 1, 2015, the Receiver has recovered
a total of $2,895,907.72 on the Rowe Judgment.18
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 $285,309.66 as of
September 30, 2015. The Receiver took $40,000 as a distribution from this annuity on April
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
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”19 (“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
24, 2014, and an additional $40,000 on April 13, 2015 and will continue to take the
maximum distribution allowed without incurring a penalty.
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.”
Determination Motion except with respect to a claim submitted by Wells Fargo (the “March
2 Order”) (Doc. 776).20
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 all 23 claims have been resolved. (See
Claim Nos. 157, 403, 404, 405, 406, 407, 408, 444, 445, 449, 450, 462, 463, 464, 465, 466,
467, 469, 471, 476, 477, 483, and 504).
During the time covered by this Interim Report, the Receiver resolved objections to
seven claims which were made by a husband and wife (Claim Nos. 403-408 and 477) and
one objection made on behalf of a sophisticated institutional investment firm (Claim No.
469). On August 12, 2015, the Receiver filed a motion to overrule the objections to Claim
Numbers 403 through 408 and 477 (Doc. 1190). The Claimants holding these claims sought
the recovery of the principal amount of their investments plus the purported investment
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.)
profits attributed to them in statements they received from the Hedge Funds and Traders.
The Receiver determined that these claims should be allowed in part such that the Claimants’
recoveries were limited to their Net Investment Amounts (the amounts they invested in the
scheme minus the amounts they received back) and would not include any false paper profits
from Traders or the Hedge Funds. The Court granted the Receiver’s motion and overruled
the Claimants’ objections (Docs. 1194 and 1198).
On September 15, 2015, the Receiver filed a motion to overrule the objection to
Claim Number 469 (Doc. 1199). On the Receiver’s recommendation, Claim Number 469
had been denied by the Court. The Claimant filed an objection to this determination. On
September 15, 2015, the Court entered an Order overruling the objection and affirming the
denial of the claim (Doc. 1204). The Court found that the Claimant (1) failed to comply with
the claims procedures and deadlines promulgated by this Court, and the information
belatedly supplied in its objection did not cure the deficiency, and (2) the investor was a
sophisticated investment firm and thus either had inquiry or actual notice of Nadel’s fraud.
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
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 on November 22, 2013 (Doc. 1087).
On April 10, 2014, the Receiver filed a motion seeking 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 (Doc. 1113). The Court granted the Receiver’s motion 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.21
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
Within a short time from the date of this Interim Report, the Receiver intends to file a
motion seeking the approval of a fifth interim distribution of $3,000,000.00 on a pro rata
basis, representing an additional recovery of 2.28% of the Allowed Amount of claims
receiving a distribution at that time, which would bring the total recovery to 46.65% of the
Allowed Amount of these claims.
Overview of Remaining Assets.
As of December 1, 2015, the total funds in all Receivership accounts are
approximately $13,293,498.10, which includes $2,803,646.58 being held in reserves for
objections in the claims process and $4,377,456.84 being held in separate accounts until a
claim to these funds is resolved. 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 and intends
to seek approval of an additional distribution of $3 million, which will bring the total
recovery for these claims to 46.65% of the Allowed Amount 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.
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 $2,260,157.00. 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 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.
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
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. The
Receiver reached a settlement agreement in one matter which has been approved by the
Court. In one of the other matters, the District Court Judge entered an order adopting a
Report and Recommendation which only awarded prejudgment interest from the date of the
filing of the complaint. The Receiver believes that the Receivership is entitled to more
prejudgment interest than that awarded and filed an appeal of this decision on a pro bono
basis. This appeal is pending. In the final matter, the defendant filed for protection under the
bankruptcy laws. The Receiver is proceeding with this matter before the bankruptcy court.
Please refer to Section IV.E.1 for a detailed discussion of these three matters.
Settlements and Outstanding Judgments.
As noted above, as of December 1, 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.22 The Receiver also has obtained 19 judgments against Profiteers and non-profit
organizations for the total amount of $6,382,396.02.
The Receiver has collected
$3,004,380.22 of the total judgment amount. The Receiver is proceeding with collection
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.
The Receiver also has a judgment against the Rowe Defendants in the amount of
To date, the Receiver has recovered $2,895,907.72 on this judgment
including the value of an annuity the Receiver obtained in connection with a settlement with
a third party who received funds fraudulently transferred by the Rowes. (See Section IV.E.4
above.) The value of this annuity is $285,309.66 as of September 30, 2015. As discussed in
Section IV.E.4 above, the Receiver reached a settlement agreement with the Rowe
Defendants wherein the Rowe Defendants agreed to pay $200,000 to resolve the dispute over
a MetLife Annuity and their remaining obligations under the Judgment. In reaching this
agreement, the Receiver’s primary considerations involved the financial circumstances of the
Rowe Defendants, the risk of litigation, and additional expenses to the Receivership Estate.
The Defendants represented and warranted that they do not have sufficient non-exempt assets
to satisfy the remaining amount owed under the Rowe Judgment. Other than continuing to
collect on the outstanding annuity, the Receiver does not anticipate that he will be able to
collect any further funds in connection with this Judgment.
The total amount collected includes $47,502.26 in interest which was paid in connection
with settlement payments which were paid over time.
Litigation involving Wells Fargo.
The Receiver instituted an 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
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 appeal has been fully briefed. The oral argument was scheduled for
January 26, 2016, but the appellate court canceled it. The appellate court stated that the oral
argument would be rescheduled, but to date it has not been.
The Next Ninety Days.
The Receiver will file a motion seeking the approval of a fifth interim distribution and
if approved, will make the distribution as soon as reasonably possible.
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 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.
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 email@example.com or call Jeffrey Rizzo at 813-3475100.
Dated this 4th day of December, 2015.
s/Burton W. Wiand
Burton W. Wiand, Receiver
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on December 4, 2015, I electronically filed the foregoing
with the Clerk of the Court by using the CM/ECF system.
Gianluca Morello, FBN 034997
Maya M. Lockwood, FBN 0175481
WIAND GUERRA KING P.A.
5505 West Gray Street
Tampa, FL 33609
T: (813) 347-5100
F: (813) 347-5198
Attorneys for the Receiver, Burton W. Wiand
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