Securities and Exchange Commission v. Nadel et al

Filing 652

Unopposed MOTION for attorney fees Receiver's Unopposed Ninth Interim Motion for Order Awarding Fees, Costs and Reimbursement of Costs to Receiver and His Professionals by Burton W. Wiand. (Attachments: # 1 Exhibit 1-Standardized Fund Accounting Report, # 2 Exhibit 2-Receiver's 9th Interim Report, # 3 Exhibit 3-Scoop Receivership-Rep of Scoop Receivership, # 4 Exhibit 4-Scoop Receivership-Carolina Mtn Land Conservancy, # 5 Exhibit 5-Scoop Receivership-Recovery from Investors, # 6 Exhibit 6-Scoop Receivership-Recovery of Assets from N. and C. Moody, # 7 Exhibit 7-Scoop Receivership-Recovery of Commissions, # 8 Exhibit 8-Scoop Receivership-Holland & Knight, # 9 Exhibit 9-Categorization and Summary of WGK Costs, # 10 Exhibit 10-Attorney Fee Schedule, # 11 Exhibit 11-Scoop Legal Team-Scoop Capital, LLC Receivership, # 12 Exhibit 12-Fowler White, # 13 Exhibit 13-Scoop Legal Team-HFH v. B. Bishop, # 14 Exhibit 14-Scoop Legal Team-Carolina Mtn Land Conservancy, # 15 Exhibit 15-Scoop Legal Team-Recovery from Investors, # 16 Exhibit 16-Johnson, Pope, # 17 Exhibit 17-Scoop Legal Team-Recovery of Assets from N. and C. Moody, # 18 Exhibit 18-Scoop Legal Team-Recovery of Commissions, # 19 Exhibit 19-Scoop Legal Team-Holland & Knight, # 20 Exhibit 20-PDR, # 21 Exhibit 21-E-Hounds, # 22 Exhibit 22-The RWJ Group, LLC, # 23 Exhibit 23-Cheney, Brock & Saudek, P.C., # 24 Exhibit 24-Goosmann Rose Colvard & Cramer, P.A., # 25 Exhibit 25-Proposed Order)(Morello, Gianluca)

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EXHIBIT 2 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647 Filed 07/21/11 Page 1 of 78 P a g e l D 9378 UNITED STATES D I S T R I C T C O U R T MIDDLE DISTRICT OF FLORIDA T A M P A DIVISION SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. CaseNo. 8:09-cv-0087-T-26TBM ARTHURNADEL; SCOOP CAPITAL, LLC; SCOOP MANAGEMENT, INC. Defendants, SCOOP REAL ESTATE, L.P.; V A L H A L L A INVESTMENT PARTNERS, L.P.; V A L H A L L A MANAGEMENT, INC.; VICTORY IRA FUND, LTD.; VICTORY FUND, LTD.; V I K I N G IRA FUND, LLC; V I K I N G FUND, LLC; AND V I K I N G MANAGEMENT, LLC, Relief Defendants. / T H E R E C E I V E R ' S NINTH I N T E R I M R E P O R T Receivership Information and Activity from January 1, 2011 through April 30, 2011. Gianluca Morello, FBN 034997 Michael S. Lamont, FBN 0527122 Maya M . Lockwood, FBN 0175481 WIAND GUERRA KING P.L. 3000 Bayport Drive Suite 600 Tampa, FL 33607 , T: (813)347-5100 F: (813)347-5198 Attorneys for Receiver, Burton W. Wiand Case 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 2 of 7 8 PagelD 9379 T A B L E O F CONTENTS Introduction I. Procedure and Chronology 4 II. The Receiver's Role and Responsibilities 6 A. Operating the Business of the Receivership Entities 7 B. Taking Possession of Receivership Property 7 C. Investigating Receivership Affairs and Recovering Funds 7 D. Reporting on Assets and Liabilities and Implementing Claims Process 8 III. Overview of Findings To Date 8 A. The Ponzi Scheme 10 B. Fictitious Trading Results and Insolvency 11 C. Depletion ofthe Hedge Funds' Assets 15 D. Investor Losses and "False Profits." 17 E. Nadel's Trading Activities in the Hedge Funds 18 Actions Taken By The Receiver IV. 21 A. Taking Possession of Defendants' Headquarters 21 B. Securing Receivership Funds 21 C. Locating Additional Funds 23 1. Recovery of Tax Refunds 23 D. Receivership Accounting Report 25 E. V. Securing the Receivership Estate Obtaining Information from Third Parties 26 Asset Analysis and Recovery 27 A. Expansion of Receivership to Include Additional Entities 27 1. 28 Venice Jet Center, LLC i Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647 Filed 07/21/11 Page 3 of 78 P a g e l D 9380 T A B L E O F CONTENTS 2. 3. 4. 5. 6. 7. 8. 9. 10. B. Tradewind, LLC Laurel Mountain Preserve, LLC; Laurel Preserve, LLC; and Laurel Mountain Preserve Homeowners Association, Inc Marguerite J. Nadel Revocable Trust UAD 8/2/2007 Guy-Nadel Foundation, Inc Lime Avenue Enterprises, LLC, and A Victorian Garden Florist, LLC Viking Oil & Gas, LLC Home Front Homes, LLC Summer Place Development Corporation Traders Investment Club 28 30 32 33 35 36 37 38 39 40 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. C. Recovery of Real Property 41 41 42 43 43 44 44 45 46 46 47 48 48 Thomasville, Georgia Grady County, Georgia Graham, North Carolina Raleigh, North Carolina Tupelo, Mississippi Newnan, Georgia Fairview, North Carolina Sarasota, Florida (Fruitville Road) Oberlin, Ohio Sarasota, Florida (La Bellasara) Evergreen, Colorado Tazewell, Tennessee Sarasota, Florida (Jefferson Avenue) Recovery of Vehicles and Other Items 49 1. 2. 3. 4. 5. 49 49 50 53 53 Vehicles Condominium Note and Mortgage Bonds.com Assets Quest EMG Promissory Note Miscellaneous Items ; D. Recovery of Assets from the Moodys 54 E. Litigation 57 1. 2. 57 61 61 62 Recovery of False Profits from Investors Litigation against Moodys and Rowe a. Moodys b. Rowe ii Case 8:09-cv-00087-RAL-TBM Document 6 4 7 Filed 07/21/11 Page 4 of 78 PagelD 9381 T A B L E OF CONTENTS 3. 4. 5. 6. 7. Recovery of Fees from Recipients of Commissions or Other Transfers Recovery of Charitable Contributions Made with Scheme Proceeds Class Action Litigation Receiver's Litigation Against Holland & Knight LLP Other Potential Litigation VI. Claims Process VII. The Next Sixty Days 65 67 67 68 Investigating Receivership Affairs and Tracing Receivership Funds VIII. 64 68 71 Conclusion iii C a s e 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 5 of 78 PagelD 9382 INTRODUCTION Burton W. Wiand, the Court-appointed Receiver for the Receivership Entities as defined herein, hereby files this Ninth Interim Report (the "Report") to inform the Court, the investors, and others interested in this Receivership, of activities from January 1, 2011 1 through April 30, 2011 as well as the proposed course of action. 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 I R A Fund"); Victory Fund, Ltd. ("Victory Fund"); Viking IRA Fund, LLC ("Viking I R A 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 ("Vildng 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; and Traders Investment Club. The foregoing entities and trust are collectively referred to as the "Receivership Entities." 1 Unless otherwise indicated, the information reported herein reflects the information in the Receiver's possession as of April 30, 2011. 1 Case 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 6 of 78 PagelD 9383 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 (1) the recovery of false profits from investors (i.e., from "Profiteers"); (2) the recovery of distributions from Receivership Entities to Neil Moody, Donald and Joyce Rowe, and certain of their affiliated entities; (3) the recovery of other distributions, such as commissions, from other individuals and/or entities; and (4) the recovery of certain charitable contributions made with scheme proceeds; • Reached 15 settlements for a total sum of $2,568,720.25 and engaged in efforts that led to the settlement of eight additional cases as of July 20, 2011, for a further amount of $1,556,910.26. As of April 30, 2011, the Receiver had reached agreements to settle with 121 Profiteers for a total amount of $17,684,817.77. As of July 20, 2011, the Receiver has reached agreements to settle with 129 Profiteers for a total amount of $19,241,728.03 (plus additional non-cash assets); • Maintained Receivership funds in appropriate accounts and certificates of deposit ("CDs"). As of July 19, 2011 the total funds in all Receivership accounts, including CDs, are approximately $21,885,060.69; • Successfully recovered $875,983.17 in federal tax refunds issued for Chris Moody and $100,266.95 in federal tax refunds issued for Neil Moody for a total recovery of $976,250.12; • Sold property in Tupelo, Mississippi which was being leased to Starbucks for $715,000, resulting in net proceeds to the Receivership of approximately $651,216 after payment of commissions and other expenses associated with the sale; 2 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647 Filed 07/21/11 Page 7 of 78 PagelD 9384 • Sold approximately 33 acres of undeveloped land in Grady County, Georgia for $135,000, resulting in net proceeds to the Receivership of approximately $123,717.84 after payment of commissions and other expenses associated with the sale. • Reached a favorable settlement with the Carolina Mountain Land Conservancy wherein the Conservancy agreed to an order vacating an easement of approximately 169 acres of an approximately 420 acre parcel owned by the Receivership near Asheville, North Carolina and agreed to pay $10,115; • Successfully auctioned jewelry from Queen's Wreath Jewels, Inc., Marguerite Nadel, Sharon Moody, and another Profiteer for a total of approximately $643,890, which substantially exceeded pre-auction estimates of $300,000 to $550,000, resulting in net proceeds to the Receivership estate of approximately $591,663.85 after payment of commission and other expenses; • Continued to operate ongoing businesses, and where possible, enhance the value of those businesses resulting in the generation of more than $228,165.64 in gross business income; • Generated $106,026.96 in interest/dividend income; $706,098.82 in business asset liquidation income; $2,368,733.76 in third-party litigation income; and $976,250.12 in other income; • Entered into an agreement in principle with Neil Moody wherein he agreed to cooperate with the Receiver to effect the orderly transfer of all of his assets and to provide assistance, as necessary, in connection with the Receiver's efforts to recover monies from third parties; • Worked on recovering assets in the possession of Neil Moody; • Deposed Joyce Rowe; • Continued to pursue the Receiver's malpractice action against Holland & Knight, LLP; the complaint seeks to recover as much as possible of the approximately $168 million of out-of-pocket losses suffered by investors; and • Continued work on the claims process, including the review and analysis of more than 500 Proof of Claim Forms and approximately 123 amended Proof of Claim Forms. 3 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M D o c u m e n t 647 Filed 07/21/11 Page 8 of 78 PagelD 9385 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 or about January 14, 2009, Nadel fled Sarasota County and disappeared for nearly two weeks. On January 21, 2009, the Commission filed a complaint in this Court charging the Defendants with violations of federal securities laws (the "Commission Proceeding"). 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 fond 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 April 6, 2009, Nadel filed his answer and affirmative defenses, in which he denied nearly every allegation in the Complaint and set forth two affirmative defenses. (Doc. 104.) Nadel also purported to set forth a "Counterclaim," which the Court struck on the Receiver's motion. (Docs. I l l , 112.) On August 17, 2010, the Commission moved the Court to 4 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647 Filed 07/21/11 Page 9 of 78 P a g e l D 9386 approve a consent judgment against Nadel and filed Nadel's consent to the same. (Doc. 457.) On August 18, 2010, the Court entered a Judgment of Permanent Injunction and Other Relief against Nadel ("Judgment"). (Doc. 460.) The Judgment permanently enjoins Nadel from further violations of the antifraud provisions of the federal securities laws and orders Nadel to pay disgorgement of ill-gotten gains with prejudgment interest and a civil penalty in amounts to be determined by the Court upon the Commission's motion. 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 August 9, 2010, on the Receiver's motions, the Court entered orders expanding the scope of receivership to include additional entities as follows: January 27, 2009 (Doc. 17) Venice Jet Center, LLC Tradewind, LLC February 11, 2009 (Doc. 44) Laurel Mountain Preserve, LLC Laurel Preserve, LLC Marguerite J. Nadel Revocable Trust UAD 8/2/07 Laurel Mountain Preserve Homeowner Association, Inc. March 9, 2009 (Doc. 68) Guy-Nadel Foundation, Inc. March 17, 2009 (Doc. 81) Lime Avenue Enterprises, LLC A Victorian Garden Florist, LLC July 15, 2009 (Doc. 153) Viking Oil & Gas, LLC August 10, 2009 (Doc. 172) Home Front Homes, LLC August 9, 2010 (Doc. 454) Traders Investment Club On June 3, 2009, January 19, 2010, and September 23, 2010, the Court entered orders Reappointing Receiver. (Docs. 140, 316, 493.) The January 21, 2009, June 3, 2009, January 5 C a s e 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 10 of 7 8 PagelD 9387 19, 2010, and September 23, 2010 Orders will be referred to collectively as the "Orders Appointing Receiver." Pursuant to the Orders Appointing Receiver, the Receiver has the duty and authority to: "administer and manage the business affairs, funds, assets, choses in action and any other property of the Defendants and Relief Defendants; marshal and safeguard all of the assets of the Defendants and Relief Defendants; and take whatever actions are necessary for the protection of the investors." (Orders Appointing Receiver at 12.) On January 27, 2009, Nadel surrendered to the FBI in Tampa, Florida. Nadel was arrested and charged with two counts of securities fraud and wire fraud based on the fraudulent investment scheme discussed herein. Nadel was transferred to the Metropolitan Correctional Center in New York, New York to await trial in the United States District Court for the Southern District of New York. U.S. v. Nadel, Case No. 8:09-mj-01039 M.D. Fla. (Docs. 5, 6). 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 and assigned to the Burner Federal Correctional Complex near Raleigh, North Carolina. II. The Receiver's Role and Responsibilities. The Receiver functions as an independent agent of the court. The United States Supreme Court has explained that: [a receiver] . . . is an officer of the court; his appointment is provisional. He is appointed on behalf of all parties, and not of the complainant or of the defendant only. He is appointed for the benefit of all parties who may establish rights in the cause. 6 C a s e 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 11 of 78 PagelD 9388 The money in his hand is in custodia legis for whoever can make out a title to i t . . . It is the court itself which has the care of the property in dispute. The receiver is but the creature of the court; he has no power except such as are conferred upon him by the order of his appointment and the course and practice ofthe court. Booth v. Clark, 58 U.S. 322, 331 (1854). Generally, the Receiver is charged by the Court with maximizing investors' and creditors' recoveries. To this end, the Court directed the Receiver to engage in the following activities: A. Operating the Business of the Receivership Entities. The Court granted the Receiver the "full and exclusive power, duty, and authority" to "administer and manage the business affairs, funds, assets, choses in action and any other property of the Defendants and Relief Defendants . . . . " (Orders Appointing Receiver at 1.) B. Taking Possession of Receivership Property. The Court directed the Receiver to "[t]ake immediate possession of all property, assets and estates of every kind of the Defendants and Relief Defendants, whatsoever and wheresoever, located belonging to or in the possession of the Defendants and Relief Defendants . . . . " (Orders Appointing Receiver *\ 1.) C. Investigating Receivership Affairs and Recovering Funds. The Court also directed the Receiver to "[investigate the manner in which the affairs of the Defendants and Relief Defendants were conducted and institute such actions and legal proceedings, for the benefit and on behalf of the Defendants and Relief Defendants and their investors and other creditors as the Receiver deems necessary against those individuals, corporations, partnerships, associations and/or unincorporated organizations, which the Receiver may claim have wrongfully, illegally or otherwise improperly misappropriated or 7 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647 Filed 07/21/11 Page 12 of 78 PagelD 9389 transferred monies or other proceeds directly or indirectly traceable from investors in the Defendants and Relief Defendants . . . ." (Orders Appointing Receiver f 2.) D. Reporting on Assets and Liabilities and Implementing Claims Process. The Court further directed the Receiver to "[pjresent to this Court a report reflecting the existence and value of the assets of the Defendants and Relief Defendants and of the extent of liabilities, both those claimed to exist by others and those the Receiver believes to be legal obligations of the Defendants and Relief Defendants . . . " (Orders Appointing Receiver % 3.) As contemplated by the Orders Appointing Receiver, the Receiver instituted a claims process primarily for the benefit of the Receivership Entities' investors who have been defrauded and suffered legitimate and verifiable losses as a result of the activities of Nadel and others (Doc. 391). The claims process is discussed in more detail in Section V I . below. III. Overview of Findings To Date. The Receiver has reviewed voluminous records from the Receivership Entities' offices, as well as records from more than thirty (30) different institutions, including banks and brokerage firms. In connection with the Receiver's ongoing investigation he is continuing to seek and obtain documents pertinent to the scheme and further analyze documents in his possession. The Receiver has formed conclusions based on his review of a substantial number of the records received. While these conclusions may change as the receipt and review of pertinent documents is completed, the Receiver does not believe any changes would be material. 8 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647 Filed 07/21/11 Page 13 of 78 PagelD 9390 In the Commission's Emergency Motion and Memorandum of Law in Support of Temporaiy Restraining Order and Other Emergency Relief (Doc. 2) and supporting papers, the Commission presented evidence showing Nadel defrauded investors through his control of the Hedge Funds' advisers and/or managers, Scoop Capital and Scoop Management. Through the Investment Managers, Nadel, along with the Moodys, was ultimately responsible for controlling the Hedge Funds' investment activities. While the Commission's evidence showed that Nadel defrauded investors since at least January 2008, the Receiver's investigation uncovered evidence showing the fraud began at the inception of the first Hedge Fund, Valhalla Investment Partners, and likely earlier. Indeed, Nadel essentially admitted as much in several letters he wrote for family at the time of his disappearance in January 2009. I n one letter in which he suggested how to calculate the Hedge Funds' investment losses he wrote, "go back as far as possible, to 1998 i f we can, to Spear, Leeds & Kellogg from Goldman Sachs, and determine the actual trading losses," and added that his "recollection of the more recent losses, say from 2001 on, is about an average of about $20M per year." In another letter, which was shredded, he wrote (emphasis added): "For more than ten rvearsl I have truly believed that [I could] trade my way out of this mess, and in 2008 did it finally penetrate my addled [brain] that this is not to be." In yet another letter, Nadel wrote, "[a]t first moderate profits were achieved, but by 1999 the volatile tech bubble created losses. When the bubble burst I began to 'doctor' the trading results." A l l ofthe above information shows that from 1999 and possibly earlier, Nadel was perpetrating his scheme. 9 Case 8:09-cv-00087-RAL-TBM A. Document 647 Filed 07/21/11 Page 14 of 78 PagelD 9391 The Ponzi Scheme. The Receiver has discovered that from 1999 through 2008, approximately $330 million was raised from approximately 687 investors 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 the Moodys through the offer and sale of securities in the form of 2 interests in Hedge Funds as part of a single, continuous Ponzi scheme. As discussed below, 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 perpetuate and perpetrate 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 were generated from new or existing investors. Nadel further caused the Hedge Funds to pay tens of 2 In past interim reports, the Receiver reported a lower number of total investors. The number reported above counts each person individually and any entity which may be associated with that individual as a separate investor. For example, an account in the name of Jane and John Doe would be counted as two investors. Further, i f Jane and John Doe held an account in the name of the Jane and John Doe Family Trust, the trust would be counted as an additional investor for a total of three investors. The previously reported number included the above two accounts as one investor. 10 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647 Filed 07/21/11 Page 15 of 78 PagelD 9392 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. The Receiver also discovered that Nadel involved at least one of his investment clubs, Traders Investment Club ("Traders"), in his scheme. Nadel formed Traders in 1998 and purported to buy and sell securities on its behalf in an effort to generate trading profits. Aside from raising money for Traders from investors, the Receiver's investigation revealed that Nadel funded Traders with unlawful transfers from the Hedge Funds. Specifically, Nadel improperly transferred at least $1.9 million from the Hedge Funds to Traders. Further, representations Nadel made to Traders' investors regarding investment performance were grossly overstated. Nadel also caused Traders to make distributions to investors that Traders' investment performance never supported. Through those distributions, Nadel improperly and wrongfully diverted money from the Hedge Funds. For more information regarding Traders, see Section V.A.I0 below. B. Fictitious Trading Results and Insolvency. The Receiver's mvestigation has revealed that for each Hedge Fund, the Hedge Fund's performance as disclosed to investors from 1999 forward was based mainly on trading results that Nadel purported to have in brokerage transactions cleared through Spear, Leeds & Kellog, LLC and its successor Goldman Sachs Group, Inc. (in which money was 11 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M D o c u m e n t 647 Filed 07/21/11 Page 16 of 78 PagelD 9393 purportedly traded to generate the purported returns Nadel was paying). The returns reported to investors and potential investors were based on fictitious performance results that were created by Nadel and then included in a database maintained by Scoop Management. These fictitious performance results formed the basis of gross misrepresentations to investors. Below are details concerning the Hedge Funds' performance from September 1999 through year end 2008 and misrepresentations concerning that performance. Table 1, below, shows a comparison of actual trading results in the Hedge Funds' accounts to the values represented to investors and to distributions paid. Specifically, for each year from 1999 through 2008, the table lists, from left to right, (1) the pertinent year; (2) the amount of gains the Investment Managers represented that the Hedge Funds had achieved that year; (3) the actual combined total trading gain or loss experienced that year in the accounts for the Hedge Funds; (4) the difference between what the Investment Managers represented the Hedge Funds had achieved in performance versus the actual trading results in the Hedge Funds' accounts (identified as "Difference"); and (5) the actual distributions paid by the Hedge Funds for the pertinent year, including distributions to investors and management and performance incentive fees paid. 3 3 Records currently in the Receiver's possession indicate that no distributions were made in 1999. I n past Interim Reports, the Receiver reported a somewhat higher number for the amount of Distributions. This previously reported amount included purported "internal transfers" among "accounts" with different Hedge Funds. The currently reported Distributions numbers do not include these purported transfers. 12 Case 8:09-cv-00087-RAL-TBM Document 6 4 7 Filed 07/21/11 Page 17 of 78 PagelD 9394 Table 1; Gains/(Losses Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Investment Managers' Represented Gains ($) 959,480 2,636,299 2,560,961 7,130,171 23,716,749 46,950,345 61,169,058 50,003,778 54,665,571 36,334,794 Hedge Funds Actual Trading Performance($) 35,647 (2,882,463) (2,402,728) (3,012,774) 19,843,624 5,152,400 6,064,172 (18,549,355) (24,989,307) (2,493,654) Total 286,127,206 (23,234,438) Difference ($) Distributions ($) 923,833 584,000 5,518,762 1,147,584 4,963,689 10,142,945 3,196,452 3,873,125 7,961,233 25,596,873 41,797,945 70,647,030 55,104,886 75,377,733 68,553,133 79,654,878 50,863,789 38,828,448 72,716,381 i 309,361,644 308,091,075 The evidence in the Receiver's possession also shows that each of the Hedge Funds was insolvent from the first year each was in operation as each Hedge Fund's liabilities were greater than its assets. This was the case because, in part, (1) Nadel distributed false profits to investors far in excess of their principal investment when, as shown above, the Hedge Funds lost significant sums of money or were allocated trading gains that were well below the Hedge Funds' returns as represented to investors and upon which the distributed false profits were based; and (2) "fees" were paid by each Hedge Fund based upon the highly inflated and misrepresented trading returns (as discussed below in Section III.C). As Table 1 shows, from their inception, the Hedge Funds' performance as represented to investors was significantly overstated and thus, false. Specifically, from the inception of the first Hedge Fund in 1999 through 2008, the Investment Managers represented that the Hedge Funds' trading activity generated more than $286 million in gains when, in reality, the Hedge Funds' investment accounts actually lost approximately $23 million. Further, while the Hedge Funds lost approximately $23 million for this same period, 13 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 6 4 7 Filed 07/21/11 Page 18 of 78 PagelD 9395 more than $308 million was paid by the Investment Managers in distributions to investors and to themselves and others as fees. As this table shows, the Investment Managers were making distributions and paying fees that the investment performance of the Hedge Funds never supported. In furtherance of the scheme Nadel intentionally and wrongfully caused the Hedge Funds to pay investors purported trading gains. On at least a quarterly basis, Nadel and the Fund Managers caused the Hedge Funds to pay to investors sums of money that were equivalent to the trading gains purportedly earned by those investors as reflected in their "account statements." Similarly, in response to investors' requests for redemptions of their principal investments, in furtherance of Nadel's scheme he caused the Hedge Funds to pay the requesting investors sums of money equivalent to all or part of the principal invested by those investors. These (and all other) distributions which Nadel caused the Hedge Funds to make to investors were paid from fruits of the scheme. Specifically, money raised from new and existing investors was used to pay these false trading gains and redemptions. The Investment Managers also were crediting fictitious profits to accounts where the accountholders were not taking distributions. These fictitious profits were likewise unsupported by the Hedge Funds' investment performance and served only to further increase the Hedge Funds' insolvency. This negative cash flow made the eventual collapse of Nadel's scheme inevitable. In short, the investment returns and performance as represented to investors and potential investors from the inception of the Hedge Funds (as applicable based on then existing Hedge Funds) were false and based on grossly overstated performance numbers 14 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M D o c u m e n t 647 Filed 07/21/11 Page 19 of 78 PagelD 9396 created by Nadel. The true results of the trading activity that actually occurred were never included in data reported to investors or potential investors. Further, each of the Hedge Funds was insolvent from its beginning. C. Depletion of the Hedge Funds' Assets. Evidence also shows that the Hedge Funds directly or indirectly paid substantial fees to Scoop Capital and Scoop Management, to other Receivership Entities, and to other third parties in the form of management, advisoiy, and/or profit incentive fees and "finder" fees. As reflected in Table 2, below, according to the Hedge Funds' documents, from 2001 through 2008 they paid approximately $97,726,438 in total fees. Profit incentive fees were paid to Scoop Management, Viking Management, Valhalla Management, and third parties, based on a percentage of profits that never occurred. Such payments significantly depleted the Hedge Funds' assets and diverted those assets to Scoop Capital and Scoop Management, which were controlled by Nadel, and to Valhalla Management and Viking Management, which were controlled in name by Neil and Christopher Moody. The payment of these fees based upon highly inflated and misrepresented trading returns and net asset values is one reason why each Hedge Fund was insolvent from its beginning. 15 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M D o c u m e n t 647 Filed 07/21/11 Page 20 of 78 PagelD 9397 Table 2; Fees Paid f r o m Hedge Funds to Investment Managers and Others Year 2001 2002 2003 2004 2005 2006 2007 2008 Total Performance Incentive Fees 124,723 1,061,285 3,440,759 7,214,560 12,869,824 14,938,134 14,238,590 13,660,088 30,178,475 Total Fees 846,451 1,783,191 4,438,726 10,494,311 17,654,252 21,268,788 20,607,662 20,633,057 67,547,963 Management Fees 721,728 721,906 997,967 3,279,751 4,784,428 6,330,654 6,369,072 6,972,969 97,726,438 Significant sums from the proceeds of Nadel's scheme also made their way into other accounts controlled by Nadel and/or his wife, Marguerite "Peg" Nadel. As of December 31, 2008, according to the balance sheet for Scoop Management, Scoop Management had transferred approximately $17,177,896.56 to accounts owned either individually or jointly by the Nadels. These amounts are in addition to the amounts Mrs. Nadel received from Scoop Management as compensation. According to its balance sheet, Scoop Management also transferred approximately $6,433,804.40 to other entities controlled by Nadel. During the time the Hedge Funds operated, neither Nadel nor his wife had any source of income that was not in some manner funded with money from that scheme. Documentation and other information that the Receiver has collected shows that money derived from the scheme was used by Nadel to purchase and/or fund other businesses. The Receiver has expanded the Receivership to include additional businesses controlled by Nadel. (See discussion of expansion in Section V.A, below.) 16 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M D. Document 647 Filed 07/21/11 Page 21 of 78 PagelD 9398 Investor Losses and "False Profits." As stated above, to date, the Receiver has discovered and identified approximately 4 687 investors who invested approximately $330 million. Based on documentation analyzed to date, it appears that investors have out-of-pocket losses of approximately $168 million. The Receiver has also discovered that some investors were paid more than their total investments. These overpayments were false profits. To date, the Receiver has discovered approximately $35 million in such false profits. The Receiver has initiated efforts to recover these false profits, and those efforts are discussed in Section V.E, below. Further, it appears that, although separate investor accounts were identified in communications with investors and brokerage accounts were used for each Hedge Fund, in reality there were not separate funds. Due to the method Nadel used to trade securities and his handling of money invested in Hedge Funds through "shadow" bank accounts, as discussed below, distinctions made between the individual Hedge Funds and between investor "accounts" have little meaning. Nadel treated the Hedge Funds as a single source of money regardless of the Hedge Fund with which investors purportedly invested, and then investor funds were commingled in Nadel's and the Receivership Entities' accounts. Nadel also maintained "shadow" banlc accounts at Wachovia Banlc, N.A. ("Wachovia Bank") which he used to transfer money among the Hedge Funds to fund distributions. These 4 I n past Interim Reports, the Receiver reported a slightly higher number for the total amount invested. This previously reported amount included purported "internal transfers" among "accounts" with different Hedge Funds. The currently reported total investment number does not include these purported transfers. 17 Case 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 22 of 78 PagelD 9399 accounts enabled Nadel to move funds into and out of the various trading accounts and made his scheme possible. E. Nadel's Trading Activities in the Hedge Funds. In the Executive Summaries disseminated to investors, Nadel represented that the Hedge Funds were generating the annual returns reflected in Table 3, below, primarily through trading in the quadruple Qs (and also in real property for Scoop Real Estate). 5 Table 3: Fund Performance as Represented i n Executive Summaries Year 1999* 2000 2001 2002 2003 2004 2005 2006 2007 2008* Valhalla 36.00% 55.12% 19.78% 21.59% 41.57% 28.96% 30.19% 19.99% 19.24% 10.97% Victory N/A N/A 34.05%* 40.93% 42.52% 30.30% 25.90% 18.94% 19.65% 11.82% Viking N/A N/A 2.97%* 26.98% 46.42% 30.46% 27.40% 19.08% 20.60% 11.43% Viking IRA N/A N/A 2.97* 26.88% 45.23% 29.93% 26.36% 18.93% 20.55% 11.52% Victory IRA N/A N/A N/A N/A 30.43%* 32.16% 27.31% 19.50% 20.02% 11.72% Scoop Real Estate N/A N/A N/A : N/A N/A 48.67%* 32.14% 21.15% 21.75% 12.31% * Results are for an incomplete year. While Nadel did trade some money in quadruple-Qs, he did not achieve for the Hedge Funds the amount of returns he represented to investors. Rather, based on the documents the Receiver's fmancial expert has analyzed, the Hedge Funds as a whole lost significant sums. Table 4, below, shows the actual performance in the Hedge Funds' accounts for the indicated time based on the money actually traded. Importantly, those accounts always had far less money than was represented to investors. Since the returns below are based on those reduced 5 The term "Quadruple Qs" (ticker symbol: QQQQ) refers to the NASDAQ-100 Tracking Stock, an exchange-traded fund ("ETF") listed on the NASDAQ intended to track the NASDAQ index. 18 8:09-cv-00087-RAL-TBM Document 6 4 7 Filed 07/21/11 Page 23 of 78 PagelD 9400 sums, those returns do not correspond to - and actually grossly overstate - the actual performance of the amounts of assets under management as represented to investors. In short, Table 4 significantly overstates the "actual returns" which could be compared to the "represented returns" set forth in Table 3. Nevertheless, the information in Table 4 provides an indication of the gross misrepresentation of the Hedge Funds' performance. Table 4: Performance of Reduced Sums Actually Present in Hedge Fund Accounts Year 1999* 2000 2001 2002 2003 2004 2005 2006 2007 2008* Valhalla 2.46% (91.24%) (98.79%) (80.82%) 110.84% 9.39% 3.85% (0.64%) 7.30% (42.31%) Victory N/A N/A N/A (35.43%)* 63.59% 3.96% 1.45% (22.02%) (36.51%) (52.54%) Viking N/A N/A N/A (5.83%)* 29.52% (5.97%) 3.20% (23.68%) (56.84%) (29.93%) Viking IRA N/A N/A N/A (4.31%)* 55.07% 5.84% 2.89% (22.13%) (55.56%) (61.28%) Victory IRA N/A N/A N/A N/A 40.53%* 11.99% 4.38% (22.03%) (69.92%) (11.97%) Scoop Real Estate N/A N/A N/A N/A; N/A 60.91%* 24.54% (20.65%) (55.96%) (80.58%) * Results are for an incomplete year. Importantly, the performance of each individual Hedge Fund is not significant because Nadel arbitrarily allocated daily results of trading transactions among the Hedge Funds. He also transferred money among the Hedge Funds using "shadow" banlc accounts. This activity resulted in the commingling of the Hedge Funds' assets and makes the performance results of each individual Hedge Fund immaterial. In short, Nadel was losing significant sums of money while representing that he was achieving annual returns from 18.93% to 55.12% (for years with full activity). Nadel traded the money invested in the Hedge Funds in a pooled and commingled fashion through a single master trading account. Specifically, when trading, Nadel would 19 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647 Filed 07/21/11 Page 24 of 78 PagelD 9401 pool all of the available money raised from investors and invested in the different Hedge Funds, along with money in his personal or other non-Hedge Fund accounts that he controlled (collectively, "Nadel's Accounts"), in a single account and use it to purchase securities. Then, before the close of the trading session, Nadel allocated the completed trades as he wished among the accounts of the Hedge Funds and Nadel's Accounts. Typically, Nadel allocated profitable trades to Nadel's Accounts, including accounts in his name or in the name of Scoop Management or Scoop Capital, and unprofitable trades to the Hedge Funds' accounts. This activity resulted in the commingling of the Hedge Funds' assets and makes the performance results of each individual Hedge Fund immaterial. He also used personal and Hedge Funds' accounts at Wachovia Bank to transfer money among the various Hedge Funds. While the Hedge Funds' accounts experienced losses, all but one of Nadel's personal accounts and other accounts maintained essentially for the benefit of Nadel and Nadel's Accounts experienced significant gains. For instance, from inception through 2008, Scoop Capital's accounts experienced gains of $11,331,464, representing a 413.17% rate of return. Nadel's trading practices indicate that he engaged in a fraudulent practice known as "cherry picking." In cherry picking, the trader allocates profitable trades to himself and unprofitable trades to clients. See, e.g., S.E.C. v. K.W. Brown and Co., 555 F. Supp. 2d 1275, 1302-07 (S.D. Fla. 2007) (holding that "cherry-picking" day-trading scheme operated by officers constituted scheme to defraud under Securities Exchange Act). 20 Case 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 25 of 78 PagelD 9402 ACTIONS T A K E N BY T H E 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, described in Section I I , above. For additional efforts of the Receiver, please refer to prior Interim Reports. IV. Securing the Receivership Estate. A. Taking Possession of Defendants' Headquarters. On the day of his appointment, the Receiver took possession of the Receivership Entities' offices at 1618 Main Street, Sarasota, FL 34236 (the "Office"). Nadel used the Office as the headquarters for administering his control of the Investment Managers, Hedge Funds, and other Receivership Entities. Among other things, the Receiver ended the Office's lease and sold the office furniture and other items for $3,500.00. The Receiver removed documents, several servers, and other computer-related equipment from the premises that were used by Nadel and the entities he controlled. The Receiver retained experienced forensic information technology experts with the firm EHounds, Inc. ("E-IIounds"), to assist in securing and analyzing the electronic data on the computers. E-Hounds personnel have possession of the equipment, have secured the data, and are well underway in their forensic analysis. B. Securing Receivership Funds. At the outset of the Receivership, approximately $556,758.33 in cash and cash equivalents in financial accounts titled in the name of the Hedge Funds and Investment Managers were identified and frozen pursuant to the Nadel TRO and the Preliminary Injunction, itemized as follows: 21 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Scoop Capital Scoop Management Scoop Real Estate Valhalla Investment Partners Valhalla Management Victory IRA Fund Victory Fund Viking IRA Fund Viking Fund Viking Management Page 26 of 78 PagelD 9403 $12,506.98 $30,343.53 $139,554.86 $16,248.68 $7,309.98 $134,101.58 $80,686.75 $70,212.65 $56,896.07 $8,897.25 In addition, cash and cash equivalents in financial accounts titled in the name of other Receivership Entities at the time those entities were brought into receivership were approximately $629,750.47, itemized as follows: 1/27/09 (Doc. 17) 1/27/09 (Doc. 17) 2/11/09 (Doc. 44) 2/11/09 (Doc. 44) 2/11/09 (Doc. 44) 2/11/09 (Doc. 44) 3/9/09 (Doc. 68) 3/17/09 (Doc. 81) 3/17/09 (Doc. 81) 7/15/09 (Doc. 153) 8/10/09 (Doc. 172) Venice Jet Center, LLC Tradewind, LLC Laurel Mountain Preserve, LLC Laurel Preserve, LLC Marguerite J. Nadel Rev. Trust Laurel Mtn. Preserve Homeowner Assoc. Guy-Nadel Foundation, Inc. Lime Avenue Enterprises, LLC A Victorian Garden Florist, LLC Viking Oil & Gas, LLC Home Front Homes, LLC $69,761.41 $77,782.72 $5,328.03 $22,640.22 $381,142.34 $0.00 $58,092.49 $1,623.89 $10,456.96 $473.91 $2,448,50 Thus, total cash at the inception of the Receivership and as the Receivership was expanded to 6 include each additional Receivership Entity indicated was approximately $1,186,508.80. During the time covered by this Interim Report, all Receivership funds were held at (1) Northern Trust Banlc, N.A. in four CDs with a yield of 1.25%; (2) Bay Cities Banlc in six CDs, a non-interest bearing operating account, and a variable interest rate money market account; and (3) Whitney Bank in a money market account with interest of approximately 6 This amount does not include any sum for non-cash or non-cash equivalent assets the Receiver has recovered. For a discussion of these assets, please refer to Section V, below. 22 Case 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 27 of 78 PagelD 9404 .75%. As of July 19, 2011, the total funds in all Receivership accounts, including CDs, are approximately $21,885,060.69. The Receiver continues to review the appropriate action to take with respect to Receivership funds in light of the current state of the economy and financial institutions. I f appropriate and in the best interests of the Receivership, he will move the funds into other interest-bearing accounts and/or revenue-generating investments. C. Locating Additional Funds. One of the Receiver's highest priorities is to locate and recover any additional funds that were in Nadel or the Receivership Entities custody at the time of the scheme. The Receiver has retained a forensic accounting firm to assist in tracing funds. As discussed in Section V below, the Receiver's investigation revealed that significant sums were used to purchase or fund other entities. 1. Recovery of Tax Refunds The Receiver is working on obtaining 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. On or about October 13, 2010, the Receiver filed a Form 1045 Application for Tentative Refund ("Form 1045") for a carryback loss on behalf of the following individuals: (1) Chris Moody, seeking a refund of approximately $800,000; (2) Neil Moody, seeking a refund of $120,685; (3) Marguerite Nadel, seeking a refund of $2,398,594; and (4) Sharon Moody, seeking a refund of $417,964. Through the date of filing of this Interim Report, the Receiver has recovered a total sum of $1,394,214.12 in tax refunds from these applications. Specifically, on Januaiy 18, 23 Case 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 28 of 78 PagelD 9405 2011 and February 25, 2011, the Receiver received three refund checks for Chris Moody in the total amount of $875,983.17. In November and December of 2010, the Receiver received four separate refund checks for Sharon Moody for the years 2004 through 2007. The four checks totaled $417,964.00 which was the amount sought in the Form 1045. On February 4, 2011, the Receiver received a tax refund check in the amount of $100,266.95 for Neil Moody. The Receiver has not yet received any tax refund for Mrs. Nadel from the filing of the Form 1045. The Receiver intends to file a Form 1045 on behalf of Art Nadel seeking the return of approximately $1,183,525.00. Also, in or about July 2010, the Receiver learned that Mrs. Nadel, with the assistance of the Nadels' accountant Michael Zucker, improperly filed documents with the IRS on behalf of a Receivership Entity and had possession of two tax refund checks in the amounts of $588,956.17 and $672,403.16. After the Receiver filed a motion to obtain possession of these refund checks (Doc. 434), Mrs. Nadel delivered the two checks to the Receiver. Accordingly, the Court entered an order denying the aforementioned motion as moot (Doc. 439). The Receiver has deposited the total sum of $1,261,359.33 from these refund checks into the Receivership's accounts. Including these two refund checks, the total amount the Receiver has recovered from federal tax refunds to insiders is $2,655,573.45. The Receiver will continue to diligently investigate the existence of any additional funds and w i l l inform the Court and investors i f any are located. 24 8:09-cv-00087-RAL-TBM D. Document 647 Filed 07/21/11 Page 29 of 78 PagelD 9406 Receivership Accounting Report. Attached as composite Exhibit A to this Interim Report is a cash accounting report showing the amount of money on hand as of January 1, 2011 less operating expenses plus revenue through April 30, 2011. This cash accounting report does not reflect non-cash or cash-equivalent assets. Thus, the value of all property discussed in Section V below is not included in the accounting report. From January 1, 2011, through April 30, 2011, the Receiver received $228,165.64 in business income from ongoing operations of some 7 Receivership Entities; $106,026.96 in interest/dividend income; $706,098.82 in business asset liquidation; $2,368,733.76 in third-party litigation income; and $976,250.12 in other 8 income. (Ex. A.). Since the inception ofthe Receivership through April 30, 2011, the Receiver received $3,598,066.33 in business income from ongoing operations of some Receivership Entities; $2,066,501.32 in cash and securities; $464,967.27 in interest/dividend $3,045,310.75 in business asset liquidation; $120,000 in personal asset liquidation; $14,767,434.91 in third-party litigation income; and $3,126,453.81 in other income. income; 9 7 As discussed in Section V.A below, much of the entities' business income is derived from rental payments. 8 The "other income" includes: $875,983.17 recovered from Chris Moody's federal tax refund and $100,266.95 recovered from Neil Moody's federal tax refund. 9 The income numbers provided in this and the foregoing paragraph are gross figures and do not include any offset for business operations costs or any other expenses. 25 8:09-cv-00087-RAL-TBM E. Document 6 4 7 Filed 07/21/11 Page 30 of 78 PagelD 9407 Obtaining Information from Third Parties. Since obtaining control of the Receivership Entities, the Receiver and his professionals have had discussions - including continuing discussions - with a significant number of people associated with Nadel and/or the Receivership Entities. Further, on September 9, 2010, the Receiver deposed Peg Nadel and on February 4, 2011, the Receiver deposed Joyce Rowe. The Receiver and his professionals have also reviewed documents located in the Office; documents obtained from the accountant for several Receivership Entities; information stored on the Receivership Entities' computer network; documents obtained from other businesses controlled by Nadel; documents obtained from financial institutions and other third parties, including lawyers and others who assisted Nadel's businesses with their transactions; and information available in the public record. In connection with the Commission Proceeding, the Receiver has sought documents from Donald H. Rowe ("Rowe") and from financial institutions where Rowe and his related entities maintained accounts. Rowe has made repeated efforts to prevent and/or limit the Receiver's requested productions. These efforts include the filing of two motions to quash and three motions for protective order in the Commission Proceeding (See Motions to Quash, Docs. 416 and 541; Motions for Protective Order, Docs. 250, 479, and 544). Rowe also filed one motion for protective order in the lawsuit against him and others. (See Motion for Protective Order, Doc. 16.) (The lawsuit against Rowe is discussed below in Section V.E.2.b.) A l l of the motions were denied and Rowe and the pertinent financial institutions 26 C a s e 8:09-cv-00087-RAL-TBM have produced documents. D o c u m e n t 647 Filed 07/21/11 Page 31 of 78 PagelD 9408 (See Orders Docs. 267, 424, 481, 542, and 569 in the Commission Proceeding and Doc. 17 in the lawsuit against Rowe.) A. Expansion of Receivership to Include Additional Entities. > As a result of the review of these records and of the discussions noted above, 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; and Traders Investment Club. Along with Summer Place Development Corporation, these entities w i l l hereinafter be referred to collectively as the "Additional Entities." 10 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; known encumbrances related to those assets; and actions taken by the Receiver with respect to those assets. Where possible the Receiver has included estimated values of these assets. However, given the state of the U.S. economy at the time of this Report and the possibility for additional information not yet uncovered by the Receiver, it is important to note that any 10 The Receiver gained control of Summer Place Development Corporation by virtue of Scoop Capital's ownership interest in that entity. However, for various reasons, a formal order expanding the Receivership to include this entity has not been sought. 27 Case 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 32 of 78 P a g e l D 9409 such estimations, valuations or appraisals are subject to change. Due to the poor state ofthe real estate markets, the estimates provided may differ markedly from the actual amounts realized upon the selling of any real property. 1. Venice Jet Center, L L C . Venice Jet Center, LLC ("VJC"), is a Florida limited liability company formed in April 2006. Nadel was its managing member and registered agent, and its principal address was the Office. The assets of VJC were purchased with proceeds of Nadel's scheme, and over time additional proceeds of the scheme were transferred to VJC. On January 27, 2009, the Court expanded the Receivership to include VJC. VJC was a fully operating fixed-base operator that included a flight school, fueling service, hangar rentals, and a cafe. On January 20, 2010, the Court approved the sale of the VJC's assets and an agreement with Northern Trust (Motion, Doc. 254; Order, Doc. 321.) In pertinent part, VJC's assets were sold to Tristate Aviation Group of Florida LLC for (1) $300,000 cash at closing; (2) a $250,000 unsecured promissory note payable over a term of three years; (3) resolution of a $1,960,169 loan with Northern Trust; and (4) assumption of prosecution of the Part 16 Complaint subject to an offset of the note obligations to the Receiver for up to $50,000 for expenses and costs actually incurred in connection with efforts to resolve all disputes with the City of Venice, including the Part 16 Complamt. For more information, please refer to prior Interim Reports. 2. Tradewind, L L C . Tradewind, LLC ("Tradewind") was formed in Delaware in January 2004 and registered for the first time in Florida in March 2008. Nadel was Tradewind's managing 28 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 33 of 78 PagelD 9410 member and registered agent, and its principal address was the Office. Tradewind owned and controlled five planes and one helicopter and owns 31 hangars at the Newnan-Coweta County Airport in Georgia (the "Georgia Hangars"). The Receiver's investigation revealed that Tradewind was funded with money from Nadel's scheme. Tradewind is a fully operating business with potential to generate assets for the Receivership estate. On January 27, 2009, the Court expanded the Receivership to include Tradewind. Since the Receiver's appointment as Receiver of Tradewind, he has taken control of it and is continuing to operate the business. Tradewind collects approximately $20,000 in monthly rent and incurs varying monthly expenses, which include land rent, loan payments, and various utilities. The Receiver is entertaining offers to purchase this business or any of its assets. The Receiver has possession and control of the Georgia Hangars, which have one known encumbrance: a loan with the Bank of Coweta with a remaining balance of approximately $903,252.60 (as of June 2011) and monthly payments of $8,055. There is also monthly rent of $3,079.89 due to the Newnan Coweta Aviation Authority. The Receiver has been making these monthly payments as he believes they are in the best interest of the Receivership. The Receiver has received offers to purchase the Georgia Hangars. The offers, however, were below what the Receiver believes to be the fair market value of the Hangars. The Receiver also acquired possession and control of the five planes and helicopter. The Receiver sold four of these aircraft for a total of $301,500 and returned the remaining two in exchange for cancellation of outstanding debts on those aircraft. 29 For more 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 34 of 78 PagelD 9411 information regarding the various aircraft and their respective Court-approved dispositions, please refer to prior Interim Reports. 3. Laurel Mountain Preserve, L L C ; Laurel Preserve, L L C ; and Laurel Mountain Preserve Homeowners Association, Inc. Laurel Mountain Preserve, LLC ("Laurel Mountain"), was formed in Florida in December 2003. Nadel was Laurel Mountain's manager and member, and its principal address was the Office. Laurel Mountain was "withdrawn" as a limited liability company in January 2006. Laurel Preserve, LLC ("Laurel Preserve"), was formed as a North Carolina limited liability company in February 2006. Nadel was Laurel Preserve's registered agent and manager, and its principal address was the Office. The Laurel Mountain Preserve Homeowners Association, Inc. (the "HOA"), is a North Carolina non-profit corporation formed in March 2006. Nadel was the HOA's registered agent, and its principal address was the Fairview, North Carolina home. Documentation reviewed and information obtained by the Receiver shows that Laurel Preserve holds title to approximately 420 acres near Asheville, North Carolina in Buncombe and McDowell counties, intended for development of home-sites (the "Laurel Mountain Property"). On Februaiy 11, 2009, the Court expanded the Receivership to include Laurel Mountain, Laurel Preserve, and the HOA. 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. 30 Case 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 35 of 78 PagelD 9412 There is also a cabin home on this property that, according to the Buncombe County Property Appraiser, is valued at $319,800. The Laurel Mountain Property's infrastructure is fully developed: infrastructure and utilities are currently in place and are fully functional. The Laurel Mountain Property has two Icnown encumbrances. The first encumbrance is a $360,157.37 loan from BB&T Banlc. The second encumbrance is a $1,900,000 interest only loan from Wachovia Bank. There is a monthly payment of $5,149.66 due on this latter loan and the Receiver presently is not making the loan payments. At the time the Receiver recovered the Laurel Mountain Property it also had a third encumbrance. The third encumbrance was an easement of approximately 169 acres of the Laurel Mountain Property, which was granted to a land conservancy in 2005 (the "Easement"). It appeared that this donation was made in part for the Nadels' own tax benefit. The Receiver determined that it would be in the best interests of the Receivership to recover this Easement from the conservancy as it may generate an exponential increase in the value of the full acreage. The Receiver instituted an ancillary civil proceeding against the Carolina Mountain Land Conservancy ("the Conservancy") to extinguish the Easement on December 1, 2009. Burton W. Wiand, as Receiver v. Carolina Mountain Land Conservancy, M.D. Fla. Case No. 8:09-cv-2443-T-27TBM ("Conservancy Action"). On May 21, 2010, the Receiver filed an Amended Complaint seeking to extinguish the easement, or alternatively, recover from the Conservancy a sum of money equal to the greater of the value of the property that is subject to the Easement or the diminution in value to the Laurel Mountain Property as a result of the Easement. (Conservancy Action, Doc. 10.) 31 The Amended Complaint also sought the Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M D o c u m e n t 647 Filed 07/21/11 Page 36 of 78 PagelD 9413 recovery of all donations made by the Receivership Entities to the Conservancy because the donations were made with proceeds of Nadel's scheme and were fraudulent transfers. These donations totaled approximately $30,429. The parties mediated this matter on January 6, 2011 and ultimately were able to reach an accord. On April 1, 2011, the Receiver filed a motion to approve the settlement with the Conservancy. (Doc. 614.) In pertinent part, the settlement provides that the Receiver will dismiss the Conservancy Action in consideration of the Conservancy (1) returning the unused donations in the amount of $10,115 and (2) agreeing to obtain an order vacating the Easement. The Court granted this motion in its entirety on April 4, 2011. (Doc. 615.) For more information regarding the Laurel Mountain Property, please visit http://www.laurehnountainpreserve, com. Parties interested in purchasing this property should contact: Jason Burk Sperry Van Ness/Whitney Commercial Real Estate 1100 Ridgefield Blvd., Suite 100 Asheville, NC 28806 Office: (828)665-9085 Email: jason.burk@svn.com 4. Marguerite J . Nadel Revocable Trust UAD 8/2/2007. The Marguerite J. Nadel Revocable Trust Under Agreement Dated 8/2/2007 (the "Trust") was created on August 2, 2007. The Receiver's investigation revealed that the Trust was funded entirely with proceeds of Nadel's scheme thi-ough (1) a transfer of $500,000 from Scoop Management in August 2007 and (2) a transfer of $150,000 from Scoop Capital on the day before Nadel fled. On February 11, 2009, the Court expanded the 32 C a s e 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 37 of 78 PagelD 9414 Receivership to include the Trust. The Receiver took control of the Trust's bank account and used the funds for Receivership costs and expenses. 5. 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 is working on marketing the real property owned by the Foundation. The Receiver has discovered that from 2000 through 2008, the Foundation made a total of approximately $2,484,589 in contributions from scheme proceeds to various nonprofit organizations and charities. The Receiver has focused his attention on the charitable organizations that received the most contributions. As discussed in Section V.E.4, the Receiver sought to obtain tolling agreements from all charitable organizations so he could contemplate the appropriate action to take regarding these significant disbursements. Three charities did not provide such agreements, thus the Receiver had no recourse but to initiate actions against them. Further, one of the tolling agreements expired and the charity refused to extend the agreement. Accordingly, the Receiver had no choice but to initiate an action against this charity as well. (See discussion of litigation at Section V.E.4 below.) The Receiver has pursued settlement negotiations with the charitable organizations with tolling agreements with little success. 33 The Receiver has mediated with two such Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647 Filed 07/21/11 Page 38 of 78 PagelD 9 4 1 5 organizations and was unable to reach an accord. At this time, the Receiver plans to proceed with filing complaints against these organizations. 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 lots appear to have been purchased by Laurel Mountain and the Nadels as part of the same general transaction in which Laurel Mountain purchased the Laurel Mountain Property. In December 2003 and December 2004, Laurel Mountain and Nadel and his wife deeded these lots to the Foundation. The Receiver is currently marketing this property with the Laurel Mountain Property. Parties interested in purchasing this property should contact: Jason Burk Sperry Van Ness/Whitney Commercial Real Estate 1100 Ridgefield Blvd., Suite 100 Asheville, NC 28806 Office: (828)665-9085 Email: jason.biu.-k@svn.com Thomasville,, Georgia Parcels Additionally, the Receiver has possession and control of two small parcels of unimproved land in Thomasville, Georgia (this land is separate from the Thomasville Property discussed in Section V . B . I , below) owned by the Foundation. According to the Thomas County Board of Tax Assessors, the first lot (located on North Stevens Street) has a 2010 tax valuation of $34,745, and the second lot (located on Church Street) has a 2010 tax valuation of $4,276. Parties interested in purchasing these parcels should contact the Receiver directly. 34 Case 8:09-cv-00087-RAL-TBM 6. Document 647 Filed 07/21/11 Page 39 of 78 PagelD 9416 Lime Avenue Enterprises, L L C , and A Victorian Garden Florist, LLC. Lime Avenue Enterprises, LLC ("Lime") was formed in Florida in August 2006. Nadel was a managing member of Lime. Lime owned a building located at 599 North Lime Avenue, Sarasota, Florida 34237 (the "Lime Building"). Lime purchased the Lime Building in August 2006. Public records and other information reviewed by the Receiver indicate that Lime was formed by Nadel and Mrs. Nadel (who also was a manager of Lime) for the purpose of purchasing the Lime Building. The Lime Building houses a flower shop, which was owned by A Victorian Garden Florist, LLC (the "Florist"), which was formed in Florida in April 2005. The Receiver's investigation revealed that Lime and the Florist were funded with proceeds from Nadel's scheme. On March 17, 2009, the Court expanded the Receivership to include Lime and the Florist. The Receiver had possession and control of the Lime Building. The Lime Building had one known encumbrance: a mortgage owed to the individuals who sold the building to Lime (Ron Carter and James Neal) on which the balance was approximately $600,000. The Receiver also took control of the business and determined that ownership of the Florist was not in the best interest of the Receivership. The Florist did not have sufficient revenue to cover its expenses. Neither the Lime Building nor the Florist was generating any income for the Receivership. Further, it appeared that the market value of the Lime Building was less than the amount of its encumbrance. Accordingly, the Receiver determined that it was in the best interests ofthe Receivership estate to convey the Lime Building and the Florist's remaining business assets to Messrs. Carter and Neal ("Carter and Neal") in exchange for the release 35 C a s e 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 of all claims against the Receivership estate. Page 40 of 78 PagelD 9417 In short, the Receiver believed that this conveyance was in the best interests of the Receivership because: (1) the Receiver does not believe there was any equity in this property; (2) the remaining business assets of the Florist had no realizable value; (3) the conveyance would eliminate over $600,000 in debt obligations and a claim of over $1,160,000 against the Receivership estate; and (4) it would save the Receivership the ongoing costs of maintaining the Lime Building. On May 25, 2011, the Receiver filed his motion to convey the Lime Building and the Florist's remaining business assets to Carter and Neal (Doc. 631). The Court granted the Receiver's motion in its entirety on May 26, 2011 (Doc. 633). The Receiver also took possession and control of two vans owned by Lime: a 1999 Ford van and a 2003 Dodge van. The Receiver sold these vans for $500 and $2,000, respectively. 7. Viking Oil & Gas, L L C . 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. Its principal address was the Office. The Receiver's investigation revealed that Viking Oil was funded with proceeds from Nadel's scheme. The funds invested in Viking Oil were used to purchase an investment interest in Quest Energy Management Group, Inc. ("Quest EMG"). Between February 2006 and April 2007, through Viking Oil, the Moodys invested $4 million to fund a working interest in Quest EMG. As discussed in Section V.C.4, below, the Receiver also has possession of a promissory note from Quest EMG and two individuals to Valhalla Investment Partners in the 36 Case 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 41 of 78 PagelD 9418 amount o f $1,100,000. On July 15, 2009, the Court expanded the Receivership to include Viking Oil. Since the Receiver's appointment as Receiver of this entity, he has taken control of it and is determining the most prudent course of action to take with respect to the working interest in Quest EMG. A n examination of this venture has caused the Receiver to question the viability and value of this investment. The Receiver hired a forensic accountant, Otto L. Wheeler, CPA/ABV, to assist with further examination of Quest EMG and the Receivership's interest therein. Mr. Wheeler identified various issues that were the subject of further inquiry. While pursuing those issues, the parties had reached an agreement to resolve this matter, however Quest failed to make the required settlement payment timely and so the agreement expired on its own terms. The Receiver will therefore proceed with collection efforts. 8. Home Front Homes, L L C . Home Front Homes, LLC ("Home Front Homes"), is a Florida limited liability company that was formed in 2006. Nadel was the sole managing member of Home Front Homes, and Scoop Capital owned a majority membership interest in it. Home Front Homes was engaged in the business of manufacturing, marketmg, and sellmg energy-efficient homes. Home Front Homes was an operating business until September 2009. On August 10, 2009, the Court expanded the Receivership to include Home Front Homes. (Doc. 170.) On January 6, 2010, the Court granted the Receiver's motion to sell certain of Home Front Homes' assets and approve an agreement with M & I Banlc in its entirety. (See Jan. 6, 2010, Order, Doc. 293; Motion, Doc. 291.) In salient part, (1) South American Development Corporation ("SADC") agreed to purchase certain assets for $250,000, with $150,000 to be 37 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M D o c u m e n t 647 Filed 07/21/11 Page 42 of 78 PagelD 9419 paid at closing and a zero interest promissory note secured by the assets due December 18, 2010 for the $100,000 balance 11 and (2) M & I agreed to waive over $3,000,000 in debt obligations and forego any deficiency claims against the Receivership estate in exchange for 65% of the cash and note proceeds after $12,000 has first been paid to the Receiver for expenses incurred. As a result of this agreement, the Receiver should realize over $95,000 from the sale of Home Front Homes' assets and alleviate over $3,000,000 of debt 12 obligations. After the sale of certain of Home Front Homes' assets, Home Front Homes continued to own a parcel of real property located at 512 Paul Morris Drive, Englewood, Florida 34223, Lot 81 of the Morris Industrial Park. The Receiver determined that it was in the best interests of the Receivership to convey this property to William Bishop, as Trustee of the William F. Bishop Revocable Trust in exchange for the release of all claims against the Receivership estate. For more information regarding Home Front Homes and related litigation, please refer to prior Interim Reports. 9. Summer Place Development Corporation. Summer Place Development Corporation ("Summer Place") is a Florida company that was formed in 2005. The Receiver has not sought a formal order expanding the 11 On March 22, 2011, SADC paid $25,000 on the promissory note. On June 24, 2011, SADC paid $80,225 which was the $75,000 balance due on the note plus 7% interest on the previous unpaid balance. 1 2 The Receiver sold, or otherwise disposed of several assets that were not included in the asset purchase agreement discussed above for a total amount of $7,600. These assets included a pick-up truck, two small free standing storage structures, and a telephone system. 38 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 4 3 of 78 PagelD 9420 Receivership to include Summer Place. However, Nadel purchased 50% of the holdings in Summer Place with a $200,000 investment in Home Front Homes and payment of $50,000 to the co-managing member's investment company. Nadel became a managing member of Summer Place, and Scoop Capital owns a fifty-percent interest in Summer Place. By virtue of this fifty-percent interest, the Receiver has not assumed full control over Summer Place but is working with the other managing member and fifty-percent owner in directing the operation of Summer Place for the benefit of the Receivership estate. Summer Place is an operating business and owns a 6-acre parcel in Bradenton, Florida. The owners originally intended to build thirty affordable home sites on this property. However, due to the decline in the market for affordable housing, no development has taken place. Taxes on the property are approximately $3,000 a year. The Receiver intends to sell Scoop Capital's equity interest ih this entity in a manner most beneficial to the Receivership estate. Parties interested in marketing or purchasing Scoop Capital's interest in this business should contact the Receiver directly. 10. Traders Investment Club. Traders was a Florida partnership formed in December 1998 to operate as a purported "investment club." Nadel controlled Traders and purported to buy and sell securities on its behalf in an effort to generate trading profits. Records in the Receiver's possession show that Traders was in existence until December 2005. During its existence, Traders had approximately 35 different investors many of whom were also simultaneously investors in the Hedge Funds. Aside from raising money for Traders from investors, the Receiver's 39 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 44 of 78 PagelD 9421 investigation revealed that Nadel funded Traders with unlawful transfers from the Hedge Funds. Nadel purported to close Traders in 2005 by distributing supposed "principal and trading gains" directly to investors or to the Hedge Funds as purported "roll-overs" into the pertinent investors' Hedge Fund "accounts." Further, representations Nadel made to Traders' investors regarding investment performance were grossly overstated. Because of the commingling of funds between Traders and the Receivership Entities and the fraud perpetrated by Nadel through his control of all of these entities, the Receiver sought the expansion of the Receivership to include Traders. (See Motion to Expand Receivership to Include Traders, Aug. 9, 2010, Doc. 453.) On August 9, 2010, the Court expanded the Receivership to include Traders (Doc. 454). B. Recovery of Real Property. In addition to the assets discussed in conjunction with the expansion of the Receivership in Section V.A, the Receiver has also recovered a number of other assets, most of which continue to be valued, assessed, and otherwise analyzed for liquidation, disposition, or other action. Again, given the state of the U.S. economy at the time of submission of this Report, the Receiver emphasizes that any estimates, appraisals, or valuations are subject to change because of market forces. In particular, due to the poor state of the real estate markets, the estimates provided in this section may be significantly different from the amounts realized upon selling such real property. 40 8:09-cv-00087-RAL-TBM 1. Document 647 Filed 07/21/11 Page 45 of 78 PagelD 9422 Thomasville, Georgia. The Receiver obtained possession and control of approximately 14 acres in Thomasville, Georgia (the "Thomasville Property") which encompassed 45 lots, 44 of which were undeveloped. The Thomasville Property was purchased on January 5, 2007 for $285,000 with proceeds from Nadel's scheme. The Thomasville Property was heavily encumbered with debt in excess of $759,000 owed to Thomasville National Bank ("TNB") as of February 23, 2010. The Receiver was able to sell the Thomasville Property for $725,000 which he believed fairly represented the market value of the property. Because the purchase price was insufficient to satisfy the outstanding liens on the property, the Receiver reached an agreement with TNB wherein TNB agreed to accept the purchase price less commissions in exchange for the full settlement of all amounts owed under the loans and the waiver of all claims against the Receivership estate. On February 26, 2010, the Court approved the sale of the Thomasville Property and Agreement with TNB as provided in the motion submitted by the Receiver. (Motion, Doc. 350; Order, Doc. 352.) The Receiver believes that the disposition of the property as described above was in the best interests of the Receivership. For more information regarding the Thomasville Property and the terms of its sale, please refer to prior Interim Reports. 2. Grady County, Georgia. The Receiver was in possession of approximately 33 acres of undeveloped land owned by Scoop Capital in Grady County, Georgia (the "Grady Property"). According to Grady County public records, the land value of the Grady Property in 2010 was $151,125. 41 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 46 of 78 PagelD 9423 On April 25, 2011, the Receiver filed an unopposed motion to approve the sale of the Grady Property (Doc. 619). The Court granted the motion in its entirety on April 25, 2011 (Doc. 620). I n pertinent part, the Order approved the sale of the Grady Property for $135,000. The purchaser provided the Receiver with $1,000 in earnest money and paid the balance of the purchase price at closing, which occurred on May 3, 2011. The Receivership estate netted approximately $123,717.84 from the sale of the property after payment of commissions and other expenses associated with the sale. The Receiver believes that this sale was in the best interest of the Receivership and that the purchase price represents the fair market value for the Grady Property. 3. Graham, North Carolina. The Receiver has possession and control of a building located at 841 South Main Street, Graham, North Carolina 27253 (the "Rite-Aid Building"). This building was purchased for $5,310,000 and is currently being leased to a Rite-Aid Pharmacy for $33,073.08 per month. The Rite-Aid Building has one known encumbrance: a $2,655,000 interest-only loan with Wachovia Bank, which matured in June 2009. The Receiver paid interest on this loan through October 2009. He currently is not making any payments on this loan. The Receiver had reached agreements in principle to sell the Rite-Aid Building. The parties, however, were unable to reach a final agreement. Parties interested in purchasing the Rite-Aid Building should contact: Jim Hamilton, Director Holliday Fenoglio Fowler, L.P. 3414 Peachtree Road NE, Suite 736 Atlanta, GA 30326 Telephone: (404) 942-2212 Fax: (404) 942-2181 42 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 47 of 78 PagelD 9424 Email: ihamilton@hfflp.com 4. Raleigh, North Carolina. The Receiver has possession and control of a building located at 4905 Waters Edge, Raleigh, North Carolina 27060 (the "Waters Edge Building"). This building was purchased for $1,900,000 and was leased to Electronic Data Systems ("EDS"), a technology services provider, for $29,688.54 per month. EDS' lease term ended January 2010 and EDS did not renew its lease. The Receiver is working on reletting this property. The Waters Edge Building has no Icnown encumbrances. Parties interested in purchasing or leasing the Waters Edge Building should contact: John La Rocca J. Rex Thomas, John Linderman Grubb & Ellis/Thomas Linderman Graham 1511 Sunday Drive, Suite 200 Raleigh, NC 27607 Office: (919)785-3434 Fax: (919)785-0802 Email: jolin.larocca@tlgcre.com 5. Tupelo, Mississippi. The Receiver had possession and control of a building located at 2433 West Main Street, Tupelo, Mississippi 38801 (the "Starbucks Building"). This building was purchased for $941,000 and was being leased to Starbucks (Store #8809) for $6,279.19 per month. The Starbucks Building had no known encumbrances. On February 18, 2011, the Receiver filed an unopposed motion to approve the sale of the Starbucks Building (Doc. 599). The Court granted the motion in its entirety on February 22, 2011 (Doc. 601). In pertinent part, the Order approved the sale of the Starbucks Building for an all-cash offer of $715,000. The purchaser provided the Receiver with $25,000 in earnest money and paid the balance of the 43 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 48 of 78 PagelD 9425 purchase price at closing, which occurred on February 24, 2011. The Receivership estate netted approximately $651,216 from the sale of the property after payment of commissions and other expenses associated with the sale. The Receiver believes that this sale was in the best interest of the Receivership and that the purchase price represented the fair market value for the Starbucks Building. 6. Ncwnan, Georgia. The Receiver had possession and control of a gas station located at 5 McCollum Station, Newnan, Georgia 30265 (the "Newnan Property"). This property was purchased on January 20, 2006 for $2,450,000 and had no encumbrances. The Newnan Property consists of approximately two acres of land and a 3,500 square-foot building. The sale of the Newnan Property was completed on August 5, 2010. In total, the Receivership received proceeds of $1,750,000 from the sale of the Newnan Property. Prior to the sale of this propeity, the Receiver received opinions from real estate professionals in the area that the property was valued between $1.2 million and $1.4 million. For more information regarding the sale of the Newnan Property, please refer to prior Interim Reports. 7. Fairview, North Carolina. On March 30, 2009, the Court granted the Receiver's motion (Doc. 98) for possession of property located in Fairview, North Carolina (the "Fairview Property"). (Doc. 100.) Nadel and his wife purchased the Fairview Property for $335,000 on June 14, 2004. The Fairview Property was a secondary residence of the Nadels and is located in the mountains of North Carolina. The Fairview Property has one known encumbrance: a loan with BB&T Bank on which there is a remaining principal balance of approximately $248,941.73. The 44 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 49 of 78 PagelD 9426 Receiver received two offers for the purchase of the Fairview Property. One offer was below what the Receiver believed to be the fair market value of the property. The Receiver negotiated with the other prospective buyer; however, the buyer was unable to obtain financing. The Receiver retained $2,000 from funds put in escrow by this prospective buyer. Parties interested in purchasing the Fairview Property should contact: The Armour Team Mike and Nona Armour Keller Williams Professionals 86 Asheland Avenue Asheville, NC 28801 Mike Armour: (828) 771-2342 Nona Armour: (828) 771-2336 http://armourteam.homesandland.com, listing ID #13704540 8. Sarasota, Florida (Fruitville Road). On July 8, 2009, the Court granted the Receiver's motion (Doc. 146) for possession of property located at 15576 Fruitville Road in Sarasota, Florida (the "Fruitville Property"). (Doc. 148.) To purchase the property, Nadel paid a $5,000 deposit on March 5, 2003, and $201,163.93 at closing. The Fruitville Property is residential propeity that was purchased in the names of Nadel and Mrs. Nadel, was deeded to their trusts, and was rented to third parties. Presently, the tenant pays a monthly rent of $500. The Fruitville Property has one known encumbrance: a loan with Northern Trust on which there is a remaining principal balance of approximately $173,929.23. Parties interested in purchasing the Fruitville Property should contact: Sharon Chiodi Sotheby's International Realty 50 Central Avenue, Suite 110 Sarasota, Florida Phone: (941)364-4000 45 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647 Filed 07/21/11 Page 50 of 78 PagelD 9427 Fax: (941) 364-9494 Email: sliaron.chiodi@sothebyrealty.com 9. Oberlin, Ohio. The Receiver has title to a condominium in Oberlin, Ohio (the "Oberlin Property"). The Oberlin Property was purchased on or about September 23, 2003, with the funds of Intex 13 Trading Corp. ("Intex") and was originally titled in Nadel's name. There are no known encumbrances on the Oberlin Property. Parties interested in purchasing the Oberlin Property should contact the Receiver directly. 10. 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. (Doc. 100.) On or about May 23, 2006, Neil Moody as Trustee of the Neil V. Moody Revocable Trust dated February 9, 1995 purchased the Bellasara Property for $2,160,000. Florida residence. The Bellasara Property was Neil Moody's primary The Bellasara Property has two known encumbrances: a primary mortgage loan from MSC Mortgage, LLC in the amount of $956,000 and a home equity line of credit from Wells Fargo Bank N.A. with an initial balance of $880,000, both of which were obtained by Neil Moody on or about the date of the closing of the purchase of the 13 Nadel created Intex and at all times was its sole director and officer. Intex was the General Partner of Scoop Investments, Ltd., which is the predecessor of Victory Fund. On November 27, 2002, Scoop Investments, Ltd. was renamed Victory Fund, Ltd. . On December 20, 2002, Intex was replaced by Receivership Entity, Scoop Capital, as Victory Fund's general partner. 46 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 6 4 7 Filed 07/21/11 Page 51 of 78 PagelD 9428 Bellasara Property. The Bellasara Property is currently subject to a foreclosure proceeding in the Twelfth Circuit in and for Sarasota County, Florida. The Receiver has notified all parties in the pending foreclosure to effectively stop the proceeding and has undertaken to market the property and negotiate with the lenders in an effort to generate money for the Receivership estate. Parties interested in purchasing the Bellasara Property should contact: Sharon Chiodi Sotheby's International Realty 50 Central Avenue, Suite 110 Sarasota, Florida Phone: (941)364-4000 Fax: (941)364-9494 Email: sharoii.chiodi@sothebvrealty.com 11. Evergreen, Colorado. The Receiver has possession and control of property located at 30393 Upper Bear Creek Road, Evergreen, Colorado ("Evergreen Property"). The Evergreen Property is a residential property that was used by Neil and Sharon Moody. The property was purchased in 1988 for $290,000. The Evergreen Property has one known encumbrance: a loan with Wells Fargo on which there is a remaining balance of approximately $387,778.56 as of May 2011. Parties interested in purchasing the Evergreen Property should contact: Yvette Putt Fuller Sotheby's International Realty 32156 Castle Court, Suite 201 Evergreen, Colorado Phone: (303)674-3200 Fax: (303) 526-0828 Email: vputt@fullerproperties.com 47 Case 8:09-cv-00087-RAL-TBM 12. Document 6 4 7 Filed 07/21/11 Page 52 of 78 PagelD 9429 Tazewell, Tennessee. The Receiver has possession and control of property located at 780 Woodlake Blvd., Tazewell, Tennessee ("Tazewell Property"). The Tazewell Property is an undeveloped lot in a golf community that the Receiver obtained through a settlement with Profiteers. The property was purchased in 2007 for $60,000. The Tazewell Property has no known encumbrances. Parties interested in purchasing the Tazewell Property should contact: Debra Schuemann Realty Debra Schuemann, Broker Woodlake Golf Resort 330 Woodlake Blvd Tazewell, TN 37879 Phone: (865) 585-5230 Fax: (423)526-2920 Email: debschuemann(S>email.com 13. Sarasota, Florida (Jefferson Avenue). The Receiver had possession and control of a condominium located at 774 North Jefferson Avenue in Sarasota, Florida ("Jefferson Avenue Property"). The Jefferson Avenue Property is a residential property that was used by an employee of the Florist. The employee had executed a promissoiy note payable to Mrs. Nadel for $126,556.24 which was secured by a mortgage on the property. The employee defaulted on the note. The Receiver obtained the property through a foreclosure and judicial sale as a result of the default. The Sarasota County Property Appraiser assessed the fair market value of the Jefferson Avenue Property at $51,700 in 2010. On May 18, 2011, the Receiver filed an unopposed motion to approve the sale of the Jefferson Avenue Property (Doc. 629). The Court granted the motion on the same day (Doc. 630). In pertinent part, the Order approved the sale of the Jefferson Avenue Property for an offer of $55,000. The purchaser provided 48 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 53 of 78 PagelD 9430 the Receiver with $5,000 in earnest money and paid the balance of the purchase price at closing, which occurred on May 31, 2011. The Receivership estate netted approximately $48,347.79 from the sale of the property after payment of commissions and other expenses associated with the sale. The Receiver believes that this sale was in the best interest of the Receivership and that the purchase price represents the fair market value for the Jefferson Avenue Property. C. Recovery of Vehicles and Other Items. 1. Vehicles. The Receiver took control of seven vehicles: (1) 2008 Mercedes-Benz E63; (2) 2009 Volkswagen EOS; (3) Maserati Grand Turismo; (4) 1998 Jeep Wrangler; (5) 2006 Subaru Legacy Outback; (6) 1997 Jeep Wrangler customized in "Barbie" colors; and (7) John Deere Buck 4x4. The first three vehicles were leased by Valhalla Management and Viking Management. Because there was no value to these three vehicles and only the continuing obligation of lease payments, the Receiver surrendered them to the respective leasing companies without penalty and without the lessor retaining any claim to Receivership assets. The remaining four vehicles were sold for a total of $32,175. For more information regarding the sale of these vehicles, please refer to prior Interim Reports. 2. Condominium Note and Mortgage. On April 30, 2009, the Court granted the Receiver exclusive interest in a note and mortgage for the Jefferson Avenue Property. (Doc. 116.) The condominium's owner, an employee of the florist (see Section V.A.6 above), had executed a promissory note payable to Mrs. Nadel for $126,556.24. The note was secured by a mortgage held by Mrs. Nadel. On 49 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M D o c u m e n t 647 Filed 07/21/11 Page 54 of 78 PagelD 9431 February 9, 2009, Mrs. Nadel assigned the note and mortgage to Nadel's former criminal defense attorneys, who subsequently assigned the note and mortgage to the Receiver, per the Court's order. The condominium's owner was in default, and the Receiver initiated foreclosure proceedings. A summary judgment hearing was held on June 18, 2010 and an order of foreclosure was entered the same day. A judicial sale of the property was held on October 12, 2010. (See Section V.B.13 above for a discussion of the disposition o f t h e condominium). The Receiver filed a Motion for Deficiency Judgment on October 26, 2010. After a hearing on the motion, on February 2, 2011, the Court entered a Deficiency Judgment against the former owner in the amount of $99,963.37. The Receiver recorded this judgment and is taking appropriate steps to attempt to collect on it. 3. Bonds.com Assets. The Receiver's investigation revealed that proceeds of the scheme were used to fund a number of assets related to Bonds.com, Inc. ("Bonds.com"). Bonds.com is a registered securities broker dealer established in 2007. Bonds.com developed and operates an online trading platform for the sale of fragmented lots of fixed income securities. Through the course of the Receivership, the Receiver has obtained control of interests and related rights in Bonds.com, including promissory notes and shares of stock. Promissory Notes The Receiver has five (5) promissory notes from Bonds.com in the total amount outstanding of $1,840,636. The notes are as follows: 50 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 55 of 78 PagelD 9432 1) A term note issued to Valhalla Investment Partners with a principal amount due of $100,000. The principal amount of this note when the Receiver took possession of it was $400,000. Through the course of the Receivership the Receiver has received three payments on this note totaling $332,875, which included $300,000 of principal and $32,875 of accrued interest; 2) A convertible note in the amount of $203,800 also issued to Valhalla Investment Partners, convertible to 849,167 shares ofBonds.com stock; 3) A convertible note issued to Chris Moody in the amount of $1,236,836, convertible to 5,153,483 shares ofBonds.com stock; 4) A convertible note issued to Chris Moody in the amount of $50,000, convertible to 208,333 shares ofBonds.com stock; and 5) A convertible note issued to Neil Moody in the amount of $250,000, convertible to 1,041,667 shares ofBonds.com stock. The term note accrues interest at 9% and the convertible notes accrue interest at 10%. The notes are in part secured by the domain name www.bonds.com. With the exception of the term note, the rest of the promissory notes are convertible to Bonds.com shares of stock at the Receiver's option. No payments have been made on the convertible notes. In October 2010, senior management from the company met with the Receiver to discuss its current financial condition. Senior management asked the Receiver (and other noteholders) to consent to the restructuring of Bonds.com's debt obligations to allow Bonds.com to raise much-needed capital to continue its business operations. The success of Bonds.com would be of significant benefit to the Receivership Estate. Accordingly, on 51 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 56 of 78 PagelD 9433 October 18, 2010, the Receiver filed a Motion for Leave to Agree to Restructuring Transactions with Bonds.com (Doc. 499). The Court granted the motion on October 19, 2010 (Doc. 500). In pertinent part, the Receiver agreed to a three-year extension on the above promissory notes. Although the Receiver agreed to the three-year extension, he was given the right to demand payment on these notes beginning on April 22, 2012, with the then-outstanding and accrued interest payable in full 90 days from the date of demand. The Receiver further agreed to a modification to the current anti-dilution protections applicable to the Receiver's equity interests discussed below to the same anti-dilution protections afforded to new strategic investors. In exchange for the Receiver's consent to the restructuring, Bonds.com agreed to use commercially reasonable best efforts to provide the Receiver with a first priority security interest in the Bonds.com domain name. As of October 18, 2010, approximately two-thirds of noteholders other than the Receiver had agreed to subordinate their security interests in the domain name to those of the Receiver. Further, Bonds.com granted the Receiver (and other noteholders) the right to receive additional shares of common stock i f Bonds.com does not meet certain performance thresholds within a year from the date of the restructuring. In light of Bonds.com's capital requirements, a capital infusion was necessary for the company to continue operating. Due to that circumstance and the potential beneficial impact to the Receivership i f the company is successful, the Receiver believes that the agreements outlined above are in the best interests of the Receivership. 52 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 57 of 78 PagelD 9434 Shares of Stock The Receiver has possession and control of 7,582,850 unrestricted shares of stock in Bonds.com. As of July 20, 2011, the shares are valued at approximately $682,457 ($0.09 per share of common stock). For more information regarding how the Receiver obtained these shares, please refer to prior Interim Reports. At this time, the stocks are thinly traded and their realizable value is highly dependent upon the success of the company in the near-to-intermediate term. I f the Receiver were to sell all of these shares through the secondary market, assuming the market could absorb the sell order, the shares would likely have to be sold at a substantial discount compared to the then-current price per share being traded on the OTC Bulletin Board. I n other words, the proceeds from such a secondary market sale would most likely equal to only a small fraction of the current market value stated above. The Receiver is contemplating the appropriate action to take with respect to all of the Receivership's interests in Bonds.com, 4. Quest E M G Promissory Note. As mentioned above in Section V.A.7, the Receiver also has a promissory note from Quest EMG and two individuals to Valhalla Investment Partners i n the amount of $1,100,000. Interest is being paid monthly on this note. 5. 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. 53 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 58 of 78 PagelD 9435 The Receiver also obtained possession of jewelry from Queen's Wreath Jewels, Inc., Mrs. Nadel, Sharon Moody, and another Profiteer. On March 10, 2011, the Receiver filed a motion to approve the sale of this jewelry by auction through a consignment agreement with Leslie Hindman Auctioneers in Chicago (Doc. 607). The Court granted this motion on March 11, 2011 (Doc. 608). The auction was held on April 10 and 11, 2011. Through this auction, the Receiver successfully sold all 39 pieces of jewelry for a total of approximately $643,890, which substantially exceeded pre-auction estimates of $300,000 to $550,000. After the payment of commission and other related expenses, the Receivership estate realized approximately $591,663.85 from the sale of this jewelry. D. Recovery of Assets from the Moodys. The Receiver's investigation has 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. In April 2009, the Receiver initiated contact with the Moodys' counsel. On April 17, 2009, the Receiver received a letter from the Moodys agreeing that they would not transfer any assets of value owned by them, nor would they remove any such assets from the state of Florida without prior written notice to the Receiver. Chris Moody has satisfied this commitment and has fully 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 allows the Receiver to effectuate the transfer of most of his assets without any direct participation from Chris Moody. 54 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 6 4 7 Filed 07/21/11 Page 59 of 78 PagelD 9436 The Receiver met with Chris Moody, confirmed the assets he owned, and reviewed in detail Chris Moody's interests and liabilities in those assets. Meaningful assets the Receiver has identified are delineated on the attached Exhibit B. Where possible, the Exhibit provides percentage of interest acquired or purchase price, the estimated value, and status or disposition ofthe asset. For the most part, the Receiver is continuing to evaluate these assets and will take appropriate actions as he determines are in the best interests of the Receivership. Any entity in which the Receiver believes he may have a viable interest or potential for meaningful recovery has been put on notice of the Receiver's interests and rights. Additionally, Chris Moody surrendered all bank and brokerage accounts to the Receiver. On February 24, 2010, Chris Moody sent the Receiver a check in the amount of $8,085 which represented the total balance in Chris Moody's personal bank account. Shares of stock were transferred to accounts held by the Receiver. In addition to the Bonds.com interests discussed above, the Receiver also received the shares of stock identified on Exhibit B. The Receiver has reached an agreement with Neil Moody contingent upon the Court's approval wherein he agrees to cooperate with the Receiver to effect the orderly transfer of all of his meaningful assets and to provide assistance, as necessary, in connection with the Receiver's efforts to recover monies from third parties. The Commission is continuing to review this agreement. Neil Moody's assets include (1) personal property; (2) real property; (3) bank and brokerage accounts; (4) various corporate interests, including the Bonds.com interests discussed above; and (5) the tax refund also discussed above. The Receiver will 55 Case 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 60 of 78 PagelD 9437 provide pertinent details of the agreement and Neil Moody's assets in a future Interim Report after the Commission has completed its review of the agreement. On January 28, 2010, the Receiver obtained possession of a condominium owned by Neil Moody in Sarasota (see Discussion at V.B.10 above for Bellasara Property; Order, Jan. 28, 2010 (Doc. 327)). Enforcement Action Instituted Against Moodys On January 11, 2010, the Commission instituted an enforcement action against the Moodys alleging that they violated antifraud provisions of the federal securities laws in connection with their involvement in Nadel's scheme. See generally SEC v. Neil V. Moody, et al, Case No. 8:10-cv-00053-T-33TBM (M.D. Fla.) (the "Moody SEC Action"), Compl. (attached as Exhibit A to Doc. 325). Also on January 11, 2010, Neil Moody and Chris Moody, without admitting or denying the allegations of the complaint, consented to entry of a permanent injunction and agreed to disgorge all ill-gotten gains upon the Commission's request. (Moody SEC Action, Consent of Def. Neil V . Moody f 3, Doc. 2, Ex. 2) (also attached as Ex. B to Doc. 325.); (Moody SEC Action, Consent of Def. Christopher D. Moody f 3, Doc. 2, Ex. 1). On April 7, 2010, Judgments of Permanent Injunction and Other Relief were entered against Neil and Chris Moody. (Moody SEC Action, Docs. 9 (Neil Moody) and 9-1 (Chris Moody)). The Judgments permanently enjoin Neil and Chris Moody from further violations of the antifraud provisions of the federal securities laws. The Judgments also allow the Commission to seek an order for disgorgement of ill-gotten gains and/or a civil penalty. 56 8:09-cv-00087-RAL-TBM E. Document 647 Filed 07/21/11 Page 61 of 78 PagelD 9 4 3 8 Litigation. In January 2010, the Receiver filed 134 lawsuits seeking $71,096,326.43. The lawsuits seek (1) the recovery of false profits from investors; (2) the recovery of distributions from Receivership Entities to Neil and Sharon Moody, Donald and Joyce Rowe, and certain of their affiliated entities; (3) the recovery of other distributions, such as commissions, from other individuals and/or entities; and (4) the recovery of certain charitable contributions made with scheme proceeds. The Receiver also continues to pursue malpractice litigation against Holland & Knight and continues to evaluate possible additional litigation. Not including the litigation against Holland & Knight, as of July 20, 2011, 48 lawsuits filed by the Receiver remain pending. 1. Recovery of False Profits from Investors. As discussed in Section III.C above, the Receiver has 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 existing investors. To date, the Receiver has discovered approximately $35 million in such "false profits." The Receiver spent substantial time identifying recipients of these false profits (the "Profiteers"). 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 to be determined by the claims process). 57 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 62 of 78 PagelD 9439 As of April 30, 2011, the Receiver reached settlements with 121 Profiteers for a total sum of $17,684,817.77. The Court has approved all 121 of these settlements. During the time covered by this Interim Report, the Receiver settled 15 cases for the total amount of $2,568,720.25. The Receiver's efforts during this period also led to the settlement of eight additional cases as of July 20, 2011, for a further amount of $1,556,910.26. As of July 20, 2011, the Receiver has reached agreements to settle with 129 Profiteers for a total amount of $19,241,728.03 (plus additional non-cash assets). 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"). The complaints set forth claims for unjust enrichment and fraudulent transfers pursuant to Florida's Uniform Fraudulent Transfer Act ("FUFTA"). Except in situations where defendants had, or should have had, knowledge of the fraudulent investment scheme or otherwise cannot satisfy the pertinent good-faith standard, the Receiver is seeking to recover false profits but not the amount equivalent to the principal investment. Individuals and/or entities who the Receiver believes cannot satisfy the good-faith defense are discussed in subsections V.E.2 and V.E.3 immediately below. The Receiver is proceeding with this litigation. Scheduling conferences required by Rule 16 of the Federal Rules of Civil Procedure have been held for all of the Januaiy 2010 Cases. At these conferences, the Court ordered the parties to mediate all cases before proceeding with litigation except those brought to recover charitable contributions discussed in Section E.4 below. The Court stayed all formal discoveiy and set deadlines for responses to the complaints for after the mediations had been conducted. A l l January 2010 Cases 58 Case 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 which remain pending have been mediated as of April 2011. Page 63 of 78 PagelD 9440 As of July 20, 2011, the Receiver has mediated 70 cases, and as a result of these mediations 26 cases have been fully resolved. The parties also attended additional Rule 16 conferences by order of the court for purposes of further scheduling to effectively manage the cases. Trials have been set in all of these matters beginning in March 2012 and continuing through February 2013. Responsive pleadings, including motions to dismiss, answers and motions to compel arbitration, have been filed in all of the January 2010 cases. On May 25, 2011, the Receiver filed an Omnibus Motion for Partial Summary Judgment ("Summary Judgment Motion") in all January 2010 Cases still pending. Specifically, the Receiver seeks summary judgment on the following: (1) Nadel's guilty plea establishes that he operated the Hedge Funds as a Ponzi scheme from 1999 to January 2009; (2) because Nadel operated the Hedge Funds as a Ponzi scheme from 1999 to January 2009, every transfer of an asset from a Hedge Fund during that time was made with actual intent to hinder, delay, or defraud creditors of the Hedge Funds; and (3) because Nadel operated the Hedge Funds as a Ponzi scheme from 1999 to January 2009, during that period each of the Hedge Funds and Nadel were insolvent. If summary judgment is not entered on issues (1) and (2) above, the Summary Judgment Motion seeks summary judgment that: because Nadel pled guilty to securities fraud, mail fraud, and wire fraud, every transfer of an asset from a Hedge Fund during that period was made with actual intent to hinder, delay, or defraud creditors of the Hedge Funds. The Receiver has requested oral argument. In 23 ofthe January 2010 Cases, Defendants filed motions to compel arbitration. The 59 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M D o c u m e n t 647 Filed 07/21/11 Page 64 of 78 PagelD 9441 Receiver opposed these motions. Oral argument was held before the Honorable Magistrate Judge Mark A. Pizzo on April 25, 2011. On June 8, 2011, the Magistrate Judge issued his Omnibus Report and Recommendation. In short, the Report and Recommendation refers the cases to arbitration. The Receiver filed objections to the Report and Recommendation on June 22, 2011. On or about September 27, 2010, the Receiver filed 12 additional actions against Profiteers who invested with Traders' "accounts." The lawsuits seek to recover false profits of approximately $962,197.43. In anticipation of initiating these lawsuits, the Receiver filed a Motion to Reappoint Receiver (Doc. 492). That motion was granted on September 23, 2010. (Order, Doc. 493.) Rule 16 conferences have not yet been held in these matters. On April 20, 2011, the Receiver filed a Motion for Approval to Serve Proposals for Settlement i n connection with Ancillary Actions (Doc 617). The Receiver sought to serve proposals for settlement pursuant to Fla. Stat. § 768.79 to (1) encourage settlement of the ancillary actions, which would help preserve Receivership assets while increasing assets available for distribution, and (2) avoid the need to seek Court approval of the settlement i f the proposal is accepted. The Court granted the motion on April 21, 2011 (Doc. 618). From April 21, 2011 through May 25, 2011, the Receiver has sent 44 proposals for settlement. The Receiver believes that he has identified all of the Profiteers. However, the Receiver is verifying that identification and will bring additional actions if appropriate and in the best interests of the Receivership. The Receiver is continuing to engage in settlement discussions with defendants of the lawsuits discussed above. 60 8:09-cv-00087-RAL-TBM 2. Document 6 4 7 Filed 07/21/11 Page 65 of 78 PagelD 9442 Litigation against Moodys and Rowe. a. Moodys. On January 20, 2010, the Receiver filed suit against Neil V. Moody, individually and as Trustee of the Neil V. Moody Revocable Trust; Sharon G. Moody, individually and as Trustee of the Sharon G. Moody Revocable Trust; and the Neil V. Moody Charitable Foundation, Inc. (collectively the "Moody Defendants") for the return of $28,341,953.10. See Wiand, as Receiver v. Neil V. Moody, et al, Case No. 8:10-cv-249-T-17MAP (M.D. Fla.). On November 5, 2010, the Receiver filed a motion to approve the settlement of all claims asserted against Sharon G. Moody in her individual capacity and in her capacity as Trustee of the Sharon G. Moody Trust (collectively referred to as "Ms. Moody") (Doc. 516). The Court approved the settlement in its entirety on November 8, 2010 (Doc. 517). In pertinent part, the Receiver agreed to settle all claims against Ms. Moody in exchange for the following: (1) payment of $39,000 within 5 business days after the Court's approval of the settlement agreement; (2) conveyance of title to real property located in Evergreen, Colorado (which according to an appraisal obtained by the Receiver and a separate realtor's estimate, has approximately $450,000 to more than $500,000 in equity); (3) transfer by Ms. Moody to the Receiver of all jewelry, furnishings, antiques, and other personal property in the possession, custody, or control of Ms. Moody which was funded by Neil Moody (which items had a collective purchase price of approximately $350,000 or greater); and (4) transfer and assignment by Ms. Moody to the Receiver of any and all claims Ms. Moody has or may 61 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M D o c u m e n t 647 Filed 07/21/11 Page 66 of 78 PagelD 9443 have for tax refunds arising from her investment in the Receivership Entities (the Receiver has already received $417,964 in tax refunds for Ms. Moody, see Section IV.C.l, above). The Receiver believes that the settlement with Ms. Moody is in the best interests of the Receivership because resolution of these claims avoids protracted litigation, conserving Receivership assets and judicial resources; avoids the risk of litigation and of an unfavorable outcome; and, in the event of a favorable outcome, avoids a significant risk of not being able to fully collect on any eventual judgment. The Receiver has reached an agreement in principle with Neil Moody which would resolve the remainder of this litigation. The Receiver will provide the pertinent details of this agreement in a future Interim Report after the Commission has completed its review of the agreement. b. Rowe. On January 20, 2010, the Receiver filed suit against Donald Rowe ("Rowe"), individually and as Trustee of the Wall Street Digest Defined Benefit Pension Plan, Joyce Rowe, and Carnegie Asset Management, Inc. ("CAM") (collectively "Rowe Defendants") for the return of $8,610,428.90, which includes approximately $2,106,568.89 in false profits. See Wiand, as Receiver v. Donald Rowe, etal, CaseNo. 8:10-cv-245-T-17MAP (M.D. Fla.). As set forth in the Complaint, Donald Rowe, both in his individual capacity and as Trustee of the Wall Street Digest Defined Benefits Pension Plan, and Joyce Rowe were investors in one or more of the Hedge Funds and received distributions of purported trading profits or purported principal redemptions in connection with their investments which do not satisfy FUFTA's "good faith" standard and which are unjust. The Receiver seeks to recover those 62 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M D o c u m e n t 647 Filed 07/21/11 Page 67 of 78 PagelD 9444 transfers under FUFTA, or alternatively, seeks disgorgement of those amounts pursuant to equitable claims of unjust enrichment. Rowe played a key role in Nadel's scheme, and was also a major financial beneficiary as he, his wife, and his entities received millions of dollars of investor funds. He actively solicited a large number of investors in violation of federal and state securities laws. He also repeatedly touted and recommended the Hedge Funds in his investment newsletter, "The Wall Street Digest," and in "reports." He extolled that the Hedge Funds were managed by "America's Top-Ranked Money Manager" or with similar praise. In addition to Rowe's violation of various state and federal securities laws by his general solicitation of investors for the Hedge Funds, he further violated these laws by: (1) his receipt of purportedly performance-based fees and commissions for soliciting investors even though neither he nor his entities were registered with the State of Florida or the Commission as a broker/dealer, associated person of a broker/dealer, or an investment adviser; and (2) his repeated material omissions and misrepresentations made in connection with his solicitation of investors. Further, CAM (and Carnegie Wealth Management ("CWM"), a division of CAM) also received certain funds from the Hedge Funds under the terms of a purported "NonSolicitation Agreement." This Agreement was merely a fmancial settlement pursuant to which money from the Hedge Funds was transferred to C A M and CWM for "management" and "performance" fees Rowe claimed he was supposed to receive for his referral and solicitation of investors to the Hedge Funds. The Receiver believes this Agreement was fraudulent and nothing more than a document designed for the sole purpose of paying 63 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647 Filed 07/21/11 Page 68 of 78 PagelD 9445 improper fees to CAM and CWM. The Receiver seeks to recover all such sums distributed to CAM and CWM from Receivership Entities. The Hedge Funds also paid "management" and "performance" fees based on the purported value and performance of the Hedge Funds to another entity controlled by Rowe, Wall Street Online ("WSO"). WSO is now defunct, however, the Receiver has information and believes that its assets remain under Donald Rowe's control. The Receiver seeks to recover all such sums distributed to WSO from Receivership Entities. The parties mediated this matter on September 13, 2010 and September 28, 2010, but were unable to reach an accord. The Rowe Defendants filed an answer on January 27, 2011 (Doc. 39). The Receiver filed a motion for partial summary judgment on May 25, 2011 (Doc. 40) and requested oral argument (Doc. 42). No order has been issued on this motion. The trial in this matter is set for March 2012. The parties are engaging in discovery. 3. Recovery of Fees from Recipients of Commissions or Other Transfers. Information available to the Receiver revealed that at least three individuals received commissions as "compensation" under circumstances that warrant the Receiver's recoveiy of those sums. 14 In January 2010, the Receiver initiated lawsuits against these three individuals. See Wiand, Receiver v. Kelvin V. Lee and Barbara Lee, Case No. 8:10-cv-251-T-17MAP (M.D. Fla.) (seeking the return of $93,921.28 in purported fees and $33,077.26 in false 1 4 The Receiver also determined that two entities received improper distributions in connection with Nadel's Scheme: GQ Digital Home Integration, Inc. and Alpha Ventures Securities Company. Both of these matters have been resolved. For further information regarding these matters, please refer to prior Interim Reports. 64 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 69 of 78 PagelD 9446 profits); Wiand, Receiver v. Michael Corcione, CaseNo. 8:10-cv-234-T-17MAP (M.D. Fla.) (seeking the return of $7,500 in purported fees); and Wiand, Receiver v, Steve Ellis, Case No. 8:10-cv-233-T-17MAP (M.D. Fla.) (seeking the return of $62,299.64 in purported fees). The Hedge Funds paid the Defendants in these cases "management" and "performance" fees based on the purported value and performance of the Hedge Funds. The Receiver seeks to recover those transfers under FUFTA, or alternatively, seeks disgorgement of those amounts pursuant to equitable claims of unjust emichment. The Receiver has resolved the Lee and Corcione matters for a total payment of $137,121.09. For details regarding these settlements, please refer to prior Interim Reports. 4. Recovery of Proceeds. Charitable Contributions Made with Scheme Nadel formed the Guy-Nadel Foundation in December 2003 as a non-profit corporation for charitable, educational and scientific purposes. The Foundation was funded solely with proceeds of Nadel's scheme. A l l money Nadel wrongfully caused to transfer or pay to the Foundation was diverted and misappropriated by him in connection with his scheme. The Receiver has discovered that from 2000 tiirough 2008, the Guy-Nadel Foundation made a total of $2,484,589 in contributions to various non-profit organizations and charities. The Receiver has focused his attention on the charitable organizations that received the most misappropriated funds. The Receiver sought to obtain tolling agreements from all charitable organizations so he could contemplate the appropriate action to take regarding these significant disbursements. Three charities did not provide such agreements and one refused to extend a tolling agreement it had entered with the Receiver upon its expiration, 65 Case 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 70 of 78 PagelD 9447 thus the Receiver had no recourse but to initiate actions against them. See Wiand, as Receiver v. Catholic Charities, Diocese of Venice, Inc., Case No. 8:10-cv-247-T-17MAP (M.D. Fla.) (seeking the return of $40,000) (the "Catholic Charities"); Wiand, as Receiver v. Diocese of Venice in Florida, Inc., Case No. 8:10-cv-247-T-17MAP (M.D. Fla.) (seeking the return of $370,000) (the "Diocese"); Wiand, as Receiver v. Sarasota Opera Association, Inc., Case No. 8:10-cv-248-T-17MAP (M.D. Fla.) (seeking the return of $353,125) (the "Sarasota Opera"); Wiand, as Receiver v. The Florida House Foundation of Sarasota, Inc., Case No. 8:10-cv-2071-T-17MAP (seeking the return of $61,000) (the "Florida House"). The Diocese, Catholic Charities, and Sarasota Opera Association have each filed a motion to dismiss the Receiver's complaint. (See Catholic Charities, at Doc. 31; Diocese, at Doc. 31; and Sarasota Opera, at Doc. 32.) Those motions are currently pending and the Receiver's response was filed on March 3, 2011. Florida House provided the Receiver with financial documents and an affidavit to prove its current financial condition rather than respond to the complaint. Based on those documents and sworn statements, the Receiver determined that Florida House has no collectible assets nor does it have an expectation of receiving assets in the near future. Therefore, the Receiver dismissed the Florida House case without prejudice. Mediation for the Diocese, Catholic Charities, and Sarasota Opera has been scheduled for August 8, 2011. Trial dates have been set for these matters for March 2012. The Receiver has also attempted to reach resolutions with the charities that entered tolling agreements which are still in effect. I f no resolution is reached soon, the Receiver will have no choice but to initiate actions against these organizations as well. 66 Case 8:09-cv-00087-RAL-TBM 5. D o c u m e n t 647 Filed 07/21/11 Page 71 of 7 8 PagelD 9448 Class Action Litigation. The Receiver had communications with the law firm of Johnson, Pope, Bokor, Ruppcl & Burns, LLP ("Johnson Pope") regarding the institution of a class action against Holland & Knight, LLP ( " H & K " ) , the law firm that prepared the private placement memoranda used to solicit investors into the Nadel scheme. On March 20, 2009, Johnson Pope on behalf of investor Michael Sullivan and others similarly situated, instituted a class action suit against H & K , Michael Sullivan v. Holland & Knight LLP, Case No. 09-cv-0531EAJ (M.D. Fla.). On March 31, 2010, the Court entered an order of dismissal based on the determination that this class action was preempted by the Securities Litigation Uniform Standards Act of 1998 ("SLUSA"). The plaintiffs filed a motion for reconsideration of this determination on April 7, 2010. No ruling on the plaintiffs motion for reconsideration has been issued yet. 6. Receiver's Litigation Against Holland & Knight L L P . The Receiver entered into a contingency fee agreement with Johnson Pope whereby Johnson Pope will pursue professional malpractice claims by the Hedge Funds against H&K, seeking to recover as much as possible of the approximately $168 million out-of-pocket losses suffered by investors. (See also Order dated August 12, 2009 (Doc. 175).) On or about August 31, 2009, the Receiver initiated an action against H & K on behalf of the Hedge Funds. Scoop Real Estate, L.P,, et al. v. Holland & Knight, LLP, et al, Case No. 2009-ca014887-NC (Sarasota County, Fla., 12th Jud. Cir.). The Receiver successfully overcame a motion for removal to federal court and motions to dismiss. Discoveiy is underway. Hundreds of thousands of documents have been 67 8:09-cv-00087-RAL-TBM D o c u m e n t 647 Filed 07/21/11 Page 72 of 78 PagelD 9449 exchanged and several depositions have been taken. On September 8, 2010, the court on its own motion designated this case as a "complex case" as defined by Rule 1.201 of the Florida Rules of Civil Procedure. This matter is not yet set for trial. 7. Other Potential Litigation. The Receiver continues to examine the actions of other professionals and businesses that provided services to Receivership Entities to determine whether he needs to take additional steps with respect to any of those professionals and businesses to recover assets for the Receivership. VI. 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 Claim, and (3) Permit Notice by Mail and Publication and Incorporated Memorandum of Law (Doc. 390) ("Claims Motion"). On April 21, 2010, the Court granted the Receiver's Claims Motion in its entirety (Doc. 391). The Court established a Claim Bar Date of the later of 90 days from the date of the Order granting the Claims Motion or the mailing of Proof of Claim Forms to all known investors (as the term Claim Bar Date is defined in the Receiver's motion). Pursuant to the Court's Order, any person or entity who failed to submit a proof of claim to the Receiver so that it is actually received by the Receiver on or before the Claim Bar Date is barred and precluded from asserting any claim against the Receivership or any Receivership Entity. The Court's Order further provided that sufficient and reasonable notice was given by the Receiver i f made (1) by mail to the last known addresses of all known potential 68 Case 8:09-cv-00087-RAI_-TBM Document 647 Filed 07/21/11 Page 73 of 78 PagelD 9 4 5 0 claimants, (2) by global publication on one day in The Wall Street Journal and publication on one day in the Sarasota-Herald Tribune, and (3) on the Receiver's website (www.nadelreceivership, com). In compliance with the Court's Order, on June 4, 2010, the Receiver mailed 1256 packages to known investors and their attorneys, i f any, and any other known potential creditors of the Receivership Estate thereby establishing September 2, 2010 as the Claim Bar Date. Each package included a cover letter, the Notice of Deadline Requiring Filing of Proofs of Claim (the "Notice"), and a Proof of Claim Form. The Receiver also published the Notice in the global edition of The Wall Street Journal and in the Sarasota Herald-Tribune on June 15, 2010, and provided the Notice and a Proof of Claim form on his website. As of July 20, 2011, the Receiver has received 477 Proof of Claim Forms from investors and 27 Proof of Claim Forms from other possible creditors, for a total of 504 submitted claims. Fourteen of the 504 Proof of Claim Forms were received after the Claim Bar Date. The Receiver completed an initial review of the claims. As a result of this review, the Receiver sent approximately 134 letters to claimants notifying them of deficiencies in their respective Proof of Claim Forms. The claimants were given thirty days from the date of the notice of deficiency to return an amended Proof of Claim Form to preserve their claims. As of June 27, 2011, the Receiver has received approximately 123 amended Proof of Claim Forms. The Receiver has completed his review of all claims initially submitted and is nearing completion of his review of amended claims. The Receiver also has substantially completed his recommended determinations of these claims to present to the Court. As of July 20, 2011, the Receiver has received claims from investors in the amount of 69 8:09-cv-00087-RAL-TBM Document 6 4 7 Filed 07/21/11 Page 74 of 78 PagelD 9451 approximately $148,294,304.25 and claims from other creditors in the amount of approximately $9,202,181.14, for atotal claim amount of approximately $157,496,485.39. VII. 15 Investigating Receivership Affairs and Tracing Receivership Funds. The Receiver has retained the services of PDR Certified Public Accountants ("PDR"), forensic accountants, to assist in investigating and analyzing the flow of funds both into and out of the Receivership Entities, and to assist in locating additional funds, i f any. The Receiver has also retained the services of Riverside Financial Group ("Riverside"), fmancial analysts to assist in investigating and analyzing all of the trading activity. In conjunction with the Receiver, PDR and Riverside are further attempting to identify additional individuals and/or entities who may be in possession of Receivership funds. PDR is also assisting in determining the amount of each investor's loss. The Receiver has also retained the services of Otto L. Wheeler, CPA/ABV, of Wheeler Fairman & Kelly Certified Public Accountants in Austin, Texas, in connection with the Viking Oil & Gas venture discussed at Section V.A.7, above. The Receiver has also retained the services of RWJ Group, LLC ("RWJ") as an asset manager for the Receivership Entities. RWJ is owned and operated by Roger Jernigan. Mr. Jernigan has over 24 years of law enforcement and investigative experience. He also has experience in managing multiple businesses with gross sales exceeding $1.5 million. Mr. 1 5 These numbers are subject to change as the Receiver, completes his review of all claims. Also, the amount set forth above for other creditors does not include claimed interest, fees or penalties which may be sought by these creditors. The other creditors include certain banks. Further, these numbers reflect the amount to which the claimants are claiming they are entitled, and not how much the Receiver has determined is the value of proper and allowable claims. 70 Case 8:09-cv-00087-RAL-TBM Document 647 Filed 07/21/11 Page 75 of 78 PagelD 9452 Jernigan formerly was the manager of the VJC and has significant Icnowledge of the maintenance of assets recovered by the Receiver. Mr. Jernigan is a commercial pilot with over 10,000 hours of accident and incident free flying. After conducting due diligence, the Receiver determined that Mr. Jernigan had no involvement with Nadel's scheme and was not an investor in the Hedge Funds. Mr. Jernigan has been an invaluable asset to the Receivership. Mr. Jernigan assists the Receiver with overseeing ongoing business operations and property recovered by the Receiver, including aiding with efforts to sell such businesses and property. His efforts are designed to ensure that Receivership assets are maintained and/or enhanced to allow for maximum recovery for the Receivership estate. Pursuant to an agreement with the Receiver, RWJ receives $5,500 per month for its services and is reimbursed for related expenses. VIII. The Next Sixty Days. The Receiver has received useful information from investors and third parties during the course of the Receivership. A number of people have contacted him with respect to the location of assets. The Receiver would like to thank those parties for their efforts. For anyone who may have information that they believe would be of use to the Receivership, the Receiver encourages those parties to bring that information to him. The Receiver has received most but not all of the documents he has subpoenaed from third parties. He will continue to malce efforts to obtain additional relevant documents and to review such documents in connection with his efforts to investigate matters underlying this Receivership, including to identify any additional sources of recovery and to prepare an accounting. The Receiver is working diligently on this task, but without knowing the full 71 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647 Filed 07/21/11 Page 76 of 78 PagelD 9453 volume of documents he expects to receive, it is difficult to estimate the time needed for completion. The Receiver will proceed with the claims process by continuing to review and analyze all submitted claims and addressing any questions potential claimants and/or their attorneys may have. After the Receiver has reviewed all submitted claims, he will submit a motion to the Court with his claim determinations. The Receiver anticipates that this motion will be filed before the filing of the next Interim Report. The Receiver will proceed with the pending cases. He will engage in discovery and motion practice. The Receiver will attend the court-ordered mediations. He will continue to thoroughly consider and review any settlement offers for pending cases 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 review information to determine i f any third parties may have liability either to the Receivership estate or investors. The Receiver will likely institute litigation against financial institutions that assisted Nadel and his companies. The Receiver will continue to pursue the recovery of tax refunds where possible, and w i l l . continue to attempt to locate additional funds and other assets. I f appropriate, the Receiver will institute proceedings to recover assets on behalf of the Receivership Entities. In an effort to more fully understand the conduct at issue and in an attempt to locate more assets, the Receiver will continue to conduct interviews and/or depositions of parties and third parties with knowledge. 72 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 6 4 7 Filed 07/21/11 Page 77 of 78 PagelD 9 4 5 4 The Receiver will also continue the operations of all ongoing businesses of the Receivership Entities to maintain and, i f 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 to either email j rizzo @wiandlaw. com or call Jeffrey Rizzo at 813-3475100. Dated this 21st day of July, 2011. Respectfully submitted, s/Burton W. Wiand Burton W. Wiand, Receiver 73 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M D o c u m e n t 647 Filed 07/21/11 Page 78 of 78 P a g e l D 9 4 5 5 CERTIFICATE OF SERVICE I HEREBY CERTIFY that, on M y 21, 2011,1 electronically filed the foregoing with the Clerk of the Court by using the CM/ECF system. I FURTHER CERTIFY that on July 21, 2011,1 mailed the foregoing document and the notice of electronic filing by first-class mail to the following non-CM/ECF participant(s): Arthur G. Nadel Register No. 50690-018 FCI BUTNER LOW Federal Correctional Institution P.O. Box 999 Burner, NC 27509 s/Gianluca Morello Gianluca Morello, FBN 034997 gmorello@wiaudlaw.com Maya M . Lockwood, FBN 0175481 mloclcwood@wiandlaw.com WIAND GUERRA KING P.L. 3000 Bayport Drive Suite 600 Tampa, FL 33607 T: (813) 347-5100 F: (813) 347-5198 Attorneys for the Receiver, Burton W. Wiand Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647-1 Filed 07/21/11 Page 1 of 2 P a g e l D 9456 Standardized Fund Accounting Report for Consolidated Nadel Entities - Cash Basis Receivership; Civil Court Docket No. 8:09-cv-87-T-26TBM Reporting Period 1/1/11 to 4/30/11 Fund Accounting (Sec Instructions); Subtotal Detail : - Grand Total <P- Line 1 Line Line Line Line Line 2 3 4 5 6 Line 7 Line 8 Beginning Balance (As of 1/1/11): Increases in Fund Balance: Business Income Cash and Securities Interest/Dividend Income Business Asset Liquidation Personal Asset Liquidation Third-Party Litigation Income Miscellaneous - Other (see attached) Total Funds Available (Line 1 - 8): Decreases in Fund Balance: Disbursements to Investors Line 9 Disbursements for Receivership in Operations Line 10 Professionals Line 10a Disbursements to Receiver or Olher Line 10b Business Asset Expenses Line 10c Personal Asset Expenses Line lOd Investment Expenses 17,809,413.67 228,165.64 106,026.96 • 706,098,82 • 2,368,733.76 976,250.12 A Line 11 h 57,337.74 113,485.54 a l I\ !V 7,210,36 Independent Distribution Consultant (IDC) Distribution Agent Consultants Legal Advisors Tax Advisors 2. Administrative Expenses 3. Miscellaneous Total Plan Development Expenses $178,033.64 $178,033,64 = Disbursements for Distribution Expenses Paid by the Fund: Line 11a Distribution Plan Development Expenses: 1, Fees: Fund Administrator 22,194,688,97 y ^ W 1 Line lOe P 1. Attorney Fees 2. Litigation Expenses Total Third-Party Litigation Expenses Line Wf Tax Administrator Fees and Bonds Line lOg Federal and State Tax Payments Total Disbursements for Receivership Operations % .6 h f r Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M D o c u m e n t 647-1 Filed 07/21/11 Page 2 of 2 PagelD 9457 Standardized Fund Accounting Report for Consolidated Nadel Entities - Casii Basis Receivership j Civil Court Docket No, 8;09-cv-87-T-26TBM Reporting Period 1/1/11 to 4/30/11 Fund Accounting (See Instructions): Detail Line lib Distribution Plan Implementation 1, Fees: Fund Administrator IDC Subtotal i Grand Total Expenses: Distribution Agent Consultants Legal Advisors Tax Advisors & 2, Administrative Expenses 3, Investor Identification: Notice/Publishing Approved Plan Claimant Identification Claims Processing Web Site Maintenance/Call Center 4, Fund Administrator Bond 5, Miscellaneous 6, Federal Account for Investor Restitution ( F A I R ) Reporting Expenses Total Plan Implementation Expenses ii i Total Disbursements for Distribution Expenses Paid by the F u n d X Line 12 Disbursements to Court/Other; Line 12a Investment Expenses/Court Registry Investment System (CRIS) Fees Line 12b Federal Tax Payments Total Disbursements to Court/Other! t Line 13 Ending Batance (As of 4/30/11) Line 14 Ending Balance of Fund - Net Assets: Line 14a Cash & Cash Equivalents Line 14b Investments Line 14c Other Assets or Uncleared Funds Total Ending Balance of Fund - Net Assets S?. K " T m 2 22,016,655,33 22,016,655.33 20,133,628,93 1,883,026,40 22,016,655.33 3lD 9458 1 of 5 Pag< Chris Moody's Assets C D CD C O Purchase Price or , Asset 1 >' % of Interest Share Information k Market Value - Loans/Liens br ' 5U T v Status/Disposition , - — Real a n d Personal P r o p e r t y 2140 Hillview St., Sarasota (Rental $228,000 Moody's interest in this property given that there was no equity In the property. $241,300 The Receiver did not exercise his right to obtain Chris (as of 1/2009) Property) The Receiver did not exercise his right to obtain Chris (as of 1/2009) $296,000 Moody's interest in this property given that there a. 1881 Summerwalk Circle, Sarasota ^: $312,000 (Rental Property) C M was no equity in the property. o •a _D C nt 647-2 iT Hideaway Bay Club, Unit K2, Little Sold for $7,875 on or about March 2,2010 (Order, $4,000 1997 Jeep (Barbie) Doc. 357). 1996 Wellcraft Scarab Sport boat rs o (Purchased in 1999) o Q this property. Gasparilla, FL (1/3 ownership in Vacation Condominium) C D C a The Receiver is evaluating Chris Moody's interest in $150,000 $45,000 Approximately $26,200 (as of $25,000 1/2009) The Receiver did not exercise hisrightto obtain Chris Moody's interest in this boat given that there was no equity in the boat. $1,000,000 King Air (Valkyrie Aviation) The Receiver is evaluating Chris Moody's interest in this entity. cn fi < cc 1 hco o o oi > o 1 o CO C D C O C D O Page l o f 5 w m x X ii Chris Moody's Assets Purchase Price or Asset v' , Drinks Americas Holdings, Ltd. % of Interest Acquired 1 Share Information 233,293 shares Market Value $489.92 Status/ Disposition Loans/Liens None The Receiver has possession of these shares and is attempting to determine the available market for (as of 10/21/10) these shares. China New Energy Group Company 2,500 shares $825 None The Receiver has possession of these shares and is attempting to determine the available market for (as of 1/29/10) these shares. Flagship Global Healthcare, Inc. Celsia Technologies (formerly iCurie) 153,265 shares 2,912 shares None This company is currently in bankruptcy. None Unknown The Receiver has possession of these shares and is Series A pfd. - attempting to determine the available market for $2,912 these shares. Page 2 of 5 Chris Moody's Assets Purchase Price or Asset r >, % of Interest Acau<<"ed CD.M. Leasing LLC - { Share „ _ si Information Market Value Status/Disposition Loans/Lsens - This is an inactive Florida Limited Liability Company. 100% The Company owns two vehicles which are currently being leased to Respiro, Inc. The leases likely will be restructured in connection with the loan to Respiro discussed below. ' Valkyrie Aviation, LLC This is an inactive Florida Limited Liability Company 100% established to co-own and operate King Air. This company has a potential $112,500 interest in an airplane transferred to another entity which assumed the note and mortgage. The Receiver is evaluating this transaction and Chris Moody's interest in the airplane. Collingwood Construction Group, LLC is in Collingwood Construction Group, LLC 16% bankruptcy. Chris Moody invested approximately $263,750 in this company. It appears that the Receiver will not be able to recover any of this investment. 3.22% Umited Chris Moody invested approximately $59,500 in this Partnership Interest TRD Land 43, LLC company to help fund the purchase of 43 acres in Arcadia, Florida. The Receiver is evaluating Chris Moody's interest in this property. Screen Test Studios, LLC 11 limited Partnership The Receiver is evaluating Chris Moody's interest in units Rand Hillview, LLC this entity. The Receiver is evaluating Chris Moody's interest in 150,000 est units this entity. Page 3 of 5 Case 8 : 0 9 - c v - 0 0 0 8 7 - R A L - T B M Document 647-2 Filed 07/21/11 Page 4 of 5 PagelD 9461 CD =• I CD Z> 5" ro 3 3 fi) (> 1 3* £ ^ •• O ; •S S O -I 3 n 3; o cu o ro =• -t. 0) § R S S c — 3. w n> 3 fl> Q ID . o o n ft s O 3 I/) 3 3" 0) (0 r+ o 5' 3 fi) -» cm CD *> o O o «< c ro > to o BJ 3 ft) 3 2 51 fo pa 3 f 3 01 CB. .Cf c 01 3' 3 crq n n 3" o o O o TO O o 3 a Chris Moody's Assets Purchase Price or f s I ' l l Asset ^ ' ' ( * % of Interest > ) Acauired • < / > Share Information 1 " r Market Value > Loans/Liens •Status/Disposition Receivables / Notes iCurie; Celsia Technologies This was a bridge note. The Receiver is evaluating $24,992 this receivable. Dennis Fontaine - Rocket Science 2 loans and a note- The Receiver is contemplating the appropriate course Labs (RSL Wrist ID); Pet Tattoos & Note for $50,000 and to take for collection of these receivables. Other Pet Products loans of $140,910. Callahan Energy Partners $50,000 The Receiver believes that $30,000 is still outstanding on this loan and Is evaluating the appropriate course of action to take with respect to collection ofthe outstanding balance. Respiro, Inc. Chris Moody loaned $577,500 to this company $577,500 owned by his wife. The company is currently operating and the Receiver is working on recovering the funds loaned to Respiro. One World Ocean, LLC This limited liability company Is a program for $120,500 fractional ownership in yachts. Chris Moody made a series of loans to Dennis Greers in connection with this company. The Receiver is evaluating these loans. Collingwood Construction Group Chris Moody loaned Collingwood $100,000. As this $100,000 company is in bankruptcy, it Is unlikely that the Receiver will be able to collect on this loan. Sea Gate Land The Receiver is contemplating the appropriate course $90,000 to take for collection of this receivable. o CO C D w C0 O Page 5 of 5

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