Securities and Exchange Commission v. Nadel et al

Filing 99

DECLARATION of Receiver, Burton W. Wiand re #98 Unopposed MOTION for miscellaneous relief, specifically Order granting possession of and title to the real property located in Fairview, NC by Burton W. Wiand. (Attachments: #1 Exhibit A, #2 Exhibit B, #3 Exhibit C, #4 Exhibit D, #5 Exhibit E, #6 Exhibit F, #7 Exhibit G)(Morello, Gianluca)

Securities and Exchange Commission v. Nadel et al

Doc. 99

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

ARTHUR NADEL, SCOOP CAPITAL, LLC, SCOOP MANAGEMENT, INC.,
Defendants,

CASE NO.: 8:09-cv-0087-T-26TBM

SCOOP REAL ESTATE, L.P., VALHALLA INVESTMENT PARTNERS, L.P., V ALHALLA MANAGEMENT, INC., VICTORY FUND, LTD, VIKING IRA FUND, LLC, VIKING FUND, LLC, AND VIKING MANAGEMENT, LLC.
Relief Defendants.

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RECEIVER'S DECLARATION IN SUPPORT OF THE UNOPPOSED MOTION FOR POSSESSION OF AND TITLE TO THE REAL PROPERTY LOCATED AT 131 GARRN CREEK ROAD, FAIRVIEW, N.C.
Burton W. Wiand declares as follows:
1. I am an attorney with Fowler White Boggs P.A. ("Fowler White") in Tampa,

Florida.
2. In the January 21, 2009, Order Appointing Receiver (Doc. 8), the Court

appointed me Receiver over (a) defendants Scoop Capital, LLC ("Scoop Capital") and Scoop

Management, Inc. ("Scoop Management") and (b) relief defendants Scoop Real Estate, L.P.,

Dockets.Justia.com

Valhalla Investment Partners, L.P.; Valhalla Management, Inc.; Victory IRA Fund, Ltd.;
Victory Fund, Ltd.; Viking IRA Fund, LLC; Viking Fund, LLC; and Viking Management

(Scoop Real Estate, Valhalla Investment, Victory IRA, Victory Fund, Viking IRA, and

Viking Fund are collectively referred to as the "Hedge Funds;" Scoop Capital, Scoop
Management, Valhalla Management, and Viking Management are collectively referred to as
the "Investment Managers").
3. In a January 27, 2009, Order (Doc. 17), the Court also appointed me Receiver

over Venice Jet Center, LLC, and Tradewind, LLC.
4. In a February 11,2009 Order (Doc. 44), the Court also appointed me Receiver

over Laurel Mountain Preserve, LLC; Laurel Preserve, LLC; the Marguerite 1. Nadel

Revocable Trust UAD 8/2/07; and the Laurel Mountain Preserve Homeowners Association,
Inc.
5. In a March 9, 2009, Order (Doc. 68), the Court also appointed me Receiver

over the Guy-Nadel Foundation, Inc.
6. In a March 17,2009, Amended Order (Doc. 81), the Court also appointed me

Receiver over Lime Avenue Enterprises, LLC, and A Victorian Garden Florist, LLC. All of
the entities in receivership are referred to collectively as the "Receivership Entities."
7. Since my appointment as Receiver, I and professionals who I have retained

(including lawyers and an accountant) have continued our investigation, which has included

communicating with people associated with Nadel and/or the Receivership Entities and
persons responsible for maintaining the financial books of Receivership Entities and of other

businesses controlled by Nadel; operating other businesses controlled by Nadel or for

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assisting those businesses with their transactions; performing accounting services; and

administering the Hedge Funds.

8. We have also reviewed documents located in the offces of the Hedge Funds
and Investment Managers (the "Offce") (located at 1618 Main Street, Sarasota, Florida
34236); documents obtained from the accountant for Receivership Entities; information

stored on 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.

The Fraudulent Investment Scheme
9. On January 26,2009, I submitted the Receiver's Declaration in Support of

the

Receiver's Unopposed Motion to Expand the Scope of

Receivership (the "Receiver's January

Declaration") (Doc. 16).
10. As shown in the Receiver's January Declaration and in Plaintiffs Emergency

Motion and Memorandum of Law in Support of Temporary Restraining Order and Other
Emergency Relief (the "SEC Emergency Motion") (Doc. 2) and supporting papers, Nadel
defrauded investors in the six Hedge Funds from at least 2003 (and likely earlier) through the

time he fled in January 2009 by "massively overstating the value of investors' interests in
them." (SEC Emerg. Mot. at 2,6.) Specifically, from at least 2003 through 2008, the value
of the Hedge Funds as represented to investors was significantly overstated. The investment
returns and performance as represented to investors were based on the overstated numbers
and thus were also false.

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11. As shown by the SEC, Nadel defrauded investors through his control of the
Hedge Funds' advisers and managers, Scoop Capital and Scoop Management, which are now
in receivership. (Id. at 4-6.) Through those entities, Nadel was ultimately responsible for

controlling the Hedge Funds' investment activities.

12. Evidence also showed that the Hedge Funds directly or indirectly paid
substantial fees to Scoop Capital and Scoop Management, and to other Receivership Entities,

in the form of management, advisory, and/or profit incentive fees. (Id. at 5-6.) According to
the Hedge Funds' documents, in 2003, the Hedge Funds paid a total of$7,045,509.31 in fees;

in 2004, they paid $14,156,501.17 in fees; in 2005, they paid $20,349,897.02 in fees; in
2006, they paid $18,257,590.52 in fees; in 2007, they paid $19,873,365.00 in fees; and in
2008 they paid $15,854,930.76 in fees.
13. Specifically, according to Scoop Management's Profit and Loss Statement for

the period from 2003 to 2008, Scoop Management received the following fees from the
Hedge Funds: $39,670,763.24 in "Incentive Fees;" $19,065,409.19 in "Management Fees;"

and $1,930,000 in "Offce Fees." In other words, Scoop Management received a total of
$60,666,172.43 in fees from the Hedge Funds between 2003 and 2008.
14. Also according to Scoop Management's Profit and Loss Statement, Scoop

Management paid a portion of those fees to others. The amount paid was $23,183,680.84,

but $6,040,566.83 of that amount was paid to another Receivership Entity formerly
controlled by Nadel, Scoop CapitaL.

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15. In sum, Scoop Management kept $37,482,491.59 in fees from the Hedge

Funds between 2003 and 2008, and an additional $6,040,566.83 of the fees it received were
transferred to Scoop Capital.
16. Consistent with our earlier findings, our investigation has continued to reveal

information showing that additional entities and other assets over which Nadel or his wife,
Marguerite "Peg" Nadel ("Mrs. Nadel"), exerted full or partial control or in which they had a

full or partial interest were purchased and/or funded with money derived from Nadel's
fraudulent investment scheme (the "scheme"). This occurred through direct payments from
Scoop Capital or Scoop Management financial accounts.
17. This also occurred through payments from accounts held in the name of

Nadel

or Nadel and Mrs. Nadel, which accounts were funded with money from the scheme,

including with the large sums of "management" and "advisory" fees that Nadel paid himself

for purporting to manage money through Receivership Entities. For example, as
demonstrated by the copies of checks attached as Exhibit A to the Receiver's January

Declaration, in 2008 Nadel signed checks transferring at least $1,003,500.00 from Scoop
Capital to himself and his wife.
18. As of December 31, 2008, according to the Balance Sheet for Scoop

Management, Scoop Management had transferred $6,761,000 to Nadel, $5,090,000 to Mrs.

Nadel, and an additional $5,326,896.56 jointly to Nadel and his wife. These amounts are in
addition to the amounts Mrs. Nadel received from Scoop Management as compensation.

19. Scoop Management also had transferred $6,433,804.40 to other entities
controlled by NadeL.

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20. Also as of December 31, 2008, according to the Balance Sheet for Scoop

Capital, it had transferred at least $1,300,000 to NadeL. It also had transferred $6,293,637.12
to other entities controlled by NadeL.
21. To date we have not uncovered any source of

income for Nadel or Mrs. Nadel

that was not in some manner funded with money from the scheme (whether through

"management fees" or otherwise). Discussions with Mrs. Nadel and others have confirmed

that, during the time one or more of the Hedge Funds and Investment Managers were in
operation (i.e., beginning in at least 1999), essentially all of

Nadel and Mrs. Nadel's income

was derived directly from those entities.
22. As detailed in the Receiver's January Declaration and the SEC Emergency

Motion, the Hedge Funds and Investment Managers were operated as part of a fraudulent
scheme from at least 2003 forward. As such, the source of

Nadel and Mrs. Nadel's income

during that period was Nadel's scheme.
23. The information gathered during our investigation shows that money derived

from Nadel's scheme was used to purchase the real property located at 131 Garren Creek
Road, Fairview, North Carolina 28730 ("the Property") and pay the Property's mortgage.
24. According to the information that we have gathered, the Property is a

secondary residence of the N adels, located in the mountains of North Carolina near the large
real estate holdings of Laurel Preserve, LLC, one of the Receivership Entities.
The Property
25. On June 14,2004, Nadel and Mrs. Nadel purchased the Property.

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26. As shown by the copy of check number 1936, attached as Exhibit A, Nadel

wrote a check in the amount of $5,000 to Coldwell Banker dated April 12, 2004. As
indicated in the memo line, this check served as the deposit, or earnest money, for the
purchase of the Property. The check was written from Nadel's personal account with

SouthTrust Ban (which subsequently merged with Wachovia Bank), which ended in the
numbers 489 (the "489 Account").

27. Coldwell Banker appears to have held this $5,000 in escrow until the closing
of the Nadels' purchase of the Property. As shown by check number 8220 dated June 14,
2004, and attached as part of Exhibit B, Coldwell Banker produced these funds at closing.

The $5,000 deposit is also reflected in the settlement statement for the Property, attached
hereto as Exhibit C.

28. As shown by the copy of the wire transfer confirmation, attached as Exhibit
D, Nadel wired $68,000 from a SouthTrust Ban account to Cogburn Goosman Brasil &
Rose, P.A. on June 9, 2004. The July 2004 bank statement for the 489 Account shows that

the wire came from that account. See 489 Account Statement, attached hereto as Exhibit E.
29. Cogburn Goosman Brasil & Rose, P.A. prepared the deed and mortgage for

the purchase of the Property and also served as the settlement agent. See Exhibit C. Copies

of the deed and mortgage for the Property are attached hereto as Exhibits F and G
respectively.
30. As shown by the copy of

the settlement statement for the Property, attached as

Exhibit C, Nadel and his wife owed $67,415.34 as "cash from borrower" at the closing of

their purchase of the Property. It appears that Nadel used the $68,000 wired from his 489

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Account to Cogburn Goosman Brasil & Rose, P.A., on June 9, 2004, to cover the cash owed
at closing. The balance of the purchase price was paid with a loan from Branch Banking &

Trust Co. ("BB&T"). See Exhibit C.
31. Both the $5,000 deposit and the additional $68,000 down-payment from the
489 Account are directly traceable to one of the receivership entities, Scoop CapitaL.

According to the ledger for Scoop Capital's bank account with SouthTrust, a check was

written on Scoop Capital's account on June 9, 2004 for $85,000, and the check's memo
stated, "acquisition of Garren Creek NC house." Also according to the ledger, that check
was made payable to Nadel and his wife. The statement for the 489 Account covering the
June 2004 period shows the $85,000 check from Scoop Capital relating to the purchase of

the

Property was deposited in Nadel's 489 Account. See Exhibit Eat 1.
32. According to documents located in the Office and obtained from financial
institutions to date, Nadel and Mrs. Nadel have used funds from a Northern Trust bank
account titled in his and his wife's names to pay the mortgage on the Property. Specifically,

according to the account ledger, Nadel and Mrs. Nadel have made at least the following

payments from the Northern Trust account for the mortgage on the Property:

Date
07124/2004

09/01/2004 10/01/2004 11/01/2004 01/04/2005 02/02/2005 03/02/2005 04/04/2005 05/03/2005 06/02/2005

Payee BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage

Memo

Amount
$1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89

Garren Creek

Garren Creek

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07/0112005 08/02/2005 09/02/2005 10/04/2005
1110112005

12/02/2005 01104/2006 02/02/2006 03/02/2006 04/04/2006 05/0212006 06/02/2006 07/06/2006 08/0212006 09/05/2006 10/03/2006
1110212006

12/05/2006 01103/2007 02/02/2007 03/02/2007 04/02/2007 05/0212007 06/04/2007 07/03/2007 08/02/2007 09/05/2007 10/02/2007 11/02/2007 12/04/2007 01103/2008 02/04/2008 03/04/2008 04/02/2008 05/02/2008 06/02/2008 07/01/2008 08/0112008 09/01/2008 10/02/2008 11/04/2008

BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&TMortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage BB&T Mortgage

Garren Creek Garren Creek

Garren Creek

March Payment April Payment
May Payment

June Payment July Payment Aug. Payment Sept. Payment Oct. Payment Nov. Payment Dec. Payment Jan. 2007 Payment Feb. 2007 Payment March 2007 Payment April 2007 Payment May Payment June Payment July Payment Aug. Payment Sept. Payment Oct. Payment Nov. Payment Dec. Payment Jan. Payment Feb. Payment March Payment April Payment
May Payment

June Payment July Payment Aug. Payment Sept. Payment
Oct. Payment

Nov. Payment

$1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,377.89 $1,690.12 $1,690.12 $1,690.12 $1,690.12 $1,690.12 $1,690.12 $1,690.12 $1,690.12 $1,690.12 $1,690.12 $1,690.12 $1,690.12 $1,496.16 $1,496.16 $1,496.16 $1,496.16

9

re

12/0112008

I

BB&T Mortgage

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Dec. Payment

Total:

$1,496.16 $77,366.28

33. For the period during which payments on the mortgage were being made, the

records we have reviewed show that at least $80,000 was deposited into that Northern Trust
bank account directly from Scoop Capital or Scoop Management, and additional money was

transferred into it from other accounts controlled by the Nadels in which money from Scoop
Capital or Scoop Management had been deposited.
34. At all times during these transactions, Nadel was perpetrating his scheme, and

essentially all of

the Nadels' income was derived from that scheme.

35. Thus, the information in our possession indicates that the purchase of the

Property and payment of the Property's mortgage were funded with proceeds of Nadel's

scheme.

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I declare under the penalty of perjury that the foregoing is true and correct to the best
of my knowledge and belief and is executed this 27th day of March, 2009.

~

Burton W. Wiand, as Receiver clo FOWLER WHITE BOGGS P.A. 501 E. Kennedy Blvd. Suite 1700 Tampa, FL 33602
TeL. [phone]
Fax [phone]

bwiand(ifowlerwhite.com

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