In Re Receiver

Filing 1475

ORDER granting 1465 Motion to Approve Schedule of Supplemental Distribution Amounts. Signed by Honorable Margaret B Seymour on 7/8/2013. (Attachments: # 1 Exhibit Schedule of Supplemental Distribution Amounts)(asni, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION
IN RE: RECEIVER

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C/A No. 3:10-3141-MBS
ORDER

This matter arises out of a fraudulent investment operation (“Ponzi Scheme”) orchestrated
by Messrs. Tony Pough, Joseph Brunson, and Timothy McQueen. On August 2, 2007, the court
issued a Pre-Indictment Restraining Order (ECF No. 6) that enjoined Messrs. Pough, Brunson, and
McQueen, doing business under various names, and their agents, servants, employees, attorneys,
family members, and those persons in active concert or participation with them (collectively “3HB”
or “The Three Hebrew Boys,” as more specifically delineated in the Plan), from directly or
indirectly selling, transferring, attaching, disposing of in any manner, the property described in
Exhibit A to the Pre-Restraining Order. The court issued an order on September 5, 2007, amended
October 10, 2008, appointing Beattie B. Ashmore, Esquire as Receiver, with the Receiver’s duties
further delineated in the court’s April 15, 2010 and January 18, 2011 Orders (collectively “Court
Orders”).
On August 21, 2008, Messrs. Brunson, McQueen, and Pough were indicted by a federal
grand jury in the United States District Court for the District of South Carolina. See United States
v. Brunson, Cr. No. 3:08-0615. A superseding indictment charged Messrs. Brunson, McQueen, and
Pough with multiple counts of mail fraud, transporting stolen goods, and money laundering. In
addition, the superseding indictment provided that upon conviction certain property would be
subject to forfeiture. On November 20, 2009, Messrs. Brunson, McQueen, and Pough were
convicted on all counts and the jury returned a special verdict for forfeiture in the amount of $82
million. On February 23, 2010, the court entered a Preliminary Order of Forfeiture. On December

14, 2010, the court sentenced Messrs. Brunson, McQueen, and Pough to terms of imprisonment and
ordered them to pay restitution in an amount up to $82 million.
Pursuant to the Court Orders and related to the underlying criminal matter noted above, the
Receiver took over all the financial and business affairs for 3HB. The Court Orders required the
Receiver, among other things, to locate and manage assets previously acquired by and/or in the
name/possession of 3HB (the “Receiver Estate”). The Receiver began collecting information for
the purpose of distributing the proceeds of the Receiver Estate using the Proof of Claim (“POC”)
form approved by the court by Order dated April 15, 2010. The Receiver then provided notice of
the POC to all potential victims of the Ponzi Scheme. The Receiver also developed a method of
distribution commonly referenced as the “Rising Tide” method. The Receiver describes the “Rising
Tide” method as follows:
The Rising Tide method treats those that deposited money with the 3HB but actually
received nothing from the Ponzi scheme more favorably than those that deposited
money and received financial returns (i.e payoffs, cash, cars, or other benefits from
the 3HB). We have determined that a large percentage of the approximately 4000
Claimants that filed a timely Proof of Claim form received nothing from the 3HB.
Therefore, these Claimants can expect to receive a greater percentage of the funds
to be distributed from the Receiver. Conversely, there is a smaller percentage that
received financial benefits from the 3HB during the course of the scheme and these
Claimants will receive a smaller percentage of the funds to be distributed from the
Receiver, and in some instances nothing during the initial distribution from the
Receiver.
“Message to Claimants,” found at http://www.3hbreceiver.com/ on June 29, 2011. The court
approved the “Rising Tide” method by order filed July 1, 2011. Also on July 1, 2011, the court
approved a Plan for Claims Administration and Distribution of Proceeds, to which Plan was
appended the Receiver’s first schedule of net loss amounts. Thereafter, the Receiver made an initial
disbursement utilizing the following formula to determine an amount of reimbursement to approved
Claimants:
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(Amount to Distribute) DIVIDED BY (Total Actual Deposits made by all allowed
Claimants) MULTIPLIED BY (the Actual Deposit associated with each Claim)
MINUS (Actual Return associated with each Claim).
Despite the Receiver’s best efforts to notify all potential victims of the Ponzi Scheme, a
number of individuals have filed requests with the court over the past two years to approve untimely
POCs. The court has considered and ruled on all such motions. Persons who have established good
cause for their delay in filing have been approved for a distribution as if they had been included in
the Receiver’s initial disbursement. To provide finality to these proceedings, the court will accept
no further motions to file untimely POCs.
This matter now is before the court on the Receiver’s motion to approve schedule of
supplemental distribution amounts, which motion was filed on June 25, 2013. The Receiver has
provided the court with a breakdown of monies to be disbursed from the Receiver Estate, including
such sums as may have been allowed by the court for Claimants who filed untimely POCs. The
amounts have been calculated in accordance with the Plan for Claims Administration and
Distribution of Proceeds approved by the court on July 1, 2013. The Receiver’s motion (ECF No.
1465) is granted.
IT IS SO ORDERED.

/s/ Margaret B. Seymour
Senior United States District Judge
Columbia, South Carolina
July 8, 2013.

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