telexfree-logoWhen TelexFree sought to circumvent regulators by filing for bankruptcy, no doubt James Merrill and Carlos Wanzeler thought the move was genius.

Run up a three billion dollar Ponzi scheme and then, when the money runs out, use the bankruptcy courts to wipe the slate clean.

Well, sort of. Turns out filing for bankruptcy has come back to bite James Merrill in the ass.

As part of the TelexFree bankruptcy proceedings, a “Section 341 Meeting” is scheduled to take place on February 10th.

Section 343 of the Bankruptcy Code provides that the debtor (TelexFree) shall appear at the Meeting of Creditors being conducted.

When then debtor is not an invidual, the debtor must appear through its principal.

james-merril-founder-president-telexfreeWith Merrill’s partner in crime Carlos Wanzeler a fugitive in Brazil, Merrill (right) is the logical choice to represent TelexFree.

Negotiations between the Trustee and Merrill’s legal counsel left the issue of Merrill’s attendance unresolved, and so the Trustee filed a motion to compel Merrill to attend on February 4th.

A hearing on the matter was scheduled for February 8th, with Merrill filing his opposition that same day.

Merril contends he shouldn’t be compelled to appear, with his lawyer arguing his attendance

will seriously complicate the paralell criminal proceedings (against him), if not deprive Mr. Merrill the ability to receive a fair trial.

Why is that you ask?

If compelled to appear, Merrill intends to plead the fifth. That is, he will provide no answers to the people who his company stole millions of dollars from.

Reflective of the dog move that it is, Merrill is worried public dissemination of his pleading will taint the jury pool in his October criminal trial.

It is reasonable to conclude that Mr.Merrill’s public appearance and invocation of his Fifth Amendment will be widely disseminated by the local news organizations, as the criminal and related proceeds have been the subject of significant and ongoing publicity.

It is reasonable to conclude … that the Truste expects a sizeable attendance, that news organizations will be permitted to photograph, videotape, publish and televize Mr. Merrill’s public invocation, and/or that any other attendees will be permitted to photograph and/or videotape the public invocation (through cell phones or otherwise) and widely disseminate the spectacle on the internet.

Mr. Merrill has a constitutional right to a fair and unbiased jury trial.

Any publicity of him publicly invoking his Fifth Amendment will seriously, if not irremediably, prejudice this fundamental constitutional right, at least in the District of Massachusetts.

Now I don’t live there so I can only ask: Are the residents of Massachusetts living under a rock?

While it’s conceivable that someone living in Massachusetts might not have heard of TelexFree, is Merrill pleading the fifth at a meeting and/or footage of the same really going to bring about judicial prejudice?

Two years after the SEC and DOJ filed their respective cases against the $3 billion dollar Ponzi scheme Merrill rode at the helm of?

Oh well see, about that… apparently Merrill was a just an ignorant bystander.

Mr. Merrill is not an appropriate person to serve as (TelexFree’s) representative at the 341 meeting.

On information and belief, Mr. Merrill has not been an officer of the company since a few days after the (bankruptcy) petition was filed.

Moroever, pre-petition, he was not the “person in control” of the company; his responsibilities were far divorced from the finances of (TelexFree), and he did not “control” the company.

Far be it from me to call out the fallacy of the co-owner of TelexFree claiming he had no idea what was going on. What a joke.

Merrill’s opposition does not name who was “in control” of TelexFree, or who oversaw its finances – but does go on to offer up Stuart MacMillan and William Runge as potential alternatives.

Both options are hilarious.

Stuart MacMillan was appointed James Merrill’s replacement (“interim CEO)” in late March. He was barely at TelexFree a month before the bankruptcy filing and regulators shutting the company down.

William Runge was appointed about the same time, with Merrill and the rest of TelexFree management hand-selecting their replacements to push the bankruptcy through.

With respect to MacMillan or Runge’s understanding and involvement in the actual running of TelexFree, the Massachusetts District court has already opined that

While credentials of MacMillan and Runge are not subject to question, (the) court finds they have little knowledge related to business administration of (TelexFree) LLC and Financial – couldn’t identify competitors.

MacMillan’s own testimonial revealed he was not a

VOIP specialist, could not identify any of (TelexFree’s) competitors or whether (TelexFree’s) product was competitive and did not know how much of (TelexFree’s) stated revenue was actually cash versus back office non-cash bookkeeping entries.

In summary, MacMillan and Runge knew next to nothing about TelexFree’s Ponzi operations. They were brought in and paid handsomely only to beat regulators with a bankruptcy filing.

Merrill however suggests they should be the ones to front TelexFree’s creditors this Friday.

A hearing on the matter is scheduled for later today, with a decision on Merrill’s appearance expected in the next twenty-four hours.

Stay tuned…


Update 12th February 2016 – Coverage from the Telegram suggests Merrill didn’t attend the meeting:

Bankruptcy officials had filed a motion last week to compel Mr. Merrill to testify at the hearing, but he did not.

Less than a hundred investors rocked up in the end.