TelexFree Trustee investigation begins, subpoenas incoming
Fantasies about a restructuring and return to business by TelexFree grow dimmer by the day, with news now that the TelexFree Trustee is investigating the company in earnest.
Filed on June 12th, Stephen Darr has asked Massachusetts Bankruptcy Court for permission to issue subpoenas on
- PriceWaterhouseCoopers, LLP (former advisors to TelexFree)
- William H. Runge (TelexFree’s Chief Restructuring Advisor) and his company Alvarez & Marsal (sic) North America, LLC (financial advisors to TelexFree)
- Kurtzman Carson Consultants, LLC (TelexFree’s claims and noticing agent)
- the law firm Gordon Silver (co-counsel to TelexFree)
- the law firm Greenberg Traurig, LLP (co-counsel to TelexFree)
In addition to the issuing of subpoenas, Darr seeks to “obtain”
- all documents, including but not limited to emails, correspondence, phone records and cellular phone records, relating to TelexFree, their affiliates or subsidiaries
- all documents concerning all accounts of any kind including without limitation any and all statements for all savings, checking, investment and 401(k) accounts, including copies of cancelled checks, debit memoranda, wire reports and deposit slips for all such bank, investment and pension/retirement plan accounts
- all documents concerning all disbursement registers for each and every bank, investment and pension/retirement plan account, which disbursement registers should include: a) checks, debit memoranda, wire transfers, intercompany transfers; b) the recipient of the disbursement; c) the date of the disbursement; d) the amount of the disbursement; e) the invoice(s), loan number(s) or purchase order(s) to which they pertain and f) the nature of the disbursement
- all documents that contain financial information including, but not limited to: vendor invoices, journals, books, records, work papers or ledgers wherein there are statements or recordings, including, but not limited to: debt information, cash receipts information, cash disbursement information, asset information and liability information
- all documents and communications with or respecting Global Payroll Gateway, Inc., International Payout Systems, Inc., Propay, Inc. and Propay.com
- all documents concerning trial balances and detailed electronic general ledgers
- all federal and state tax returns – payroll, income, excise, property or otherwise
- all audited, reviewed, compiled or internal financial statements
- all documents concerning year-end W-2s issued to employees and the associated W-3’s
- all documents concerning 1099 statement issued to TelexFree, their affiliates and subsidiaries
- all documents concerning intercompany reconciliations, whether monthly, quarterly, or annual
- all documents concerning loan documents that were in existence two years prior to the petition date, to which TelexFree, their affiliates or subsidiaries were a party
- all documents concerning pension/retirement plan documents, including any agreements, plan documents, annual summaries, and year end participant account balances
- all documents concerning leases and contracts to which TelexFree, their affiliates or subsidiaries are or were a party
- all documents relating to any and all intellectual property owned, including but not limited to patents, trademarks, and registrations, whether domestic or international, and any cell phone or smart phone applications, whether of TelexFree, their affiliates or subsidiaries.
- appraisals for all real or personal property
- all communications with and documents concerning TelexFree, their affiliates or subsidiaries
- all documents concerning engagement letters between Greenberg and TelexFree, documents concerning legal services and payment for legal services including
retainers, invoices, billing records, and time records reflecting time for services not yet billed - all documents concerning legal memorandum, opinion letters or other documents produced by Greenberg relating to TelexFree, their affiliates or subsidiaries.
- all documents relating to the preparation of TelexFree’s schedules, statement of financial affairs, and matrix of creditors
Darr also wants ‘all documents concerning communications with‘:
- Greenberg
- Gordon Silver
- Alvares & Marsal North America, LLC,
- William H. Runge, III
- Kurtzman Carson Consultants, LLC
- Stuart Macmillan
- James M. Merrill
- Carlos W. Wanjeler (sic)
- Steven M. Gabriola (sic)
- Joseph H. Craft
- Sanderley Rodrigues de Vasconcelos
- Santiago De La Rosa
- Randy N. Crosby
- Faith R. Solan (sic)
- Global Business, Inc.
- Gerald P. Nehre (sic)
- Richard W. Waak
- T.D. Bank
- N.A., Bank of America Corporation
- Citizens Financial Corp., Inc.
- Citizens Bank of Massachusetts
- Fidelity Co-Operative Bank
- Middlesex Savings Bank
- Wells Fargo and Company
- Fidelity Investments
- Laddell & Reed Financial, Inc.
- Global Payroll Gateway, Inc.
- International Payout Systems (i-Payout)
- Pro Pay, Inc.
- Argus Payments
- Base Commerce LLC or
- Vantage Payments, LLC
And incase he’s not happy with the information provided, or wants to question where it came from and/or how it was collected (including any information that might be withheld), Darr also requests permission to compel the above parties to
attend an oral examination relating to the procedures followed by (the parties) in locating and producing documents and the basis upon which any
documents were withheld.
Darr claims his requests are justified, because
the books and records that were located at TelexFree’s principal place of business have been seized by governmental authorities based upon allegations that (TelexFree was) engaged in an illegal pyramid scheme.
The Trustee does not have ready access to these records. TelexFree’s principals are unavailable. No schedules, statements, or list of creditors have been filed.
TelexFree principal James Merrill is currently in jail, and Carlos Wanzeler (collectively co-owners of TelexFree) has fled to Brazil. Wanzeler is wanted by US authorities and a warrant has been issued for his arrest.
How long the Trustee will take to sift through the mountain of information requested is unclear. What’s the bet though that, when all’s said and done, Darr doesn’t find a viable operation that stands poised to generate $50 million a year in VOIP sales?
Darr has requested “expedited determinations” on the five subpoena requests, with a decision expected early next week.
Stay tuned…
Update 17th June 2014 – All five of Darr’s motions have received endorsed orders. Any objections are to be filed before June 20th, with a hearing scheduled for June 24th. If no objections are filed, the order will be granted (presumably without a hearing).
Here’s the flip side of the so called “bankruptcy protections.” Telexfree must undergo a financial colonoscopy” and everything that is discovered is useable as evidence in civil and criminal actions.
The SEC could hardly ask for better.
What’s the chance that almost every MLM could pass the test with retail sales? I would bet the chance is pretty close to zero, because the retail sales are pretty close to zero.
Well, that’s for the regulators to determine, which is basically what happened in Burnlounge, right? And what’s the bat Ackman is beating Herbalife with.
TelexFree should yield a similar result: the “sales” of VOIP doesn’t even come CLOSE to covering the ponzi payout.
There are 2 bats Ackman has against HLF. One is close to zero profit from sales to external customers, and the other is even bigger, the RICO fraud from the lead generation and other tools, which HLF got rid of, but only AFTER Ackman shined a bright light on them.
An analogy would be someone robbing banks for 30 years, then when they’re caught, say they won’t do it again, and given a pass for the previous 3 decades.
Since so few MLMs have external sales that make up a significant part of their profit, the regulators should require the MLMs to report this information instead of letting them run loose by the hundreds and pick off one or two occasionally.
Same with the tool scams, the MLMs should have to prove they aren’t running a scam, not the other way around.
Finalmente uma empresa para lutar contra a SEC que está habituada a ganhar sempre… Ainda faltou incluir esta informação no seu poste: “A Companhia Americana de Seguros Liberty faz um Seguro de $1.000.000,00 para a Recuperação Judicial da TelexFREE”
Google translates as:
Oh, no,
not the old
“we are insured against being declared one of the worlds biggest ponzi scams ever” fantasy.
Happens every time one of these things is busted.
People sure have some funny ideas about insurance and what it will cover.
Google translation: Finally a company to fight the SEC that is accustomed to always win … yet failed to include this information in your post: “The American Insurance Company Liberty Insurance makes a $ 1,000,000.00 for Judicial Recovery Telexfree”
I still don’t know what it means.
Finally a company to fight the SEC that is accustomed to always win … yet failed to include this information in your post: “The American Liberty Insurance Company is an Insurance of $ 1,000.
Americana da liberdade Seguro indenizará Steven Darr (o Trustee Telexfree) se ele é processado com sucesso por um credor da propriedade. Isso é tudo.
Telexfree is going to take on the SEC, which is used to winning, and it (TF) has the backing of a million dollar insurance policy with Liberty Insurance to fund its’ defence
This fellow has ascribed a purpose to the American Liberty Insurance bond (the Trustee’s bond) that is wholesale nonsense.
He concludes that American Liberty Insurance will contest the SEC charges for $1,000.
I would be willing to bet the insurance company has a clause that states illegal activity will nullify the policy, and they will soon drop TF like a wet dishrag.
Yo, Joaquim Pedrosa, stop being an ass dude! Lets not act like religious fundamentalists, when that shitty company is not even a religion! (Despite some of the pastors of the evangelical churches, being indeed salesmen, and acting has such,by peddling forth telexfree! (In Brazil.)
No comment on the many manipulative tactics that C.Costa in Brazil used in trying to sell the company by caling it “Gods comapny”…A well devised technique to rally the poor and uneducated, unfortunately. Calling it “God company” does not even give any credibility to the Catholic church! Which has a looong past of manipulation and genocide.
Sec waited a long time in order to gather all the necessary evidence to properly stop Telexfree in its tracks. I believe they took too much time actually. It might be difficult no longer having access to easy money, but, if you are fluent in English, Joaquim, welcome to world of the “few” that are in the know about the dynamics and inner workings of MLM business.
Since you have access to this site, and others, and will conclude that the supposed “owners” of Telexfree, already had a somewhat long history of trial and error in setting up this type of Ponzi and Pyramid schemes.
Now, if you dont really care about crimes against the peoples economy, well then, thats in reality no different then the many rich corrupt restarted (fucktards) that are excellent at exploiting Brazil, via Mafia techniques, and other “friends only placements” and many other ways, that overall, lack a great deal of integrity.
They are actively destroying one of the richest country in the world! If not the richest!
It’s not even Telexfrees’ insurance policy.
It’s the bond the bankruptcy trustee has to provide before accepting the trusteeship.
TF supporters have extrapolated the fact a million dollar bond exists into “the trustee is going to fight the SEC and allow Telexfree to continue”
Well there you go! LOL
Some morons in the Brazlian scam world (such as that Carlos Castilho clown on YouTube) think Darr’s bond is Ponzi insurance.
Lol. How embarassing.
Yeah, and he’s going to do that by subpoenaing everyone who has had anything to do with TelexFree, haul them in for depositions and share information with regulators on the backend.
All so that said information can then be used against TelexFree at a later date.
Fight the power! Wait, what?
At this end of a long running fraud such as Telexfree, those behind it have two major advantages:
1) Remaining victims have self qualified themselves as perfect victims. They’ve believed everything up until now, no matter how unlikely or improbable it sounds to observers, so it’s unlikely that will change
2) The general population has little or no experience with bankruptcy laws, the target demographic even less, making it a perfect target for misinformation.
Darr, not Barr.
Hehe, Stephen B. Darr. Thanks for the pickup
headlines on websites of zombies:
Stephen D. Barr…..Stephan B. Darr? Macht nichts.
Well worth a read:
http://www.bostonglobe.com/business/2014/06/14/telexfree-owner-wanzeler-takes-refuge-brazilian-seaside-city-while-partner-awaits-trial-prison/UU1V6krOMLAH0gi2Z6f0NP/story.html
Lololol!
Hilarious.
What else would you expect a scumbag lawyer to say?
Lol. Promoters say how hard they “work” being on the road for days at a time RECRUITING OTHERS.. This is like a drug dealer talking about his feet being swollen from the long days standing on the street corner in the heat and calling it hard work. Geesh.
I almost feel sorry for poor, poor Wanzeler. LOL.
If his beloved brother-in-law is not afraid to face justice, why is he hidding like a girl in Brazil? What a rat.
Wanzeler: Hey Jim, You want to get out of here and go hang out in Brazil?
Merrill: I am going to stay here and face justice.
Wanzeler: Why would you want to do that?
Merrill: We didn’t do anything illegal
Wanzeler: You thought it was legal?
I thought Merrill was caught on a highway, between two major airports.
IIRC, he was taken into custody on State Hwy 9, but it’s NOT the main thoroughfare there. There’s an interstate that parallels Hwy 9. And I don’t recall any newspaper that said which way he was going, or even East vs. West.
They have been taught by “false prophets” who think recruiting is same as selling. They think they’re “selling”, but they’re really recruiting. It’s a part of their self-delusion.
Oz, this site there and identical to the original site of Telexfree.
Oz, este site aí e idêntico ao site original da Telexfree.
xg-telexfree.com
It doesn’t matter which way he was going if there was an airport nearby in each direction. It would also make sense he stayed away from the main route and take a secondary road, in order to not be as visible.
Can’t remember if it’s been discussed, but were they following him? I always thought nabbing him there was strange. They had to have been following him to make that arrest, otherwise what are the chances of some random patrol pulling him over?
Katia Wanzeler I can understand, she was nabbed at the airport and HSI was called in by security staff. Merrill’s arrest however seemed much more random.
The authorities have never alleged that he was driving to an airport, or that he possessed his passport, a ticket or luggage when arrested even though they have had the motive and opportunity to do so.
As victim of TelexFree what shall be our fate?
@Kato
That’s still being determined.
Can I get some clarification from a Portuguese-speaker re. the TelexFree audit report in Brazil?
is auto-translating as
Has TelexFree gone and delayed the “presenting” of the auditor’s decision to the court by another 60 days? Or is the report still due to be presented today (16th)?
http://economia.ig.com.br/2014-06-16/ainda-nao-ha-certeza-se-e-ou-nao-piramide-diz-juiza-que-bloqueou-telexfree.html
You’re right, I was referring to a comment someone else had made, and since Route 9 goes through Worcester, where he is based, that would be a probable place for him to be arrested.
After the report is presented, both parts,Telexfree and MP-AC (Acre Prosecutory Office), will be able to hire “technical assistants” (specialists who will give “second opinion”).
If one or both parts choose to do so, a new deadline will be set to those assistants to analyse all the documents and present their own reports, that will be attached to the lawsuit, so the judge will have to read the 3 reports, before deciding.
The text you’ve highlighted just says that the due date to E&Y finish the audit report is today (June 16th). Judge Thais says once she receives the report, she will notify TF and MPAC and then their own experts will have some time to present their analysis.
Sure.
I’m inclined to believe the Feds were wiretapping and surveilling all of them. Evidence submitted by the SEC shows Wanzeler suspected his e-mail had been hacked.
Factually, the Feds knew Merrill and Katia went to the bank together to get the checks. Those checks ended up in the possession of Craft who e-mailed that he was prepared to leave headquarters and deposit them in a safe box. Coincidentally (?) the Feds show up before Craft can get out of the door.
Warrants are issued for Merrill and Wanzeler.
Speculatively, Wanzeler alert to the e-mail monitoring and the raid at headquarters flees in a car other than his own and Merrill is arrested on sight (probably in his own car.) Surveillance on Katia continues and she is nabbed trying to join her husband.
If they were doing surveillance on all of them, they weren’t doing a very good job on Wanzeler, he got away. It wouldn’t have taken much at all to put an alert on his passport, let alone tail him.
It looks more like the Keystone Cops to me. Then I see them patting each other on their backs, nearly breaking their arms, claiming what a great catch they made, while even bigger MLM scam fish swim right in front of them, such as Amway and Herbalife.
Maybe the SEC doesn’t particularly care that Wanzeler left the country. Why spend a small fortune prosecuting him, only to then feed and house him for years.
He’s gone. As gone as if he were in prison and at no cost. Let the Brazilians deal with him. There are other fish to fry.
As a major player, I don’t buy that. If true, why not let Merrill go for the same reason? Why not cancel Wanzeler’s arrest warrant as well? And let his wife go back to be with him?
I do not doubt that if Wanzeler had been home when the arrest warrant was served that he would have been taken into custody as per procedure. Justice demands that, but the fact is that he was not at home and his wife told the arresting officers he was in a local hotel.
So should the authorities take pride in the fact that the scheme is broken, he’s gone, his partner is jailed, and he and his accomplices are being civilly prosecuted while he himself is subject to criminal arrest if he ever comes back? I think so.
When I wrote the SEC doesn’t particularly care, I was talking about caring to expend further resources to bring him to justice…caring that he went into self exile. If he falls into their lap then of course they will arrest and prosecute but how much of a priority should the authorities give to one guy sitting behind an extradition treaty in Brazil?
Whether the authorities fouled up and let him slip away is an internal matter for the police to decide. I chalk it up to win some… lose some.
Wanzeler got lucky. He’s nullified. It did not cost much. Running as he did potentially saves the US the cost of a trial and years of incarceration. Its not a bad outcome pragmatically speaking.
Lastly I did not mean that the authorities “let him go.”
It pisses me off to no end to see that scumbag Wanzeler escape with all his stolen money. It really sucks bad !
It seems a little early to draw such a conclusion. If I recall he has (had) a personal residence, expensive cars, a yacht, and 36 rental homes and a life in the US. The Feds have identified several foreign bank accounts. (Singapore/China?)
So while for now he has escaped criminal arrest the civil prosecution goes on and every thing he ever had or owned is subject to being lost. There’s also a reasonable chance he will face civil/criminal charges in Brazil.
Everything the U.S. government can get its hands on, but probably not as much if he was behind bars right now. And it sounds like Brazil won’t put him in prison for more than 2 years.
While Brazil may not extradite him, they may cooperate on the money side of things, and as you say, time will tell.
Unfortunately, many of the people who lost money to him literally couldn’t afford to lose the amount they lost, will have to wait a VERY long time, and only be partially reimbursed.
It will be interesting to see how “reimbursement” is handled. Filing and paying claims against the assets of the estate is a long drawn out process in or out of bankruptcy…. and then you throw in the fact that significant Telexfree/Ympactus funds were frozen by Brazilian authorities who may or may not recognize the primacy of the US Bankruptcy Court.
Somehow I doubt Brazil is just going to transfer multi millions of their citizen’s funds to Massachusetts.
I suppose its possible there will be some kind of dual administration, but then there is the Dominican Republic to consider and I guess that makes it a threesome. Then there is the UK and Rwanda and Madeira. Heck this may need to be handled at the United Nations.
That’s hilarious! If the UN gets ahold of of this, the victims will end up paying the UN!
Article updated with news of endorsed orders being passed for Darr’s motions. An objection deadline has been set for June 20th and a hearing will be held on June 24th.
Hahaha… NO!!! We, (the brazilian) don’t want this piece of shit!!! Please, take it with you!!!
But two years in brazilian prison can be a really danger thing! Maybe, 20 year in a 23 hours per day in a solitary confinement, can be a safe and better place!
Y’all need to send them Carlos Costa as a trade.
Hell, I’d pay to watch Costa’s logic go up against the SEC.
You think Sloan’s silly arguments are hilarious? You ain’t seen nothing!
Even because, in Brazil, if the sentence is shorter than 4 years,the person only goes to jail in rare cases
Judging from the way a Brazilian court handed down a victory to a single TF affiliate, giving hime 300% of what he lost, I believe it will be every country (or possibly every man) for themselves.
Captured funds outside the US will probably be subject to disbursement based on a whole different set of rules that are prevalent in that country (taking into account different levels of corruption). I doubt there will be much sharing going on. Every country will want to take care of their own first.
What the authorities have already captured and all US based assets are probably what US based affiliates can expect assuming anything at all is left over after paying the trustee, McMillian, Alvarez/Runge, and all the other affiliated parties.
At least here in the US, I believe the authorities will try to equitably distribute whats left of the captured assets and ward off lawsuits from individuals and classes.
Yet, I forget about it. Less than 4 year and you only need to sleep in the cell.
I think you’re right. The number and variety of parties claiming entitlement to hopelessly commingled funds begs a solution. Perhaps the US Trustee will recommend a Creditor’s Committee for each country.
Wanzeler’s attorney illustrated one example of the conflicts created by this crossover effect when he claimed that the US had no right to freeze Wanzeler’s assets because the money used to purchase them was legally earned in Brazil.
I see PWC listed on there. Could this turn into another Enron for the accounting industry?
Were there any financial statements that were audited or was their participation in Telex Free purely as an adviser? Regardless, I find it difficult to believe that they did not realize this was a ponzi scheme.
I don’t believe that. Enron involved a rather active destruction of evidence by Arthur Andersen / Enron, after Enron had filed for bankruptcy (IIRC). “The big five” was permanently reduced to “the big four” when Arthur Andersen lost its license as an auditing firm. It probably still exists, handling lawsuits rather than auditing client companies.
There’s some huge differences here, e.g. in years the companies were active, size of companies, type of companies, etc.
PWC was listed as “Financial Advisor”. TelexFree would never have survived being audited, e.g. the internal transactions are not something an auditing firm will accept from a client.
Hold up, we haven’t seen what comes out Brazil yet. Their auditor might turn a blind-eye yet.
None of this matters until:
1. Money is returned to investors.
2. Arrests and prison sentences are issued.
3. All crooks and their immediate downlines go to jail
4. The whole scam is exposed as an infographic with pictures of the culprits and for the whole world to see.
5. Find and arrest all screw balls that have hidden money away.