TelexFree Trustee’s 2nd round of subpoenas approved
Just over a week ago we saw the TelexFree Trustee issue subpoena requests on some of the bigger names linked to the TelexFree Ponzi scheme.
Eight requests were made in total, with the standout names to me being Gerry Nehra (and his lawfirm) and i-Payout.
i-Payout were running around telling everyone TelexFree wasn’t a Ponzi scheme, as this was a threat to the millions of dollars they were making in processor fees.
Nehra was the legal face of TelexFree (up until the company experienced actual regulatory problems), and was responsible for sending out cease and desist emails to anyone who bothered to look over TelexFree’s business model.
Initial objections were filed by Opt3 Solutions (IT service provider) and ProPay Inc. (payment processor).
Opt3 Solutions’ objection is limited to concerns about confidentiality and information being circulated by the Trustee among the general public. ProPay also raise these concerns, but also requests they be given 20 days to respond to any requests by the Trustee.
In his original motion, the Trustee had requested a 10 day response time for any subpoena requests and 5 days response time for any requested depositions.
Propay also objected to the Receiver request that he be granted authorization
to compel the Payment Processors to produce for inspection and copying any additional documents he deems necessary to complete his administration of the cases by delivering them to the undersigned upon (10) days notice.
ProPay argue that
this request strays outside Rule 2004’s boundaries. Rule 2004 examinations are broad but do have limits; courts have consistently held that Rule 2004 cannot
be used for “purposes of abuse or harassment” and “cannot stray into matters which are not relevant to the basic inquiry.”
Reading between the lines, ProPay (who naturally don’t want to give up any of the processor fees they made facilitating the TelexFree Ponzi scheme), are accusing the Trustee of requesting information “not relevant to the basic inquiry” (TelexFree).
Seems a bit premature to me. Logic would dictate waiting for the Trustee to issue a subpoena request that is “not relevant to the basic inquiry” before filing an objection.
One would assume the Trustee is aware of the scope of Rule 2004, and as such accusing him of breaching it before he’s even had a chance to issue any requests seems silly.
Perhaps ProPay’s lawyers watched Minority Report the night before they drafted the objection.
In any event, Judge Hoffman has signed off on endorsed orders granting subpoena requests on Babener and Associates (lawyers), Garvey Schubert Barer (lawyers), Lane Powell Prof. Corp (legal advice), The Sheffield Group (MLM consultants), Gerald Nehra and Nehra & Waak (lawyers) and Joele Frank, Wilkinson, Brimmer, Katcher (PR firm) and the payment processors (Global Payroll Gateway (GPG), International Payout Systems (i-Payout), ProPay, Argus Payments & Allied Wallet).
i-Payout’s lawyers had reached an agreement that the original subpoena request be granted, on condition that any documents produced are held confidential. This was written up in a stipulated order which was granted by the Judge.
ProPay’s objection as it stands hasn’t been taken into consideration (or has been rejected?). It was filed on the 10th, the same day the Judge entered in an endorsed order granting the Trustee permission to issue subpoenas.
I’m not sure whether or not ProPay’s objection will be considered at a later date.
Opt3’s objection was filed on the same day, with a hearing set to flesh out the objection on July 17th. Unless there’s been a delay with the filing of pending documents, this suggests Propay’s objections were overruled.
Looking forward, as we saw recently with Kevin Grimes and Howard Kaplan in the Zeek Rewards Receivership case, I would be at all surprised to see the TelexFree Trustee turn around and sue some of the parties he’s requesting information from.
i-Payout and Gerry Nehra in particular are likely sitting on a goldmine of self-incriminating evidence. Evidence they are now compelled to provide the Trustee (who, let’s not forget, is acting on behalf of the DoJ).
Stay tuned…
Footnote: The recent round of endorsed orders and objections can be viewed over at the KCC website (docs #330 to #342)
Lol, oz, why are you not talking about the Carlos Costa election? Did you see the 1,5 milion that their 20 year old daughter that only study give him a loan?
To be honest I’m finding it hard to translate that. I can handle translating Ponzi articles in Portugese but political ones (with me being unfamiliar with the Brazilian political system) is stretching it.
Barring anything hugely scandalous (such as Costa winning), I think Costa’s political foray might be best discussed in the comments. You guys down there have a much better grasp on the local situation than I do :).
As for the loan, I did read that but wasn’t sure exactly what it was translating into.
Given Costa’s wife had the top bankruptcy creditor position, it wouldn’t surprise me at all if they’d been laundering money through their daughter.
made weekly magazine article about the fact that this nonsense will happen
translate to english:
http://translate.google.com.br/translate?sl=pt&tl=en&js=y&prev=_t&hl=pt-BR&ie=UTF-8&u=http%3A%2F%2Fveja.abril.com.br%2Fnoticia%2Feconomia%2Fnos-eua-dono-da-telexfree-e-preso-no-brasil-se-candidata-a-uma-vaga-na-camara%3Futm_source%3Dredesabril_veja%26utm_medium%3Dtwitter%26utm_campaign%3Dredesabril_veja%26utm_content%3Dfeed%26&edit-text=
Does this sort of approach really work in Brazilian politics?
Oh my! Yes! And it’s the most annoying thing! I have been there during election time. They have these vans going around with their speakers at full blast playing these silly songs all day!
The thing is…after a while you can’t get the awful tune out of your head. And on top of it all, they litter the streets with thousands of fliers. The catchier song/slogan wins…most people don’t have a clue who the candidates are or what they stand for. Voting is mandatory by the way.
Unfortunately in Brazil and so any villain can be a deputy or senator so justice can not investigate it it was already expected!
I-Payout made a deal = “We’re sending the documents we have in our immediate possession, without any objections” and “If the Trustee want more documents, we can send that too, or we may potentially object”. 🙂
It’s a “give and take” strategy. The alternative would probably have been to file a detailed objection, trying to reduce the number of documents / asking for more time, etc.
At best, it’s a delaying tactic.
As Oz points out, the trustee is acting on behalf of the DoJ, in addition to which, other agencies are already involved i.e the FBI and Homeland Security.
I find it impossible to believe this prosecution and investigation are being carried out independently of the Financial Fraud Enforcement Task Force, of which they are all members
IOW, they either cough up the documents now, after being asked “nicely” or they do so later, under a lot more pressure, and a lot harsher penalties for not doing so.
Either way, the documents WILL be surrendered.
Not exactly ….to do so would be a breach of his fiduciary duty to the debtor.
However, the “Trustee’s Manual” states that “a judge or private trustee “having reasonable grounds for believing that any violation under chapter 9 of this title or other laws of the United States relating to insolvent debtors, receiverships or reorganization plans has been committed, or that an investigation should be had in connection therewith, shall report to the appropriate United States attorney all the facts and circumstances of the case, the names of the witnesses and the offense or offenses believed to have been committed.”
The Telexfree Trustee’s mandate is to follow the Bankruptcy Code not the wishes of bureaucrats in the DOJ or SEC.
That being said Rule 2004 Examinations are open to the public and the DOJ, SEC or anybody else can attend. The examinations become part of the public record and testimony is under oath.
The Trustee justified his need for the Rule 2004 Examinations on the basis of the SEC’s seizure of the company’s records. This suggests that the SEC is not sharing information…which is understandable since it is suing the company which, for now at least, Darr has the fiduciary duty to defend.
A trustee is normally independent?
U.S. Trustee is acting on behalf of the Government, but trustees in general should be independent.
The US Trustee is an employee of the DOJ.
Private trustees like Darr are appointed by the US Trustee and approved by the Court. Once approved Darr became the Telexfree Trustee (Big T) as that is now his official title and he is called for the sake of brevity, the Trustee…. but he is not the US Trustee….does not work for the DOJ and his mandate is to follow the Trustee’s Manual and the Bankruptcy Code not the dictates of the DOJ or the SEC.
The US Trustee’s function is to ensure the Bankruptcy Code is being followed not to micro manage the efforts of the private trustees.
Meanwhile, in the real world………………………
What is “normal” about a billion dollar international fraudulent scheme attempting to hide behind bankruptcy laws ?
You’ve used those words before, and had to eat them. You may as well put your bib on again since you seem to have an appetite for crow.
More to the point…..There is nothing “abnormal” about it.
Where would you expect them to try and hide? In the corn bin? Under the ocean? The system is going to digest and spit Telexfree out just like it does 1000s of BK filings every year.
There is no exceptions to the Bankruptcy Code just because the SEC has alleged this or thatm and none are needed. This court and Darr are going to follow the law as written and everything will eventually resolve itself.
What does not work is to have government agencies controlling private bankruptcy trustees or conversely having private trustees working on behalf of the DOJ. Someone has to represent the debtor and in this case its DARR.
Here in the real world we have adopted an adversary legal system, which while cumbersome is preferable to the police state you seem to think exists.
Which is precisely why the polluting of this thread and forum you and your Norwegian buddy have been doing with your petty nit picking and one-upmanship means exactly nothing.
The “system” is not going to stand by and be misused by a gang of fraudsters, no matter how many Wikipedia explanations either of you produces.
We’ll all play ’round and ’round the mulberry bush for at least two or three years and, doubtlessly, Hoss and M_Norway will have many “victories” along the way, the prosecution will play the game and go through the motions so that no ones’ constitutional or legal rights are trampled, the defendants will use every legal maneuver and delaying tactic available to them and the result will be exactly as predicted.
It has nothing to do with police states.
It has everything to do with the fact Telexfree is a billion dollar international fraud.
You and M_Norway can fill in your time discussing the ins and outs of a ducks anus, all you like, it will make no difference to the outcome, only to the ability of readers to remain awake as you both treat this blog as some sort of personal playground.
Wow. Tell me more. What kind of duck we talkin’ about there?
You think this is a bad thing? Do you prefer lynchings?
Then it should be just as obvious to Stephen Darr as it is to you. The difference is that he has to prove it and you just have to shoot your mouth off about it.
You’re quivering like a virgin. Everything will turn out ok. Your prediction was that was that Telexfree would end up with a Claims Administrator. If you are right that should occur pretty shortly.
Hey guys, any news about Telexfree US IRS forms and the outcome of that?
In Brazil, the “Brazilian IRS” (called RFB) is now putting a lot of people under scrutiny because they have informed incorrect or inconsistent values on their forms, due to Telexfree sending them completely wrong data.
Last month, the RFB started processing all the forms received and since then the number of TF affiliates despearately complaining in forums and blogs has increased by the day.
Here in the US the trustee has only been on the job for few weeks, plus he says the SEC seized all the Telexfree computers and records as evidence. I doubt he’s even scratched the surface yet. .
The only “bad thing” about it is that it gives you and your garrulous mate years of filling BehindMLM with endless, repetitive point scoring nonsense.
Here’s a thought:
why don’t you take a deep breath, get some cojones and commit yourself.
If you think Telexfree is NOT a billion dollar fraud, say so.
If you think there’s a chance the trustee WON’T discover Telexfree to be a billion dollar fraud, say so.
If you think those behind Telexfrees’ strategy of declaring bankruptcy ahead of the world falling on their heads will make any material difference to the inevitable outcome, say so.
If you think Telexfree members shouldn’t lose hope but instead hang in there, say so.
If you think ending this sorry saga will come down to defining whether or not it is a pyramid or a ponzi, say so.
Don’t you mean thoughts?
OK
OK, got ’em
You did not say to what?
I think….someone just threw a tantrum and needs a new diaper.
Does that mean you are going to stop clogging the blog and thread/s with your nonsense ??
I will not be posting any nonsense. This does not mean that you will agree with it or understand it, but while you are finding some baby wipes ….
Go read your comments to Anjali and you will see what “filling Behind MLM with endless, repetitive point scoring nonsense” really looks like.
Like I said get a diaper.
Oh goody,
Can we expect a change in your posting style then ??
Yes…. at the exact moment you quit using the phrase “Oh goody” and promise to never use it again.
Great find, Hoss.
I think you should take your find over to one of the Telexfree members’ forums.
You can join them in wiling away many happy hours discussing how Telexfree pulled the wool over the DoJ’ eyes and what material difference/s the bankruptcy is going to make in the long run.
He just cited something found on the internet, at “nolo.com” or something. That method is normally called “copy writing”.
You’re hopeless.
Copyright denotes a claim to publishing rights
Copy writing is the process of writing copy, as in the case of someone who writes the copy for an advertisement.
I cited the Nolo press material because I thought it said what needed to be said. If your two would concern yourself with understanding the material rather than acting like elementary school hall monitors, then you might learn something.
And the word you do not seem to know, Norway is plagiarism and no, I was not plagiarizing it. I never tried to pass it off as my own writing and it was obvioiusly clear that it was not.
Search time .00000045 sec. Its amazing how much information is available….. most of which obviously choose to disregard.
The trustee is responsible to the estate, not to the DOJ. Did you miss that part? Do you get it yet?
Since you seem to be able to do an internet search why don’t you save me some time and Google estate. That should allow you to get a better picture of what the trustee actually is expected to do.
I doubt they understand the bankruptcy process any better than you do. They only have a different set of biases. Who said Telexfree pulled the wool over the DOJ’s eyes?
Not I.
I get the fact that you visit and read forums and listen to those people. Don’t. They are ignorant and its rubbing off on you. If that’s your peer group. Get a new one.
I was being deliberately facetious when I said “great find”
Other than Hoss and the remaining Telexfree’ers, does anyone really think Telexfrees’ tactic of declaring bankruptcy ahead of the shitstorm it knew was about to hit is going to make any material difference to the inevitable ??
As has been pointed out, a bankruptcy trustees’ primary resonsibility is to the bankruptcy estate.
So, on the one hand we have a billion dollar international fraud with hundreds of thousands of victims and on the other a trustee representing the (fraudulent companies) estate.
Do YOU think the bankruptcy will be anything more than one of many delaying tactics attempted by the perpetrators of the billion dollar international fraud or that the bankruptcy trustee won’t find out he is involved in a billion dollar international fraud disguised as a legitimate company ??
Do YOU think the bankruptcy trustee won’t be forced to hand over to someone whose primary responsibility is the “creditors and/or victims” of the billion dollar international fraud.
The point is, we could join with the Telexfree’ers, spend thousands of hours and make countless posts clogging numerous forums and blogs finding every possible way the bankruptcy and subsequent appointment of the trustee COULD benefit Telexfree and its’ followers,
BUT
It ain’t gonna happen that way.
I have been clear about that the bankruptcy either will be converted to a Chapter 7 or will be dismissed, based on the recommendations from the Trustee when he has analysed the business.
He will find fraud. He won’t find the number of paying customers TelexFree pretended to have = he won’t find what’s needed to reorganize the company.
Of course. There’s no indication it will be otherwise.
The DOJ doesn’t need to have the Trustee “prosecute and investigate” on their behalf because Darr will be independently doing those things in the normal course of his duties as bankruptcy trustee anyway.
As we know LRM has some police state fantasy where everyone is working for the DOJ. I half expect him to report that the DOJ ordered drone strikes against Carlos Costa, and LRM’s much beloved Anti Fraud Task Force has landed on the beaches of Rio Santo and kidnapped Carlos Wanzeler.
You don’t have a clue how all this works together.
Well, that’s settled then.
No more cut and pastes from Hoss demonstrating his complete lack of knowledge about fraud, fraudsters, the FFETF, it’s members and history,the difference between how errant and fraudulent businesses are handled, or, indeed, online fraud itself.
Backed into a corner, he’s resorted personal attacks.
PHEW peace at last.
IMO there has been an underlying plan by the authorities to proceed with the route of converting to a Chapter 7. This was a response to TelexFree’s sudden filing of bankruptcy in April.
It was clear that the entire filing of bankruptcy by TF was a sham meant to try to throw out the promoter contracts and undermine the inevitable intervention from the Massachusetts Securities Division, the SEC, and other authorities.
So why would the authorities go along with the bankruptcy route instead of having the entire bankruptcy dismissed in court?
The explanation I think is that the authorities felt they could use the bankruptcy system to achieve the same endpoint of recovering funds for the victims as the receiver route (which is where this was headed prior to the bankruptcy filing). And this would perhaps save time rather than having a prolonged argument in court against TF lawyers on why the bankruptcy should be thrown out.
BTW does anyone know the reasoning behind hiring a private trustee as opposed to using the US DOJ Trustee. I’m assuming that this is common practice perhaps because of the volume of work involved and to try and remove bias from the bankruptcy process.
That’s entirely correct. Whether this is handled by Receiver outside of BK or a trustee inside is procedural. The results will be about the same either way.
The US Trustee could act as a case trustee but that’s not usually his role. He’s expected to supervise and oversee the activities of dozens of staff and private trustees, each of whom could be handling nearly a hundred cases at one time since they do personal bankruptcies as well as larger and more complex ones like Telexfree.
Its completely typical for a company to seek contract avoidance if it hopes to reorganize and the SEC and MSD actions were never going to be more than temporarily stayed anyway. It will be interesting to hear Darr’s findings.
Correct. It’s the common practice, to remove bias etc.
U.S. Trustee is the government body (part of DOJ) responding to potential bankruptcy fraud by filing a Motion for appointment of a Trustee, but the individual trustee will be independent (someone QUALIFIED by education, profession and experience). Hoss posted something about it in post #27.
Right
I see your point that every company has a right to reorganize via bankruptcy and from the eyes of the law you cannot just assume that a company is fraudulent until it has been proven by a preponderance of evidence.
However, the timing of bankruptcy filing and “reorganization” was very suspicious with the authorities clamping down on TF and the company bleeding money after the compensation plan change.
The outcome of a court case can take years, but in the mean time my opinion is that I don’t believe for a second that TF would have filed bankruptcy when they did had it not been for the authorities clamping down on them and forcing them to change their compensation plan to appear legit.
If it weren’t for the crunch they were feeling from authorities, they would have continued milking the same original Ponzi compensation plan for all its worth and probably would have still been happily in business (which would have been good for many of the earlier investor but bad for the later investors and for society in general).
Oh, totally. They were at the end of their rope financially and legally….. but there is nothing exceptional about that.. The BK Courts see and deal with failure all the time.
What sticks out for me is the owners’ brazen pretense of legality and good will at a time when they knew very well that they were going to screw every investor with money left in the game.
“Drowning men will grasp at straws” as the old saying goes, and here it looks like Merril and Wanzeler were doing just that.