March Madness (not really)

Well, we’ve had some activity.

First up is the criminal case against Ed & Joel.  On January 21st, Joel finished entering his guilty plea. The court document confirms that Joel did suffer some kind of illness at the last hearing, but doesn’t go into any details.  It also mentioned that Joel has been taking his prescribed medication for the 72 hours prior to this hearing, but and I’ll repeat that – BUT – he felt well enough to proceed.  Is that a typo or does Joel’s medication have some nasty side effects?  Anyone’s guess.  In any event, the boys were supposed to be sentenced on March 30th, but at the request of the US attorney, it was moved to July 20th.  Apparently, the US needs more time to determine the extent of damage that these two have caused in order to figure out a fair sentencing recommendation.  Understandable.

On the receivership front, the receiver’s submitted a proposal for clawbacks.  Bullet lists are awesome:

• NASI may have actually owned 238 ATMs, but the investors owned none.   Not one.  NASI didn’t actually “sell” any of their ATMs to investors.  I once had this theory that they “sold” real ATMs to multiple investors under the assumption that they could still pull a profit per ATM and that they got greedy and it spiraled out of control.  Well, that theory was crap.  They out and out sold their victims nothing right from the start.
• Generally, anyone who invested in 2009 and before received more than they invested.
• The receiver mentioned a seven year period several times in the filing and sure enough on page 15, it clearly states: Accordingly, the maximum “reach back” period for recoverable fraudulent transfers is seven years from the date a complaint is filed.
• The largest 20 investors profited $17 million in the seven year period.  This is a preliminary number and is subject to change.  That’s $850k average per investor, for those playing the home game.
• NASI paid people $500 to $1000 per ATM as a referral fee.  Preliminary analysis of 16 sales agents showed $9 million paid out in referral fees. That’s a little over half a million per sales person, average and between 9,000 and 18,000 ATMs sold by paid referral.
• Because the receivership needs as many net winners to settle up quickly so that they don’t start losing potential recovery sources to the seven year limit and to minimize the legal fees, he’s sweetening the pot for the winners to settle quickly.  There’ll be letters sent, so you’ll know if you’re one of these lucky folks.
  You can settle for 70% of your profits if you pay in one lump sum or 75% if you pay in installments over the next 12 months.  It’s only available to the first 30 people to accept the offer or until the receiver files a complaint.  After that, it increases to 80% of your profits and the 60 day clock starts counting down.  When it hits zero, the litigation starts.
• The receiver is requesting that the litigation for clawbacks all remain in one court with one judge who is familiar with the case so we don’t up with contrary rulings, general confusion and apocalyptic legal fees.
• An example of the letter investors will receive was posted at the end of the document.

Keep in mind that the receiver is still trying to piece things together, so I’m not sure when these letters will get sent out.

And now we move onto the fees from the receiver and the attorney.  Good times.  The receiver billed over $185k in fees and $14k in expenses from 9/30 to 12/31.  80%  of the fees will be paid and 100% of the expenses (they are out of pocket, after all).  I think we all knew it would be big, but it still took me by surprise.  As the receiver states, the boys kept shitty records.  And they had a bookkeeper.  How… what was she… Ugh.  I can’t even.  The good news is that these kinds of things always start expensive and get cheaper as you approach the finish line.  The receiver points this out and I can tell you first hand that it even works out that way on a smaller scale.

Another thing that raised the bill was the rubber checks.   I believe my last post pointed out the tedious hair-pulling task of figuring out that kind of cluster-bunny.  The receiver also points out that these rubber checks were often reissued with the same stupid number.  How did they manage that? A check can only bounce twice before the bank stamps it “Do not redeposit,” so did they have multiple copies of checks with the same number sequence?  Did they use a program like VersaCheck to print their own checks (and by “print their own”, I mean instead of ordering checks from the bank they just print theirs), and therefore also had a printer capable of printing the MICR line at the bottom?  That takes magnetic ink.  This thing keeps getting weirder.

As for the attorney, the fees were $113k in fees and $9k in expenses for the same period of time. Like the receiver, he’ll get paid 80% of the fees, and 100% of the expenses.  Also like the receiver, the fees drop over time.  I expect they’ll pick back up once they initiate clawbacks.

Anway, I’m cutting this one short since I have to get up for work at 3am and there’s nothing juicy enough in the Attorney’s bill to report on.  Except $3 for text editing.  It made me laugh.