Receiver’s Second Report

There’s nothing too juicy in this new report.  It’s all Ed & Joel’s fault.  If they kept decent records, the receiver would be further along.  But as it is, the receiver has to completely rebuild the books from scratch, or close to it.  I used to do this as a bookkeeper, although not in a forensic capacity, and it’s truly time consuming.  And annoying.  And I’m really glad I don’t have to do it anymore.

On with our adventure:

• The ATM business has provided some steady income (don’t get your hopes up!).  That one servicer who withheld $25k from the September payment has now held a total of $70k. It’s allegedly for a line of credit, which is not unheard of, but they’ve failed to provide sufficient documentation – that is, they’ve handed over something but it’s not good enough.  The receiver may end up going to court to get them to release the funds.  I don’t think he intends to sit on this for long.  I mean, they’ve already had three months to make this right.
• Over October, November and December, the ATM business only averaged about $52k net income.  Net income means your income minus your expenses.  In this case, the ATM income from servicers, minus the payouts to the ATM locations.  Payouts were not made to ATM locations in October, but if they had, the monthly average would only be $42k.  In short, the ATM business only makes about $42k a month on average.  While that’s probably not bad, if this was an ATM business only, it certainly sucks if you’re running a Ponzi.  The receiver at some point estimated between $90k and $150k, but now that he’s figured out how much the ATM locations are supposed to be paid, he’s discovered his initial estimates to be far lower.  I really hope that ATM business is still viable for sale.  I mean in November, a huge shopping month, it only pulled $71k net and while that’s nearly double, it’s still likely to be the highest month of the year.
• It’s taking a long time to get the forensic accounting done (that’s basically a fancy term for rebuilding the books well enough to pass muster in court).  Apparently, there’s a ton of investor activity and as he puts it “NASI did not use a customary accounting system or investor tracking database.”  Huh, that’s too polite.  I would have said that NASI chained two hamsters to an abacus and fed them nothing but cocaine and Red Bull since NASI’s inception.
• NASI cut an average of 2,000 checks a month to investors in 2014.
• The receiver’s had to figure out that bounced check mess.  Trust me, that’s a nightmare.  If a check bounced twice, that’s four transactions – two checks and two deposits. Trying to match those transactions together, especially in this case where there’s probably 2000 of them is not an easy task, especially when some banks don’t notate the bank statements on the deposits to say which check it was that bounced.
• The receiver believes that after the books are all done, they’ll be able to figure out who received fraudulent funds and then be able to go after them for the monies and that if they are successful, those funds would make up a good chunk of what can be used to make the victims whole.  Don’t let that get your hopes up. In the end, it partly depends on whether those folks can repay. Some may have hidden their assets well, others may be flat broke with nothing to sell.  There have also instances where people will settle for pennies on the dollar.
• In regards to the Oasis companies… the companies are actually run by Robert Keller, Jr., the bookkeeper is Stacy Round and Keller’s father appears to be involved in some capacity.  The receiver had one short phone call with Keller after which Keller stopped responding.  Subpoenas have been issued to all three, but so far they’re forked over very little.  You may recall from prior reports that Oasis rents out mobile studios/dressing rooms to film companies.  While the receiver doesn’t know who owns all the equipment (yet), it appears that some of it is owned by a third-party and leased to Oasis.  And as icing on the cake, the receiver has to rebulid Oasis in a similar manner to NASI.  At first that might seem strange, since they have a bookkeeper, but I think the receiver isn’t going to wait around for them to get their shit together.  It’s in everyone’s best interests to wrap this up quickly.
• NASI no longer has the office space and the sale of the office equipment should happen shortly.  Don’t expect miracles there.  The receiver initially estimated the value at less than $10k.
• In a dramatic turn of events, the guy who runs Fuel Doctor is cooperating.  But, the company’s changed hands a number of times, so who knows what’s going to happen there.
• The receivership estate is another matter.  It started when the receiver took over on 9/30/14, with a $0 balance.  For the period of October-December, there was a bout a million dollars in income and about half a million in expenses.  Among the expenses:
  • $5k to KP Calabasas LLC, which I suspect is the landlord.  They’ve since moved out of the unit, so we likely won’t see that again. $800 to a moving company
  $4,500 to a bank.  Likely a loan payment.  I wonder if NASI got a line of credit or financed some of their ATM purchases.$4,900 to Hartford Insurance.  Not sure for what.  I want to say that it could be worker’s comp, but NASI no longer has payroll.  My only other explanation would be insurance on the ATMs they owned.$300 to the state.$133k for ATM location payments.

In about two months, the receiver might be filing a report of the forensic accounting.  I haven’t been this excited about a financial document since…never.  I have NEVER been excited for a financial document.  But this one, oh, I will make sweet mental love to.

And now a tangent from a bookkeeper:

I don’t know what the receiver’s process is on rebuilding those books, but I doubt it differs too much from what we did – especially since our clients were often unintentionally uncooperative.  We used to start by procuring all the bank statements.  Since cancelled checks often came separately, we’d enter the bank statements “blind.”  That means we’d enter all the transactions off the statements into QuickBooks as uncategorized income or expenses.  This would get us a list of items that needed more information (like credit card payments would prompt us to ask for the credit card statements).  As the checks came in, we’d edit them in the computer to read correctly.  It’s my understanding that the receiver likely got the checks at the same time as the statements, which makes me jealous. After that, we’d use any supporting documentation available to categorized all those expenses and income, and try to get anything that we were still missing (like statements from vendors and the like).

And that’s got me thinking about how I would set up a QuickBooks file for this.  I’d likely set up each investor/victim as a customer.  Investments received would be allocated to the customer, either directly on the deposit or via an “invoice.”  And since you can cut a check to a “customer,” all the payments would be properly allocated.  Then, the receiver could pull a Customer Profit & Loss report to determine if the person was a net winner.

It sounds fairly simple, but there are other factors to consider in this case.  Firstly, if you go back through the criminal complaint, you’ll see an area where there are some specifics about how much was given to NASI and when (starts on page nine).  I went back through it to try to make a chart a couple weeks ago.  I failed. Data too weird, but that weirdness is important I think.  Like the $1,039,836 received from 19 investor/victims on 12/01/2010.  No combination of the $12k or $19.8k investment amounts will account for that $836 at the end.  Impossible maths.  If I recall correctly, Joel used to offer financing.  I suppose he did it as a way of making the investment affordable to those who do not have the cash on hand or to get him a better spot in hell.  Maybe both.  Anyway, this financing option complicates things further.  We all know that Joel and Ed didn’t keep decent records, so the receiver might have his work cut out here.

/tangent off