Ponzi Schemes, Receiverships, and more at NAFER Fifth Annual Conference

Participants of the NAFER 2016 conference, which covered receiverships, Ponzi schemes, and other topics

The fifth annual NAFER conference featured receivers and federal judges, among others

DailyDAC Editorial Staff attended the fifth national conference of the National Association of Federal Equity Receivers (NAFER), held at the historic Mayflower Hotel in our nation’s capital, on October 13-15.

The audience at the three day conference was composed largely of receivers, professionals who represent receivers, and federal judges. For newbies, the conference opened with a two-hour session entitled Receiver Training Camp, led by two past presidents of NAFER (Robert Wing and Steve Donell) plus presidents outgoing (Ira Bodenstein) and incoming (Greg Hays).

Ponzi Scheme Mock Trial with Gary Caris

Another highlight was “John X. Pert On the Stand: The Mock Direct and Cross Examination of a Forensic Accountant to Prove the Ponzi Scheme.” This was pedagogically sound and great fun.  Could the receiver’s counsel (played by Gary Caris, of Diamond McCarthy, who once recovered assets in Latvia) establish that the business was a Ponzi scheme and thus enjoy the “Ponzi presumption” and that he therefore could be relieved from proving intent in fraudulent transfer actions? Here the problem was the defendant’s expert witness (played by frequent expert witness Gil Miller of Rocky Mountain Advisory LLC) and his counsel (played by the Hon. Stephen Rhodes (ret.)).  Hon. David Carter (C.D. Cal.) played the judge, donning a crown for his deliberations (it was a close call).

Kathy Bazoian Phelps (Diamond McCarthy) produced the panel.  She and Judge Rhodes have authored the authoritative work on Ponzi schemes, The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes (Lexis Nexis 2016).  A beautiful Charles Ponzi bobblehead doll was distributed to each conference attendee.

Other panels included:

• “International Asset Recovery,” in which Alex Moglia (Moglia Advisors). Jack De Kluvier (US Dept. of Justice), Mark McDonal (Grant Thornton, BVI), David Molton (Brown & Rudnick LLP) and Eric (Rick) Rein (Horwood Marcus & Berk Chtd.) discussed getting money and property that is resident outside of the US (this would be good to know!), while fostering cooperation with foreign governments, financial institutions, and professionals.
• “The End Game: Fairness in Distributing Receivership Funds ,” which featured Kevin Duff (Rachlis Duff Adler Peel & Kaplan, LLC), Richard Foelber (CFTC), Marion Hecht (Clifton Larson Allen), Martha Massey (SEC), and Burt Wiand (Wiand Guerra King P.A.).
• “Communication is Key: But Receivers Must stay Within Ethical Boundaries,” which featured Ira Bodenstein (Shaw Fishman Glantz & Towbin), John M. Breen (University of Chicago Law School), Stephen Harbeck (SIPC), Kristin Murnahan (SEC), and Henry Sewell (Law Offices of Henry F. Sewell Jr., LLC).
• “Money, Money, Money: Tax, Insurance, Expenses and Reporting,” which featured Andrew W. Caine (Pachulski Stang Ziehl & Jones), Mark Dottore (Dottore Companies), Byron Moldo (Ervin Cohen Jessup, LLP), and Irving Picard (Baker Hostetler).
•  The concluding “Judges Panel” featured Robert Mosier (Mosier & Company) as moderator, with Hon. David Carter (C.D. Cal.), Hon. Darrin Gayles (S.D. Fla.), and Hon. Robert Shelby (D. Utah), who spoke of the duty of receivers and their lawyers to educate judges on what powers can be wielded and how, and of the perplexity for judges in the receivership case (who appoint the receiver and consult with the receiver) of presiding over lawsuits initiated by the receiver in order to amplify the funds available for victims of fraud, etc., and of presiding over criminal cases of persons against whom related civil cases are pending.

Louis C. Griesman Keynote at NAFER 2016

The keynote was delivered by Lois C. Griesman, Associate Director, Division of Marketing Practices, U.S. Federal Trade Commission, who led listeners into the processes of the Commission and emphasized the animating purposes of the Commission as it gathers evidence and then decides whether to seek appointment of a receiver.

We found the written conference materials to be ample, pertinent, and well-organized.  They were downloadable from an app provided by NAFER – ever oriented toward practical problem-solving, as are its members.

Kudos to outgoing NAFER President, Ira Bodenstein of Shaw Fishman Glantz & Towbin LLC, Conference Chair Robert Mosier, and NAFER Executive Director, Maureen Whalen (of MCorr Consulting) for their great work in putting together such a lively and highly substantive conference.  We look forward to the national conference, the several regional conferences, and other programming that NAFER will produce over the next year under the presidency of Greg Hays (Hays Financial Consulting, Atlanta, GA).

The Nuances of Federal Receiverships

To review, a federal receivership is an equitable remedy employed to protect the interests of persons and entities harmed or potentially harmed by a business or property that is subject to federal jurisdiction.  Federal district courts appoint federal receivers at the request of harmed persons (like creditors or defrauded parties) or of federal regulatory entities, like the Securities and Exchange Commission, the Federal Trade Commission, and the Commodities Futures Trading Commission, which represent the diffuse interests of people protected by federal laws and regulations.

The federal receivership remedy is not well known even among insolvency professionals – though it has grown in use in recent years and we anticipate that its use will continue to grow.  A federal receiver can quickly and efficiently gain control over a defaulting or fraudulent business in order to maximize returns to the receivership’s beneficiaries.  Federal receiverships are often imposed on businesses that engaged in Ponzi schemes and other securities fraud.