Summary of the 3/13/09 Trustee Hearing.
Present at the hearing yesterday were partners Mr. Kenneth P. Silverman and Mr. Ronald J. Friedman of SilvermanAcampora LLP.
The Law Firm of SilvermanAcampora LLP was appointed interim trustee by the courts on Feb 12th.
Joining the team was our good friend Rachael E. Dioguardi. Rachael has been tremendously gracious about answering any questions from our group when needed.
The main purpose of the hearing was for the firm to present to the Bankruptcy court the status of their investigation, findings, details of any activities and some of their short term plans. Mr. Friedman presented a very detailed and methodical account of what they have uncovered in terms of how the Agape business operated. He spoke with clarity and definition about how the Ponzi scheme was started, how the monies came in and how they were paid out.
In this presentation Mr. Friedman made several references to the Brokers and Sub brokers.
According to the Trustees research, the "ponzi" scheme when eventually shut down by Cosmos arrest had reached the point where there was international exposure.
Note: After an attorney has filed a bankruptcy petition, under either Chapter 7 or Chapter 13 (in our case Chapter 7), Agape will be required to attend a meeting of their creditors. This meeting is called a "341 meeting" after the section in the bankruptcy code that requires it.
The meeting is usually scheduled about 20 to 40 days after you file for bankruptcy. Mr. Silverman is looking to have that meeting scheduled sometime around the first week in April. A letter to ALL creditors will be sent out informing them that this meeting is scheduled.
On a good note, It was reported that the trustee will be launching an informative web site where important information will be posted as well as any ongoing updates on the current activities of the office. This is something I believe our group triggered. It was suggested many times to Rachael that the lack of information to the investor is causing unnecessary angst which most likely resulted in hundred of calls to their offices and if they are on the phone answering the same questions over and over again then they are not working on our case.
It was also reported..............
· that in the end (December 2008), Agape was pulling in more than $20 million per month in investor monies. That most investments were in the $30K – $75k but there were a few that were in the high 100's of thousands.
· that Cosmo was the ONLY principal in the Agape business and that he had several employees and commissioned brokers who help run the business with him.It was also noted that the trustee's office has not had the opportunity to speak directly with Cosmo for further investigation. As suggested by the judge, the Trustee office will schedule a meeting with Nick Cosmo after the 341 meeting which is required by law
· by the Trustee that they felt they were getting very good cooperation from the US Attorney's Office and Security and Exchange Commission. By way of a search warrant, the US Attorney's office confiscated the books and records of Agape and the trustee's office has full access to those books and records. Within these books and records were various contact list and employee/broker lists.Mr. Silverman stated that after reviewing all the relevant books and records of Agape and other sources of information to date, that:
- the business was running from 2004 thru 2008
- there were about 5500 creditors/parties of interest 370 million dollars was brought into the company over that time. It was further clarified that the 5,500 creditor number was a total of all investors, trade creditors and vendors who might potential have a stake in the restitution.
It was also clarified that although the number is high, it did include investors who:
- potentially might have already received ALL of their principal back
- some who received partial principal back
- some who received principal and interest and
- some who have not received any money back
· that Agape did indeed provide about 15-17 legitimate loans to 3rd parties from 2006 thru 2008. These loans amounted to about $20 million but they cautioned that each one was in a very different stage of completion and that recovery of these monies to the Agape restitution pool could present a challenge. Some have filed breach of contract against Agape, some are at a complete standstill and some are due to be complete in the coming months.
· that 80 million of the 370 million dollars was traded and lost in commodities future trading thru many
brokerage accounts that are directly traceable. These accounts were either in Agape's name or Nick Cosmo's name directly.
· that SIPC is the first line of defense in the event a brokerage firm fails owing customer's cash and securities that are missing from customer accounts. Nick and or Agape were not a license securities broker so SIPC does not apply.
· The trustee asked the courts assistance in issuing a 362 stay against all current and future lawsuits filed against Agape. STOP!!! is the message of the automatic stay to virtually all of a debtor's creditors, secured and unsecured, when a petition under any chapter of the Bankruptcy Code (e.g. Chapter 7, 11, or 13) has been filed by or against the debtor. The automatic stay, in section 362(a) of the Bankruptcy Code, is the bankruptcy equivalent of a temporary injunction against virtually all creditor activity that may hinder the trustee in his attempt to recovery monies. What was interesting is that D&B, Entrepreneur Mag etc… are NOT directly connected to the Agape ponzi scheme and those suits can not be stopped by the Trustee's office via a 362 injunction.
· that there are some cases where Agape made payments to 3rd parties (Speranza and Cosmo Sports Facility) where there was no mortgage and thus no 1st lien. In these cases it was reported that Agape had a vested interest in these properties and that Agape received either direct ownership or stock in these entities. They believe the sports facility is worth about $3.5 million and that Agape also paid for all the build outs to ensure the property could open.
· that the trustee has requested a motion to invoke Rule 2004 against several entities (Bank of America and Citi Bank). Thru granting the 2004 motion the court orders full examination of an entities books and records.
· that the trustee is investigating a turf baseball field that Agape paid for that is owned by the Levittown, Wantagh, and Seaford sports league.
· that the trustee is investigating the purchase of NY Jets/NY Giants season tickets. The expectation is that the Jets and Giants will provide a full refund.
· that the trustee is investigating the purchase of USGA tickets. The expectation is that the USGA will provide a full refund.
· that creditor body is totally un-secured which means that the only true creditors are the investors themselves.
The trustee is looking to engage an accounting firm to help them with this case. They have one in mind and asked the courts permission to move ahead with retaining them.
After an attorney has filed a bankruptcy petition, under either Chapter 7 or Chapter 13 (in our case Chapter 7), Agape will be required to attend a meeting of their creditors. This meeting is called a "341 meeting" after the section in the bankruptcy code that requires it. 11 U.S.C. 341. The meeting is usually scheduled about 20 to 40 days after you file for bankruptcy. Silverman is looking to have that meeting schedule sometime around the first week in April. A letter to ALL creditors will be sent out informing them that this meeting is scheduled.
Bob and Dom
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