BULLETIN: Nevada Attorney General To Intervene In TelexFree Licensing Matters Before The State Public Utilities Commission

BULLETIN: (Updated 8:56 p.m. EDT U.S.A.) The Consumer Protection Bureau of Nevada Attorney General Catherine Cortez Masto says in regulatory filings that it intends to intervene in TelexFree-related licensing matters before the Nevada Public Utilities Commission.

TelexFree, accused of conducting a Ponzi scheme that gathered $1.2 billion, has Nevada telecom applications pending for TelexFree LLC and TelexMobile. TelexFree filed for bankruptcy in Nevada last week.

Beatriz Aguirre, a spokeswoman for Masto, had no immediate comment on why the attorney general intended to intervene. More information may become available later, she said.

[** Update 8:56 p.m. In a letter dated March 31, according to Nevada records, TelexFree asked for telecom authorization. An application with 2013 financial information for TelexFree was submitted with the letter. TelexFree, according to the application, wanted the information “FILED AS CONFIDENTIAL — UNDER SEAL.” In a separate letter dated March 4, according to Nevada filings, TelexFree referred to a “Refiling of the Confidential Financials of Applicant,”  saying “these financials contain trade secrets and should remain Confidential for as long as possible under Nevada Administrative Code.”

In an email to the PP Blog this evening, Aguirre referenced TelexFree’s request for confidentiality. The attorney general’s office filed its notice to intervene, according to a document provided by Aguirre, to represent “the public interest” with respect to TelexFree’s applications before the state PUC. Original story continues below. End of update **.]

Trouble with licensing could affect TelexFree’s ability to persuade a bankruptcy judge that it could continue as a going concern.

The SEC says TelexFree may owe $1.1 billion to promoters of its MLM scheme.

The agency further alleged that records suggest TelexFree co-owners James Merrill and Carlos Wanzeler “have caused more than $30 million to be transferred from TelexFree operating accounts to themselves and to affiliated companies in the past few months.”

Separately, the PP Blog has learned that Joe Craft, an accountant and TelexFree’s alleged CFO, is associated with a New Hampshire payment-processing business known as BWFC Processing Center LLC. A company by the same name operates in Nevada as a registered-agent service.

Craft was listed as “manager” of the New Hampshire entity in a filing in that state on Feb. 27, 2014. His role in the Nevada entity is unclear.

Regardless, documents exist that instruct customers looking to set up a “Nevada Mailing Address” to fax payments to an Indiana number associated with Craft. The service charges a “onetime” fee of $125 to “set up” a “Nevada Post Office box,” and an additional $180 as an “annual fee.” An additional fee of 3 percent for “merchant processing” is charged, bringing the first-year charges for the mailbox service to $314.15.

“**Payments will be made to the Indiana BWFC office**,” the instructions note. “**Post office box service will be performed by the Nevada BWFC office**” (Asterisks appear in the original document.)

Like Merrill and Wanzeler of TelexFree, Craft was accused by the SEC of securities fraud.

Two of the issues surrounding TelexFree concern precisely when Craft became CFO and his precise role in TelexFree prior to becoming CFO.

Regulatory filings to obtain a telecom license in Alabama identify Craft as TelexFree’s CFO during the opening week of March 2014. Page 19 of the 99-page Alabama filing shows an image of a March 8, 2014, document from the office of Alabama Secretary of State Jim Bennett. The document notes that the name TelexFree LLC was “reserved as available” in the state.

“This name reservation is for the exclusive use of BWFC Processing Center, LLC, 825 East Main St, Boonville, IN 47601 for a period of one year beginning March 08, 2014 and expiring March 08, 2015,” the document reads in part.

The East Main Street address is the address of both Craft’s accounting firm and the address of BWFC Processing Center LLC, the company listed in New Hampshire as a payment processor. As noted above, a company with the same name operates in Nevada and provides registered-agent services.

“Joe Craft” is listed on Page 3 of the March Alabama TelexFree filing as holding the “Official Title” of “CFO” of TelexFree LLC. Page 15 includes an oath recorded March 5, 2014, before a Massachusetts notary public. The oath bears the name and signature of Jim Merrill, who is listed as “President” of TelexFree LLC. The oath attests that the information in the Alabama document — an “Application for a Certificate of Public Convenience and Necessity to provide interexchange telecommunications services in Alabama” — is true to the best of Merrill’s knowledge and belief.

The document appears accidentally to have identified Merrill as a woman, given that the certification line actually reads “the statements made herein are true to the best of her [emphasis added by PP Blog] knowledge and belief. Merrill appears not to have noticed when signing the document.

Despite the sworn oath of Merrill that Craft was the “Official” TelexFree “CFO” on March 5, 2014, however, TelexFree’s board appears not to have named Craft CFO until sometime after 8:11 p.m. on April 13, 2014, the same day TelexFree and related entities filed for bankruptcy in Nevada.

According to TelexFree’s bankruptcy filing, “Joe H. Craft” of “Joe H. Craft, CPA” was present at the meeting, which was called to order by Carlos Wanzeler.

During the meeting, the board and other attendees, including CPA Craft, “considered the Company’s liabilities, the strategic alternatives available to it, and the impact of each of the foregoing on the Company’s businesses,” according to the bankruptcy filing.

During the meeting, the board decided to file for bankruptcy. It then was resolved that “Joe H. Craft” would become one of TelexFree’s “authorized persons.” After this resolution, it then was resolved that “the Authorized Persons be, and they hereby are, authorized and directed to employ the accounting firm of Joe H. Craft, CPA to provide Joe H. Craft to serve as Chief Financial Officer of the Company while the Chapter 11 case is pending and to assist the Company in carrying out its duties under the Bankruptcy Code.”

Another resolution resolved that “Joe H. Craft be, and he hereby is, elected to serve as Chief Financial Officer of the Company.”

Three TelexFree related firms filed bankruptcy: TelexFree LLC of Nevada, TelexFree Inc. of Massachusetts and TelexFree Financial Inc. of Florida.

TelexFree Financial Inc., one of the companies included in the filing, was was “incorporated by Craft on December 26, 2013,” with Wanzeler and Merrill as its directors, according to the SEC.

TelexFree has pushed back on reports last week that Craft attempted to leave TelexFree’s Massachusetts office with a laptop computer and nearly $38 million in cashier’s checks while a search warrant was being executed by federal agents..

“The cashier’s checks were in Mr. Craft’s possession because the Company’s bank accounts had been closed, which necessitated the Company obtaining the funds in the form of cashier’s checks,” TelexFree said in a statement. “Upon the filing of the Chapter 11 cases, the Company determined to marshal all of the Company’s funds for the benefit of the Chapter 11 bankruptcy estate. Mr. Craft had taken possession of the cashier’s checks at the request of the Company’s counsel and advisors in order to assure that the estate funds were protected. Mr. Craft was holding the checks until they could be deposited in either a newly-established Company safe deposit box or an escrow account that the Company was in the process of establishing. The laptop was Mr. Craft’s personal property.”