EDITOR’S NOTE: There is a link at the bottom of this story to a report filed by Burton Wiand, the receiver in the Arthur Nadel Ponzi case in Sarasota, Fla. We encourage readers to read the document in its entirety. The Nadel case is not yet a year old. Nadel, who turned 77 today and is a onetime attorney, was disbarred in 1982 for taking money from a trust fund to pay off a loan shark, a fact allegedly hidden from investors. Nadel allegedly also employed an unlicensed accountant.
Among other things, the Wiand document shows that unwinding a Ponzi scheme is a monumental undertaking. At the same time, the document may leave some readers scratching their heads and asking how on earth any person actually could advocate for Ponzi schemes — and yet such advocacy occurs on a daily basis in the bizarre world of autosurf and HYIP Ponzi schemes, where so-called “leaders” get paid for recruiting people into Ponzis.
Here, now, the story . . .
Burton Wiand, the court-appointed receiver in the alleged Arthur Nadel Ponzi scheme involving at least $350 million, has identified at least 85 investors who received more than they paid in and is working to identify more.
Clawbacks have begun in earnest, with the winners offered a choice of settling for 90 percent of the total they received and returning the money or being sued for 100 percent and paying lawyers to defend them in the lawsuits.
Meanwhile, fleeced investors in a separate Ponzi case in Tennessee are demanding that politicians who received campaign donations from the Dennis Bolze Ponzi scheme return the money so it can be used to compensate victims.
Bolze, 61, of Gatlinburg, Tenn., pleaded guilty Nov. 10 to all counts against him, and is awaiting sentencing. He was accused of wire fraud and money-laundering in a $21.5 million scheme.
WATE reported that Bolze gave money to a number of politicians.
Beyond the Bolze case, it is clear that substantial sums of Ponzi money made its way into the coffers of local, state and national politicians in various jurisdictions. It is equally clear that there is no uniform approach to returning the money. Some politicians have said they’ve spent the money. Others have said they donated it to charity after Ponzi allegations surfaced. Still others have returned money.
Unlike fleeced Ponzi investors who receive tainted largess directly, politicians’ ill-gotten gains may come indirectly from a polluted money stream linked to a Ponzi. There are allegations in Florida, for instance, that disbarred Fort Lauderdale attorney Scott Rothstein provided campaign donations from Ponzi proceeds, while at the same time paying lawyers in his now-shuttered, 70-attorney firm from Ponzi proceeds. It is possible that some of the Ponzi money paid to attorneys also made its way into the political process.
Elsewhere in Florida, there are allegations that Andy Bowdoin, president of Quincy-based AdSurfDaily — itself implicated in a Ponzi scheme — donated at least $5,500 to the National Republican Congressional Committee (NRCC) — before the alleged ASD Ponzi scheme was exposed in August 2008.
Meanwhile, the Miami Herald reported that Allen Stanford, implicated in an alleged $7 billion Ponzi scheme, also donated to politicians prior to the scheme being exposed. Like the Rothstein case, politicians in both major U.S. political parties received donations.
Nadel Clawbacks
In the Nadel case, Wiand estimated that the winners received at least $39 million in fictitious profits — ill-gotten gains from the scheme. He has settled with 26 investors to date, meaning that at least 59 potential clawback cases remain to be resolved. The number could increase because Wiand still is working to identify winners.
The Sarasota Herald Tribune reported that six of the 26 settled clawback cases were settled in the final two weeks of 2009. One investor agreed to return $207,000 in fictitious profits by making four payments over the next three years.
The SEC approved the 90 percent settlement figure, Wiand said. He added that the window was closing on the discount deal.
In a November court filing, Wiand said that “those who do not settle with the Receiver should anticipate that litigation will be commenced in the immediate future” and that the discount “will no longer be available.”
It appears as though two groups of clawback targets exist: a group of 85 who received letters and were offered the discount, and a group of an unknown size that will receive settlement letters soon.
Wiand said the group of 85 represented about $16.2 million in fictitious profits from the scheme. The other group represents about $22.8 million.
Read Wiand’s interim receivership report in the Nadel case.
See Nadel story in Sarasota Herald Tribune.
See Bolze story from WATE.
