Tag: NFA

Some of the investors in the Trevor Cook/Pat Kiley Ponzi scheme are none too pleased with Cook’s plea deal, which may place a ceiling of 25 years on any prison sentence he receives while tens of millions of dollars remain missing.

One investor has told the PP Blog that a group of investors is seeking a meeting with prosecutors either to overturn the plea deal or delay Cook’s sentencing until more information becomes known. Cook, 38, is scheduled to be sentenced in Minneapolis July 26, one month from today.

Cook pleaded guilty in April to mail fraud and tax evasion. Under the terms of the agreement, he is required to cooperate with authorities and R.J. Zayed, the court-appointed receiver, to unravel the scheme. Although Cook has met with both the government and Zayed, investors are concerned that he is incapable of telling the entire truth. Their concerns are based on his history of telling spectacular lies and thumbing his nose at both investors and the court by spending investors’ funds even after his assets were frozen in November 2009.

Records from the National Futures Association (NFA) show that Cook has a history of scamming. In 2006, NFA fined Cook $25,000, saying he had committed a “very serious violation” in the manner in which he treated funds entrusted to him by an 80-year-old woman who was the guardian over her elderly sister. The case featured assertions of side-dealing and fabricated signatures on account documents. Read more about Cook’s NFA encounter here. Read more on yet-another case in which Cook’s name was referenced by NFA here.

Before we get into the details of some of recent events in the Cook case, we’d like to provide a short capsule based on court filings. It has become clear that the Cook Ponzi scheme has caused financial pain for hundreds of people, including loved ones, and also has resulted in frustration — some of it of the needless and senseless variety.

Such frustration surfaces in virtually all Ponzi cases, in part because the crimes can be extraordinarily elaborate even though the basic concept of a Ponzi is simple: tricking people into believing everything is on the up-and-up by using cash from new investors to pay earlier investors or duping people into rolling over their investments instead of taking distributions to keep the cash from drying up — all while the Ponzi schemer siphons funds and glad-hands and back-slaps with investors, politicians, bankers and others to create the illusion of success.

At the end of the day, however, Ponzis are about people. They cause pain and frustration for every person and institution they touch.

• Cook’s in-laws, Clifford and Ellen Berg of Apple Valley, Minn., received $948,848.36 from the scheme. Zayed recovered $726,650.38 of that sum, and then effectively sued the Bergs by seeking a court order for the balance of $222,197.98. The SEC, which had named the Bergs relief defendants in the case for receiving ill-gotten gains, backed Zayed in his efforts to recover the balance. Records show that the Bergs raised $194,000 to pay the receivership estate through the sale of two cars, the tapping of an IRA account and by taking out a mortgage on their cabin. They were given credit by the receivership for $13,500 from the sale of another vehicle, but still came up nearly $15,000 short of the sum needed to retire the receivership balance. If the shortage is not paid by Sept. 15, a judgment will be entered against the Bergs, who have retained the right to be treated as victims of their son-in-law and to file a claim for the principal they invested with Cook.
• Zayed effectively had to sue Wells Fargo by seeking a court order to force it to turn over the relatively small sum of $9,275.22 from Cook’s bank accounts. This document is worth reading because it paints a picture of a receiver — Zayed — encountering frustrating resistance in his bid to round up assets for victims. Although the Cook/Kiley Ponzi is extremely serious business that has altered the lives of more than 1,000 people, the document linked to above is almost dolefully comedic. Zayed eventually had to file a 12-page legal document to force the return of the sum. Just 13 days after Zayed asked a federal judge to order Wells Fargo to return the money, he filed a three-page document advising the judge that the bank finally had turned over the sum — something he’d been trying to get it to do for months.
• If you’re a victim of a Ponzi scheme or a loved one of a Ponzi schemer — such as Gina Cook, Trevor Cook’s wife — this document shows that your life may start to revolve around attorneys. No matter how you slice it, the result is conflict — legal, emotional or otherwise.

Can Cook Be Trusted In Any Context?

As noted above, some investors fear that Cook is incapable of telling the full truth. There is fear that he has stashed money and covered his tracks so well that he could emerge from prison and benefit from his crime — or perhaps permit insiders or unknown criminal colleagues to benefit from the fraud while he is jailed.

International litigation can be an extremely complex thing. The Cook case, according to Zayed, has required the notarization of documents “under the Hague Convention standards.”