Wednesday, January 30, 2013

Ponzi Perps Must Plead Guilty, judge ruled

According to a report on Ponzitracker, in a courtroom first, a Federal judge has REFUSED to accept a proposed settlement between the SEC and the two Ponzi scheme perpetrators, over the language "neither accept nor deny". In other words, the court refuse to allow the perps to walk away without any admission of guilt. Unfortunately, SEC is likely to appeal to the circuit court where the decision is likely to be overruled.

William Sullivan and Jane Turnock operated an insurance company called Bridge Premium Finance, which SEC shut down in August 2012 as a $15 million ponzi scheme. From 1996 on the two claimed to allow investors put money into insurance policies that are low risk and 100% collateralized, but generating high profit. Before the scheme's collapse, one perp supposedly admitted that it was all a Ponzi scheme over the phone.

SEC reached some sort of agreement with the perps and filed a motion to enter "final judgement" with the judge, John Kane, where the perps agree to cough up 12 million, but neither admit nor deny any guilt. The motion was filed on January 15, 2013. In a sharply worded denial, Judge Kane tossed the motion back as being vague, as the final judgement failed to include any sort of findings of facts and such where the public who look up these court records will know what really happened based on SEC investigations of this Ponzi scheme. By reaching this settlement, and thus sealing off the records, what these scammers did will likely NEVER see the light of day.

According to Jordan "Ponzitracker" Maglich, this represents a growing trend among judges across the country that a judge should not be a party to cover up the truth of what really happened by helping seal the truth. Judge Jed Rakoff did something similar in 2011 when he ruled against proposed settlement against Citigroup over a fraud case involving toxic assets and mortgage-backed securities.

However, any sort of admitting guilt usually dooms the perpetrator in any civil case launched by victims that inevitably follows the official government investigation. Which is why SEC and the defense attorneys favor the inclusion of such language. Defense attorneys want it as they don't want to doom their clients later chances in court, while SEC understands this and figure it's better to get something out of them now then to drag the whole thing out in a public trial that lasts years.

However, Rakoff's decision was overruled by circuit court when SEC appealed. While Judge Kane did indicate that he may accept a settlement including more details, SEC may likely appeal to circuit court as well, rendering his decision moot.

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