Recent Reports and Communications
Receiver To Hold a “Tele-Town Hall” for Wextrust Victims on October 11th
The Receiver will hold a tele-town hall at 9:30 A.M. EDT on Thursday, October
11th to update Wextrust victims on recent actions within the Receivership and to
respond to live questions.
To participate, dial toll-free (888) 886-6603, and then when prompted for an
extension dial 20036#, at 9:30 A.M. EDT on Thursday, October 11th.
The Receiver will speak for 15-20 minutes about the current "state of the
estate", the status of the next distribution, and plans for winding down the
receivership. The Receiver will then
take and respond to questions from participants.
Investors are encouraged to email questions in advance by sending them to
wextrustreceiver@abdata.com
with a subject line "Town Hall
Question".
“*** UPDATE: *** International callers may have to dial in using the
following number: +1 253-382-9982, then when prompted for an extension dial
20036#.
*** UPDATE ***
Outlined below is a summary of the Wextrust Receiver Tele-Town Hall that was
held on Thursday, October 11, 2012.
state of the
estate
1.
Current State
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§
Byers and
Shereshevsky are in prison
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§
Cash in
Receivership accounts: Approx. $21 million; added $13 million in last year, $5
million of which was in the last 9 months
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§
8 remaining
income-generating properties; 3 properties to be relinquished
2.
Key Events of
2012
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§
February:
Receiver files interim report
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§
May: Court
hearing on fee applications
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§
June: Court
hearing and approval of settlements with two law firms for $7.9 million and
settlement with general contractor for $560,000; fee applications approved;
bank’s motion to take back properties denied
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§
August: Court
approves sale of First Highland with net cash to estate of $100,000; Receiver
files interim report
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§
July/August:
Receiver and IRS file legal analysis and arguments with the Court on taxation of
the receivership
3.
Results to Date
(8/11/08 – 8/31/12)
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§
$68.6m in
tenant receipts; $14.2 million net cash flow
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§
New leases /
renewal of leases signed by Receiver created $37.3 million of revenue
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§
Receiver sold
19 properties for $67.7 million; 8 properties relinquished
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§
$10.5 million
net in other settlements
4.
Where Did the
Money Go Pre-Receivership?
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§
Fraud, waste,
and abuse: untold millions
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§
Real estate
market collapse: most of Wextrust’s assets were in highly leveraged commercial
real estate; that market is down approximately 40%
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§
Southern
Africa: Fraud and waste by Byers and Shereshevsky of more than $50 million
II.
status of the
next distribution
1.
Next
Distribution
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§
Expected date:
First quarter of 2013
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§
Amount: Bulk of
available cash in receivership (current cash is $21 million)
-
-
§
Difficulty
remains with IRS, which wants to tax the Receivership; currently in settlement
discussions; distribution cannot be made until discussions are completed
2.
Expectations:
How much will investors recover?
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§
Early
assessment was as low as 5%; today, expect about 10% total recovery
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§
Hopeful for
most of that to be paid during 1Q 2013
-
III.
plans for
winding down the receivership
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§
Plan is to
continue the Receiver’s disposition strategy:
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·
Maximize value
on each asset by seeking to fully lease all properties
-
·
Continue to
actively market and sell every property
IV.
Questions
Q: Does the
estimated 10% recovery take into account previous distributions and the final
distribution?
A: Yes, the
estimated 10% recovery includes both past and future distributions. However,
this 10% number does use a fairly conservative valuation of the potential sale
price of the various remaining Wextrust properties.
Q: What will be
the percentage of total amount of money distributed in each distribution, and
when exactly will the next distribution be? Just as an example, would the first
distribution be 20% of the total money distributed, the second 70%, and the
third 10%?
A: The answer
depends very much on the tax liability—before a distribution is made, the IRS
must agree on the appropriate method to tax the receivership. The Receiver cannot as of now give
percentage numbers, but the next distribution will be the largest, leaving only
enough money to fund the case to termination.
Q: Why has the
Receiver chosen not to pursue claims against various entities/individuals (e.g.
banks, other firms, former Wextrust employees) and why was no insurance claim
made?
A: In the
investigation the Receiver considered whether there were other claims (against
employees and insurance claims) that were worth filing. There was no insurance
coverage. The Receiver found evidence of complicity by some Wextrust employees. Rather than spending resources to litigate
and recover funds directly from former employees, the Receiver substantially
reduced the claims those employees had against Wextrust according to their level
of complicity, up to a 100% reduction.
The Receiver concluded that further litigation would not result in a net benefit
to the estate.
Q: Will Elka
Shereshevsky’s assets be sequestered?
A: The majority
of Shereshevsky family properties have more debt than they are worth. The Receiver is in the process of
finalizing deals with lenders on them, which may net up to $100,000 for the
Receivership estate. Elka Shereshevsky
had been cooperating but is not any longer; thus, the Receiver is pursuing other
measures to close out this issue.
Q: Does the
Receiver agree with Judge Chin that, if the amount of professional fees had been
known at the start of the Receivership, things would have been done differently?
A: The Receiver
was required by the Court’s orders to take a variety of steps to, among other
things, secure Wextrust’s assets that were spread across the country and around
the world. Many of these requirements
were very costly. While fees have been
large, they have also included substantial discounts, writeoffs, and holdbacks –
amounting to a reduction of about half off standard rates. The Court and the SEC have approved only
those fees deemed reasonable. A receiver
order with a more limited scope should be an option in future cases.
<:p>
Q: Madoff
investors received money from SIPC. Why
is that not an option for Wextrust investors?
A: SIPC is the
Securities Investor Protection Corporation.
The Receiver immediately notified SIPC within a month after the case was
filed. However, after the Receiver's
investigation, there were no specifically identifiable bank or brokerage
accounts belonging to specific Wextrust investors. Instead, funds were raised by private
placement debt or securities offerings and then placed into Wextrust accounts
tied to specific Wextrust entities or investors, and subsequently commingled. By contrast, in Madoff, each individual
investor allegedly had a specific account that held his or her cash securities.
Accordingly,
the Receiver consulted with the SEC and determined that SIPC claims are not a
viable option for Wextrust investors.