Dear Victims or Other Interested Parties,

Certainly the major event since the last newsletter has been the sentencing of Mr. Okun to 100 years in prison by Judge Payne, who handled the criminal court matter in Richmond, Virginia. Additionally, the judge will order $40 million in asset forfeitures Unfortunately, Okun has no known assets left that were not heavily encumbered, and thus the forfeiture award is unlikely to yield a positive result for victims.  

On August 13, the Criminal Court also sentenced defendant Lara Coleman to 10 years in prison with her sentence being served starting on September 29.

We continue to make progress in various settlements and have filed motions with the court for approval of settlements with Greenberg, Traurig, who were the creditors' committee’s counsel, and with Mesirow Financial, who were the creditors' committee’s financial advisors. The essence of these agreements requires that both firms fully subordinate all of their professional fees incurred prior to my appointment to all of the claims of the victims and creditors. This means that neither firm will receive anything unless all creditors and all other expenses and fees are paid in full first.  This amounts to $2,585,142 of fees of Greenberg, Traurig and $1,137,764 of Mesirow Financial. The court ruled favorably on these settlements on August 13.

I am also pleased to report that I have reached a similar settlement with Huron Consulting Group who served as the chief restructuring officer and financial advisor for the debtors.  Like Greenberg, Traurig and Mesirow, the settlement requires Huron to forgo any payments on pre-trustee professional fees until all creditors are paid in full. In the case of Huron Consulting Group this amounts to $3,680,109.

This leaves Dreier, LLP, as the last of the professional firms requesting fees for activity prior to my appointment. They represented the debtors, and have not been willing to reach an agreement.  We have made a major effort to get Dreier’s Trustee and Official Creditors’ Committee to waive this claim for fees, in the amount of $ $3,349,187.  Settlements have been hindered, however, by the fact that the Trustee for Dreier’s bankruptcy has no personal knowledge of the matter, and the Dreier Creditors’ Committee, at least at this point, does not seem to understand the gross malpractice which occurred, and the lack of any merit to their claim.  We are stayed from pursuing any malpractice action against Dreier due to the automatic stay in its bankruptcy case.  However to bring this matter to a head, we have filed an objection to their fees in our case and have alleged Dreier’s malpractice as one of the grounds for denying the entire claim.  Judge Glenn will hear this matter on September 10, at which time we will find out whether the Dreier Trustee and Committee really intend to pursue this claim.

With the three settlements in hand, a total of $7,403,015 has been saved and if we're successful in the Dreier matter, it would represent an additional $3,349,187 of fees, for total savings of almost  $11 Million.

During the month, working with the class-action counsel, we have had serious settlement discussions with one of the lender-defendants, as well as with an insurance agency that marketed the crime insurance program for the debtors.  Hopefully we will be able to report success shortly.

As to Okun’s New Hampshire property, Wachovia has a first lien of $6 million plus interest, and as part of the settlement with Wachovia for $45 million, Wachovia keeps that lien.  As previously reported, instead of continuing to incur legal expenses in a fight with the next lienholder, JPS and an exchanger, Newton Bayard (which had obtained an injunction to prevent the premature sale by JPS of the property), we reached a settlement with them, which Judge Glenn approved after notice to the creditors, which provides that the lien is assigned to the Estates and any proceeds from a sale above Wachovia’s lien are divided -56% to the Estates, 38% to JPS, and 6 % to Newton Bayard.  The Government agreed with us that a forfeiture was unlikely to defeat the liens of Wachovia and JPS, and that our agreements with Wachovia and JPS were the best way to efficiently try to obtain value for the Estates from this property.  Accordingly, this property was not forfeited and Judge Payne approved my agreement with the Government that will permit me to sell the New Hampshire house in accordance with my Bankruptcy Court-approved agreement with JPS Capital.  Our broker is actively marketing that property. This is a very unusual property and there are very few sales and very few buyers for such properties at this time in New Hampshire.  The broker is continuing to market the property aggressively and does have interested parties so that we will hopefully realize some value from it.

The class-action "opt out" deadline was August 3 and no one has "opted out" of the class-action (other than a pleading filed by the Alvarez group, which is merely a reservation of rights).  This will facilitate final approval of the pending settlements, including the granting of certain injunctions, in the class action court, which in turn, will facilitate confirmation of the plan in the bankruptcy court.  We had filed a proposed disclosure statement with the court and Judge Glenn approved that disclosure statement at a hearing held August 13.  

The disclosure statement, which we will send you, will explain the Plan and everything more fully and will explain how the class and the plan interact.  Bankruptcy Rules limit how much we can say beyond the disclosure statement, but we are also exploring ways that we can arrange a forum or some other means to answer any and all questions you have prior to the time that voting on the plan will be required

We are hopeful that the bankruptcy plan and the class-action settlement agreements will be approved at joint hearings commencing on October 7.  Generally, all of the settlement agreements, which fund the Plan and provide any money through the Class require approval of both Courts.  If that happens on or about October 7, and there are no appeals and assuming no unforeseen glitches, objections or other issues, we will be able to begin making distributions approximately 30 days later.

The requests for payment of fees and expenses by the lawyers and other professionals retained by the creditors’ committee and myself will be filed shortly after confirmation of the plan. Voting to accept the plan does not mean that you have agreed to any amount of fees and expenses. Any or all creditors may object to some or all of the fees and the bankruptcy court will hold a hearing to determine the reasonableness of the amounts requested and any objections will be heard at that time.