Rulings hit net 'gainers'

Source: Albuquerque Journal, N.文件倉M.Jan. 06--Close to 50 investors who, through a roll of the dice, made money off the biggest Ponzi scheme in state history are facing summary judgments in federal courts that could strip them of at least some of their profits.The legal battles are far from over in the Vaughan Company Realtors bankruptcy case, however, as the judgments require more detailed accounting of the Ponzi scheme payments that enabled the so-called "net gainers" or "net winners" to profit.The legal battles are a legacy of convicted fraudster Doug Vaughan, who used Vaughan Company Realtors to scam $75 million from about 600 investors. The 66-year-old Vaughan is currently in a low-security federal prison in Arizona with a release date in early 2023, according to the Federal Bureau of Prisons.Vaughan and his flagship real estate company both filed bankruptcy in February 2010 as his scheme unraveled after an estimated 16-year run.The company's bankruptcy set the stage for an eventual wave of 120 "clawbacks," a type of civil lawsuit to recover or claw back money in bankruptcy cases involving fraud. The clawbacks were filed by Judith Wagner, the court-appointed trustee.The ranks of clawback defendants have been thinned by negotiated settlements that must be approved by a judge. Among those recently settling clawbacks is Susie Fairchild, who was long identified as Vaughan's girlfriend.Fairchild, who worked at Vaughan Company Realtors, had custody of Vaughan from the time of his arrest to his sentencing and subsequent incarceration in September 2012. Although she never invested with Vaughan, she was listed in bankruptcy documents as owing the company $128,484. She settled for $50,000.The recent series of summary judgments against "net winners," which have come in both U.S. District Court and Bankruptcy Court, are based on the finding of "no genuine issue of material fact" that needs to go to trial.The summary judgments are more accurately described as partial summary judgments, since they all leave open the question of a money judgment, which will be limited to the "net winnings" of the defendants.The first partial summary judgment, issued in October, applied to 25 clawback cases in Bankruptcy Court. In a supporting opinion, Judge Robert Jacobvitz describes Vaughan Company Realtors as a money-losing business and that payments made to investors in its promissory note program constituted fraud.Investors loaned money to Vaughan in exchange for promissory notes, a type of investment security that was the vehicle used by Vaughan to operate his scam. Investors thought their money was being used for real estate investments such as flipping houses.Instead, money put up by later investors was used to make fake profit payments to earlier ones -- the essence of a Ponzi scheme -- as well as shore up Vaughan Company Realtors' finances and support Vaughan's lavish lifestyle.The first partial summary judgment in District Court was issued in late November in the clawback against Julie and Andy Feld of Albuquerque. The supporting legal opinion by Judge William P. Johnson covers the same ground and reaches the same basic conclusions as Jacobvitz'searlier one.Both judges note that net winners can only keep their profits -- essentially interest payments above and beyond the amount of their original principal investments -- at the expense of net losers and "other innocent investors."The Feld clawback serves as a trial balloon in that the partial summary judgment led to the first arguments over how to calculate a potential money judgment. The Felds' lawyer, Michael Cadigan, calculated an award of $19,870, while Wagner's lawyer, James Askew, came u存倉 with a $68,330 award.Arguments over methodology and applicable law continued in subsequent court documents before Johnson issued an amended opinion Dec. 23.A potential clawback or money judgment against the Felds, and presumably any other net winner, would be limited by law to four years prior to Vaughan Company Realtors' filing bankruptcy, he said. Wagner has more work to do before proving that the bankruptcy estate is entitled to a money judgment, he said."She has not demonstrated which transfers took place and what amount of money was transferred during the relevant time period," his opinion says.Such detailed accounting information is available and just needs to be prepared in a format that can be reviewed by the judge, Askew said.The initial judgment against the Felds, coupled with another almost identical one in early December against Irene Tarro of Albuquerque, prompted Wagner to file a mass motion for a partial summary judgment against defendants in the remaining 22 net-winner cases in District Court.The mass motion was tossed because it failed to address legal findings in the judges' opinions supporting the Feld and Tarro partial judgments. The mass motion will be filed again in updated form, Askew said.The partial summary judgments in District Court have been a major blow to net winners because the judgments likely cancel the need for jury trials.The clawbacks all originated in Bankruptcy Court, where they would be heard by a judge. Close to 60 defendants originally elected to transfer their cases to District Court for the apparent purpose of getting jury trials.In what might be a strategic move to fight the momentum of the clawbacks, lawyers for the 22 net-winner cases remaining in District Court all have filed late motions to raise a legal defense called "in pari delicto."The thrust of this defense is that the sins of Vaughan Company Realtors, as the vehicle for large-scale fraud, have passed on to the trustee of the company's bankruptcy estate. As a result, the trustee lacks good standing to sue anyone under the clawback provisions of law.Wagner opposes the motions, citing an earlier court order saying the in pari delicto defense does not apply to clawbacks.Recent Clawback SettlementsThe following are recent settlements of clawbacks approved by Bankruptcy Court Judge Robert Jacobvitz in the Vaughan Company Realtors bankruptcy case. As a rule, the defendants admit to no wrongdoing or liability.William and Linda L. Campbell of Vienna, Va., $1,000.Heather Charles for the estate of Jeanne McBride of Mound, Minn., $500.Deborah Davis of Ashland, Ore., $20,000.Donald and Pamela Duke of Albuquerque, $155,000.Nan Elsasser of Albuquerque, $15,000.Susie Fairchild of Albuquerque, $50,000.Andrew Gray and Adam Gray of Belleville, Texas, $3,500.Ronald and Janice Heggem of Albuquerque, $60,000.William Hilliard and Barbara White (hometown not available), $10,000.Douglas and Ruth Jones of Washington state, $5,000.Ilah Jones of Sandia Park, $37,000.Evelyn King of Albuquerque, $29,000.Kimon Lee of Albuquerque, $7,500.Paul Lee of Albuquerque, $12,000.Dorothy Parks of Albuquerque, $1,500.John Petty of Albuquerque, $35,900.Laura Rodriguez of Greenwood Village, Colo., $14,000.Victor Rosenthal of Placitas, $40,000.Nell Sale of Albuquerque, $4,200.Richard Seery of Foothill Ranch, Calif., $4,000.Edith Tarbescu-Deutschmann of Albuquerque, $1,000.Chou Wen Wang of Albuquerque and the estate of Pin Shih Lee, $12,000.Kathleen Wilson of Albuquerque, $15,500.Copyright: ___ (c)2014 the Albuquerque Journal (Albuquerque, N.M.) 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