Tom Moran appointed as receiver in Ponzi case

By Marie Price | The Journal Record

[APRIL 20, 2009 - OKLAHOMA CITY ] – Tom Moran of Oklahoma City-based Asset Servicing Group has been appointed receiver in a case in which the U.S. Securities and Exchange Commission alleges that New York hedge-fund manager Edward T. Stein ran a “classic Ponzi scheme” that cost investors $55 million or more.

SEC officials accused Stein of preying upon longtime friends and acquaintances in the scheme. The case involves both a civil lawsuit and criminal wire-fraud allegations.

Oklahoma City attorney Mel McVay said about 83 investors may have been affected. The SEC filed an emergency enforcement action earlier this month. In its filing, the federal agency said that Stein has been deceiving investors since 1992, using some of their funds for personal uses such as purchasing a $1 million New York condominium.

Assets have been frozen in the case, in which Moran and McVay must unravel Stein’s trail to all assets, some of which Moran said appear to have been sold more than once.

“What we will do now is start taking control of the assets and actually figuring out what to do with them,” Moran said Friday. “When you sell assets multiple times, you don’t know how many people are involved in those things.”

That may not be an easy task to accomplish.

“It appears that there are a lot of different claims to the same assets, which makes it fairly convoluted,” Moran said.

That leaves many legal issues to be sorted out, he said.

“What I try and do as receiver is try and get equitable relief for everyone involved,” Moran said. “Until I know the legal ramifications of each deal, I can’t actually even make a decision on that. But we will sort through that next week and probably come up with an initial game plan.”

The SEC said Stein controls the Gemini Fund I LLP hedge fund, Prima Capital Management Corp. LLC, DISP LLC, Vibrant Capital Corp., and Vibrant Capital Funding I LLC, which are named relief defendants along with Edward T. Stein Associates Ltd.

DISP invests in life-settlement policies. It is Stein’s activities involving those investments that lie at the foundation of the SEC’s case.

In receiverships around the country, Moran’s firm has been responsible for the return of more than $50 million to investors.

Moran is president and founder of Asset Servicing Group.

“The firms that we typically act as receiver for are firms that have bought insurance policies from third parties,” he said.

In these life-settlement arrangements, he said, the initial life-insurance policyholder receives funds he or she can use to meet end-of-life expenses.

That part of such plans can work well for both sides, with needed funds for someone who may be very ill, and a decent rate of return for the person who invests in the policy that was the object of the life settlement, Moran said.

“What happens is, third parties like Stein and those type people get involved, and things just go haywire,” he said. “Promises are made that can’t be kept.”

Typically, he said, investors who buy up such policies must continue to pay the premiums on them, but they may not be informed of that responsibility.

“When they have to come up with more money and don’t have the money, that’s when regulators get involved, because they file complaints,” Moran said. “That’s when I get phone calls saying, ‘Hey, can you help us?’”

Moran’s firm takes over the policies, borrows money to pay premiums until it can ascertain values and decide whether to hold on to the policies for the benefit of the investors or sell them.

Usually, he said, investors are interested only in the financial aspect of things, not in managing the policies, and may hire Moran’s firm to do that for them.

Moran said his firm has handled cases involving more than $100 million, which is about twice the figure estimated by the SEC in the Stein case.

McVay, a shareholder in the Phillips Murrah law firm, said Stein used different companies to solicit investors to obtain funds that he used for various purposes, including personal uses. That is one of the SEC’s allegations. He also said that both funds and policies have been transferred from one company to another.

“There’s been quite a bit of commingling of funds between these various companies, and there have been various interests in these life-settlement policies that have been transferred to various third parties,” McVay said.

He said the policies make up a large part of the assets that have been discovered up to this point.

“From a legal standpoint, I think at this juncture we’re just trying to unwind what he’s done over quite a few years, to determine who has interests in these policies and other assets, and who has claims on these policies, as well as other assets,” McVay said.

Priorities of claims must also be determined, he added.

“We’re still trying to get to the bottom line here in terms of what gave rise to all of the various interests and claims that we’ve been able to identify,” McVay said.