Selling fruits of Ponzi scheme is expensive, time consuming
Finding all the riches of alleged fraudster Kevin B. Merrill is pricey work in itself.
The 53-year-old Towson businessman had millions in bank accounts, vacation homes and exotic sports cars. With his criminal case underway, a team of lawyers and investigators set about to sell his treasures and pay back his investors.
The divestment team has billed more than $500,000 for their first 44 days on the job. Despite criticism from the defense team, they say their work is exhaustive and it’s money well-spent.
“If you look at the list of assets, it’s mind-blowing,” said Lynn Butler, an attorney for the court-appointed receiver. “We’re responsible for changing the lights, maintenance, keeping [the houses] up and running. If you don’t, the value and the ability to market them falls.”
“If you read our bills and you’re the SEC attorneys racked up millions in fees Merrill funded a lavish lifestyle by opponent,” he said, “you would be able to while hunting for the money. And a judge swindling hundreds of people around the see what the strategy is going forward.” ordered the SEC and its receiver to pay back country in an elaborate Ponzi scheme, Their dispute arises in a lawsuit against nearly $5 million, writing that the lawyers federal prosecutors say. Officials pledged to Merrill and Ledford. The U.S. Securities and had “swallowed” the estate. repay his investors by selling everything Exchange Commission sued them to reJamison quoted the judge’s order in the from his $800,000 Louis Vuitton wardrobe coup what authorities call “ill-gotten gains.” Northshore case. to his $950,000 Bugatti Veyron sports car. Bennett appointed Gregory Milligan, “Sadly, it appears that Northshore’s
Court records list 22 attorneys on the vice president of the firm Harvey Manageinvestors would have been better off if the divestment team. A federal judge approved ment Partners LLC, as a receiver to manage receiver had simply distributed the $15.4 hourly rates as high as $590 a person. the sales. Milligan’s lawyers defended the million on deposit and promptly wound
“They’re consuming the assets,” said Jack team’s expenses, saying the rates are small down the affairs,” U.S. District Judge Jamison, attorney for Merrill’s co-defendand deserved when compared to what William Pauley III wrote. ant. “All this is supposed to be for the benefit authorities described as a $364 million Investors around the country — retirees, of the investors.” Ponzi scheme. small-business owners, bankers, lawyers
Jamison represents Merrill’s business “Certainly, it’s no one’s plan to outspend and doctors — were duped into paying partner Jay Ledford, 54, a Texas businessthe estate,” Butler said. “The SEC is much Merrill and Ledford millions over the past man also charged with fraud, identify theft more concerned about paying back infive years, prosecutors say. One California and money laundering. Jamison asked U.S. vestors than Mr. Jamison ever will be.” woman said she invested $150,000 set aside District Judge Richard Bennett to freeze the A decade ago, a U.S. District judge in New for her grandchildren’s college tuition. But divestment team’s payments and compel York rebuked the SEC and its attorneys for many were corporate investors, prosecutors say.themtopubliclyshowtheirinvoices.chargingnearly$11millioninfeesto
“Even blindfolded, it is easy to see billing disburse $15.4 million from Northshore U.S. Attorney Robert Hur called their is excessive and rates are exorbitant,” he Asset Management LLC. The investment business model one of the largest Ponzi wrote the judge. firm’s executives had been accused of schemes ever charged in Maryland. Both
In such work, attorneys routinely submit buying hedge funds, raiding the money for men could face more than 200 years in invoices under seal, Butler said. themselves and leaving investors out to dry. federal prison. They have pleaded not guilty. A trial date has not been set.
The investors believed their money was buying bundles of debt on student loans, credit cards and car loans known as “consumer debt portfolios.” But prosecutors say the businessmen actually were funneling money from new investors to their previous investors. Sometimes, prosecutors say, the menpaid an investor with the person’s own money, only returning the funds under the guise of profits. Meanwhile, Merrill and Ledford allegedly skimmed off millions of dollars to live in style.
Officials have filed documents with the courts that they intend to hire Sotheby’s International Realty to sell a dozen houses the men owned in Maryland, Florida, Texas and Nevada. Together, the homes are worth more than $20 million.
Prosecutors say Merrill spent $37,500 on designer watches and jewelry, that he collected rare wine and art of the mustached Monopoly character Rich Uncle Pennybags.