Andrew C. Snyder, Esq East Prentice Avenue, #1500 Case No. 2013CV31667 Denver, Colorado Ctrm.: 269 Phone Number:

Transcription

1 DISTRICT COURT, CITY AND COUNTY OF DENVER, COLORADO 1437 Bannock Street Denver, Colorado FRED J. JOSEPH, Securities Commissioner for The State of Colorado, Plaintiff, v. PROVIDENCE FINANCIAL SERVICES, INC., et. al., Defendants. RECEIVER: COURT USE ONLY Andrew C. Snyder, Esq East Prentice Avenue, #1500 Case No. 2013CV31667 Denver, Colorado Ctrm.: 269 Phone Number: RECEIVER S 6TH INTERIM REPORT COMES NOW Andrew C. Snyder, as duly appointed Receiver ("Receiver") in this case, and for his 6th Interim Report, states as follows: I. INTRODUCTION AND RECEIVERSHIP SUMMARY Andrew C. Snyder was appointed as Receiver for the assets of Perry Sawano, individually ( Sawano ), Providence Financial Services, Inc. ( Providence ) d/b/a Integrity Financial Consulting ( IFC ), RMC Financial, LLC s, Delta Real Estate Fund, Ltd. s, and Aspen Ridge Investments, Inc. s of any kind or nature whatsoever, related in any manner to Sawano s investment advisory business as further described in the Amended Complaint for Injunctive Relief by the Denver District Court, State of Colorado, Case No. 2013CV31667, on January 10, 2014 ( Civil Action ). Receiver previously filed his 5th Interim Report with the Court on or about May 19, This 6 th Interim Report will provide an update to items covered in the 5th Interim Report and new matters that are of interest to the Court and to Investors.

2 a.) Receiver Meetings and Contacts Discussions continue to occur with counsel for Plaintiff in this case, and with representatives of the Colorado Division of Securities. b.) Criminal Action On July 16, 2015, a sentencing hearing was held in Courtroom 5-B (Division 6) of the Jefferson County District Court. After arguments made and a Power Point presentation by the District Attorney, along with over 2 hours of statements by victims detailing their hardships caused by the $4.1 million theft and fraud perpetrated by Perry Sawano, Sawano received a 28- year a prison sentence, one year for each victim. c.) Third-Party Litigation Schott v. Sawano et.al. This matter has been consolidated as part of the MDL discussed below. Gurinsky v. Sawano et.al. This matter has been consolidated as part of the MDL discussed below. Graham v. Sawano et.al. This matter has been consolidated as part of the MDL discussed below. d.) Clawback Litigation and Settlements Eight of the claims have now settled and recovery to date on clawback claims amounts to $242, Receiver v. Linda Sawano Receiver filed a fraudulent transfer action against Linda Sawano for recovery of $223,200 paid as alleged salary. A jury trial was set for September 9, 2015, but is now stayed as a result of the Chapter 7 Bankruptcy filing on May 3, 2015 by Perry and Linda Sawano, Case No MER. Subsequently, Linda Sawano bifurcated her case and converted it to a Chapter 13. A Plan has been filed and is currently being evaluated for objection. Receiver is also evaluating the filing a Complaint objecting to the dischargeability of the fraudulent salary debt. If successful, the collection of the judgment would be limited to garnishment of wages for many years. Linda Sawano s primary asset is her 50% interest in the residence, which after the homestead exemption leaves limited funds for creditors. Receiver is expected to be the largest creditor in her case. 2

3 Receiver v. Martin Wohnlich Receiver commenced an action in Arapahoe District Court against Martin J. Wohnlich on March 20, After engagement in informal discovery and investigating an allegation that the promissory notes were forged by Perry Sawano, a settlement of the case was reached with Mr. Wohnlich for $ and the action was dismissed by stipulation. Multi-District Litigation ( MDL ) On May 11, 2015, the Colorado Supreme Court issued an Order of Consolidation and assigned the matter to Hon. Morris Hoffman, Denver District Court (Civil Action 2014CV33327 Consolidated). On July 7, 2015, William Moore filed a Motion for Determination of a Question of Law which seeks a finding that after the appointment of a receiver in a Ponzi scheme case, an individual investor cannot assert a separate cause of action against other investors seeking to trace and recover money taken by the Ponzi operator and disbursed to other investors. Movant seeks a dismissal of the third-party claims. Various responses and joinders have been filed to the Motion, including a Joinder in support by the Receiver. On July 31, 2015, the de Barros Defendants filed a Motion for Separate Trials. The de Barros Defendants request a separate trial on the claims made against them because they assert that such claims are separate from the claims made by and between other parties and a separate trial will be less expensive for them. The Receiver will timely file a Response in Opposition to the Motion for Separate Trials. On June 17, 2015, Shareholders Service Group, Inc. ( SSG ), filed a Motion to Intervene on the basis that it is the beneficiary of a subrogation agreement due to the payment of a $120,000 award in a FINRA arbitration in favor of Jean Schott and against SSG. On July 8, 2015, the Receiver filed a Response in Opposition to the Motion to Intervene. Oppositions were also filed by Clark Milner, Richard Libert, Jeanne Libert, and the de Barros Defendants. Sharon and William Moore filed joinders in the Oppositions. By Order dated July 14, 2015, the Court denied SSG s Motion to Intervene. Trial in the MDL is set for two weeks to commence February 29, e.) Bankruptcy Perry Sawano filed a joint Chapter 7 Bankruptcy with his wife Linda as described above. There have been several Adversary Complaints Objecting to Discharge of Debt in Perry Sawano s individual case, the deadline for which was July 27, Because Linda Sawano s case was converted to a Chapter 13, new deadlines have been established. The meeting of creditors is scheduled for September 1, 2015, and the deadline to Object to Discharge or Dischargeability of Debt is November 2, Receiver will timely file a proof of claim in the Chapter 13 case. f.) Asset Recoveries: None other than litigation recoveries described above. 3

4 II. RECEIVERSHIP ACCOUNTING Below is an accounting of receipts and disbursement in Receiver s trust account since the last accounting provided through April 30, 2015 in the 5th Interim Report: BANK Key Bank (Checking) April 30, 2015 Balance Key Bank (Receivership Account- Savings) April 30, 2015 Balance BALANCE $12, $185, RECEIPTS Shareholder Services account Clawback settlements (Wohnlich) Interest (May- July 2015) TOTAL RECEIPTS DISBURSEMENTS Attorneys Fees Receiver's Fees and costs TOTAL DISBURSEMENTS $ $7, $9.06 $7, $16, $7, $24, CASH BALANCE KEY (CHECKING) As of July 31, 2015 CASH BALANCE KEY BANK (SAVINGS) As of July 31, 2015 $6, $175,

5 III. RECEIVER S GOALS Receiver believes that additional funds could be recovered from Investors who were winners or who made a profit from the Ponzi scheme operated by Defendants and others in this case. This recovery will be determined at the completion of the MDL Litigation. When Receiver is able to liquidate the clawback and debt claims, and assets owned by the Defendants, the Receiver will file a proposed Plan of Distribution for Investors, creditors and tax claims, if any. However, a claims procedure must be established before a Plan can be proposed. Receiver cannot determine what Investors accounts as a whole will yield on return of principal under a Plan. These will be the subjects of later reports to the Court. Dated this 11 th day August, Respectfully submitted, /s/ Andrew C. Snyder Andrew C. Snyder, Receiver 5

6 CERTIFICATE OF SERVICE I hereby certify that on this 11 th day of August, 2015, a true and correct copy of the foregoing pleading was placed in the United States Mail, first class postage prepaid or sent via or e-filing and addressed to the following: Russell B. Klein, Esq. First Assistant Attorney General Charles J. Kooyman, Esq. Assistant Attorney General 1300 Broadway, 8 th Floor Denver, CO Gerald Rome, Esq., Commissioner Lillian Alves, Esq., Deputy Commissioner. Colorado Division of Securities 1560 Broadway, Suite 900 Denver, CO Via Via Providence Financial Services, Inc. d/b/a Integrity Financial Consulting Perry Sawano 6634 Arbutus Ct. Arvada, CO Copies of this report will be delivered to known investors who may have claims in this action and to counsel who have filed an entry of appearance in this case. This Report will also be posted on Receiver s Website which can be located under the Investors sub-heading at /s/ Andrew C. Snyder Andrew C. Snyder 6