Dear Victims, Creditors and Interested Parties,

Although the wheels sometimes seem to turn slowly, they are turning and moving in the right direction. Seeds that were planted in the summer and fall are now bringing fruit as spring approaches.

I know it’s been a bit since I last updated the newsletter, but I assure you it was not because of inactivity in the case, but quite the opposite.  Since the last newsletter, the majority of the time has been focused in four areas.

First, now that it is clear that there will be recoveries for distribution in this case, we are working on reconciling the claims that were filed by the victims and creditors, to the Schedules originally filed in the case, as well as “scrubbing” those claims to eliminate duplicative claims, preparing to make amendments to the schedules “as filed” as necessary, and also preparing objections to claims where necessary (e.g. where duplicative claims were filed).
We would ask that, should you receive correspondence from us with questions respect to your claim or the filing of your claim, you respond as quickly as possible so we can continue to move this process forward expeditiously. At this time suffice it to say that the total claims (without including consequential damages such as attorneys’ fees, lost profits or lost tax deferrals) appear to be in the $150 Million range.

Second, we have been working hard at developing claims against, and settling with, certain pre-trustee professionals in matters related to the fees that were incurred prior to my appointment, as well as potential lawsuits against those firms. These unpaid fees are as follows;

Dreier, LLP – Attorneys for the Debtor    $3,305,239.25
Huron Consulting – Chief Restructuring Consultants for Debtor    $3,680,109.78
Greenberg Traurig – Attorneys for the Unsecured Creditor Committee    $2,585,142.50
Mesirow Consultants – Financial Advisors to the Unsecured Creditor Committee    $1,137,764.00
Total    $10,708,255.53
 
Since every $1.5 million represents the approximate equivalent of 1% additional return to each of the creditors or victims, we will be negotiating hard in this area.

Third, we and the class action attorneys spent a good deal of time in preparing for and participating in, settlement discussions with Wachovia, which is a potentially significant source of recovery.  An early settlement would obviate the necessity to litigate the matters and incur further fees.  I and my attorneys have also recently achieved a settlement in principle of the lawsuit commenced against affiliates of JPS Capital, which, if approved, will result in the ability of the Estate to recover value from Okun’s lavish New Hampshire home (even though it was one of the properties retained by him under the asset transfer agreement).  We are in the process of finalizing the settlement document.

Fourth, on the matter of Alvarez vs. IXG (the "Colorado litigation”), we have reached an agreement in principle which, in consideration of a relatively modest payment, will end the protracted litigation with those parties, greatly reducing administrative costs, and end what best can be described as a major distraction.

Other Matters
In other matters, The Greenberg, Traurig firm has resigned as counsel for the unsecured creditors’ committee and that committee has now retained the law firm of Cozen, O’Conner.  We look forward to moving forward with working with that firm and will provide full cooperation in getting them up to speed as quickly and cost effectively as possible.

We began the month of March with the cash balance of approximately $7.7 million dollars. We received insurance settlement funds, in escrow, from the crime policy insurers totaling $23.25 million dollars. We also received approximately $300,000 from the sale of the jewelry.  Thus, including the escrowed funds, as of March 31, we are holding $31.2 million dollars, much of which is being held in escrow pending court approval as part of the plan confirmation and class action approval process.

We continue litigation and settlement discussions with certain pre-trustee professionals, certain financial institutions and with Lockton Insurance, who was the insurance agent for the crime policies, as well as with a number of other parties.

On other matters, the plan and disclosure statement have been filed and we move forward in the confirmation process. I would anticipate that there will be a few amendments to the plan and disclosure statement.  Since most of the settlements that we have reached do require both the approval of the bankruptcy court and the confirmation of the bankruptcy plan, it would appear that distributions might be possible in the fourth quarter of this calendar year.


Best Regards,
The 1031 Tax Group, LLC,
Gerard A. McHale, Jr.
Chapter 11 Trustee