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It was just before midnight and Fort Lauderdale, Fla., attorney-receiver Michael I. Goldberg was working alone in the Doylestown, Ohio, office of Cyprus Funds Inc. Suddenly, the door flew open and a tall, burly man with a shaved head stormed in and yelled “Who the f— are you? And what are you doing in my office?” Fortunately for Goldberg, he held a get-out-of-trouble card — a fresh federal court order appointing him receiver of Cyprus Funds, an offshore mutual fund, and giving him complete custody of its headquarters. A U.S. District Court judge in Miami had issued the order hours earlier, based on the U.S. Securities and Exchange Commission’s allegation of massive fraud. The receiver was surprised, to say the least, at the man’s sudden arrival at the office on that night in August 1999. “I’d been told everyone in the scam had skipped town,” said Goldberg, a bankruptcy lawyer and partner at Akerman Senterfitt. “He was a scary-looking guy. In my best bluff, I pulled out the receivership order and said back, ‘Who are you?’” The big guy with the shaved head turned out to be an investment fund partner named Doug Shisler. Goldberg calmed him down, and they started talking. Hours passed, and by dawn Shisler had become Goldberg’s ally in unraveling what turned out to be a $48 million fraud with 1,000 investor-victims. “He was totally cooperative,” Goldberg said. “He said he was a peripheral player, and I believed him. He was crying that his life was ruined.” Today, Shisler is serving a 21-month sentence in a federal prison for his role in the massive Cyprus Fund pyramid scheme, which allegedly was run by former Miami resident Eric V. Bartoli, who is a federal fugitive. Shisler received credit for helping Goldberg accomplish his mission of recovering assets for defrauded investors. So far, $15 million has been recovered in the Cyprus fraud case, which is overseen by U.S. District Judge Ursula Ungaro-Benages in Miami. Millions more could be recovered through a class action fraud lawsuit filed by Cyprus investors against Key Bank in Ohio, and in a second state court action alleging legal malpractice against a Columbus law firm, Wolman Genshaft & Gellman. Demand is intense for attorneys like Goldberg who know how to find and recover assets for aggrieved investors, either as court-appointed receivers, bankruptcy trustees or as lawyers representing individuals or classes in securities fraud lawsuits. And that’s unlikely to change any time soon. “We live in Florida, where the largest industries are citrus, tourism and fraud,” said Goldberg, who with seven active cases involving 7,000 cheated investors is among South Florida’s busiest receivers. Investors who lose big money don’t confine their recovery efforts to the thieves who stole it. Increasingly, their focus is on identifying deep-pocketed banks or professional services firms associated with the fraud. “The risks are huge today under the Sarbanes-Oxley requirements,” said Miami attorney Mark F. Raymond, referring to the 2002 law passed in the wake of several huge corporate accounting scandals. “The downside of not knowing your customer or your client can mean not merely a civil lawsuit, but a criminal indictment. And there’s also personal liability, as opposed to just liability for the entity.” INDEPENDENCE In large investment frauds such as the Cyprus case, judges often appoint receivers at the request of the SEC or other regulatory agencies to oversee insolvent companies or partnerships. The goal is to preserve and recover assets. Those receivers take on the role of business owners, with full authority to keep the business running or close it. By law, receivers are independent, doing their work on a parallel yet cooperative track with any criminal investigation. Bankruptcy trustees have similar powers and duties. The fundamental characteristic of those who make a successful living recovering assets is doggedness. “Certain people have excelled over the years in getting better results, because they are tenacious,” said Tom Cash, former chief of the U.S. Drug Enforcement Administration’s Miami field office and now executive managing director of Kroll Inc. in Miami. Kroll is the national risk consulting subsidiary of professional services giant Marsh & McLennan Cos. Inc. “The only real strategy is to move quick and don’t sleep the first week,” said Lewis B. Freeman, a Miami attorney-accountant who is frequently tapped by the courts to serve as a receiver. Mark Raymond, a veteran of Miami-based Tew Cardenas who earlier this month jumped to Broad and Cassel to head its litigation group, agreed. He recalls the time a reminder notice about a past due lawn-spraying bill was the tip-off to a recoverable asset. “We checked and found out the guy in the scam owned that house,” Raymond said. “Nothing makes up for persistence, because it is the little things that do it.” While there is a “wheel” in place in bankruptcy court for the random appointment of trustees, receivers are often chosen by a judge upon recommendation from a regulatory agency like the SEC or the Federal Trade Commission, said Freeman. Judges are free to disregard those recommendations, however, and choose an attorney they think is qualified. Receivers and trustees both are paid “reasonable” hourly fees, subject to court approval. Bonuses are sometimes paid for substantial recoveries, including, when a case is in bankruptcy court, a percentage of collections or disbursements, Freeman said. BLITZKRIEG APPROACH Success in asset recovery is measured in cents on the dollar. Recoveries of 100 percent are as rare as snow in South Florida. Fifty cents on the dollar is considered excellent, experts say; 10 cents or less is more typical. Every receiver’s game plan starts out with the same theme — parachute in as quickly as possible after the judge signs a temporary restraining order. The first priority is often to preserve company assets for investors. The receiver’s goal is then to vacuum up every scrap of information for examination later. “There’s one blueprint more or less, and that’s to marshal your assets and seize control of them wherever they are located,” said Craig V. Rasile, an insolvency expert and partner at Hunton & Williams in Miami. He has represented receivers and bankruptcy trustees in a number of notorious cases like the Cascade International and College Bound securities frauds of the 1990s. “Go in without advance warning so nothing gets destroyed,” Rasile said. “Freeze the cash, the computer, the books and records and get a line on any transfers of inventory out of the ordinary course of business.” Kroll Inc.’s Tom Cash stressed the importance of locking down the company’s computers quickly before files and e-mails can be deleted and hard drives destroyed, then subjecting them to a forensic examination. “People know they shouldn’t put anything in e-mail they don’t want in the New York Times, but they can’t help themselves,” Cash said. There also should be a prompt forensic accounting examination of all books and records, with a focus on bank checks and uncovering domestic or offshore bank accounts. That examination also can be helpful in identifying third parties who might face liability because of their involvement with the fraud perpetrators. “We’re looking for them to have made a mistake that we can trace,” said Ross Gaffney, a retired FBI agent who is now a partner in the Plantation forensic consulting firm Gaffney Gallagher & Philip. Gaffney said success in such investigations increasingly requires technological savvy. Still, it often comes down to “who you know and who you can put on the ground to find the assets.” Typically, Gaffney said, that means following transactions from one financial institution to the next. Money is often hidden offshore. The Cayman Islands is fashionable today. But loot from investment fraud is just as likely to be found in a U.S. bank. “Even in the wake of Sept. 11, people who are knowledgeable about how to set things up can still use domestic banks,” Gaffney said. “I’d say 30 [percent] to 50 percent of the time, [stolen] money that goes offshore can be seen to come back here laundered.” Bankruptcy trustees and receivers say it’s important to talk to both the defrauded investors and the former employees of those who conned them to help find assets and identify liability targets. Nancy Van Sant, a former SEC attorney who is now a partner at Sacher Zelman Van Sant Paul Beiley Hartman Rolnick & Waldman in Miami, recalled a case where a casual question to a secretary yielded an unexpected answer that linked a supposedly independent accountant to the fraud. “You never know who the next great source of information is going to be,” Van Sant said. Sources also can be useful in locating fraud perpetrators who skip town. Also helpful are techniques like tracing passports and e-mail accounts, and tracking family members. Receiver Michael Goldberg once traced a man by determining where his children’s school had forwarded transcripts. DEEP POCKET TARGETS Private attorneys retained by investors to get back their money — who often are paid a percentage of the recovery — have a focus at the outset of a case that’s somewhat different from bankruptcy trustees and receivers. Their main concern is whether it’s viable to sue third parties with deep pockets — accountants, banks, law firms or others — for negligence or complicity in the fraud. “We are concerned with the concept of collectability,” said Scott Dimond, a commercial litigator who focuses on investor cases at Dimond Kaplan & Rothstein in Miami. He said it’s obviously worth suing a major financial services firm that could be implicated in the fraud. “But with second-tier firms, we need to figure out if we win, is this collectable?” Complicating the analysis of collectability is Florida’s generous homestead exemption, a centerpiece in this state’s reputation as a haven for debtors and con men and women. Jeffrey B. Kaplan, Dimond’s partner, notes that in Florida, parties seeking to recover assets cannot generally collect on homestead-protected property, no matter how much it’s worth. “That’s a major impediment to collectability, and it comes very regularly into play,” he said. Attorneys bringing suit on behalf of aggrieved investors rely on a number of federal statutes to help victims of securities fraud recover assets. They include the Securities Act of 1993, the Securities and Exchange Act of 1934, 1994′s Private Securities Litigation Reform Act and 2002′s Sarbanes-Oxley Act. Still, the complexities of these laws and the creative methods used by white-collar criminals make suing individuals and companies for investment fraud “extremely fact sensitive,” said William M. Pearson, a former federal prosecutor and partner at Shutts & Bowen in Miami. Asset checks performed by private investigators who mine financial databases are standard operating procedure in seeking to recover assets for investors. But experts say the best chance for recovery lies with identifying and suing professionals who knew or should have known about the fraud. The search for hard assets can be largely unproductive because fraud perpetrators tend to spend their ill-gotten gains rapidly through lavish lifestyles. In addition, they often stash cash offshore, where it’s both difficult and expensive to trace. “These people are financiers. They’ve had their plans in place since before the first victim is snared,” Cash said. Depreciation undercuts the value of hard assets like computers or office furniture. Typically, such stuff is worth “10 cents on the dollar, at best,” Lewis Freeman said. Real estate and vehicles are often valueless, because they’re heavily mortgaged. The best chance of hitting an asset jackpot, albeit a slim one, is to sue a bank or accounting firm tied to the fraud, said attorney Harley S. Tropin, a partner at Kozyak Tropin & Throckmorton in Coral Gables. In 2003, Tropin helped extract a $5 million class action settlement from First Union, now Wachovia Bank, on behalf of defrauded investors in the Cyprus Funds case. In the mid-1990s, in his biggest case as an SEC receiver, Tropin used third party lawsuits to obtain a return of 63 cents on the dollar for investors who lost about $254 million in the mammoth grocery-diverting scheme operated out of Premium Sales Corp. in North Miami Beach. Van Sant also had success with suing a bank that was involved in a scam. In 2001, she and other class counsel struck gold with a $67.5 million settlement from the Bank of Bermuda in the Cash-4-Titles scam. In that fraud, investor money infused into a short-term loan business was illicitly pumped through the bank, Van Sant said. The bank settled after it was decided the U.S. District Court in Miami had jurisdiction, Van Sant said. Sometimes, there’s a luck factor in snagging third-party recoveries. In 1997, Florida Attorney General Bob Butterworth’s office moved to shut down Unique Gems International Corp., which was involved in an alleged $90 million Ponzi scheme. In that case, receiver Freeman got back for investors $24 million that had been stashed in a Liechtenstein bank. The bank paid that money on the advice of an overseas law firm. The law firm made that recommendation because it feared its own exposure to a legal malpractice claim in the case. OTHER RECOVERY ROUTES A new pot of money for aggrieved investors has emerged in recent weeks — the personal wealth of corporate directors. Former directors of both WorldCom and Enron — corporate giants whose stocks collapsed under the weight of massive accounting frauds — agreed to kick in millions of their own money to settle class action lawsuits. “There’s no doubt that this had a very sobering effect in boardrooms and at the law firms that advise boards of directors,” Mark Raymond said. “It sets a precedent, and it’s a wild card that will now be played.” Of course, another recovery route for the small investor is arbitration under NASD, formerly known as the National Association of Securities Dealers. “If grandma takes her life savings to Merrill Lynch and says, ‘I need to live on this,’ and the broker invests it speculatively and loses, that’s fraud and there is a [NASD] claim,” Dimond said. Using the power of the courts and government enforcement agencies can be a double-edged sword when it comes to recovering funds for defrauded investors. Goldberg said a court order to disgorge profits obtained by fraud breaks down barriers to collection, including Florida’s homestead shield. The likelihood of criminal action or a restitution order can motivate underlings like, the Cyprus Funds’ Doug Shisler, to cooperate. “It’s a huge hammer for me,” Goldberg said. The downside is that prosecutors and government agents may seize evidence and take charge of the investigation, Cash noted. “You’ve lost control then, and you’ll have to contend with a thousand other people who want money in addition to your client,” he said. On the other hand, having the government lead the investigation can produce evidence that’s valuable in prosecuting a civil lawsuit. “From a pragmatic standpoint, it is easier to trail the SEC or federal investigation to avoid duplicating efforts,” Bill Pearson said. The job of regulatory agencies like the SEC is to put fraud perpetrators out of business. The job of the Department of Justice is to put them behind bars. Along the way, both seek restitution for victims. But the government agencies leave actual collection to receivers and their teams of attorneys and forensic experts. “Do they have a $150 million nest egg offshore?” Rasile said. “That’s always the question, and that’s what we’re looking for.”

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