SEC v. Colon End Parenthesis Trust LLC, et al.
And The CEP Bankruptcies

June 28, 2011

CEP Bankruptcy Cases Closed

Judge James Massey issued the FINAL DECREE directing the Clerk of Court to close the CEP bankruptcy cases immediately. This discharges the Trustee and there will be no further activity in this case in this venue.

October 19, 2010

FAQ Update

The Frequently Asked Questions section of this website has been updated to address the queries I'm receiving on the distribution mailed to allowed claimholders last week. If there are other questions you may have, please send me an email at the address provided above..

October 15, 2010

Mailing Notice

The first and final CEP distribution to all allowed claimholders with a net distribution check of $10 or more were placed in the mail today.

October 6, 2010

Distribution and Notices

A hearing is scheduled for next Tuesday, October 12, 2010 regarding the final applications of the Receiver and counsel for fees and expenses. Notices regarding these applications are posted in the Documents section for your review. This has delayed the determination of final funds available for distribution and I apologize for the confusion to many who have been looking for their distribution as stated in my last post.

Following the hearing Tuesday we will proceed with mailing the distributions checks and I anticipate all checks will be mailed not later than Friday, October 15. For those eligible for distribution, I anticipate this first and final distribution will be approximately 3.3% of allowed claims. These will be issued to over 3,000 individuals in 70 countries.

September 10, 2010

Distribution

The first and FINAL distribution of all available funds will be made on or before September 30, 2010 to all allowed claimholders in accordance with the terms of the CEP Plan of Liquidation. There is a hearing scheduled for Tuesday, September 21, 2010 that will hopefully resolve all claim objections. Any open items from that hearing, as well as other administrative expenses will be reserved as necessary.

August 19, 2010

Status Update and Notices

Plan Balloting. We received 787 valid ballots voting to accept or reject the Debtors' First Amended Plan of Liquidation. The Plan was overwhelmingly approved, with only three of those ballots rejecting the Plan. We gave a report to the Court of these results and in a hearing last Monday, August 16th, Judge Massey confirmed the Plan. The Plan will become effective 10 days thereafter. A copy of the Confirming Order is included in the Documents section for your review, which also includes another copy of the Plan itself.

Claims Processing. As has been frequently discussed on this site, the Proposed Allowed Claims Report ("PACR") in the Hot Links section lists what I consider the valid claims in this matter. Nevertheless, a number of CEP participants filed about 200 claims on or before the cutoff date of July 30, 2010. These claims have to be specifically addressed with the Court. Some of those claims matched or were reasonably close to those shown in the PACR and require no further action. Some people filed duplicate claims in each of the two CEP cases-one of which now has to be eliminated, and some were misclassified or had the wrong amount in my view. Objections to those claims were filed and will be the subject of a hearing on September 21, 2010 in Judge Massey's courtroom. A copy of the Notice of Hearing, which lists the people and claims involved, is attached in the Documents section.

Payment of Claims. Once the Court resolves the disputed claims on September 21st, we will try to distribute all available funds as soon as possible thereafter. If there are claims still hanging at that point we will have to set aside funds to pay them. There are two very important considerations to keep in mind. First, there is a small amount of money to distribute on a pro rata basis to investors who lost over $10 million. So the distribution will only be in the 3% to 5% range. Second, if 3% to 5% of your allowed claim is less than $10, then we will not issue you a check due to the cost of processing and mailing the check. No further distributions to holders of allowed claims are anticipated.

June 22, 2010

Disclosure Statement Update

A. At the Disclosure Statement hearing last Thursday, June 17, 2010, Judge Massey approved the First Amended Disclosure Statement to the Debtor's Plan of Liquidation filed June 17 ("the Disclosure Statement"). The Judge's Order approving the Disclosure Statement and related procedures was entered on June 21, 2010.

We are mailing to each person listed on the Proposed Allowed Claims Report ("PACR") the following documents:

1. A Summary Disclosure Statement
2. A Ballot for acceptance or rejection of the Plan
3. The Judge's order approving the Disclosure Statement and setting key dates, and
4. The Notice for Deadline to file Proofs of Claim

I have attached in the Hot Links a single document entitled "Disclosure Statement Mailer" that includes all four of these documents, which should reach each of you by regular mail by next week. Please review these documents carefully.

B. I have also attached for your review what I believe will be the final three documents for the Hot Links. These are the complete Disclosure Statement, the Debtors' Plan of Liquidation, and a Proof of Claim form. Again, you need not file a proof of claim unless you are not listed on the PACR and you believe you should be, or you believe the amount of your claim on the PACR is in error. Both the Disclosure Statement and the Plan describe the manner in which an Allowed Claim is calculated. Every new proof of claim filed will have to be investigated by my office, which will not only consume available funds, but may also require the Court's attention at some time in the future.

C. After your review of these documents, I urge all claimholders listed on the PACR to return your completed ballot to me accepting this Plan so we can move this case to a final resolution. You may either print the ballot in the Disclosure Statement Mailer attached in Hot Links, or use the ballot you will receive in the mail. The deadline for return of ballots is August 9, 2010, and the confirmation hearing, at which the Plan will hopefully be approved, is scheduled for August 16, 2010.

May 27, 2010

Fee Application Notice and Hearing

The Receiver and his counsel, Greenberg Traurig, LLC, have submitted fee applications for the seven months ending April 30, 2010 in which they seek payment of 80% of fees incurred and 100% of out of pocket expenses for this period. Net fees and expenses sought at this time by the Receiver are $26,737.76 and $42,000.39 by Greenberg. The hearing for these applications will be on June 17, 2010 at 2:00 p.m. A copy of the Notice of Hearing - Hays and Notice of Hearing - Greenberg are linked here and in the Documents section for your review and consideration.

May 14, 2010

Hearing Scheduled

I have added to the Hot Links a Notice of Hearing to be held June 17, 2010 at 2:00 p.m. here in Atlanta. Several motions were filed yesterday submitting a Disclosure Statement for the Court's approval, solicitation procedures, deadlines and procedures for filing claims. Again, all claims on the Proposed Allowed Claims Report (PACR) are deemed to be filed, so don't be concerned about having to file a claim if you are already listed on the PACR.

Once the Court approves the Disclosure Statement, I will post the Disclosure Statement and the Plan of Liquidation in the Hot Links for your review. As soon as practical after the June 17th hearing, everyone on the PACR will receive a mailing that will include a brief summary of the Disclosure Statement, a ballot for your acceptance or rejection of the Plan, and perhaps other brief documents. This website will remain the primary source for the significant documents you may need because the cost of physically mailing them to all claimholders is prohibitive.

If enough claimholders vote for the Plan, it should be confirmed in a separate hearing toward the end of July or perhaps early August. The case will then proceed under the terms of the Plan shortly after the confirmation hearing when it will become effective. All of this effort, if successful, will move the case toward distribution of funds and the closing of the case in accordance with the Bankruptcy Code.

May 12, 2010

Hot Links

I have started at right a new tool that I've called HOT LINKS that will give you a quick reference to the key documents we will be working with as we proceed through the process of (a) getting the CEP Disclosure Statement approved by the Court, (b) voting on and confirming the CEP Plan of Liquidation, (c) finalizing creditor claims and ultimately, (d) the distribution of available funds to creditors. Please review again my March 26, 2010 post below regarding the Plan process and Allowed Claims.

The first HOT LINKS are the Proposed Allowed Claims Report (725kb PDF) and the Disputed Claims Report (14kb PDF).

The Proposed Allowed Claims Report is in alphabetical order by last name and provides your current address per our files and the amount of your claim that I will recommend the Court allow. The claim amount shown is based upon the net investment method as described in the March 26, 2010 post. This is an updated version of the old "Schedule F" posted earlier. IMPORTANT: If your address is not correct, email the Receiver at with your new address, and for validation purposes, please provide the bank name and the last 5 digits of the bank account I have on file with CEP. It is critical that these addresses are correct because you will be receiving a ballot to vote on the Plan at this address and any distribution I make will be by check sent to this address.

The Disputed Claim Report lists people who failed to settle or turnover certain amounts due to the Receiver. No payment will be made on this group of claims until amounts due to the receivership estate are remitted.

You'll be seeing more HOT LINKS, posts and an update of the FAQ's over the next 10 days.

March 26, 2010

Plan of Liquidation

In order to complete the bankruptcy process, chapter 11 cases involving Ponzi schemes such as these two CEP entities either have to be converted to chapter 7 liquidation case or a chapter 11 plan of liquidation has to be drafted and approved by the creditors as required by the Bankruptcy Code. You may be aware of another option called a plan of reorganization. Being illegitimate enterprises, Ponzi schemes, such as CEP, of course, will not be reorganized.

I am drafting a Plan of Liquidation ("the Plan") for the consolidated CEP entities and a related document called a Disclosure Statement. The Court must approve the Disclosure Statement by finding that it contains adequate information to enable creditors to vote on the plan. We will file the Disclosure Statement and Plan in April 2010. The hearing on the approval of the Disclosure Statement will likely be held in May, depending on the Court's calendar.

Assuming the Court approves the Disclosure Statement, I will send out the appropriate notices and a ballot to each creditor for you to approve or reject the Plan. There are over 5,000 creditors scattered all over the world. To minimize the mailing costs, I will ask the Court for permission to not mail the full Disclosure Statement and Plan, but rather only a summary which will contain a link to this website on which those will be posted as soon as they are approved by the Court and you may read and print them from here before completing your ballot.

Depending on the court's calendar and if it approves the Disclosure Statement, I anticipate a confirmation hearing in late July or early August. I am going to ask the court to have you return your completed ballots to me by mail. Assuming the Plan passes as regulated by the bankruptcy code and if the court rules the Plan is confirmed (approved), and after a stipulated period thereafter, the Plan will become effective and, if approved by the court, will designate me as the trustee responsible for administering the plan. So, what does that mean?

The Plan will lay out the rules and procedures which will be used by the trustee to complete the remaining bankruptcy tasks. Among other tasks, these will include:

1. Completing the prosecution of litigation still in progress (see 3/24/2010 post here);
2. Completing the process of determining the claims that will be allowed;
3. Pursuing or marketing judgments or other assets held by the trustee in order to liquidate them to cash;
4. As funds are available, paying the allowed claims of tax, vendor, and investor creditors in accordance with the terms of the Plan;
5. Completing administrative procedures as necessary to close the case.

Some of these tasks are in progress and I have the authority to act thereon. We will make every effort to complete these steps this year.

Allowed "Investor" Claims

I want to emphasize at this time that investor claims-whether you considered yourself an advertising purchaser, an investor or otherwise-will be allowed in the amount of your net cash invested: that is, cash you transferred to a CEP entity by a bank or third-party payment processor, minus transfers out to your personal bank or third-party payment processor. This is the very same approach that receivers and trustees are using in the big Ponzi scheme cases in the news, such as Madoff, Stanford, Bayou Capital, etc. It is also the basis of the listing of claims initially posted on this website as Exhibit F. (See Documents Section). I will post another listing in the next week or two that will include the amounts I will propose to allow as a claim and it will reflect the latest addresses you have reported to me via email. The amount of the distribution is unknown presently and depends upon the processes still to be completed. However, I anticipate that it will be a very small percentage of the $10.0 million of outstanding claims.

Due to the number of claimants and the basic cost of preparing and sending out distribution checks, I anticipate making only one complete and final distribution. Also, the Plan will likely include a claim payment threshold. For example, I will propose that if the calculated distribution amount on your allowed claim does not equal at least $10.00, no check will be issued and your claim will be ignored because the cost to calculate, prepare and mail the check and monitor for payment will likely exceed the amount of the claim.

You will see more frequent posts to update you in the coming months as this process unfolds.

March 24, 2010

Schreier Litigation

The Receiver's lawsuit against CEP participants Gary and Susan Schreier for amounts in excess of $200,000 was tried on August 20, 2009. On January 6, 2010, U.S. Bankruptcy Judge James Massey ruled in favor of the Receiver and awarded judgments against Gary Schreier in the amount of $149,474; against Susan Schreier in the amount of $148,529; and against The Schreier Family Retirement Assets LLC in the amount of $161,695. The judgment awards are duplicative against the parties and the Receiver is entitled to only one satisfaction of the judgments, not to exceed approximately $230,000.

The Schreiers have appealed these judgments by notice with the U.S. District Court on January 14, 2010 and later filed their brief with the District Court. The Receiver's response to the Schreier appeal brief was filed today.

June 8, 2009

Fee Applications

My legal counsel, Greenberg Traurig, LLP (Greenberg) has filed its third fee application for the seven months ending April 30, 2009 that will be heard in Judge Massey's Court in Atlanta at 11:00 a.m. on June 23, 2009. Greenberg is seeking approval of fees and expenses of $95,867.14, and payment at this time of the expenses plus 80% of the fees. Notice of this application that includes additional details is attached in the Documents section of this site.

June 5, 2009

Notice of Lawsuit Settlements

I have posted in the Documents section a Notice and the Motion for Settlement of certain of the Receiver’s claims against investors whose trial was scheduled in January and February 2009. The Court will consider approval of those settlements and any party in interest may file an objection within 15 days of the posting on this site. Objections may be filed with the Court as directed in the Notice.

January 8, 2009

Notice of Lawsuit Settlements

I have posted in the Documents section a Notice and the Motion for Settlement of certain of the Receiver’s claims against investors whose trial was scheduled in December 2008. The Court will consider approval of those settlements and any party in interest may file an objection within 15 days of the posting on this site. Objections may be filed with the Court as directed in the Notice.

November 26, 2008

Upcoming Trials

Nineteen trials were scheduled for December 11th and December 12th, 2008.  I have resolved three matters with consent judgments from Skye Karls, Gary Schreier, and  Charles Russo.  Eleven others were settled for approximately $106,000.  Trials presently going forward are E-Business, Nahawee Alwine and Nevin Alwine, Chris Bergland, Shad Foss, Gary Harbin, Ronnie Montano

Another 20 individuals are scheduled for trial on January 8, 2008. 

Fee Applications

Both my firm, W. G. Hays & Associates, LLC (Hays) and my counsel, Greenberg Traurig, LLP (Greenberg) have filed fee applications for the 12 months ending September 30, 2008 that will be heard in Judge Massey’s Court in Atlanta at 11:00 a.m. on December 16, 2008.  At this time, Hays is seeking payment of fees and expenses of $286,557.65 and Greenberg is seeking payment of $393,436.06.  Notices of these applications are attached in the Documents section of this site.

November 18, 2008

Trevor Reed and Clayton Kimbrell Trial

The civil trial of Trevor Reed and Clayton Kimbrell was held in U. S. Bankruptcy Court in Atlanta, Georgia before Judge James E. Massey on November 13, 2008.  Reed and Kimbrell were found jointly and severally liable for damages of $1,453,665.08 plus interest as a result of breach of fiduciary duty and fraud.

The funds at issue totaling almost $1.5 million were transfers caused by the defendants to themselves, their family and other employees and principals of CEP.  Asset recovery efforts resulting from this judgment are under way.

Attached in the Documents section is the Judgment issued by the Court.

August 20, 2008

SureInvest Settlement Hearing

Numerous comments were received regarding the recent omnibus settlement motion cited below in the August 18, 2008 post that have brought to my attention that I did not post the SureInvest settlement, motion and notice of hearing.  That hearing had been originally set for August 26, 2008.  As a result, I have had the SureInvest hearing reset for Tuesday, September 16, 2008 at 11:00 a.m.  You will find the notice of hearing, the motion and the settlement agreement in the Documents section herein for your review. 

These settlements with the three SureInvest defendants, including Donaker and Herron addressed in this specific settlement, will recover $750,000 when paid in full.  That leaves almost $1 million not recovered, or over $300,000 each.  We deposed these two defendants and their wives under oath and analyzed where and how the money was spent.  A lot of money was spent on their attorneys (2 sets involved), in other business ventures, in their new homes, to pay down debts, and elsewhere.  Unfortunately, it is typical that over 8 to 12 months that 95% of the defendants in the CEP cases have spent the money they’ve received from CEP.  That’s why settlement is so difficult—the money is never sitting in T-bills earning interest and waiting for me to take it back.

Settlement is a function of weighing how much it will cost to pursue a claim to trial, estimating my likelihood of receiving an enforceable judgment at trial, and assuming success, what is my likelihood of collecting the judgment.  And of course, if you succeed in finally getting a judgment, your costs don’t end.  You may then have to proceed with post-judgment discovery requesting bank records, taking depositions of the defendant, etc., only to find that the money was spent gambling in Las Vegas. 

The SureInvest settlement being heard on the September 16th hearing was the end result of a mediation with an experienced bankruptcy judge who heard both sides, examined the data each had put forward, and made her recommendations.  Among other things, this settlement requires Donaker and Herron to sell their houses—into which a lot of this money was invested, and essentially start over.  They were not happy with the settlement, I assure you, and neither was I. 

August 18, 2008

Notice of Settlements

I have posted in the Documents section a notice and motion requesting the Court’s approval of settlements reached in several lawsuits filed against various investors with profits or preferential transfers.

The amounts listed in the motion described as “gross demand amount” represent all transfers to the defendant and were the total amount of each lawsuit’s claim.  However, this amount includes all return of “principal” as well as any profits.  For example, one defendant is listed with a gross demand amount of $37,500 with a $20,000 settlement.  This individual invested $25,000 and received back $37,500, for a profit of $12,500.  This settlement represents the full return of their profits of $12,500 plus $7,500 to resolve preferential payments he received. 

A preferential payment generally is one received within 90 days of CEP filing bankruptcy.   Under certain circumstances described by the Bankruptcy Code, CEP may recover those transfers that are assumed to give preference to certain investor creditors over others so that CEP may make a more fair distribution to all creditors.  Investors against which I have asserted a preference claim, by definition, have lost money  (or have after returning their profits).  There are numerous lawsuits of this sort, so these settlements do not only represent people who have profited.

The financial circumstances of these defendants vary greatly and in many cases have deteriorated since CEP was shut down.  In probably 95% of our settlements we review background information, personal financial statements, tax returns, credit reports and supporting documents such as bank statements and liability statements before settling with an individual at a substantial discount.

May 22, 2008

Judge Rules CEP A Ponzi

I have posted in the Documents section Judge Massey’s Order dated today ruling that the Receiver (Plaintiff) successfully made the case that CEP was a Ponzi scheme and rejecting the defenses of the Defendants of 74 lawsuits that are listed on page 2 and 3. This is a major step toward resolving these cases and the Receiver anticipates that motions for summary judgment will be filed in many of the cases absent immediate settlement progress.

Feb. 8, 2008

1099 - MISC Feedback

Several CEP investors have responded correctly that their 1099's I mailed at the end of last month were in error. Some of the forms I sent out included 2006 activity as well as 2007, which is obviously an error. My office has mailed a corrected 1099 this week that those affected should be receiving soon. Please discard the first 1099-MISC I sent you. I apologize for the confusion.

Otherwise, I get many polite and not-so-polite letters and emails asking why I am requesting information and sending out 1099's when you have lost money. The answer is simple, the IRS requires me to report your GROSS RECEIPTS from CEP. That does not mean that the payments are taxable income you have to report, it just means the IRS will be aware of it and you may have to answer a question about it. Please consult with your personal tax advisor about whether the payments you received in 2007 have any impact at all on your tax return. I can't answer that question, but be prepared in case you have to.

Jan. 25, 2008

W-9 Form Requests

As U.S. resident investors of CEP should be aware by now, we have sent out requests to all of you for information that will enable us to prepare 1099-MISC forms that we will be sending you later this month. 

We are required to report to the IRS the gross payments you have received from CEP for 2007 and will do so with the best information we have.  It will be reported in block 7 of the 1099-MISC, which is labeled “non-employee compensation.”  How you treat that information on your tax returns is a matter you must take up with your tax advisor. 

Your assistance with helping us comply with the Internal Revenue Service reporting requirements will be greatly appreciated.

Jan. 4, 2008

Litigation Settlements

The settlement of the Receiver's claims in excess of $30,000 against U.S. domestic residents requires the Bankruptcy Court's approval. I have posted in the Documents section herein two Notices of Hearing for 11:00 a.m. on January 29, 2008 and the related Motions to Settle Claims for settlement amounts totaling $330,000 related to two separate pieces of litigation. 

If the Court approves these settlements, the funds should be received during the first quarter of this year. Settlement discussions are in progress on other major litigation claims, but the outcome is uncertain and may require proceeding to trial to resolve. Several smaller claim settlements that do not require Court approval totaling over $100,000 have been received to date.

Distributions to investors with claims against CEP Trust remain contingent upon the outcome of other claims in progress, and cannot be made at this time.

Dec. 19, 2007

Deposition of Christopher Barany

My counsel took the deposition of Christopher Barany today at Barany’s attorney’s office near White Plains, New York. Like Trevor Reed and Clayton Kimbrell, Mr. Barany chose to exercise his Fifth Amendment rights against self-incrimination, answering no questions regarding the CEP programs or investments.

Dec. 7, 2007

Fee and Expense Applications

The Receiver with his firm, W. G. Hays & Associates, LLC and Receiver's counsel, Greenberg Traurig LLP have filed First Interim Fee and Expense Applications that will be heard at 11:00 a.m. on December 18, 2007 in the Bankruptcy Court, Northern District of Georgia, Atlanta, Georgia in Courtroom #1404. Fees and expenses applied for are $152,094.50 for Hays and $170,486.79 for Greenberg. Copies of the Notice of Hearing are posted in the Documents section.

Dec. 4, 2007

Fair Warning

The following people have not responded in a substantive manner to my demand for their return of the fictitious profits that they removed from CEP Trust in the amounts shown.  If, in my judgment, I receive no meaningful response from these individuals by the end of this week, Friday, December 7, 2007, then I will proceed with more formal legal remedies as stated in the demand letters.  These individuals pocketed a total of $503,000 of “profits” from CEP Trust.

JEAN ANDERSON,  $28,113.85
JOSHUA ANDERSON,  $16,368.67
PENNY AULD,  $27,961.52
RONALD VILLA / AURELIO, INC.,  $15,492.08
KELLY BEAUCHAMP,  $29,495.95
KEITH BEAUCHAMP,  $23,625.00
KENNETH BOYD,  $29,759.14
KENNETH BROWN,  $16,970.04
DAVID FERNANDEZ,  $23,946.76
GARY HARBIN,  $25,082.00
CINDY HENRYSON,  $24,919.24
KELLY HIGGINS,  $23,437.76
CHARLES HOLDER,  $23,040.41
NOEL HURD,  $17,650.00
JOEL KANTOR,  $18,321.77
RUTH ANN MCDONALD,  $15,436.18
APRIL PATTIE,  $24,611.39
REBECCA PROSCH,  $19,855.98
DELFIN RODRIGUEZ,  $19,728.25
PAUL STANSEL,  $25,936.70
SHARM STILTZ,  $22,153.34
DAVID STUCKE,  $15,339.73
DOUG WHYTE,  $15,723.04

October 24, 2007

Depositions of Kimbrell and Reed

I took the depositions of Clayton Kimbrell and Trevor Reed today in Atlanta, Georgia in the bankruptcy cases and adversary proceedings filed in the Bankruptcy Court thus far.  A deposition is a sworn statement given in response to questions by opposing counsel and taken down by a court reporter for potential use as evidence in these cases.  Mr. Kimbrell and Mr. Reed chose to exercise their Fifth Amendment rights against self-incrimination, answering no questions regarding the CEP programs or investments. They also asserted their Fifth Amendment rights against self-incrimination in response to my Requests for Production of Documents, Interrogatories and Requests for Admission.

Authorization to Settle Claims

The Bankruptcy Court has issued an order outlining procedures for settlement of the adversary proceedings (bankruptcy lawsuits) and demand letters that I have issued on behalf of the Debtors.  A copy of the Order is posted in the Documents section herein.  It provides that the Debtors will have blanket authority to settle avoidable transfer claims of less than $30,000 without further notice or an order of the Court.  It proscribes three different procedures for settling gross claims of $30,000 or more depending on the case and circumstances.

October 1, 2007

Update October 1

Posted in the Documents section are the Statement of Financial Affairs and related schedules for CEP Holdings and CEP Trust that were filed with the Bankruptcy Court last week. The Schedule F for CEP Trust was posted previously on September 24, 2007.

September 24, 2007

Update September 24

The last month has been extremely busy. I have filed another 27 lawsuits on preference issues totaling $1.5 million and written 64 demand letters for the return of approximately $1.1 million. I am sure that when the deadlines pass on the demand letters on October 5 and October 12 that many more lawsuits will become necessary.

Posted in the Documents section is the Schedule F that I am submitting to the Bankruptcy Court. This is the official list of creditor claims superceding the 8/14/07 and the 8/29/07 lists previously posted. I will leave the 8/29/07 list on the board for your reference since it provides some of the detail for you claim amount. The 8/14/07 list I am deactivating. All future issues regarding what you may be owed must be compared to Schedule F. If the address shown is incorrect, make sure you advise me of the change in writing.

August 29, 2007

Updated Creditor List

Attached in the Documents section is a new “CEP Updated Creditor Listing” [292kb PDF] dated today.  This schedule adds a “Receiver Adjustment/Correction” column where we have adjusted for bounced checks, unprocessed ACH transfers and other failures to correctly post a cash transaction to the proper account.  Please review the list and see if it resolves an issue you may have had because distributions you requested appeared on your CEP Trust account but bounced or were never processed by the bank to your credit.

August 28, 2007

Hearing Regarding Discovery Motions

A hearing was held this morning before Bankruptcy Judge Massey on CEP's motion to immediately commence the discovery process in our lawsuits for the recovery of funds transferred to various parties.  [See the Motion in the Documents section]  The federal rules of civil procedure and local rules of the court state that discovery cannot commence until after (a) an answer has been filed, which must be filed within 30 days after the filing of the complaint and (b) a scheduling conference has been held, which must be held within 20 days after an answer is filed.  This means it could be a minimum of 50 days before we can serve discovery requests (to which parties have 30 days to respond, which would be about 80 days from the filing of the lawsuit) or take depositions of the defendants (or they of us).  We filed this motion to request a waiver of those rules in the two lawsuits against the insiders of the company (Reed, Kimbrell and their family members) and SureInvest and its principals, as well in the main bankruptcy case to apply to future lawsuits because we had not filed any other lawsuits at that time.  However, by the time the motion came on for hearing, we had filed another 35 lawsuits the previous week.

The Judge agreed to permit us to commence discovery immediately in the first two lawsuits, but said we could not get a blanket waiver that would cover all future lawsuits.  Instead, he said we had to file a similar motion in each lawsuit filed.  We will file such a motion this week in each of the 35 other lawsuits filed thus far, which will be heard in September.

August 23, 2007

Investor Lawsuits Filed, Discovery Hearing

I have filed 33 lawsuits in the Bankruptcy Court (two more to go) in this first round of recovery suits against investors.  We are pursuing all distributions to these defendants.  I am not attaching the complaints here due to volume, although I understand that some have probably been picked up off the docket and are being circulated about the forums.  This group includes Caroline, Bart and Heidi Strittmatter, Israel Lagares, Daniel May, Gary Schrier, Marcus Petrelli, Regina & Gary Johnson, Dustin Fennell, Thomas Hall, Maurice Usenbor, Max Gonzalez, Troy Winters, Pamela Anderson, Curtis Greek, E-Business (Alwine), Hobson Black, Wilfried Owatoye, Patricia Bruno, William Nugent, Skye Karls, Shad Foss, Wilmer Michael Wrenn, Bill Holcombe, Andrew Hockenbrock, Jevard Hitch, Brenda Bumgardner, Jace Wingard, Greg Collier, Jim Pratt, Denise Higgins, Howard C. Phillips, and Gareth Lodge.  This group received distributions in excess of $2.5 million with over $2.0 million of that amount appearing to be in excess of their investment.

There is a hearing scheduled for Tuesday morning, August 28, 2007 at 10:00 am to hear motions I’ve put forth to the Judge to expedite the discovery process related to these and other cases pending or to be filed.  [See Documents CEP #0032 and #0020].  “Discovery” is essentially the process by which both sides of the litigation endeavor to find out the facts.  This includes responses by both plaintiff and defendant to specific questions called interrogatories, the physical production of electronic and hardcopy documents or records, and questioning of parties under oath. 

August 17, 2007

First Interim Report of the Receiver

I have posted the First Interim Report of the Receiver issued to the U. S. District Court in Raleigh, NC on Wednesday.  Also, I've added some other Orders and documents from the Bankruptcy Court involving employment of the Receiver's attorneys and my firm, W. G. Hays & Associates, LLC.

August 15, 2007

Creditor List, etc.

Thank you for your emails regarding the Preliminary Creditor List dated 8/14/07. As many of you have pointed out, the ACH and check transactions in the last 30 days or so before my appearance on the scene are pretty murky. Probably three out of four emails I've received in the last 24 hours cited this problem. I know the bank bounced some checks issued to you that had been posted to your CEP Trust account. Some ACH batches were posted to the accounts but never processed by the bank. All that has to be cleaned up. Unfortunately, the bank accounts have never been reconciled, but we will be receiving the details from the bank next week that should enable us to start getting that done.

I called the List preliminary and put a date on it because it WILL be changing as more information becomes available. The List was posted yesterday in its present state because (a) I was surprised (my fault) by the claim form that the Bankruptcy Court attached to the notice sent to about 4,200 of you last week (b) I wanted you to be aware that we do have your account data, and (c) the fact is that there is no way that this case can afford to administer 4,000 claims. We must get the creditor list in pretty good shape before I have to file it formally with the Court in mid-September in the form of the "Schedule F" I discussed in the FAQ's. That way claims will only be necessary in order to deal with the exceptions. I expect I'll probably post at least two more updated "preliminary" lists before then.

Another key topic is when will distributions be made? -- realistically, not anytime soon and I presently cannot foresee any distributions this year. It's all subject to recovery from lawsuits filed in the last 10 days and more that will be filed in the next two or three weeks. Lawsuits can easily take over a year to resolve. Patience and determination will be required.

August 14, 2007

No Need to file Proof of Claim at this Time

You may have recently received a proof of claim form from the Clerk of the United States Bankruptcy Court along with the Notice of the filing of the bankruptcy cases and the Meeting of Creditors. You do not have to file a proof of claim at this time. No distributions will be made to creditors in the near future because I am in the process of trying to recover assets from which to make any distributions. Prior to any distributions being made to creditors, you will receive a separate notice containing the date by which you will have to file a proof of claim if you think it is necessary to do so (see below on whether it will be necessary to file a proof of claim). It may be many months before a notice of the deadline by which you must file a proof of claim is sent to you. That notice will provide you with the address to where and to whom you should send your proof of claim.

Will I ever need to file a proof of claim? You will not have to file a proof of claim if you agree with the amount of your claim as listed on the schedules to be filed by me with the Court. Please to see my other post dated 8/14/07 which refers to a creditor listing of the preliminary amount at which I will list your claim. This amount is subject to change as my investigation continues. After you receive a notice of the deadline by which you must file a proof of claim, you should check this list again to see if the proposed amount has changed. If you agree with the amount listed or are willing to accept the amount listed as the amount of your claim, you will not have to file a proof of claim. The amount listed is not the amount you will be paid, but rather the amount at which your claim will be allowed if you agree with or accept that amount. The amount that you will be paid will be based on the amount of assets recovered by me. Your claim, if allowed, will be paid the same percentage as all other similarly situated creditors. No similarly situated creditors will be favored over other similarly situated creditors (those having the same type of claim).

What if I chose to file a proof of claim? If you do chose to file a proof of claim, follow the instructions provided to you on the notice and claim form received from the Court. Please note, however, that you will not get paid more or sooner based on when you file a proof of claim, as long as it is filed before the deadline that the Court will establish at a later date. Also, if you file a proof of claim, please be advised that I reserve the right to object to the amount of your claim. At this point in time, I intend to object to any claim that is filed for an amount that is greater than the amount of money you invested in CEP minus whatever distributions you received. I also intend to object to any claim for interest or profits that may have been promised to you by CEP.

Should I attend the First Meeting of Creditors? If you received the notice mentioned above, it also includes information about the First Meeting of Creditors, which is being held at 1:00 p.m. on September 6, 2007 in Atlanta, Georgia at the Richard Russell Federal Building, Room 365. A copy of the notice is posted here [PDF, 152kb]. Your attendance at this meeting is not required, but you are certainly invited to attend. You will not get paid sooner or more if you attend. No money is paid to any creditor at the Meeting of Creditors. Your claim will not be allowed or disallowed based on whether or not you attend the First Meeting of Creditors. I do not anticipate requiring Trevor Reed or Clayton Kimbrell to attend. I will make a short presentation and will take questions.

August 14, 2007

Preliminary Creditor List

The biggest concern everyone has right now, very understandably, is whether they are on the list to get their money back. The big question buried in that statement is whether there will be any money to give back to you. I don't know the answer to that yet. We are continuing to draft lawsuits to recover funds in order to permit the return of some portion of your net cash investment.

Who is a creditor? At this time, my definition of a creditor is anyone who put more money into CEP Trust and/or the three CEP investment programs than they got back. Alternatively, if you got back more money from CEP than you put in, you are not considered a creditor. These definitions ultimately have to be approved by the Bankruptcy Court, so it is possible this could change.

In order to provide you the best information I have right now — and it very preliminary and it may change up or down before this is over — I have posted in the Documents section a “Preliminary CEP Creditor List - 8/14/07” for balances of $100 or more. This is a listing sorted by your CEP Trust account number showing only your account number and what I have calculated to be your net cash balance, but only if that cash balance is a positive $100.00 or more. That is, you are listed only if I calculate that you are a creditor. The cash balance I calculated includes E-Gold and Virtual Money funding and withdrawals, as well as bank wires, checks and ACH funding and withdrawals.

August 8, 2007

Complaint Filed Against Coastin88.com Contractors

I filed a lawsuit yesterday against SureInvest LLC and its principals, Michael Donaker, Kyle Herron and Tammy Dowell, seeking the return of approximately $1,753,000 transferred to them during 2007. A copy of the Complaint may be reviewed in the Documents section.

August 3, 2007

Creditor Notice Procedures: MONITOR THIS WEBSITE

A hearing was held in Court before Judge Massey yesterday approving the initial administrative motions of the Debtors (see Documents). Foremost among the motions discussed and approved were the procedures giving notice to creditor/investors of significant events in the Bankruptcy case going forward. The complete Order in this regard will be posted here when available next week.

In summary, the Judge ordered that a mailing go out by the Clerk of Court that includes (a) a notice of the commencement of the case and (b) a copy of the Order regarding notice procedures. The Notice Order cites that after this mailing, any communications requiring notice to ALL creditors will be handled through this website, not by mail. The 20 largest creditors will receive notice (copies) by email on most filings in the Court.

I am defining “creditors” who will receive this initial mailing to be all participants that CEP records indicate have a net positive cash balance as discussed in FAQ #5.

August 3, 2007

Lawsuit Filed Against Insiders

A lawsuit was filed in U. S. Bankruptcy Court in Atlanta yesterday for the recovery of transfers of CEP funds totaling approximately $1.5 million. The defendants named are Trevor Reed, Ginger Phillips Reed, Earl Reed, Clayton Kimbrell, Greg Kimbrell, Russell Phillips, Jessica Phillips, Chris Barany and Cliff Barany. A copy of the complaint can be reviewed in the Documents section.

August 1, 2007

FAQ Added, and More Filings

Please take note that a FAQ section has been added today in order to address the most common questions that many of you have been asking via email. Please read them carefully.

Also added today in the Documents section are several administrative filings (motions and notices) filed in the bankruptcy yesterday. You'll see a lot more legalese than you would like to deal with, but among other things these motions ask the Court to combine the two companies into one case for all practical purposes; asks for more time to file the schedules I discuss in the FAQ's, and establishes notice procedures. Once orders are issued by the Court in response to the motions, I'll post the order and remove most of the motions so we don't get too cluttered. Pay particular attention to the pdf "Motion for Order Shortening Notice and Expediting Hearing of First-day Motions."

If you have access to the governments Pacer reporting system online, you can follow the docket online using the case numbers I cited in the first post.

The Court will hold a hearing on these motions on Thursday, August 2, 2007 at 2:00 p.m. in Courtroom 1404, Richard B. Russell Federal Building, 75 Spring Street, S.W., Atlanta, Georgia 30303.

July 30, 2007

CEP ENTITIES PLACED IN BANKRUPTCY BY RECEIVER

On Friday, July 27, 2007, I filed voluntary chapter 11 bankruptcy petitions for ColonEndParenthesis Trust, LLC (aka CEP Trust) and CEP Holdings, Inc. in the U.S. Bankruptcy Court, Northern District of Georgia, Atlanta Division. CEP Holdings, Inc. was doing business as colonendparenthesis.net, Coastin88.com and CEPCoast.com. Judge Massey was assigned as the bankruptcy judge and the case numbers are 07-71810 for CEP Holdings, Inc. and 07-71813 for ColonEndParenthesis Trust, LLC.

This step was taken after interviews with the principals, consultation with the Securities and Exchange Commission, and after almost two weeks of examination of the transactional databases of CEP Trust and the three "investment" websites. The very preliminary findings to date indicate:

• Only the payment processor, CEP Trust, has a bank account. The currently identified accounts of CEP Trust combined hold less than $100,000.
• CEP Trust records indicate its obligations to "depositors" may approach $1 million.
• The funds invested in CEP.net and used to purchase Coastin88 and CEPCoast advertising packages may total several million dollars more beyond the CEP Trust balances. It is unclear what, if any, obligations these represent to the Debtors.
• There were significant transfers of funds to the principals, Trevor Reed and Clayton Kimbrell, as well as to their family, friends and sub-contractors.
• The principals have thus far been unable to identify where and how any CEP funds were invested outside the CEP programs in order to support the payouts being reported to CEP participants.

I believe the bankruptcy process will offer the most efficient means of recovery and distribution of recoveries to those impacted. Copies of the petitions filed are provided for your reference, which includes the schedules of the 20 largest creditors for each. A bankruptcy claim process will be established and forms for submitting your claim will be available on this website.

I cannot presently foresee circumstances under which CEP Trust, colonendparenthesis.net, Coastin88.com or CEPCoast.com will return to operations.

William F. Perkins, Receiver
July 30, 2007

SEC v. COLON END PARENTHESIS TRUST LLC, et al.

On July 9, 2007 the Securities and Exchange Commission (SEC) filed a complaint in the U. S. District Court (see link below) naming Clayton Kimbrell, Trevor Reed and certain Colon End Parenthesis entities as defendants in the matter. Mr. Reed and Mr. Kimbrell consented to the appointment of a receiver, the freezing of their assets, and on July 10, 2007, I was appointed receiver of the corporate entities (see link below).

The tasks of the Receiver include marshalling and liquidating the assets of the Receiver entities, asserting claims against third parties where appropriate, and making such distributions to creditors and/or investors as directed by the Court. This case is at a very preliminary stage, but I am proceeding as quickly as possbile to implement this order. The servers handling CEP Trust and related .com entities have been disconnected from the internet in order to preserve what may be the only viable records documenting the activity of the entities. We will be reviewing this data in order to trace funds, determine who is owed money, and to determine where to look for other assets. Because of the relationship with CEP Trust, Coastin88.com and CEPcoast.com, it was necessary to also disconnect those servers.

The Order requires me to make an interim report in not less than 45 days. In the meantime, this site will be used to communicate whatever information, documents, and events that can be made available. At sometime in the future, a claims filing process will be undertaken, and we will post the forms and details here in to assist in that process. But we do not presently know what assets there will be to distribute, if any. It is not presently possible to set a time frame for any distributions. We will add an FAQ section to this site as soon as possible to address the primary questions you may have.

Please use to contact me if needed, and I will respond as practical. Do not attach any files. Emails with attachments will be deleted and not read.

William F. Perkins
July 12, 2007