In Re Receiver
Filing
529
ORDER approving the within and foregoing Plan for Claims Administration and Distribution of Proceeds. Signed by Honorable Margaret B Seymour on 7/1/2011. (Attachments: # 1 Exhibit schedule of net loss amounts, Attachment A and Objection Form)(asni, ) Modified to edit text on 7/1/2011 (asni, ).
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION
IN RE: RECEIVER
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C/A No. 3:10-3141-MBS
PLAN FOR CLAIMS ADMINISTRATION AND DISTRIBUTION OF PROCEEDS
The provisions of this Plan shall govern and control the resolution of the Claims of
Depositors and Creditors of The Three Hebrew Boys (“3HB”) and their related entities, especially
Capital Consortium Group (“CCG”), as well as distribution of the Receiver Estate. These Claims
arise from the operation of an illegal Ponzi scheme. Any and all objections by any person affected
herein must be submitted and postmarked by August 31, 2011. A hearing on any timely but
unresolved objections is set for September 21, 2011. Only unresolved objections properly submitted
by August 31, 2011 will be heard at the September 21, 2011 hearing. The Receiver intends to make
an initial distribution of $19 million to those Claimants determined to be eligible for an initial
distribution. A second, much smaller distribution will occur in the future. This Plan adopts the
Rising Tide theory of distribution which will return more money to Claimants who never received
money or other benefits from the 3HB.
SECTION 1: DEFINITIONS
Certain terms are defined in the substantive provision of this Plan. The following terms, as
used throughout the Plan, are defined as follows:
RECEIVER: Beattie B. Ashmore, Esquire.
RECEIVER TEAM: Beattie B. Ashmore, Esquire and his associated staff including The
Tollison Law Firm, P.A.
3HB or THE THREE HEBREW BOYS: Tony Pough, Joseph Brunson and Timothy
McQueen doing business under the following names: Three Hebrew Boys, LLC; Capital
Consortium Group, LLC; Brunson Outreach; Daniel Development Group, LLC; Wotteth Outreach
Ministries; Vision Financial Service; Faith Ministries; Warrior Express; TMS Family Trust; Purpose
Driven, LLC; Tri-Warrior Transit, LLC; Tri-Transit Logistics, LLC; KMF, Inc.; Vision Outreach;
M&M Holdings; Meshak Holdings; Multiplex Educational Ministries; Wealth Creation and
Prosperity Forum; Saint Peter and Paul, LLC; Free Gospel Church of our Lord; Hester Services;
Ernest Hester, individually or d/b/a Hester Services; PMB; Beauty Extraordinaire; Ernestine Green;
Brenda Irizarry; Dolly Bullock; and Heritage CTL Corp. including the subsidiaries, successors and
assigns of the foregoing.
IR or INDEPENDENT REPRESENTATIVE: As part of the Ponzi scheme, the 3HB
utilized Independent Representatives or IRs to recruit individuals to invest in a system of
“programs” guaranteeing such results as the payoff of mortgages, credit cards, and car loans as well
as highly profitable short and long term investments. In addition to payoffs received through
participation in a “program,” the IRs profited from their involvement in the scheme through the
award of IR fees.
DEPOSITOR: Any known person or entity that made a deposit in a program (individual
or joint) offered by the 3HB through CCG.
POC or COURT-APPROVED PROOF OF CLAIM FORM:
The Proof of Claim form
approved by the United States District Court for submitting a claim to the Receiver as filed on April
15, 2010 and received by the Receiver, whether timely or after the August 16, 2010 deadline, that
indicates a Depositor’s intent to claim money from the Receiver Estate.
UNTIMELY POC: A POC postmarked after the Court-imposed August 16, 2010 deadline
for submission.
CLAIMANT: Someone who has submitted a POC to the Receiver, whether individually
or jointly.
CLAIM: That which is generated from submitting a POC to the Receiver and has an
accompanying Claimant number.
COURT: The United States District Court for the District of South Carolina, Columbia
Division, the Honorable Margaret B. Seymour, presiding.
PLAN: This Plan for Claims Administration and Distribution of Proceeds.
RECEIVER ESTATE: All money and assets that have been or will be seized and/or
acquired by the Receiver and are in the custody and control of the Receiver.
RECEIVERSHIP ORDERS: The Orders appointing the Receiver entered on September
5, 2007, superseded on October 10, 2008, and supplemented on April 15, 2010 and January 18,
2011.
ACTUAL DEPOSIT: The total principal amount of money deposited into a program or
programs by a Claimant (whether as an individual or jointly with another) that has been verified by
the Receiver.
ACTUAL RETURN: The amount of money from 3HB/CCG, if any, paid to or for the
benefit of a Claimant that has been verified by the Receiver. The Actual Return includes any and
all payments, including but not limited to, program payoffs, long-term residual payments, IR fees,
gifts, early payouts, or otherwise.
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NET LOSS: The calculated difference between the Actual Deposit and the Actual Return.
THIS IS NOT THE AMOUNT YOU WILL RECEIVE. The amount of distribution for each
claim will be less than the Net Loss.
SCHEDULE OF NET LOSS AMOUNTS: Schedule attached to the Plan that lists the
Receiver’s calculations, determinations and/or recommendations for each Claim. This Schedule will
NOT list the amount you will receive in the initial distribution.
CREDITORS:
All potential creditors of the 3HB.
OBJECTION FORM: The form used by a Claimant to submit objections with regard to
the Schedule of Net Loss Amounts and the information contained therein.
SECTION 2: CLAIMS ADMINISTRATION
Section 2.1:
Notice
Depositors
On or about April 15, 2010, the Receiver mailed a Court Approved Proof of Claim form to
all known Depositors. The Receiver also posted the Court Approved Proof of Claim form, and
published notice of the Proof of Claim form in the Stars and Stripes on April 20, 23, 27 and 30, 2010
as well as May 4, 7, and 21, 2010 and in The State, The Fayetteville Observer, and USA Today the
weeks of April 18, 25, and May 2, 2010.
Additionally, the Plan is on the Receiver’s website: www.3hbreceiver.com. These
notifications, coupled with the various communications provided for in the Plan, are reasonable and
sufficient notice to all persons and entities regarding the Receiver’s claims administration and funds
distribution processes. Any and all written notices or other communications shall be delivered by
First Class U.S. Mail to the address of record of all Claimants. Delivery shall be deemed effective
three days after the date of mailing. Claimants are responsible for keeping the Receiver
informed as to their current mailing address.
Creditors
In addition, this Plan will be published to all known or potential Creditors. All Creditors
have until August 31, 2011 to submit a claim to the Receiver, along with supporting documentation.
Section 2.2:
Submission of Claims
The Receiver has concluded the process of reviewing the POCs. The deadline for
submission was August 16, 2010 and the Receiver received approximately 4000 timely submitted
POCs. It was the Claimants’ responsibility to make sure that their POC was properly and timely
submitted and that all required documentation was provided. As part of the review process, the
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Receiver Team sent approximately 1000 deficiency letters to Claimants who submitted inaccurate
or incomplete POCs. Any Claim that was either fraudulent, failed to conform to the requirements
set forth in the POC, or failed to cure noted deficiencies may be recommended for disallowance.
Section 2.3:
Untimely POCs
The Court set a bar date of August 16, 2010 for submission of a properly executed POC to
the Receiver. Despite this clear deadline, the Receiver has received approximately 200 Untimely
POCs and that number continues to rise. As stated in the April 15, 2010 letter to investors attached
to the POC, for “good cause” shown, the Court may allow POCs submitted after the August 16,
2010 deadline to be considered and request that the Receiver process these POCs. The Schedule of
Net Loss Amounts specifies those POCs that were untimely. Any Claimant whose POC is identified
as untimely MUST provide “good cause” in writing by August 31, 2011, by submitting an Objection
Form as set forth in Section 3 below. Objection Forms purporting to state “good cause” for an
Untimely POC submitted to the Receiver will subsequently be filed by the Receiver with the Court.
No Untimely POC will be considered by the Receiver unless the United States District Court
approves and so directs.
Section 2.4:
Claims Analysis
The Receiver and/or members of the Receiver Team have reviewed and analyzed each POC
to determine its validity and correctness. The Receiver Team used the information provided by the
Claimant and other information available to the Receiver Team, including, but not limited to, bank
records and 3HB records.
The Schedule of Net Loss Amounts contains the Receiver’s recommendations regarding the
Name as it will Appear on Check, the Actual Deposit, the Actual Return and resulting Net Loss
relevant to each Claim. The recommendations entered into the Schedule of Net Loss Amounts are
listed alphabetically with the associated claim number. These amounts do not reflect the actual
amount a Claimant will receive for each Claim.
In addition, there are a number of POCs for which the Receiver is recommending
disallowance based on various legal and/or equitable reasons. The Claims for which the Receiver
is recommending disallowance and the reason for such recommendations can be determined by
referencing the Schedule of Net Loss Amounts.
Additionally, POCs that have been identified as untimely can be determined by referencing
the Schedule of Net Loss Amounts.
After the time for submitting written objections has passed on August 31, 2011, and a final
determination is made by the Court at or after a hearing scheduled for September 21, 2011 with
regard to information set forth in the Schedule of Net Loss Amounts, the Receiver will calculate the
amount of initial distribution for each Claim.
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SECTION 3: RESOLUTION OF OBJECTIONS
If the Claimant AGREES with the information set forth in the Schedule of Net Loss
Amounts, NO FURTHER ACTION IS REQUIRED BY THE CLAIMANT.
If a Claimant DISAGREES with any of the following:
(1)
(2)
(3)
(4)
the Name as it Appears on Check,
the Actual Deposit,
the Actual Return, and/or
the recommendation that a POC be disallowed for any reason,
the remaining provisions of Section 3 shall govern resolution of the dispute.
In addition, all Claimants whose POCs were untimely and would like to have the United
States District Court allow their POC to be considered by the Receiver must proceed in accordance
with the remaining provisions of Section 3.
Section 3.1:
Objection Form
Along with the Plan, each Claimant will receive an “Objection Form” that shall be completed
by anyone (including those whose POCs have been identified as untimely and those Claimants for
whom the Receiver is recommending disallowance) objecting to the information set forth in the
Schedule of Net Loss Amounts, including the Name as it Appears on Check, the Actual Deposit,
and/or the Actual Return as well as the Receiver’s recommendation for disallowance of a POC. A
separate Objection Form must be submitted for each Claim for which there is an objection.
Additionally, all Claimants whose POCs were untimely MUST submit an Objection Form
indicating “good cause.” Failure to submit an Objection Form will result in disallowance of an
Untimely POC and waives any further objection to such disallowance.
The Objection Form will also be available on the Receiver’s website, www.3hbreceiver.com.
Section 3.2
Submission of Objection Form
The Objection Form, along with all required supporting documentation shall be mailed to:
Beattie B. Ashmore, Receiver 3HB
PO Box 9199
Greenville, SC 29604
Attn: Claim Dispute
Only Objection Forms sent to the above address will be considered. Objection Forms should
not be filed with the Court, nor sent to The Tollison Law Firm, The Law Office of Beattie B.
Ashmore, or the United States Attorneys Office.
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The Objection Form must be postmarked by August 31, 2011. Failure to timely submit an
Objection Form shall terminate any right to object to or otherwise contest the information set forth
in the attached Schedule of Net Loss Amounts.
All Objection Forms that are not resolved prior to the hearing will be filed with the Court
by the Receiver for consideration and adjudication at or after the hearing scheduled on September
21, 2011.
Section 3.3
Resolution of Objections by the Court
Any Claimant whose Objection Form cannot be resolved by agreement with the Receiver
prior to the September 21, 2011 hearing will be heard and the dispute decided by the Court at or
immediately following the hearing. Only timely submitted Objection Forms will be considered.
As to unresolved Objection Forms, failure to appear at the September 21, 2011 hearing is a waiver
of any objections including those to the attached Schedule of Net Loss Amounts. The Court’s
decision regarding each Objection Form shall be final.
Additionally, as noted above, any Creditor who fails to submit a claim and attend Court on
September 21, 2011 waives any claims to the Receiver Estate.
Section 3.4
Notice Regarding Resolution of Objections Forms and Related
Proceedings
Anyone who has submitted an Objection Form shall be entitled to notice only with respect
to the adjudication of that particular Objection Form and shall not necessarily be entitled to notice
of any other proceedings related to the action.
SECTION 4 – DISTRIBUTION
Section 4.1
Approval of Claims by the Court
Within 20 business days after the final determination by the Court with regard to all
unresolved Objection Forms in accordance with Section 3 above, the Receiver shall file with the
Court an Amended Schedule of Net Loss Amounts and Initial Distribution Amounts. All allowed
Creditor claims will also be included in the Amended Schedule of Net Loss Amounts and Initial
Distribution Amounts. This Amended Schedule of Net Loss Amounts and Initial Distribution
Amounts will set forth the Court’s final determination of Actual Deposit, Actual Return and
resulting Net Loss as well as a final determination with regard to the allowance or disallowance of
POCs for legal and/or equitable reasons and the allowance or disallowance of Untimely POCs. In
addition, based upon the method of distribution set forth below, a calculation will be made and an
amount will be provided as to the amount of the initial distribution for each allowed Claim.
Subsequently, a final distribution will be made in this same manner.
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Section 4.2
Priority and Payment of Claims and Other Expenses.
Claims will be prioritized and paid as follows:
(a)
Administrative Expenses. In accordance with the terms of the Receivership Orders,
the Receiver has paid and will continue to pay expenses associated with the administration of the
Receiver Estate. These expenses include, but are not necessarily limited to, professional fees and
expenses, which have been and will continue to be subject to Court approval. The Receiver will
establish as a reasonable reserve an amount necessary to pay future professional fees and expenses
to be incurred in managing and liquidating assets, bringing and defending lawsuits and appeals,
recovery of assets, conducting depositions and other discovery, filing of tax returns, review and
analysis of additional financial documents and records and concluding the activities in this
Receivership.
(b)
Tax Liabilities. To the extent there are any outstanding and published tax liabilities,
the Receiver will reserve enough money from the initial distribution to pay any tax liabilities.
(c)
Claims of Depositors and Unsecured Creditors. Claims of Depositors and
unsecured Creditors are general unsecured claims against the Receiver Estate and shall be paid with
equal priority. The funds in the Receiver Estate are insufficient to pay these claims in full. The
3HB spent a substantial amount of the $80 million through lavish lifestyles and the promotion of
the Ponzi scheme, which included making mortgage payments, car payments, and other distributions
to Depositors and third parties. As such, Claims will be paid based upon the distribution method
set forth below.
Section 4.3
Distribution
(a)
As soon as reasonably practical after the Court’s approval of the Amended Schedule
of Net Loss Amounts and Initial Distribution Amounts, the Receiver will make distributions in
accordance with this Plan.
(b)
The amount to be paid to each Claimant will be calculated using the “Rising Tide”
methodology, which is more fully explained below. In sum, the amounts of distribution shall be
determined using the following formula:
(Amount to Distribute) DIVIDED BY (Total Actual Deposits made by all allowed
Claimants) MULTIPLIED BY (the Actual Deposit associated with each Claim)
MINUS (Actual Return associated with each Claim).
The Receiver will make the initial distribution and at least one supplemental distribution
(with approval to make the supplemental distribution a “final” distribution), as set forth below. For
each distribution, the above formula will be applied as many times as needed until all of the
“Amount to Distribute” is utilized. This method of distribution treats all payments defined within
the term Actual Return as if they came from the Receiver Estate in a distribution.
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All Claimants who timely submitted a POC and have no Actual Return and for whom
the Receiver has not recommended disallowance based on other legal or equitable reasons will
receive a payment from the Receiver Estate in the initial distribution.
Furthermore, if the Actual Return is equal to or greater than the percentage of the
Actual Deposit being paid under this calculation, the Claimant will receive no payment from
the Receiver Estate. In other words, if you have already received through 3HB program
payoffs, long-term residual payments, or otherwise an amount equal to or greater than the
percentage of the Actual Deposit being paid to Claimants, you will likely receive no
distribution from the Receiver Estate.
For example:
EXAMPLE 1:
Assuming hypothetically there is $40,000 for distribution in the initial
distribution and there are two Claimants, Claimant A and Claimant B who each
deposited $100,000. In this case, the multiplier would be $40,000/$200,000 and
would equal 20%. As such, 20% of the Actual Deposit for each Claimant is $20,000.
Assume also that Claimant A received an Actual Return of $20,000 from the
Ponzi scheme and Claimant B received no Actual Return. Because Claimant A
received an Actual Return of $20,000, he will get nothing in the initial distribution.
Claimant B, because he received no Actual Return, will receive $20,000.
In a subsequent distribution where there is $2,000 to distribute, the multiplier
would be $2,000/$200,000 and would equal 1%. In the subsequent distribution, each
Claimant would receive $1,000. In total, Claimant A would receive $1,000 from the
Receiver Estate from the subsequent distribution, which when combined with
Claimant A’s Actual Return would equal a combined return of $21,000. Claimant
B would also receive $21,000. However, Claimant B’s total return would come
solely from the Receiver Estate through the initial and subsequent distributions.
While the total amount of distribution from the Receiver Estate differed for
each Claimant, each Claimant ultimately received the same percentage (21%) of
their Actual Deposit.
EXAMPLE 2:
Assuming hypothetically there is $40,000 for distribution in the initial
distribution and there are two Claimants. Claimant A deposited $50,000.00 and
Claimant B deposited $150,000.00. The multiplier would be $40,000/$200,000 and
would equal 20%. In this case, 20% of the Actual Deposit for Claimant A is $10,000
and for Claimant B is $30,000.
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Assume also that Claimant A received an Actual Return of $10,000 from the
Ponzi scheme and Claimant B received no Actual Return. Because Claimant A
received an Actual Return of $10,000, he will get nothing in the initial distribution.
Claimant B, because he received no Actual Return, will receive $30,000.
In a subsequent distribution where there is $2,000 to distribute, the multiplier
would be $2,000/$200,000 and would equal 1%. In the subsequent distribution,
Claimant A would receive $500.00 and Claimant B would receive $1,500.00. In
total, Claimant A would receive $500.00 from the Receiver’s Estate in the
subsequent distribution, which when combined with Claimant A’s Actual Return
would equal a combined return of $10,500.00. Claimant B would receive
$31,500.00. However, Claimant B’s total return would come solely from the
Receiver Estate through the initial and subsequent distributions.
While the total amount of distribution from the Receiver Estate differed for each Claimant,
each Claimant ultimately received the same percentage (21%) of their Actual Deposit.
(c)
Subsequently, the Receiver will make a final distribution in accordance with the
terms of this Plan upon discovery and/or liquidation of additional assets and the conclusion of the
Receivership. The Receiver is currently pursuing IRs and others who benefitted financially from
the 3HB and continues to search for other assets hidden by the 3HB and/or their associates.
Section 4.4
Method of Payment
Distribution payment for each Claim shall be made from the Receiver Estate in the form of
a check made payable to the Claimant(s) as it is listed on the Amended Schedule of Net Loss
Amounts and Initial Distribution Amounts approved by the Court.
SECTION 5-OTHER RELATED MATTERS
Section 5.1:
Acceptance of Payment Effects Release
Upon acceptance of any Distribution payment from the Receiver, any and all asserted and
unasserted claims, demands, rights, and causes of action of any nature that a Claimant may have
against the Receiver Estate, the Receiver, and/or any member of the Receiver Team shall be deemed
to be discharged, released, extinguished, or satisfied. Notwithstanding the foregoing, nothing in this
Plan is intended to nor should be construed to release or limit any claims against or obligations of
3HB or any other person or entity other than the Receiver and the members of the Receiver Team.
Section 5.2:
Limitation of Receiver’s Liability for Payments
Without any limitation to the description of limitation of liability afforded to the Receiver
and his team in the Court Orders, neither the Receiver nor any member of the Receiver Team shall
have any liability to any person or entity for any action taken in good faith in connection with or
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related to the administration of the Receiver Estate, including the implementation of this Plan. In
the event that such a claim or cause of action is asserted against the Receiver or any member of the
Receiver Team, the Receiver or Receiver Team member shall be entitled to a defense by counsel
of his or her choice, payable as any other Administrative Expense herein, even if willful misconduct
is alleged.
Section 5.3:
Checks Not Cashed
Any check issued to a non-active military Claimant that is not cashed within 120 days of the
date of the check shall be deemed void, and the Claim pursuant to which check was issued
automatically shall be deemed to have been satisfied. Any check issued to an active military
Claimant that is not cashed within 240 days of the date of the check shall be deemed void, and the
Claim pursuant to which check was issued automatically shall be deemed to have been satisfied.
With respect to any such voided check, the intended recipient shall have no right or claim of any
kind against the Receiver or the Receiver Estate, including any claim for the amount of the intended
distribution or any future distribution. The Receiver will make a reasonable inquiry regarding any
uncashed checks.
Section 5.4:
Final Report
As soon as reasonably practical after making the final Distribution in accordance with
Section 4, above, the Receiver shall file with the Court, a Final Report providing the following
information:
(a)
The activities engaged in or to be undertaken in winding-up the Receiver Estate;
(b)
A financial statement for the Receiver Estate indicating the receipt and disbursement
of money by the Receiver during the course of the Receivership; and
(c)
The Receiver’s proposal regarding the use of any monies or other assets remaining
in the Receiver’s Estate.
Section 5.5:
Receivership Orders Remain in Force and Effect
This Plan in no way should be deemed to modify, amend, or otherwise limit the Receiver’s
ability and authority provided for in the Receivership Orders, including the continued use and
administration of the assets of the Receiver Estate.
Having reviewed and considered the within and foregoing Plan in light of the facts and
circumstances related to the subject receivership,
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IT IS HEREBY ORDERED that within the foregoing Plan for Claims Administration and
Distribution of Proceeds is APPROVED.
IT IS SO ORDERED this 1st day of July, 2011.
/s/ Margaret B. Seymour
United States District Judge
Columbia, South Carolina
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