A former Southern California business consultant received a four-month prison sentence for conspiring to obstruct a Securities and Exchange Commission investigation of financial advisor Reed E. Slatkin’s $593-million investment scam, federal prosecutors said Tuesday.

Daniel W. Jacobs helped stall the SEC for more than a year by pretending to represent a Swiss brokerage holding hundreds of millions of dollars in funds from Slatkin investors, according to his plea agreement with the government.

Jacobs, 63, who pleaded guilty and cooperated extensively with prosecutors, is expected to serve his time near his Michigan home, said Assistant U.S. Atty. Michael Wilner.

At Jacobs’ sentencing Monday in Los Angeles, U.S. District Judge Margaret Morrow also ordered him to repay $450,000 to victims of Slatkin’s schemes.

Also, AP story here:

Daniel W. Jacobs, 63, of Burbank pleaded guilty three years ago after agreeing to cooperate with federal prosecutors in their case against Slatkin.

Authorities say Jacobs lied to the Securities and Exchange Commission and provided false documents so victims’ investment statements in Slatkin’s Ponzi scheme would seem legitimate. He also acknowledged fabricating account statements and setting up false phone numbers to make it seem like a Swiss firm held hundreds of millions of dollars in investor money.

In her plea agreement, Janu admitted that, at Slatkin’s direction, she created and revised account statements and other documents that supported Slatkin’s claim that he held over $500 million in securities in brokerage accounts at the fictitious entity "NAA Financial" of Zurich, Switzerland. Janu knew these documents were to be submitted to the SEC. Janu created these bogus statements on her computer and printed the NAA account statements on blank, European-sized stationary provided to her by Slatkin that contained NAA’s name and purported Swiss address. Slatkin then instructed Janu to erase the account statements from her computer.

Additional coverage can be found at stockwatch.

In a memo presented at a hearing Monday before Bankruptcy Judge Robin Riblet in Santa Barbara, Neilson said the 20-cent reckoning was made at a stage of the case when "it was very difficult to estimate with any degree of reasonable accuracy possible payout percentages."

The main reason for the uncertainty was the fact that only some of Slatkin’s clients were paid back more than they invested — a common occurrence in such so-called Ponzi schemes, which use funds from later investors to pay phony profits or dividends to the earliest participants.

Neilson sued 430 of these so-called "net debtors," seeking the return of anything they received in excess of the amount they put in.

So far, 144 of those suits have been settled — typically at about 80 cents on the dollar — for a total of $31.8 million, most of it to be collected in payments over the next two or three years. For example, tobacco litigator John Coale and his wife, legal commentator Greta Van Susteren, agreed to return about $700,000 of the $939,000 they netted.

Suits seeking an additional $138 million are pending against other defendants, including actor Peter Coyote, who made $943,000.

If those defendants "were to simply find it within their hearts and wallets to pay the $138 million without any further litigation," Neilson wrote, it would yield a return to the creditors of 84% of their losses.

But Neilson called that scenario "highly unlikely." A "more realistic approach," according to his memo, would be to assume that 35% of the $138 million can be collected by spending an additional $7 million on litigation — a formula that would bring the recovery to about 40% of the losses.

In a letter Wednesday to the office of the U.S. trustee in Los Angeles, the investors complained that 10 legal and accounting firms had submitted $19 million in bills as of June. Meanwhile, unsecured creditors in Slatkin’s bankruptcy have received only $12 million so far.

"We are petitioning you to step in and take action to stop the runaway fees in this case," the investors wrote. "Many of us are middle-income people, who lost substantial sums to Slatkin."

Slatkin’s attorney, Gerald Boltz, a former Securities and Exchange Commission administrator, should have discovered the pyramid scheme in early 2000, shortly after he was hired, Neilson said. But Slatkin’s scheme wasn’t spotted until it began to come apart shortly before he filed for Chapter 11 bankruptcy protection in May 2001. "Bryan Cave did not recognize possible signs that Slatkin was running a Ponzi scheme, or at the very least defrauding hundreds of investors," Neilson said in a court filing.

Boltz and other Bryan Cave officials declined to comment.

Under the terms of a tentative settlement filed last week, the law firm does not admit to wrongdoing. But it will pay $650,000 to Slatkin’s trust to be distributed to creditors, said R. Alexander Pilmer, Neilson’s attorney.

I am speaking not just for myself and my family, but for hundreds of smaller investors who can’t afford to come here and speak, who may have in fact been damaged far more in relative terms than I have been, whose collective suffering is monumental. I have commiserated with many of these victims, and they want and deserve justice. Hundreds of lives have been permanently disfigured – not just the victims but their family members and those connected to or dependent on them. The domino effect of misery is too extensive to be measured by just the $240 million lost by them.

Slatkin’s stalling enabled one of his oldest buddies Tony Hitchman, who was on his monthly payroll, who owes the Slatkin estate millions of dollars and may have known of the Ponzi from the very beginning, to flee the country just ahead of a subpoena. Slatkin still won’t answer questions about his hundreds of overseas phone calls, his foreign bank accounts, or his and Ron Rakow’s many journeys abroad. He still hasn’t come clean about the full extent of the gold coins and silver bullion, the crated art, and the staggering amounts of cash the FBI found when they raided his and Rakow’s homes. We strongly suspect he has stashed away millions, which will be waiting for him when he gets out of prison. Had Slatkin been as proactively helpful to us as he was proactively a criminal -- in the spirit of the plea agreement -- millions in legal fees could have been saved and distributed to victims. Instead, Slatkin and his attorneys are floating a smokescreen of theories in order to obscure reality, from saying that Slatkin made some of us offsetting money at EarthLink to claiming that he was brainwashed by the Church of Scientology. With all due respect, the only brainwashing that took place was Slatkin brainwashing his investors and the SEC.

To understand how far Reed Slatkin has come, know that even some of the people who knew him, who invested with him, and who had him over to their homes, did not recognize him seated at the defense table. But then, Reed hardly looked at the Los Angeles courtroom audience of approximately 40 who filled every available seat and even stood at the back, at least at first. Many were the very people he had both befriended and defrauded. Perhaps it was his significant bald spot; did he used to have a toupee? Wearing a green windbreaker, grey t-shirt, blue pants, and white slippers, Reed’s prison garb was not the type of clothing seen at Hope Ranch. Neither were the handcuffs, tied to a chain around his waist, nor the leg cuffs, that he wore the entire time of the four-hour proceeding, but they were pretty much not noticed by many in the courtroom until he rose to speak.

[ ... ]
Investors who had criticized prosecutors’ recommendation for an 11-year sentence praised the judge for coming down heavily on Slatkin, 54, who lived on a four-acre estate near Santa Barbara, accumulated an extensive collection of art and spent lavishly on cars and airplanes. But one Slatkin victim, former venture capitalist John Poitras, said the 14-year sentence was too little for someone who cost his purported friends their retirement funds, college savings and proceeds from sales of businesses.

The sentence was "a slap on both wrists" and "an insult to the victims," said Poitras, who lost $15 million. "The system is still broken."

A lawyer for the Church of Scientology praised the judge, saying she "saw right through" Slatkin’s claims about Scientologists. "The church had nothing to do with the fact that he lied, cheated and stole," the lawyer, David Schindler, said after the hearing. Slatkin’s fraudulent financial empire lasted 15 years, dissolving into bankruptcy proceedings in May 2001, leaving investors with a loss prosecutors set at $240 million. Taken into custody in April 2002, he pleaded guilty to 15 counts of fraud, conspiracy and money laundering. [ ... ]

[ ... ]
U.S. District Judge Margaret M. Morrow rejected defense claims that Mr. Slatkin had kept his fraud going for 15 years because of his strong beliefs in - and fear of - the Church of Scientology, saying that she wasn’t convinced he acted under such duress.

"There is no evidence the church urged the defendant to engage in this conduct," she said from the bench, moments before handing down a sentence more than double the 6 1/2-year term urged by Mr. Slatkin’s attorneys. It is three years longer than the sentence recommended by Assistant U.S. Attorney Steven Olson, for what was one of the biggest Ponzi schemes in U.S. history.

"The harm is immense," Judge Morrow noted. "Innumerable lives have been damaged or destroyed. He even cajoled people with fake illnesses to get them to invest," all the while living a "lavish lifestyle" filled with Lear jets, luxury cars, a beautiful home and expensive country-club memberships.
[ ... ]

During more than 15 years of fraud that cost his investors $240 million, Reed E. Slatkin seemed as much trusted friend as money manager. He schmoozed clients with tips on how to landscape their estates, attended funerals of their family members and all the while offered assurances that he would protect their college and retirement funds. His victims have asked to tell some of those stories today at Slatkin’s sentencing hearing in Los Angeles, hoping to persuade U.S. District Judge Margaret M. Morrow to throw the book at the former Santa Barbara financial advisor.

Slatkin, who had a number of celebrity and high-profile clients, had portrayed himself as a shrewd manager whose investments were outstripping the market, but prosecutors said he was actually running a Ponzi scheme. His attorneys blamed much of his behavior on the influence of the Church of Scientology, of which he was a member and from where many of his victims came. ``There is no question that the hold the Church had on Mr. Slatkin was significant,’’ lawyer Brian Sun told the court. ``It took us a while to de-program Mr. Slatkin.’’ But an attorney for the Church told Reuters that Slatkin’s claims, and those of his lawyers, were all a ruse designed to draw attention away from his crimes. ``We were pleased the judge saw through it,’’ said David Schindler, an attorney from the firm of Latham & Watkins who represents the Church. ``It was shameful of (Slatkin). He sold the psychiatrists a bill of goods.’’

Slatkin’s attorneys claimed he was influenced by the Church of Scientology, from which he has been ousted. His attorneys said investors who did receive returns donated between $25 million and $50 million to the church, an arrangement Slatkin was afraid to end.
David Schindler, an attorney for the Church of Scientology, was present for the sentencing. He said later the comments were outrageous.
The judge noted that during most of the time Slatkin was allegedly in fear, he lived a lavish lifestyle.

Slatkinfraud.com would like to apologize for the recent confusion surrounding the date on which Reed Slatkin will appear before Judge Margaret Morrow for sentencing.

In the last week, several sources have contacted us to let us know that the hearing will take place on Tuesday, September 2 at 9:30 A.M.

However, the docket report for Judge Morrow’s court shows the hearing scheduled for Wednesday, September 3, 2003:

8/18/03 28 MINUTES OF IN CHAMBERS HEARING held before Judge Margaret
M. Morrow as to Reed E Slatkin: Continuing sentence
hearing for 9:30 9/3/03 for Reed E Slatkin. C/R: None. (step)
[Entry date 08/25/03]

It is very possible that the later date is simply a typographical error on the court webpage, and we will do our best to clarify this question as quickly as possible, so that those who are interested in dropping by the courtroom to watch justice take place will be able to do so.

While attempting to determine the exact date of next week’s hearing, we also noticed that several of Slatkin’s victims have filed letters with the court in advance of sentencing, including his fellow Scientologists, Charles Borom and Charles Ohl:

8/27/03 29 LETTER re defendant sentence filed as to Reed E Slatkin by
Terry Johnston (ca) [Entry date 08/28/03]

8/27/03 30 LETTER Re: Sentencing filed as to Reed E Slatkin by Charles
Borom (ca) [Entry date 08/28/03]

8/27/03 31 LETTER Re: Sentencing filed as to Reed E Slatkin by Charles
N. Ohl (ca) [Entry date 08/28/03]

Given the rumour that Slatkin will attempt to dodge a heavy sentence by blaming Scientology "brainwashing", we are, of course, most curious as to how his (former?) fellow Scientologists will react to this particular legal dodge.

A correspondent to info@slatkinfraud.com (anonymous, naturally) tells us that Reed may, indeed, lay the blame on Scientology brainwashing at next week’s sentencing hearing, and plead for mercy on the grounds of mental illness.

If this sounds too fantastic for Slatkin-watchers, we offer this entry in the docket report from the court itself:

8/11/03 23 ORDER filed by Judge Margaret M. Morrow as to Reed E
Slatkin: granting ex parte application for order permitting
filing under seal of (1) Sentencing Memorandum and Exhibits
of Defendant Reed e. Slatkin; and (2) Report of Shelia
Balkan, PH.D. and Exhibits [22-1] (cc: all counsel) (roz)
[Entry date 08/12/03]

Note the report from Sheila Balkan, a Santa Monica criminologist and private investigator who has authored several widely-cited papers on criminal behaviour who, in 2001, was touted to be the "real-life" model for a planned NBC crime drama about a female criminologist. Will her next role be as apologist for Reed Slatkin?

Since the filing is under seal, we’ll just have to wait until September 3 to find out, but our correspondent suggests that Slatkin’s attorneys are pushing for a 3-5 year sentence - far less than the double digits initially sought by the state. Even if he did throw himself on the mercy of the court with a "Scientology made me do it" defence, it’s likely that a such a light sentence would satisfy the hundreds of bilked investors who want to see Slatkin due hard time for his crimes.

But just how "hard" is the year and a half of jail time that Slatkin has served so far? Our sources say that far from pining for the fresh air and unrestricted privileges of his erstwhile Hope Ranch estate, Slatkin is actually enjoying his time in prison, morphing into a real-life Andy Dufresne. We hear the inveterate schmoozer is not only winning friends and influencing people within the convict population, but is actually giving them investment advice - advice the prison guards are heeding as well!

In other news, we’re told that Mary Jo Slatkin, the embattled soon-to-be-ex Ponzi spouse, has resurfaced, and is seeking comfort - both emotional and financial - from her former friends, many of whom were victimized by her husband’s scheme.

According to witnesses who have heard her tale of woe, Mary Jo claims that the day her husband turned himself into authorities, he blithely informed her that he was "just going to LA for the day." Of course, he’s been in jail ever since. But instead of tying yellow ribbons round an old oak tree, the embattled Mary Jo, who is reportedly facing six figure liens courtesy of the IRS, is headed off to divorce court to rid herself of her troublesome spouse.

Our source also reveals that up to this point, the Slatkin children have sided with their father in the familial dispute, who has assured them that the whole matter is just a big misunderstanding that he will explain later. It’s not clear whether the Mess’rs Slatkin, who were both submitted to Scientology auditing performed by Slatkin co-conspirator Dan Jacobs, are equally serene with their father’s reported about face on his once beloved faith.

In a mass email sent out last January, longtime Scientologist Tony Lonstein, currently on the hook for nearly $2 million according to the suit filed against him by the estate, called on his fellow Scientologists to join an objection to the trustee’s plans to reorganize the estate, claiming that trustee Todd Neilson is "out of control" and plotting to attack the church:

1. The Trustee is out of control, suing anyone he can find. As an example, in the 50 page interrogatory which he just sent us, there is a full page devoted to listing out every single corporate entity of the Church, followed by questions related to our dealings with the Church. Despite the fact that this is highly inappropriate, it does lead one to believe that the Trustee has taken significant time researching all the Church’s legal entities, and one must wonder if he doesn’t intend to use this information in some sort of a suit or other attack against the Church, which I am sure you would not want to support.

Scientologist net-loser Al Ribisi questioned Lonstein’s failure to make clear his own pecuniary interest in the motion, and chided him; "(for) positioning the issue in any way with our Church. Leave the Church out of it. It’s off-line. We have an Office of Special Affairs to handle these things." Lonstein responded by quoting liberally from Scientology founder L. Ron Hubbard, and claimed that trustee Todd Neilson was a "suppressive" - a Scientology term for an "enemy" - for attempting to recoup Slatkin profits from "hundreds of upstanding, ethical, productive Scientologists":

3. While I understand your comm about the Church, there is no "positioning" going on here. It is a fact that we have received interrogatories from the Trustee, listing out the various entities of the Church, and asking for information about them. It certainly appears that he is getting ready to at least attempt to sue the Church. Have you seen the interrogatory listing all the Church entities?

To say that this is simply a matter for OSA misses the mark as to all of our personal responsibility. If the Church is sued, then each person involved in this Slatkin mess, (be it net losers or net gainers) is personally responsible to fully handle the situation. I think that rather than just wait for the Trustee to sue the Church, we should all (net gainers and net losers) take pre-emptive actions to stop him right now.

And just for the record, I personally believe that the Trustee’s actions are suppressive, and that his suit of hundreds of upstanding, ethical, productive Scientologists is suppressive, and that his attempts use the legal system to strong-arm Scientologists into paying him by trying to get their assets attached in advance of a judgement are suppressive, and that his posturing to sue the Church is grossly suppressive, and if he sues the Church, he is 100% suppressive, and that anyone who actively backs him up or sits quietly on the sidelines getting monetary benefit from his actions is aiding and abetting a Suppressive. Think about it, one of the distributions you receive from the Trustee could potentially be money extracted from the Church. No-one would want that to occur.

These are strong words, but the fact is that the legal system is unjust and capricious, and it is being used by a "clever" attorney to unleash much pain and suffering on upstat and ethical Scientologists whose only crime is taking out more money from Reed than they put in, in some cases over a 15 year period. The Trustee’s actions are based on a completely arbitrary piece of wog law that doesn’t produce justice for anyone. Many of these withdrawals went to pay taxes or to donations, or personal living expenses. There were no "crimes" committed here.

We should all apply the reference HCOPL "The Justice of Scientology, its Use and Purpose", where LRH says:

"Don’t react to Scientology justice as though it were wog law. In society’s "courts" one is given the works, and truth has little bearing on the findings. A mean judge or clever attorney and small legal errors decide a lot of their cases. Wog courts are like throwing dice. There is huge cost and publicity and punishment galore even for the innocent.

So we must preserve our justice. And use it.

That’s the main lesson. If we don’t use it in all questions where the truth of the matter is in doubt, we’ll just go on being wogs."

[...]

The joke is that Reed has managed to add one more suppressive act to all the rest of his actions, and that is getting Scientologists arguing amongst themselves, and splitting up the power of our group. What a sad situation.

The push surrounded last January’s so-called "Bernstein objection" (see slatkinfraud.com updates passim), a motion opposing the proposed estate reorganization that was filed by Danning Gill, allegedly on behalf of Brad Bernstein, a Scientologist and net-loser with a claim for several hundred thousand dollars against the Slatkin estate.

Not surprisingly, Kirkland Ellis, the law firm representing the powerful Creditor’s Committee, lost little time in filing a motion of its own. The firm raised questions over whether it was appropriate for Danning Gill to purport to represent a creditor in the case at the same time that it was actively recruiting net debtors to take part in its audacious "stockbroker defence", and making every effort to stop the trustee’s efforts to recoup the money that Slatkin paid out to profiteers.

Very few Scientologists, as it turned out, were willing to give in to Lonstein and co.’s pressure tactics. Only twenty-odd joinders were filed in response, according to this list from an earlier slatkinfraud.com story:
David Minkoff, Harold Gerlis, Edw. E. Marsh, Charles and Lanna Borom, David Morse, Forest Dockery, "Tsadore M. Ghait" (ed. note: almost certainly Isadore M. Chait), Norm Novitsky, Randall Wise, Nancy Wise, Alastair N. Wood, Marta L. Brewer, Lisa G. Downey, Marsha Fox, Janet Gildersleeue (ed. note: Gildersleeve), Theodore A. Wells, Joyce Anderson, Marlin Anderson, Paul J. Hedlund, Chelsea and Jack Murgatroyd, Charles N. Ohl.

The Bernstein opposition was ultimately unsuccessful, but the battle over Danning Gill’s tactics is far from over. Just last week, Kirkland Ellis, acting on behalf of the Creditor’s Committee, filed a motion for sanctions (pdf) against Danning Gill for "bad faith conduct" and failure to comply with bankruptcy rule 2019, claiming that:

"Danning Gill purposefully used its net creditor clients as unwitting tools to advance the interests of its paying net debtor clients. It further refused to comply with Rule 2019 by not disclosing these net creditor clients and the circumstances of the firm’s retention, and also by affirmatively misrepresenting whose interests it was advancing, in order to hide its own misdeeds, and those of its net debtor clients."

Ironically, it appears to have been Bernstein’s own testimony that did the most damage to Danning Gill’s claim that his "Objection" was legitimate:

In open court, Danning Gill represented that Mr. Bernstein was not a "shill," "this was not some type of a game, " and that Mr. Bernstein had "deep-seated" and "passionate "feelings about the issues raised in the Objection.

But Mr. Bernstein later testified under oath that:

• Danning Gill approached him about the Objection,
• he had never even heard about the arguments in the Objection (let alone what constitutes a "stockbroker") until after he spoke to Danning Gill and/or read Danning Gill’s Objection, and
• he did not care one way or another about whether the disclosure statement was approved.

The motion for sanctions is scheduled to be heard (pdf) on July 25. Click here to read the full motion (pdf) and evidence (huge pdf), as well as Danning Gill’s response (pdf).

High-ranking Scientologist creditors are fighting back against Trustee Todd Neilson’s proposed reorganization of the estate, claiming that he failed to disclose his plan to go after Church of Scientology entities in an effort to recoup some of the millions lost in the Slatkin Ponzi Scheme.

The Scientologist bloc is represented by lawyer Helena Kobrin, herself an active Scientologist and Slatkin net debtor, who has also served as counsel to several of the Scientology organizations targeted by the trustee.

On Monday, Kobrin filed a joinder to the objection that was filed last week by Danning Gill Diamond Kollitz, the firm representing many of the investors who profitted from Slatkin’s scam. The Kobrin motion, filed on behalf of two dozen Scientologist creditors, objects specifically to the trustee’s efforts to pursue Slatkin money that wound up in the coffers of the Church of Scientology through various corporate channels, claming that they were not informed of this line of attack at the time that creditor approval on the proposed re-organization was sought.

(For background on Neilson’s efforts to pull church officials and entities in for questioning, scroll down to the March 3 and 4 news updates on slatkinfraud.com)

From the Kobrin motion:

Objecting parties assert that the Plan cannot be confirmed because it has become evidence that the Trustee intends to sue various Scientology entities, but did not disclose this intention in his disclosure statement. Instead, he waited to make this intention known through his attorney’s comments to a newspaper reporter, resulting in a March 26, 2003 article entitled "Victims of Scam Target Church". Beyond the obvious desire to use this intention to create yellow journalism, the Trustee’s failure to disclose this intention in the normal fashion through disclosure documents filed in the court violates 11 USC 1129(1),(2) and (3). Not only would it affect how a substantial number of claimants who are parishioners of the Scientology religion would vote, but the concealment of the issue affects the entire conduct of the case, including such things as the intensity of the Trustee’s pursuit of these and other adversary defendants, and the Trustee’s refusal to settle other than at a very high percentage of the amounts demanded.

Joining the Kobrin parties in objecting to the Plan are two other Scientologists with familiar names to slatkinfraud.com readers: Ike Kezsbom and Chelsea and Jack Murgatroyd.

Kezsbom, a longtime Scientologist, writes in his declaration of objection:

[I] had two investment accounts with Reed Slatkin. I filed a Proof of Claim for these accounts, My accounts suffered a net loss of approximately $2,400,000. I am a longstanding member of the Church of Scientology. I reviewed the Trustee’s disclosure statement and proposed plan, and it did not state that they were planning to sue the Church of Scientology. I would be opposed to any Plan that involves suing my Church, and would prefer a plan that liquidates the assets of the Estate as promptly as possible. Based on the disclosure, I was under the impression that they did not intend to sue the Church. I believe other Scientologists [sic] creditors were also left with the same impression

[ ... ]

On March 26, 2003, in the LA Times, the Trustee’s attorney announced that he intends to sue the Church. I think tha this is improper under the good faith disclosure requirements and feel like I have had the wool pulled over my eyes, with respect to this particular issue. if they were going to sue the Church, they should have disclosed it in the Plan.

[... ] Therefore this, proposed plan should not be confirmed until a proper Disclosure is circulated amongst the Creditoes comprised of many Scientologists, their family and friends, amongst others.

Chelsea and Jack Murgatroyd are the children of Slatkin profiteer George W. Murgatroyd III, also a Scientologist, who is on the hook for over a million dollars in profits he took during the Slatkin Ponzi years. Murgatroyd’s children, however, weren’t so fortunate in their dealings with Slatkin, and have claims against the estate totalling $45,000.

Ironically, the younger Murgatroyds’ motion was filed on their behalf by Scientologist lawyer Paul Hedlund, a former law partner of Murgatroyd Sr. and himself a Slatkin profiteer facing adversary proceedings for $18,000 in fraudulent gains. One wonders whether it is really the interests of Chelsea and Jack Murgatroyd that are being protected by the legal action being brought forward in their names by their father’s former associate and fellow profiteer.

Richard McMullin, 38, will admit to making false statements to the FBI and the bankruptcy trustee for the Slatkin estate.
[ ... ]
McMullin, who received almost $2 million in salary when he worked for Slatkin from 1986 to 1999, could face up to 15 years in prison and a $750,000 fine. He also agreed to pay $1.5 million in restitution to Slatkin’s investors, according to the U.S. attorney’s office in Los Angeles.

Co-conspirator Slatkin asked defendant MCMULLIN not to answer certain questions and to minimize falsely his role in and knowledge of Slatkin’s investment business. Defendant MCMULLIN knew that the purpose of these requests was to help prevent and delay the SEC from discovering the existence and scale of co-conspirator Slatkin’s fraudulent investment scheme and to shut it down. Co-conspirator Slatkin wanted to prevent the SEC from discovering his wholesale fabrication of investor account statements. Defendant MCMULLIN agreed to help co-conspirator Slatkin.
[...]
Defendant MCMULLIN falsely testified that he spent 99 percent of his time from 1990 on performing technical analysis of the stock market, when in truth and in fact his duties included assisting co-conspirator Slatkin in preparing investor account statements and locating stocks to reference in the statements. Defendant MCMULLIN knew that in most cases co-conspirator Slatkin did not purchase or sell those stocks in the volume and on the dates represented to investors, or did not purchase those stocks at all.

Defendant MCMULLIN testified that he did not assist Slatkin in the preparation of the “numbers” that appeared on the investor account statements when, in truth and in fact, as defendant MCMULLIN well knew, he assisted Slatkin as necessary in finding historic stock trades for the annual investor account statements that would generate the bogus rates of return Slatkin determined appropriate for various groups of investor accounts;

Investors defrauded of $255 million by EarthLink Inc. co-founder Reed Slatkin are hoping to recover funds from the Church of Scientology International and six affiliated organizations that allegedly wound up with tens of millions of dollars from the investment scam, their attorneys said Tuesday.

The investors won an initial battle when a bankruptcy judge in Santa Barbara recently refused to block subpoenas ordering the Scientology groups to hand over records of money transferred to them by certain Slatkin investors who came out ahead financially. The subpoenas also seek records of communications the groups had about Slatkin, a longtime but now excommunicated Scientologist who was known for his celebrity clientele.

[...]

Legally, there is no protection for third parties such as the Church of Scientology if it can be shown that they received supposed profits from Slatkin, said Alexander Pilmer, an attorney for the trustee and creditors. He added that there’s a potential for significant recoveries from the organizations.

"We believe that Scientology entities received tens of millions of dollars from Slatkin or from Slatkin’s Ponzi scheme," Pilmer said.

Business 2.0 magazine lists Reed amongst its annual "101 Dumbest Moments in Business" listing, which is described as a send-up of the most ill-conceived, embarrassing, and downright appalling developments of the past year. Slatkin’s #27 rank was accompanied by this entry::

27 Which also explains the Travolta oeuvre.
Reed Slatkin, one of three original investors in EarthLink (ELNK), pleads guilty to 15 counts of fraud after a Ponzi scheme he orchestrated bilked investors out of $254 million. Though he faced a 105-year sentence, the plea allows Slatkin, a well-known Scientologist, to receive a shorter sentence due to the "psychological impact of his association with certain individuals and/or groups."

This week, two more Scientology organizations have been added to the list - the World Institute of Scientology Enterprises, the quasi-independent network of Scientologist businesss, and the Church of Scientology Religious Trust, one of the strongholds of cash within the labyrinth of the Scientology corporate empire. Both organizations have the potential to provide the trustee with a wealth of information related to Slatkin’s activities in the years before his Ponzi scheme was uncovered.

In fact, according to Church of Scientology International spokesman Aron Mason, quoted in the October 2001 edition of Esquire Magazine, Slatkin was ejected from WISE precisely because of a failure to meet unspecified "ethical standards". This Knowledge Report, prepared by Slatkin business associate and net profiteer Richard Levine in 1988, is likely just one example of the correspondence that WISE and other Scientology-related entities would have received from puzzled and angry Slatkin investors over the years about Slatkin’s shifty and deceptive business practices.

The last-minute addition to the Rule 2004 examination line-up of the Church of Scientology Religious Trust is also good news for investors who want to see Neilson track down Slatkin’s purloined cash. As most Scientologists know, many Scientology-related payments and donations are made directly to the Church of Scientology Religious Trust, which serves as a repository for virtually all of the cash collected from within the United States. It was also CSRT that eventually wrote the check for over a million dollars in donations from Scientologist Benjamin Franklin Cook during the bankruptcy proceedings related to his 1999 Ponzi-related bankruptcy. For more information on CSRT, click here.

Not all Skatkin investors were celebrating last week’s announcement of the expanded investigation into Scientology-related entities, however. Scientologist attorney Helena Kobrin, long-time counsel to the Church of Scientology International and Religious Technology Center, two of the Scientology entities currently facing Slatkin-related Rule 2004 examinations, lost no time in filing an objection to the examination on behalf of net-gainers named in adversary proceedings related the Slatkin case.

Ms. Kobrin’s motion, filed on behalf of Elvira Morgan, Yvonne Kellerhals, Alex Guevera, and the Fair family (Virginia, Whitney, Joshua and Jana), argues that the Rule 2004 examinations into the Scientology-related entities, which will scrutinize not only money received from Slatkin, but also from adversary defendants, would improperly deprive defendants of discovery rights. The motion claims that the named defendants "may well have privacy, clergy-communicant and other issues" that would be better served under "traditional discovery procedures." Claiming that time is of the essence, Ms. Kobrin is also requesting that the motion to vacate be heard by March 21, 2003.

Ms. Kobrin, of course, also has a personal interest in the upcoming examinations and adversary cases. She and her husband, Michael D. Kobrin, are also facing adversary proceedings (Case 03-0184), based on the Trustee’s claim that they netted $268,000 in Slatkin-related profits.

Finally, Ms. Kobrin’s firm, Moxon and Kobrin, also has a special connection to slatkinfraud.com. Moxon and Kobrin associate Ava Paquette was the legal force behind the legal threats related to this site’s use of the Scientology cross as part of its previous logo.

Far short of a century after declaring that he’d "fight this thing for 100 years" (Dec 2001), well-known Scientologist lawyers "Bhopal" John Coale and wife Greta Van Susteren, former legal affairs correspondent for CNN turned FOX newshost, have settled with the trustee Todd Neilson over profits that the couple allegedly made during the years that Slatkin’s Ponzi Scheme was operating.

According to the agreement (warning - large PDF file), the couple has agreed to pay back $705,000 to the Estate, payable in seven semi-annual installments. The settlement figure is based on profits of over $900,000.

His association with Slatkin didn’t just cost Coale a bundle in repayments for allegedly improper transfers, however. The Washington DC-area lawyer and his media maven wife are likely also smarting over the release of a letter that he wrote to Reed Slatkin in February 2000 -- over a year before the Ponzi came crashing down -- lauds Slatkin for helping he and wife Greta "set a good example" as "opinion leaders" to millions - but also asking for the couple’s investment money back.

In the letter, which refers to both his and Greta’s successes since joining the Reed Slatkin Investment Club some years previously, Coale tells Slatkin "There is no way in hell either of us could have pulled this off without your help."

But he has far different things to say a year later, as shown by the second letter (page two of original PDF). In the April 18, 2001 letter, sent just weeks before the Slatkin bankruptcy and Ponzi scandal would hit the news, Coale demands that he be first in line for complete repayment:

I have now learned that there is a "problem" with the funds and that various members of the fund have asked for their money. I would like our money as well. In terms of the order of payout, I would like our request to be the first since our request went in more than a year ago (February 18, 2000.)

Also of note in the first letter is Coale’s use of the term ’Safe-Pointing’ with regard to Greta’s position at CNN.

’Safe-Pointing’ is a Scientology term described by ex-Scientologist Teresa Summers as [when] "Scientologists join community organizations so there is better understanding and less scrutiny of the church. It’s a way of encroaching into the area."

Safe Pointing isn’t a casual term - it was part of the language of public relations "war" used by Scientology founder L Ron Hubbard, as seen in this excerpt:

[...]
The optimum action is to send a PR area control team to the area you want to operate in, and have it establish PR area control first.

A new group or company should be established first as a safe point and then as an operating point.
[...]

HCO PL 1 April 1982 PR 19 R THE SAFE POINT

Greta, of course, is no longer CNN’s legal eagle, having moved to Fox News last year, where she hosts her own show, "On the Record". But Coale’s shamelessly self-serving letter to Slatkin does raise the question -- is she now "safe-pointing" America’s most pugnacious 24 news network on the part of Scientology?

As the original Reed Slatkin information source, we’d like to extend a warm welcome to a brand new website:
www.slatkininfo.com

This site attempts to provide a different perspective on the Reed Slatkin affair - and it is one that we believe investors who lost money to Slatkin will find especially fascinating. It questions whether the Investment Club was a "ponzi scheme" or simply a legitimate business venture that fell on hard times, and even offers muted defence of Slatkin himself, noting his tireless working hours and his "large network of hedge fund managers". The site boasts an entire section dedicated t