Slatkin refuses to answer as angry creditors fume

Trustee promises Ôreckoning'

7/31/01

By MARK VAN DE KAMP

NEWS-PRESS STAFF WRITER

Reed E. Slatkin made no apologies Monday as he faced angry creditors for the first time since his financial empire crashed three months ago.

In his brief appearance, the unregistered money manager from Hope Ranch made a 20-word statement and refused to answer questions before being excused by the court-appointed trustee.

"I just want to say that I'm here today and I'm not hiding. And I wanted you to know that," Mr. Slatkin said.

To the dismay of about 125 creditors who traveled to Fess Parker's Doubletree Resort to confront him about their missing millions, Mr. Slatkin refused to say anything more, invoking his Fifth Amendment right against self-incrimination. Some groaned and cursed, but as he left one person told him, "Good luck, Reed."

Taking the Fifth was predictable because of the pending criminal investigation, court-appointed trustee R. Todd Neilson told the frustrated crowd. Mr. Neilson then spent two hours explaining his investigation, and led a question-and-answer session.

Fifteen anguished creditors raised a litany of complaints and questions, from wanting to know where the missing money is and what fraction will be recovered, to anticipating tax return headaches and questioning how Mr. Slatkin and his family are financing their present lifestyle.

"For years you've been lied to," Mr. Neilson told the group. But he declared that Mr. Slatkin is being held accountable, stating: "I assure you that the charges will be brought and he will have his day of reckoning."

Mr. Slatkin's attorneys are talking with the Justice Department about charges, but those proceedings are secret, Mr. Neilson said. He expects that matter to be resolved within six months, probably through a written plea agreement.

He also implied that over the 15 years that Mr. Slatkin ran his investment club, he may have had help creating reams of allegedly fraudulent records. While Mr. Neilson stopped short of detailing who else may be culpable, he said, "I will say this: It would have been very difficult for him to do this on his own."

Mr. Slatkin is the subject of a federal investigation for allegedly defrauding investors through his unregistered investment advisory business for 15 years until he declared bankruptcy May 1. He promised investors annual returns of up to 60 percent, but creditors' lawyers suspect it was a Ponzi scheme in which early investors were paid with money belonging to more recent participants.

Although exactly how much is missing is still unknown, Mr. Slatkin owes perhaps 850 creditors an estimated $250 million and up to $539Êmillion, but apparently has only $44.6 million in assets, according to the first official accounting of his finances by Mr. Neilson. But Mr. Neilson said the accounting analysis is incomplete and admitted it may presently overstate the scope of debt.

Mr. Slatkin's criminal defense attorney, Brian A. Sun, said Mr. Neilson's report considerably overstates the amount owed to creditors and greatly understates Mr. Slatkin's assets. He said there is information and assistance that Mr. Slatkin can provide to maximize returns, and that some previous media reports have distorted the case.

"It is my belief that Mr. Slatkin will eventually cooperate," Mr. Neilson said. "I believe that we will find out what happened to your money. .Ê.Ê. We can do that without his help."

Mr. Neilson has met twice with Mr. Slatkin and will have more sessions to trace the money. Cooperation will help Mr. Slatkin, 52, if and when he is criminally charged, Mr. Neilson said, while failure to cooperate or lying to investors could enhance a sentence.

So far, the approximately 400 individual assets catalogued are small and large. They include two airplanes under construction, an extensive art collection, vehicles, 35 properties and 35 partnership investments that Mr. Neilson described, saying "some are quite good, others are pieces of crap."

Additionally, a financial market expert asked by Mr. Neilson's team to review 140 investments in stocks told him it's "the worst portfolio he's ever seen."

Richard Wynne, an attorney representing the creditors' committee, said some financial statements that were sent to investors appear to have been made up.

"There's reality and then there's the investor statements," Mr. Wynne said.

Of the two bookkeepers who worked for Mr. Slatkin, Phyllis Rogers is cooperating with putting records in order while Jean Janu, who lives in New Mexico, has retained a criminal defense attorney and is refusing to help, Mr. Neilson said.

Through all this, Mr. Slatkin has not been arrested and remains a free man.

"The first question I think you have is, ÔWhy isn't Mr. Slatkin in jail or hanging from a tree?'Ê'' Mr. Neilson told the crowd.

He explained that federal investigators are piecing together a case and likely are preparing an indictment in front of a grand jury. But all proceedings must be secret by law, and while that's frustrating, he said, the system must be allowed to run its course.