Credit Unions Defrauded by Bentley Financial Services to Receive First Payment of $135 Million in April

PHILADELPHIA – Individual investors as well as credit unions and banks that were sold $370 million worth of bogus CDs from Bentley Financial Services Inc., a defunct broker, are scheduled to receive the first of at least two payments by the end of April. On April 11, the U.S. Attorney’s Office for the Eastern District of Pennsylvania delivered a closing agreement from the SEC, IRS and the U.S. Department of Justice to David Marion, the court-appointed receiver consenting to a $220 million distribution that will see checks mailed to claimants before or on April 24. The receivership is the largest in SEC’s history, according to SEC officials. In 2001, the SEC obtained temporary restraining orders and asset freezes against Bentley Financial in connection with a Ponzi scheme for the sale of supposed bank-issued CDs to more than 220 investors including financial institutions. The CDs were in fact uninsured securities issued by the defendants named in the SEC suit. Of the 222 investors that submitted claims to the receiver, 103 were credit unions. Those credit unions will receive checks totaling $135 million by the end of April, said Frank Mayer, counsel to the receiver. While individual investors, banks, savings banks, trust firms and corporations were also defrauded, Mayer said credit unions were impacted the most. “It’s premature to say how much credit unions lost but it could potentially be up to $50 million,” Mayer said, adding that the loss is indeed expected to be less than $50 million. The amount of the initial distribution was approved in December 2002 by the U.S. District Court for the Eastern District of Pennsylvania, Mayer said. The amount of subsequent distributions will largely depend on two factors: the amount of immediately available funds held by the receiver and the size of any necessary reserves against contingencies. These contingencies include successful challenges to the disallowance of claims, tax liabilities, administrative and legal expenses, and potential losses in the remaining CD portfolio. “As these contingencies are resolved the receiver expects that additional funds will be freed for distribution,” Marion said. After April’s distribution, $131.8 million in assets will be held by the receiver. Of those assets, approximately $83.4 million will consist of CDs that have not yet matured. Approximately $36.6 million of the CD portfolio is scheduled to mature during the remainder of 2003, but the final $46.8 million matures at later dates, with more than $9 million maturing after 2006. The latest maturity is in 2018. Mayer said the receiver is working to liquidate those assets in an orderly fashion prior to maturity without any loss of principal and expects that “a significant portion of the receivership’s CD portfolio will be liquidated in 2003 and become available for distribution.” He also said that a second distribution will also require the approval of the court and new consents from the SEC, IRS and the Department of Justice. The receiver is expected to apply to the court for a second distribution before year-end. As of March 31, 2003, the receiver holds approximately $266,525,000 in interest-bearing institutional funds invested in U.S. Treasury obligations and U.S. government agency obligations and CDs with a total face value of approximately $83,378,000. Personal assets that Bentley derived from the fraud with an approximate value of $1,930,000 are also being held in the receivership. The total value of the assets held as of February 28, 2003, is approximately $351,833,000. Robert L. Bentley along with BFS and Entrust Groups has consented to the issuance of a permanent injunction barring him from participating in the securities industry. He has also consented to the inclusion of personal assets valued at approximately $1.93 million in the receivership estate. The Department of Justice continues to investigate bringing criminal charges against Bentley and the receiver has cooperated with the Department of Justice whenever asked to do so. The SEC also initiated enforcement actions against four salesmen who worked for Bentley Financial Services – Robert Glazewski, Matthew Matz, Jeffrey Patterson and Terrance Turman – and those cases were recently settled, according to Marion. As a result of the settlements, the four salesmen have been suspended from participating in the securities industry and have been ordered to make restitution payments to the receivership. Checks will be mailed by certified mail and return receipt, if requested. If claimants want the check sent by overnight service, they must send a self-addressed overnight envelope and a label filled in with the claimant’s address, overnight service account number and any necessary signatures to Bentley Receivership, c/o Montgomery, McCracken, Walker & Rhoads, 123 South Broad Street, 24th Floor, Philadelphia, PA 19109. Overnight charges must be paid by the claimant. For more information, call the receiver’s office at (215) 772-7434. -