Victims of Bentley Financial Ponzi Scheme to Get Another $18 Million, Receiver Goes after Banks that Assisted in Scam

PHILADELPHIA – More than 200 credit unions, banks and individual investors impacted by a Ponzi scheme through the defunct Bentley Financial Services are scheduled to receive another $18 million. In 2001, the SEC filed a complaint against Robert L. Bentley, Bentley Financial Services and Entrust Group alleging that the defendants claimed to be selling bank-issued, federally insured certificates of deposit that were actually uninsured securities. Hundreds of credit unions, banks and individuals invested more than $370 million with the defendants. As of Sept. 3, 2004, a court-appointed receiver was granted an order to distribute $18.5 million to claimants, the fourth round of payments. More than $314 million has been distributed so far. The receiver is holding approximately $46.43 million in interest-bearing institutional funds invested in U.S. Treasury obligations and U.S. government agency obligations and CDs worth $9.25 million as of June 30, 2004. Approximately $7.68 million of that portfolio is scheduled to mature during the second half of 2004, with the remainder maturing at later dates. Bentley agreed to an injunction barring him from the securities industry and inclusion of his personal assets in the receivership estate. David H. Marion of the Philadelphia law firm Montgomery, McCracken, Walker & Rhoads LLP was appointed receiver over the assets. According to Marion, it is difficult to determine if there will be other distributions because the nature of the Ponzi scheme that Bentley operated limits the Receiver’s ability to make further distributions in two ways. First, the scheme was such that the recoverable assets of Bentley, Bentley Financial and Entrust available to the Receiver at the inception of the Receivership were millions of dollars less than the total allowed claims of the investor claimants. Second, the amount of additional distributions, if any, cannot be determined until the Receiver is able to resolve certain known and contingent liabilities and expenses arising from the operation of the scheme. “To account for these contingencies, the Receiver is required to maintain reserves,” according to Marion. “The need to maintain these reserves pending resolution of the contingencies may require (the delaying of) later distributions even if the receivership has immediately available funds at its disposal.” The Receiver is maintaining reserves against such contingencies as successful challenges to the disallowance of claims, tax liabilities, administrative and legal expenses, potential losses in the remaining CD portfolio, and other consequences of the Ponzi scheme the Receivership court found existed. Marion’s firm is also pursuing litigation against certain financial institutions, securities firms, accounting firms and related individuals who may have assisted Bentley in the operation of his Ponzi scheme, including Southeastern Securities, SFG Financial Services, Peninsula Bank and certain individuals associated with those institutions. “The litigation seeks to have the third party defendants and others pay the Receivership for the losses and harm suffered by Bentley Financial Services, Inc. because of the actions of the defendants in assisting Bentley in his scheme, including its inability to pay monies contractually owed to investors,” according to Marion. On May 27, 2004, Judge Fullam issued an order denying the `third party defendants’ motions to dismiss the case, saying that there was “no reason why the Receiver should be precluded from proceeding against wrongdoers who damaged BFS by increasing its liabilities merely because, eventually, any recovery would inure to the benefit of the defrauded investors.” Judge Fullam issued a similar order in a separate case brought by the Receiver against. Bentley’s accountants. The Receiver has now begun the discovery phase of both cases. Marion also continues to pursue his claims against three banks in Texas and others that received premature pay-outs of their Bentley investments and have refused to return those amounts to the receivership, as well as his actions against certain companies and individuals who have withheld assets that the receiver believes rightly belong in the receivership estate. [email protected]