Scientology's Reed Slatkin


Santa Barbara News-Press - 8 juni 2001 -

Investors Wait for Details of Bankrupt :
California Businessman Accused of Fraud :

Jun. 8-- Creditors of bankrupt investor Reed Slatkin, who had hoped for a revelation on Thursday, will have to wait weeks longer for any answers about their missing millions.

Because of the sheer volume, financial documents seized by federal investigators will take at least seven extra weeks to sort out, said R. Todd Nielson, the court-appointed trustee in Slatkin's bankruptcy case.

Until that accounting is done, no updated picture of the Hope Ranch resident's assets and liabilities, current income and expenses, or other financial affairs will develop.

Those numbers are anxiously anticipated by as many as 500 clients, including perhaps 100 in Santa Barbara County, whom federal regulators allege were defrauded of at least $230 million through Slatkin's unregistered investment advisory business.

None of the investors knows how much he or she will be able to recover.

Nielson was unable to meet Thursday's initial deadline to file such an accounting for the U.S. Bankruptcy Court in Santa Barbara.

Instead, his request for an extra 45 days was granted by Bankruptcy Court Judge Robin Riblet.

Nielson said in a motion filed on Wednesday that his staff has not had access or the opportunity to review all the books and records seized from Slatkin.

About 165 of the 305 boxes of documents are reportedly in the possession of the FBI or the accounting firm of Deloitte and Touche.

Nielson is negotiating for those records to be turned over to him.

His court motion revealed that Nielson's staff is downloading information from Slatkin's computers, but that there may be two more computers loaded with information that he has not yet reviewed.

The many files were seized from Slatkin's Hope Ranch home and Goleta office by federal agents within the last three weeks as the investigation into his crumbling financial empire deepened.

Regulators said that between 1985 and April of this year, Slatkin collected at least $230 million from investors, telling them he was investing in securities through Swiss accounts that never existed.

They suspect that he was using new investor funds to pay interest to earlier investors, a type of fraud that is called a Ponzi scheme.

Bankruptcy officials and attorneys for the investors estimate that claims in the case could reach more than $600 million.

In his court motion, Nielson said Slatkin's attorneys have informed him that Slatkin will not assist in the accounting, but Nielsen also said that he is trying to hire Slatkin's former bookkeeper.

However, Brian A. Sun, one of Slatkin's lawyers, said Thursday that the defense team is cooperating with both the trustee and federal investigators.

"We have a continuing dialogue with both the investigating authorities and the trustee," Sun said. "And we have already provided valuable information to the trustee which has preserved hundreds of thousands of dollars."

Slatkin, 52, last week signed a consent decree with federal regulators, agreeing not to violate federal securities laws in the future, according to U.S. Securities and Exchange Commission documents.

Under that decree, Slatkin admits no wrongdoing and the agency retains the right to fine him and order him to repay investors.

When he began his investment club in 1987, Slatkin collected money from fellow members of the Church of Scientology with promises of big profits, court records show, and over the years he added other investors.

However, investigators say he lied to investors and now cannot account for hundreds of millions of dollars.

Three of those investors sued him in April, alleging he had failed to return $34 million to them.

On May 1, Slatkin filed for Chapter 11 bankruptcy protection in Santa Barbara, listing debts exceeding $100 million.

Ten days later, the Securities and Exchange Commission won a court order freezing his assets.

Slatkin is an eight-year resident of Hope Ranch.

He is also a co-founder of EarthLink, a major Internet service provider, but he resigned from its board of directors in April.


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(c) 2001, Santa Barbara News-Press, Calif. Distributed by Knight Ridder/Tribune Business News. ELNK,



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