http://www.newspress.com/westmont/0727slatkin.htm
Slatkin may be half a billion short
Bankruptcy: Manager will face creditors Monday
7/27/01
By MARK VAN DE KAMP
NEWS-PRESS STAFF WRITER
Bankrupt money manager Reed E. Slatkin owes hundreds of investors and
creditors more than $539 million but apparently has only $44 million in
assets, the first official accounting of his finances by a
court-appointed trustee found.
This lopsided profile appears to confirm creditors' fears that they are
likely to recover only a fraction of any money entrusted to Mr. Slatkin.
The eight-year Hope Ranch resident is the subject of a federal
investigation for allegedly defrauding up to 850 investors through his
unregistered investment advisory business.
But lawyers for Mr. Slatkin said the trustee's financial report
considerably overstates the amount owed to creditors and greatly
understates Mr. Slatkin's assets. They assert that the amount owed is
closer to $250 million and think his assets may be closer to $100
million.
However, the trustee's conclusion that Mr. Slatkin is apparently nearly
half a billion dollars short -- and that he paid $3.4 million this year
to relatives prior to filing for bankruptcy protection in May -- will
not endear him to a crowd of creditors due at a Santa Barbara hotel's
conference room on Monday for a special case update. Mr. Slatkin is
scheduled to face his creditors for the first time at that meeting.
There are individual investors who claim to have lost $1 million to $15
million, even a couple who lost $40 million. A News-Press review of
court records found that approximately 75 creditors live in Santa
Barbara County.
The new financial accounting of Mr. Slatkin's assets and liabilities was
compiled by trustee R. Todd Nielson and his team after they spent
thousands of hours poring over 330 boxes of documents seized from Mr.
Slatkin.
Mr. Nielson's report closely matches earlier estimates by bankruptcy
attorneys, who said Mr. Slatkin owes anywhere from $300 million to $600
million. It is still impossible to accurately state precisely how many
people are owed money and how much they are owed, the trustee and
creditors' attorneys say.
Lawyers for Mr. Slatkin on Thursday issued a statement that the $500
million figure in the report includes claims by investors who made more
than they invested with Mr. Slatkin, but believe they are owed still
more money. The statement said some of these investors might actually be
required to return some or all of their profits to Mr. Slatkin's
bankruptcy estate for distribution to investors who did not do so well.
Further, lawyers said, Mr. Slatkin's assets as outlined in the report
are understated because they do not include the value of substantial
assets in illiquid investments. By definition, such investments are not
readily convertible into cash, such as a stock, bond or commodity that
is not actively traded and would be difficult to sell at once without
taking a large loss.
In any case, a better picture is now emerging about the large sums of
money that Mr. Slatkin moved around. For the first time, his donations
to local organizations such as the Santa Barbara Bowl Foundation are
spelled out.
Mr. Slatkin paid $26,233,340 this year to investors, creditors and
vendors such as the phone company before filing for bankruptcy
protection in May, the report states.
That included paying $3,403,278 to six relatives, the trustee's report
said. The payments ranged from $50,000 to his wife, Mary Jo Slatkin, to
$76,836 to his son, Justin Slatkin. He also paid $1,808,768 to Sally
Sovernisky, $853,575 to Irving Rubin, $600,000 to Ron Schmier and
$14,199 to Joanne Berger. The report identified these people as
relatives, but gave no further details.
Mr. Slatkin this year also paid $78,263 to Jean Janu, his bookkeeper in
New Mexico.
He paid the Internal Revenue Service $2Êmillion this year and the state
Franchise Tax Board $754,242.
He also donated $68,975 to the Church of Scientology this year, records
show. Mr. Slatkin and his wife are ordained ministers in the church.
When he began his investment club in 1987, Mr. Slatkin collected money
from fellow members of the Church of Scientology with promises of high
profits -- some did realize high returns -- and over the years added
other investors.
Since moving to Hope Ranch eight years ago, Mr. Slatkin has made
donations to various entertainment groups. Records show that in the past
year he gave $224,000 to the Santa Barbara Bowl Foundation, including
$14,000 on March 13. He gave $25,000 to the Lobero Theatre Foundation,
including $10,000 in March. He also gave $5,000 to the Santa Barbara
Children's Chorus and $3,000 to the Community Environmental Council.
Mr. Slatkin's personal property includes three country club memberships:
The Alisal in Solvang, La Cumbre Country Club in Hope Ranch and El
Caballero Country Club in Tarzana.
Mr. Slatkin owns more property than has been previously disclosed. The
trustee is preparing to put the properties up for sale and use the
proceeds to help reimburse creditors. The assets range from his $35,000
wine cellar to his country club memberships.
Mr. Slatkin has 10 properties worth more than $7,880,000, records show.
These include his Hope Ranch estate at 4480-4484 Via Esperanza that
includes two homes of 4,000 and 5,800 square feet, with an estimated
market value of $4Êmillion. Other properties are: 96 acres of
undeveloped land north of Solvang in Ballard Canyon, worth an estimated
$1Êmillion; a two-story, 2,200-square-foot house at 890 N. Kellogg Ave.
in Goleta worth $500,000; and an 1,800-square-foot house at 3125 Riley
Road in Solvang worth $280,000.
Beyond that, he also owns land in Newport Beach worth $1Êmillion; 6
acres in Ashland, Ore., with an unknown value; land in Santa Fe; more
property in Germany; and $1Êmillion worth of property in Sedona, Ariz.,
plus 40 acres of undeveloped land in Nevada.
[end]
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