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JOHN S. GORDON UNITED STATES DISTRICT
COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA UNITED STATES OF AMERICA, Plaintiff, v. REED E.
SLATKIN, Defendant. ) ) ) ) ) )
) ) ) ) ) No. CR 02 - ______ PLEA
AGREEMENT FOR DEFENDANT REED E. SLATKIN PLEA 2. Defendant gives up
the right to indictment by a grand jury and agrees to plead guilty to a
fifteen- count Information in the form attached to this agreement or a
substantially similar form. NATURE OF THE
OFFENSE a) In order for
defendant to be guilty of counts one through five, which charge violations of
Title 18, United States Code, Sections 1341 and 2, the following must be
true: (1) defendant made up and/ or executed a scheme or plan for obtaining
money or property by making false promises or statements; (2) defendant knew
that the promises or statements were false; (3) the promises or statements
were material, that is they would reasonably influence a person to part with
money or property; (4) defendant acted with the intent to defraud; and (5)
defendant used or caused to be used, the mails or private commercial
interstate carriers to carry out an essential part of the scheme. b) In order for
defendant to be guilty of counts six through eight, which charge violations
of Title 18, United States Code, Sections 1343 and 2, the following must be
true: (1) defendant made up and/ or executed a scheme or plan for obtaining
money or property by making false promises or statements; (2) defendant knew
that the promises or statements were false; (3) the promises or statements
were material, that is they would reasonably influence a person to part with
money or property; (4) defendant
acted with the intent to defraud; and (5) defendant used, or
caused to be used, interstate wire communications to carry out an essential
part of the scheme. c) In order for
defendant to be guilty of counts nine through fourteen, which charge
violations of Title 18, United States Code, Sections 1957 and 2, the
following must be true: (1) defendant engaged or caused another to engage in
a monetary transaction; (2) defendant knew that the transaction involved
criminally derived property; (3) the property had a value greater than
$10,000; (4) the property was derived from a specified unlawful activity,
namely mail fraud or wire fraud; and (5) the transaction occurred within the
United States. The term “monetary transaction” means, among other things, the
deposit, withdrawal, transfer, or exchange, in or affecting interstate commerce,
of funds or a monetary instrument by, through, or to a financial institution.
d) In order for
defendant to be guilty of count fifteen, which charges a violation of Title
18, United States Code, Section 371, the following must be true: (1) there
was an agreement between defendant and at least one other person to corruptly
influence, obstruct, and impede, and endeavor to influence, obstruct, and
impede the due and proper administration of the law under which a pending
proceeding was being had before the Securities and Exchange Commission (“
SEC”), a department or agency of the United States, in violation of Title 18,
United States Code, Section 1505; (2) defendant became a member of the
conspiracy knowing of its object and intending to help accomplish it; and (3)
one of the members of the conspiracy committed at least one overt act for
the purpose of carrying out the conspiracy. Defendant
admits that defendant is, in fact, guilty of these offenses as described in
counts one through fifteen of the Information. PENALTIES AND
RESTITUTION a) The statutory
maximum sentence that the Court can impose for each violation of Title 18,
United States Code, Section 1341 is: five years imprisonment; a three- year
period of supervised release; a fine of $250,000 or twice the gross gain or
gross loss resulting from the offense, whichever is greater; and a mandatory
special assessment of $100. b) The statutory
maximum sentence that the Court can impose for each violation of Title 18,
United States Code, Section 1343 is: five years imprisonment; a three- year
period of supervised release; a fine of $250,000 or twice the gross gain or
gross loss resulting from the offense, whichever is greater; and a mandatory
special assessment of $100. c) The statutory
maximum sentence that the Court can impose for each violation of Title 18,
United States Code, Sections 1957 is: ten years imprisonment; a three- year
period of supervised release; a fine of $250,000 or twice the amount of the
criminally derived property involved in the transaction, whichever is
greater; and a mandatory special assessment of $100. d) The statutory
maximum sentence that the Court can impose for each violation of Title 18,
United States Code, Section 371 is: five
years imprisonment; a three- year period of supervised release; a
fine of $250,000 or twice the gross gain or gross loss resulting from the
offense, whichever is greater; and a mandatory special assessment of $100. e) Therefore, the total
maximum sentence for all offenses to which defendant is pleading guilty is:
105 years imprisonment; a three- year period of supervised release; a fine of
$3.75 million or twice the gross gain or gross loss resulting from the fraud
and conspiracy plus twice the value of the criminally derived property
involved in the money laundering transactions, whichever is greater; and a
mandatory special assessment of $1500. 5. Defendant
understands that defendant will be required to pay full restitution to the
victims of the offenses. Defendant agrees that, in return for the USAO’s
compliance with its obligations under this agreement, the amount of
restitution is not restricted to the amounts alleged in the counts to which
defendant is pleading guilty and may include losses arising from charges not
prosecuted pursuant to this agreement as well as all relevant conduct in
connection with those charges. The parties currently believe that the
applicable amount of restitution is not less than $254,597,235, but recognize
and agree that this amount could change based on facts that come to the
attention of the parties prior to sentencing. Defendant further agrees that
defendant will not seek the discharge of any restitution obligation, in whole
or in part, in any present or future bankruptcy proceeding. 6. Supervised release
is a period of time following imprisonment during
which defendant will be subject to various restrictions and requirements.
Defendant understands that if defendant violates one or more of the
conditions of any supervised release imposed, defendant may be returned to
prison for all or part of the term of supervised release, which could result
in defendant serving a total term of imprisonment greater than the statutory
maximum stated above. FACTUAL BASIS WAIVER OF
CONSTITUTIONAL RIGHTS a) The right to persist
in a plea of not guilty. b) The right to a speedy and public trial by jury.
c) The right to the assistance of counsel at trial, including, if defendant
could not afford an attorney, the right to have the Court appoint one for
defendant. d) The right to be
presumed innocent and to have the burden of proof placed on the government to
prove defendant guilty beyond a reasonable doubt. e) The right to
confront and cross- examine witnesses against defendant. f) The right, if
defendant wished, to testify on defendant's own behalf and present evidence
in opposition to the charges, including the
right to call witnesses and to subpoena those witnesses to
testify. g) The right not to be compelled to testify, and, if defendant chose
not to testify or present evidence, to have that choice not be used against
defendant. By pleading guilty,
defendant also gives up any and all rights to pursue any affirmative
defenses, Fourth Amendment or Fifth Amendment claims, and other pretrial
motions that have been filed or could be filed. SENTENCING FACTORS 10. Defendant and the USAO
agree and stipulate to the following applicable sentencing guideline factors:
/// /// /// /// /// /// /// /// a) Guideline
Calculation for Mail and Wire Fraud Offenses Base Offense Level : 6
[U. S. S. G. § 2F1.1( a)] Loss (over $80 million)
: +18 [U. S. S. G. § 2F1.1.( b)( 1)( S)] Sophisticated means :
+2 [U. S. S. G. § 2F1.1( b)( 6)( C)] Loss understated : +3
[U. S. S. G. § 2F1.1] Knowledge funds Obstruction of Justice
: +2 [U. S. S. G. § 3C1.1] c) Guideline
Calculation for Conspiracy to Obstruct Justice Base Offense Level : 12
[U. S. S. G. §§ 2J1.2, 2X1.1( a)] Role in the offense :
+4 [U. S. S. G. §§ 3B1.1( a)] e) The government gives
up its right to seek an upward departure except as stipulated above (i. e.,
agreed upon upward departure based on understatement of loss), reserves its
right to seek downward departures as set forth in paragraph 15, and reserves
its right to oppose any request by defendant for a downward departure. f) Defendant reserves
any right he may have to seek downward departures on the following bases: (1)
his alleged extraordinary acceptance of responsibility; and (2) the alleged
psychological impact of his association with certain individuals and/ or
group( s). Defendant gives up his right to seek a downward departure on any
other basis. 11. There is no
agreement as to defendant’s criminal history or criminal history category. 12. The stipulations in
this agreement do not bind either the United States Probation Office or the
Court. The Court will determine the facts and calculations relevant to
sentencing. Both defendant and the USAO are free to: (a) supplement the facts
stipulated to in this agreement by supplying relevant information to the
United States Probation Office and the Court, (b) correct any and all factual misstatements
relating to the calculation of the sentence, and (c)
argue on appeal and collateral review that the Court's sentencing
calculations are not error, although each party agrees to maintain its view
that the calculations in paragraph 10 are consistent with the facts of this
case. DEFENDANT'S
OBLIGATIONS a) To plead guilty as
set forth in this agreement. b) To not knowingly and willfully fail to abide
by all sentencing stipulations contained in this agreement. c) To self- surrender
to federal custody on the date of his initial appearance. d) To not knowingly and
willfully fail to: (i) appear as ordered for all court appearances, (ii)
surrender to federal custody as ordered, and (iii) obey any other ongoing
court order in this matter. e) Not to commit any
crime. f) To not knowingly and willfully fail to be truthful at all times
with Pretrial Services, the U. S. Probation Office, and the Court. g) To pay the
applicable special assessments at or before the time of sentencing. h) To provide to law
enforcement officials in writing, within thirty (30) days of the date he
executes this agreement and at regular intervals thereafter to be determined
by the USAO over the duration of his incarceration and supervision in this
matter, a complete identification and location of and all other information
known to defendant about, all monies, property or assets of any kind
(including all bank accounts, tangible or intangible assets,
artwork, jewelry, collectibles, ERISA or other pension plans, profit sharing
plans, annuities, or life insurance or any other material asset with a value
of over $2,500) derived from or acquired as a result of, or used to
facilitate the commission of, defendant's illegal activities, whether
currently owned or controlled by defendant or by other persons or entities,
including any information regarding the disposition, transfer, and exchange
of such monies, property, and assets. i) To forfeit, to
repatriate (to the extent located within a foreign country), and to give up
all right, title, and interest in and to items identified pursuant to
paragraph 13( h) and to prevent the disbursement of any and all such assets
and any other things of value traceable to such assets (except as directed by
court order) if such disbursements are within defendant's direct or indirect
control. j) To fill out and
deliver to the USAO within thirty (30) days of the date he executes this
agreement, a completed financial statement (Form OBD- 500) listing
defendant's assets. k) That the USAO may
share information provided by defendant pursuant to paragraphs 13( h) and 13(
j) and information obtained by the USAO for purposes of its criminal
investigation of defendant with the Trustee and the Official Committee of
Unsecured Creditors of the Chapter 11 Bankruptcy estate in the matter of In
re Reed E. Slatkin, Bk. No. ND 01- 11549- RR. l) To not challenge the
right of the USAO, through the grand jury and other investigative means, to
investigate defendant’s criminal
activities, including activities to which defendant is pleading
guilty, for the purposes of, among other things, evaluating the veracity of
information provided by defendant pursuant to this agreement and the Letter
Agreements referenced below, determining whether defendant has obstructed the
government’s investigation, and determining the full scope of defendant’s
criminal activities. m) To waive any
attorney- client privilege he may hold with respect to his communications
with attorneys and law firms with whom he conferred over the duration of the
charged conduct with the exception of his attorneys at the following law
firms: O’Neill Lysaght & Sun; Pachulski, Stang, Ziehl, Young & Jones;
and Michaelson, Susi & Michaelson. 14. Defendant further
agrees to cooperate fully with the USAO, the Federal Bureau of Investigation,
and the Internal Revenue Service, and, as directed by the USAO, with any
federal court (including the federal bankruptcy court and its
representatives, the Trustee and the court- approved counsel for the Official
Committee of Unsecured Creditors of the Chapter 11 Bankruptcy estate in the
matter of In re Reed E. Slatkin, Bk. No. ND 01- 11549- RR), any state, local,
or foreign court, and any administrative or law enforcement agency. This
cooperation requires defendant to: a) Respond truthfully
and completely to all questions that may be put to defendant, whether in
interviews, before a grand jury, or at any trial or other court proceeding. b) Attend all meetings,
grand jury sessions, trials or other proceedings at
which defendant's presence is requested by the USAO or compelled by subpoena
or court order. c) Produce voluntarily
all documents, records, or other tangible evidence relating to matters about
which the USAO, or its designee, inquires. d) To assist in
identifying, locating, and recovering for the benefit of the victims of
defendant’s criminal conduct, all personal, family, partnership, and
corporate monies, properties, and assets derived from or acquired as a result
of, or used to facilitate the commission of, defendant's illegal activities,
whether currently owned or controlled by defendant or by other persons or
entities. THE USAO'S
OBLIGATIONS a) To abide by all
sentencing stipulations contained in this agreement. b) At the time of
sentencing, provided that defendant demonstrates an acceptance of
responsibility for the offenses up to and including the time of sentencing,
to recommend a two- level reduction in the applicable sentencing guideline
offense level, pursuant to U. S. S. G. § 3E1.1, and an additional one- level
reduction if available under that section. c) At the time of
sentencing, provided defendant demonstrates an extraordinary acceptance of
responsibility for the offenses up to and including the time of sentencing,
to recommend a downward departure on that basis. d) Not to further
prosecute defendant for violations of federal law arising
out of defendant's conduct described in the stipulated factual basis set
forth in the attached statement of facts that has been incorporated herein by
reference. (Defendant understands that the USAO has no authority to dictate
to the Department of Justice Tax Division whether that office should or
should not prosecute defendant for criminal tax violations, including
conspiracy to commit such violations chargeable under 18 U. S. C. § 371).
Defendant understands that the USAO is free to prosecute defendant for any
other unlawful past conduct or any unlawful conduct that occurs after the
date of this agreement. Defendant agrees that at the time of sentencing the
Court may consider the uncharged conduct in determining the applicable
Sentencing Guidelines range, where the sentence should fall within that
range, and the propriety and extent of any departure from that range. e) Not to offer as
evidence in its case- in- chief in the above- captioned case or any other
prosecution that may be brought against defendant by the USAO, any statements
made by defendant or tangible evidence provided by defendant pursuant to this
agreement or the letter agreements previously entered into by the parties
dated June 27, 2001, July 25, 2001, and September 5, 2001 (“ the Letter Agreements”).
Defendant, however, agrees that the USAO may use such statements and tangible
evidence: (1) to obtain and pursue leads to other evidence, which evidence
may be used for any purpose, including any prosecution of defendant, (2) to
cross- examine defendant should defendant testify, or to rebut any evidence,
argument or representations made by defendant or a
witness called by defendant in any trial, sentencing hearing, or
other court proceeding, (3) in any prosecution of defendant for false statement,
obstruction of justice, or perjury, and (4) at defendant's sentencing.
Defendant understands that information provided by defendant pursuant to this
agreement will be disclosed to the probation office and the Court. f) In connection with
defendant's sentencing, to bring to the Court's attention the nature and
extent of defendant's cooperation. g) If the USAO
determines, in its exclusive judgment, that defendant has provided
substantial assistance to law enforcement in the prosecution or investigation
of another (" substantial assistance"), to move the Court pursuant
to U. S. S. G. § 5K1.1 to impose a sentence below the sentencing range
otherwise dictated by the sentencing guidelines. DEFENDANT'S
UNDERSTANDINGS REGARDING SUBSTANTIAL ASSISTANCE a) Any knowingly false
or misleading statement by defendant will subject defendant to prosecution
for false statement, obstruction of justice, and perjury and will constitute
a breach by defendant of this agreement. b) Nothing in this
agreement requires the USAO or any other prosecuting or law enforcement
agency to accept any cooperation or assistance that defendant may offer, or
to use it in any particular way. c) Defendant cannot
withdraw defendant's guilty pleas if the USAO does not make a motion pursuant
to U. S. S. G. § 5K1.1 for a reduced sentence
or if the USAO makes such a motion and the Court does not grant
it. d) At this time the USAO makes no agreement or representation as to
whether any cooperation that defendant has provided or intends to provide
constitutes substantial assistance. The USAO specifically advises defendant
that the government currently questions the veracity of certain information
provided by defendant regarding, among other things, the alleged transfer and
the alleged legitimacy of transfers of certain assets including real estate,
artwork, and gold, the existence of foreign assets, and the potential
destruction of computer evidence. Defendant understands that resolution of
these questions against defendant could result in the government declining to
make a motion for downward departure. The decision whether defendant has
provided substantial assistance rests solely within the discretion of the
USAO. e) The USAO's
determination of whether defendant has provided substantial assistance will
not depend in any way on whether the government prevails at any trial or
court hearing in which defendant testifies. BREACH OF AGREEMENT the agreement breached,
and the Court finds such a breach to have occurred, defendant
will not be able to withdraw defendant’s guilty pleas, and the USAO will be
relieved of all its obligations under this agreement. In particular: a) The USAO will no
longer be bound by any agreements concerning sentencing and will be free to
seek any sentence up to the statutory maximum for the crimes to which
defendant has pleaded guilty. b) The USAO will no
longer be bound by any agreements regarding criminal prosecution, and will be
free to prosecute defendant for any crime, including charges that the USAO
would otherwise have been obligated not to prosecute pursuant to this
agreement. c) The USAO will be
free to prosecute defendant for false statement, obstruction of justice, and
perjury based on any knowingly false or misleading statement by defendant. d) The USAO will no
longer be bound by any agreement regarding the use of statements, tangible
evidence, or information provided by defendant, and will be free to use any
of those in any way in any investigation, prosecution, or civil or
administrative action. Defendant will not be able to assert either (1) that
those statements, tangible evidence, or information were obtained in
violation of the Fifth Amendment privilege against compelled self-
incrimination, or (2) any claim under the United States Constitution, any
statute, Rule 11( e)( 6) of the Federal Rules of Criminal Procedure, Rule 410
of the Federal Rules of Evidence, or any other federal rule, that statements,
tangible evidence, or information provided by defendant before or
after the signing of this agreement, or any leads derived
therefrom, should be inadmissible. 18. Following a knowing and willful breach
of this agreement by defendant, should the USAO elect to pursue any charge or
any civil or administrative action that was either dismissed or not filed as
a result of this agreement, then: a) Defendant agrees
that any applicable statute of limitations is tolled between the date of
defendant's signing of this agreement and the USAO’s discovery of any knowing
and willful breach by defendant. b) Defendant gives up
all defenses based on the statute of limitations, any claim of preindictment
delay, or any speedy trial claim with respect to any such prosecution or
action, except to the extent that such defenses existed as of the date of
defendant’s signing of this agreement. LIMITED MUTUAL
WAIVER OF APPEAL AND COLLATERAL ATTACK counsel, a claim of
newly discovered evidence, or an explicitly retroactive change in
the applicable Sentencing Guidelines, sentencing statutes, or statutes of
conviction. 20. The USAO gives up
its right to appeal the Court's Sentencing Guidelines calculations, provided
that (a) the Court does not depart downward in offense level or criminal
history category (except to the extent requested by the USAO) and (b) the
Court determines that the total offense level is 34 or above prior to any
departure under U. S. S. G. § 5K1.1. RESULT OF VACATUR,
REVERSAL OR SET- ASIDE SCOPE OF AGREEMENT established by statute,
defendant cannot, for that reason, withdraw defendant's
guilty pleas, and defendant will remain bound to fulfill all defendant's
obligations under this agreement. No one -- not the prosecutor, defendant's
attorney, or the Court -- can make a binding prediction or promise regarding
the sentence defendant will receive, except that it will be within the
statutory maximum. 23. This agreement
applies only to crimes committed by defendant, has no effect on any
proceedings against defendant not expressly mentioned herein, and shall not
preclude any past, present, or future forfeiture actions. NO ADDITIONAL
AGREEMENTS This agreement is
effective upon signature by defendant and an Assistant United
States Attorney. I have read this
agreement and carefully discussed every part of it with my attorney. I
understand the terms of this agreement, and I voluntarily agree to those
terms. My attorney has advised me of my rights, of possible defenses, of the
Sentencing Guideline provisions, and of the consequences of entering into
this agreement. No promises or inducements have been made to me other than
those contained in this agreement. No one has threatened or forced me in any
way to enter into this agreement. Finally, I am satisfied with the
representation of my attorney in this matter. _________________________
_______________ I am Reed E. Slatkin’s
attorney. I have carefully discussed every part of this
agreement with my client. Further, I have fully advised my client of his
rights, of possible defenses, of the Sentencing Guideline provisions, and of
the consequences of entering into this agreement. To my knowledge, my
client's decision to enter into this agreement is an informed and voluntary
one. _________________________
_______________ STATEMENT OF FACTS I. INTRODUCTION REED E. SLATKIN (“
SLATKIN”) was a resident of Santa Barbara County, California. SLATKIN
portrayed himself as an investment adviser and money manager and accepted
funds from individuals for the stated purpose of investing these funds in
securities and other investments. SLATKIN was not registered as an investment
adviser with the Securities and Exchange Commission (“ SEC”). The Reed Slatkin
Investment Club was an investment program created by SLATKIN in or about 1990
to invest individuals’ retirement funds. Topview LLC, Fanfare LLC, and London
Powell LLC were limited partnerships created by SLATKIN in or about the year
2000 through which he offered his money management services. Over the above-
referenced years, SLATKIN obtained over $593 million from approximately 800
investor accounts. With the assistance of others, including Ronald Rakow,
SLATKIN promoted himself as a successful financial adviser and provided his
investors with account statements which purported to document a consistent
record of achieving above- market returns on their investments. In truth,
SLATKIN used the bulk of investor funds to operate a massive “Ponzi” scheme
whereby he defrauded his investors by paying them returns largely with funds
raised from other investors. SLATKIN generally did
not buy the securities that he represented to investors as having been bought
on their behalf with their funds. He
invested only a small percentage of investor funds,
typically on speculative and ultimately unprofitable ventures that were not
disclosed to the investors. SLATKIN also misappropriated investor funds by
using them for the personal benefit of himself and his family, friends, and
business associates. SLATKIN obtained new
investors through referrals from existing investors and through the efforts
of others, including Ronald Rakow, who solicited individuals to invest their
funds with SLATKIN. In soliciting funds from investors, SLATKIN made and
caused others to make the following representations and promises, among
others: (1) SLATKIN had developed trading techniques and theories that
enabled him to achieve above- market returns; (2) funds deposited by
investors would be used to purchase securities and cash instruments that
SLATKIN determined to be appropriate; (3) returns on investors’ portfolios
would be based on profits from their investments; (4) investments would be
held in SLATKIN’s name or in the name( s) of companies, partnerships, and
other entities that SLATKIN owned or controlled; and (5) SLATKIN would
maintain an accurate accounting of individual investor portfolios. In order to invest with
SLATKIN, an individual investor would mail, wire, or personally deliver funds
to SLATKIN, to others working at his direction, or to bank accounts
controlled by SLATKIN. Thereafter, SLATKIN would cause quarterly account
statements to be sent to investors which listed the account number, the
starting balance, any deposits and withdrawals for the quarter, and the
ending balance. Some investors would also receive annual
statements which purported to show the itemized securities which they held,
the proceeds from the purchase and sale of these securities, and the overall
performance of their portfolio. These account statements represented that
SLATKIN held a large portfolio of securities on behalf of his investors in
corporations such as Lockheed Martin Corp., AT& T, and Global Crossing,
as well as a variety of smaller technology and communications companies. SLATKIN also developed
a program, called the Reed Slatkin Investment Club, whereby individuals could
place their retirements funds under his management. From in or about 1990 to
in or about May 2001, approximately 80 investors participated in this
program. From in or about the
year 2000 to in or about May 2001, SLATKIN also formed limited partnerships
with certain individuals through which he offered his money management
services in various investments. These partnerships included Topview LLC,
London Powell LLC, and Fanfare LLC. Beginning in or about
1986, and continuing until in or about May 2001, in the Central District of
California and elsewhere, SLATKIN, knowingly and with intent to defraud,
planned and executed a scheme to defraud approximately 800 investors
throughout the United States of over $593 million, and to obtain money and
property from such investors by making and causing materially false
statements to be made to such investors and by concealing material facts from
them. In carrying out this
scheme, SLATKIN engaged in and caused others to engage in the
following fraudulent and deceptive acts, among others: (1) SLATKIN did not
use the vast majority of investor funds to purchase securities and cash
instruments as represented on account statements, but instead disbursed these
funds to other investors as fraudulent returns, diverted funds for his own
personal benefit, and dissipated funds on many speculative, undisclosed, and
ultimately unprofitable investments in which SLATKIN had a beneficial
interest; (2) account statements sent to SLATKIN’s investors were misleading,
deceptive and materially inaccurate. SLATKIN would fabricate the percentage
of return to be represented to investors and would devise a false trading
history for various securities. He caused others to generate fraudulent
account statements reflecting this false information through the use of
specialized computer programs. The false returns represented to investors
averaged approximately 24% annually during the course of the scheme; (3)
SLATKIN failed to maintain separate accounts for investors but rather
commingled investor funds and treated them as his personal funds; (4) because
SLATKIN’s investments did not generate sufficient income to meet investors’
periodic requests for payments, SLATKIN used newly invested funds from some
investors to pay other investors. SLATKIN intended these payments to induce
existing investors both to entrust him with new funds and to expand his pool
of investors through referrals. The Reed Slatkin
Investment Club operated in much the same manner. From the inception of this
program, SLATKIN commingled investors’ retirement funds with other funds
under his control. All account statements
sent to investors were fabricated; the listed investments,
trades, and profits were false. Similarly, SLATKIN commingled the investor
funds he obtained through his various partnerships with his other investor
funds and used these funds for his personal benefit, to payback other
investors, and to otherwise promote the continued operation of the Ponzi
scheme. SLATKIN misappropriated
investor funds by, among other things, using the funds to: (1) pay his
personal expenses and the personal expenses of his family and friends; (2)
make payments for the benefit of consultants and other business associates
who assisted him in perpetrating the fraudulent scheme; (3) invest in
speculative business ventures which he did not disclose to investors and in
which he had a beneficial interest; and (4) purchase real estate, airplanes,
cars, artwork, and other luxury items for his personal use and the use of his
family, friends, and business associates. SLATKIN concealed and
caused others to conceal the following material facts, among others, from
investors: (1) the vast majority of investor funds were not being used to
purchase securities and cash instruments; (2) the source of payments to
investors was generally funds solicited from other investors; (3) investor
funds were often squandered on speculative business ventures; and (4) SLATKIN
misappropriated investor funds for his personal benefit, and the benefit of
his family, friends, and business associates. Moreover, in order to
lull and deceive investors into believing that his investment program was
legitimate and to conceal the unauthorized diversion of investors’ funds,
SLATKIN (1) sent or caused
others to send account statements to investors which purported to
state the value of their portfolios; (2) made or caused others to make
payments to investors until near the end of the scheme, by which time SLATKIN
had depleted their funds; and (3) made or caused others to make a variety of
pretextual excuses to investors regarding why he could not return their
funds, including that it was an inopportune time in the market to sell shares
and that investor funds were temporarily frozen in overseas bank accounts. On or about the dates
set forth below, in the Central District of California and elsewhere,
SLATKIN, for the purpose of executing the above- described scheme, caused the
following items to be placed in an authorized depository for mail matter and
to be sent and delivered by the U. S. Postal Service according to the
directions thereon: DATE / ITEM MAILED 4/ 17/ 98 Quarterly
account statement from SLATKIN to Carolyn Judd, Los Angeles, California,
showing balance of $5,819,468.26 for the period ending 3/ 31/ 98 9/ 7/ 00
Brokerage statement from Jersey Shore Trading Group Inc. to Top View LLC,
Santa Barbara, California, showing closing balance of $638,729.47 for month
ending 8/ 31/ 00 10/ 17/ 00 Quarterly
account statement from SLATKIN to Ike Kezsbom, Nationwide Title Clearing,
Inc., Glendale, California, showing balance of $1,707,112.15 for the period
ending 9/ 30/ 00 DATE / ITEM MAILED DATE / TRANSMISSION 6/ 2/ 00 Wire transfer
of $500,000 from an account of Gregory Abbott at Morgan Guarantee Trust in
New York, New York to an account of SLATKIN at Union Bank of California in
Irvine, California V. THE MONEY
LAUNDERING DATE / MONETARY
TRANSACTION 1/ 13/ 99 Payment to investor
Linda Rosen in the amount of $1,850,000 by wire from an account of SLATKIN at
Union Bank of California, using funds derived from a variety of investors In or about November
1999, the SEC initiated a formal investigation of SLATKIN’s investment
activities. On or about December 13, 1999, the SEC issued a subpoena
requiring SLATKIN to testify under oath before the SEC and to identify and
provide various documents including account statements for all of his
investors. Beginning in or about
November 1999, and continuing until a date unknown, in the Central District
of California and elsewhere, SLATKIN, Jean Janu, Dan Jacobs, Didier
Waroquiers, and others, knowingly
conspired and agreed to obstruct the SEC proceedings. SLATKIN
provided and caused others to provide materially false documentation to the
SEC to obstruct the SEC investigation and to conceal the fact that his
investment program was a massive Ponzi scheme and that his investor account
statements were complete fabrications designed to lull and deceive investors.
Specifically, SLATKIN provided and caused Jean Janu, Dan Jacobs, Didier
Waroquiers, and others to provide the SEC with, among other things,
fabricated investor account statements, fabricated lists of liquidated
investor accounts, and fabricated correspondence and account statements from
a nonexistent, purportedly legitimate Swiss brokerage company called NAA
Financial (“ NAA”) where a significant amount of investor funds were
purportedly held. SLATKIN falsely
testified under oath before the SEC in several material respects for the same
purposes. Specifically, SLATKIN testified falsely about, among other things,
the purported success of his investments made on behalf of investors, the
purported accuracy of account statements sent to investors, the purported
existence of NAA and brokerage accounts held with NAA, his purported efforts
to liquidate investor accounts, and his purported intention not to accept
additional investor funds. At SLATKIN’s direction,
Jean Janu fabricated lists of liquidated investor accounts which she knew
would be provided to the SEC. Dan Jacobs and Didier Waroquiers assisted
SLATKIN in maintaining the fictions that NAA really existed, that it was a
legitimate brokerage company, and that investors’ funds were held overseas in
one or more NAA accounts. SLATKIN, Janu, Jacobs,
and Waroquiers committed and caused the commission of
numerous acts within the Central District of California, including, but not
limited to the following: (1) on or about January 7, 2000, SLATKIN caused
fraudulent investor account statements to be sent to the SEC identifying
approximately 500 investor accounts with a purported cumulative value of
approximately $230 million as of September 1999; (2) on or about the same
date, SLATKIN caused the SEC to be advised that SLATKIN was in the process of
liquidating investor accounts, that is, repaying investors the funds SLATKIN
managed for them; (3) between on or about January 19, 2000 and in or about
April 2000, SLATKIN, in an effort to demonstrate the existence and legitimacy
of NAA, caused the SEC to be provided with false information regarding NAA,
including fabricated correspondence and account statements on NAA letterhead;
(4) on or about January 21, 2000, SLATKIN falsely testified under oath during
a deposition before the SEC that (a) NAA was an established investment firm
located in Zurich, Switzerland; (b) as of March 31, 1999, he had been holding
over $217 million in investor funds in an account with NAA; and (c) he was
not accepting any new accounts or any money for existing accounts; (5)
between in or about the beginning of the year 2000 to in or about May 2001,
SLATKIN concealed from the SEC the material fact that he obtained
approximately $135 million in new funds from investors during that time
frame; (6) on or about February 2, 2000, Waroquiers, using the false name
Michel Axiall, fabricated a letter on NAA letterhead reflecting that SLATKIN
had an account with NAA through which assets were being held in five
different European banks; (7) on or about
August 17, 2000, Janu prepared a list to be provided to the SEC
which falsely reflected that as of July 31, 2000, SLATKIN had liquidated all
but approximately $33.5 million of investor accounts; (8) on or about the
next day, SLATKIN caused the SEC to be provided with the fabricated list that
Janu had prepared the previous day; (9) In or about September 2000, SLATKIN
caused account balances for approximately two- thirds of his investors to be
shifted from an existing computer database (the RBF database) to two newly
created databases (the London Powell and Fanfare databases) so that it would
appear to the SEC that these investors had zero account balances; (10) on or
about October 5, 2000, Janu fabricated another list to be submitted to the
SEC which falsely reflected that as of September 30, 2000, SLATKIN had
liquidated all but approximately $3 million of investor accounts; and (11) on
or about October 6, 2000, SLATKIN caused the SEC to be provided with the
fabricated list that had been generated by Janu and caused the SEC to be
informed that his liquidation of investor accounts was virtually complete. |
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