Hearing set for Jan 17th at 10 am and reply briefs due 28 days before. Text of actual suit-link.

On Nov 16th, 2002 the Bankruptcy Trustee filed a Partial Summary Judgment Suit-link on the limited issue of did Slatkin possess the Actual Intent to Defraud his creditors. Slatkin's Plea Agreement-link is attached from March 27, 2002 in which he waived his constitutional rights and plead guilty to multiple counts of wire, mail and money laundering crimes. He stated he ran a "Ponzi" scheme and he pled guilty in open court to the charges against him. The test for fraudulent intent is a transfer made by debtor "with actual intent to hinder, delay, or defraud andy creditor of the debtor"-link. The Trustee maintains the test for intent requires inquiry into the debtor's subjective state and the direct evidence of Slatkin's state of mind is the guilty plea and confession. The admission of a Ponzi scheme also speak to intent, but importantly the Trustee believes he does may not need to prove a Ponzi scheme to prevail because Slatkin admitted to fradulent intent. He also maintains that no amount of discovery will change or alter his confession and wants to proceed without discovery. This is a highly agressive tactic.

Legal defenses include the fact that a Plea Bargain is not made under oath and is not admissible. The plea also does not state when the Ponzi and fraud began and does not address whether Reed ran a legitimate operation that deteriorated late. Importantly various arguments are made without forensic backup such as Reed invested only a small amount of the money entrusted to him. This is not consistent with a net worth of over 200 million in 1999 which would have represented a larger percentage of money than net monies entrusted to him.

Approximately 40 people have been sued. This decision is a crucial element of the trial. If the trustee wins before any discovery has been allowed to take place, the appeal will rest on legal issues and a ruling for the Trustee will increase pressure on defendants to settle. Several attornies are upset at the lack of discovery and threatening to ask for sanctions. Some will be making motions to vacate the hearing date to allow time for a proper response. Expect an appeal whatever happens.