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All About Silver - ... the buck stops here ...
$5 Billion(?) Class Action Against Monex and owners Louis Carabini and Michael Carabini




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Admitted Unnecessary Expenses?

December 3, 2015 1:10PM EST
Please try to follow my logic here.

Dan Bensimon (CRO) and Joe Martinec (Bullion Direct's attorney) made a voluntary decision to stop communications with me, despite my requests otherwise. I would be happy to post the relevant E-mails if anyone wishes. Their first and only E-mail to me was the day after the bankruptcy petition was filed. So the vast majority of expenses were after they chose not to communicate with me.

By choosing not to communicate with me, they are essentially saying that doing so is not necessary. Obviously, if it was necessary, they would communicate with me, right? I assumed it would be negligent not to do something necessary. So they have made it clear that communicating with me is unnecessary (of course, that isn't really true, but that is what they appear to be saying).

The problem, though, is that I have given them information they have acted on. For example, I alerted them to the $9.8M in bogus claims, which they then fixed. I alerted them to the fact that a 2010 tax return had been filed (after they implied (Docket 44) and clearly stated under oath (creditors' meeting) that none had been filed), and they took action to get a copy of the return. I guess if I unintentionally lied under oath I wouldn't be happy (the expression "Shooting the Messenger" comes to mind).

So the problem is this: if they have decided my input in unnecessary, how can they say that expenses for acting on my input is necessary?

Dan and $34K to Understand Database

November 25, 2015 1:40PM EST
Dan Bensimon is asking for approval to be paid $33,980 (of the $81,241.90 total) for 'Understanding and utilizing database for estimating accounting information'.

Unlike much of the communications with creditors that was not necessary, this was critical. Aside from the word estimating, there is little question that this was a necessary function to be performed.

The real question, however, is whether $34K is a reasonable fee to charge to understand the database? The first issue that comes to mind is that Dan promised at the Creditors' Meeting that there would be no cash outlay for his work for Nucleo. How can you license the technology without understanding the database? So there appears to be a conflict of interest: when learning about the database, does he bill the estate (getting cash if the court approves), or count it as part of his work with Nucleo (where he risks not getting paid)? One is obviously better for him, the other is obviously better for the creditors: therefore, a conflict.

Another issue is that it is hard to understand how the database could be that complex. In most cases, customers could simply log in to their account to see exactly what was in their account. The only exception I am aware of is cases where someone put in a request for a product or cash draw, that had not been fulfilled yet. But Dan ended up getting that information from the database, so it was in there. A database expert might charge $300 an hour -- but be able to fully understand the database in a few hours. The expression 'Jack of all trades but master of none' comes up.

The biggest issue in my mind is that Bullion Direct botched the initial schedules. The $34K fee was to understand the database for the schedules. But the original schedules were extraordinarily inaccurate. I discovered -- without the access to databases and confidential data that Dan has -- that of the $16.7M of cash Dan said was owed customers, $4.3M was duplicated, and $9.8M was not actually owed customers. To be fair, I get paid $0/hour for my work here, and do not get $300/hour, so I might be missing a good reason Dan originally listed $9.8M of bogus liabilities and $4M of duplicate liabilities and then removed them after I told him about them. Perhaps there is a good reason for listing $16.7M of cash liabilities to customers when it is really $1.9M. Barring that good reason, it looks like Dan did not have the slightest grasp of the numbers when putting together the schedules.

And if Dan botched the initial schedules, should creditors pay him to fix his mistakes and learn more about the database -- again, something that he needs to know to market Nucleo (which creditors should not be paying for, at least at this point)?

Wait, there is another issue: Dan also billed at least 4-20.3 hours (the actual time is not possible to determine as he breaks up his time into days, rather than 1/10th hours like attorneys do) for what appears to be work on Nucleo (meeting with an organization that was looking to license the Nucleo technology). Then there is "review app on web for marketing", which sounds a lot more like Nucleo work than Bullion Direct. I thought there was going to be no cash outlay for Nucleo work?

Dan also did meet once with Bullion Direct's Director of IT (who had been there over a decade, and the person most familiar with the database) and had discussions about the database and how it works. What issues were not resolved in that one meeting that required billing an extra 100+ hours for? Why were those issues not resolved by meeting with the employee again?

To put $33,980 in perspective, that's enough to pay off the 2,800 creditors with the smallest claims. That's roughly half of all the creditors (to be fair, they are all owed under $50).

Finally, part of Dan's justification of his fees was "The work to date has helped the unsecured creditors understand the multitude of projects and the overall financial position of the Debtor." However, that is blatantly untrue. With no communication, there is zero understanding among creditors of the "multitude of projects." And, the financial position is also very unknown to creditors: the main asset is the intellectual property, and the value of that is less certain than before. At the creditors' meeting it was implied that there would be little value in the IP if a deal wasn't finalized in a few weeks; it's now been a few months. And we found out that Charles' Mom is a patent attorney -- instantly casting doubt on the $10M valuation (e.g. that it may have been done by friends of hers, especially given all the attorney entanglements).

I don't want my writing to seem like an attack on Dan or Joe, but if they are going to charge $300-$450/hour, they need to expect that their work is going to be scrutinized, and sloppy work will be uncovered and brought to light. That may not normally happen in bankruptcies, but it has to be expected. With the Tulving case, I could not find reason to harp on the professional fees, despite the fact that Tulving's professionals charged about twice per hour what Bullion Direct's professionals do.

10 Attorneys With Their Hands in the Cookie Jars

November 24, 2015 4:20PM EST
Let me be clear -- this is not intended to suggest wrongdoing on the part of these attorneys. The point of this post is to show how interconnected some attorneys in and around Austin are with companies that have strong ties to Bullion Direct.

I have found so far 10 different attorneys with connections to Bullion Direct and the companies connected to Bullion Direct, that appear to be doing more than simply acting as an attorney.

One benign example is an attorney who appears to be friends with the McAllisters, and did work for both Charles personally and a previous business Charles ran (the attorney worked at two different companies, neither of which appears to normally do the type of business the attorney was doing). But it is an example of hiring an attorney based on connections, rather than their specialty.

Next is the lawyer that received mail for a Bullion Direct subsidiary -- a personal injury lawyer that worked in the same building as Bullion Direct (and whose website advertises that they only get paid if they generated a monetary recovery). That obviously isn't a typical job for that attorney. What was the rationale for Charles picking him? Was it the same rationale he used to pick Joe Martinec?

Then there are 3 attorneys who were co-inventors of a patent owned by a company controlled by a company that Bullion Direct invested in. Those 3 attorneys are involved in at least 19 other companies which appear to be related to one Bullion Direct invested in.

And 4 of these 10 attorneys work within 1,500 feet of Joe Martinec (and the location where the $24M of missing metal went missing from).

The point of all this? Remember that it was the person believed to be the mastermind of a $24M Ponzi-like scheme who picked Joe Martinec (who then picked Dan Bensimon). Given the connections between local attorneys and the companies that Bullion Direct invested in (or loaned money to, or had high-level employees working at the same time they worked at Bullion Direct), Charles' odd choice for an attorney to receive mail, and that Joe knew of Bullion Directs' insolvency 2 years before they shut down, I think it is only prudent to scrutinize the professional fees. As Ronald Reagan would say, "Trust, but verify."

Web of Companies, Employees, and Families

(a networker's dream)

November 24, 2015 1:20PM EST
Bullion Direct was immersed in an interesting culture: one where there were many connections between companies, employees and families.

As an example of family connections, one high level employee's brother and daughter were also hired. And as we just learned, Charles' mother had involvement in the beginning, middle, and end. There are also a number of the closely related companies that have spouses or other relatives as members, directors, or in other similar positions.

The employee connections get a bit more interesting. In one case, a high level employee's college buddy was hired. And another employee had worked with and still works with the employee whose brother and daughter were hired. Two Bullion Direct high-level employees started a business while they worked at Bullion Direct: a company that Bullion Direct invested $375,000 in. And one high-level employee -- possibly unbeknownst to Charles -- apparently got Bullion Direct to purchase services for which he earned a 15% commission on all billings (a company he was a VP of while working at Bullion Direct). As this example shows, in many cases high-level Bullion Direct employees had positions or other heavy involvement in other companies.

But the number of companies with close relations to Bullion Direct are staggering. I have a list of 52 (so far) different companies with connections to Bullion Direct. Bullion Direct itself consisted of at least 7 different companies. And then there is a conglomeration of companies having to do with hunting and related outdoor activities, a number of which Bullion Direct invested in and/or loaned money to, and many of which have heavy involvement by ex-high-level employees of Bullion Direct. Finally, there are about 6 companies related to gold mining operations, all of which appear to have been started by the same high-level Bullion Direct employee (that employee was involved in evaluating an investment Bullion Direct was considered that would have involved a $4M downpayment).

The only company that there is proof Bullion Direct invested in direct is NBFog, Inc. (which appears to now be defunct). However, NBFog was listed with 4 other companies on the "list of questions" for the creditors' meeting, hoping someone would ask if Bullion Direct invested in them or loaned them money. The U.S. Trustee asked about 4 of the 5 (I have no clue why NBFog was not asked about, as it was in the list), but Dan Bensimon said he was unaware of any such investments/loans. It was not long afterwards that it was proven that there was an investment in NBFog, Inc., making it highly likely there were investments and/or loans made with these other companies.

Cost of Communication ($27,220)

November 20, 2015 8:00PM EST
Dan Bensimon and Joe Martinec are asking the court to approve payment of $205,425.16. Of this, $83,430.00 will go directly towards paying Joe Martinec, and $73,080.00 will go towards paying Dan Bensimon. See dockets 124, 124-1, and 125.

Of the billable hours, 70.9 hours fall under the category "Creditor Inquiries" at an average of $384/hour, for a total of $27,220.00 being requested for simply responding to creditors. An example of what the $27,220 paid for was "It is likely that we will file an amended list of creditors but to [sic] early to tell." In another example, $157.50 was charged to add someone to the Website Claimant list (something I imagine could have been handled by an Admin for under $10). There seems to have been no effort made to ensure that lower-paid personnel would be utilized when appropriate.

On August 13, 2015, I E-mailed Dan and Joe asking if they planned to file an amended list of creditors -- saying that I was asking "because if there is a way that I can help save the estate tens of thousands of dollars, I would like to do so," and explaining that providing that information "could potentially save the bankruptcy estate significant money. My understanding is that you have a fiduciary duty to maximize the value of the estate for the benefit of all creditors." Yet they chose not respond. And when I gave them a final chance to respond 2 days later (Cc:'ing Valerie Wenger, the U.S. Trustee), I still got no repsonse.

On September 10, 2015, I E-mailed Dan and Joe that "We need an open line of communication," and again Cc:'d Valerie Wenger. I pointed out that their refusal to respond to me or provide information was a great disservice to creditors. Again, I got no response.

At this point, I was wondering if maybe I'm just delusional, a crackpot that should be ignored. But on September 8, 2010 I had E-mailed Dan and Joe to let them know that there was a 2010 tax return filed that they were unaware of. I never heard back from them, so I assumed that they didn't care. However, this week I discovered that Dan and Ben had a meeting about it, and the day after my E-mail they wrote a check to the U.S. Treasury to get a copy of that tax return (charging creditors $585 to do so)! Obviously, this was extremely useful information I provided.

To be blunt, Dan Bensimon effectively lied under oath (albiet unintentionally, stating at the creditors' meeting that no 2010 tax return was filed, and that they had copies of all tax returns that had been filed -- both untrue), and (again, unintentionally) misrepresented assets in Schedule B (using the 2009 tax return NOL rather than the 2010). The largest dollar amount listed in the schedules was incorrect, and they found out through me. Yet they don't want to hear from me! I also informed them of $9.8M in bogus claims on the schedules, which they fixed in a court filing 10 days later. These are massive dollar amounts they made mistakes with, and instead of a simple "thank you" or even "OK, we got your E-mail", nothing -- just a refusal to communicate with me.

When I tried to open the line of communications with them, I warned them that "Since I am not looking for money or credit for my work, the only reason that I can think of why you would choose to ignore me is that creditors are right: that you fit the stereotype of bankruptcy professionals ("keeping the dying corpse barely breathing for as long as there's money to spend" as one eloquently said). Please prove me wrong.". They didn't prove me wrong.

The court says "This court believes all fees should be reasonable and necessary to justify their approval for payment out of the funds of the estate prior to payment of allowed unsecured creditors," and that for a case like this justification is required to pay attorneys over $175/hour (Joe charges $450/hr). Yet the professionals are charging an average of $384/hour (more than double the maximum amount an attorney can charge before having to justify his rate) to answer simple creditor questions. That's not reasonable, and not necessary if they can just pass that information on to creditors through me. And they charged $157.50 to add a creditor to their list of claimants, which is certainly not reasonable if it could be done for 1/10th the cost.

So should Dan and Joe (and to a smaller extent their co-workers) get paid $27,220 for their communications with creditors? Should they get over $200,000 for all their work so far if they are going to close off a source of information that proved to be incredibly useful to them, that costs them (and creditors) nothing?

Fee Applications by Professionals

November 19, 2015 3:50PM EST
Both Joe Martinec's law firm and Dan Bensimon's firm have filed applications to get paid.

I will update this with further details later, but given that I just sent out an E-mail update, I thought I would post this as a heads-up that more information will be appearing shortly.



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