About.Ag


All About Silver - ... the buck stops here ...
Bullion Direct's owner, Charles McAllister arrested, indicted (wire fraud, money laundering), facing up to 50 years in prison



[Summary: Tulving ceased operations Mar. 3, filed for bankruptcy Mar. 10, after many reports of multi-month delays]
[Other Tulving pages: FAQ, Old News, Post-Mortem, Order Volume, $42.5M Calc., PDFs, Anonymous Tips, Mtngs #1, #2]
[See also: Bullion Dealer Data]

Halfway House

February 10, 2018 6:35PM EST
People are starting to get E-mails letting them know there is an update on Hannes Tulving, Jr.

The information is that he will be transferred on February 22, 2018 to a "halfway house" (officially, a "Community Corrections Center"). His scheduled release date of June 23, 2018 remains the same, but he will be at a halfway house until then.

Anonymous Tips...

February 8, 2018 1:35PM EST
I got an anonymous tip recently, that had some information about what happened at The Tulving Company.

If you have any more information, feel free to share! It would be more than welcome.

UPDATE: I am very, very careful with information I receive (in this case, the Bullion Direct case, and the NWT Mint case, I have received quite a bit of sensitive information). Most information never gets published for various reasons, and when requested I make sure not to publish information I receive. However, such information can be very useful and give me a better picture of what happened.

Government Duped by Trustee?

February 1, 2018 2:30PM EST
A few weeks ago I wrote a post "Did Trustee Lose or Squander $385,000?". I asked the Trustee for clarification, and got a response from her attorney, Linda Cantor.

The issue is that the non-error coins generated net proceeds of $385,314 (per Ms. Cantor in Docket 640; "The net proceeds of the auction amounted to $385,314"), which were to be sent to creditors entitled to "prompt payment." Docket 289 refers to "any additional recoveries by the estate will be distributed to all claimants on account of their outstanding allowed claims pursuant to the priorities and other provisions of the Bankruptcy Code." To me (as a layperson) that sounds like 2 separate payments distributed in 2 different ways to 2 (potentially) different groups of people.

Ms. Cantor responded that "The proceeds of the Seized Assets are also subject to other fees and expenses" (without stating why). She further states that the amount of the fees will not be known until the end of the case, so presumably she does not plan on paying creditors the net proceeds (if any) until then. She states that the fees related to the liquidation were approved without any objections in the second interim expense fee applications, yet the expenses are not outlined in any clarity (there is no separate category for liquidation or the Non-Error coins; the fees with "liquidation" in the description amount to $13K or so).

Linda Cantor also implies that she will be deducting the costs of grading the error coins from the proceeds of the non-error coins, despite the language clearly referring to the "net proceeds of the sale of the Non-Error Coins." Apparently, when the Trustee proposed to the Government that "the Trustee will distribute the net proceeds of the sale of the Non-Error Coins to Victims/Creditors", (s)he really meant "the Trustee will at some point in the future distribute the net proceeds of the sale of the Error and Non-Error Coins to Victims/Creditors, minus other fees and expenses." So much for the "prompt liquidation" that the Government was expecting.

Can the Trustee Pawn Off Her Work?

January 16, 2018 8:20PM EST
I haven't seen any evidence that the new Chapter 7 Trustee (Weneta Kosmala) has done anything other than sign a few documents. She has not replied to my E-mails, nor have I heard of her responding to any creditors. The only communication we have from her is 2 Trustee Reports, but those appear to have been written by the Trustee's law firm (at $850/hour), and the Trustee's financial advisors (at $620/hour).

In the NWT case, the Judge complained that the Trustee pawned off work he should have been doing to his accounting firm, which is advantageous to the Trustee in cases where the Trustee may not get paid (as is the case here, where Trustee Weneta Kosmala's allowed fee will presumably be very small due to the lack of cash distributions). The NWT case Judge also says "the trustee is tasked with reviewing the bills of his professionals and it would be difficult for him to review the bills of his own firm." Note that the NWT Mint case, while very similar, uses Washington State bankruptcy laws.

The NWT case Judge believed that the entire categories of "Bankruptcy Administration, Plan & Disclosure Statement, Committee, Court Hearing" should be covered by the Trustee (not the professionals). In the Tulving case, the professionals billed for "General Case Adminstration", which sounds very similar to "Bankruptcy Administration".

Just some food for thought.

Did Trustee Lose or Squander $385,000?

January 16, 2018 3:55PM EST
From what I can tell, the Trustee was supposed to promptly distribute the $385,000 net proceeds of the auction of Non-Error coins to creditors. Needless to say, that hasn't happened. I have contacted the Trustee and will post here if I get a response.

Back in March, 2014, the Secret Service seized non-bullion coins from The Tulving Company, as part of what became a criminal case. Despite many conflicting valuations, the non-error coins turned out to be worth roughly $385,000, with the error coins worth roughly $600,000. Over 2 years later, the Trustee started distributing the error coins to creditors (if you are a creditor and have NOT received the coins, please let me know).

In June, 2015 The U.S. Attorney approached bankruptcy Judge Smith to approve an agreement "for the purpose of achieving prompt liquidation of seized unique and rare assets and distribution of funds for the benefit of victims." 4 reasons were given for having the bankruptcy estate handle this rather than the criminal case: [1] the list of victims would be determined more quickly, [2] the items would be sold/distributed more quickly, [3] the proceeds would be distributed more quickly, and [4] avoiding a dispute of who should control the assets, which would help allow "prompt delivery of funds to victims." Criminal case Judge Cogburn ordered the Trustee to "make every effort to prioritize payments to Victims over all other payments, except for reasonable costs and expenses of liquidation approved by the Bankruptcy Court which the Parties do not object to in writing." On July 22, 2015, bankruptcy Judge Smith signed the order.

The Trustee filed a motion with his proposal (as the agreement required), which bankruptcy Judge Smith approved, where the Trustee would "distribute the net proceeds of sale of the Non-Error Coins to Victims/Creditors." The Non-Error coins would be auctioned in a 3-6 month period , which would expose the coins to the greatest number of buyers and "bids will be subject to overbids" (p10; so the bids would be known, and anyone could then bid more).

On May 31, 2016, the Court suddenly announced that the non-error coins would be auctioned less than 2 weeks later, in a mail-only sealed bid auction, completely contrary to what had been in the proposal and contract with Heritage Auctions. It neither exposed the coins to the greatest number of buyers (over a 3-6 month period), nor allowed overbids (it even clearly states "no overbids"), reducing the amount of money available to creditors. But at least it generated some cash.

Then, Trustee Weneta Kosmala stated in her Trustee Report #9 "Please note that the distribution of funds in a chapter 7 case generally does not occur until the conclusion of the case" -- but that goes against the proposal (a check separate from any standard bankruptcy distributions was going to be sent to creditors for the net proceeds).

The Trustee's attorney Linda Cantor in November, 2016 wrote "The net proceeds of the auction amounted to $385,314." This clarifies things: a layperson would assume that "net proceeds" of an auction would be the amount the auctioneer sends ($385,314 in this case) after taking their cut, and Ms. Cantor confirmed this here.

It is very clear that the net proceeds of the sale were $385,314, which 2 Judges, the U.S. Attorney, the Trustee, and Hannes Tulving, Jr. all agreed would be distributed to creditors. So where is this money? It has been over 2 1/2 years since the Trustee, criminal case Judge Cogburn, and bankruptcy Judge Smith signed an order which contemplated "expediting distribution" of "sale proceeds" and "promptly liquidat[ing] the Seized Items and distribut[ing] funds derived from liquidation to Tulving Company customers." And creditors have seen none of that money yet.

Aside from the $385,314 of missing money, these other questions come to mind:

  • Why was it a one-time auction, when the Order and contract stated auctioning over a 3-6 month period?
  • Why was the auction held with only 11 days notice?
  • Why did the Estate pay for photographs which were not taken and/or used? Without photographs, some lots could only realistically be sold to bidders who flew to the auction site (e.g. "Lot of assorted bits and pieces").
  • What ever happened to the Error coins that creditors opted out of (which were to be auctioned, with proceeds going to creditors)?
  • Why was there very little marketing of the auction? Heritage Auctions stated it would "advertise the Non-Error Coins for sale in various print and online media", but I heard no reports of anyone seeing any such advertising.
  • Why was Heritage Auctions unable to find the auction, as reported by one potential bidder?
  • Why was the auction not on the Heritage Auctions website?
  • Judge Smith's order allowed the Trustee to employ Heritage Auctions based on the terms in Docket 391, which had the contract stating that the auctions "will take place during the first 6 months of 2016". Yet they took place on 1 day, with less than 2 weeks' notice.

Update: More Cash Than Known

January 16, 2018 8:10PM EST
I have reported recently on the assets held by the estate. I reported the last known assets as $605,093, as reported in October, 2016. However, there was a reference to $814,240.60 in "unrestricted funds" in Docket 638 p7.

This only compounds the issues of the Trustee claiming that the creditors would get nothing even with a full victory against the Gugasians (~$2.1M). That claim seemed highly dubious given what we knew, but now that we know that there is an extra $200K of cash, that's an extra $200K of expenses we do not yet know about that go well beyond what was expected.

Check From United States Treasury

January 12, 2018 3:00PM EST
I have now heard from several creditors who received a fairly small check from the United States Treasury, with little information on what it was about.

It appears that the checks, ranging from an estimated $18 to $760 (depending on how much you are owed) are being sent to creditors. It looks like they are paying slightly over 0.18% of what each creditor is owed.

It appears that the checks were sent from the Administrative Office of the United States Courts, which sent out the checks by request of the Finance Department of the U.S. District Court, Western District of North Carolina (based on the phone number listed on the check), the court where Hannes Tulving, Jr. was sentenced. It appears to be a check for restitution, based on about $29K that was received by the court.

Note From Creditor

December 28, 2017 7:45AM EST
Here is a note to creditors from the creditor who put together the letter for the Judge:

dear creditors I am sorry to report that A Series of Unfortunate incidences occurred where the judge did not get the pleading in time for the court but the attorneys representing the bankruptcy said it wouldn't have mattered anyway because even if we they went to court with a new settlement still the professionals would get 100% of it so it wouldn't have mattered but just so you know what happened was that I sent it Priority Mail in the same city as Santa Ana on Saturday and the judge did not still receive it on Thursday and I was told it would arrive on Monday and then I was out of town traveling and I kept getting notices from the post office that what it would arrive on Monday and then it said it would arrive on Tuesday and then it said it would arrive on Wednesday and then it said it would arrive on Thursday so I kept thinking that it would arrive any day and that the judge would get it but it turns out that it was supposed to have been sent by the 11th anyway in order to be admitted so I wasn't told any of these details and it was a big Mess but it turns out that it was a futile effort anyway but I will compose a pleading and do it in plenty of advance notice to protest the professional fees and the way they billed because the attorneys are charging many hours of time for travel when they could have done everything over the phone. I'm sorry that I wasn't able to make a difference in this one I hope you all have a Merry Christmas and happy holidays. Kendra

Settlement Agreement Approved

December 18, 2017 4:30PM EST
The Judge, as expected by her Tentative Ruling, approved the Gugasian Settlement Agreement.

The letter from creditors arrived on the same day as the hearing, but apparently after the hearing was held. So the Judge, while aware of the existence of the letter, made her ruling without factoring it in. Hopefully she has read the letter, and understands the concerns of the creditors, who are furious that the professionals have apparently billed or will bill over $2M while returning next to nothing to creditors (the error coins worth roughly 3% of the value of claims).

2017 Tax Deduction

December 14, 2017 1:20PM EST
A tax deduction for the loss from the Tulving Company fiasco can be tricky. I wrote a page about it a few years ago.

Given what the Trustee has said, it appears that it is safe to deduct any amount you have not yet deducted, in the 2017 tax year (remember, of course, I am not a tax professional).

In general, there are two options: a capital loss (just as if you had paid for a stock that is now worthless), or a theft loss. A theft loss gets trickier, as it could increase the chance of an audit, but could result in more of a tax saving.

December 18, 2017 4:35PM EST UPDATE: Someone kindly pointed out that the casualty loss will be removed in 2018, so be sure to take the loss on your 2017 return if you have not already (or a tax professional advises otherwise for some reason).

... and the Judge Doesn't Care, Either

"the court will not consider the Opposition."

December 13, 2017 3:30PM EST
I just checked Judge Erithe Smith's calendar, which she has updated. In it, she writes in her 'tentative rulings':

     Grant motion.

     Special Note: The Trustee has filed a reply referencing a late Opposition.
     However, as of December 13, 2017, no such Opposition appears on the
     court's docket. Accordingly, the court will not consider the Opposition.

So 50 creditors sign a letter to a Judge, and she ignores it because it didn't appear in the court docket. It's pretty much a moot point now, since the Trustee said there won't be any distributions to creditors. But for the Judge to not even consider the Opposition? That doesn't seem like justice to me.

What Could Happen?

December 13, 2017 5:00PM EST
My expectation at this point is that the bankruptcy will close, the professionals will get paid, and creditors will not get anything beyond the low-value coin distribution (and perhaps a tax deduction).

That said, there are a couple of unlikely scenarios that could potentially help creditors in the bankruptcy before it closes. The first that I see is if a creditor has an attorney appear at the hearing tomorrow. It's very, very last-minute, and the Judge may well refuse to listen to an attorney or consider the views of the creditors. But given that the Trustee is obviously not on the side of creditors, a good attorney could potentially help tomorrow.

The second that I see is if a creditor has an attorney intervene after tomorrow. Given the circumstances, it may be possible an attorney could do something. For example, even though the Judge approved expenses through October, 2016, creditors may well have objected if the Trustee had been forthcoming about the likely outcome of the case. And some of the money collected may have been under somewhat false pretenses (e.g. the coin auction catalog stated "Auction ... to benefit creditors of the Tulving Company, Inc."). And can you really justify suing the Gugasians simply to pay off attorney fees? And repeatedly suggesting to the Judge that creditors got 18.75% of their money back, when they really got coins worth perhaps 3-4% of what they were owed? And how did they rack up $1M of expenses so quickly? How can the Trustee know the creditors will not get money but not tell them?

In any case, I believe the case is effectively closed.

The Trustee Response

December 13, 2017 3:00PM EST
The Trustee, Weneta M.A. Kosmala (she can be rated at that link), has responded to the letter that about 50 creditors included their names on. She did not even have the decency to mention that so many creditors included their names on it.

In it, she subtly announces the big news: she racked up an extra $1M or so of expenses in a year (at a much faster rate than before), and even if the lawsuit is successful, creditors will get nothing. In other words, Ms. Kosmala is telling creditors that they will not receive any money, regardless of whether the Settlement Agreement is approved or not.

Specifically, we know that as of last October, the professionals had unpaid expenses of about $1.2M, and assets of about $540-770K (depending on whether On The Rocks paid the money they owe). With the $648K from the Gugasian Settlement, that would be about $1.2M-$1.4M in assets. Ms. Kosmala wrote that the professionals would only receive about 50%-60% of their fees in this case, implying that total fees are about $2.4M -- over $1M higher than last reported.

What in the world has been done during that time that justified nearly doubling the fees, when the case was "in its concluding stages" in March, 2016?

She also seems to have changed her position on trial costs. On November 21, 2017, Ms. Kosmala estimated $100K-$200K in professional fees to try the cases. Now she says that it would cost $700K to go to trial (paying someone on a contingency fee) plus up to $100K of expenses. How can expense estimates go up 4-8 times in under a month? Finally, she points out that the questions that creditors have are irrelevant, because she factored those questions into her decision to make the Settlement Agreement. She completely ignores that fact that creditors wanted to know the answers to those questions, not have them (some answered and some not) quietly factored into the settlement.

So this raises more questions than it answers. How in the world could the professionals have incurred $1M of fees/expenses in the past year (compared to $1.3M in the busy 2 1/2 years before that)? Why didn't the Trustee let us know in her last report (Febrary, 2017) that no distributions to creditors were likely? Even if she did not know then, why did she not provide any updates since then? How much of that $1M of mystery expenses from the past year was related to the Gugasian Settlement? Did the Trustee sue the Gugasians solely to pay their legal fees? These actions are completely unfair to the creditors, who are the only victims here.

The Cowardly Trustee Says: It's Over, No Money

December 13, 2017 12:30PM EST
Unfortunately, it looks like the Tulving Company bankruptcy is over (as far as creditors are concerned), with the final outcome of the $17M bankruptcy being creditors getting coins worth roughly 4% of what they are owed. And the professionals getting somewhere around $1.2M to $1.5M.

So how did it all happen? Apparently, the Chapter 7 Trustee (Weneta M. A. Kosmala) has known for a long time that creditors were not going to get any cash, but was too cowardly to tell them. She has treated the creditors poorly since the beginning; I haven't heard of a single creditor who got a reply to their E-mails to her, and she happily gave away customer data for free despite the objections of creditors.

I will be writing more in the upcoming days about this.

Quiet

December 12, 2017 1:35PM EST
There are less than 48 hours until the hearing on the Settlement Agreement. Despite the protest from many creditors (or perhaps because of it), there has been complete silence.

I look at a number of sources for information on court happenings. The primary source is the case docket, which shows all the papers filed for the bankruptcy. Nothing has been filed regarding the Gugasian Settlement since the day the Settlement Agreement was filed with the court. Often there will be documents, such as objections/oppositions (or a notice that there are none), replys/responses, and similar documents. In this case, there has been nothing. That suggests that the local rules do not have letters written to the Judge automatically become part of the case docket (unlike, for example, the NWT Mint bankruptcy in Washington State).

One thing that can be determined from this is that as of this writing, no creditor has had an attorney file a written opposition, which an attorney would very likely do if a creditor hired them because they were opposed to the Settlement Agreement. If an attorney is planning to do so, they are doing it quite late.

For this issue, I am also looking at the Judge's calendar of tentative rulings. I believe she often will update that when she has information ahead of time suggesting how she will rule (e.g. stating that if there are no objections filed she will rule in favor of a motion). But she has not updated her page. That could either be typical, or indicative of her having received objections from creditors; there is no way for me to know.

In any case, the Gugasians and the Trustee will know on Thursday how the Judge rules. Hopefully, it will not be too long after the hearing before we hear the outcome.

Not Too Late?

December 1, 2017 4:15PM EST
I expressed concern that [1] The Judge might automatically approve the Settlement Agreement if there are no oppositions filed, and that [2] it may be too late for an opposition to be filed.

An attorney writing on Avvo.com states "Judges aren't obligated to grant any motion, unopposed or not." and "The opposing party can still show up and argue, and can still file an untimely opposition, and it's within the discretion of the judge to decide whether they consider a late filed document (they often do) and allow someone to argue even without having filed an opposition (also often done)."

So there may be hope yet.

Additional Notes

December 1, 2017 3:55PM EST
Here are some notes, just in case they may be useful later:

  • The Trustee was not required to 'notice' creditors about the motion, due to the Order of Judge Smith allowing limited notice. But, the motion stated "Moreover, the Trustee has caused to be established a website for creditors in this case which provides information regarding pending matters and other case events at http://tulvingbankruptcy.com".
  • The Trustee did not in any way notify creditors about the Settlement Agreement: not by official notice, not by the official Tulving Company bankruptcy website, or any other way.
  • When requesting the limited notice, then-Trustee Mr. Neilson wrote that requiring notice would not "[confer] any meaningful corresponding benefit" (docket 129 p8) -- but the ability to object to a potential $1.5M loss to the Estate could be meaningful.
  • The Trustee also wrote on that page that the cost of sending notice to creditors "would diminish the assets ultimately available for distributions to the Debtor's creditors" -- but if the Settlement Agreement is approved, that would prove untrue.
  • The Judge was unwilling to sign the original order for "limited notice" despite no objections, suggesting to creditors that she may be willing to do the same with other orders (I.E. approving the Settlement Agreement).

Formal Oppositions Required - But Too Late?

December 1, 2017 1:50PM EST
At least one creditor has heard back from one of the Trustee's attorneys, who said that to oppose the settlement, creditors need to file with the Court a written opposition explaining the basis for the opposition. This does make sense, as the Trustee's hands are tied -- she signed the agreement, so she likely cannot simply back out of it. She already pulled the trigger, so to speak.

The first problem is that it appears that it may be too late for a formal opposition. In re-reading the original motion, it appears that a formal opposition should have been filed 14 days before the hearing (December 14th), and by my (perhaps incorrect) calculations, that would have put yesterday as the deadline. Part of the problem here is that according to a order from 2014 from Judge Smith, the Trustee was not required to inform the creditors of the motion.

The other catch is that filing a proper opposition without an attorney is extraodinarily difficult. The Court has Filing Requirements and Procedures (section 2.5) and LBR 5005-1 and 5005-2. But even for someone who has looked at thousands of legal documents, this would take many hours to figure out. Further rules, for example, show that appearance at the hearing may be required if you file an opposition. There are a lot of potential "gotchas" (e.g. you need to serve the opposition to the proper parties). You can see an example of a proper opposition here. The Court does have a form for an opposition and request for hearing, but there already is a hearing scheduled.

In the NWT Mint case, a number of creditors filed informal oppositions; it is unclear if they intended these as oppositions or if they were just writing to the Judge. See for example, this, this, and this.

The best solution, of course, is to have one or more creditors hire an attorney to just "do it" -- even if it is too late for a formal opposition (attorneys have tricks up their sleeves, such as filing for exceptions to rules). But given that creditors already lost $17M, and the bankruptcy professionals have already billed $1.5M, it does not seem fair to expect all creditors who object to pay perhaps $300-$1,000+ to hire an attorney for this.

So at this point, I believe that the best that can be done without attorneys is to ensure that Judge Smith is aware of any important facts the Trustee may not be letting her know about (e.g. that most creditors believe the Settlement Agreement should not be signed, that creditors are getting error coins worth just 4% or so of their claim rather than the 18.75% Ms. Kosmala states).

I am hoping that Judge Smith will get the information she needs, and will make a fair determination of the Settlement, not relying solely on information supplied by the Gugasians, the Trustee, and their attorneys.

Why Action is Needed

November 30, 2017 2:10PM EST
The bankruptcy system, while slow and costly, is designed to get money to creditors when available.

However, the Tulving Company bankruptcy is broken. In 2016, the Trustee asked Judge Erithe Smith to give away customer data to Great Collections, at no cost to them. This gave Great Collections something of value, at a cost to Tulving Company customers (privacy). A number of customers contacted the Trustee, and one filed an objection through their attorney, who asked to appear at the hearing by phone (from Florida).

The Trustee did write in her reply to the objection that "informal creditor responses to the Motion (conveyed by e-mail) cite confidentiality concerns..." However, the creditor's attorney did not appear at the hearing (it is unclear if they were authorized to appear by phone). The Judge allowed this obviously poor motion, writing "Though an objection and request for hearing was filed, the objecting party gave no basis for its objection to the Motion. Accordingly, the objection is overruled."

In other words, Ms. Smith apparently did not take the creditor's opinions into account when making her decision. She may have been unaware (due to not scrutinizing the Trustee's reply), or maybe she could not legally take the creditor's opinions into account informally. Either way, it clearly will take more than a few E-mails to the Trustee to get the Judge to include the thoughts of creditors when balancing the fairness of the Settlement Agreement.

Survey Results: Settlement Agreement Should Not Be Approved

November 28, 2017 5:10PM EST
I sent out an E-mail yesterday to the Tulving Updates mailing list, explaining that a Settlement Agreement with the Gugasians had been reached, and that the Court will need to approve it. I added a very brief survey, asking if the people responding were a creditor, and whether they felt the Settlement Agreement should be approved (if you have not yet responded, feel free to do so).

As I write this, 41 Tulving Company creditors have responded. Of them, 1 felt that the Settlement Agreement should be approved, 2 were unsure, and 38 believe the Settlement Agreement should NOT be approved (there were also 4 non-creditors that took the survey, who all felt the Settlement Agreement should not be approved).

From the results so far, it seems pretty clear that the majority of creditors would like to see the Settlement Agreement denied.

When the Trustee last year asked the Court's permission to give some customer information to Great Collections at no cost to them, one creditor had a lawyer file a basic objection with the court (not going into any detail of why the creditor objected), without having the lawyer attend the hearing. Quite a few creditors E-mailed the Trustee as well. However, the Court allowed the Trustee to give away the customer data. That means that it may be difficult to convince the Judge to deny the Settlement Agreement.

So the question becomes: What can a creditor do to help see to it that the Settlement Agreement is not allowed? The only advice I can offer (because I am not an attorney) is to contact an attorney. That said, if you aren't looking to spend money, I can provide information. And the most obvious piece of information is that if you want your opinion known to people, you must let them know. So E-mailing the Chapter 7 Trustee Weneta M. A. Kosmala (wkosmala@kosmalalaw.com, dmf@txitrustee.com, wkosmala@txitrustee.com, kgeorge@kosmalalaw.com) and/or her attorneys Linda F. Cantor (lcantor@pszjlaw.com) and James K.T. Hunter (jhunter@pszjlaw.com) is one option. It didn't work before, but likely can't hurt.

At the first Creditors' Meeting, then-Trustee Mr. Neilson said "Sometimes judges do not know what is going on unless someone files something." Filing court documents to the Court's specifications can be very complex, but in the NWT Mint bankruptcy, many creditors simply wrote a letter addressed to the Judge, which the court filed as part of the case (which becomes a public record). I cannot say how to file something to get a judge's attention; however, I can provide the general court phone number: (855) 460-9641 (which could be used to get information on how to file a document), and the address the Court's website gives for the Judge:

Honorable Erithe A. Smith
United States Bankruptcy Court
Central District of California
Ronald Reagan Federal Building and Courthouse
411 West Fourth Street, Suite 5040 / Courtroom 5A
Santa Ana, CA 92701-4593

The case number is 8:14-bk-11492-ES, the motion to approve the Settlement Agreement is
Docket 724.

Ultimately, it may take one or more creditors getting an attorney involved to prevent the Settlement Agreement from being approved (e.g. writing a formal objection, and appearing at the hearing).

Unanswered Questions

November 29, 2017 3:40PM EST
If the Court approves the Settlement Agreement, it will likely leave many questions unanswered, that creditors may wish to know. For example:

  • Was the 2006 Home Office lease forged? If not, what explains it being identical to the 2006 Residential lease, except "2110 1/2" (street address) changed to "2112 1/2" and Levon's initials added?
  • Was the Home Office lease (that the Gugasians apparently got over $800K for) ever used by The Tulving Company? If so, for what purpose?
  • How were the $12,500/mo 2006 residential leases fair market value? It appears that one was offered for $5,500/mo, the other for $1,850/mo, after the bankruptcy filing.
  • Why were both the 2006 leases for exactly the same rent, whereas later the rents were different?
  • Why were the 2006 leases made in the name "Tulving Corporation" -- a company name that never existed?
  • Why was there a "For Lease" sign at the unused building (16th Street) in October, 2011, in the middle of rent/expenses?
  • Why was rent being paid for the 16th Street building before The Tulving Company would be able to use it?
  • What does the 2011 agreement state?
  • Were the Gugasians partners of The Tulving Company per the 2011 agreement?
  • Was David Seyller, the person who signed the 2011 leases, authorized to sign leases?
  • Why does it look like David Seyller's signature and initials were placed over someone else's, for all 3 2011 leases?
  • The 2011 office lease, effective January 1, 2011, was for $30,000/mo. How come a rent payment of $12,000 was made on January 3, then payments of $17,800 and $29,800 on February 1?
  • How come the rent payment for the office went up 6% on October 12, 2011 ($30,000 to $31,800), when a rent increase wasn't due for another few months, and should have been $1,000/mo
  • What was a plausible reason for reallocating the rents? The IRS scam theory doesn't hold water.
  • Is the Court aware that the actual value of the error coins that creditors received is approximately 4% of what they are owed (compared to 18.75% that Ms. Kosmala keeps mentioning to the Court)?

Rationale for Approving Settlement Agreement

November 29, 2017 2:25PM EST
The Motion for an order approving the Settlement Agreement points out that a court should consider 4 factors to determine the fairness, reasonableness, and adequacy of a proposed settlement agreement (the "Woodson Factors"). Those 4 factors are: [1] the probability of success in litigation, [2] the difficulties, if any, to be encountered in the matter of collection, [3] the complexity of the litigation involved and the expense, inconvenience and delay necessarily attending it, and [4] the paramount interest of the creditors and the proper deference to their reasonable views in the premises.

For #1, Ms. Kosmala states that she believes that "the Estate has viable claims against the Gugasians and there is a good likelihood of success." Presumably, this factor favors a trial.

For #2, Ms. Kosmala states that she "is not aware of any facts to indicate the uncollectibility of judgment(s) obtained", but does point out that the Gugasians would likely appeal any judgment(s), which would increase the costs of litigation and delay any recovery. I have no idea how the likelihood of an appeal affects this factor (without the likely appeal, however, this factor would seem to favor a trial as well).

For #3, Ms. Kosmala states that there may be complex forensic accounting issues (determining when The Tulving Company was insolvent), and that there would need to be significant additional discovery. She points out that a trial would incur large costs (she estimates $100K-$200K; the Gugasians believe it would be $200K-$300K), and that it would delay the closing of the Estate (especially if a judgment is appealed). My understanding is that the large costs would be borne by either the Gugasians or the bankruptcy professionals (depending on the outcome).

For #4, Ms. Kosmala points out that settling will allow final partial distributions for administrative claims (the professionals), and points out that the creditors received (or opted out of receiving) coins "valued at approximately 18.75% of their claims." I'm sure creditors find it insulting that Ms. Kosmala is letting the Judge think that they got more than the ~4%-5% of their claim they actually got through the error coins. And with the majority of creditors clearly preferring the potential of a cash distribution through a trial, Ms. Kosmala's argument pretty much self-destructs.

Fact Checking: Gugasians

November 26, 2017 1:45PM EST
Regarding the consulting fees and payments for the 16th Street building, the Gugasians assert that those were pursuant to an agreement between the Gugasians and The Tulving Company to enter into a new business venture for minting silver coins, with the Gugasians agreeing to provide $2M in funding for silver and equipment. I am aware of some agreement signed in 2011, but the agreement and details have not surfaced. So at this point, I have no evidence suggesting that the agreement was made.

However, it does not seem to fully account for the 16th Street building expenses. For example, The Tulving Company paid rent on the property from 23 May 2011 through 07 Mar 2012, despite the property having a "For Lease" sign during part or all of that time. And why was The Tulving Company paying contractors and others directly, rather than paying Levon Gugasian as the landlord? Why would a company pay rent and expenses on a property it would never occupy? And why was rent being paid before the property was ready? Why didn't the Gugasians just show Ms. Kosmala a copy of the lease and the 2011 agreement? That would answer these questions.

Next, the Gugasians assert that the The Tulving Company and creditors benefited from the "reallocation of rents" (in early 2011, the rents of the apartments and office were altered dramatically, with the office rent going up and the rents of the apartments going down). There is no doubt that The Tulving Company benefited from the office and one of the two apartments. All facts point to the office being used as expected by The Tulving Company, and one apartment being used by Hannes Tulving. So there was definitely a lot of benefit there.

The Gugasians also assert that they gave value "by way of the leased premises and accommodations respecting same". In other words, The Tulving Company did use the office building and apartments. However, James Santaniello and Karen Santaniello declared under the penalty of perjury that they lived at the "home office" while The Tulving Company was paying rent there. And later, a chef of Levon Gugasian's restaurant was apparently living in that apartment. I have seen nothing suggesting that The Tulving Company in any way used the second apartment. Hannes Tulving might have known James, Karen and the chef -- but Levon Gugasian definitely did (they were his contractor, real estate agent, and Levon's restaurant's chef).

The Gugasians further state that Levon's claim for rent rejection should be allowed because his claims "represent actual damages (as the leases were not below market)." Presumably that was an error, and meant to say "as the leases were not ABOVE market". This applies to the rents as of the dates The Tulving Company stopped paying them. Fair Market Value is subjective, and as a landlord, his opinion should be spot-on. Yet this statement stretches credulity, for 2 reasons. First is the obvious: the rent on the office appears to have been way above market ($33K/mo in 2014 going up to $40K/mo in 2021, compared to the $10K/mo the unit was actually offered for in 2015). The second is that he claims the $6,000/mo and $7,300/mo for the apartments were market value -- but if so, why did he rent them for $12,500 each in 2006 (with one of the leases apparently forged)?

Finally, the Gugasians contend that The Tulving Company "remained solvent at least until the end of 2012." The catch is that by mid-April, 2013, The Tulving Company had hit a point where it could no longer send out orders as quickly as they came in. And if the contention is true, it suggests that The Tulving Company somehow lost $17M within about a year, which if true suggests massive previously unknown fraud (expected actual expenses in 2013 were about $6M on the $300M in business they did that year). And if true, it does not account for orders in 2012 that took 3+ weeks to deliver (versus the several days it had previously taken). However, I have heard that the accounting records put together by a Gugasian employee do show the value of the error and other coins to be over $15M, which indeed could have shown The Tulving Company as being solvent at the end of 2012.

Fact Checking: Trustee Weneta Kosmala

November 26, 2017 1:30PM EST
Settlements are tricky, as there are often disputed facts, and almost always a dispute over what constitutes a fair settlement. The vast majority of the facts stated by Ms. Kosmala appear to be true (such as the background of the case). So I will focus on the ones I see as concerning.

First, she states on page 7 line 16 that all 3 leases (office, apartment, home office) were "upon information and belief at fair market rates." This is, unfortunately, complete hogwash. The apartment lease started in 2006 at $12,500/month plus tax/insurance (with a $25,000 security deposit). Yet somehow in 2015, it was being listed (partially furnished and newly upgraded) at just $5,500/mo (with a $5,500 deposit). The "home office" lease was similar, being leased to The Tulving Company in 2006 for $12,500/month but being offered in 2016 for $1,850/mo. How in the world could $12,500 in 2006 have been market rate if the apartment was then offered it for $1,850 in 2016? The office lease of $13,000 in 2008 appears to me to have been roughly market value at the time, but how could it have been fair market value if the rent of $33K in 2014 was fair (per Levon's statement), and it was then offered in 2015 for $10K?

Ms. Kosmala also states that Hannes Tulving was able to reduce his recognized income by $200,000 in 2011 as a result of the "reallocated rents". That opens a can of worms: the original rent was heavily inflated (so it likely should NOT have been recognized as income), and half of the $200,000 amount comes from the "home office" that Hannes Tulving was apparently not using at all (and should therefore not have to be reported as income). So it appears that the "reallocated rents" reduced Hannes Tulving's income to what it should have been reported as.

Ms. Kosmala knew last year that the apartment she believes had a fair market value of $12,500/mo in 2006 was on the market for $1,850 last year. She was also aware that the 2006 leases had identical rents (despite being apartments with very different values), and that the reason for the identical rents was that one of the leases appears to be an altered photocopy of the other (and if true, presumably forged). She also knew that the the Santaniellos (associates of the Gugasians) lived in the "home office" for years, making it dubious that The Tulving Company could have benefited from the apartment.

What we see here, unfortunately, has all the signs of a clueless Trustee, treating this as a simple Chapter 7 lawsuit of a normal business arrangement that didn't quite work as planned. Ms. Kosmala has handled roughly 30,000 Chapter 7 cases over the past 13 years , so she is likely on "auto pilot", and has no clue what really went on (e.g. considered $12,500 "market rent" for an apartment that was offered for $1,850 a decade later), and what a fair settlement should be (from what is known, it appears that the Gugasians received about $875,000 in rent just from the apartment that The Tulving Company apparently never used and did not even sign a lease for).

Other Notes

November 25, 2017 5:30PM EST
According to the court filings (Docket 724 p11 footnote), it would cost about $100K-$200K (Trustee's estimate) or $200K-$300K (Gugasian's estimate) to try the Gugasian lawsuits.

The Trustee, Weneta M.A. Kosmala, says that the Settlement Agreement should be allowed by the court based on 3 factors used in cases like this: "1. Probability of Success / Complexity of Litigation", "2. Difficulties with Collection", and "3. Interests of Creditors."

For #1, she says that she believes the claims are viable and "that there is a good likelihood of success", but there may be "complex forensic accounting issues" (e.g. the Gugasians have challenged that The Tulving Company was bankrupt at certain times), it would take additional months and fees/costs ($100K-$300K, not out of the creditors' pockets). For #2, she does not anticipate difficulty collecting a judgment, but believes the Gugasians would appeal (costing more time and potentially more money). For #3, she points out that the error coins were valued at 18.75% of the claims (despite apparently being worth much less).

The Benefit of Suing the Gugasians

November 25, 2017 5:25PM EST
If the Settlement Agreement is allowed by the court, we have to wonder what benefit there was to the $2.1M Gugasian lawsuit.

If the court allows the settlement, the lawsuit will have penalized the Gugasians, who allegedly took money improperly from The Tulving Company (and therefore creditors). But if the allegations are accurate, they will still have gained (e.g. they made more improperly than they have to pay). All the money would end up in the pockets of the professionals. That would mean that the creditors gained nothing from the lawsuit (and lost something, as the estate could have been closed well over a year ago without the lawsuit).

For the creditors, the benefit of settling for the $648K amount is simply that it speeds up closure; the case can be closed quicker.

Professional Fees, Assets

November 25, 2017 5:20PM EST
In January, I put together a list of professional fees awarded. No further compensation updates have occurred, but I have calculated what I believe is owed and what has been paid so far. The courts make it extremely difficult (and costly!) to compile and verify this information, so there could be errors.

FEES/EXPENSES:

Professional3/2014 through 1/20152/2015 through 10/2016TotalPaidOwedNotes
BRG$200,203.19$418,403.44$618,606.63$32,864$585,742.63BRG was authorized to be paid $86,470.05, but received $32,864 (per docket 637).

PSZ&J$245,394.31$498,208.05$743,602.36$107,763.54$635,838.82 
R. Todd Neilson$97,347.39None$97,347.39$2,802.14$94,545.25 
Total$542,944.89$916,611.49$1,459,556.38$143,429.68$1,316,126.70 

ASSETS:

DateCashOtherNotes
OctoberNovember, 2016$605,093$814,240.600 to $567,434Last known cash balance. 'Other' is money owed by On the Rocks jewelry.
December, 2016 -$227,000Weneta Kosmala authorized a debt collector to collect the debt, with a 40% fee plus expenses.
June, 2017-$99,885 Money paid to Great Collections to grade the error coins
November, 2017+$648,250 Gugasian Settlement (if approved)
TOTAL$1,153,4580-$340,000Total from $1,153,348 to $1,493,458

By my calculations, it would take about $1,225,000 in cash for creditors to get any payments (assuming the Trustee's fees are limited based on the amount of money that creditors get, not including the error coins, which the Trustee agreed not to be included in the calculation).

So if the settlement is approved and no money comes in from On The Rocks (as the Trustee seems to imply), it looks like creditors would not be able to get any money (the full $1,153,458 would go to the professionals). If all the money from On The Rocks comes in, and my calculations are close, creditors would get roughly 1.5% of what they are owed (e.g. $150 for every $10,000 owed).

I could well be overlooking something here, but since the Chapter 7 Trustee Weneta Kosmala doesn't seem to be willing to communicate with me or creditors, I have no further information to go on.

December 1, 2017 2:40PM EST UPDATE: Docket 638 p7 shows that as of November 9, 2016, the estate held approximately $814,240.60 in "unrestricted funds" (presumably cash), compared to the . It is unclear where the discrepancy lies.

Gugasian Settlement Reached...

November 22, 2017 2:45PM EST
Last night I found out that Chapter 7 Trustee Weneta Kosmala signed a settlement agreement with Levon Gugasian and Armen Gugasian. A hearing will be held on December 14 to see if the court approves it.

The terms of the settlement agreement require the Gugasians to pay $648,250.00 (compared to the $2.1M the Trustee was looking for). The original lawsuit claimed: $259,500 for the 2 apartments, $971,200 for the main office, $454,067.88 for the unused 16th Street building, $225,000 each against Levon Gugasian and Armen Gugasian for consulting fees, and that Levon drop his bankruptcy claims (which he will per the settlement agreement).

I will be writing further about this, as it bring up a number of issues.

November 25, 2017 5:10PM EST UPDATE: In reading section B-3 of Docket 724, it unfortunately sounds like the Trustee is trying to say that she believes that there will be no distributions to creditors if the Settlement Agreement is approved. She writes "The Settlement Agreement will allow the Trustee to ... make final distributions in partial payment of administrative claims" (emphasis mine) and that the Settlement would "allow a greater (but not 100%) distribution on account of administrative claims." An administrative claim is an expense that occurs after the bankruptcy is filed.

Error Coins - Many Shipped, Values

November 12, 2017 11:40AM EST
So far, it seems that quite a few creditors have received their share of error coins, but there are still some who have not yet received them. If you haven't received them yet, you should not worry (unless you received an E-mail saying that they have already been shipped).

I have heard from a number of creditors regarding the value of the coins. This has been an issue since the beginning, where the U.S. Attorney called them worthless, yet estimated valuations ended up ranging as high as $20 million. The Trustee originally used a $7 million valuation as a way to determine which creditors should get which coins (which ended up failing, as the coins were not individually graded). About a year ago, the new Trustee said that Heritage Auctions estimated the coins were only worth about $500,000, but that the coins would need to be individually graded to determine whether the value was closer to the $500K or $7M. The grading was completed around May, 2017, with the Trustee reporting a value of $2,955,113, based on the PCGS Price Guide.

Unfortunately, reports I have heard from creditors seem to indicate much lower values. That means that if, for example, you were sent coins with a valuation listed as $10,000, it is unlikely that you would be able to actually get that much money if you were to sell them (perhaps getting $2,000-$4,000 or so). Part of the reason seems to be that the PCGS Price Guide had unrealistically high values to begin with. Another reason is that there are a lot of these coins that will be coming to the market, decreasing the value. Also, the easiest way to dispose of them is going to a local coin dealer, who cannot offer anywhere near what the coins are valued at (a typical coin store does not specialize in error coins, and would likely have to sell most/all to another dealer, and factor in the risk of overestimating their value).

I have had several creditors ask me for advice on the best way to sell them. Unfortunately, I do not have an easy answer for this. If you are just looking to sell them as quickly as possible, and are willing to put in a bit of effort, you could try auctioning them on eBay (where you can reach a large audience). If you can find a coin store that specializes in error coins, that might be a good way selling them quickly with little effort, at a price greater than what a local coin store would likely be able to pay. Alternatively, you could just hold on to the coins without planning to sell them. If anyone knows of a better way, please let me know, and I can post the information here.

Error Coins: On Their Way!

September 21, 2017 8:55AM EST
The error coins hold different meaning to different creditors. Some chose not to receive them, some just want to get rid of them as soon as they can, others will hold on to them.

The coins, however, are on their way. I believe that most creditors received an E-mail yesterday letting them know when the coins were or will be sent, along with a tracking number. Some have already received them.

.

Gugasian Mediation

September 14, 2017 5:00PM EST
The attorneys for Levon Gugasian and his son Armen Gugasian have filed a request to the court to extend the deadline for non-expert discovery from September 29 until January 15, 2018. This is being done so that the Gugasians and the Trustee can meet with a mediator again, this time on November 3, 2017.

Error Coins: Very soon.

September 9, 2017 8:25PM EST
I have now heard from two separate sources that the error coins will be delivered soon. It seems that all the legal hurdles have been dealt with, and it is just a matter of the company that has the coins sending them out.

The best guess seems to be within the next two weeks.

Error Coins: Not Much Longer. Maybe.

June 2, 2017 4:10PM EST
In December, 2015, then Chapter 7 Trustee Mr. Neilson expected the error coins to be distrubuted to creditors by mid-February, 2016. That got delayed to early May, 2016. As August hit, the new Chapter 7 Trustee Ms. Kosmala expected the coins to be delivered in early 2017.

Finally, however, the coins have now all been graded, and are waiting to be shipped once the court approves Docket 667. The 2-page Exhibit A lists the coins in 59 different categories (based on coin type, date, error variety, and grade), along with the PCGS Price Guide value of each. There are a total of 15,580 coins, with a PCGS value of $2,955,113.

After the order is approved, each creditor should receive in the mail a list of the coins they are to receive, along with an option for updating their mailing address and/or opting out (samples here). They point out that if you opt out of receiving the coins, it is possible that you may get no other form of distribution out of the bankruptcy estate (in other words, it may be the coins or nothing). There are scenarios where opting out could be advantageous (not being a lawyer, I cannot go into depth on that). But if I had ended up being a creditor, I would definitely not opt out of receiving the coins.

A quick spot-check shows these values to be more in line with the actual values, but still appear to be somewhat high (especially given that the Tulving bankruptcy will bring a lot more of these to the market).

Error Coins Now Graded

June 1, 2017 10:05AM EST
Chapter 7 Trustee Weneta M. A. Kosmala filed a motion yesterday, asking to be allowed to pay Great Collections, LLC, the company that took care of grading the error coins. The total cost was $99,885 (with $20,000 having been paid previously as a deposit). It is unclear if this includes the cost of shipping the coins to creditors, or whether that will be billed separately.

A total of 15,580 error coins were graded by PCGS, and have an "aggregate value determination" of $2,955,113 (compared to the $7,367,325 valuation that was originally going to be used, and the $500,000 estimate by Heritage Auctions).

Gugasian Pretrial Conference to be Delayed

March 20, 2017 2:40PM EST
The Trustee and the Gugasians have entered a stipulation requesting that the court give them until September 29, 2017 to produce documents (it was April 3) for the Adversary Proceeding, and a pre-trial conference in October, 2017 or November, 2017 (both months are mentioned). The Trustee has already deposed Armen Gugasian, but has not yet deposed Levon Gugasian.

2004 Exam Subpoena on Marc One

March 10, 2017 4:10PM EST
As the last Trustee Report said would happen, the Chapter 7 Trustee Weneta Kosmala has filed a motion requesting a subpoena to require Marc One Numismatics to appear for an oral examination (2004 exam). Apparently, they were cooperative and provided records, but when the Trustee needed more information, the subpoena was necessary to get them to comply.

Exhibit A-1 on Page 10 provides some details about where the error coins came from and went to. Tulving bought 22,600 error coins in late 2010 from Marc One. It also refers to 6,000 error coins that apparently came from Rare Coin Wholesalers of Irvine, CA in January, 2011. It then refers to $540K of error coins (an estimated 8,300 coins), using a loan from Armen Gugasian in early February, 2011. It also refers to 13,200 coins returned to Marc One. It also refers to 31,248 error coins sold by Marc One to Kevin Lipton Rare Coins in November, 2014, and finally about 19,475 error coins bought from Byers Numismatic Corp and later sold to Kevin Lipton Rare Coins.

Interestingly, Byers Numismatic Corp had purchased somewhere between about 30,000 and 100,000 error coins from a U.S. Mint employee that had stolen them from the Mint from 2007 to 2010. The employee was sentenced to 36 months in prison, where it appears he died in September, 2014. There was no indication that Byers knew that the coins were stolen. Some 9,000 of these coins were supplied by Fred Weinberg & Co. of Encino, CA to Israel Discount Bank as collateral for a loan by First State Depository, which got entangled in a lawsuit (the coins were valued at $1,000 each in 2009, while the Mint employee was getting less than $75 each for them). Presumably most of the error coins sold to Tulving were among these coins stolen from the U.S. Mint.

Trustee Report #10

February 10, 2017 8:15PM EST
The Chapter 7 Trustee, Weneta Kosmala, has released the Trustee Report #10.

As always, I recommend creditors read it. You might be interested in something that I do not mention in my summary.

It says that GreatCollections handed over the error coins to PCGS in November, and that PCGS has graded about half the coins, and expects to finish grading them by the end of February. Then, a distribution schedule will be prepared, and creditors will be given another opportunity to opt out (coins that creditors opt out of will be auctioned, and the proceeds will be distributed to all creditors). She expects to file a motion in March, 2017 to allow the coins to be distributed.

Ms. Kosmala expects the litigation with Levon Gugasian and Armen Gugasian to go to trial in the 2nd or 3rd quarter of 2017.

She sent the $600,000 accounts receivable to a collection firm, and plans to conduct an oral examination of a different coin dealer (like they did with A-Mark Precious Metals) to see if any money may be owed.

Professional Fees to Date

January 30, 2017 2:45PM EST
Someone just asked me what the total of professional fees was. Here is what I have (inclusive of expenses), through the end of October. Some may have been approved, but not yet paid.

Professional3/2014 through 1/20152/2015 through 10/2016Total
BRG$200,203.19$418,403.44$618,606.63
PSZ&J$245,394.31$498,208.05$743,602.36
R. Todd Neilson$97,347.39None$97,347.39
Total$542,944.89$916,611.49$1,459,556.38

Quiet...

November 17, 2016 7:50AM EST
This is just a quick update to let you know that I haven't heard much lately.

I just found out that there was an article in the Orange County Register that gives a brief summary of where things stand, as well as some information about the sentencing of Hannes Tulving, Jr. earlier this year. Other than that article, I haven't heard anything since my last update.

Trustee Report #9

August 25, 2016 9:15AM EST
First, I want to say that this report has given me more confidence in the new Chapter 7 Trustee, Ms. Kosmala, and her desire to do what is right for creditors.

It quietly addresses the rumor I had heard about thousands of missing error coins. Whereas the previous Trustee Report #8 referred to 12,539 error coins, Ms. Kosmala is now referring to 15,544 error coins (3,005 more). It also addresses the issue of the coins not being graded: Ms. Kosmala is going to propose to the court that GreatCollections be paid to get the coins graded by PCGS, and for GreatCollections to auction error coins from customers who opt out of receiving them (with the net proceeds distributed among all creditors, including those who receive the error coins). The grading will be beneficial to creditors, as it ensures that the distribution will be fair (preventing some customers from getting lower-grade coins while others receive higher-grade coins). The Trustee also wants to give the creditors a final chance to opt out after they see the list of coins they would receive and their valuations.

The Trustee expects the distribution of the error coins to occur in early 2017. That is due to the legal delays (e.g. a required 3-week notice period), an estimated up to 10 weeks to transport/grade the coins, time to determine the valuations and assign the coins to creditors, etc. Given what is being done, the time frame seems realistic. It is disappointing that Mr. Neilson dropped the ball on the grading piece, but nice to see that it is finally being addressed.

Ms. Kosmala says that the distribution of funds generally does not occur until the conclusion of the case. That is true, but the suggestion that there may not being an interim distribution does conflict with what we were expecting (the previous Trustee's proposal that the court approved had language which seemed to make it clear that there would be an interim payment of the net proceeds of the non-error coin auction).

The report mentions that On The Rocks Jewelry, which owed $600K to The Tulving Company, defaulted on the payments that they were supposed to make, and the Trustee has "pursued state law remedies including perfecting our judgment and appointing a keeper."

Perhaps the most interesting piece is that the August 10, 2016 mediation between the Trustee and the Gugasians did not result in a settlement. The Trustee expects it to go to trial by the 2nd or 3rd quarter of 2017, to allow time for discovery and depositions. I find this encouraging, as it suggests that the new Trustee is willing to do what it takes to get creditors what she believes they deserve. I believe a trial is in the best interests of the creditors, and will also ensure that Levon Gugasian has the opportunity to explain what happened.

Where is Trustee Weneta Kosmala?

Originally posted August 23, 2016 8:55AM EST
Updated August 25, 2016 9:20AM EST
UPDATE: Ms. Kosmala has released the Trustee Report #9, which I discuss in the article just above this one, and it looks like a lot has been going on behind the scenes, and she is acting more in the interests of the creditors than I had originally thought.

I've had several creditors asking me if I have heard anything lately. I have not.

Which leads us to the question: what the heck is going on with the new Trustee? She hasn't sent out any communications to creditors in the 4 1/2 months she has been in charge of the estate of The Tulving Company. The little we do know about her is that she cares little, if at all, about creditors (giving away their private information against their wishes, just because she legally can).

What we have no clue about is why the error coins have not been shipped to customers yet. They have, from what I understand, been sitting at Heritage Auctions for over 4 months, with Heritage waiting for the "OK" from Ms. Kosmala to ship them to customers. There are rumors of missing error coins, and Ms. Kosmala flew to Dallas to look at the coins in June, but there hasn't been any word about why she went (aside from the rumor) or what may have transpired there. She signed a document on August 9, so she hasn't completely disappeared. However, the last Trustee Report stated that the error coins should have been mailed out over 3 months ago.

So what happened? My guess is several things. First, there may indeed be some missing coins. That would have to be addressed (was it a simple miscount, or theft from the vault used by the Secret Service?). Second, I suspect there are some graded error coins, which could make things more difficult. That's because the Trustee was valuing the error coins as ungraded (the price someone would pay for a coin knowing that it is uncirculated, but not knowing if it is graded as "MS65" or "MS70"). That's bad for creditors (it's "luck of the draw"; some might get great coins, others get lousy ones, and either way, creditors would have to pay to get them graded to find out). But what happens if you say all the coins are worth $31 each, and now you find some graded coins that have values of $500 or $1,000 or more? It makes the process of determining who gets what more complex.

There is also no indication of when Weneta Kosmala will make the initial distribution of the net proceeds of the sale. The last Trustee Report said the distribution would be made, but did not give a timeline. The distribution would likely not be large, but I am sure would be welcome by creditors.

Weneta Kosmala's Giveaway Motion Approved

July 20, 2016 4:05PM EST
The court has just approved the motion made by the Trustee to give away the pre-2011 paper customer records to Great Collections, LLC.

Although I am disappointed by this, without having listened to the audio of the hearing, it is hard to be certain that the judge (Erithe Smith) did receive all the appropriate information to make her decision. She can only make a decision based on what is presented to her.

What is clear, however, is that [1] the Trustee does not seem to have the creditors' best interests at heart, and [2] there are some creditors who are willing to take on the Trustee if necessary. We can only hope that the judge does have the creditors' best interests at heart, and either had a good reason for the decision, or did not properly receive the necessary information.

It is important, however, to remember that we have been told that Great Collections is still bound by privacy restrictions.

Ms. Kosmala's Reasons for Giving Away Customer Data

June 28, 2016 8:10PM EST
The new Chapter 7 Trustee, Weneta M. A. Kosmala, has filed a reply and statement regarding the motion to give away the Tulving paper documents. She finally explains her reasons for giving away the customer data (which before was limited to "because we can").

In it, she states her belief that the concern of creditors is confidentiality (which I agree is the primary concern). She also states that those concerns are unfounded. Unfounded? Well, let's give her the benefit of the doubt and see what she says:

First, she states that the original sale to Great Collections (which included 2011-2014 electronic customer information) did not violate the Tulving privacy policy, and that Great Collections agreed to protect that data. That is true (per the bankruptcy proceedings). However, I fail to see how the status of the 2011-2014 electronic information (which Great Collections paid for) affects the 2004-2010 paper records (which Great Collections did not pay for). It should also be pointed out that the Privacy Ombudsman said that the 2011-2014 electronic information did not violate the Tulving privacy policy, but he said nothing of the 2004-2010 paper records.

Second, she states that Great Collections was granted access to inspect the paper records, and that they were not given the paper records because of the then-pending criminal investigation, and that the records appear to be unnecessary for prosecution of criminal charges. Again, I fail to see how this is relevant. From what I have seen, it was the Trustee, not the Court, that gave Great Collections permission to inspect the paper records. And the reasons for why the paper records were not part of the sale seem irrelevant: how can they be part of the sale if they were intentionally excluded from the sale?

Third, she points out that Great Collections has agreed to maintain the privacy of customer records. While this is nice, it doesn't address the problem: they are getting something for free that invades the privacy of customers.

Finally, she points out the creditors' concern for the "lack of additional consideration" (legalese for "giveaway"). For this, she points out that she believes the price paid by Great Collections is sufficient consideration for the paper records, and that the giveaway would save the estate the cost of destroying the records (which was previously estimated as under $600). This is, of course, absurd to me (a non-lawyer). First, creditors are receiving ZERO consideration from Great Collections (the estate is, and the professionals have already allocated all the money, and then some, to themselves). And saving the estate $600 is ludicrous; the minute (OK, 40 minutes or so) the $850/hour attorney forced creditors to fight for their privacy, that $600 savings disappeared. The Trustee's decision to fight the giveaway likely has cost the creditors at least 10 times the cost of shredding the documents.

Perhaps if the Trustee were a creditor paying Great Collections for the customer data, rather than receiving tens of thousands of dollars for it, her attitude would be a bit different.

Auction Results

June 23, 2016 8:50PM EST
The total amount the bankruptcy estate is expected to receive from the non-error coins that were auctioned is just about $385,000 (that is the amount after the buyers' premium, shipping, and insurance charges are deducted).

That number could change if some people do not pay, but I imagine should be close to the final number. If anyone is looking for a copy of the prices realized for all the lots, please let me know.

Error Coins: Still Waiting

June 21, 2016 8:15PM EST
Back in December, the original Chapter 7 Trustee Mr. Neilson expected the error coins to be distributed to creditors by around the middle of February. Later, in April, Mr. Neilson in his Trustee Report #8 stated that "If the process proceeds as I have envisioned the Error Coins should start arriving by the first half of May."

As creditors have likely realized, this did not happen.

On June 9-10, Ms. Kosmala found the time to travel to Dallas with two BRG employees (BRG is the firm that Mr. Neilson works for), partly to review and inventory the error coins. I have heard a report that the reason they traveled to Dallas was to try to find several thousand error coins that somehow went missing. Whether this is true, and whether they were found, remains to be seen. There were also apparently some graded error coins mixed in with the non-error coins, which were part of the government $3M valuation and were not part of the $7M error coin valuation (and as such, should be auctioned by Heritage rather than go to customers). But it is not clear what happened to those coins, as they were not in the auction.

Needless to say, we will need to keep a close eye on this, to ensure that [1] all the error coins are accounted for, and [2] the graded error coins get auctioned (or are otherwise handled legally and appropriately).

I do want to add one piece of good news. Between Hannes Tulving, Jr. agreeing to plead guilty, and Mr. Neilson's negotiations with the government, it looks like creditors will see some money from a distribution this year. In another criminal case handled in North Carolina (Liberty Dollar), it took about 8 years from the time metal was seized until the metal was returned to victims.

Auction Results?

June 13, 2016 4:05PM EST
I have heard from two people who bid in the auction.

From what I understand, it sounds like while there were likely some bargains among the 255 lots, there were enough bidders to prevent much in the way of 'fire sale' prices (like below face value or spot). Of course, 1,600 1976 proof dimes split into 2 lots isn't going to bring in nearly as much as they would auctioned over a 6 month time period as Mr. Neilson was originally discussing. However, I do not have any concerns that the "Old Boys Network" (which the bankruptcy professionals use) was at play with Heritage (some people expressed concern that Heritage might let some of their favorite dealers get the coins while not accepting outside bids).

I should point out that I did hear from one person who tried to bid in the auction, but was unable to do so. Apparently, the people he talked to at Heritage were unable to find the auction. My guess is that that was a result of the auction being a "gallery auction" (mailed bids only), which does not appear on the Heritage website.

More About the Auction

June 5, 2016 4:05PM EST
I have already pointed out some of the downsides to the auction of the Tulving coins (e.g. that it is a single auction instead of spread out over 6 months, only accepting mailed bids, no photographs, little advertising).

However, there are some positives. First, this appears to be a standard type of auction that Heritage does for bulk numismatic items. Even though this auction is hidden from the public, it does appear that there are enough dealers that know about the auction that some will travel to Dallas to view the lots. That will help ensure that lots that are not well described get appropriate bids.

Also, unlike an eBay auction, the price you bid is the price you pay (plus buyer's premium). So with eBay if an auction for a $100 coin opens at $1, and only one person bids, they will get it for $1 (even if they bid $100). But in this auction, if the bidder bids $100, they will pay $100. And with eBay if you get two bids of $50 and $100, the $100 bidder would pay a bit over $50. But with this auction, the high bidder would pay the full $100 bid (again, plus buyer's premium).

It would have been very helpful if they had auction estimates for the lots, but they do not. A total for the entire auction of $400K-$600K was given (with the coins insured for $600K), but no estimates were given for individual lots.

And while the lots have no reserve (which allows a $1 bid to win), if there was a reserve, the Trustee would have to figure out what to do with the coins that were left. And depending on how many lots did not meet the reserve, the costs involved in re-selling the coins could easily eat up any money they would bring in.

Why Not 6 Months of Auctions? Where are the Error Coins?

June 3, 2016 3:55PM EST
Several things have come to mind as I have been thinking about the auction of the seized error coins.

First, the error coins that users opted out of receiving are not listed. Mr. Neilson said (e.g. in Trustee Reports #7 and #8) that they would be auctioned with the non-error coins. Hopefully, they are being auctioned in a better way (not as a giant lot sold all at once). But the fact that the "opted out" error coins are now missing is something that has to be addressed at some point.

More importantly, though, is that this auction is mail-only with no pictures, taking place with almost no notice (less than 2 weeks from the time the court documents about the auction appeared until the time of the auction). Mr. Neilson stated in his motion to the court "by this Motion the Trustee seeks authority to retain Heritage as Auctioneer to auction the Non-Error Coins over a six month period." There are lots of references in the court documents and Trustee reports to auctioning the coins over several months. He stated in Docket 289 that he believes that "an auction over a three to six month period is the best method by which to maximize the value of the Non-Error Coins." So why not use the best method?

Next, there are no photographs of the coins. In the motion to sell the coins, Heritage Auctions states that they will "professionally photograph, as appropriate, samples of the Non-Error Coins for marketing to potential buyers", and the motion itself states "The Trustee has agreed that the Lot Buyer’s Premium for the sale of the Non-Error Coins will be 19.5%, which will cover costs of photography, insurance and the transfer of the Seized Coins..." That means that the only way some lots can get appropriate bids is for the bidder to fly to Dallas. For example, Lot 50 is "Lot of assorted bits and pieces.(Total: 33 pieces)," and Lot 245 is "A bag of 6.75 pounds of assorted bars" (which could be silver, gold, or worthless copper). A picture would fix that.

Also an extremely minor concern is that the minimum buyer's premium is $19, whereas the court documents stated $14. This will likely have no impact on creditors, but in the Tulving case, we have seen that everything must be scrutinized carefully.

I have sent an E-mail to the Trustee so see if she has a comment on this.

Coin Auction - Face Value, Spot Value

June 2, 2016 5:10PM EST
I have added a webpage that shows the face value, metal content, and spot value of all the Tulving auction lots. The data can also be downloaded as a .csv file (spreadsheet).

Hopefully, this will make it easier for people to bid well on the items, and to make sure that nobody gets 'fire sale' prices on these. If you use this data, please be sure to double-check to make sure that I did not make any errors! Also remember to factor in the 19.5% buyer's premium.

The spot value was calculated based on the spot price this afternoon ($15.98 silver, $1,211 gold, $957 platinum). The totals are $58,690.03 face value and about $78K spot value, for a total intrinsic value of about $136,000. The numismatic premium, of course, could add substantially to that (remembering that the government appraised the coins at around $3M).

Coin Auction June 10, 2016

May 31, 2016 6:50PM EST
The coins that were the property of The Tulving Company and seized shortly after the company shut down (minus any error coins to be distributed to creditors) will be auctions on June 10, 2016 by Heritage Auctions.

Anyone who is interested in bidding can contact Max Deleon for a catalog or to reserve a space for lot viewing at MaxD [at] HA.com or 214-409-1285. Lot viewing is from June 6-10, 2016. Sealed bids are accepted up to 5:00PM on June 10, 2016.

There will be about 175,000 coins auctioned, in lots of 500-1,000+ coins. The majority of the graded coins are PCGS MS64 to MS69 and PF69-70. It includes different dates Lincoln Cents, Jefferson Nickels, Roosevelt Dimes, State Quarters, Presidential Dollars, American Silver Eagles, and Modern Commemorative Coins.

Be sure to spread the word!

June 1, 2016 12:30PM EST
UPDATE: You can get a copy of the catalog here. You can also find an HTML version here.

It is disappointing that the auction has very little notice (someone mailing in for a catalog might have to mail their bid the same day they got the catalog), and that it does not appear to be advertised at all on the Heritage Auction website. And requiring written bids (no Internet or live bidding) is surprising as well, as is the fact that quantity is not guaranteed (you must fly to Dallas to inspect the lots, or accept the risk that you might not get what you think you will). But hopefully this will get into the hands of enough people to make it worthwhile. And while the Trustee touts that "Heritage will not charge the Debtor’s estate ... [a] separate charge for photography or insurance", not a single picture made it into the catalog.

Objection to Tulving Records Giveaway

May 23, 2016 2:35PM EST
On Friday, an attorney representing a Tulving customer filed an objection to the motion the Trustee made to give away the Tulving paper customer records to Great Collections (which had previously paid $150K for the 2011-2014 electronic records), and requested a hearing. The objection was entered today.

Honestly, I am quite pleased about this, given that the new Trustee's seeming lack of regard for the wishes of Tulving customers (the only reason given for the giveaway was because "there is no reason why" it cannot be done -- something that benefits the Trustee and other professionals, with zero benefit and a loss of privacy to customers), that the creditors have likely paid more in professional fees than this sale brought in, and that the original records may have been worth many times the original $150K pricetag.

May 26, 2016 8:15PM EST
UPDATE: There will be a hearing on June 30, 2016 at 10:30AM.

Motion Regarding Tulving Company Records

New Privacy Concerns

May 7, 2016 9:25PM EST
The new Chapter 7 Trustee, Weneta Kosmala, has filed a motion (docket #576) for the disposition of the Tulving Company records.

The two main issues I see that affect creditors are that [1] it appears to allow Great Collections (the company that purchased the customer list going back to 2011) access to documents it is not entitled to, which would violate customer privacy, and [2] it could potentially destroy documents which may be beneficial to creditors in the future.

The sale to Great Collections was approved by court order in Docket 208, which stated "The Customer Lists and Electronic Customer Files are in electronic format and shall be transferred to Buyer in such format." That makes it clear that Great Collections was only buying electronic records, and not paper records. The "Customer Lists" and "Customer Files" that Great Collections was sold were defined in Exhibit A to the Asset Purchase Agreement, (found in Docket 187 (p46) and elsewhere). Customer Lists is defined as "Customer List - January 2011 through Petition Date. Containing the following (Approx. 12,600 - Names, real property addresses, telephone numbers and email addresses)" and Customer Files is defined as "Customer Files - January 2011 through Petition Date - Containing the following (Name, Product and Quantity sold/purchased, amount paid/received and date)". That makes it VERY clear that only records from 2011 on were being sold/auctioned.

It appears that a privacy violation has already occurred (although a minor one) -- Mr. Neilson "granted Great Collections an opportunity to inspect and review the Customer List Documents" (Docket 576 p4), which Exhibit A of Docket 576 lists as including records going back as far as January, 2004 -- a full 7 years of data that Greatcollections did not pay for, and the Consumer Privacy Ombudsman did not consider giving them access to. Mr. Neilson went even further, and entered into an Undertaking Agreement with Great Collections, to preserve and prevent the destruction of the documents to which they do not appear to be entitled (docket 576, R. Todd Neilson Declaration, paragraph 10). Now Ms. Kosmala is requesting permission from the Court to allow Great Collections to receive these documents. Great Collections did not pay for them, and I do not believe that the court authorized Great Collections to receive those documents.

This also brings up a related issue: that the electronic records sent to Great Collections may well have included pre-2011 data. Given that Mr. Neilson appears to have thought that Great Collections was entitled to pre-2011 data, it brings up the concern that he may have already given them pre-2011 data. This is something that I think should be looked into, and creditors told whether or not they were given access to this data, as I believe it would be a serious breach of privacy.

The second (and perhaps more important) issue is that some of these documents may later become beneficial to creditors. In a case like this, where there are a lot of accounting issues (such as the $1.7M accounting error, payments in incorrect amounts, incorrect memo lines for checks, etc.), hard copy documents could become critical later on.

May 9, 2016 9:15PM EST
UPDATE: I E-mailed Ms. Kosmala, and got a response that alleviates my second concern. I am waiting for clarification on the first issue (whether Great Collections is entitled to pre-2011 customer data). As of May 13, 5:00PM I have not received a response as to why they are apparently giving away details of bullion purchases from 2004-2010 without any benefit to the creditors.

Latest Coin Update

May 5, 2016 3:45PM EST
Here is what I have found out.

First, it appears that some (thousands) of the error coins were graded by PCGS, while many of the error coins were raw (not graded or encapsulated).

Second, it appears that the Standish valuation was of only the raw coins, which he assigned grades to, and he then used the PCGS price guide to determine the valuation. The valuation was done to find valuable coins that the government appraisal might have missed (which it did -- the government assigned face value to the thousands of raw error coins), with no request made to segregate the coins by grade. So without being asked to or paid to segregate the coins by grades, the coins were likely put back exactly as he found them. Ungraded.

So what really appears to have happened is that Mr. Neilson did not fully understand the grading process. He had been told that the coins needed to be graded and encapsulated by PCGS for creditors to receive maximum value, but decided to leave that decision up to each creditor (although creditors will have to pay much more for the grading, as Mr. Neilson was offered a very significant discount for grading all those coins at once). It sounds like he was under the impression that the 12,539 error coins would all somehow be identified in a way that he could fairly distribute them to creditors. But that just wasn't the case: while some were already graded by PCGS, Mr. Neilson never asked nor paid anyone to grade the rest.

This brings up my concern from the beginning: how can you use a $7.3M valuation based on the grades of coins, and fairly distribute them to creditors without knowing what their grades are? The answer, of course, is that you cannot. And that is what they just discovered, and why they had to use the $400,000 valuation. The $400,000 valuation is based on raw, ungraded coins: what someone would pay for a coin without knowing its grade (and likely assuming someone had already had the option of "cherry picking" the highest grade coins).

So this brings up a couple of issues: [1] the decision to receive the coins or opt out changes a bit (as claims get reduced by much less when receiving the coins), and [2] coins cannot be distributed completely fairly (two people with identical claims would get the same number of coins, but one might 'hit the jackpot' and get one or more coins with grades justifying large prices).

Weneta Kosmala Says Error Coins Only Worth $400K

May 5, 2016 8:55AM EST
Unfortunately, I have just found out that the new Chapter 7 Trustee, Weneta Kosmala, has changed the valuation of the error coins from the $7.3M that the previous Trustee Mr. Neilson used to $400,000.

The explanation is that the coins were supposedly graded, but were not. However, we already knew that they were not graded by a coin grading service (e.g. Mr. Neilson turned down the option of spending a lot of money to have them professionally graded). However, it now sounds like these coins may never have been assigned grades by anyone. In other words, there is no way to know if any given coin is MS-65 or MS-69 -- which in the coin world is like not knowing if the bill you have in your pocket is a $1 bill or a $100 bill.

This of course just re-opens the questions: The $7.3M appraisal could not have been done by someone reputable without knowing the grades of the coins. But we are now hearing what appears to be conflicting information: that nobody ever assigned grades to the coins. It just doesn't make sense.

So what does all this mean? It means that [1] as I have previously mentioned, if you get the error coins, you should have them professionally graded to get the best possible price (but, that will involve some time and money), and [2] your expectations should be lowered as to how much money they may be worth.

People who had opted out of receiving the coins are being given the option of receiving them because of this change (and presumably those that chose to accept them are being given the option of rejecting them).

Payment to Creditors' Accountant

May 2, 2016 12:40PM EST
I got an anonymous tip today, asking:

Why did the trustee pay a bill sent by an accountant for one of the creditors?

Things in this case keep getting stranger and stranger. Surprisingly, this information appears to be completely accurate (the person submitting the tip did provide further details, which I will not share here). R. Todd Neilson, as Chapter 11 Trustee, paid a bill submitted by someone who is the accountant for one of the Tulving creditors (although a relatively small amount).

To answer the question, in a Chapter 11 bankruptcy (which this was at the time), my understanding is that the company can pay bills that it incurs in the normal course of operations. It is not clear to me, however, how the accountant for the creditor would be doing work that is normally incurred in a business, as The Tulving Company did not do business after it shut down (since the coins they were planning to sell off were seized). My impression is that the bill was not for services or work done for the creditor (in other words, I do not believe that the money went to the creditor).

Error Coins, Again...

April 25, 2016 1:30PM EST
As I have mentioned in the past, we know relatively little about the error coins: just that they are Presidential Dollar Missing Edge Lettering coins. We do not know the years or grades of the coins, or who graded the raw coins (they were not assigned grades by a service like PCGS, but someone must have assigned them grades -- for example, one of these coins graded MS-68 by PCGS might be worth 100 times more than one graded MS64).

One piece of information that I was unaware of is that the $7M appraisal was apparently done using the value of the coins around the time of the bankruptcy filing. This accounts for part of the discrepancy we have been seeing, as the prices for many of these error coins has gone down somewhat since that time.

And as I believe I have mentioned before, the $7M appraisal is based on the coins being graded by PCGS (raw coins are almost always worth less than ones that have been professionally graded). This means that it would be wise for creditors to have their coins professionally graded before attempting to sell or auction them.

Hannes Tulving in Prison

April 21, 2016 6:50AM EST
According to the Federal Bureau of Prisons, Hannes Tulving is now in prison, in Butner, NC, the location the judge recommended.

For those that may not be following the situation closely, there have been concerns based on information recently discovered that Hannes may in fact not be guilty -- which becomes even more unusual since the U.S. Attorney's Office will not respond to queries about it (not even the "No Comment" that they frequently give). Some creditors have contacted the prosecutors with these concerns, and I am not aware of them responding (despite the law, of which the sponsors said "the victim has the right to confer with the Government concerning any critical stage or disposition of the case").

Partnership Agreement

April 15, 2016 3:45PM EST
I had heard early on that there was a written partnership agreement between either The Tulving Company or Hannes Tulving, Jr. and one or two other individuals.

I have not seen a copy of any partnership agreements. However, I found out today that in California, a general partnership can be created without a written agreement -- so even if the written partnership agreement cannot be found for some reason, that does not mean that it cannot be proven that there was a partnership. A general partnership does not need to be registered in California.

This leads to one very interesting possibility: in California, partners are "jointly and severally liable for all legal and financial obligations of the partnership and for all wrongful acts of any partner acting in the ordinary course of partnership business."

In other words, if there is a partner (or partners) out there, they may be legally responsible for the money owed customers.

Trustee Report #8

April 11, 2016 2:25PM EST
Mr. Neilson has released the Trustee Report #8.

It discusses his withdrawal from being the Chapter 7 Trustee, and discusses the remaining matters: [1] distribution of the error coins (expected in mid-May), [2] auction of the remainder of the coins (expected around early fall), [3] the litigation against Mr. Levon Gugasian and his son Armen, and [4] pursuit of possible other assets.

It also states that the Department of Justice conducted an extensive review of the business operations of The Tulving Company, and no legal action was taken against anyone aside from Hannes Tulving, Jr.

As usual, I recommend creditors read the report.

Levon Gugasian Replies to Complaint

April 8, 2016 8:40PM EST (updated April 11, 2016 4:25PM)
Levon Gugasian has replied to the complaint ($1.9M adversary lawsuit).

As is typical in such responses, it responds to each paragraph of the complaint, either admitting it, denying it, stating that the defendant lacks sufficient information, or a similar response. It also lists some affirmative defenses, as is typical with responses.

UPDATE: Armen Gugasian replied to the complaint against him ($225K) as well, in a similar fashion.

Tulving Truth

April 4, 2016 5:20PM EST (updated April 4, 2016 8:00PM)
I have sent out an E-mail to the Tulving Updates mailing list, with a link to a document that goes into some detail about The Tulving Company and what really happened.

It is intended for customers of The Tulving Company who are owed metal/money. If you did not receive the E-mail, and want access to the document, please let me know.

Update: It shows, among other things, how Hannes Tulving, Jr. was apparently sentenced to prison not for any actions he took, but rather for actions he did not take (shutting down the company). On the other hand, the government is defending someone who took what seems like blatantly fraudulent actions (such as forging documents and billing for millions of dollars of services that were not provided), and refuses to even say 'no comment'.

New Chapter 7 Trustee

April 4, 2016 5:20PM EST
The U.S. Trustee has appointed Weneta M.A. Kosmala as the new Chapter 7 Trustee, now that R. Todd Neilson has withdrawn.

$17M mystery

March 30, 2016 3:20PM EST (updated April 4, 2016 12:35PM)
$17M was stolen from The Tulving Company customers. That is very clear. But where did it go? I am aware of 3 organizations that are expected to have looked into it: the bankruptcy Trustee, the CFTC, and the Department of Justice. All three had access to just about all the records they wanted.

The CFTC huffed and they puffed, but they ended up being the laughingstock (their 'all bullion frauds are the same' blinders convinced them that The Tulving Company set up shop in 2013, and few, if any, orders were ever fulfilled). In the end, the only place they could find that money went other than to customers was the generic "paying debts of the company." So we'll pass on the CFTC.

Unlike the CFTC, the Department of Justice is given serious responsibility and has the power to send people to prison. But they also only came up with what the CFTC did: the only place they could find that money went other than to customers was to "pay debts of the company." Huh.

The bankruptcy Trustee was hoping to provide "concrete answers as to what occurred and who was responsible" (along with the caveat that the costs of finding those answers would need to be considered). The Chapter 7 Trustee did just file 2 adversary proceedings/lawsuits totaling $2.1M, but even that only accounts for only 12.5% of the $17M.

So here is where I have found money went (some legitimate expenses, some not). All amounts are from the January 1, 2011 through February 28, 2014 unless otherwise noted. The total is $24.8M. Not included is a loan to purchase some of the error coins, and likely a lot more that I just don't have access to.

$5,000,000.00Shipping (rough estimate)
$4,000,000.00Loan repayment, around June, 2013 (unconfirmed)
$4,000,000.00Estimated payments for a hedged bullion account, to finance inventory of metal sold by customers to The Tulving Company
$1,700,000.00Accounting Error (confirmed)
$1,500,000.00Payroll, rough estimate (minus Hannes' salary and the consulting gigs)
$1,306,090.00750 W 17th Street (main office). Market value approx. $400K.
$1,000,000.00No description.
$953,000.002112 ½ W Oceanfront, since late 2006 (market value approx $450K)
$907,500.002110 ½ W Oceanfront, since late 2006 (market value approx $450K). Reportedly not used by The Tulving Company.
$900,000.00PCGS grading fees
$600,000.00Bullion purchased for On The Rocks (checks bounced)
$580,000.00Insurance
$560,000.00Bank fees (rough estimate)
$454,067.88740 W 16th Street. Reportedly not used by The Tulving Company.
$400,000.00Hannes salary
$300,000.00Health insurance
$225,000.00Armen Consulting
$225,000.00Levon Consulting
$100,000.00Common area expenses
$45,000.00Phone service

$24.8M is a lot of money. But The Tulving Company wasn't a charity -- like all bullion dealers, it charged money through a spread. And it did a massive $1.3B of business from 2011 through the end. At an average spread of perhaps 2% 1%, that would be at least $13M that would have come in. At $17M stolen from customers, plus $13M of cash flow, there is still some $5M unaccounted for.

Ultimately, if you take away the inappropriate expenses, The Tulving Company would likely not have needed to shut down, and if it did, would have had enough assets to pay everyone what was owed.

[Note: when I originally wrote this, I incorrectly calculated a 2% spread. I was basing my estimate on the buy-sell spread, which was roughly 2% -- but that involves two separate transactions, so the 2% spread would then need to be halved. Although most metal bullion dealers sell comes from wholesalers, the posted buy prices of a dealer give a good indication of what spread the dealer has with wholesalers.]

The $450K of Payments for a Car Repair Shop

March 26, 2016 6:05PM EST
Someone wanted some more details about 740 W 16th Street, Costa Mesa -- the car repair shop.

The $1.9M lawsuit shows that $454,067.88 in payments were made by The Tulving Company for that property. That includes $165,000 in rent payments (from May, 2011 to March, 2012), $184,788.17 of repairs and maintenance, and $104,279.71 of tenant improvements.

There is no sign that a lease was ever signed for this property. There is also no sign that it was ever used by The Tulving Company. Indeed, how could it have? It appears to have been vacant and undergoing renovations the entire time. And there was a "for lease" sign at the property for most or all of the time.

The location had been used at times by Bimmer & Benz, Absolut Motorcars, and Doctor Jaguar. Bimmer & Benz started in that location in 1989 , and was planning on leaving in 2011. Doctor Jaguar had been there since at least 2003.

Documents

March 23, 2016 5:20PM EST
I have added some items to the "Key Documents" section of the documents page to make it easy for people to access the leases and/or other documents that my readers have been requesting.

If there are any other documents people would like to see, please let me know. And if anyone has any documents that I do not, I am always interested.

Mr. Neilson Withdraws as Trustee

March 22, 2016 7:25PM EST
Docket #564 was just filed giving notice that R. Todd Neilson withdraws as Trustee, effective April 1, 2016.

Reminder: Anonymous Tips Page

March 21, 2016 8:35AM EST
Just as a reminder, I have an Anonymous Tips page set up for anyone who wants to contact me, but would prefer for me not to know who they are. The main drawback is that I am unable to respond (if you want a response, you can E-mail me, or create an account with a service such as mailinator).

Further Lease Details

March 21, 2016 8:00AM EST
The 2008 main office lease has a different font in 2 sections: the first page states "Lessee share of common area operating expenses is included in base monthly rental amount", and page 20 states "50. Base rent shall increase five percent (5%) annually on the anniversary date each year of the lease." I believe it would be difficult to either prove or disprove whether that was there when the lease was signed. A valid explanation would be that it is a standard lease, to which the landlord added basic changes he uses with most tenants allowing for the rent to increase (so the text with that font would have been added before the lease was signed). However, given what we have seen, it may warrant further examination.

What is clear, however, is that the 2008 main office lease and the 2011 main office lease include common area expenses. The 2008 lease specifies "Lessee share of common area operating expenses is included in base monthly rental amount" and "Common Area Operating Expenses: $ included". The 2011 lease also states "Lessee share of common area operating expenses is included in base monthly rental amount" and states "Common Area Operating Expenses: $ [blank]." That, however, conflicts with the information I have that The Tulving Company paid $100,000 or so of common area expenses.

Forums

March 20, 2016 5:20PM EST
I have set up forums at http://forums.bulliondealerdata.com/?forum=514885 that people can use.

Given how much has been going on lately, I thought it might be useful. I will still post news here and send out E-mails to the E-mail list. However, the forums can be used as a place for creditors to discuss the situation, post new information that is not on this page, come up with ideas, and so forth.

Entry of Default

March 19, 2016 8:35PM EST (updated April 13, 2016 12:40PM)
There was a class action lawsuit against Hannes Tulving, Jr. personally (separate from the one initiated around the time of the bankruptcy).

A default judgment was requested and entered yesterday. According to the request, Hannes' attorney contacted the attorneys handling the class action lawsuit and informed them that Hannes was sentenced to prison, and Hannes' attorney did not request an extension of time in order to respond to the complaint.

UPDATE: This was an entry of default, not a default judgment.

Fake Lease Documents?

March 18, 2016 9:30PM EST
When I first saw the original residential and home office leases (2006), I was surprised for several reasons. One is that the rent was so high is 2006, and then lowered in 2011. I was also surprised that Hannes had signed both a residential and home office lease, especially when the home office was being lived in by other people while the original lease was in place (in other words, it seems to show that Hannes was aware of the home office lease, and was aware that it was being misused).

I also noticed that the one for 2112 1/2 West Oceanfront had the "0" changed to a "2" in all the locations in the lease. I didn't think much about it -- but as we're seeing, everything must be inspected very carefully.

Someone with an eagle eye pointed out that it appears that there is one lease signed by Hannes (2110), with another lease photocopied (2112). Indeed, that does appear to be the case here. In other words, one was signed by Hannes, the other was not. We are talking about a document describing $750,000 $895,000 of payments -- apparently not signed by either party.

UPDATE: [1] The only differences in the documents are the "0" changed to a "2", which were initialed by the landlord and not Hannes. [2] Both the 2110 and 2112 leases have "2110 half W Oc' printed on the bottom.

Note that the same mistake was made on both leases -- the landlord's initials were made in the box for the tenant's initials (which were correct on subsequent pages). You will see that while these are clearly not digitally altered (e.g. the photocopy has more random dots and such, easier to see if it is made larger), the initials are identical.
UPDATE 2: Someone noticed that the original main office lease has a section 50 that is in a different font, causing the rent to go up 5% each year, and suggested that it may have been added after the lease was signed. The 'odd' font also appears on the first page of the lease ("Lessee share of common area..."). The lease does have a checkbox stating to look at paragraph 50, with the "50" appearing to be the original font. Everything does need to be investigated closely, although this one may be legitimate.

Here you see that the initials from page to page are slightly different, as would be expected:Here are the initials (with error) on the first page of the original and the photocopy. You can see they are identical.

Unaccounted for Accounting

March 17, 2016 3:15PM EST
In my article discussing when the leases were signed, I referred to a problem with "unaccounted for accounting." By that I mean there are some payments that aren't for the expected amount. That could be benign, or it could be a sign of a problem. You have to investigate these things to find out. And we've learned here that you have to investigate every tiny detail.

Main Office Security Deposit: The first anomoly is that the "reallocated" lease shows $24,000 due on signing. That number is unaccounted for: It should be $60,000 (first month plus security deposit). The previous lease did have a $24,000 security deposit, but if that were applied, it would still be $36,000 due at execution. So how much was actually paid? $47,600.

Main Office Lease Payments: Lease payments were supposed to be $30K for 2011, $31K for 2012, $32K for 2013, and $33K for 2014. In 2011, $30,000 was paid monthly from March through September. But then the payments were raised to $31,800 (an unaccounted for number) for 7 months, and then went back down to $31,000 in May, 2012. They did not to up to $32,000 in 2013 as they should have.

Main Office Security Deposit Application: When payments are not made on a lease, it is customary (and described in these leases) that the security deposit will be applied towards the rent. What is interesting is that as I pointed out, the lease payments in 2013 were not raised (January through June payments were all $31,000, but should have been $32,000). According to court documents, in May, 2013 a security deposit of $1,000 was applied towards the May, 2013 lease payment. What is odd about this? The security deposit had not been applied towards the January through April lease payments. That could have simply been an oversight, however.

Home Office Security Deposit: The first anomoly again is that the "reallocated" lease shows $19,500 due on signing (which seems correct). The previous lease had a $25K security deposit, and the new one a $15K security deposit, so really it should be $9,500 due on signing. So how much was actually paid? $5,000. Unaccounted for.

Home Office Lease Payments: We know less about these, since they are not all outlined in the lawsuit. However, in May, 2013 and June, 2013 the payments that were made were for $5,000, not the $5,500 they should have been. Unaccounted for.

Home Office Security Deposit Application: The same as with the Main Office. Application of the security deposit towards underpaid rent was only started in May, 2013, although the payments were likely low before that.

Residential Security Deposit: The first anomoly again is that the "reallocated" lease shows $20,800 due on signing (which seems correct). The previous lease had a $25K security deposit, and the new one a $15K security deposit, so really it should be $10,800 due on signing. So how much was actually paid? $7,500. Unaccounted for.

Residential Lease Payments: Here it gets odd again. An extra payment of $6,800 was made on September 14 (a week after the correct lease payment was made). Then the November, 2011 lease payment was raised to $6,800 (the 2013 rate), where it stayed until May, 2012, after which the correct 2012 lease payments were made. But the 2012 lease payments ($6,300) were made in 2013 as well (which should have been $6,800).

So what we see here is a whole bunch of accounting that at least at first glance does not make sense. Some or all of the issues could have obvious explanations. And some or all could be errors. We just don't know.

Financial Troubles in Early 2011

March 15, 2016 5:45PM EST
In the $1.9M lawsuit against Levon Gugasian, Mr. Neilson states that he believes that at least since December 31, 2010, The Tulving Company was either [1] insolvent, [2] engaged in transactions for which its remaining assets were unreasonably small, or [3] intended to incur (or believed or reasonably should have believed that they would incur) debts beyond its ability to pay as they became due. Yes, it is legalese, but in layman's terms it means The Tulving Company was in financial trouble by the beginning of 2011 (perhaps -- but not necessarily -- due to the alleged fraudulent transfers).

So what does this mean? Why is it important?

First, it puts a whole new light on the situation. Until now, the public facts made it look like all was well until around April, 2013 when orders could no longer be fulfilled. In fact, the judge in the Hannes Tulving criminal case pointed out what a staggering amount of money was stolen from the victims in such a short period of time. And nobody (aside from myself) was discussing events from before around April, 2013. It also strengthens my argument that most or all of the missing $17M was gone by around April to June, 2013.

This opens the door for people to say "any Tulving Company financial transactions after December 31, 2010 really ought to be scrutinized." That would include, I believe, the $6M or so in payments for financing a part of the bullion inventory (I.E. was there $6M of benefit to the company?), and the $4M loan that was apparently paid off around June, 2013. Those two transactions could potentially account for more than half of what customers are owed. It may be too late to take action; if so, hopefully Mr. Neilson at least investigated those payments determined that there was no need to take action. A number of creditors have pointed out the lack of transparency in the bankruptcy: it would be nice if I could just send Mr. Neilson an E-mail and say "Hey, did you look into those transactions?" A quick "Yes, but those were legitimate, for X and Y." would both save my time and prevent potential false hope for creditors.

When Were Leases Signed?

... and are they 10yr or 10yr 2mo leases?

March 15, 2016 4:15PM EST
This may seem trivial, but trivial things can sometimes turn out to be important.

The "reallocated" Tulving Company leases were dated January 1, 2011. They were dated January 1 for "reference purposes" (e.g. to identify that lease compared to another), plus the term started January 1st (the day that The Tulving Company could start using the office based on the new lease), plus the first rent check was due January 1st, plus the base rent was for the period starting January 1st (not specified, but assumed, for the residential and home office leases), and finally the leases were executed on January 1st. That is a total of 13 places that the January 1, 2011 date appears on the 3 leases. You'd think that January 1 was correct.

So what got me curious and thinking something was up? Early on I noticed that all three leases expire February 28, 2021. I didn't really think too much about it at first, assuming it was just "how things work" (I've said I'm not a lawyer or accountant, now it's time to say I'm not a real estate agent) or perhaps a typo.

However, I revisited this when I looked at the rent payments. The rent payments on January 3, 2011 were for $12,000 (main office), $15,800 (residential) and $12,500 (home office). Those are clearly based on the old lease payments (which should have been $13,891.50, $16,500, and $16,500 respectively; the new payments would be $30,000, $5,800 and $4,500 respectively, before security deposits). Yes, the numbers do not match -- there appears to be a lot of "unaccounted for accounting", which is a story for another day. The other piece is that the leases are in error (they specify a 10 year, 0 month lease, but show a length that is not 10 years); while mistakes happen, people typically try to avoid errors in documents.

So if the new lease was signed and effective January 1, 2011, why would the accountant 2 days later pay the old rental rates? It just doesn't make sense. You go out and sign 3 leases on a holiday with your friend, for a job you just recently were hired for, and 2 days later you are paying the old rent? I don't buy that.

On February 1, 2011, checks were now made out for $47,600, $7,500, and $5,000. Again, "unaccounted for accounting" (they do not match the actual rent, or the amount that was due on execution of the leases), but those are clearly based on the new rents.

So things just don't add up here. The documents clearly show they were intended to be 10 year 0 month leases starting January 1. However, from the February 28 end date on the leases (which the landlord used in his 3 claims, so it looks like his lawyer also thought the leases ended that day), it looks like they were supposed to be 10-year 0-month leases starting on March 1, 2011. But the rent payments were made on February 1, 2011, which would suggest they were in reality signed sometime in mid-January, 2011, for an effective date of February 1.

No matter which scenario you go with, it appears that at least 2 errors were made related to each lease. First, all 3 leases have the error of showing 10 years 0 months, but showing a 10 year 2 month date range. If they were 10-year leases signed/effective January 1st (as stated), the first rent payment was in error, and the claims had errors (including January and February rent payments for the last year). If they were 10-year leases signed mid-January starting February 1, the start dates and end dates of the leases are in error, and the claims had errors. If they were 10-year leases starting March 1, the February rent checks look to have been made in error (using the new rent payments), which would mean the leases were at least contemplated before February 1st. Nothing makes sense here.

Going back to the "this may seem trivial" piece. As I wrote this, I realized it isn't so trivial. If the leases were 10 year 0 month leases (as specified) and started before March 1 (which seems like it must be the case given the February 1 rent payments that appear to be based on the new leases), then the rent damages are $120,600 higher than they should be, resulting in claims $18,090 higher than they should be (by my calculations). That's about $50 that would be taken out of distributions for every Tulving customer that didn't get their metal.

March 16, 2016 8:40AM EST UPDATE: The landlord Proof of Claim forms claim that the lease payments went up January 1 each year, again causing more confusion. This suggests the leases were indeed signed and executed January 1, 2011.

Security Deposits

March 14, 2016 9:25AM EST
I have been meaning to go over the numbers to check out the security deposits for the various leases, to see where that money went. This is something I was unable to do until the lawsuit was filed, as I did not have access to the original leases. Please note that I cannot see *all* information here (e.g. if security deposits were returned in 2011). This just goes by the information I do have access to.

From what I see, the security deposits were applied towards rent in mid-2013 when the rent payments stopped. This can be seen in Exhibit 4 (last page, in the "Security Deposit Applied" column). It shows a $30,000 security deposit being applied towards rent for the main office, and $15,000 each for the other two leases. The leases do allow the security deposit to be applied toward unpaid rent, so that money is appropriately accounted for (in my opinion).

However, the actual amount of the security deposit held is unclear. Per the leases, it was $30,000 for the main office, at $15,000 each for the other two leases. That matches what was applied towards rent. But by my calculations, the actual security deposits were $25,500 for 2110 1/2 W Oceanfront, $26,700 for 2112 1/2 W Oceanfront, and $41,600 for 750 W 17th Street. I calculated this by taking the security from the original lease, and adding what was paid on February 1st, 2011 above the amount of the lease. That totals $93,800 total compared to $60,000 on the leases, or a $33,800 discrepancy.

This could be due to a number of factors. One possibility that comes to mind is that part of the original security deposits may have been used before the new leases were signed. It is also possible, as I state above, that part of the security deposits may have been returned in 2011. Another possibility is an accounting anomoly (e.g. Mr. Neilson shows 2 checks numbered 50404 paid towards 750 W 17th Street, one for $17,800 and one for $29,800; I took this to be a $47,600 check split into two separate accounting categories).

However, from what I can see, it looks like the bankruptcy estate may have an extra $33,800 that has not been mentioned yet.

I have also added PDFs of the original Office Lease, Residential Lease, and Home Office Lease. The "reallocated" 2011 leases are at Office Lease, Residential Lease, and Home Office Lease.

Objection to Gugasian Leases

March 13, 2016 7:15PM EST
When I wrote about the $1.9M lawsuit against Levon Gugasian, I forgot to mention that the Chapter 7 Trustee also objected to the claims for 2 of the 3 leases (the residential and home office leases), stating that there were no damages since the rent had been lowered below fair market value, and therefore Mr. Gugasian did not suffer any damages. The claim for the main office was not directly objected to, but Mr. Neilson requested that it not be allowed until Mr. Gugasian pays the $1.9M.

Mr. Gugasian had put in claims for totaling $921,056.84 for unpaid rent and damages for the 3 leases. The law allows a landlord to put in a claim for unpaid pre-petition rent plus 15% of the rent that would have been due until the lease would have expired. These claims are unsecured claims. In other words, the claims would be lumped in to be treated the same as customers who had paid for bullion they expected to receive a few days later. One catch here, of course, is that Mr. Neilson said that the leases were signed without any apparent authorization.

Info on the Leases

March 11, 2016 3:05PM EST
The adversary proceeding shows that in 2006 Hannes Tulving signed (on behalf of The Tulving Company) a residential lease and a home office lease, each for $12,500/mo (increasing $1,000/mo each year for the following 5 years). So at the end of 2010, The Tulving Company was paying $33,000/mo for these two apartments. The Tulving Company was also paying $13,891.50/mo for the main office. That's a total of $46,891.50/mo for the three. The rents were then changed ("reallocated") to $5,800 and $4,500 (residential and home office leases) and $30,000/mo (main office), for a total of $40,300/mo.

Location2007 MarketLate 2010 RentEarly 2011 Rent2015 RentNotes
750 W 17th Street~$10,000$13,891.50$30,000$10,000Main office.
2112 1/2 W Oceanfront~$4,000$16,500+$5,800$5,000Hannes' Residence
2110 1/2 W Oceanfront~$4,000$16,500+$4,500$5,000Home Office
740 W 16th Street$12,000?n/a$15,000$17,340Used by 3 car repair companies at various times.
TOTAL$30,000$46,891.50$55,300$37,340
(or less)

2112 1/2 W Oceanfront. This was Hannes' apartment. Hannes signed the 5-year lease in 2006 (about a year after his stroke), paid for by The Tulving Company. The rent started at $12,500 plus tax, insurance, and maintenance, or roughly 3 times what I calculate the market rent to be. In 2011, the rent was lowered to roughly market rent.

2110 1/2 W Oceanfront. This was listed as Hannes' home office. Hannes signed the 5-year lease in 2006 (about a year after his stroke), paid for by The Tulving Company. The rent started at $12,500 plus tax, insurance, and maintenance, or roughly 3 times what I calculate the market rent to be. On January 1, 2011, the rent was lowered to roughly market rent. However, sometime in late 2010, two people that apparently have no connection to The Tulving Company moved in. It is unclear if the apartment was ever used as a home office, and/or what other uses it may have had for The Tulving Company.

750 W 16th Street, Unit A. This was The Tulving Company's main office. The original lease was a 10-year lease signed in September, 2008. In 2011, the rent was raised to roughly 3 times market rent.

740 W 16th Street. Court documents do not include a copy of this lease, but rent payments were made for the months of May, 2011 through March, 2012. In the past, it had been used by Absolut Motorcars and Bimmer & Benz (dating back to at least mid-2008). Signs for both companies were still there in mid-2011, although both appear to have already moved out. The property was available for lease in mid-2011 through at least late 2011. It may have been 2 units at the time, and major improvements were made, so the $17,340 current rent could be high compared to 2011. It is unclear why The Tulving Company paid the rent and expenses.

Landlord Sued for $1.9M in Alleged Fraudulent Transfers

March 10, 2016 1:30PM EST
The Tulving Company landlord/employee Levon Gugasian is being sued by R. Todd Neilson on behalf of The Tulving Company, for $1.9M in fraudulent transfers. In a bankruptcy, this is referred to as an "adversary proceeding."

The first set of transfers sought to be avoided are the 3 leases (the office, the apartment, and the "home office" lease). It was stated that on January 1, 2011, existing and unexpired leases were replaced with new leases with rents "reallocated" among the 3 properties. Apparently, the "home office" was indeed used by Hannes in early years. And from what I can sense, the original home office and apartment leases were originally well above market price (reduced to market rent as part of the reallocation), while the office lease was more than doubled. At least as of late 2010 -- before the new leases were signed -- the "home office" was being occupied by a couple that both did work for Mr. Gugasian.

The lease for Hannes' apartment (that The Tulving Company was paying for), signed about a year after his stroke, was at $16,500/mo plus tax/insurance/maintenance when the replacement leases were signed. That same unit has later been offered for lease at $5,000/mo -- less than 1/3rd of what The Tulving Company had been paying.

The next transfers sought to be avoided are nearly identical to those of his son Armen: consulting fee transfers. The complaint states that Leo Gugasian received $225,000 from April 15, 2011 through January 3, 2012 for consulting fees. The lawsuit alleges that Leo "in reality had provided no such services, or anything else of value."

Finally, there was the $15K/mo rent and over $250K of repairs and improvements for a property that The Tulving Company "received no benefit from." That property has at times been used by Doctor Jaguar, Absolut Motor Cars, and Bimmer & Benz -- all car companies. I am not aware of The Tulving Company or Hannes Tulving ever offering cars for sale. Over $50,000 of the repairs and improvements was paid to someone whose had been living in the Tulving "home office".

Documents include the complaint, and Exhibits 1-3, 4, 5, 6-11, and the cover sheet.

First Complaint Filed - Landlord's Son

March 9, 2016 9:10PM EST
Tonight, R. Todd Neilson filed a complaint (see 560.pdf, 560-1.pdf and 560-2.pdf) against Armen Haig Gugasian, for avoidance and recovery of fraudulent transfers. Armen Gugasian is the son of the landlord.

For those that are not familiar with how these things work, just as with any lawsuit, the complaint does not necessarily mean the fraudulent transfers did occur.

The complaint states that Armen Gugasian received $225,000 from April 15, 2011 through January 3, 2012 for consulting fees. However, Mr. Neilson states that he "is informed and believes, and thereon asserts, that Defendant did not give the Debtor, and the Debtor did not otherwise receive, reasonably equivalent value for any of the Consulting Fees Transfers."

Tulving Company Accountant to be Deposed

March 9, 2016 12:40PM EST
Mr. Neilson has issued a deposition for a 2004 exam of the accountant of The Tulving Company, as the accountant was unwilling to talk directly to Mr. Neilson. In general, a 2004 exam allows Mr. Neilson (or any interested person) to require someone to testify and produce documents on matters related to the bankruptcy. Mr. Neilson had previously had a 2004 examination with A-Mark Precious Metals.

I just found out that last November, an accounting analysis was prepared of transactions between The Tulving Company and an individual. Mr. Neilson stated that "It is very interesting and reveals a pattern of deception on the part of [the individual] and a number of his associates, including [the accountant]."

Mr. Neilson further stated that the accountant "without any apparent authorization signed new leases on behalf of Tulving which moved the lease payments beyond the previously agreed upon price to a price well above market. There are also a number of other transactions which Mr. Seyller engaged which are questionable." As I had previously pointed out, the $30,000/mo for the office was way above market rent, and in fact the same unit was recently offered for $10,000/mo. There has also been a report of a $1.7M "accounting error".

Sentencing Transcript

March 1, 2016 3:55PM EST
I have obtained a copy of the transcript, and am starting to review it.

8:40PM EST UPDATE: I've gone through about the first half of the transcript. It's over 80 pages long, so there is a lot to digest. It has alleviated many of my concerns; much of the information I have posted was indeed brought to the courts' attention (e.g. the it was mentioned that 85% of the orders were delivered, which exactly matches my calculation, and a number of key facts were brought up). I did notice what appears to be one majorly impressive error (the U.S. Attorney stated that the apartment rent was $30,000/mo, when in fact it was $5,800/mo; the Tulving warehouse was $30,000/mo) (UPDATE: Hannes' attorney later corrected him on that). But the case appears to have been investigated a bit better than I had thought, and the judge appears to have understood the case quite a bit better than I had been led to believe.

I will be reading the rest tomorrow, and then try to cross-reference with some of the concerns I had noted previously.

One thing I thought would be worth sharing is that Hannes did state "I accept full and complete responsibility for all my actions in this case."

Clarification

March 1, 2016 9:40AM EST
I have had several creditors contact me and explain that Hannes is guilty, and that he should not get off on a technicality.

My goal is to get to the truth: Without the truth, it is impossible to have a fair conviction (the outcome might be fair, but the conviction itself would not).

Remember, even if Hannes were to appeal (I do not believe he plans to do so) and win the appeal, I suspect (again, I have no legal training) that it would go back to the beginning: depending on the circumstances, the U.S. Attorney could say "We have no case", or a different plea agreement might be signed, or a trial might occur.

In any case, I am hoping to get a copy of the sentencing transcript later today, which hopefully will provide more details.

Expanding My Role

February 29, 2016 3:45PM EST
I've had quite a few creditors let me know their feelings regarding what I have recently said about Hannes, and the feelings vary widely. I have had several creditors that have made it clear to me that their opinion is that no matter what the circumstances may be, Hannes is guilty. I appreciate hearing all thoughts; it is important for me to know how creditors feel.

What I feel is critical is finding out the truth and bringing to light what really happened. Some of the truth I already know and/or am convinced of (correctly or not), some I do not know; but in any case, I believe the truth (whatever it may be) is essential here. I believe justice must be properly served -- I cannot sit by idle if I see I feel that the justice system has failed. Remember, if Hannes did commit a criminal act, but certain errors were made in his criminal case, he could be innocent in the eyes of the law. If anyone is innocent in the eyes of the law, and that person is sent to prison, justice has not been served, regardless of whether the person committed a crime. It is the governments job -- and responsibility -- to prove guilt as the law describes. If you passively allow someone who is innocent in the eyes of the law go to prison, I feel that you are essentially saying anyone can go to prison for any reason.

So what I want is one of the following: [1] to become convinced that the case was indeed properly handled (e.g. that there were no issues that negate the guilty plea), or [2] for the justice system to take over and fix things (revert Hannes' status to 'innocent until proven guilty', until proven otherwise).

There are a lot of things that just don't add up here, including:

  • False advertising and bankruptcy are not normally criminal offenses
  • The government is not accusing Hannes of stealing money.
  • There is the inconvenient fact that the government seems to have no idea what happened to the $17M that was stolen.
  • There is no indication Hannes profited from false statements he may have made (e.g. he reduced his salary after this started).
  • Hannes did take steps to stop the fraud (e.g. paying a retainer to a bankruptcy attorney, and having ongoing negotiations with a bullion wholesaler to shut down the business in an orderly fashion)
  • 85% of the orders placed since the first unfulfilled order were in fact delivered (although often late)
  • The total loss to customers during the time Hannes was in control may have decreased (e.g. $20M may have been owed customers in June, 2013, when Hannes regained control of the company).
  • The false advertising was put in place while Hannes was not in control of the company.
  • Part of the rationale for wire fraud charges was that most customers wired money; however, they were not promised a delivery time on the ordering page (those paying with checks were).
  • The advertising on the order page only applied to those sending checks (first time customers were REQUIRED to pay by bank wire). It stated "about 30 days." Remember, this is a false advertising charge: how long does he have to ship orders before "about 30 days" is false?
  • How come negotiations with the bullion wholesaler took so long? Would Hannes have shut down his business within weeks after regaining control if the negotiations were quicker?
  • How long does the victim of fraud have to try to restore their business before it becomes a crime?
  • If a victim of fraud could not afford to pay some bills as a result, and told the companies that they would "send a check in about a month", and later claim bankruptcy, should they go to jail? At what point does it go from benign to prison-worthy?
  • Then there is the balance sheet, that showed at least $17M of assets ($3M of certified coins and $14M of raw coins). How does that affect the case?
  • While Hannes likely should have known that when the business shut down, many orders would not be able to be fulfilled, there may have been no point at which he took orders knowing that those specific orders could not be fulfilled
  • Why did the government change from accusing Hannes of knowing that the company "could not fulfill the orders as agreed" to the factual basis that stated that Hannes knew the company "could not fulfill all of the orders as agreed." The addition of that one simple word suggests that the government filed the charges assuming that $17M was taken in, $17M disappeared, with 0 orders delivered -- but the government then realized at least part of the truth (~$120M was taken in from around 3,800 orders during that time, and 85% of orders were fulfilled).
  • The CFTC assisted in the criminal case. And it looks like criminal case relied heavily on the CFTC investigation (e.g. the criminal case and CFTC civil suit use the same timeframe, which was not very accurate). The CFTC vilified Tulving in a press release, and clearly had no clue of what The Tulving Company was (e.g. stating that The Tulving Company's claim of doing $2.1B of business was false -- yet court documents prove that they did $1.2B in just the 3 years prior to the bankruptcy).
  • The CFTC accused Hannes of misappropriating customer funds for his own financial benefit. What they do not mention is that during their "Relevant Period" (August->January), the only evidence so far is that Hannes took out about $23,000 salary. That is less than 0.05% of the money taken in during that time.
  • The CFTC said "Tulving was the sole person responsible for making all business decisions on behalf of Tulving Company." From the facts I have seen, this is false.
  • The CFTC has painted a picture of a typical bullion scam: a boiler room operation that starts, makes cold calls, collects a few million dollars, and then shuts down with the owners making millions in an obvious fraud. That is very different from a reputable and established company that has done $2B of business shutting down owing $17M that may have been embezzled from the company.
  • The CFTC said that The Tulving Company and Hannes Tulving misappropriated the $17M for "improper and unauthorized" uses. While much or all of the $17M that was lost/stolen seems to have gone to an individual, the U.S. Attorney only said money went to customers (for orders and refunds) and to pay "company debt." If there is such a massive discrepancy, shouldn't it be looked into?
  • The Secret Service seized the assets and records less than 1 week after the company shut down, making the apparent planned orderly Chapter 11 bankruptcy impossible. If that plan was indeed already in the works, the Secret Service did great harm to creditors/victims.
  • Had I started publicly warning people when I first suspected problems (December 2012, where I discussed it in a private forum: "As I've been looking more and more at Tulving, I'm getting more and more concerned"), and it shut down then, few would entertain the idea that Hannes could be guilty. However, it would have been unethical for me to have warned people at that time (I had no proof then).
  • If there is reasonable doubt, why would a defendant agree to plead guilty?
  • Some creditors placed their orders when someone other than Hannes appears to have been in full control of the company; for any such orders, any false advertising on the website would be the responsibility of the person in control of the company.
  • A common defense against wire fraud is apparently a "good faith" defense. Hannes ran a reputable bullion business for 20 years, successfully taking and delivering over $2B of orders. Over that time, over 99% of orders were fulfilled, and about 99% of customers got all their orders. And a number of his creditors/victims do not believe he should go to jail.
We're not talking about an issue that doesn't seem quite right, or a "hunch". There are a lot of things that just do not quite add up, including some blatant errors.

It seems like the CFTC has a "cookie cutter" case it presents against those accused of bullion fraud (company starts, makes money cold-calling customers, maybe sends a few orders, then shuts down having made a few million dollars). A $17M fraud occurred, victims were complaining, and the government looked into it. The $17M was definitely stolen. The company had a sole owner/shareholder/President. The CFTC gives the info to the U.S. Attorney, who comes up with criminal charges so someone can get sent to jail over this, gets him to agree to plead guilty, and they can tell victims that the man is in jail. Case closed, it looks good on paper, easy-peasy.

But the justice system isn't supposed to be easy-peasy. I cannot imagine how the government can send someone to jail with so many unanswered questions.

I expect to be able to get a copy of the transcript of the sentencing hearing tomorrow, and will hopefully have more information to share (and hopefully not simply more questions).

E-mail to Creditors re: Hannes & Justice

February 26, 2016 10:55AM EST
Last night, I sent out an E-mail to the mailing list that I have (which I believe reaches almost all creditors), explaining that I believe that justice was not served in Hannes' sentencing. Specifically, that I think that Hannes is considered innocent in the eyes of the law.

I want to thank everyone that contacted me; you have reassured me that I am doing the right thing here.

For the most part, creditors supported me, often encouraging me to seek the truth and ensure justice is properly served. A few specified that they do not think Hannes should go to jail; a few made it clear they felt he should (which I can certainly understand; if I had lost money in this, I might fall in that category as well).

I expect to provide more details later today.

UPDATE: I'm going to hold off a couple days. I am also debating whether I should take action to help if Hannes does not let me know that he wants me to. There are a lot of questions I do not know the answer to (e.g. whether some of this information in sealed documents, and the reasoning for the guilty plea), and without those answers, I would have much more work to do.

UPDATE 2: I am going to see if I can get a copy of the transcript of the sentencing hearing.

NWT Mint Convicted of Defamation

February 19, 2016 4:35PM EST
A man and his real estate investment firm have been awarded $38.3M for defamation per se and false light invasion of privacy by NWT Mint, its owner, and an NWT employee.

By my calculations, that is $12.5M against NWT, $25.5M against its owner, and $300,000 against the employee.

[UPDATE: The L.A. Business Journal removed their article; the Las Vegas Review-Journal still has their article]

30 Month Prison Sentence

February 18, 2016 1:35PM EST
The Department of Justice has just issued a news release stating that Hannes Tulving, Jr. has been sentenced to 30 months in prison and 3 years of supervised release.

Sentencing Hearing February 17

February 7, 2016 8:50AM EST
The sentencing hearing for Hannes Tulving, Jr. has been set for February 17, 2016 at 02:30 PM.

Motions Granted

February 7, 2016 8:45AM EST
It looks like the judge granted all of Mr. Neilson's recent motions.

This includes the motions dismissing duplicate claims and other similar claim-related issues, as well as the proposal for auctioning the non-error coins and distributing the error coins to creditors.

CFTC Changes Story - Sort Of.

January 13, 2016 1:10PM EST
In September, the CFTC filed a civil complaint against The Tulving Company and Hannes Tulving, Jr. They painted a fanciful story, making The Tulving Company look like a typical fraudulent bullion dealer (con artists intending to defraud from the start), making creditors look like fools for doing business with the company. Most creditors were repeat customers, who knew that The Tulving Company had been in business for about 2 decades. I lambasted the CFTC ("Tulving, CFTC, and the Truth (Oh my!)").

The CFTC's Media Contact never responded to my E-mail (which included "To me, it looks like the CFTC is either completely incompetent, or has some agenda in vilifying Tulving."), nor have they changed their story online.

However, they have changed their tune in hard-to-find court documents. For example, the original complaint stated that during a certain time period Tulving did at least $17.8M of business and misappropriated all of it for improper and unauthorized purposes including paying personal expenses. They have changed that to saying that by adding that he did about $150M of business in that time, and the $17.8M went to fulfilling other customers' orders, paying debts of the company, and returning money to previous customers that did not receive their coins. In other words, about 88% of orders were shipped.

Previously, they said that Tulving "never actually purchased precious metals" (which, ironically, is exactly what Bullion Direct says they did). The CFTC removed that completely from the new court documents. It kind of makes sense that they would remove that claim, since records show that Tulving bought well over $100M of metal during the period in question. How does one buy $100+M of metal and not actually purchase it?

The CFTC also added a bunch of qualifiers, especially the word "some". Previously, they made it sound like no Tulving customer got their metal (when in fact, over 99% of orders were fulfilled since Tulving began operations).

What the CFTC did not do was remove or update the original press release, or admit that they screwed up. Unless you happen to have access to PACER to get the court documents, you aren't going to know about the CFTC's change of position. In other words, the CFTC is still treating customers as fools who fell victim to a con artist, rather than intelligent people who were often repeat customers of a company in business for 20 years (or were referred by others who would give him a glowing recommendation). I feel bad for people who actually do fall victim to con artists ("Yeah, yeah, I've been in business 20 years now. Sold billions of dollars. No, don't bother wasting your time looking it up, TRUST ME!"). But that simply wasn't the case here.

NWT Mint Update

January 4, 2016 1:20PM EST
In July, I pointed out issues with NWT Mint. Someone has recently mentioned to me that their BBB rating is now an 'F', the lowest possible BBB rating. I have started a new webpage covering NWT Mint within the next few days, and closely follow the situation.

Previously, I did not start a new page and was only occasionally following them. This was due to a combination of their standard business practice (typically taking several months to deliver orders), combined with the BBB botching their data. From this, it was difficult to tell if there was an unusual pattern of complaints. However, I feel that the recent pattern of complaints warrants further and continued investigation.

Specifically, about 6 months ago the BBB complaint volume went up significantly. A lot of people are complaining that [1] after placing their order, they are told it will take 8-10 weeks for delivery (which is typical with NWT), [2] around the date the order is due, they receive a notice saying that it will take up to 30 more days (as a decree requires them to do), and then [3] that date passes, and they have troubles either getting their bullion or a refund (which they are told will take 4-6 weeks).

Heritage Auctions to Auction Coins

December 29, 2015 3:45PM EST
A motion was filed yesterday to allow Heritage Auctions to auction the non-error coins. Heritage Auctions is one of the largest auction companies for coins.

The auction estimate for the non-error coins is $400,000 to $600,000. As I have pointed out, this is a bit surprising, as the Secret Service had a professional appraisal made (taking 12 days), which came up with a fair market value of $3,017,718.03. Their appraisal had an "incorrect valuation" for the error coins, suggesting that they were not valued as error coins -- which would make the $400K-$600K estimate for the non-error coins seem quite low. Hopefully, the Secret Service will get their money back for the apparently botched appraisal. UPDATE: It appears the Secret Service valuation attributed minimal value to the error coins, making their valuation for the non-error coins nearly $3M.

Interestingly, the CFO of Heritage Auctions used to be president of A-Mark Precious Metals, which had extensive involvement with The Tulving Company. However, the CFO has not been involved with A-Mark since mid-2010 (when he became president of APMEX). And where Heritage Auctions gets paid a percentage of the hammer price, it is in their best interest to see the highest prices realized for the coins. I find this interesting, but nothing to be concerned about.

Motions Limiting Claims

December 22, 2015 8:25AM EST
Over the past few days, Mr. Neilson has filed quite a few motions with the court objecting to claims.

For the most part, it appears to be due to issues like duplicate claims, people incorrectly stating that their claim was secured, people asking for interest on what was owed, calculation errors and other similar issues. This is exactly what creditors want: otherwise, some creditors would get more than their fair share of what is owed them.

Although I have not fully examined all the objections, I have not seen any that in my mind appear to be problematic (although there was one motion objecting to 3 claims where Tulving's records show the metal had already been shipped; if those creditors never received the metal that would be a problem).

If you do receive notice in the mail that your claim was objected to, however, I would be sure to look carefully at the motion. In most, the key section appears to be under the "ARGUMENT" section, part "D" ("The Objection"), usually around page 6 or 7. It is a short paragraph that summarizes what is being objected to and why.

Trustee Report #7

December 4, 2015 4:50PM EST
Mr. Neilson has released Trustee Report #7 (you can also find it at the official bankruptcy site at tulvingbankruptcy.com).

As usual, I think it would be a good idea for all creditors to read it. My summary could miss something important to you, and this information comes straight from the source. The report covers the disposition of the coins (both the error coins and non-error coins).

Essentially, the non-error coins will be auctioned over a 3-6 month time period, and the error coins will be distributed directly to creditors. Any creditor not wishing to receive the coins can have their share included in the auction with the non-errors coins, and receive the proceeds from the auction (with the caveat that too many coins auctioned at once could lower their value). As a reminder, these are non-bullion $1 Presidential error coins ("Missing Edge").

A number of creditors believe the valuation for the error coins ($7.3M for 12,539 coins, averaging $587 each) is high, which I agree with. I did get some information from Mr. Neilson about the valuation. The valuation was done by a leading expert on these error coins. I did not ask Mr. Neilson for the specific details on the coins, as he alleviated my previous concern about a possibly high valuation (that it could limit the recovery of creditors). From the pieces I can put together, it sounds like the valuation is overly optimistic (but I am also not an expert at valuing coins). In other words, if I were a creditor, I would not expect to get as much for the coins as they are valued for. However, I do not see the downside of an overly high valuation that I had seen before.

Error Coins to go to Creditors

December 2, 2015 3:00PM EST
R. Todd Neilson, the Chapter 7 Trustee, has filed a motion regarding his proposed plan for liquidating the coins seized by the Secret Service.

The coins are divided into 2 categories: 12,539 Presidential Error-Missing Edge Letter Coins, and roughly 175,000 non-error coins. The error coins are the ones that if auctioned all at once would likely reduce their value significantly (taking a number of years to auction to preserve the value).

If approved by the court, Mr. Neilson plans to auction the non-error coins (with the proceeds going to creditors), and give the error coins an official valuation of $7,367,235 -- and distribute those error coins to creditors. Creditors would be free to do whatever they wanted with those coins: keep those coins, sell or auction them right away, sell or auction them in a few years, etc. Alternatively, there would be an option where a creditor could choose not to receive the coins, but have them auctioned along with the non-error coins (and receive his/her share of the auctioned error coins).

This does seem to be a reasonable proposal. One thing to be aware of is that there is no indication of where the $7.3M valuation stands compared to previous valuations. The coins were originally described as "worthless" (which we knew to be untrue), then had a $3M valuation (without the error coins being noted), and then valuations of $11.3M and as high as about $20M. They were reportedly on Tulving's books at about $17M, based on the wholesale value. But there is no way to tell if the non-error coins have a value of nearly $3M, or over $10M -- nor is there a way to know where the valuation of the error coins lies (on the high side, low side, or somewhere in the middle).

What needs to be noted is that when the error coins are distributed to creditors, their claim will go down by the estimated value of the coins. So if you have a claim of $10,000, you'll get about 8 error coins (worth about $4,800 per the $7.3M valuation) and your claim will now be $5,200. My understanding (as a non-lawyer) is that would limit your future distributions to a maximum of $5,200. So if the error coins end up being worth less than the $4,800, you cannot get a full recovery.

This means the lower the valuation used for these coins, the better for creditors. Conversely, a valuation that is higher than what they are worth would, from what I can tell, be damaging to creditors. So everything hinges on whether the $7.3M valuation is reasonable.

To see how this works, imagine the valuation of the error coins was $15M or so (the exact amount owed all creditors). The coins would be distributed to creditors, who would then have a $0 claim (but have those error coins).

From what I can tell, the valuation does appear to be within reason. The coins (error and non-error) appear to have been on Tulving's books with a wholesale value of about $17M (nearly 2 years ago, however). And the 2 valuations we know of for all the coins were $11.4M and $20M. Combine that with the Secret Services' $3M valuation for all the coins (not knowing of the error coins), and $7.3M seems in line. But without more details, we are left to trust the professionals, but not verify.

But, we don't know a few things. For example, how could the professional appraisal firm hired by the Secret Services take 12 days to value the coins, and not know there were error coins? That could only happen if the error coins were raw (ungraded). But that is a big problem: the grade of the coins is crucial in determining their valuation (it could easily mean the difference between a $1M or $10M valuation). We also have no idea of exactly what the coins are: the best description appears to be "51,459 Dollar coins in plastic sleeves" -- which covers the error and non-error coins, with no idea on years, and whether they were graded or not (if so, they were almost certainly PCGS-graded). Since the appraisers hired by the government missed lots of error coins, it brings up the question of whether the coins previously used as collateral by CFC may have included error coins?

CFTC Lawsuit Update

November 24, 2015 5:00PM EST
Chapter 7 Trustee R. Todd Neilson filed a motion today asking the court to allow Hannes Tulving, Jr. to enter into a consent order to resolve the CFTC lawsuit.

My understanding is that this will not negatively affect creditors; specifically, the CFTC would not get any money from Mr. Tulving unless all creditor claims are paid.

New Class Action Lawsuit

November 24, 2015 10:55AM EST
Today I heard about a new class action lawsuit, which is against Hannes Tulving, Jr. personally. The lawsuit was originally filed in August, with an update today trying to get permission to use alternate means to serve Mr. Tulving.

Some (Slow) Progress

November 20, 2015 1:15PM EST
The bankruptcy appears to have been sitting idle for most of the past 2 months.

On Wednesday, a request was made to the court to disburse $15,600, mostly to get the seized coins transferred from the Federal Depository in Wilmington, Delaware to "Auction" -- apparently a company that has or will be selected to auction the coins (and will apparently cover any storage fees).

Yesterday, R. Todd Neilson filed a stipulation to allow him a short extension to come up with a final list of creditors and a plan for auctioning the coins. That was originally due today, but the extension will give him until December 1st to do so. I believe this makes sense, as a final list of creditors should be, well, final and unchangeable.

One likely minor but interesting note is that the stipulation was supposed to be signed by Hannes Tulving, Jr., his attorney, and the U.S. Attorney. However, the signature for Hannes appears to have been signed by someone else. There is a small hand-printed illegible notation on the same line, but someone unfamiliar with Hannes' signature would almost certainly assume it was his. I have no idea why this document would have what appears to be his signature but is not.

Tulving, CFTC and the Truth

September 28, 2015 4:25PM EST
Given how disturbing the CFTC Press Release and complaint were, I have set up a page Tulving, CFTC, and the Truth (Oh my!).

I wish to make it clear that I am not trying to defend what happened. The U.S. Attorney's office determined that what happened was wrong, and Mr. Tulving agreed to plead guilty to a charge of wire fraud. That is how the justice system works. What is not acceptable, however, is for a government agency to (from what I can tell, intentionally) mislead the public. What they did tries to re-write history, and take a company that was successful for 2 decades and make it "disappear" by saying that it did not do $2B+ in transactions, and was not an established and reputable dealer. This in effect portrays Tulving customers as fools -- people who got suckered by a con artist who made wild claims, when in fact most Tulving creditors were either repeat customers or referred from repeat customers.

To me, it seems like the CFTC acted with reckless disregard to the truth. I did contact the CFTC a few days ago to alert them to my article, and have not heard back. I will be happy to do anything I can to assist in getting the truth out. This was so out of line that I was unable to see through the misinformation to see what merit, if any, the lawsuit may have.

CFTC Complaint Update

September 13, 2015 4:20AM EST
I think I have to call the CFTC on Monday.

Their press release has the appearance of a complete farce. It appears that the CFTC missed that The Tulving Company was indeed a highly reputable, stable, and established precious metals firm from 1999 through some time around roughly 2011. It appears they think that Mr. Tulving started up shop around August 2013, took in $17.8M and skipped town (as is the case with the subjects of many of the CFTC enforcement actions).

For example, it says "The Defendants allegedly purchased and sold little or no precious metals with the funds they collected from customers. Instead, according to the Complaint, the Defendants defrauded customers by lying to them and misappropriating their funds for improper and unauthorized uses, including for the Defendants’ own financial benefit.". As most people reading this know, The Tulving Company did indeed take many orders that it was unable to deliver. However, I have proof (gathered by a 501(c)(6) non-profit organization) that at least $8.1M of metal was shipped in the Relevant Period, and court documents show only $26,437 (0.14% of the $17.8M) went directly Mr. Tulving during the Relevant Period.

So at best, the Press Release is highly misleading.

CFTC Files Civil Complaint

September 11, 2015 8:20PM EST
The CFTC filed a civil complaint today against The Tulving Company and Mr. Tulving.

I will likely post more about this tomorrow, but I am quite surprised at first glance. Reading the press release makes it sound like The Tulving Company was never a reputable business (which it was, until the end). It also says that Mr. Tulving handled all funds received; however, the information I have shows that he was not even a signatory on the bank account. At first glance, it almost appears that this complaint was mixed with that of another company, and gives me grave doubts about the CFTC. But please note, this is after the briefest review; I expect to write more tomorrow.

Hearing Thursday in Criminal Case

August 18, 2015 2:10PM EST
On Thursday at 9:30AM there will be a hearing in Charlotte, NC. The purpose is for Mr. Tulving to enter a plea of guilty. Creditors are allowed to go and/or speak (you need to call ahead to speak). According to the U.S. Attorney's office, Mr. Tulving has already plead guilty. Because of the guilty plea, there will be no trial. The sentencing date is expected to be within about 6 months to 1 year.

UPDATE 20 Aug 2015 1:40PM: The hearing was held, and a guilty plea was entered.

E-mail from U.S. Department of Justice

August 13, 2015 2:30PM EST
I have heard from a Tulving customer that they received an E-mail today from the U.S. Department of Justice, regarding the criminal charge against Mr. Tulving.

Many of the documents have been sealed, and I am not a Tulving customer, so I cannot access the notification website and any notifications or documents that may be there.

What I do know is that a Plea Agreement was filed, as well as a Summons, and a Plea Hearing is set for August 20.

Bullion Direct Update

July 29, 2015 1:25PM EST
Earlier, I reported that Bullion Direct was out of business.

It turns out that they have admitted to "not purchasing" metal that customers bought and stored with them (to the tune of an expected $25M+). In other words, you would send them a check for metal, they would say "OK, that metal is in your portfolio", but instead of buying the metal with your cash they would spend the money.

A-Mark/CFC Motion to Sell Collateral

July 29, 2015 1:15PM EST
A-Mark's subsidiary CFC has filed a motion for relief from the automatic stay, which would allow them to sell the coins they are holding as collateral. They are valued at face value ($173,642), to cover a debt with principal of $175,600 and $44,631.66 of accrued interest (since the bankruptcy petition; the loan was current until then) and $7,079.50 in fees, totaling $227,311.16.

The valuation at face value is an immediate red flag, but further investigation shows that these coins (it looks like presidential dollar coins and rolls of quarters) do not even get high premiums on eBay. Unless they were proof, mostly high graded, or error coins, I cannot imagine a much higher valuation.

UPDATE: These are not the coins that were seized by the Secret Service (which have valuations from $300K to around $20M). These are separate, and have been in possession of A-Mark's subsidiary CFC since 2008. CFC loaned The Tulving Company some money around 2008, using these coins as collateral, and now is using the collateral since The Tulving Company now cannot pay back the loan (since it is in bankruptcy).

Older Tulving Information

I occasionally 'prune' this page, as it gets very big -- you can go to the Older Tulving Information page for older information.



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