[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]
Trustee Report #9August 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 geting 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 thoguht.
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 determing 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 distibution would likely not be large, but I am sure would be welcome by creditors.
Weneta Kosmala's Giveaway Motion ApprovedJuly 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  the Trustee does not seem to have the creditors' best interests at heart, and  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 DataJune 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:
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 prosectution 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 Collecitons (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 ResultsJune 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 WaitingJune 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 travelled 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 Hertiage 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  all the error coins are accounted for, and  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 AuctionJune 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 ValueJune 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 rememember 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, 2016May 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!
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 GiveawayMay 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
Motion Regarding Tulving Company Records
New Privacy ConcernsMay 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  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  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.
May 9, 2016 9:15PM EST
Latest Coin UpdateMay 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:  the decision to receive the coins or opt out changes a bit (as claims get reduced by much less when receiving the coins), and  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 $400KMay 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  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  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' AccountantMay 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 PrisonApril 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 AgreementApril 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 #8April 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:  distribution of the error coins (expected in mid-May),  auction of the remainder of the coins (expected around early fall),  the litigation against Mr. Levon Gugasian and his son Armen, and  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 ComplaintApril 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 TruthApril 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 TrusteeApril 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 mysteryMarch 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 totalling $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.
$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
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 ShopMarch 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.
DocumentsMarch 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 TrusteeMarch 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 PageMarch 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 DetailsMarch 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.
ForumsMarch 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 DefaultMarch 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 intiated 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
UPDATE:  The only differences in the documents are the "0" changed to a "2", which were initialed by the landlord and not Hannes.  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.
Unaccounted for AccountingMarch 17, 2016 3:15PM EST
In my article discussing when the leases were signed, I refered 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 2011March 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  insolvent,  engaged in transactions for which its remaining assets were unreasonably small, or  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 cuomsters 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 DepositsMarch 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.
Objection to Gugasian LeasesMarch 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 LeasesMarch 11, 2016 3:05PM EST
The adversary 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.
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 mainenance, 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 mainenance, 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 TransfersMarch 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".
First Complaint Filed - Landlord's SonMarch 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 DeposedMarch 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 TranscriptMarch 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 calcuation, 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."
ClarificationMarch 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 convinction (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 RoleFebruary 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:  to become convinced that the case was indeed properly handled (e.g. that there were no issues that negate the guilty plea), or  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:
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 & JusticeFebruary 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 DefamationFebruary 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 SentenceFebruary 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 17February 7, 2016 8:50AM EST
The sentencing hearing for Hannes Tulving, Jr. has been set for February 17, 2016 at 02:30 PM.
Motions GrantedFebruary 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 UpdateJanuary 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  after placing their order, they are told it will take 8-10 weeks for delivery (which is typical with NWT),  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  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 CoinsDecember 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 exensive 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 ClaimsDecember 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 #7December 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 CreditorsDecember 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 somwhere 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 UpdateNovember 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 LawsuitNovember 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) ProgressNovember 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 sigature but is not.
Tulving, CFTC and the TruthSeptember 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 UpdateSeptember 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 ComplaintSeptember 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 CaseAugust 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 JusticeAugust 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 UpdateJuly 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 CollateralJuly 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, totalling $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 InformationI 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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