This page is for OLDER NWT Mint information

I will be occasionally "pruning" the main NWTM page, moving posts over here, so the main page does not get too large.

New Request to Destroy Records

It is unclear what he would do with the records if they were abandoned, rather than destroyed. In a bankruptcy, property that is abandoned goes back to the debtor. Would they go back to Ross Hansen?

And of course, there is what appears to be a glaring error. The motion starts by "requesting authority to abandon and destroy business records of NWTM from before 2012", but the proposed order states "The Trustee is authorized to destroy all business records of NWTM that pre-date the year 2013." Remember, 2012 is a whole year, so you have to phrase things properly. You cannot say both "get rid of records before 2012" and "keep records after 2012". The poor records from 2012 get lost if you do that.

This is also interesting because Calvert declares that he is "unaware of any litigation or other bankruptcy estate matters for which such records could become relevant." However, documents from 2009 were 2012 were pulled from NWTM's records for a hearing just 1 week ago.

WARN Class Action Lawsuit Dismissed

I do not have any further information as to whether this was because there was evidence clearly showing that the WARN Act was not violated (so the plaintiff would not have an incentive to continue the case), or if the case is going to be re-opened in some other way (such as in a different court), or if there is some other reason. I will update this if I hear more.

FBI Investigation Started ~October, 2015

The FBI interviewed at least one former high level NWTM employee in December, 2015, who mentioned the interview to another high level employee working at NWTM at that time.

Sell to the Lowest Bidder?

As we know, Medalcraft put in an initial 'stalking horse' bid of $700,000. At the auction (before the March 9 hearing, between Medalcraft and Mr. May), the bids went up to $810,000 for Medalcraft and $825,000 for Mr. May. Then, the Trustee was concerned about Mr. May's credentials (despite him having been qualified to bid), so the Trustee declared Medalcraft as the successful bidder. Then, according to Mr. Gearin, Mr. May made an unsolicited bid for $900,000. The Trustee then called Jerry Moran of Medalcraft to explain that while his $810K bid won, Mr. May later made an unsolicited bid for $900,000 -- at which point Mr. Moran offered to increase his bid to $910,000 "if that would make a difference." Huh? If I won something in an auction for $810K, I wouldn't volunteer to pay $910K.

In any case, court documents show that the $910K counter-offer (which appears to have been completely solicited by the Trustee) was somehow relayed to Mr. May's attorney (at which point I would assume it was a valid bid). Mr. May's attorney then countered with a $950,000 bid on March 14. And then on March 15, Mr. May's attorney raised his bid to $1,250,000 (presumably to make up for what Mr. Gearin may have considered drawbacks with Mr. May's offer).

So both parties have increased their bid (at least 3 times total) without needing to. That makes little sense to me.

And then in court, Mr. Gearin said that the Trustee was willing to accept the original $700,000 bid (a bit more than half the highest offer) "if that is what we need to do to get the sale to go through." Is Calvert trying to sell to the lowest bidder?

And no mention was made of an offer made by a different party in February, complete with a deposit, that included the Medallic name (which this auction is selling). How can you hold a deposit for a bidder and then sell some of the items out from under him that he is bidding on?

Potential Bidder Diverted Business

"One former sales employee has taken a position with a direct competitor who had executed a nondisclosure and nonsolicitation agreement with the estate in connection with its expression of interest in acquiring the estate’s business. The former employee appears to be contacting customers of the estate and attempting to divert business to the competitor. The competitor’s violation of its nonsolicitation agreement with the estate may adversely impact operational results and give rise to actionableeeds.ges [sic] claims."

I believe that I know who both the employee and the competitor are, and if I am correct, this is not the same employee whose E-mail I recently quoted. It is not known from what is written if this company put in a bid we do not know about, put in a bid that was never accepted, or a bid that is still being considered. But what appears certain, from "actionableeeds.ges claims", is that whoever wrote this is a lawyer that has a pet cat that sometimes walks on the keyboard.

Any Company Can Use Chinese Dies?

It isn't as simple as that. This issue combines U.S. and Chinese laws, as well as the policies of a company in China. There are issues of who owns the physical dies, who owns the artwork, and who can use the dies. And the big issue of how to contact customers.

Ross Hansen stated at the Creditors' Meeting that NWTM owns 10,000s of dies in China. If NWTM is the legal owner of the dies (which Mark Calvert presumably believes, as he believes NWTM owns the dies in the U.S., and has not stated otherwise regarding the Chinese dies), it is unclear how another company could use them. Next, if NWTM owns the copyright to the artwork (which may depend on whether they designed the entire image, whether they worked on a crude drawing from a customer, or whether the Chinese artists created them), another company should not be able to use them.

But perhaps the biggest issue is that it would be very difficult to generate business this way legally. Sure, you could say "Hey, if you did business with NWTM and had medals made in China and know the die numbers, we can work with you!". But that isn't going to get you far quickly. You're going to need to contact NWTM customers, and know the die numbers, for best results. But the NWTM customer list is the property of the NWTM estate. As far as I know, it would be illegal to use the customer list without permission.

Judge Denies Motion to Sell to Medalcraft

This comes after such strange things as Mr. Calvert apparently putting the interest of customers over creditors, and a report of Mr. Calvert ignoring a company attempting to make an offer in 2017.

Medalcraft has stated that they have no connection or relation to NWTM or Ross Hansen, and negotiations were free from any fraud, collusion or bad faith.

NWTM Lost Domain Names

Apparently, there was an NWTM employee who sold custom medals. At some point, either before or after he started working at NWTM, he registered some domains that NWTM used. It is unclear whether NWTM thought that NWTM owned the domains, or whether there was some sort of arrangement allowing NWTM to use them (which is very rare). In any case, these were domains that for many years let people see NWTM inventory, and displayed the contact information for NWTM, and had an NWTM copyright notice.

However, at some point well after the bankruptcy -- around July, 2017 -- the domains were sold to another company that produces medals, which now provides their own contact information on them. Therefore, anyone who had been going to these sites will likely start using this other company, rather than NWTM, for their medals.

Since the company that bought the domain names appears to have done nothing wrong, I am not going to mention the company or the specific domain names.

UPDATE March 20, 2018 7:20AM: I have found out that the employee owned the domains before working for NWTM, and rented them to NTWM. NWTM stopped paying at some point before the bankruptcy, so from the looks of it, it appears that the old management dropped the ball on this.

NWTM Designs With New Company?

It is unclear how this is happening. A Chapter 11 Reorganization Plan couldn't slip by under the radar. Could Chapter 11 Trustee Mark Calvert have decided to operate under a different name (and would that even be considered a new company?)? If it is part of NWTM, why not use the old E-mail address? Did NWTM get court approval to sell major assets that slipped past me? How else can a new company have access to NWTM designs, and a list of E-mail addresses to send to?

The E-mail is as follows (the copy I received did not include the headers or E-mail address it was sent from).

Good afternoon,

[Name] here with your custom coins! Happy New Year!

Long story short, Northwest Territorial Mint filed for bankruptcy in April 2016 and has since then not been
able to work its way out, this is all public knowledge on the internet. Unfortunately, Northwest Territorial
Mint shut down on 12/29, doors are closed and all systems are shut down; THE GREAT NEWS is your designs are
still on file and you have the ability to continue to work with me under a new company that has all the same
capabilities, quality and even faster turnaround times! I would be happy to continue working with you if
you’d like, please call or email me at anytime if there is anything I can do for you. PLEASE BE SURE TO EMAIL
ME AT THIS EMAIL ADDRESS, THE PREVIOUS EMAIL HAS BEEN SHUT DOWN AND DEACTIVATED.

Same contact # [Phone]

[Name]
[Phone]

UPDATE March 20, 2018 8:15AM: I have found out that a copy of this E-mail was sent to a group that had some medals made in 2015. The E-mail was sent "out of the blue" from their old contact at NWTM. I also received an anonymous tip that "Another company can use the NWTMINT dies if they are the ones from China. As long as the owners are on board." If NWTM actually owns the Chinese dies, as has been claimed, the legality of doing that would be questionable.

Another Offer on the Table

I expect that the details of the offer should become public within the next few weeks.

Trustee Objects to Rodger May Bid

There is some irony here. The Trustee's attorney, Mr. Gearin, E-mailed Rodger May's attorney after the March 9 hearing, stating "the Trustee expressed his concerns regarding Mr. May's ability to protect customer interests in light of the fact that Mr. May does not have experience in the minting business." The irony is that the Trustee (and his accounting company), as we all know, had less experience in minting or bullion (so little, in fact, they weighed precious metal using bathroom (avoirdupois) scales -- something I'm sure Mr. May would never have done, as he is involved in mining companies).

Mr. Gearin also stated concern that NWTM owner Ross Hansen might be involved, saying "the Trustee will not be party to allowing customers and creditors to be mistreated again as they have been in prior business enterprises run by Mr. Hansen." It is quite a relief to know that Mr. Calvert is so strongly aligned with creditors, although I'm not sure how creditors could be harmed by a higher offer (even if the resulting business was unsuccessful). And while it is noble of him to be aligned with customers, he has a fiduciary duty to creditors, and no obligation to customers (that are not creditors) as far as I know. It was disclosed that Mr. Hansen did bring the auction to Mr. May's attention, but Mr. Hansen's role would "never be more than that of a consultant".

In order for the Trustee to entertain offers by Mr. May, he expects to know things like how Mr. May will ensure timely orders and and what management team will be involved (which Mr. May provided, but not to the Trustee's satisfaction). This seems quite ironic for a dead company -- one that died under Mr. Calvert's watch. I urge you to download the declaration and read "Responses to Questions" (pp 40-41) to make your own opinion on whether Mr. May's responses suggest that his bids should be accepted or not.

Perhaps the Trustee is mistaking this sale for a plan of reorganization (where creditors could benefit after the sale), and not an asset sale (where the benefit to creditors is normally limited to the cash at closing)? Or maybe I am simply missing something (yes, it does happen!). It's nice to ensure future customers will be treated well (and very important to ensure that dies are not mis-used), but I'm not sure why a higher offer would trump a lower offer based on the future expectations of the company (which again brings irony: Calvert seemed convinced he would be able to make NWTM succeed, but with hindsight we now know the outcome).

There seems to be no question that Medalcraft is better suited to quickly take over the Medallic assets, and has the least risk of the assets going to waste somehow. However, it is also important to make sure that Mr. Calvert isn't turning down a better offer for reasons that do not relate to the interested parties.

February Financial Report

In it, it shows that the skeleton crew was reduced from 22 employees to 10 employees.

The "Significant Events and Case Progress" section, which usually is the most information (a narrative of what went on during the month) has no new information from what I could tell. There is what appears to be a line regarding either the Medallic sale to Medalcraft or the sale of older dies to the ANA, but I cannot fully comprehend it ("The Trustee also has confirmed for the dies available for sale which is anticipated to be confirmed in March and April.").

How Did Rodger May Get Involved?

According to a filing I will be discussing in depth later today, Rodger May hopes to buy the Medallic assets to run a business (e.g. providing medals to customers), with one of his partners taking the lead role. Mr. May's attorney states that Mr. May found out about the current auction from Ross Hansen, but that his partner originally tried contacting Chapter 11 Trustee Mark Calvert in 2017 (the implication being that Ross Hansen was not involved in the original inquiry).

Further, Mr. May's attorney states "Mr. Hansen's role in the company going forward has not been determined, but it would never be more than that of a consultant." Traditionally, a consultant provides advice, but cannot make any actual decisions on their own. For example, a consultant might say "Hiring Mr. Jones would benefit the company, and $55K/year is a reasonable salary" but someone else would need to actually make the decision to hire Mr. Jones and how much to offer him for a salary.

The Trustee's attorney stated that Ross had contacted ex-NWTM employees and stated that he is "back in business" and representing that he would be "running the mint within the week."

Trustee Reportedly Ignored an Offer

The Trustee's attorney responded that "The Trustee has no recollection of Mr. Holabird or any communication with him in which he expressed interest in purchasing the estate's assets."

He said, she said, I guess.

NWTM Asset Sale Approved

One catch is that they are buying 1 "Group of (70) sections of heavy duty adjustable shelf units w/(21) sections of die bins." The photo appears to show the shelving that the Medallic dies are located in. It is not clear where those dies will go, or even if the purchaser is aware that they need to be saved.

$22M Offer Turned Down?

In this case, I have heard from a reliable source that "legitimate offers as high as $22 million for the assets of NWTM have been turned down by the management of the company and the Trustee."

There could be good reasons for this, but it may be time for someone to ask Mark Calvert "Hey, what offers have you received, and why did you turn them down?"

UPDATE March 13, 2018 8:50PM: I have been unable to confirm that such an offer existed, and have heard from some other sources that this offer just does not seem like it was realistic. I will have to assume that there was no such offer, unless I get more information.

Trustee Untrustworthy?

However, things are worse than that. He has failed to act in a number of cases where he should have. For example:

• The bankruptcy schedules on May 10, 2016 stated "Debtor stored personal property for certain customers, Trustee has commenced a detailed storage inventory which will be provided to creditors when completed." No storage inventory was provided.
• Calvert wrote that he confirmed that certain dies belonged to a specific customer, and asked for permission to return them. The Judge's order stated that "The Trustee may return the Coining Dies purchased by [customer]". A year and a half later, he had not returned them, requiring the customer to write to the Judge.
• After a lot of debate between the Trustee and the landlord over what repairs NWTM needed to make to the Dayton facility, the Judge ordered the Trustee to "promptly" make many repairs (a list of 21 was provided). The landlord of the Dayton facility claimed on February 20, 2018 that there was "no progress in any repairs or other compliance with the Court’s September 1, 2017 Cure Order."

The more serious problem here is for people like me that are acting as watchdogs that trust that the Trustee is doing what he says and is told to do. If the Trustee doesn't do things he says he will do, and doesn't do things he is told by the Judge to do, it's like dealing with a small child. I simply cannot trust Mr. Calvert (it has gone from "trust, but verify" to just "verify"). Now I have to go back and look at all the things that he promised to do, or was ordered to do, and see if I need to check if they really were done. I assume, for example, that all the storage customers that still had metal at NWTM (that wasn't stolen) got their metal -- but now I have to wonder if there are some who did not.

Tips Wanted...

If you would like to supply me information anonymously, you can do so on the anonymous tips page. My E-mail address is also there (I do not publish information given to me via E-mail unless you give me permission, and in the rare cases where I publish the names of my sources I never do so unless I have explicit permission).

Chinese Business

As far as I know, nearly no mention has been made in court documents regarding the Chinese business and dies. It is not mentioned in the recently filed budget.

Further, I have heard that an NWTM employee has bragged that nobody cares about the Chinese business, and that he will be able to take it over himself. Since the dies are "invisible" (nobody has gone or will go to China to investigate them, as far as I can tell), they could easily get transferred to a new owner "under the radar."

UPDATE March 12, 2018 4:45PM: Someone mentioned to me that the Chinese dies use a numbering format with a "Q" followed by a letter indicating the salesperson followed by 4 digits. This information, combined with the die numbers found in the inventory list, suggest somewhere in the order of 15,000 30,000 Chinese dies (2 dies per number; obverse and reverse). It appears that some of the dies are destroyed after a number of years if they are not used.

More on Die Values

Over the years, NWTM has acquired many dies not created by NWTM (e.g. through the acquisition of companies). The majority of the dies appear to be from the Balfour Company, which are relatively tiny dies for things like jewelry and pins, and therefore would not have much scrap value. There are also a lot of dies for tokens, which are also fairly small, and therefore would have little scrap value. Next comes the Medallic dies, which are large, heavy, and have historical value (such as the die for a coin that was given to the captain of the ship that picked up 700 Titanic survivors... a die that some NWTM employees are very familiar with). Finally there are the dies that NWTM themselves created, and ones that the Chinese companies created.

The photos I posted are of the Medallic Art dies. It seems that there are somewhere around 25,000-40,000 Medallic Art dies. I have not seen any estimate of how many NWTM dies there are (which is ironic, as those should have been the most likely to have been inventoried and/or referenced in court documents).

So what about the value? Much of the value is historic: the ability to hold a die used to create a famous medal, or the ability to restrike old coins for the companies that originally had them made. But the scrap value is an important reference point.

From what I have heard, a good guess would be that about 350,000 dies are small, and would have a scrap value of perhaps $.20 each, or roughly $70,000. Then there should be roughly 40,000 Medallic dies, weighing about 20 pounds each, with a total scrap value of roughly $150,000. Medallic had had around 15,000 copper die shells and 5,000 galvanos, with about 250,000 pounds of copper/lead, which would likely have a scrap value of over $500,000. That's a total of over $700,000 of scrap value, above and beyond any historical value or value for customer reorders.

Of course, we have no idea how many dies still exist, or who would get what dies.

UPDATE March 19, 2018 9:20AM: I have heard from another source that about 250,000 of the dies are essentially "junk" -- small dies, typically for jewelry, that have almost no scrap value. The source suggests that the total scrap value of all the dies and galvanos is under $100,000.

NWTM Budget Filed

UPDATE 2 March 9, 2018 2:25PM: Ross Hansen stated at the 341 hearing that silver storage and lease statements were handled by the legal department, consisting of Amelia Swan and Greg Fullington, and that they left in October, 2015 (although Mr. Fullington reportedly worked at NWTM through 2017). In 2014, Mr. Fullington was aware of at least one order where the order was not shipped as of the "drop dead" date (the date at which the Consent Decree required NWTM to immediately refund money if the order had not yet been shipped), and Mr. Fullington was aware of at least one customer who felt that NWTM was "using [his] money as float" (again, 2014). After hearing of those orders, he became the Acting Chief Financial Officer of NWTM for nearly a year. He supervised Amelia Swan, who handled at least 50 serious customer complaints, many of which involved the "drop dead" date being reached with no immediate refund being given as required by the Consent Decree.

UPDATE 3 August 27, 2018 7:45PM: I now have a page about Sierra Mint, with background information and a timeline of its formation. Mostly for my own use.

March 6 Hearing Audio

The hearing was about the ability of NWTM to sell dies (with actual ownership set for a separate hearing).

Calvert: "We have in excess of 400,000 dies"

So Ross Hansen was correct (see my recent "How Many Dies" post below). So where are these dies? Is Medalcraft going to get 400,000 dies for $750,000?

$350 to Get Dies Back?

The piece that is more newsworthy, though, is that Chapter 11 Trustee Mark Calvert told the customer that "Also there is a cost to research this and find your dies and ship them to you. Not sure what the cost is but my guess is that it is in excess of 250.00 maybe as high as 350. Are you prepared to pay this amount?"

The Trustee's attorney, Mike Gearin, told the customer that this was a mistake (apparently since it was already handled in a motion). This, of course, is horrendous: they have had a year and a half to ship the dies, but have not, with an imminent sale. However, the obvious implication here for other customers is that Calvert is going to try to gouge you if you request your dies back (treating this as a profit-making endeavor of some sort, rather than a return of property that does not belong to NWTM).

UPDATE March 7, 2018 9:30AM: In a recent agreement, NWTM and a customer agreed that the customer would pay $18,000 for 60 dies ($300 each). So it seems fairly clear that NWTM is willing to let customers "pay to play" to get their dies back. It is interesting that both the customer and NWTM still assert ownership of the dies.

February 9 Hearing Audio

You can download the audio (4 hours, 30MB), and/or a very imperect computer-generated transcript. The transcript is barely readable (as it was computer generated; true transcriptions are quite costly), but can be useful if you are looking for something specific.

Oops!

One of the changes is that "The third sentence of section 7.8 commencing with the word "Notwithstanding" and ending with the word "(Trust)" is deleted."

It looks innocuous. So what was removed? It removed "Notwithstanding the foregoing, Gary Anderson, Investment Trustee for RNO Financial/Eureka House of Metals (Trust) may assign all or a portion of its rights and obligations under this Agreement to any subsidiary of Gary Anderson, Investment Trustee for RNO Financial/Eureka House of Metals (Trust)." Major Oops!

From the looks of it, the attorneys (who get paid up to $900/hour) created an APA for Gary Anderson (who was supposedly buying the entire company, not just the Medallic portion, as a going concern). When Medalcraft made an offer, the attorneys then modified that APA to remove NWTM assets and have Medalcraft as the buyer, but forgot to remove the section specifically giving Gary Anderson rights to assign the contract to himself. I'm sure a court would not have allowed that, understanding that it was an error, but imagine the nightmare if the Medallic assets were sold to Medalcraft and Gary Anderson got to assign all the assets to himself?

I wonder if this will have any bearing on the class action lawsuit about the WARN Act. If Gary Anderson's name appears in a document used to "slice and dice" the NWTM assets into two categories after the company shut down, it certainly suggests that Gary Anderson may have entertained the thought of terminating employees and using the assets separately, or perhaps paring down the company to the most profitable pieces.

And yes, I'm sure the attorneys are billing to pay for their time to carefully create an amendment that doesn't mention Gary Anderson's name and clearly refer to the fact that they made a major blunder. Just like they and Calvert billed for their time fixing the major accounting errors they made with the assets being returned to customers.

Class Action Response

Responses to complaints in lawsuits usually do not have much useful information in them. A few pieces of information that were in there, however, include:

"Trustee denies that Defendant employed 100 or more employees (exclusive of part-time employees) 60 days prior to December 29, 2017."
"Plaintiff’s claims are barred in whole or in part by the “faltering company” exception to the WARN Act. See 29 U.S.C. § 2102(b)(1)."
"Plaintiff’s claims are barred in whole or in part by the “unforeseeable business circumstances” exception to the WARN Act. See 29 U.S.C. § 2102(b)(2)."

It will be interesting to see how NWTM did not employ 100 or more employees 60 days prior to December 29, since Mark Calvert certified (p46) under penalty of perjury that NWTM had 116 full time employees as of October 31, 2017, and that only 4 employees were added/terminated that month.

The "faltering company" exception is the one that it was expected that Calvert would use as a defense. In general, it allows companies that are looking to secure financing to forego the full 60 day notice, if providing notice would have "precluded the employer from obtaining the needed capital or business". According to this source, "courts have held that it is not available in the event of a proposed sale of the company in question". The law also states "the employer must give as much notice as is practicable."

UPDATE March 4, 2018 7:40AM: Another reference point on the number of employees is that there were 113 employees when Gary Anderson (the first potential buyer with empty pockets) threw the pizza party, 19 days before Calvert decided to shut down the company. Also, for the curious, the "100 employees" that the WARN Act refers to is the number of employees at the company (not the number of employees that are laid off).

How Many Dies?

The official bankruptcy inventory that Chapter 11 Trustee Mark Calvert filed on May 10, 2016 references about 700 individual dies (some are coins referencing the die code, others may be actual dies), with a total of about 550 unique dies. The die codes are in a format "M 26 99" (a letter from A to M, followed by 2 1-2 digit numbers). This allows for roughly 30,000 dies (but likely less) coded this way (there were also a handful of dies using a dated coding system, such as "2005-186").

Ross Hansen on May 27, 2016 testified that 15,000 Medallic dies were shipped to Tomball, but the Trustee disputes that there were any Medallic dies in Tomball.

In 2009, a security agreement (p84) refers to "210 Shelves of Dies" and "2 Cabinets of Coining Dies". If the shelves held 100 dies each (this article says that a "drawer" can contain 100 small dies), that would be roughly 20,000 dies.

At the May 27, 2016 hearing, Ross Hansen also testified that Medallic had 400,000 coining dies. Mr. Hansen had previously stated that there were about 400,000 dies in Dayton in the Creditors' Meeting (341 Meeting) on May 11, 2016 (per the questioning, that should have referred to NWTM dies, but was likely referring to Medallic dies).

An image shows what appears to be 10,000s of larger dies stored on shelves (which is separate from the ones in drawers).

Ross Hansen also stated at the May 11, 2016 Creditors' Meeting that there were about $2M-$4M of dies in China, stating that there are "tens of thousands of dies" at the two companies in China.

I have not seen any court documents where Mr. Calvert has clearly stated how many dies there are (or claimed that some were missing or lost). Some dies may have been included in the Graco/Tomball sale. But what has happened to the 10,000s of dies in China, and the estimated 20,000-400,000 dies in possession of NWTM? How can creditors determine if $700,000 is a reasonable offer if they have no clue how many dies NWTM has?

Monthly Financial Report

On page 47 ("Significant Events and Case Progress"), which is usually where the most important information is found, there is little new information. The last paragraph sums it up: While the Trustee believed in the potential of the company, the deterioration in the monthly sales while in bankruptcy resulted in insufficient cash flow to remain a going concern. The Trustee did not want to close the business he was forced to do so based upon the performance of the business, no going concern buyer and inability to obtain additional advances on the DIP Financing facility.

Die Ownership Fight Update

Look for 'not shipped, archived' on receipt

Die Ownership Fight

This is a separate issue from the question of whether dies are owned by NWTM or the customer. The answer to that question seems to vary customer-to-customer, as some customers paid extra to own the dies, while most or all paid for the creation of the dies. The NWTM/Medallic websites have stated that the dies belong to NWTM, so presumably only customers who were somehow promised ownership of the dies would get to keep the physical dies.

The New York Numismatic Club counters with a different opinion on the copyrights. They point out that the copyright law changed in 1978, which in some cases may give rights to different parties. They suggest that it may be the artists, not NWTM, that own any copyright rights in the artwork in some of the dies (and points out that NWTM has not made an attempt to contact the artists, or their heirs in the case of artists who have died since creating the works, and therefore not giving them the opportunity to object to the sale). It also points out that NWTM promised that the dies would stay in the United States (making it less likely that they would be lost or counterfeited).

February 9 Hearing

Unfortunately, I do not have a copy of a transcript for the hearing, or audio for it. My understanding is that the Western District of Washington requires audio CDs to be picked up in person. Transcripts can be ordered, but are usually very costly if ordered within 3 months (after that, if someone has ordered a transcript, it can be obtained through PACER, much less expensively). This is especially problematic with this hearing, which I heard lasted more than 4 hours -- which means that it would be time consuming to listen to the audio, and more expensive than most transcripts.

If I do get a copy of the audio and/or transcript, I will be sure to post it here if possible.

UPDATE March 5, 2018 4:55PM: I have received a copy. You can download it here, or a very imperfect computer-generated transcript.

Inventory Error?

My guess is that the $1,020 (and $666) is what NWTM was paid in addition to the gold (and copper), with the metal customer supplied. However, this raises the questions: were these medals in inventory (and if so, who owned them)? And if they were owned by NWTM, why were they valued at about 7% of their actual value? And if owned by the customer, how could the medals have any value as inventory?

UPDATE February 26, 2018 8:30AM: I am now guessing that the inventory was referring to the dies, not actual gold medals. That would explain why there was one of each type of prize listed. This doesn't fully make sense, of course, as Kavli has pointed out that the dies belong to them (the NWTM invoice stated "dies will become the property of Kavli Foundation upon full payment of the project"). If these were the actual Kavli medals, they would have been made with Kavli's missing gold, and would be the property of Kavli and would have been returned to them (which appears not to be the case). The latest information suggests these were actual medals, likely samples (note that it is likely there would be 4 dies: 3 unique for one side, and one common to all three medals).

UPDATE March 2, 2018 1:55PM: Docket 728 helps answer this question. In it, the Judge orders that the Trustee "may return the four (4) Coining Dies purchased by the Kavli Foundation". Therefore, I see no other possibility than the 6 inventory entries above representing actual coins that are or were in possession of NWTM.

More About the Anonymous Letter

One person suggested that it was actually written by Ross Hansen. I have to admit, that thought did cross my mind when I first read the letter. However, I do not believe that he would write such a letter: if it could be proven that he wrote it, I imagine it could be very damaging to the criminal investigation.

The consensus from employees seems to be that the letter could have been written by an employee, but it differs from what the known employees experienced. I sense that the employees are trying to get the idea across that while it is possible much of the information in the letter is true, some is not, and they cannot confirm most of the allegations, and therefore the letter should be taken with a grain of salt.

Several employees have pointed out that NWTM did continue to make new products after the bankruptcy (perhaps not as many as before, but it was making products). This conflicts with the anonymous letter, which stated "under Mr. Calvert there has not been one new product added to the inventory." I often get anonymous information, and to me, when one piece of information from an anonymous source appears untrue, it always casts doubt on the rest.

So my hope is that whoever wrote the letter will contact me (via the anonymous tips page or the E-mail address above) with more details. For example, any information on bullion sold in February, 2017 would be helpful.

New Tips?

If you have any information about accounting issues, know of any accounting statements that aren't public but should be, or have any other information about any problems at NWTM, I would be happy to hear from you. You can attach files if desired. You can also E-mail me (address above at 'Contact').

$1M Accounting Error?

So I looked at the accounting records (those are the monthly balance sheets and income statements; details on cash receipts can be found in the monthly financial statements at the NWT Documents page). I didn't see anything that pointed to large sales of bullion in February 2017. The inventory went down $1M, but that's due to something else. The monthly financial reports show a number of payments from A-Mark Precious Metals (a bullion wholesaler), but nothing suggesting a large single purchase, aside from "Core Operating Sales" about $300K higher than normal.

But I did discover something very interesting: what appears to be a $1M accounting error. Specifically, the value of the inventory went down from $3.1M to $2.1M ($942,332). In the same month, an "Inventory Brass-Copper Adjustment" of -$938,844 appeared as a loss related to restructuring.

Apparently, there was a lot of inventory that was listed as copper, but was actually brass. Brass is a copper-zinc alloy, which one NWTM page shows as sometimes being 75% copper, 20% zinc, and 5% tin. In February, 2017, copper was about $2.75/pound, zinc was about $1.30/pound, and tin about $9.00/pound. Let's assume that the brass inventory was really a base metal and worthless. $938,844 of copper in February, 2017 would have been about 340,000 pounds, or 5,400,000 ounces. If it was truly brass, which is normally at least 50% copper, we would be dealing with over 20 million ounces of metal that was mis-classified.

What makes this even odder is that the original inventory (docket 222-3) only had about $50K of inventory with "copper" in the description. It also had about $375,000 of inventory listed with "brass" in the description.

Maybe I'm wrong, and something else caused this. But what else could cause a $942,332 reduction in inventory, while also accounting for an "Inventory Brass-Copper Adjustment" of -$938,844?

Anonymous Employee Speaks Out

"Mr. Calvert is a Dishonest Bully"

The employee wrote anonymously for fear that he would be sued by Mr. Calvert. It states that before the bankruptcy, NWTM would produce hundreds of new, innovative products each year, but that after the bankruptcy not a single new product was added to the inventory. It alleges that Mr. Calvert told employees that they were all guilty of running a Ponzi scheme, and that he bragged that he "fixed it" so that NWTM owner Mr. Hansen would go to jail, and that as Trustee he could order the FBI to arrest employees.

The letter goes on to allege that Mr. Calvert sold metal that "obviously belonged to [NWTM] customers," and that some coin dealers left with boxes of metal "with little or no accounting." The author claims that a room full of gold and silver coins was liquidated last February, and sold at a deep discount. This piece is especially interesting, as I do not recall seeing any mention in court documents of what ever happened to the NWTM-owned precious metals. And given that Mr. Calvert shut down the bullion portion of the business immediately, the sale of what bullion was present would be outside of normal business operations, which often requires court approval. The balance sheet shows that "Inventory" went down from $3.1M to $2.1M between February and March of 2017 (the accounting does not distinguish between regular inventory and bullion). I'll write about that in a separate post.

The author of the letter also states that he believes Mr. Calvert never intended to save the company, just to stay long enough to burn through the money. That is an opinion, of course, but one that a number of employees have shared with me.

Finally, the author alleges that Mr. Calvert has thrown away many of the recent accounting records.

Please note: It is important to remember that these allegations were written anonymously, and certainly cannot be assumed to be true. However, given the recent concerns over accounting (and the gross accounting errors I previously discovered), some of these allegations should not be easily dismissed. UPDATE February 25, 2018 11:15AM: NWTM employees have expressed concern that at least some of the information contained in the letter may not be true. Please see my post above ("More About the Anonymous Letter") for further details.

Creditors Speak Out

This saga starts with a mysterious letter that a creditor referenced in an objection to the expense applications in September, 2017, asking the court to publish the letter and offer any comment or clarification. The Judge asked about the letter at the hearing, and Mr. Gearin (the Trustee's attorney) pooh-pooh'ed it, saying that it was just a letter drafted by NWT Mint owner Ross Hansen's attorneys, and that the UCC wanted to go ahead with a plan concocted by Ross Hansen and remove the Trustee. And that "I don't think it went anywhere." Then Mr. Northrup, the attorney who is paid to represent the UCC, said that Ross Hansen would "fill the atmosphere with allegations and claims about this case" and "this letter I think was an attempt by [Ross Hansen] through [a co-chair of the UCC, who submitted the letter to Mr. Northrup] to get an alternate plan for the case to the committee so the committee could support it."

After the Judge heard those answers from Mr. Gearin and Mr. Northrup (see the full explanations in the hearing transcript), he was satisfied. But what the attorneys neglected to say is that the co-chair of the UCC sent that letter to Mr. Northrup, requesting that he seek removal of the Trustee, and if Mr. Northrup refused, he was to file the letter with the court. The letter did not include any alternative plans that may have been "concocted by Ross Hansen". Of course, Mr. Northrup and Mr. Gearin likely have a different version of the story, but will it reconcile with what they told Judge Alston? And why did Mr. Northrup never file the letter, and how did Mr. Gearin get a copy?

Then, in a separate document filed with the court, a member of the UCC requested the ability to be able to file confidential documents provided by Chapter 11 Trustee Mark Calvert, including inventory and accounting sheets. The purpose was related to matters of accounting and accountability with respect to the immediate needs of the creditors. Reading between the lines, the implication is that the UCC member is aware of accounting issues that creditors should know about. At the hearing on February 9, however, the Judge reportedly said that he could not waive the confidentiality agreement, as it is a private contract. Given the serious accounting errors I discovered from public documents (regarding the precious metals inventory -- see my "Accounting Nightmare" posts of August 23-26, 2016), I would not be shocked if there were other serious accounting problems.

Trustee Missing Metal?

In the words of Judge Alston: "And yet."

At the Creditors' Meeting on May 11, 2016, the Trustee stated "All of the customer inventory that we've identified, we have in a specific list, by location. Here it is." (it is unclear who he showed it to). In the Trustee's recent status report, he touted "The Trustee and his staff conducted a detailed and comprehensive physical inventory of all precious metal held by the company." So it *should* be simple.

Calvert wrote in the bankruptcy schedules "Debtor stored personal property for certain customers, Trustee has commenced a detailed storage inventory which will be provided to creditors when completed." To my knowledge, this was never provided to creditors. The closest was on June 28, 2016, when the Trustee filed a motion to return stored metal that was marked as belonging to a specific customer. He included Exhibit A ("Customer Owned Inventory to Return, June 2016"). But this is not a list of all precious metals not listed in the NWTM-owned inventory. The big clue here is the date, showing that this was prepared after the original customer-owned inventory (finished May, 2016). And it is in a very different format than the NWTM-owned inventory (e.g. showing ounces of metal instead of value, showing details of metal rather than a generic description).

The problem is the missing metal: metal that should have appeared on one of the two lists, but did not. On August 7, 2017, Calvert filed a new motion to return customer metal. It identifies:

• 2 100oz Pan American silver bars that "were located during the initial inventory conducted by the Trustee, but were omitted from the Initial Stored Inventory Motion as the Trustee attempted to make contact with [the customer]." This shows that the Trustee knowingly had precious metals that were not in either the NWTM-owned inventory or the published customer-owned inventory.
• 500 1oz ASE's (a monster box), that "Subsequent to the initial inventory, the Trustee discovered a “monster box”..." So this is a monster box of ASEs that was missing from the original inventory.
• A set of ingots, that was "inventoried and secured" after being told that the area it was in belonged to Ross Hansen. Later, after Ross Hansen testified that he was broke, NWTM revisited these items. They appear to never have made it to a published inventory.
• 2 100oz silver bars which were "located during the Trustee's initial inventory" along with a receipt. No such bars appear to be in the original inventory.

So this begs the questions: How much other metal was not listed in the inventories? And why did Calvert hide the customer-owned inventory?

Hearing Today

The complaints range from a number of creditors who filed invalid complaints (in response to getting notice of this motion in the mail, they wrote the same letter they would have written in response to *any* court letter, about being upset about the bankruptcy), to Ross Hansen objecting that some of the property belongs to Medallic Art Limited Partnership. There are also several creditors who are objecting to their dies being purchased by another company (NWTM's policy seems to be that NWTM owns the dies, although there appear to be a number of cases where customers either paid extra to own the dies or were promised that the dies belonged to them). And there is more. So this should be a very, very interesting hearing.

Trustee to Liquidate for $2.6M

In this case, Industrial Assets Corp. and Maynards Industries USA LLC would be purchasing the majority of the NWTM assets for $1.95M. Medalcraft Mint, Inc. would buy the Medallic name, website, customer lists, dies, and related items for $700K. The companies would provide a combined deposit of $295,000.

Compendium of Significant Event Reports

To make it easier, you can download the compilation of "Significant Event" and "Case Progress" reports.

December Financial Report

It shows (p44) that as of December 1, 2017 there were 114 full time employees, with no part time employees. It shows that at the end of the month, there were 18 full time employees left (the "skeleton crew").

The "Significant Events" page (p45) states that Chapter 11 Trustee Mark Calvert decided to shut down the company on December 26, 2017. That was the first business day in the week that employees were asked to take off (originally with pay, then using vacation time). Mr. Calvert expects to "close down" the company by the end of February.

Mr. Calvert states "While the Trustee believed in the potential of the company, the deterioration in the monthly sales while in bankruptcy resulted in insufficient cash flow to remain a going concern." Monthly sales clearly fell within 2-3 months after the bankruptcy. They started at $1.6M-$1.7M in April-May, 2016. However, June-July, 2016 sales averaged $1.06M (the 2nd half of 2016 averaged a similar $1.08M), while sales for 2017 averaged $966K (including the partial December month), just 10.6% less than the 2nd half of 2016.

I'm not an accountant, but I have trouble understanding that explanation, given that the monthly sales deteriorated within the first 3 months after the bankruptcy. If it was doomed to failure (losing money every month), why was there so much optimism in the report filed with the expense applications a few months back?

More About Christmas Week

It goes back to sometime around December 7 to December 15, when someone in management told NWTM employees that they would get Christmas week off with pay (reports are conflicting as to who said it; I have heard the comment attributed to 3 different people). That appears to have led to the December 21, 2017 meeting Mark Calvert had in Dayton, NV. He explained that the court would not allow him to pay employees for time off without using vacation time (which certainly makes sense). He said that anyone with accrued vacation time would take the week off, and get paid using vacation time (those without enough accrued vacation time would not get paid, unless their supervisor authorized them to work that week).

It was clear that Calvert was not saying that the company would shut down before the end of the year: he reportedly ended the meeting by saying that the first day back to work would be January 2nd, and told employees that New Years' Day would be a paid holiday.

So unbeknownst to me at the time, there was just a skeleton crew working from December 26 through December 29, with most employees at home using vacation time. The first letter was apparently given to the few employees present at the Dayton office on December 28. So it sounds like many employees did not get written notice of the closing until after the company was shut down. The second letter was mailed, dated December 29, received by employees in early 2018, after the business was shut down. Interestingly, it added a phone number for a contact, which the first letter omitted (a phone number appears to be required in a WARN Act notice).

Confusing things is that NWTM is still running, despite letters said they were forced to "close the company". Confusing things even further is when people were terminated. The first letter says December 31. The second letter says December 29. One employee reportedly was told to file for unemployment retroactively to December 26. But if the employees were terminated during a week where they were instructed not to work, wouldn't the date of termination effectively be their last day of work (December 22)?

Diane's Request Denied

The Judge has denied her request.

Class Action Filed re: WARN Act

The lawsuit alleges that NWTM violated the WARN Act in firing employees at the end of December.

NWTM Professional Expenses - Now Searchable

It is not 100% accurate, due to the many issues in converting 4 different types of expense reports (some of which the text cannot be directly extracted) into a single document. However, it should be useful for a number of purposes.

NWTM Bankruptcy Professionals

UPDATE: To clarify: Mark Calvert presumably only bills for one of those roles for any work he does (e.g. if he does accounting work, he would bill through Cascade Capital, for typical Trustee duties he would bill as himself as Trustee). Mr. Atalla is presumably owed the $100K severance due to the contract that he and NWTM signed, that the court approved.

How Did NWTM Fail?

But we quickly found out that while the bullion operations had been doomed to fail for many years, the custom minting operations were vibrant. That's what was going to help make creditors whole. So what happened?

There are a number of possibilities, and it is impossible to pinpoint which one(s) were responsible. Some obvious possibilities include: the bankruptcy spooked potential buyers ("bankruptcy headwinds"), the company was mismanaged, or that an outsider (or even insider) intentionally interfered with operations. I'll be looking into this a bit to see if I can narrow down what happened.

Violation of WARN Act?

The WARN Act requires employers with over 100 employees to give employees 60 days notice of plant closings and mass layoffs in most cases.

In August, 2016 Chapter 11 Trustee Mark Calvert's company Cascade Capital performed a liquidation analysis (see Doc 1229 p34) of a conversion to Chapter 7 that specifically set aside $1,011,377 in administrative Chapter 7 claims for "WARN Act" (of which 77% would be paid from money available after liquidating the company). It stated "The 'WARN' Act would apply in this case requiring the Trustee to pay two months in additional salary to all employees at the Dayton facility." So clearly Mr. Calvert is aware of the WARN Act. Heck, he should be: he billed over $4,000 for legal research on the WARN Act! Presumably the 2016 liquidation analysis was on the assumption that a non-liquidation buyer was sought.

So what changed that did not require 60 days notice? According to NOLO, the law covers employers with over 100 employees. There were 114 full time employees at the end of November, 2017 according to the November Financial Report. WARN covers a plant closing or mass layoff, which this should be if it would have been in the 2016 analysis.

Exceptions to WARN include No Notice (temporary employees or strikes, neither of which apply here) or Shorter Notice (natural disasters, faltering company, or unforeseeable business circumstances). The business circumstances were definitely foreseeable (e.g. the September, 2017 financial report and the October, 2017 financial report both stated "If the tight cash flow issues cannot be resolved, the Trustee will need to close the business"). That leaves a faltering company (which applies to plant closings, not mass layoffs): NOLO says "If a company is struggling financially, it can give less notice." But to use that, the company has to be "actively seeking business or money ... that it reasonably believed, in good faith, that giving 60 days’ notice would have precluded it from obtaining the necessary business or money." But why would that not have applied in 2016, but apply now? Would warning employees of a potential layoff have prevented the GoFundMe campaign from collecting the $500,000 deposit?

There is also an rare exception (see 54 FR 16042) that allows liquidating bankruptcy fiduciaries to be exempt from WARN, but that doesn't seem to apply here (it only applies to those liquidating a company, not operating a company, which the Trustee was trying to do).

Were Employees Paid for Final Week?

I received an anonymous tip today suggesting (stating) that some of the information I had previously reported (on January 17, 2018) may have been in error. Specifically, it stated "The employees did receive funds for Christmas week, and the employees were informed when it was coming. Also HR did not send anyone to Cascade Capital, but did allow people to contact Mark Calvert to ask questions."

I heard from three sources (two known reliable sources and one anonymous source) that NWT Mint employees did not get paid for the final week (12/25 through 12/29) on January 12, 2018 as they should have. The part about being referred to Cascade Capital may have come from a high level NWTM employee not in HR, but I was given the name of a Cascade Capital employee (not Mark Calvert) that an employee had been referred to.

If anyone has any information that can confirm or deny whether (and/or when) employees got paid for the last week (12/25 through 12/29), and/or whether they were informed when they would get paid for that week, I would appreciate it (the anonymous tips page also has a link to E-mail me directly if you like).

UPDATE 1: The letters given to employees on December 28 and December 29 stated that employees would be paid for the final week "consistent with NWTM's normal payroll procedures". Unless employees were paid January 12, that appears to have been a lie. Further, Nevada law states "Whenever an employer discharges an employee, the wages and compensation earned and unpaid at the time of such discharge shall become due and payable immediately." That compares with an employee who quits, who must be paid within 7 days, so presumably employees should absolutely have been paid by January 5th for NWT Mint to be compliant with the law.

UPDATE 2: I heard from an employee who did receive payment for the final week, several weeks after the January 12 payroll.

UPDATE 3: I heard from a second employee who said that he was told that he could use his vacation time for the last week and get paid for it, but did not.

UPDATE 4: The general consensus is that: [1] All NWTM employees did or will get paid (not all have been paid as I write this), [2] It looks like none got paid in the time required by law, [3] It seems that most/all got paid AFTER the normal pay period when NWTM told them they would get paid, [4] It seems that vacation time used in the final week likely was treated the same as regular pay (e.g. employees have been or soon will be paid).

The GoFundMe Campaign to Buy NWT Mint

Trustee to Sell Assets

There have been quite a few objections, including both typical objections as well as a few letters from creditors since this motion was mailed to creditors (who often do not understand the purpose of motions).

One interesting objection is from NWT Mint's owner, Ross Hansen, who put together a group of investors that tried to buy the assets for $1M, which would have allowed the re-employment of some employees and continuation of the company. Hansen makes it sound like Calvert was unwilling to give serious consideration to the offer, and was unwilling to let the investors inspect the premises.

Little News

Unofficially, I have heard that the second potential buyer did not come up with money either.

I have also heard that employees that were laid off have not been paid for their final days of employment. Employees were apparently told that they would get paid for their vacation time, but then later told they would not. Apparently human resources at NWT Mint referred people to Cascade Capital (Chapter 11 Trustee Mark Calvert's company) for answers regarding payment and unemployment. Employees have apparently been instructed to file unemployment claims going back to December 26, several days before the employees were informed that they would be laid off.

If NWT Mint were not already in bankruptcy, they are definitely at a point where I would warn people about financial problems, and not to do business with them. That is quite shocking in a bankruptcy, especially where the Trustee filed very bullish comments just a few months earlier.

News Articles

There was also a short article on Friday (January 5, 2018) in Nevada Appeal about Medallic (a/k/a NWT Mint) and the potential buyer.

Latest Update on Sale of Company

"We met yesterday with our new and qualified buyer. We successfully concluded a purchase agreement. We identified the critical payment milestones which are near term. As those dates are met, I will share with confidence and transparency the details of this transaction. We are talking days not weeks. This could be the partner and funding the great employees of the Mint truly deserve."

More About the Buyer and Closure

We have been in contract with a buyer for about 7 week.
The signed offer in the APA is for 10 million and a nonrefundable deposit of 500k
He has great plans for the company....but...
The long and short is that the buyer has not been able to fund the purchase price
We have been experiencing smaller monthly operating losses until December
In December we will have a large loss December...


Last week I had a face to face meeting with the buyer and two of his associates in Dayton.
And while you could have asked a few more questions and confirmed his honesty maybe better than me, I concluded
he was honest and truly anticipated receiving his funds of [over $10 million] in the next few days... But, he has been telling
me this since November... and it has not happened as of yet... Of the [over $10 million] 10 million was allocated to the
purchase of the business.


The fact of the matter is I can not wait any longer....with the loss in December I do not have sufficient working
capital to remain a going concern. I do not have enough cash to pay your taxes or the rent. Thus I have drafted an
letter to all employees we are closing the business effective 12/29/2017. So... it may still happen the buyer may get
his money.... but..... I am forced to close the business. ...


We have a few bottom feeder buyers that have been kicking around and waiting to buy assets that we are in
discussion with..
We will likely accept one of their offer for the heart of the company, the Medallic name, archives, dies, Wisconsin
operations and customer base... The offer might be submitted to the court later this week. The offer is more of a
liquidation offer than a going concern offer. The balance of the equipment will likely be auctioned off.


Mike Gearin has reached out to Martin Smith on the conversion of the case to a Chapter 7


I am sorry, the buyer did not come through for the employees and the estate...


So, that is the status...
Please feel free to call with any questions.
Mark

Truth to Come from CEO

As many of you know, the truth goes to the core of what I do with the about.ag website. With the bankruptcies, I do report speculation or unverifiable information when I feel it is in the best interest of my readers. I expect to speak with Bill by the end of the week for an update on what is going on, and will be sure to report what I find out here.

January 8?

I heard a report that there was supposed to be a company meeting on January 8. It is unclear if that was scheduled before or after NWT Mint closed.

I have also heard a report that there is a chance that a buyer could emerge, if they can come up with money by January 8. This seems to coincide with an anonymous tip that I received suggesting that something positive might transpire by around January 8.

So while NWT Mint is officially closed, the scuttlebutt is that there is something still in the works that, if things go well, might allow NWT Mint to keep running. It sounds like a long shot, but there is at least this bit of hope (for creditors, NWT Mint employees, and future potential customers of NWT Mint).

From "Very Bullish" to "Closed" in 87 Days

Calvert himself wrote "The Trustee and his professionals have devoted every effort to ... recovering as much as possible for the benefit of creditors." He also wrote "The enterprise value ... is approximately $14 million" and "This increase in sales activity provides room for optimism regarding the prospects of the business." and "The Trustee anticipates that the sale of the Company as a going concern or reorganization ... will eventually provide the resources for payment of distributions to creditors." He ends with "The Trustee remains optimistic that the company will grow and will achieve its full potential and if so, will provide a deserved recovery for creditors."

More importantly, Calvert also included CEO Bill Atalla's views of the progress and potential of the company. Atalla forecast that by the end of 2018, NWT Mint would have a value of $20M, and a $60M valuation in 5 years. Atalla wrote "We are on the rise with sales moving in the right direction" and "The outlook for this company is realistically bright" and "I face only a handful of hurdles at this time" and "I am very bullish about Medallic Art."

Less than 4 weeks after his "Very bullish" comment, Mr. Atalla started cozying up to a company that would soon present an offer to buy NWT Mint. Two months later, that company would fail to produce the $10M or so, even after making a brief attempt to raise funds through a short-lived GoFundMe campaign.

And now NWT Mint is closed, less than 3 months after incredible optimism. I now hold Judge Alston in higher regard, as he was the one who wrote that he was "deeply unhappy" with the report.

NWT Mint Closed

Unfortunately, the news is true. I have received a copy of the letter from two sources, signed by Chapter 11 Trustee Mark Calvert. It appears that only a "skeleton crew" will remain. The Mint is being closed because the buyer (reportedly Gary Anderson of Eureka House of Metals, who tried funding the purchase via GoFundMe) could not come up with the money, and other funding could not be obtained.

It states "Thus, effective December 31, 2017, we were forced to close the Company due to the lack of adequate cash to remain a going concern." According to the letter, this likely outcome was discussed at a company meeting on December 21, 2017 in Dayton (although I have heard anonymously that at the meeting employees were told their job would be secure). Most of the two-page letter is information relevant primarily to employees.

December 29, 2017 5:50PM UPDATE: I have heard from another employee who was unaware of this letter. If you have not received it, it may be wise to contact your boss.

NWT Mint to Close?

If true, this would likely mean that the bankruptcy would convert to Chapter 7 (which Chapter 11 Trustee Mark Calvert has said would provide no expected return to creditors).

If anyone has more information, feel free to use the anonymous tips page.

Contact Info

Chapter 11 Trustee Mark Calvert's number is (206) 909-3636. The primary attorney for Mr. Calvert is Michael Gearin, whose number is 206.370.6666. The Court has a page with the contact information for Judge Christopher M. Alston.

... and the bad news

Now, in the November, 2017 financial report, he says that if the business is sold the recovery for general unsecured creditors will be "limited if any" and if liquidated would provide "no expected return to ... the general unsecured creditors."

At this point, it would be advisable to look into the possibility of deducting this as a tax loss if you have not done so yet. Specifically, it could likely be deducted as either a capital loss (like a stock going down to $0), or a theft/casualty loss (which has a high audit potential, but often provides a higher tax benefit). I have a page at http://about.ag/TulvingTax.htm that I wrote regarding tax losses for the Tulving Company situation, which is similar in many ways.

The Tulving Company bankruptcy also came to an abrupt halt a few weeks ago, and one of the creditors pointed out that 2017 is the last year to take a casualty loss. So if you do not take it this year as a theft loss, it may only be possible to take it as a capital loss. As a reminder, theft losses like this are not always straightforward (but always worth taking, as it usually provides at least some type of recovery).

Link to Hearing Transcript

I said that I would try to post a copy of the transcript; you can find it here.

Judge: I am Deeply Unhappy with [Calvert's] Report

Apparently, the Judge had requested that the professionals file their fee applications, because he was concerned about the potential expenses. Just prior to the hearing, Chapter 11 Trustee Mark Calvert filed a status report. What was not known is that this wasn't something that was required: he apparently filed it to help justify the expenses.

The Judge pointed out that the fee applications (for roughly $4M) did not include projected fees, which is required by local rules. You would think if you made $525/hour you would remember the local bankruptcy rules for your state.

It was also pointed out that the chair of the Creditors' Committee had been sharing information with Ross Hansen througout the course of the case, and subsequently resigned. This is information creditors need to know, and shouldn't be hidden in a hearing.

The Judge pointed out that there are many Cascade Capital expenses (Cascade is the company of the Trustee) that are really bankruptcy administrative expenses, not accounting. That's an issue because the expenses of the Trustee -- who should be doing that work -- get capped, whereas the other professionals do not have a mandated cap on their expenses. He also pointed out $20K spent on data entry, with no explanation of why it was necessary. The Judge was also concerned that the cap on the Trustee's expenses was not mentioned, and it looked like he was going to try to include $900K of metal returned to customers as distributions (which would increase his cap).

Then there is the expense application of the law firm used by the Trustee, K & L Gates. The Judge said "So, you’re going to need to tell me why you should be paid for pursuing what I thought what was a doctored and phony dispute... you sought to settle a phony dispute and then presented a sweetheart settlement deal and I have denied them both."

The worst was the status report. The Judge stated "You can’t really think that this is an objective report. It is, it is filled with allegations, many of which are very severe, unproven. It contains allegations that you’ve litigated that were not proven. I ruled against you. It contains representations that are not true. ... this is basically a personal attack on Ms. Erdmann and Mr. Ross Hansen. But the balance of it is explaining all your victories and all the great things you’ve done. But there’s zero balance, because you’ve had setbacks. I’ve made rulings against you. The rulings are not on the web site are they?"

The Judge said of the Trustee's status report "there’s a lot of ... patting yourself on the back about all the things that the Trustee has done," and "I was this close ... to saying yank the web site because you are putting improper and inappropriate things on there ... I told you that you were not to put anything on the web site other than just the facts, ma’am. This is not that. This is a vituperative attack on the one hand and on the other hand it is saying how great and how many victories you’ve had without any mention that you’ve had some setbacks ... It’s either, if I can’t trust you to do the web site, then I think the option is to not have a trustee to run the estate. Okay?"

So it seems pretty clear that while the Trustee is bashing Ross Hansen and Diane Erdmann, the Judge believes that the Trustee isn't exactly behaving very well himself.

[I am hoping to post a copy of the transcript online, if I can get permission from the person who kindly sent it to me.]

Diane Wants Her Metal Back

The declation lists the items that were seized, valued at $95,000.

Trustee Wants to Sell NWT by End of Year

According to the Trustee, NWT Mint has received a signed asset purchase and sale agreement. This likely means that they have a very serious buyer. The Trustee is expecting to verify the source of funding, and if successful, accept the offer and present it to the Court for approval. He expects to file a motion to approve the sale this month, with a closing by the end of next month.

It does not provide many clues as to how much money creditors might see from this, aside from "a limited recovery."

And I want to add a special "Thank You" to the person who has sent me copies of quite a few important court documents, including this one.

Potential Buyer

"The Trustee is in discussions with a potential buyer for the estate and continues to entertain offers for the operating business. The terms are under discussion and we anticipate obtaining a term sheet in the next 30 days. The Trustee objective as of this point is to sell the company to maximize the recovery for the estate and for creditors. Any party with an interest in acquiring the business should contact the Trustee. Total filed claims are in excess of $70 million and the recovery will be limited such that creditors should not expect a high percentage of recovery on their claims. If the tight cash flow issues cannot be resolved, the Trustee will need to close the business and liquidate the assets on terms that will provide very little return to creditors."

Note that only about $40M of the claims are for customers.

Dick Bressler Files $9M Claim for $3M Investment

...Invokes RICO

In March, 2017, Mr. Bressler signed a Settlement Agreement that would have allowed him a general unsecured $3M claim, with no other claim possible in the case, in exchange for supporting consolidation of NWT Mint and Medallic. The Trustee filed a motion for the court to authorize the settlement, and the Creditors' Committee supported it. However, the judge denied the motion (the consolidation had already been approved, the judge felt that Mr. Bressler did not have the ability to fight the motion, and the judge did not want it to appear that Mr. Bressler's testimony could be bought). The judge appeared to believe that the $3M claim was worth much more than whatever Mr. Bressler would be giving up.

Apparently, Mr. Bressler was upset at the judge. The judge pointed out that Mr. Bressler had not filed a claim, then saying "And the claims bar date has passed, so he's got no claims against the estate." So clearly, the judge thought that Mr. Bressler was not going to be able to have a claim. He was hoping to have a general unsecured claim for $3M, but when that was denied, he decided to put in a $9M claim, stating that NWT Mint violated the RICO act and therefore he is entitled to 3 times his damages.

Mr. Bressler's claim does not seem to state why he feels that his $9M claim should be allowed nearly a year after the bar date, and his negotiations for a $3M claim failed.

AG Gave Blessing to Illegal Activity

New Lawsuit Against NWTM and Ross Hansen

The lawsuit by itself is fairly meaningless to creditors: it is asking NWTM and Hansen to stop doing this (it stopped over a year ago), and the State intends to fine each $10,000. However, it contains information that has the potential to shed more light on the situation, as well as where the Attorney General failed. Among other things, it states that between April, 2014 and September, 2014, 70% of the 2,430 orders NWTM took were shipped more than 10 weeks after payment cleared.

Attorney General Completely and Utterly Fooled

... AG Signed Consent Decree With NWT $35M In The Hole

The Chapter 11 Trustee Mark Calvert yesterday filed a Report of Investigation and Status Report. Most information is already known, but the lengthy report is likely worth a read.

What is shocking, however, is that it confirms the incompetence of the Washington State Attorney General in 2008. In February, 2008, the Attorney General filed a complaint against NWT Mint and Ross Hansen, stating that "Consumers have ... waited months for their orders to arrive." A multi-month delay means one of two things: either the company is poorly managed, or it is engaging in financial shenanigans (e.g. delaying orders to keep the interest, trying to time the market, embezzling the money, etc.). But by September, 2008, the Attorney General and NWT Mint shook hands with a Consent Decree, letting NWT Mint continue their practices with certain restrictions and allowances.

We have known for a year or so that the Washington State Attorney General in recent years was incompetent. One of the AG's goals for 2015 was to "Proactively enforce state and federal consumer protection laws by investigating alleged unlawful activity and taking legal action when appropriate to compensate consumers and deter illegal activity and deceptive practices in the marketplace." In 2015, NWT Mint was running a $30 million Ponzi-like scheme. This is a company that the AG had already tried suing, and had a signed Consent Decree with, and the AG even received more complaints in 2015 about NWT Mint than any other Washington State company (except 3 household names bound to generate complaints: Amazon, Microsoft, and Expedia). Is "flying over the radar" a thing?

But things get worse. This report shows that at the end of December, 2008, about 3 months after the Consent Decree was filed, NWT Mint had assets of about $19M and liabilities of about $55M -- in other words, they owed customers $35,000,000 more than they had. They were insolvent. How can an Attorney General possibly sue a company for delaying millions of dollars of orders by months, and then sign a Consent Decree without even checking their finances?

The report also says:

• The assets seized from Ross and Diane (by the defamation victim) included precious metal worth $149,000 and $6,000 in cash
• The Trustee contacted about 50 potential purchasers for the business, assembled by his company. 8 of them signed confidentiality agreements, 4 toured the operations, and 3 made offers. All 3 offers focused on the liquidation value, and therefore were not acceptable to the Trustee.
• Later, 2 more parties expressed interest in investing $4M-$5M for a 50% interest in the company, with the balance in a liquidation trust for creditors. Another investor expressed interest in paying $2M for a 20% share.
• From 2008 to 2016, the company had about $1.2 billion of revenue
• There were no physical inventories conducted from 2010 through 2016
• There were no financial statements for fiscal years 2011-2016 [p18]
• "The results of the analysis suggest that the company had total customer liabilities ranging from a low of $20 million to a high of $45 million over the period 2008 to 2016."
• "the Company was insolvent from 2008 to 2016"
• "it appears that the company had attributes of a “Ponzi” or “lapping” scheme from at least (though likely earlier) 2008 to 2016."

Video of Medallic Art and Mint

At Least 11 FBI Subpoenas

... and Diane Sold $695,000 of Metal

In it, he mentions that NWT Mint has responded "to at least eleven subpoenas from the FBI."

In response to the $174,552 that the Trustee and his company (Cascade) allocated to preparation of the reorganization plan and disclosure statement, which the Creditors' Committee was concerned about, he says that only about $82,500 really falls into that category. The other $92,052 would "more accurately captured in the Cascade billing statements as financial analysis in support of business operations" or "re-categorized as relating to business operations."

Calvert also mentions that Ross Hansen's long-time girlfriend Diane Erdmann has now sold approximately $695,000 of precious metals since her testifying that she had virtually no assets in June, 2016. Calvert writes "Based upon the amounts of metals liquidated and the other assets Ms. Erdmann alleges she owns, Erdmann’s net worth would have been in excess of $1 million as of April 2016."

McMeel Hearing

The U.S. Trustee says that McMeel "filed numerous false and frivolous papers in bad faith, vexatiously, and for oppressive reasons, thereby participating in an abuse of process that interfered with the rights of individuals and government agencies, and further interfered with the administration of justice." McMeel is a creditor, and clearly not pleased with the way the case is being handled. His two most recent filings are Docket 1214 and Docket 1206. Also see 850 and 735. He also filed a motion that the judge referred to as "incomprehensible".

There will be a hearing about this issue on October 20, with anyone opposing needing to respond by October 13.

I have heard from 2 creditors that received a mailing about this today, asking me how to handle it. I need to be clear here that I do not feel that I can legally answer that question directly: I am not a lawyer, which means that while I can provide legal information (as anyone can), I cannot provide legal advice. But in the interest of saving creditors a combined $500,000 or so in legal fees, I feel an obligation to push this close to the edge. I can safely say that if I received a notice of a hearing in a bankruptcy regarding someone I did not know personally, that did not have my name anywhere on the document, I would almost certainly ignore it.

If you know McMeel and/or wish to help him, however, I would strongly recommend consulting with an attorney, who could help you write a written response to assist McNeel and/or provide alternative options.

If you are still concerned about what to do, and do not wish to pay an attorney, you could try calling the phone number on the document you received. If I were a creditor, however, I would not bother doing that.

Creditors' Committee Concerned About Expenses

What is interesting is that while not officially objecting to the fee applications, the Creditors' Committee pointed out some "areas of concern." Some of the concerns are dependent upon the outcome of the case (e.g. some expenses will have been worthwhile to creditors if a reorganization plan is filed, but not if the company is liquidated). It also covers $132,184 of expenses related to the FBI investigation of Mr. Hansen and Ms. Erdmann, and suggests that those costs would not likely provide any tangible return to creditors. It points out that "The amount of fees potentially recoverable in the Tracy advance fee deposit dispute are/were less than the amount of legal fees and costs it took to pursue (unsuccessfully) their recovery" -- in other words, more money was spent trying to recover some money than could have been collected. It also suggests that the cost of paying professionals $50 or more per hour to commute to their office should be general overhead of the company and not separately billed.

Diane Erdmann Pleads the Fifth

In it, he says that he conducted a 2004 exam of Diane Erdmann on August 3, 2017. He states "At the deposition, Diane Erdman invoked her 5th amendment rights in connection with questioning regarding her liquidation of the precious metals and her prior sworn testimony." The Fifth Amendment states that no person "... shall be compelled in any criminal case to be a witness against himself," and is usually used in criminal proceedings so a defendant does not have to answer questions that could incriminate themselves.

To be clear, there is currently no criminal case against anyone involved in what happened at NWT Mint (but at least one criminal investigation is in the works).

Info from Applications

• The Creditors' Committee expects the reorgnization plan by the end of the year, while the attorneys say that the Trustee envisions filing it in the spring of 2018.
• Trustee Mark Calvert has talked with quite a few potential buyers, including a major bullion wholesaler.
• The Trustee (apparently at some unknown past point in time) felt that if the business could be preserved, $15-$17M could be returned to customers.
• $12.9M of inventory was considered "missing." However, this includes $5M of metal leased from customers, which arguably could have been sold to finance operations (the leased bullion could be used "for any business purpose deemed necessary or convenient by Lessee...").
• A good summary of the status appeared: "The Trustee anticipates that the sale of the Company as a going concern or reorganization of the Company on terms providing dividends to creditors post confirmation will eventually provide the resources for payment of administrative expenses and distributions to creditors. The Trustee is also in discussion with potential purchasers who have expressed interest in purchasing the company on a going concern basis, or otherwise investing in the business."

• $490K to K&L Gates relating to the Medallic lawsuit
• $163K to K&L Gates relating to the Diane Erdmann lawsuit
• $139K to K&L Gates relating to the American Express fraudulent transfer action
• $71K to K&L Gates for meetings and communications with Creditors (161.2 hours). That's $445/hour.
• $52K to the Creditors' Committee for 109.3 hours communicating with non-committee members . Perhaps I should raise my fee from $0/hr to something closer to their $474/hour. Wow.

Compensation Applications Filed

The numbers below include fees and expenses (postage, lodging, airfare, etc.). Although some of the money has been previously paid, my understanding is that most of it will not get paid until NWTM has the ability to do so. If you want you can view the compensation applications: Creditor's Committee and its declaration, Cascade Capital Group and its declaration, Trustee and his declaration, K&L Gates declaration.

Chapter 7 Rumor

Chapter 11 is "reorganization", where debts are paid to the extent possible while allowing the business to continue. In this case, the idea is to get the company running and growing with reliable accounting records and to sell the business, with the proceeds going to creditors (not Ross Hansen, the owner of the company).

A Chapter 7 bankruptcy is "liquidation" -- essentially a "fire sale." The idea is to shut down operations and pretty quickly sell whatever assets there are, with any proceeds going to creditors. Most bankruptcies are Chapter 7, but Chapter 11 typically provides the best results to creditors if it is possible to reorganize the business successfully. A Trustee would normally only consider converting to Chapter 7 if the business could not continue profitably, and a Chapter 7 liquidation would therefore provide more money.

In the June, 2017 monthly financial report (from just over a month ago) the idea of liquidation came up, but only if the business could not be successfully sold. The more recent July monthly financial report (from a couple weeks ago) does not mention the possibility of liquidation, although with the difficulties NWTM has faced, it certainly cannot be ruled out.

If I get further information, I will certainly report it here.

June, 2017 Monthly Financial Report

It points out that they are seeking a buyer for the business as an ongoing concern. The cash flow is tight, and they may use the factoring financing. They are considering pay cuts to help manage the down turn in sales (due to 'bankruptcy "headwinds" and seasonality'). The new CEO is focused on rebuilding the sales organization and driving growth in sales for the company. If sales growth does not materialize, then the company will need to be liquidated.

The report has further details on page 48 ("Significant Events and Case Progress").

No news...

I keep watching for any news on NWT Mint, reading any anonymous tips that may come in, and awaiting E-mails from those in the know. But there just hasn't been anything to report lately.

Judge Orders 2004 Examination

The order differs significantly from the suggested order filed by Calvert (it is typical in a legal proceeding for someone to file a suggested order, which the judge will often sign as it is written, but that did not happen here).

While it does not allow everything the Trustee wants, it does allows the examinations to occur (which Diane Erdmann and Ross Hansen did not want to happen), which is good for creditors, as it may help speed up the bankruptcy process slightly.

The $500K Saga

Diane responded, basically saying that she shouldn't have to testify again because she never claimed she had no assets, and that it would be more appropriate to testify in the adversary proceeding against her (alleging that $1M or so of expenses charged to Diane's American Express card, that NWTM paid for, were personal).

What I haven't yet covered is that earlier this week, [1] the Trustee replied (e.g. pointing out that the $500K of metal is a different asset than the American Express charges), [2] a creditor (thank you!) filed a memorandum in support of the 2004 exam (e.g. pointing out that metal of customers that Ross and Diane were in charge of safeguarding is missing), [3] Ross filed an objection (e.g. saying that the Trustee is harrassing Ross), and [4] the Trustee replied (e.g. pointing out that the Trustee's actions were typically because of an issue Ross caused). The hearing is set for today at 9:30AM PST (12:30PM EST).

Sadly, by my estimation, Diane's desire to essentially delay testifying will have cost creditors roughly $25,000 (that goes beyond what would have been spent if Diane had not objected to the 2004 exam). Including Diane and Ross's costs, and related expenses that have not yet occurred, it could easily top $50K that will have been spent just to delay a single testimony.

Hansen Hired Tulving's Criminal Attorney

In the depositions where this was discussed, it seemed that nobody was familiar with James Wyatt. For me, though, that name was nearly jumping off the page. James Wyatt is the leading expert on criminal charges against the owners of well established online retail bullion dealers that go bankrupt owing customers millions of dollars. In fact, he is the only attorney with such experience. He is located in Charlotte, North Carolina, where the owner of The Tulving Company was indicted.

I do wish to make it very clear that hiring a criminal attorney in no way indicates guilt. If I had been in Ross' situation then, and could afford the $25,000 retainer, I likely would have done the same thing. It is quite possible that Ross was already aware of a criminal investigation (my understanding is that the Washington Attorney General was investigating or helping investigate in February, 2016).

2008: Negative Net Worth $1.5M

Further, the negative net worth increased between 2008 and 2016 (except in 2011 due to some speculative hedging gains).

Remember, in 2008 NWTM was investigated by the Attorney General, leading to a consent decree. So how did the AG not notice this?

Diane Responds

Transcripts of the two depositions were included with the filing. Although they are public documents, I am not going to post them here, due to the amount of personal information they contain. The fact that she filed both transcripts shows that she has confidence in what she said.

I expect to write one or more posts later based on some information from the transcripts.

Trustee Does the Right Thing

At the hearing, however, NWTM's attorney stated that the Chapter 11 Trustee, Mark Calvert, desired to strike the relief requested which would have allowed him to give the records to Ross Hansen. The issue of the old records will be addressed in a future motion.

Kudos to Mr. Calvert for recognizing that this was a concern to creditors, and for seeing to it that that part of the motion did not go through.

Ross Hansen to get NWTM Records?

Mr. Calvert has filed a reply stating "the Trustee is willing to allow Ross Hansen ... to take possession of ... the Records which the Trustee intends to destroy." He also updated the order to include this (with slightly different wording).

So if things go as expected (e.g. no objection or denial from the court), Ross Hansen will receive the paper records of NWTM from around 1990 through 2008. My understanding is that the judge will rule on this at a hearing on Friday (June 9) at 9:30AM PST. But where both sides want Ross to get the records, it is hard to imagine the judge denying the motion.

In 2005, the NWTM privacy policy stated "Any information collected from visitors to this website will only be used in serving our customers, in completing our business transactions with our customers, and not shared with third parties.".

Concerned? You could let Mr. Calvert know, or if you felt appropriate, the FTC has a website where you can let them know (see the "Alert: Concerned about how a company is handling your personal information?..." link).

Diane's 240oz Gold and 4,000oz Silver

In that same month, Mr. Bugbee implied that Ms. Erdmann was now 'destitute' (it is unclear what happened to the 120 ounces of gold she had had a couple months earlier; it may have been seized), and assisted Diane Erdmann in sworn testimony where she claimed that she had no assets. What Mr. Bugbee apparently was unaware of is that less than 3 weeks later Ms. Erdmann would somehow come up with over $30K of precious metals to pay legal bills, and within under a year access to another $500K or so of precious metals. I'm trying to think of a logical explanation as to how a destitute woman with could come up with $500K of metal over the course of 10 months. Cash would be more explainable (a $500 bank loan to a destitute woman or a winning lottery ticket). But who would give or loan her precious metals? And what did Mr. Bugbee think about getting an $11,000 check from a coin company to pay Ms. Erdmann's legal bill 4 months later?

Two coin stores and a refinery have submitted documents claiming that Diane Erdmann sold them a total of about 240oz of gold, 4,000oz of silver, 155oz of platinum, and 2 ounces of palladium between June, 2016 and March, 2017. Of the proceeds, about $400K went to attorneys representing Medallic and/or Ross Hansen, about $100K went to Diane Erdmann, and about $10K were checks made out to "Cash." Two of the companies state that Ms. Erdmann requested blank checks, allowing her to fill in the payee (in this case, either herself, "Cash", or one of 6 different law firms).

A $10,000 check was made on June 20, 2016 to Allen Lichtenstein, an attorney representing Ross Hansen and NWTM in the defamation lawsuit. 6 checks and 1 wire were made totalling $305,500 from June 20, 2016 through January 31, 2017 to "Bucknell Stehlik", "Bucknell Stehlik Sato & Orth, LLP" or "Bucknell Stehlik Sato & Stubner, LLP", a law firm representing Medallic Art Company, LLC. Between October, 2016 and January, 2017, 3 checks were made to "Cable Langenbach" or "Cable Langenbach Kinerk & Bauer, LLP", a law firm representing Ross Hansen in the NWTM bankruptcy. 2 checks for about $10K were made out to "Cash." One check for $17K was made out to "Colvin and Hallett" (representing Medallic and/or Ross Hansen). One check for $20K was made out to "Davis Wright Tremaine" (who represented Ross Hansen). Another check for $11K was made out to DBS Law (Daniel Bugbee, representing Ms. Erdmann and either Medallic and/or Ross Hansen). Finally 2 checks were made out to Diane Erdmann, totalling about $100K.

Ross Hansen Objects to Destroying Pre-2009 Records

Mr. Hansen believes the Trustee's motion should be denied (so NWTM would keep the records for the time being), and that if it is not, the records should be given to Mr. Hansen rather than destroyed. He points out that some of the records are his personal records (some relating to others businesses of his). He also points out that if fraudulent conveyances are persued, the potential defendants might need those records.

NWTM Seeking $1M Loan

The reasoning can be summarized by this line: "While the Trustee remains convinced of the long-term viability and profitability of NWTM’s business, the Debtor needs an infusion of cash in order to have sufficient runway to allow time for the new CEO and sales team to grow sales."

The arrangement is complex (a type of factoring arrangement), but would give NWTM access to cash that it needs (which is especially important because companies in bankruptcy often have difficulties finding funding).

NWTM to Destroy Pre-2009 Records

It is believed that these records will not be necessary (e.g. there are no legal proceedings requiring them). This is better than with the Tulving case, where the Trustee happily gave away the paper records to a company for free (actually, less than free: the creditors were billed for her work to give them away).

$500K Loan by a Destitute Woman

In fact, Daniel Bugbee was so convinced that his client was destitute that he objected at least 4 times when his client was asked questions about her assets, complaining that the questions were asked and answered 'multiple times', accusing the questioner of "harassing [Ms. Erdmann] about her state of financial affairs."

What Mr. Bugbee hopefully didn't foresee was information from Docket 1013: that Ms. Erdmann would in less than a year magically come up with about $500,000 to loan Medallic (the company that Ross Hansen bought with an NWTM customer, that just became part of NWTM) to pay their "extraordinarily expensive attorneys." Sorry, magically isn't quite accurate: At least $280,000 of the money Ms. Erdmann loaned Medallic to pay the attorneys was paid via checks and wire transfers from 6 different coin dealers, 5 located in Washington state within less than 30 miles of NWTM's headquarters.

Medallic Now Part of NWT Mint

Judge Denies Trustee's Motion

However, we have what appears to be an unusual case here. The judge basically ruled against the Trustee, against the thousands of creditors, in favor of an individual.

Medallic Art Company is owned by former NWTM owner Ross Hansen (who put in $2M) and a former NWTM customer (who put in $3M). Medallic filed a lawsuit where Medallic fought the consolidation of Medallic and NWTM assets. On April 7, 2017 Trustee Mark Calvert filed a motion to convert the customers' $3M ownership interest of Medallic into a $3M claim. Although this would raise claims from about $55M to $58M, the customer would agree not to oppose the consolidation of Medallic and NWTM assets. This would make consolidation of Medallic and NWTM assets much easier.

On April 19, 2017, Calvert stated that Medallic filed a motion to dismiss its claims. Why Hansen chose to dismiss the claims can only be answered by speculation, but he decided to do so. Then on April 21, 2017, the Unsecured Creditors' Committee filed a response agreeing that the motion to convert the $3M ownership interest is in the best interest of creditors. No objections to the motion were filed. On April 24, 2017, the Trustee filed a proposed order. The court then responded with a brief message "Counsel for trustee shall appear on date and time stated in notice to provide information to allow Court to determine if compromise is fair and equitable". And then on May 3, 2017, the judge denied the motion, simply saying "the Court made oral findings of fact and conclusions of law that are incorporated by reference herein.

While that is useful information to those who were at the hearing (who may well have expected the denial), the thousands of creditors have no idea what happened. Did the judge not find the settlement with the customer fair? If not, why not? Why would the customer have agreed to the settlement if he did not think it was fair? Will this prevent the Medallic consolidation from being finalized? Hopefully, there was a good reason for this denial.

October 23, 2017 4:05PM EST UPDATE: The judge denied the motion for 3 reasons: [1] the consolidation had already been approved, [2] the judge felt that Mr. Bressler did not have the ability to fight the motion, and [3] the judge did not want it to appear that Mr. Bressler's testimony could be bought. The judge did not rule in favor of Mr. Bressler as I had assumed.

1,000th Court Document Filed

As a comparison, the Tulving Company bankruptcy is now just over 3 years old, and has under 700 court documents (an average of about 4 per week). The Bullion Direct bankruptcy, which is approaching 2 years old, has just 266 court documents filed (about 3 per week).

The large number of court documents is due in large part to the complexity of NWT Mint -- it is a much larger operation than the other two companies, and unlike the other two, it is still operational.

Medallic Lawsuit Dismissed

"The estate has a pending litigation matter with Medallic Art Company LLC, an entity controlled by the former CEO of the Debtor, Ross Hansen. The trial in that litigation was set for May and June, 2017. However, in the week before the preparation of this report, Medallic filed a motion to dismiss its claims. Based upon the dismissal of Medallic's claims, the Trustee is preparing to enter a judgment susbstantively consolidating Medallic with the NWTM bankruptcy estate. The Trustee expects entry of that judgment in early May, 2017."

In other words, the concerns about Medallic being a separate entity from NWT Mint (which would cause a nightmare of expensive issues, trying to figure out what belonged to which company) should now be gone.

March Financial Statement

It shows a small profit of $23,132 for March (not accounting for restructuring costs). There are now 135 full time employees, up from 130. Improved results are anticipated for upcoming months.

It shows that $932K of metal was returned to customers (the stored metal that existed and the owner could be properly determined). NWTM is getting ready to sell or auction surplus equipment.

Regarding the Chapter 11 Reorganization Plan, he states that "The current plan is for the operating company to generate profits that will be distributed to creditors over some period of time. After an agreed upon period of time the company would be sold and sale proceeds would be allocated to creditors."

On a related note, the EEOC settled a discrimination lawsuit that had originally been filed before the bankruptcy, with a $725,000 settlement (in the form of a bankruptcy claim).

February Financial Statement

It shows a small loss for February, which could have been reported as a small (or perhaps more) profit if different accounting had been used. There are now 130 full time employees, down from 140.

Regarding the Chapter 11 Reorganization Plan, he states that "The current plan is for the operating company to generate profits that will be distributed to creditors over some period of time. After an agreed upon period of time the company would be sold and sale proceeds would be allocated to creditors."

January Financial Statement

They continue to lose money, but the Trustee believes it is because of the bankruptcy and seasonality. He expects them to break even in February, with with profits starting in the spring.

The Auburn location was closed, which cost about $100K, but that will bring about $300K of annual savings. So that cost will quickly be recovered.

The litigation with Ross Hansen's company is expected to being the first week of May. This needs to be resolved before the reorganization plan can be confirmed. The expected reorganization plan envisions the company running in Dayton, NV with profits going to creditors, but no real details are available yet.

NWTM has Drafted Plan of Reorganization

Typically in a Chapter 11 bankruptcy, a reorganization plan is made, which creditors then vote on. The Creditors' Committee usually provides input on what they are aware that creditors want, to help ensure that the vote will allow the plan to proceed.

NWTM Duped the Attorney General

'Complain to the AG and We Will Delay Your Refund'

It looks like NWTM managed to dupe the Washington State Attorney General's office several times over the years.

This all starts in 2008, when the Attorney General sued NWTM (after having received just 11 complaints). Somehow, NWTM got the Attorney General to sign a consent decree, effectively giving NWTM the Attorney General's blessing to operate in a way that is illegal in some states (California requires delivery in 28 days), while being able to use millions of dollars of customer money as float, in exchange for a $58K judgment. Not a bad deal!

Fast-forward to April 1, 2015, exactly one year before NWTM filed for bankruptcy. At this point, the AG now had over 50 new complaints filed, in a pattern showing rising complaint volume. Some customers are just upset (not having realized it might take months to get their orders). But others were cases that clearly violated the consent decree. NWTM was so brazen as to not even respond to the AG for months at a time, never responding to many complaints. At other times, they lied to the AG (often stating an incorrect "drop dead" date, which the AG apparently trusted without bothering to calculate the actual date -- adding 30 days to a given date is not rocket science).

At this point in time, a year before the bankruptcy, I have been told that the Attorney General also had some damning information: NWTM violated the 2008 consent decree by not immediately refunding money to a customer when the "drop dead" date was reached, and then when the customer said he was going to complain to the Attorney General, NWTM advised the customer not to, saying that the owner of NWTM would then get mad and try to delay the refund as long as possible. Assuming my information is correct, this single instance shows [1] NWTM violating the 2008 consent decree with the Attorney General, [2] that NWTM found a way to manipulate customers into generating fewer complaints with the Attorney General, and [3] that the Attorney General ignored an extremely blatant red flag.

It really boggles the mind that the Attorney General could sit on this information for a year, with complaints piling up (over 200 complaints were filed before the bankruptcy). In fact, in 2015, the only companies located in Washington with more complaints than NWTM were Amazon, Microsoft, and Expedia.

Latest Updates (NWTM Might Not Be Sold)

He also states that he plans to have a Chapter 11 Reorganization Plan ready by the end of the year, with confirmation of the plan around April/May, 2017.

Also, the report says that NWTM plans to mediate the issues with Medallic this month.

Another noteworthy statement: "Continue to respond to subpoenas and to provide information requested to the FBI."

As of August 31, there were 150 employees at NWTM.

From around the time of the bankruptcy filing through the end of August, $1.69M of bankruptcy professional fees have accrued. This breaks down to $855K for the Trustee's attorneys, $482K for the Trustee's company as financial advisors, $169K for the creditor's committee counsel, $147K for the Trustee, and $38K for NWTM's counsel.

$9K Sanctions Against Diane Erdmann

Deposit Not to be Returned... Yet?

Final(?) List of Storage Metal to be Returned

As you may remember, the previous court documents were fraught with errors. This one, however, I believe for the most part is accurate. I am a stickler for details, however, and given the previous errors, I will nit-pick here as well. Any document with numbers that aren't defined requires scrutiny in my opinion (in this case, there is a number that is clearly an "item number" (e.g. 1 means first item), but looks like it could be quantity).

The biggest issue to me is that one of the customers filed their original Proof of Claim stating that the metal they were owed was leased to NWTM (metal that should be the property of NWTM). The customer did file an amended Proof of Claim showing some stored metal, but the receipts included in the Proof of Claim do not show the items being returned. I imagine the customer simply left out some receipts, and a Proof of Claim is not required for stored property to be return, so this is likely a non-issue (but something that NWTM must scrutinize if they have not yet done so).

The next issue is that several storage customers are no longer listed, with no explanation. I interpret that as "we originally thought this metal belonged to this customer, but we made a mistake. It does not." If I were one of those storage customers, I would investigate further -- but for other creditors, this is not a concern.

In one case, a customer is getting 5 less ounces of gold than was originally planned, with no explanation. And in another case, the customer is getting just 1 gold coin when originally they were going to get 22. Given the level of errors before, these really require an explanation (although there may be one in another document).

Then there is the customer who was originally supposed to get 6 1,000oz bars, but the accountants then counted 7 of them, but now it is back to 6. That is odd, of course. But the other issue is that the court records will show the customer getting 6,000oz of silver, when in fact it will really be around 5,714 (6,714.9 minus the bar they are not getting), as most 1,000oz silver bars are a fair bit lighter (or heavier), as these bars are.

And the final 'nit-picking' issue is that NWTM does not list the property belonging to one of the customers. In this case, NWTM is going to hold onto until they can confirm the property belongs to the customer. But I cannot see how you can ask the court to return an asset (even if it is at some point in the future) without giving any indication as to the value of the asset. From previously filed documents, it seems clear that this is very low value -- but no hint of the item(s) are given, and since other customers had their amounts mysteriously altered, only NWTM knows the exact items here.

$1M Lawsuit Against Hansen's Girlfriend

It alleges that over $1M of the transactions were for non-business purposes, and that she benefitted from the millions of Reward Points.

Court Document: 'NOTICE OF FILING PROOF OF CLAIM...'

From the docket text, this applies only to one specific creditor (with the initials SCR). Specifically, it refers to the claim number, and the claim number it refers to is a claim filed for a creditor "Northwest Territorial Mint" instead of the real name of the creditors. It also shows a bogus address (the address that the first person claiming to be Northwest Territorial Mint used, another artifact of the "impulse claim" system). The form states that the person filing it is NWTM, but the court shows that it was filed by the creditor. It certainly looks like it was filed by the creditor.

So I'm not quite sure why some (all?) creditors are getting this more-than-just-misleading letter from the court. My best guess is that the bankruptcy system is out of control, and that it allowed a creditor to file as NWTM (not just entered their name as NWTM, but checking the box saying that it is NWTM filing the claim on behalf of someone), which then triggered a system of sending out a very misleading notice. If this truly is the case, then they really need to send out another mailing to explain what happened. Otherwise, many people may end up consulting with attorneys needlessly.

Total Claims: ~$55M

One key takeaway is that the electronic filing of claims ("impulse claims" as I call them) is great for businesses, but very flawed for filing by individuals. In this case, of the 774 claims that were mailed, 0.0% entered their name incorrectly. Of the 2,249 electronic claims, 1.0% gave a street address as their name, and 3.9% gave Northwest Territorial Mint as their name. Those combined 4.9% of electronic claims will (if nothing is done) receive a check made out to their street ("Payable To: 1234 Main Street") or to NWTM. Given the large number of claims with such a basic error, who knows what percentage of electronically filed claims may have other errors.

NWTM Couldn't Get Pan American Their Silver

However, in January, 2016, Pan American apparently had concerns, and requested their 70,000oz of silver back. NWTM agreed to give back their metal in installments of 15,000oz per month for 5 months (the last month being 10,000oz). Pan American says that the Trustee informed them that failed to safely store, segregate and mark their silver. Given the facts we now have available to us, it seems clear that NWTM did to Pan American what it did to its storage customers: ignored their contracts and sold metal that did not belong to them.

Accounting Nightmare, Further Details

So I have now gone through every customer listed in Docket 458 to have metal returned, and categorized errors as 'minor' or 'major'. I consider a major error to be: NWTM requesting to send the customer more metal than they are owed, the total listed in the declaration not matching the total in the original motion, the weight on the scale showing less than what is listed in the motion or the declaration, the weight listed in the motion does not match the actual weight. A minor error is one that should not have an effect on the outcome, mainly where the description times quantity does not match the total (e.g. description of "1Oz CML", quantity of "1", total of "75" -- it should be a quantity of 75, not 1).

Of the 29 customers (30 if you count customers listed twice), I count 10 11 with major errors, 5 with just minor errors, 2 with missing information, and 12 11 that do not have errors. That's 38% with major errors. And just over 1/3rd with no errors at all. And from the chart, you can see that many customers have multiple errors. [Note: the chart does not include 2 lease customers; lease customers should not be treated the same as storage customers]

[click chart to see full image]

Proof of Claim Deadline Thursday

If you have not yet filed a Proof of Claim form, you must do so if you want to receive any distribution(s) that may be made.

I would suggest doing so electronically, to help ensure that a mail delay will not jeopordize your claim. You can fill it in electronically by going to http://www.wawb.uscourts.gov/eclaims.htm by clicking on "Submit a Proof of Claim" and using case #16-11767. Note that you are the Creditor, Northwest Territorial Mint is the Debtor.

Attorney General

According to an article by the Federal Way Mirror, the Attorney General received hundreds of complaints before the NWTM bankruptcy (and refers to thousands of complaint documents). The article mentioned that even if NWTM did not respond to the AG within the allotted time, the case would be closed.

A number of customers have wondered if the Attorney General can be held accountable for this.

I bring this up today because of an article by the Everett, Washington HeraldNet. It refers to "a fraud orchestrated by the state's own Attorney General", where there was "a secret pact by the state’s experts, with the blessing of the state Attorney General, to systematically destroy emails and repeatedly deceive the plaintiffs about what they were doing." Interestingly, I used the same term "blessing" when I previously (on April 25, 2016) referred to the 2008 NWTM decree by saying "the State of Washington gave NWT their blessing to allow length shipping times, making financial problems very difficult to see from complaints."

Accounting Nightmare

The bankruptcy records turn out to be a nightmare, too. The first problem is that all the metal was weighed in avoirdupois pounds, whereas bullion is traded by troy ounces (or metric measurements), making accounting more difficult than it needed to be (e.g. what they show as 1.0 pounds is about 14.5 troy ounces) and introduced errors. The next problem is that many of the pictures did not show the bullion (so there were bars with serial numbers that were not visible), making it impossible for other storage customers with serial numbers to know if NWTM is giving their property away to someone else. Finally, there were supplemental declarations from accountants to confirm the numbers that were filed in Docket 458, but they were fraught with errors (none of which they identified). Examples include:

Customer 9-2. Docket 458 shows NWTM identified 1,830.0oz of silver belonging to this customer. The accountant states that she found 1,830 1oz silver rounds, and a total of 1,830oz of silver. However, while she includes 3 boxes (labeled 600, 600, and 630 rounds), the weights add up to 59.795lbs, or only 872 troy ounces. Either the accountant did not properly add up the contents of the boxes, or they are counterfeit, and she did not verify the weight.

Customer 5-2. Docket 458 shows NWTM identified 6,008oz of silver belonging to this customer. The Creditor List (NWTM-supplied) and Proof of Claim both show 6,200oz of silver owed the customer (this could be explained by NWTM "poaching" 192oz of silver). However, the accountant states that she found 6,500oz belonging to the customer. From the pictures, it is impossible to even estimate the amount of silver (I count 19 visible boxes, whereas only 13 belong to the customer). Worse, the accountant states that the 6,500oz consists of 5 monster boxes (500ea) American Silver Eagles and 8 monster boxes (500ea) of Canadian Maple Leafs. The customer claims she is owed 6,200oz: 4,000 silver eagles, 700oz Pan American bars, and 1,500 silver maples. This shows that [1] NWTM is trying to send her 300 more ounces of silver than she is owed, [2] NWTM is trying to send her 4,000 of metal that is not legally hers (the 8 monster boxes of maples, which she had previously sold back), and [3] she did have 4,000 silver maples and sold 2,500, so NWTM didn't even bother to remove them from her storage account when she sold them.

Customer 9-9. Docket 458 shows NWTM identified 777oz of silver belonging to this customer. The NWTM-supplied creditor list also shows 777oz. The customer claims she had 2,215oz (again, not an issue -- NWTM likely "poached" 1,438oz of her metal). But the accountant stated "I confirmed there are 1106 - 1oz silver rounds .999 and 1 - Silver American Eagle marked for [customer]. In total, I found 1,299 ounces of silver stored for [customer]." The accountant appears to have added 1,106+1 incorrectly (last I checked, it was 1,107, not 1,299). And neither that 1,107 or 1,299 adds up to the 777oz Docket 458 shows. The photos show 1,200.5 troy ounces (including boxes and packaging), making 1,299oz impossible and the 777oz highly unlikely. The most likely correct weight is 1,107 troy ounces, a number they do not even list.

Customer 9-13. Docket 458 shows NWTM identified 5.0oz of silver belonging to this customer; this was an obvious mistake (the description is "5 - 1oz Silver American Eagles - Sealed Monster Box"; monster boxes contain 500 coins). The accountant identified 1 monster belonging to the customer, for 500oz. This is obvious not 5.0oz, but it is also not 5 monster boxes as the Docket 458 error implied.

Customer 9-16. Docket 458 shows NWTM identified 6,000.0oz of silver belonging to this customer. The customer claims they had leased 18,786.4oz of silver to NWTM. That normally means that NWTM would use the metal somehow, and replace it with different metal at the end of the lease (so there would be no metal belonging to the customer until the lease was over). But it gets worse: the accountant identified 7,000oz as belonging to the customer, which differs from the 6,000.0oz originally stated. But even that isn't even right: the photograph shows 7 silver bars totaling 6,715 troy ounces (7 bars that are commonly referred to as 1,000oz bars, but not labeled as such, that are expected to weigh a fair bit more/less than 1,000oz).

Customer "Pick Up - Scott" is only identified by first name, unlike all the others. Docket 458 shows NWTM identified 0.2oz of gold belonging to this customer. But it specifies that it is a "1922 St. Gaudens" -- a coin with a weight of about .96 troy ounces. An error. The accountants did not provide further details about this customer.

Customer 9-23. Docket 458 shows NWTM identified 0.7oz of silver belonging to this customer. However, it was for 2 proof silver eagles and a necklace. As almost any NWTM customer knows, a silver eagle weighs slightly over 1oz, so this is another clear error. I believe it was 0.7 avoirdupois pounds (including the necklace, proof boxes, and cardboard box), but was mistakenly listed as 0.7 troy ounces.

Customer 9-20. Docket 458 shows NWTM identified 840oz of silver belonging to this customer. The first problem is that the accountant stated "I confirmed there are 10 - 500oz Pan American silver bars...", when in fact they were 100oz bars (I'll call that a typo). But that brings a new problem: the accountant identified 1000oz, compared to the 840oz originally stated. The customer Proof of Claim states that the customer is owed 840oz. So NWTM is again trying to return more than the customer is owed, as with Customer 5-2. And like Customer 5-2, it appears that the old NWTM never removed metal from segregated storage belonging to the customer after she sold it (she originally had 10 100oz bars, but sold 2).

Finally, included in the pictures was a monster box of silver eagles with the name of 2 other storage customers crossed off, and replaced with the name of the customer NWTM now attributes the metal to. I am concerned that while NWTM currently attributes this one one customer, they previously attributed it to another customer. How to we know that the metal does indeed belong to the customer NWTM currently says it belongs to? If the other 2 customers are not owed any monster boxes of silver eagles, there should be no problem. But if either is owed a monster box of silver eagles, this opens up a can of worms.

So here we see out of about 32 storage customers with metal to be returned, at least 8 had errors that appear to have been caused by the bankruptcy professionals. And their accountants apparently did not notice a single one of the errors! How can accountants filing declarations with the court, declaring that what they say is true and correct under penalty of perjury, not notice a single one of these errors?

Worse, we see that the bankruptcy professionals are planning to return more metal to some people than they are owed, and trying to give metal belonging to the estate to customers. And, we can see that in fact customer metal was at times comingled with NWTM metal (in the case of Customer 5-2 and Customer 9-20).

Internal Code for Storage Theft: 'Poaching'

A court document filed yesterday shows that NWT referred to their act of taking metal belonging to customers as "poaching" (one definition is "to take without permission and use as one's own"). The exact phrasing from a box stored for a customer was "Customer Supplied - No Poaching!!" written in large letters. This was for a storage order received on April 11, 2014.

NWTM stored two types of metal for customers: metal purchased from NWTM, and metal sent in from customers. NWTM rarely gave out serial numbers or other identifying information to storage customers purchasing from NWTM, so that metal was safe for NWTM to steal (their mantra was "we can just mint more"). If the customer asks for the stolen metal, NWTM finds some and sends it to them. Customer supplied metal, however, is very different: the customer may have written down serial numbers or have taken pictures that could uniquely identify the metal. If NWTM steals that metal, the customer may find out if they ask for their metal back, which could then expose the whole scam.

To me, the phrasing (and exclamation marks) first shows that the practice was widespread. You don't come up with an internal term for theft if it just happens once, and you don't use large letters and exclamation marks unless you are trying to avoid something that is easy to happen. Next, it shows that poaching was authorized by the company (specifically, the implication is that non-customer-supplied metal is OK to poach). It also shows that someone at NWTM clearly knew this was wrong (or else you wouldn't use the term "poaching"). And finally, it suggests that knowledge of the theft was known to many employees (this wasn't an internal memo to a few people, it was very obvious to anyone with access to the vault).

Medallic Suing NWT Mint

The legal ownership of corporations, LLCs, and partnerships is usually impossible to obtain from public records. Ross Hansen essentially claims that Medallic Art Company is owned by him and Richard Bressler (each owning 50%) with Ross putting in $2M and Dick putting in $3M. The $2M Ross put in was obtained from an owners' draw from NWTM . The company has 2 employees: Ross and Diane Erdmann, his girlfriend.

NWTM Chapter 11 Trustee Mark Calvert previously stated "it appears that [NWTM] transferred money to Ross to allow him to buy Medallic when the company was insolvent," and that Medallic is "so commingled into the operation of Northwest Territorial Mint it cannot be broken apart." It seems clear that the while the transaction was intended to be by Ross Hansen (and NWTM customer Dick) and not NWTM, the $2M was taken out of NWTM as an owner's draw immediately before the purchase, at a time that Mr. Calvert claims NWTM was insolvent (which the backlog of bullion orders at the time seems to confirm).

I have found no references to any source that creditors could have used to find out that Medallic was owned by Ross and Dick, until after the bankruptcy petition was filed. On the contrary, the Internet is full of information suggesting that Medallic was owned and operated by NWTM. It appears that NWTM claimed that Medallic was a division of NWTM, a subsidiary of NWTM, and acquired by NWTM. For example:

The question becomes: if NWTM clearly claimed that it owned Medallic, how can NWTM's sole owner think that the assets do not belong to NWTM? From a strictly moral standpoint, I think the best solution would be for Medallic to drop any claims of ownership, and file an unsecured Proof of Claim for any value it believes it is owed. Let them be in the same position as NWTM customers. Remember, too, NWTM's beliefs on ownership: it stored $8M legally owned by its customers, yet appears to have used $7M of it to pay bills.

July Financial Report

It shows a net profit of $312K for June, and a net profit of $13K for July. July's lower net profit appears to have been due in part to higher salary/labor costs (which may be due to severance packages, as they decreased the number of employees by about 20% in the past 2 months). As before, I believe this does not include reorganization expenses. It also shows that they are still working on getting a database of cash in and cash out from 2007 to 2016.

The Chapter 11 Trustee, Mark Calvert, said that there are 3 options under consideration: [1] a quick sale of the assets, [2] sale of the assets following a period of internal reorganization and stabilization, or [3] a filing of a plan to reorganize the company. He reiterates that a history of reliable financial records and operating reports will be very important to maximizing the sale price of the company.

It also mentions that the court has required more detailed proof of the ownership of the storage inventory before returning it to customers. This is good, as there were concerns from creditors that metal marked as belonging to one customer might really belong to another (e.g. if NWTM 'borrowed' some bars from Customer A and sold them, then replaced them with bars from Customer B -- in this case, the bars would likely legally be the property of Customer B, even though they are listed as belonging to Customer A).

It appears that the Tomball sale generated $954,418.18 of cash (not including expenses).

And, on a lighter side, NWT Mint generated $7.42 from Pizza Hut for ordering. That appears to be a rewards program that gives them 4% back on their pizza purchases.

Hansen Not in Contempt

May Financial Report

NWTM showed a net profit of $321K for May, compared to a $69K loss in April. This does not appear to include bankruptcy fees, but seems to show that there is hope for the company being able to make it through Chapter 11 bankruptcy (reorganize in some fashion, likely with creditors taking a sizable loss, rather than liquidating the assets, which would likely result in a larger loss for creditors).

Deposit to be Returned

The judge has ruled that the remaining funds should be returned to Ms. Erdmann. The judge also ruled that Ms. Erdmann intentionally and egregiously violated the automatic stay (which prevents people from attempting to collect money from a bankruptcy company), and while it did not cause any damage to NWTM, it caused damage to the law firm holding the money, and sanctions may be imposed on her. It states that Ms. Erdmann is held in contempt for the violations of the automatic stay.

In the decision, the Judge states that the $75,000 cash and approximately $200,000 of gold bullion Ms. Erdmann had came from a $133,900 life insurance payout from 1993, that was apparently parlayed into at least this $275,000. Ms. Erdmann could only come up with one receipt from 1997 buying $15,798 of gold and silver from NWTM. She said that she made other purchases, but the documents were lost or destroyed in 2012. When asked if she disclosed any gains on federal tax returns, she refused to answer, stating "It's my business." However, the Judge stated that she was not required to prove where the money came from.

Contempt, Part II

Mr. Calvert replied, asserting among other things that that Mr. Hansen requested that an employee disable a machine and destroy copies of computer files (which Mr. Hansen had denied), stating that 6 boxes of coins shipped shortly after the bankruptcy filing were not property of Medallic Art Company, and that Mr. Hansen interfered with the Graco sale. It also states that Mr. Hansen tried to make a $600K bid on Graco using Olympic Trading Company as a financial backer, but Olympic had only committed $100K.

In Docket 574, a declaration is made that the 400,000 coining dies that Medallic claims to own are not owned by Medallic. It also states that there are no records showing that the $300,000 coining press that Medallic claims to own is indeed owned by Medallic. Then in Docket 575, an NWTM employee states that at a lunch with 5 people, Mr. Hansen stated that if Mr. Calvert led him astray, Hansen would "beat Mark Calvert to death with a baseball bat."

In Docket 577, Mr. Calvert requests that Docket 569 be stricken.

Then, Mr. Calvert filed a separate contempt motion for Mr. Hansen for failing to comply with an order compelling him to produce documents (bank and credit card statements), and requests sanctions in the amount of $5,000. Apparently, he said that they were part of NWTM's records, and did not order copies from the bank(s).

So there has been a lot of behind-the-scenes activity, which gets quite confusing, but ultimately does not (so far) appear to be of much importance to creditors.

Contempt

Among other things, it states that Mr. Hansen has informed Mr. Calvert that he intends to take control over NWTM's assets through Medallic Art Company. It alleges that Mr. Hansen requested that an employee disable critical manufacturing equipment, destroy some records, and provide copies of the destroyed records to Mr. Hansen.

What seems most concerning is that if was is alleged is true, it sounds like Mr. Hansen really is interfering with the business (it states "Mr. Hansen is an intimidating presence for employees"). Hopefully, if it is true, he will stop and allow the bankruptcy process to take its course. The worst thing he could do is cause damage to NWTM.

Motion to Return Stored Metal that Exists

It also acknowledges that only $1.1M of the $8.2M of stored metal could be found. It does not specify what NWTM claims happened to that stored metal, which was the property of customers.

Proof of Claim Forms Required: by September 1

The docket urges creditors fill out the Proof of Claim online, but I highly disagree with that. I refer to the online Proof of Claim system as the "impulse claim" system, as it makes it very easy for someone to file a claim without carefully going over it. About 1 in 30 creditors will, if nothing is done, receive a check payable to "Northwest Territorial Mint" -- that almost certainly would not have happened with electronic filing. So if it were me, I would mail in a Proof of Claim form.

UPDATE: Note that if you were waiting on an order that was not delivered, the first $2,850 or so of your order may qualify as a priority claim (with the rest, if any, being a standard unsecured non-priority claim). If you think that you may qualify, you should check off the appropriate box.

'Looted', 'Stole', 'Thief'

Yesterday, Chapter 11 Trustee Mark Calvert filed a Trial Brief, discussing the legal standard to be applied at an evidentiary hearing on June 22. What makes it interesting is that for the first time we are seeing phrases like 'The evidence will show... Diane Erdmann and Ross Hansen stole from NWTM in the weeks prior to its bankruptcy filing' and 'A thief does not take title to assets stolen from another' and 'The evidence will show... that Diane Erdmann and Ross Hansen looted assets from NWTM prior to the bankruptcy.'

This is specifically referring to funds that were used as a retainer to pay the bankruptcy attorney, without which the bankruptcy likely could not have occurred, and my understanding is that without the bankruptcy all the assets would have gone to the person who won a defamation judgment against NWTM. Since NWTM assets were frozen, the attorney could not use NWTM funds to pay his retainer. So to me, it looks like this move ultimately benefited most creditors.

Meanwhile, Diane Erdmann filed a Trial Brief countering this, explaining that the money came from a life insurance settlement, which she invested in precious metals and kept in private safety deposit boxes and her personal safe, and through strategic trading she took advantage of the 3-fold increase in the price of gold. She points out that if she or Ross Hansen needed more money, they would have just increased their owners' draw, that there would be no need to resort to theft.

Why NWT is Still Selling Stuff

NWT Mint filed for Chapter 11 bankruptcy. Chapter 11 is "reorganization", where a company continues business, but with their debts "stayed" (compared to Chapter 7, which individuals typically file, where everything is liquidated and split among creditors after bankruptcy fees are paid). With Chapter 11, the business continues taking orders as it had before. Any pre-petition debts (money owed before filing for bankruptcy), however, cannot be collected (which gives the company "breathing room" to continue operations). Bankruptcy law determines (over time) who gets how much money. In this case, if it were not for the bankruptcy filing, any legal judgments (such as the $12.5M defamation judgment against NWT Mint) could possibly cause NWT assets to be sold to pay the judgments, effectively shutting down the company.

If the company makes a profit, this benefits creditors. Yes, someone paying $120 for a $100 product will get that $100 product (and you won't get the $100 products you paid for). But if after expenses that brings $5 or $10 of profit, that's an extra $5 or $10 that can go to creditors (after bankruptcy expenses). And if the business can be run well for a year or so and then sold, as the Trustee hopes to do, it might be able to bring in a good amount of money that also can end up going to creditors (again, after bankruptcy expenses). So continued operation of the company should benefit creditors.

In this case, the Chapter 11 Trustee Mark Calvert chose to shut down the bullion operations. So there is no longer any way to order bullion through NWT (except perhaps some small quantities through their store), with NWT focusing on custom minting instead. Although I haven't seen the reason for this, it was almost certainly because the bullion operations was a money-losing operation.

Status Report

Of note:

• On the day that the jury verdicts were awarded, NWT ceased maintaining its records of cash held in its Federal Way vault. It had $225K cash at that time, and $3K cash when the bankruptcy petition was filed.
• The Trustee anticipates filing an adversary proceeding against Medallic Art Company, LLC (“Medallic”) and Mr. Hansen. Medallic has asserted that it owns certain assets located in Dayton, Nevada, and Texas, which the Trustee believes are assets of the Debtor. As Mr. Hansen confirmed in testimony before the court on May 27, 2016, Medallic has no employees, other than Mr. Hansen and his girlfriend Ms. Erdmann.
• Mr. Calvert stated that the $2 million component of the Medallic purchase price was funded directly from the Debtor’s bank accounts.
• Total cash transfers within the ninety day period prior to the petition were approximately $11 million and total precious metal, coin and product deliveries during the ninety day period were approximately $6.8 million.
• The Trustee mentioned that some creditors who had placed orders for metal have filed Proof of Claim forms alleging that they are priority creditors due to 11 U.S.C. § 507(a)(7), which applies to the first ~$2,850 of deposit money in connection with the purchase of property “for the personal, family, or household use of such individuals, that were not delivered or provided.” No comment was made on whether this may be valid or not, but the total if all Proofs of Claim for such customers are amended to use the priority, the total priority claims would be around $10M. This would benefit low-value creditors with unfulfilled orders, but would likely not benefit those owed a lot of money and those with stored metal.

Court Documents, PACER, and RECAP

I download most of them, and place them online here.

The official source is through PACER. The catch is that you are billed $.10 per page ($3.00 maximum per document), which includes the list of dockets. If you spend less than $15 in a quarter, your fee is waived. There is an RSS feed at https://ecf.wawb.uscourts.gov/cgi-bin/rss_outside.pl that lets you see when new documents are added. To get all NWT documents from PACER would cost hundreds of dollars, which is why I put them online for free.

Today, I installed RECAP, which helps everyone reduce the PACER costs. It works with Firefox and Chrome, and automatically will link to a free copy of a document if RECAP has it (and if not, when you download it, it will automatically upload to RECAP for others to get for free). It does not increase your PACER fees in any way. I would encourage people who are accessing court documents through PACER to use RECAP, as it will help reduce the fees for everyone.

Graco Sold for About $1M

It looks like the total purchase price is $1M exactly, plus the assumption of contracts which appear to provide a benefit to NWT of another roughly $175,000 (although I could be wrong about that).

Hansen Proposing MAC/Tomball/NWT Deal

On the surface, it seems like a legitimate proposal. However, there are some unanswered questions so far. One that immediately comes to mind is that it include various insurance that MAC would agree to provide. NWT Mint's storage customers reportedly only have about $1M of metal compared to the $8M they have stored. If that is not covered by insurance -- as the storage agreements state -- the idea of this accepting this proposal would seem to be an insult to creditors. Hopefully, either all the stored metal is there, and if not, there is insurance covering it.

Audio of Creditors' Meeting

New Activity

First, Medallic Art Company, which Ross Hansen bought a 50% interest in for $2M in 2009, as filed a motion to force the Trustee to make $25,000/month payments to Medallic Art Company for use of its equipment (that it has been paying for several years). It also includes an exhibit showing a letter that Mr. Calvert sent to employees stating that they would be terminated immediately if they communicate with news agencies or Ross Hansen or Diane Erdman. A news agency is a company like the Associated Press that sells news to other companies that provide news. The filings also show that NWT owes Medallic Art Company $1.5M.

Next, Medallic Art Company filed an objection to the Tomball sale, pointing out that NWT Mint paid $3M over time for Tomball assets, and suggests that the sale for $600K plus $150K in assumed liabilities would be a "fire sale."

Then, Harris County filed an objection to the Tomball sale, saying that it should have a provision for their taxes to be paid.

Finally, Ira Green, Inc. filed an objection to the Tomball sale, saying that they wish to submit a higher and better offer.

I would like to add a note to NWT employees: if you choose to contact me via E-mail, I will not publish anything unless you clearly state otherwise (I consider myself an advocate, not media). You can also provide anonymous tips (you can use Tor for even more anonymity; in any case, I would not recommend submitting a tip on an NWT computer). I treat privacy and confidentiality very seriously.

Creditors' Meeting Overview

• Ross Hansen's girlfriend, Diane Erdmann, was the vault manager at Federal Way, and kept an inventory of what was brought in and shipped out on a daily basis.
• Ross would normally take out money (an owner's draw, similar to a salary) by taking cash from the vault, although would be paid by check in the past.
• The lack of financial statements was explained as due to the ERP software failing; they tried replacing it with Epicor (which ironically Bullion Direct used) and SAP. They spent $2M or so on that, and decided to focus on the business instead.
• While it was mentioned that Ms. Erdmann receives money from owner's draws that Ross takes, nobody asked about the $50,000 per month in personal American Express card payments that NWT Mint was paying for Ms. Erdmann.
• When asked if metal stored for customers was segregated and if it was used in the mint's business operations, Ross Hansen said "I believe that -- and I could be wrong -- but I believe that most -- all metals that were -- that were put into storage are in storage."
• When the U.S. Trustee asked Ross Hansen if he ever invaded the metal stored for customers for other uses, Mr. Hansen said "To my knowledge, no."
• Storage customers have wondered about insurance. Mr. Hansen said they have a type of insurance called "jewelers block insurance". Nothing was said as to whether it may cover metal that NWT was storing for customers.
• Some checks customers sent were missing, and Mr. Calvert is trying to find if any were deposited into any non-NWT accounts.
• Mr. Calvert immediately made backups of security tapes, which record over themselves "over a period of time." It was not mentioned what the time period is, whether they have days of security footage, months, or years.
• It seems clear that some stored metal is there, and some is not.
• Mr. Calvert stated "It appears -- it appears that when he was short of cash, he would drop the price, close to the spot price, to increase orders. But the reputation of the long delivery resulted in less people buying. And as a result, there wasn't enough money to keep going."
• It seems clear that the bullion operation of NWT is what resulted in massive losses. The "irregularities" only apply to the bullion operations.
• Mr. Calvert intends to run the operations in Dayton for about a year to increase the value and get proper accounting records, and then sell it.

Creditors' Meeting Transcript

I will be going over this very carefully, and reporting on it (likely tomorrow, as it is getting late on the East Coast). And a special thanks to Mr. Calvert for getting the transcript to creditors, and to the person who alerted me to it.

UPDATE: You can also view this now on an web page I set up if it is easier.

Only $1M of $8M Stored Metal Found

The storage contracts that I have read all appear to be crystal clear: the metal belongs to the customer. If the metal cannot be found, it would be considered either lost or stolen. And losing $7M of allocated customer metal (the majority of the metal being stored) seems quite far fetched. Further, the storage contract requires NWT to insure the metal, which I highly doubt occurred.

More Creditors' Meeting Notes

• Bradley Cohen, who won the $38.3M defamation lawsuit, agreed to release $190,000 back to the estate that he obtained from a court-appointed seizure.
• Mark Calvert, the Chapter 11 Trustee, said the mint has been insolvent since 2009 or before, suggesting Ponzi-like activities began prior to 2007. To me, this is significant since the State of Washington investigated them in 2008, and should have checked their finances at that time.
• Owner Ross Hansen said that he believes the assets are worth $20-$25M, although Calvert believes them to be worth much less than that.
• It is 'less clear if all "owner's draws," which is how Hansen took compensation, were logged.'
• Ross Hansen had $156,000 worth of coins seized from his home several weeks ago.
• Calvert said "The FBI and DOJ (Department of Justice) is a one-way highway when it comes to information, and justice will take time."
• Calvert cut the staff from about 240 employees to about 200 employees.
• Unfortunately, Calvert estimated there would be less than 10 percent of recovery for general unsecured creditors
• Calvert said that there was a higher amount of storage contracts than physical inventory

The King Does Not Have Priority

The Wall Street Journal wrote "Another thread: Mr. Calvert assured a nonprofit that the King of Norway will still receive 36 gold medals from the mint to present to scientists who win this year’s Kavli Prize. He found a buyer willing to pay $600,000 for the company’s Houston mint that flooded last month."

The first thing I want to point out is that these are two totally unrelated threads. The sale of the Houston business does not have anything to do with the medals ordered by the nonprofit.

The nonprofit had 108 ounces of gold stored with NWT Mint, apparently in the exact same way as other creditors that have metal stored there. Several weeks after the bankruptcy was filed, the nonprofit placed an order for the medals (which use 108 ounces of gold). With the arrangement, the nonprofit would pay for the work NWT did to create the medals and would supply the gold for them. However, the gold they supplied was separate from the gold that was stored at NWT.

The end result is that the nonprofit is in exactly the same position it would have been if it had done nothing with NWT, and had someone else make the medals.

Forums for Discussing NWT Mint

I will still post here and send out occasional E-mail updates, but the forums will offer a place where creditors can interact with one another if desired. Note that while the forum is intended for NWT creditors, anyone may view and post there.

Did You Pay with a Credit Card?

If so, and you should file a dispute with your credit card company immediately if you have not yet done so. Typically in bankruptcies a credit card company is responsible for reimbursing customers who did not get their orders.

If you paid by credit card and have already filed a Proof of Claim form, and your credit card company reimburses you, make sure to withdraw your Proof of Claim (intentionally not withdrawing the claim might be considered bankruptcy fraud, which is taken very seriously).

News Articles

Searchable Inventory List

This is the inventory from the bankruptcy schedules, and likely does not include any customer inventory. The inventory contains over 18,000 listings, so this is a massive (3MB) webpage. It will likely take at least 10 seconds to load and process commands, and likely will not work with many browsers.

Alternatively, you can download the data as a .csv file, for processing in Excel, OpenOffice, or other spreadsheet/database programs.

Some Information on the Creditors' Meeting

It lasted over 3 hours, and I understand that it will be continued at a later date. NWT Mint owner Ross Hansen was there, put under oath, and was asked many questions.

I have heard that Ross Hansen was there without a lawyer, but unwilling to answer a number of questions. Some of the questions related to metal that was taken out shortly before the bankruptcy filing, that presumably belonged to Ross's girlfriend and likely was used to pay the bankruptcy attorney (who has since withdrawn).

It was mentioned that for the past 3 years, no taxes were filed, and their accounting has not been working during that time.

An FBI agent was present at the meeting.

An inventory has been completed, but they are not in a position yet to identify which owners of stored metal had their names attached to allocated metal in the vault. Those that have stored metal at NWT should be contacted within a few weeks. Allocated metal will not be considered NWT assets, but returned to the customers. However, it seems that much of the allocated metal is not there or marked as such. If a storage customer does not have metal allocated in their name, they will be considered a general unsecured creditor.

I understand that the audio of the meeting has been prepared, and will likely be available by the end of the week. I will post more details after going through the audio.

Info on Creditors' Meeting Wanted...

If anyone is/was there and has any information to share, I would be happy to hear from you. You can either or you can provide information anonymously at the tips page.

UPDATE:: It's getting late on the East Coast, so I likely won't be able to provide any updates until tomorrow, as I haven't heard anything about the meeting yet. Any information would be very welcome!

UPDATE:: As of 4:00PM EST on Thursday, I have not heard anything.

Creditors' Meeting Questions

If you are going to the meeting, and feel like asking any of these questions, I'm sure other creditors would appreciate it. I just included the questions as presented to me by creditors.

I have also sent a copy to the U.S. Trustee (who I understand runs the meeting), with a copy to the Chapter 11 Trustee (who answers questions), to help increase the chances that the questions will get asked.

Bankruptcy Schedules

• Total listed liabilities are $55,861,961.76 (only $72,753.76 of that is secured)
• Total assets listed are $6,476,227.75 (but that is a 'best guess', not actual market values)
• They have $1.4M of accounts receivable
• Of the $55.8M owed, $26.8M is for unfulfilled bullion orders, $8.2M is for storage customers.
• The checking account has $1,007.07 in it, with an extra $3K of actual cash
• There are no known payments to NWT Mint's owner, Ross Hansen, since September, 2015 (and payments for the past year total only about $10,000).
• NWT Mint shows $554K in American Express payments for Ross Hansen's girlfriend over the past year. Interestingly, only 10 of 12 payments appear to have been made by NWT Mint.
• There are "Possible inventory losses under investigation"
• Regarding stored metal (which *should* exist, and therefore reduce claims), the schedules stated "Debtor stored personal property for certain customers, Trustee has commenced a detailed storage inventory which will be provided to creditors when completed."
• Tax returns have not been filed since 2010. This is eerily similar to Bullion Direct.
• Despite apparently having 7 accountants on staff, NWT Mint "did not have standard bookkeeping or accounting practices, and did not generate financial statements or account reconciliations for many years."
• There was a $10,000 check made out to CASH on February 29, 2016.
• $3,960 was paid to survivalblog.com on February 16, the website that dropped NWT's advertising in December, 2014 calling NWT Mint "deplorable" -- and retracted 4 days later.
• Bullion wholesalers received $2.5M in the 90 days before the bankruptcy filing, working out to $10M/year -- a tiny fraction of what customers ordered
• Refunds to customers appear to have been around $8M in the 90 days before the bankruptcy filing, working out to about $30M a year.
• Payroll is about $8.8M/year (from a prior court document)
• There is a State Senator that is owed money
• One interesting asset is a satellite phone

$55.8M Owed, ~$6.4M Assets

The $6.4M of assets is not the current market value, but based on net book values and/or good faith estimates.

I will be posting more, with links to the schedules, soon.

I strongly urge creditors to sign up for the list, as I expect to E-mail reminders about certain important dates (such as the 'bar date', the last date to file claims, if Proof of Claim forms are necessary).

Two Attorneys Suckered by Impulse Claim System

One sign of the problems with this impulse claim system is that there are now 53 creditors claiming that their name is "Northwest Territorial Mint." That's because the average customer is not familiar with bankruptcy, and does not know whether they are the debtor or creditor.

I thought it was just individuals who were making mistakes due to the impulse claim system. But no, that isn't the case. Two law offices have now submitted duplicate claims -- both filed electronically. Both had made errors in their name and/or address in the first claim, that I doubt would have occurred if they had to file a paper claim. But worse, both of them filed DUPLICATE claims. Why? Well, it turns out that the court doesn't let you choose the creditor name from a drop-down box, and it ONLY lets you file an amended claim if you choose your name that way. In other words, the impulse claim system lets you file a duplicate claim, but refuses to allow you to check the "amended claim" box.

I really need to find whoever oversees the courts and see if I can get them to stop the whole impulse claim nonsense, or at least fix it. It has proven damaging to customers, and in this case will cost money to sort through the duplicate claims.

Creditors' Meeting on Wednesday

The public is welcome to attend creditors' meetings. There is no requirement for creditors to attend. It gives creditors an opportunity to ask questions of the debtor (NWT Mint). Most likely, there will be a lot of information presented at the meeting. If it is like similar meetings, it could easily last several hours. I do not know if the owner of the company, Ross Hansen, will be attending.

As soon as I hear details from the meeting, I will be sure to post them here. I expect to be able to get a copy of the audio (likely within a week or two) and post it online, along with important details from the meeting.

If you have any specific questions you wish to be asked, and cannot make it, please let me know, and I will try to pass them on (I cannot, however, guarantee that they will be asked or answered). Also, if you are planning on attending the meeting and may be willing to ask some questions on behalf of creditors that cannot attend, please let me know.

May 10, 2016 1:10PM EST
UPDATE: The creditors' meeting is not a hear or true legal proceeding; the judge is not allowed to be present at Creditors' Meetings. The goal of these meetings is primarily to give creditors a good idea of what the financial situation of the company is.

Graco Awards Manufacturing to be Sold

This is discouraging, as $600,000 is only about 1.3% of the estimated claims, and yet the cash is considered important to preserve other aspects of NWT. This is a very clear sign that there is no cash or metal backing the estimated $30M of unfulfilled customer orders.

FBI Raid?

That said, this is the type of thing that is not easy to confirm; usually government agencies do not confirm or deny investigations. Also, the fact that there was bullion is not unusual in this case (compared to a company that does not handle bullion). However, if true, this would answer a question that many have been asking (whether the government is investigating the situation).

May 6, 2016 7:35AM EST
UPDATE: It has been confirmed that the FBI has an ongoing investigation into the activities at Northwest Territorial Mint.

May 8, 2016 8:00AM EST
UPDATE: It looks like the raid was not by the FBI, but instead done by a deputy sheriff, to collect a judgment (not against NWT), but could possibly have seized NWT property. The FBI is, however, investigating what went on at NWT Mint.

Unsecured Creditors' Committee

In a Chapter 11 bankruptcy, an unsecured creditors' committee is usually formed, and consists of several of the unsecured creditors that are owed the most money. The committee has a number of functions, but is essentially formed to protect unsecured creditors. In some cases, it will investigate the assets, liabilities, and actions of the company as well.

Upcoming Dates & Information

Then on May 18, the bankruptcy schedules are due. This will likely include a lot of financial information as well, and answer many questions.

Finally, the court ordered a case management conference for Friday, June 3, 2016 at 1:30PM. By Friday, May 27, the Trustee is required to provide some other financial information. This meeting is listed as "no mandatory, but strictly voluntary" for all interested parties other than the Trustee. However, if you go, there are caveats (e.g. you should bring an attorney or be willing to enter into stipulations -- presumably you could just go and listen, but that is not clear).

Defamation Award Upheld

NWT had submitted a motion for a retrial, which was denied.

Court Overwhelmed by Proof of Claim Forms

The court wants people to file claims electronically. That likely saves the court money, but these "impulse claims" harm creditors. The vast majority of creditors in bankruptcy cases are businesses, and electronic claims work well for them. But for people who are not familiar with bankruptcies, errors abound. For example:

• 42 people declared under penalty of perjury that their name is "Northwest Territorial Mint", and they are owed a total of $344,960.11. That's because on the electronic form asks for "Who is the current creditor?" and I'll even admit to having been confused between "creditor" and "debtor" when I first encountered bankruptcies. When filling out a paper form, you'll be much more likely to notice that you didn't put your name anywhere on the form. Of those 42 bogus claims, 100% were filed electronically. The same thing happened with Bullion Direct.
• In most cases, in Chapter 11 bankruptcies, Proof of Claim forms are not required. And at this point, it is not known whether they will be required. Proof of Claim forms are public documents, and bullion purchasers often want to keep their information private. The electronic Proof of Claim forms make it much more likely creditors will file unnecessary Proof of Claim forms.
• The electronic form automatically hides the types of priority claims a user might be entitled to. This makes it less likely that creditors will choose "Up to $2,850 of deposits toward purchase..." that may well apply in this case. This could potentially cause a creditor to receive no money when they otherwise would have received some money.

Tips Wanted: Loose Lips Save Ships

If you have information or documents you think I should see, you can either E-mail me directly or use the anonymous tips form. I am looking for information about NWT, not specific orders. I never publish information sent to me via E-mail without permission. When information is sent via the anonymous tips page (where I cannot respond), unless stated otherwise, I assume it is OK to share (but in most cases do not). I take great care to ensure that anyone sending me information (even anonymously) cannot be identified (for example, if I were to post a document sent to me, which I rarely do, I would normally convert it to a different file format to provide an extra layer of protection).

If you have any information about NWT Mint that you think I should know about, you can either or you can provide information anonymously at the tips page. I want to again thank those who have submitted tips.

NWT Had Serious Problems

However, I now have Proof of Claim forms. These are documents I get directly from the government, that state right on them that you can get sent to prison for a false claim.

I have looked at a not-quite-random sample of claims (picked based on claim number ranges). NWT gives out a 8-10 week timeframe as their estimated shipping time, and is allowed a 30-day grace period, after which NWT is "restrained from failing to pay to the consumer, immediately after the expiration of the period, either the full spot market price on the day the period expired or the price the consumer originally paid for the goods, whichever is greater, in addition to all shipping and other charges." That leaves NWT 100 days after receipt of good funds -- a maximum of about 119 days from the date of the order if you include 14 days for checks to clear and 5 days for checks to arrive.

Of 22 claims I looked at where I can determine the order date and/or cleared funds date, 13 were at or past the 120 day deadline (as of the date of the bankruptcy petition). That is more than half, all of which NWT was supposed to have refunded. One order was 254 days old (over 8 months) at the time of the bankruptcy filing. These were not orders that merely "slipped through the cracks" -- half of all orders I checked were beyond the deadline imposed by the State of Washington consent decree.

Worse, at least 2 of those orders were not for NWT Mint products, which is important because the lynchpin for NWT's business model is that they mint products in batches, causing the delays (you order, then they mint the product). But they can get a $1,000FV bag of quarters or 1oz platinum bars within days from bullion wholesalers.

Also, at this point I should mention that the voluntary petition shows that NWT leased over $3.5M of metal from customers. I have not heard yet from anyone who leased metal to NWT (either directly or via Proof of Claim), so I do not know the details of their leasing. However, it appears that $3.5M of metal leasing was essentially a loan from customers.

In other words, the large judgment appears to have just sped up a bankruptcy filing, rather than being the cause of it.

Top 20 Creditors

Of them, the 2 largest related to the large defamation judgment, and Proof of Claim forms have been filed for those.

Of the other 18, 2 have filed a Proof of Claim so far: one for the exact amount listed, and one for about 66% of the amount NWT Mint had listed their claim as. And another claim has been filed from someone showing that should have made it to the list of top 20 creditors.

NWT Requesting Court Require All Creditors to File Proof of Claim Forms

It states that NWT would notify creditors that they must file a Proof of Claim, using a notice that states that anyone required by the order to file a Proof of Claim who does not do so would not be treated as a creditor. In other words, all creditors would be required to file a Proof of Claim.

To me, this suggests that NWT Mint does not have accurate enough records to properly identify all claims. Specifically, Chapter 11 creditors are only required to file a Proof of Claim if they are not on the creditor list (scheduled), or they are listed as disputed, contingent, or unliquidated.

Claims Explosion ($22M and counting)

The Judge filed an Order to Show Cause, blaming the hundreds of paper Proofs of Claim, improper forms, and duplicate claims on instructions published by the Chapter 11 Trustee. He has ordered that the Trustee show cause why the Court should not impose restrictions on the Trustee's operation of the debtor's business.

I should add that there may have been a good reason for publishing the information (which did get updated a day or so after it was published), and I have in other cases referred to the Claims E-Filing process as "impulse claims" because people tend to blindly fill out the form without thinking about the legal implications, whereas filing a paper form helps ensure that people really think about what they are doing. The Claims E-Filing by itself tends to cause many creditors to file claims that are completely unnecessary, that they very likely would not fill out if they had to take the time to write everything down on paper, sign it, and mail it to the court. And many people file the "impulse claims" without even realizing that it is a public document, and anyone can see their name, address, amount of bullion they bought, and other information from the supporting documents.

From the numbers, there are now approximately 1,000 customer claims (many duplicates), averaging about $10,000 each (not including the $12.5M judgment).

Court Documents

I do not have links to all the documents there; if there are any you would like access to, please let me know.

UPDATE: The original links went to Bullion Direct documents, they are fixed now!

NWT Mint's Attorney Withdrawing

It verifies that there was a restraining order that "prevented any funds of [NWT Mint] being transferred to any third party." This is something that customers reported NWT Mint telling them, but had not yet been confirmed. As a result of this restraining order, the deposit with the law firm was paid for by 2 third parties. It is unclear who will receive the money that has not yet been used.

It also states that "the attorney-client working relationship between TTLG and Mr. Hansen, as the member of Northwest Territorial Mint LLC has deteriorated to the point where any continued representation of the Debtor is not possible."

One interesting note is that it shows that most of the creditors were entered into their software as priority claims, which strongly suggests that they were treating orders as deposits, giving up to about $2,850 of the money owed those creditors priority over standard unsecured claims.

UPDATE: The bankruptcy attorney representing Ross Hansen in the NWT bankruptcy has filed a similar motion.

~$30M-$40M Owed Customers?

At this point, 140 claims have been filed, totaling $2.5M. It seems that almost all of them are from individuals that are owed money, mostly for bullion. The average claim is about $17,000. We also know that about $10M is owed the ~17 customers who made the list of 20 largest unsecured claims, and that there are about 3,000 creditors (based on the number of people listed in the bankruptcy petition).

With about 3,000 expected creditors, if each claim averaged $17,000, that would be $51M. However, the $17,000 average claim is based on the people who have submitted claims fairly early, and it is often the people who are owed the most who file claims quickly (with Bullion Direct, the average claim was somewhere around 1/2 of the average of the early Proof of Claim forms). On the other hand, only 1 of the top 20 creditors has filed a claim so far.

From these numbers, my hunch is that the total owed customers will be around $30M-$40M (which does not include the $12.5M of the defamation judgment that NWT owes, money owed businesses, the IRS,e tc.).

Proof of Claim Form

You can go to the bankruptcy website and click on the "Proof of Claim" tab on the top of the page. It has a link to the Proof of Claim form, the address to send it to, and an address to send a copy to NWT Mint as well.

Each bankruptcy is different, and in this one, you should go to that page and follow the instructions there for filing a Proof of Claim.

NWT Financials Due May 18, 2016

This is not something that creditors need to do anything with. When the schedules are filed, however, they will provide a lot of details about NWT Mint's financial situation, and I will post much of that information here.

Notice of Chapter 11 Bankruptcy

This is a document to inform creditors that the company is in Chapter 11 bankruptcy.

Bankruptcy Website

The site states that you need to file a Proof of Claim form. Normally, in a Chapter 11 bankruptcy, Proof of Claim forms are only required if you are either not in the list of creditors (which will be filed later), or if you are not correctly listed (e.g. the amount is wrong, or listed as disputed, contingent or unliquidated), or you are notified otherwise by the court (e.g. if the case converts to Chapter 7).

If it looks like the Proof of Claim form is indeed necessary, I will provide information to assist people (although I cannot provide legal advice, as I am not a lawyer). In many cases, it is best not to fill out a Proof of Claim form unless required, as they are fraught with errors (which costs money to fix, that comes out of money that would otherwise go to creditors). One of the key issues with Proof of Claim forms with bullion customers is that nobody seems to know if customers are allowed to take advantage of a ~$2,775 priority claim (I am not aware of any bullion bankruptcies where this was addressed). In this specific bankruptcy, it could be an important question.

UPDATE: In the NWT Mint bankruptcy, creditors are being instructed to fill out a Proof of Claim form. You can go to the bankruptcy website and click on the "Proof of Claim" link on the top of the page for further details.

Letter to Employees

It explains what the current situation is (e.g. the judgment and bankruptcy), and points out that the company has a promising future. It points out the beauty of the NWT products, and their importance. It also points out how Kitco had a much larger debt, and it has survived for about 5 years so far afterwards.

I won't go into more details, as the document was intended for employees, but felt a general outline would be useful for creditors.

As a reminder, if you have any information about NWT Mint that you think I should know about, you can either of you can provide information anonymously at the tips page.

Motion to Extend Time to File Schedules

The motion states that NWT does not have regularly prepared financial statements. It also states that partially prepared schedules have already been made.

Although the delay is disappointing, it is understandable. In the Tulving bankruptcy, it took 6 months before the schedules were filed. And while Bullion Direct had theirs ready in just over 3 weeks, they were shoddily prepared and highly inaccurate. So a delay in the financial documents is not necessarily a bad thing.

Chapter 11 Trustee Appointed

Interestingly, before the bankruptcy Calvert had met with NWT Mint owner Ross Hansen to see if Calvert's firm would be interested in providing restructuring services to NWT, but Calvert's firm declined to undertake the engagement. Aside from that, however, Calvert and his firm have no connection with NWT or Hansen.

Creditors' Meeting on May 11 1:00PM

There is no requirement for creditors to go to the Creditors' Meeting. With Tulving and Bullion Direct, only a few creditors went. What I usually tell people is that I would go to a Creditors' Meeting if it was within driving distance, otherwise I would not.

Chapter 11 Trustee to be Appointed

Also, the judge authorized NWT Mint to pay its employees and utility bills.

CRO Request Withdrawn

Opposition to CRO

UPDATE: The U.S. Trustee has also opposed the appointment of a CRO, and has requested a Chapter 11 Trustee be appointed. At this point, I think it is unlikely that a CRO will be appointed.

CRO To Be Appointed

My understanding is that the idea behind this is to give creditors some peace of mind that the company is being overseen by people who had no involvement in any issues that may have led to the bankruptcy.

Northwest Territorial Mint Files for Bankruptcy

It estimates 200-999 creditors, with assets of $10M-$50M, and liabilities of $10M-$50M. However, the creditor list appears to show about 3,150 creditors. The top 18 creditors, not including the two owed the $38M judgment, appear to be owed $10.8M.

I have a redacted copy of the voluntary petition available (which removes pages with information on creditors).

Judge Says NWT Mint Cannot Refund Money

The news report states that there are 100 to 200 customers that are owed money.

Writs of Execution

I have also heard from several customers that they are being told that NWT Mint is trying to appeal the judgment, and working on a plan to help protect customers. I was also told that checks are not being sent out because of the judgment, but have been unable to confirm that.

Motion for New Trial; "Nothing left in NW Mint's vaults"

Bradley Cohen filed a response a day later, stating among other things "[Cohen's] counsel has also been advised ... NW Mint has dissolved all of the metals they are holding for clients to fill orders and there is nothing left in NW Mint’s vaults."

Mr. Cohen also included a transcript of a cross-examination of Mr. Hansen where he is asked "In fact, you haven't filed tax returns for 2012, 2013, 2014 or 2015; isn't that a fact?" and he states "That's correct."

$38M Defamation Verdict

I do not know yet if there are plans to appeal.

Full details are at the link above.

UPDATE: NWT Mint is responsible for $12.5M of the judgment.

How I Analyze

First, here is what I do not look at:

• Orders not be shipped within a few days. Although most bullion dealers ship within a few days of good funds, NWT's niche is minting products on demand based on orders they receive, which takes time (in exchange for a better price).
• Orders not being shipped within 28 days. Some states require bullion to be shipped within 28 days, but I see no such laws that apply to NWT Mint.
• Taking orders knowing they cannot be fulfilled as advertised. This one is tricky -- this is what Hannes Tulving was accused of (and agreed to plead guilty to). The difference in my mind is that while The Tulving Company took orders that it knew would take months to be delivered (if at all), NWT Mint appears to be getting the majority of orders out on time (the 8-10 week timeframe, with an allowed 30-day delay, and option for money back if it goes beyond that).
• Lawsuits. There are some lawsuits that NWT is and has been involved in. However, there is a big difference between a customer suing because they never got their $100,000 order or because the bullion dealer couldn't repay a $9.2M loan (neither involve NWT), versus a sexual harassment lawsuit (which did involve NWT). In my mind the first two affect the chance a customer will get an order, the second does not.
• Past activities. I believe that old problems (say, 10+ years) by a company and/or its principals do not affect current operations (which is why I rarely brought up the FTC issues with Mr. Tulving from around the late 1980s).

Float. One of the biggest concerns I have with any bullion dealer is float -- money that they have received without having yet shipped the order(s). For example, if NWT Mint does $300M of business a year, with $100M of that being non-government, and half of that is bullion orders, then the 8-10 week shipping window would mean they have float in the order of $7.6M to $11.5M. A company has to do something with that money, and to my knowledge, there are no laws covering what they may do with it. They could have it sitting in a bank account, could buy enough 1,000oz silver bars for each order immediately, or it could have been used to pay expenses; it is normally impossible to tell from the outside. Presumably, the Washington Attorney General looked into the financials in 2008, and found it acceptable. But this is something that I try to monitor as best I can for anomalies.

Refunds. With BBB complaints, I have noticed that while refunds were originally quoted as 2 business days, that went up to 5-7 or 10 days in late 2014, then 2-3 weeks in early 2015, and 4-6 weeks more recently. NWT Mint explains the reasoning (such as having accounting verify that the order has not been sent, unwinding the position, etc.). However, a delay like that could simply be due to not having enough money to process the refunds. Taking a long time to process refunds in a company with a lot of float is a red flag, and could be a sign of simply not having enough cash on hand to process the refund (which could either be due to a dire financial situation, or simply not planning well enough for refunds).

Delays. I try to gauge the percentage of orders that are delayed beyond the initial shipping window, and the percentage of orders that hit the 'drop dead' mark (the end of the first delay period, where the customer can request a refund either of the price they paid or spot). This is important because it shows a potential financial trap: if NWT bought silver when the order was placed, and spot went down, NWT has to process a refund at the price the customer paid (but when selling the silver backing the position would lose money). While many BBB complaints refer to delays, the majority seem to be within what is expected (e.g. they were quoted a 4-6 week delay for a refund, but did not actually wait).

BBB Complaint Volume Update

On January 2, the BBB was showing 203 complaints closed within the past 3 years. Today, it is showing 211. That's 8 new complaints in 20 days, which works out to 12 complaints per month. This is below their average since April.

The number of complaints closed in January is on track to be on the high side. This appears to be due to a number of complaints that were originally closed in December, but re-opened to allow NWT to respond (the local BBB seems to have some technical issues). Even so, it is not expected to exceed the month with the highest volume of complaints (August), which is a good sign.

Reassuring Call With CEO

Before I continue, there are certainly some people who do not like the way the company operates. And they may also not appreciate the position that I am taking here. I did have serious concerns before talking to Ross, and was quite reassured by what he said. I am aware of issues that the company and/or CEO have had, but only pay attention to issues that I believe may affect the chances of customers getting their orders, which is my key concern.

Here are some key facts he gave me:

• They process about 165,000 orders per year. That means that well under 1% of orders result in a BBB complaint.
• They have not borrowed any money from banks, not even for equipment. They own all their equipment.
• They are also a much larger company than most bullion dealers, with numerous locations, lots of employees, lots of assets.
• About 65% of their business is for U.S. Government contracts, which at times have shipping/production priority.
• Their business model is to offer a great product, at the best prices -- in exchange for long shipping times and occasional delays. They custom mint their own products, and run them in batches based on the orders they have. They could borrow money to have a large inventory, but then their costs would rise, and they would no longer be competitive on price.

This information helps fill in some of the gaps in what I can read from BBB complaints (which provide me with a lot of information). For example, while there is a large volume of BBB complaints, it is small compared to the number of orders they take.

Their business model is also very different than most bullion dealers, and isn't for everyone (to be honest, it isn't for me). And that is a big part of the BBB complaints. If someone places an order with NWT without realizing that there is a long wait for delivery, they will understandably be upset. However, the website does make the shipping time reasonably clear.

Analysis of BBB Complaints

As I was aware, there was an uptick of BBB complaints starting around April, 2015, reaching a peak in August. The fact that it peaked in August is important: the lack of higher volumes of complaints since then does not suggest serious financial problems (which is what I would be looking for). What would most concern me is if there were ever-increasing volumes of complaints each month, but that is not happening.

The uptick could be explained by a number of factors. For example, there are a number of complaints from people who have not yet reached the expected shipping date of their order, but are simply worried. These people may have read a complaint somewhere online, for example, that pushed them to file a BBB complaint that they otherwise would not have filed. Another example is that NWT may have changed their advertising, which might attract a different group of customers who are more likely to file complaints.

Ultimately, I do not see signs that NWT is unable to ship orders out by the time promised, aside from the occasional glitch (although a number do enter the 30-day delay period, as is explained to customers before ordering). And when that does happen, the customer can either wait for the metal or get a full refund (and I have verified that customers do get a full refund, even if spot has gone down).

I will continue to monitor the BBB data. I would be happy to any NWT customers, both those that have issues and those who do not. This will give me a better sense of how things are working at NWT. You can also provide information anonymously at the tips page.

Ordering from NWT: What to Understand

However, Northwest Territorial Mint mints their own products, and as such, works differently. For various reasons (such as minting many of the products they sell), their orders typically take 8-10 weeks to be delivered. This is stated, for example, on the "Product Information" section for each product. It is also stated when you begin your checkout. It is also stated in their terms, and I understand there is a checkbox saying that you have read the terms.

If the product is not shipped by the time the quoted shipping time is reached, NWT will send out an E-mail stating that there is a delay, which gives them 30 more days to ship the order. If they do not ship the order by the end of those 30 days, you may wait for delivery, or you are entitled to a refund of the greater of the price you paid or the liquidation value.

At any point in the process you may liquidate your order, at a price dependent upon the current spot price.

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I am in the process of analyzing the data that I can obtain, and contacting NWT Mint.

The BBB reports over 200 complaints in the past 3 years, with over 150 in the past year. Many people complain that they place an order, and find out about an 8-10 week delay. At the time of the expected delivery date, they receive a notice saying it may take up to 30 more days. Now, many people are complaining that they do not receive their order by the second deadline, and that they are told refund requests will take 4-6 weeks to process.

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