U.S. Trustee Wants To Interview Jack Brown On Missing Millions; Brown Attorney Resists; Skiles Said Daughter Spotted Ponzi Scheme

Wednesday, February 6, 2013

Samuel K. Crocker of the U.S. Trustee's Office is asking to be able to interview Soddy Daisy tax advisor Jack E. Brown about an alleged $12 million Ponzi Scheme that left dozens of "investors" holding the bag.

Attorney Tom Ray, representing the ailing Brown, said he remains too sick to be able to answer questions. He said, "The Debtor’s health condition is such that it is unlikely that he is able to give testimony."

He added, "The Debtor has executed financial disclosure forms for the U.

S. Trustee to obtain his banks records and the chapter 7 trustee is in possession of all of his records."

Attorney Ray also said, "The Debtor intends on fully testifying if he is physically able, at the 341 meeting or at a time and place that is mutually convenient to the trustee which is consistent with his current health situation."

A hearing is set on the motion before Bankruptcy Court Judge John Cook.

Meanwhile, bankruptcy trustee Jerry Farinash said he has worked out a compromise with one of the Brown investors, B.A. Skiles.

He said the issue "relates to the amount of monies paid to Mr. Skiles by Jack Brown which must be returned to the Estate as the result of an avoidable transfer."

Trustee Farinahs said Mr. Skiles began doing business with Brown's Tax Service in 2006. He periodically would “invest” money with Mr. Brown and those monies would be returned to him. When those monies were returned to him, he was not paid the interest due on his investment.

In April of 2010, the amount of interest owed to Mr. Skiles was $133,432.81 as told to him by Mr. Brown. Mr. Skiles “invested” another $66,567.19 to round the number of his interest and investment to $200,000.

A Promissory Note made payable to Mr. Skiles and signed by Jack Brown in the amount of $200,000 was delivered to Mr. Skiles.

On behalf of his brother and sister, Mr. Skiles “invested” another $60,000 in separate investments.  On behalf of another individual, Mr. Skiles “invested” $2,504.23.

Trustee Farinash said in early 2011, Mr. Skiles' daughter viewed a program on television discussing Ponzi Schemes. She "became convinced that the Debtor was running a Ponzi Scheme and encouraged her father to withdraw all of his money from his investment with Mr. Brown."

The trustee said, "Mr. Skiles was initially reluctant but after continued prodding from his daughter, withdrew all monies with Mr. Brown. Even though he received his funds from the Debtor, Mr. Skiles continued to believe Mr. Brown was operating a legitimate investment business. It was not until late 2012 that Mr. Skiles came to grips with the fact the Debtor was operating a Ponzi Scheme."

The total interest paid to Mr. Skiles on the three investments was $163,883.54. The total investment returned to Mr. Skiles, individually, was $66,567.19.

The terms of the settlement are that Mr. Skiles will pay the trustee the sum of $197,167.13 in full and final settlement of any and all claims which the Trustee has against him. This amount represents the interest of $163,883.54 plus one half of the total investment returned to Mr. Skiles individually, the trustee said.

He added, "This settlement is fair, equitable and in the best interest of the Estate and its creditors in that it allows the Trustee to recover all of the interest paid to Mr. Skiles on his investment as well as one-half of the amount he actually invested. In the event the Trustee were to institute litigation against Mr. Skiles for the avoidance of the payment he received, it would be an all or nothing case.

"The repayment of one-half of the investment that he received is, in essence, a 50/50 compromise on the likelihood of success by either party. Mr. Skiles sought out the Trustee to negotiate this settlement. He voluntarily came forward to disclose" his part in the Brown investments.


A Memorial Day Reflection

I wish I could find that combination of words that would capture an inclusive meaning of Memorial Day.  I have attended many Memorial Day programs at the Chattanooga National Cemetery, so many that now they have merged into one memory.  But what stands out is that each year there are more friends and veterans to visit.  Some gave their all many years ago.  And ... (click for more)

Roy Exum: Keep Your ‘Dirty’ Feed

Mark Twain once observed the difference in a cat and a lie is that a cat only has nine lives. You might remember that when you hear that a group of Tennessee Walking Horse trainers just donated two tons of horse feed “to aid and assist in the rehabilitation” of 55 horses that were rescued from deplorable conditions at a West Tennessee farm. The truth is that the horses were taken ... (click for more)

Gilpin, Stocks Victorious In Chattanooga Chase 8K

John Gilpin has done plenty of training in North Chattanooga and is very familiar with the Chattanooga Chase and the series of hills the oldest race in Chattanooga is known for. Jennifer Stocks has done more than her share of workouts on those roads, so she was fully aware of the challenge she faced when the starting horn sounded. Both were overall winners in this unique 8K ... (click for more)

Golf and Chattanooga Have Lost Another Oehmig

  It was a classic Father’ Day golf picture. No, not Jack and Arnie and their kids relaxing at Augusta National with the Dogwoods blooming. But the Oehmig men – Lew, the family patriarch, with his youngest son, King, and his then two grade school age sons Henry and John, all crowded into, what else, a golf cart and donning that Oehmig glasses look – round, turtle shell-colored ... (click for more)