Bilked Funds allegedly tracked to Bahamian Trust
An estimated$6 million trust now believed to be in The Bahamas with Michael Paton as trustee is being chased by New Jersey’s attorney general’s office to recoup funds fraudulently taken from investors.
New Jersey’s Deputy Attorney General Anna Lascurain, in a Trenton New Jersey federal bankruptcy court Monday, told U.S. Bankruptcy Judge Kathryn C. Ferguson that Cardinal Trust, belonging to Robert E. Brennan and his family, was in The Bahamas and that prominent Bahamian lawyer Michael Paton, the trustee, had participated in a Ponzi scheme with the trust’s funds. According to Lascurain the trust was originally thought to be domiciled in Nevis, a British West Indies territory.
“In fact the trust was never[in Nevis]. It was in The Bahamas, which no one was aware of,”a New Jersey publication reported Lascurian said.
Information provided by Eric Resteiner, a jailed financier accused of running the Ponzi scheme in which some or part of the trust funds are alleged to have been invested, implicated Brennan’s Bahamian law firm in a 2008 affidavit. Lascurain interviewed him in a federal prison in Texas.
According to the affidavit, Resteiner indicated that his Bahamian lawyers approached him about moving some of Brennan’s money to him. According to the affidavit, Lennox Paton, another partner at the firm, told Resteiner that Michael Paton was”hiding money for Bob.”
Resteiner is serving time on mail fraud and wire fraud convictions after a 2006 guilty plea to operating a$47 million Ponzi scheme.
Brennan, convicted of bankruptcy, fraud and money laundering, was released from prison on January 7 at age 66, after serving nine years for the convictions. According to reports, he is cooperating with investigators on the repatriation of the funds in the trust to New Jersey. The state is seeking the funds to repay investors in companies Brennan operated including Hibbard Brown&Co., L.C. Wegard, and First Jersey Securities Inc. A$45 million-plus interest settlement was awarded to New Jersey to partially compensate investors in two of the companies.
U.S officials, however, are considering the best way to pursue the return of those funds, as Ferguson said there was a fundamental question of jurisdiction which had to be resolved before the federal bankruptcy case could be reopened. If New Jersey has to retain lawyers in The Bahamas, it would increase the difficulty and cost associated with recovering the trust, according to Lascurain. A hearing on the matter is scheduled for March 8, and Ferguson has requested supporting briefs from Lascurain on that matter of jurisdiction to reopen the bankruptcy case.