Efforts to clean up what the Securities and Exchange Commission alleged was an $8.6 million Ponzi scheme perpetrated by Indianapolis-based Veros Partners Inc. are entering their final stages, with all but one defendant having reached a settlement and the company’s receiver preparing to make his first distribution to affected investors.
The SEC in April 2015 sued accounting firm Veros Partners Inc., company President Matthew Haab and two business associates, charging they relied on infusions from new investors to pay off older ones after the performance of a $15 million fund that made loans to farmers began to sour.
Since then, Veros’ receiver, William E. Wendling Jr., an attorney with Indianapolis-based Cohen Garelick & Glazier, said he’s recovered about $3.5 million from farmers who had borrowed from that fund, with another $3.1 million in the pipeline. He said he plans to make a $3 million disbursement in the next several weeks, and that the case will wind up soon.
Excluding settlement money, investors in the case are set to recoup about $6.6 million—roughly 75 percent of what they were owed when the case started.
“We’re about done,” Wendling said. “And I know the investors are pretty glad about that.”
So far, Veros, Haab and business partner Jeffrey B. Risinger of Fishers have agreed to settlements without admitting or denying the allegations. Last month, the court ordered Risinger to pay $100,000, Haab to pay just under $184,000, and Veros to pay $983,000.
Another business partner, Tobin J. Senefeld of Indianapolis, has a settlement hearing scheduled for Oct. 28. His attorney didn’t reply to requests for comment.
Risinger has paid his settlement and has cooperated with the SEC and receiver “in good faith,” said his attorney, Ron Elberger.
“In my opinion, the resolution of this contested case is reasonable and fair,” he said.
Meanwhile, Richard Kiefer, a Bingham Greenbaum Doll attorney representing Haab and Veros, said he expects Veros to pay its settlement soon from “certain bank account assets” that were frozen when the case began. Haab is scheduled to pay his settlement in three installments.
Kiefer said Haab, whose background is in accounting, will continue to perform services in that industry but does not intend to manage any more investment funds.
“I think Matt [Haab] always wanted to make sure that investors not only got their money back, but that they got a good return,” Kiefer said. “So I know that he is personally very upset that any investor would lose any money.”
Tim Warren, the SEC’s associate regional director of enforcement, acknowledged the case is nearing conclusion. He noted that “funds collected from the defendants will go to the receiver to disperse to the defrauded investors.”
Investors are faring far better than they typically do in Ponzi scheme cases, and the resolution has been far speedier than usual, industry observers said.
“Even if the investors end up with something north of 50 percent, which it looks like they probably will, that is a relatively great result for them,” former Indiana Securities Commissioner Mark Maddox said. He said the case appears on track to wrap up in two years, “while some of these things you can see drag on for three, five, seven or eight years in the worst-case scenarios.”
Wendling said he’s employed a variety of tools to recover funds, including seizing borrower collateral and filing lawsuits.
The money in the pipeline includes a settlement of approximately $2.5 million with RJW Williams Farms in Illinois, a large borrower from the loan fund.
Wendling said he decided against pursuing some borrowers who defaulted but clearly lack the means to pay.
“We’ve investigated pursuing individuals that owe the money, but it’s very apparent that they don’t have the money to collect and there’s no assets to attach,” he said. “So it would just be a waste of investors’ money.”
Federal Judge Jane Magnus-Stinson appointed Wendling in May 2015 to investigate the Ponzi scheme allegations but later broadened his authority to include assessing the soundness of another division of Veros. That unit oversaw about two dozen private placements, which involve the sale of securities to select investors as a way of raising capital.
Wendling said that of the roughly $40 million in loans made from those private placements, about $8 million worth are considered “bad investments.”
Some of those private placements have been transferred directly to investors as Wendling winds down Veros’ operations. But he said “there’s still some loose ends that we’re trying to get tied up.”•