More than 100 credit unions victimized in the massive Ponzi scheme known as Bentley Financial Services are expected to get an additional payment on their principal investments over the next 60 days.
Frank Mayer, a Philadelphia attorney appointed receiver for the now-defunct CD brokerage, said he will request permission from the federal court to make a $60-million payment to the 220 or so financial institutions that had invested with the rogue broker-dealer. "We are close to filing a motion with the court asking approval to make an additional distribution," said Mayer.
The payout, if approved by the court, the U.S. Justice Department and the Internal Revenue Service, will make a total of $280 million, or 75%, of the $370 million in total investments repaid to the credit union and bank investors in the company, Mayer said. Plans call for the payments to be mailed to investors around the end of October, he said.
Bentley Financial, which grew to be a popular investment source for credit unions, was shut down two years ago by federal regulators who found the investment scheme to be a massive fraud. The company had been selling phony certificates it claimed to be federally insured bank CDs. The scheme was supported by funds gathered form later investors used to pay off early investors, making their investments appear to be legitimate-a classic Ponzi scheme.
Since then, the Securities and Exchange Commission has brought civil actions against five Bentley figures, including its founder and principal owner, Robert Bentley, and four salesmen. The SEC has also secured financial settlements with those figures, obtaining less than $2 million from Robert Bentley, and much smaller amounts from the others, to help pay off victims of the fraud.
Those figures are also the target of a criminal investigation which is expected to culminate in indictments brought against Bentley and several others in the coming weeks, sources told The Credit Union Journal. Justice Department officials refused to comment last week.
"We're not allowed to speak about any criminal investigation, not even to confirm one exists," said Mary Crawley, assistant U.S. Attorney for the Eastern District of Pennsylvania.
The receivership set up by the SEC to repay investors has gathered $370 million in claims and $330 million in assets, making it the largest receivership ever organized by the SEC.
Claimants are expected to receive about 85% of the principal of their claims, according to Mayer. That means credit unions, which made up the majority of the Bentley investors, will lose more than $50 million in principal and interest in the fraud, marking it as the largest investment-related loss ever for credit unions.