Illustrative Cases

Jul 01, 2013

OUTCOME: Award, Judgments, Recovery, Settlements

Avens v. Wealth Management Resources I represent a group of twenty investors to recover the money they invested through Phillip Trujillo, a Ft. Collins investment adviser, and also through a bank, ... trustee for a number of IRA accounts of our clients, who helped him with raising money. I won a settlement from a bank even though going in I believed the case against it was a fifty-fifty proposition I prevailed against a dream team of Colorado Super Lawyers by building the case carefully from the beginning, working with regulators and organizing the group of investors so the whole case was greater than the individual parts. Trujillo had a business selling membership interests in LLC’s styled as hedge funds, and worthless promissory notes in the hedge fund manager, his firm. Trujillo sold to the elderly, people he knew from church, and people who were referred by paid shills –including at least one tax accountants, real estate agent and chiropractor. Whenever he thought it might be effective, Trujillo was unstinting in his use of Jesus or God as part of the sales pitch for his Biblical investment platforms and strategies. One particular bank acted as IRA trustee if folks wanted to purchase the hedge fund in an IRA. It was a tie-in arrangement with the adviser. The bank had an important role in the scheme. It executed the subscription paperwork, accepted the investors money, paid the money to the hedge fund, held the certificate or promissory note, issued account statements to investors and issued checks to the investors from purported profits. The bank provided the adviser with an accounting of the investors subscriptions and the payables for each hedge fund. By the time I had the case, Trujillo was out of business. It was upsetting to investors when their calls went unanswered. He was already telling disaffected investors that the Lord had a plan to return their money. Our best recourse was against the bank, the only deep pocket. At that time Bernie Madoff’s victims were consistently losing against IRA trustees in federal court. The clients were able to obtain some early return and leverage expense money by settling with the peripheral defendants – an attorney, accountant and others. The effort became somewhat daunting when the mediator, a former district judge, told our clients there was no case against the bank. I did not believe him and redoubled my efforts. There were many attempts to derail the case — defendants’ bankruptcy filings, motions to dismiss, attempts to force arbitration and more. The defendants sent clear signals that they were “guilty as charged.” Not content with the usual attempts to obstruct our discovery, the adviser’s computer systems, computer storage and records somehow disappeared, and a sales representative pled the fifth amendment at his deposition. We never lost ground even when we had to wait out the adviser’s criminal conviction (he was sentenced to 16 years). I shared our documents with the SEC. The SEC shared important evidence filed in its case, a big help. I secured the assistance of former employees and associates of the adviser. I hired a top shelf expert – the former Colorado Securities Commissioner. An energetic prosecution resulted in a persuasive case. We were ready to show that the bank knew Trujillo was selling a Ponzi scheme and continued helping him by concealing the scheme. We were prepared to demonstrate that the bank sent false account statements. A trust officer completed and signed subscription agreements and transferred money to Wealth Management without the knowledge of investors or making risk disclosure. We were ready to prove that the bank violated banking rules, bank policies, and its IRA account agreements in mishandling investor funds. We were prepared to show that the bank helped the adviser bring in investors knowing he was under investigation and despite a federal court injunction that should have prevented further sales. We just kept grinding away, Eventually our clients obtained the remaining insurance of the bank.