How one firm's claims could hurt Rick Siskey's Ponzi victims

The trustee unraveling the Rick Siskey Ponzi scheme said in bankruptcy court filings this week that there won’t be enough money for investors if claims filed by a firm once affiliated with Siskey are allowed.

Siskey, 58, took his own life in December 2016, shortly after public filings alleged he was involved in fraud, costing investors millions. For more than a year, trustee Joe Grier and his team have been working to gather money to return to victims but so far no payments have been made.

Grier has previously objected to about $27 million in claims by Stone Street Partners — a private equity firm and consulting firm once known as Siskey Capital — and two of its employees. But the firm is pressing forward with additional legal maneuvers, leading to objections this week from Grier and the U.S. Securities and Exchange Commission.

In court documents, Grier said there won't be enough assets available to "satisfy all claims in full if the Stone Street claims are allowed," noting the firm's claims are equal to about 40 percent of the total claims in the case.

If the Stone Street claims aren't allowed, then "making distributions totaling one hundred percent of the base claims in this case is a reasonable possibility," Grier said in an affidavit. The trustee is using a method to determine claims that excludes promised interest and money that investors already got back from Siskey.

The main asset in the case is nearly $50 million in life insurance proceeds paid out to Siskey's widow, Diane, following her husband's death. Grier has been negotiating a possible settlement with Diane Siskey but no agreement has been reached.

In a filing this week, the SEC, which is keeping tabs on the case, said the Stone Street claims are "further complicating the trustee's ability to negotiate a final settlement."

The filings by Grier and the SEC are the latest sign of tension over Stone Street's role in the case. The bankruptcy court judge overseeing the case last month rejected an interim settlement with Diane Siskey after objections by Stone Street Partners and others.

In addition to its bankruptcy court claims, Stone Street Partners and two of its employees, Dawn King and Paul Porter, filed a lawsuit in August that alleges Diane Siskey “actively participated” in her husband’s Ponzi scheme. The complaint, now in North Carolina Business Court, also accuses insurance giant MetLife, which was once affiliated with Rick Siskey's financial services firm, of turning a blind eye to his activities.

The suit says Stone Street and its employees knew nothing about Siskey's illegal activities but have seen their business and their careers devastated after the Ponzi scheme became public. Diane Siskey's lawyers have denied any wrongdoing and emphasized her cooperation with authorities.

In its latest legal action, Stone Street has asked the bankruptcy court to lift a stay that would allow it to pursue claims in state court against former Siskey companies that have been pushed into bankruptcy. A hearing is scheduled on the motion Monday.

Grier and the SEC are opposed to the motion, saying it will delay the bankruptcy case and increase costs. The trustee estimates that it will cost between $50,000 and $100,000 to litigate the Stone Street claims in bankruptcy court versus $150,000 to $300,000 in state court.

Grier previously objected to Stone Street's bankruptcy claims because the firm and its employees weren't actual investors with Siskey. Jim Smith, an attorney representing Stone Street Partners, said he believes his motion "is supported by good cause and the applicable law."

This story was originally published April 6, 2018 at 9:37 AM with the headline "How one firm's claims could hurt Rick Siskey's Ponzi victims."