Investors who lost money in a series of Ponzi schemes allegedly operated by the late Charlotte businessman Rick Siskey will have to wait longer to find out how much money they will get back.
A federal bankruptcy court judge on Monday said the case before him was about as “complex as you can imagine,” noting it has pieces proceeding through bankruptcy and state dockets. The court still needs to figure out what claims investors are owed, as well as what assets will be available to pass along to them.
“I’m sure you would all like to know when a distribution will be made,” Judge Craig Whitley told attorneys and investors who packed a hearing in Charlotte on the case. “We don’t know.”
Siskey, 58, took his own life in December 2016, days after court filings gave the first public indication that he was under investigation for fraud. An FBI affidavit unsealed weeks later alleged Siskey – who long sold insurance and other financial products to Charlotte clients – was operating a Ponzi scheme for years, costing investors millions.
Siskey’s records showed that investors were owed around $51 million, including interest. But a Nov. 1 report by a court-appointed bankruptcy trustee indicated investors could receive much less, if promised interest and other gains are excluded. For example, investors in one fund submitted claims of $29.6 million, but the trustee said they might only get $17.5 million back.
At Monday’s hearing, attorney Anna Gorman, who works with trustee Joe Grier, said an examination of records showed that Siskey operated three entities – TSI Holdings, WSC Holdings and SouthPark Partners – as a Ponzi scheme, while another entity, Sharon Road Properties, appears to have been handled as a legitimate real estate investment. In total, investors have submitted 265 claims to the trustee.
The next step in the case will be a hearing on Jan. 24 to debate the legal theory being used by the trustee – a formula that says investors should initially receive the amount they paid Siskey minus what they received back over time. Any promised interest or gains would only be distributed if there is enough money available.
Following that hearing, individual objections to recommendations made by the trustee will be heard starting Feb. 5. The trustee will also send out a notice giving investors more time to object to the handling of their claims.
At Monday’s hearing, attorney Keith Johnson, who is representing one of the victims, questioned a decision by the trustee to include more than $500,000 in claims from investors who put money into one of Siskey’s earlier investments. Gorman noted that any distributions, in the end, will come from the same pie. The trustee’s goal is a “global settlement” that takes into account all claims and potential assets, she said.
The money potentially available to investors includes life insurance money paid out to Rick Siskey’s widow, Diane, as well as proceeds from an estate and wine auction.
Diane Siskey has indicated she plans to turn over $37.5 million of the $47 million she has received from her husband’s MetLife policies “subject to reaching a mutually acceptable agreement,” the trustee report says. Life insurance typically pays out in suicides if the death occurs two years after the policy is taken out.
In filings, some investors have questioned whether all of the insurance money should be available to investors because their investments may have helped pay for the premiums.
It’s difficult to estimate how much Siskey paid in premiums because it’s unclear what kind of policies he had and when he took them out. He also had an association with MetLife so he could have benefited from the commissions.
But an insurance broker who is not involved in the case told the Observer that $1 million in insurance for a male nonsmoker in his mid-50s could range from about $1,500 per year for 10-year term life insurance to about $36,000 per year for permanent life insurance that provides lifelong protection and the accumulation of a cash value.
Among the claimants objecting to the trustee’s recommendations is a firm called Stone Street Partners and two of its employees, Dawn King and Paul Porter. The private equity firm, once known as Siskey Capital, has said its former association with Siskey has destroyed the business and sullied the reputations of those associated with the company.
In bankruptcy court, Stone Street Partners, along with Porter and King, submitted claims of about $26.4 million, but the trustee recommended against those claims because they didn’t involve investments in Siskey’s funds. Stone Street has said its employees had no knowledge of Siskey’s activities.
Stone Street and the employees filed a lawsuit in August in Mecklenburg County Superior Court against Siskey’s estate and his widow, as well as insurance giant MetLife, which was affiliated with a Siskey firm called Wall Street Capitol. That complaint alleged Diane Siskey was involved in her husband’s activities and said MetLife had turned a “blind eye” to his schemes. An attorney for Diane Siskey has adamantly denied she had any role in her husband’s activities, while MetLife has declined to comment.
That case has since been moved to North Carolina Business Court, where both Diane Siskey and MetLife have filed motions seeking to have the suit dismissed. At Monday’s hearing, Whitley said the bankruptcy court will wait for now to see how to address Stone Street’s claims, giving the North Carolina Business court case time to proceed.