Riverside Info » About Riverside
Fiscal Emergency / Wextrust / Arcade Building
(172 posts)-
Posted Wednesday Aug 13, 2008 10:27 #
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The article neglects to mention that Mr. Mechanic's position (Part-Time Museum Director) is only funded through the end of this year. The upcoming budget meetings will determine whether the position is funded next year. Mr. Mechanic was hired to replace the previous director who resigned unexpectedly. His hiring is a neutral event/non-factor in regards to next year's budget and the ongoing discussions about the financial health of the Village and appropriate expenditures. As I have stated before in this forum, the Village is realizing tangible benefits and receiving real value from the meager budget of the Historical Commission and the Museum.
Posted Wednesday Aug 13, 2008 16:21 # -
Actually, discussion at a Board Meeting about whether the offer ought to be extended when the position was funded only through the end of the year. The decision was yes because the board was anticipating revenue from the tax increase. So, to my mind, it is in significant part a plan to spend money not in hand, i.e., deficit spending.
There is no doubt there is benefit to such things. The question is one of priorities. There are benefits to many things governments do not have the money for.
I noted your "love Riverside" comment. Everyone who loves Riverside ought to preserve it from bankruptcy, and make sure it has money for infrastructure, fire, police and trees before adding on. Everyone who loves Riverside does not have to agree with every expenditure the government makes, rampant McCarthyism notwithstanding.
Posted Wednesday Aug 13, 2008 22:28 # -
Go away for a week and miss all the fun! Pull up the Landmark and discover that - as I predicted so long ago - another permutation of the tunnel has surfaced right where I said they would put it - west of the train station - so it could "connect" the parking garage the TOD study called for on Pine (and of course the "200 condos as fast as you can build them" down Pine. Do I see they are talking about taking more green space on the south side of the tracks across from Guthrie Park for parking? I don't care if it is for "green" cars, bicycles or pogo sticks they should not take ANY green space for parking. PERIOD.
So who can tell me how the disaster happened with the Babson House lamp? What a rollicking start and a novel way to kickoff the new "museum" by trashing the most valuable item in it.
And now this:
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20678 / August 11, 2008
Securities and Exchange Commission v. Steven Byers, Joseph Shereshevsky (a/k/a Joseph Heller and "Josie"), Wextrust Capital, LLC, Wextrust Equity Partners, LLC, Wextrust Development Group, LLC, Wextrust Securities, LLC and Axela Hospitality, LLC, 08 Civ. 07104 (SWK) (S.D.N.Y.)
SEC Charges Defendants in $255 Million Ponzi-Type Scheme Involving Wextrust Capital, LLC and Other Wextrust Entities
The United States Securities and Exchange Commission today filed charges against Wextrust Capital, LLC (Wextrust), its principals, and four affiliated Wextrust entities, alleging that defendants conducted a massive Ponzi-type scheme from 2005 or earlier that raised approximately $255 million from approximately 1,200 investors. The targets of the fraudulent offerings are primarily members of the Orthodox Jewish community. Simultaneously with the filing of the action, the Commission is seeking emergency relief from the Court to freeze the defendants' assets and place the Wextrust entities under the control of a receiver to safeguard assets. The Commission is also seeking a temporary restraining order to stop the ongoing offerings and other immediate relief.
The Commission's complaint, filed in federal court in Manhattan, charges that Wextrust, its principals Steven Byers and Joseph Shereshevsky, and its affiliated entities Wextrust Equity Partners, LLC (WEP), Wextrust Development Group, LLC (WDG), Wextrust Securities, LLC (Wextrust Securities) and Axela Hospitality, LLC (Axela) conducted at least 60 securities offerings through private placements and created approximately 150 entities in the form of limited liability companies or similar vehicles to act as issuers or facilitators of the offerings, purportedly to fund the acquisition of specified assets, the majority of which were commercial real estate ventures. Contrary to representations in the offering memoranda that proceeds would be used for specific projects, the defendants allegedly diverted funds to pay returns to investors in prior offerings, or to fund expenses of the defendants.
In one offering, conducted in 2005, the SEC complaint alleges that defendants falsely represented to investors that the more than $9 million raised would be used to purchase seven specifically identified real estate properties that were leased by federal government agencies, such as the General Services Administration. In fact, according to the complaint, the defendants never purchased the seven properties. Moreover, at the time the offering occurred, they knew or were reckless in not knowing that the seven properties would not be acquired. Significantly, while the offering was ongoing, the Wextrust entities "borrowed" more than $6 million from the funds raised in the GSA offering and used these funds for purposes unrelated to the GSA offering.
Overall, the complaint alleges, defendants diverted at least $100 million dollars to unauthorized purposes. The complaint alleges that the defendants are conducting at least four ongoing offering frauds intended to raise money to pay back investors from prior offerings.
In addition to the emergency relief sought today, the Commission's complaint seeks disgorgement of the defendants' ill-gotten gains, civil penalties, and permanent injunctions barring future violations of the antifraud and other provisions of the federal securities laws.
The complaint names the following defendants.
Byers, age 46, is a resident of Oakbrook, Ill., and owns sixty percent of Wextrust. He is the Chairman of Wextrust and President and Chief Operating Officer of WEP, the arm of Wextrust focusing on income-producing properties, and is also an owner or controlling person of Wextrust Securities. Together with Shereshevsky and others not named in the complaint, Byers controls the Wextrust affiliated entities.
Shereshevsky, age 51, is a resident of Norfolk, Va., and owns twenty percent of Wextrust through a partnership interest held in the name of his wife. Shereshevsky was, until recently, Wextrust's Chief Operating Officer, was instrumental in founding Wextrust Securities, and was responsible for Wextrust's expansion into purported diamond mining investments in Africa. Shershevsky pled guilty to one felony count of bank fraud in June 2003, U.S. v. Shereshevsky, 94 Cr. 248 (CSH).
WexTrust, an Illinois limited liability company, was formed by Byers in 2003. According to the company's website, Wextrust is a globally diversified private equity and specialty finance company, specializing in investment opportunities ranging from real estate to specialty finance and investment banking. Wextrust is headquartered in Chicago and maintains offices in New York, N.Y., Norfolk, V., Atlanta, Ga., Boca Raton, Fla., Nashville, Tenn., Tel Aviv, Israel; and Johannesburg, South Africa.
WEP is an Illinois limited liability company headquartered in Chicago, engaged in the business of buying real estate assets, generally though its partially-owned subsidiaries. According to WEP documents, WEP is the beneficial owner of approximately 120 entities formed for the purpose of owning equity interests in commercial and multi-family real estate assets.
WDG is an Illinois limited liability company headquartered in Chicago, in the business of developing real estate assets.
Wextrust Securities is a broker-dealer registered with the Commission and a Virginia limited liability company headquartered in Norfolk, Va. It employs thirty-six registered representatives and maintains branch offices in New York, N.Y., Norfolk, Chicago, Southfield, Mich., and Ramat Gan, Israel. It was formed in March 2005, registered with the Commission in March 2006, and has been a licensed broker dealer since that time.
Axela is an affiliate of WexTrust Capital. Axela, through its LLC subsidiaries, owns and operates Wextrust's hotel properties, including the Axela Baltimore Hotel and the Park View Hotel in Chicago, and provides asset management services to other Wextrust affiliated LLCs, such as Crowne-Phoenix Investors LLC.
The Complaint alleges that defendants violated and are violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Wextrust Securities violated Sections 15(b)(1), 15(b)(7) and 15(c)(1) of the Exchange Act and Rules 10b-3, 15b1-1, 15b3-1 and 15b7-1 promulgated thereunder. Shereshevsky violated Section 15(a) or alternatively, aided and abetted, Wextrust Securities' violations of Sections 15(b)(1), 15(b)(7) and 15(c)(1) of the Exchange Act and Rules 10b-3, 15b1-1, 15b3-1 and 15b7-1 promulgated thereunder. Byers aided and abetted Wextrust Securities' violations of Sections 15(b)(1), 15(b)(7) and 15(c)(1) of the Exchange Act and Rules 10b-3, 15b1-1, 15b3-1 and 15b7-1.
The Commission acknowledges the assistance of the United States Attorney for the Southern District of New York and the Federal Bureau of Investigation in connection with this matter.
So who will be the next to fold? This is like "The Gang That Couldn't Shoot Straight." Anybody hear anything on the "restaurant space" in the VC? I was told by a leasing agent months ago that it was a "done deal" but when I slipped my order under the door I didn't get my pizza. I guess th timers that turn the lights in the unrented apartments on and off ate them all.
Posted Wednesday Aug 20, 2008 09:02 # -
I see that one of the defendents in the lawsuit, one of the principals who own the Arcade is Joseph Heller. Joesph Heller is also the author of Catch-22*.
*
http://en.wikipedia.org/wiki/Catch-22Among other things, Catch-22 is a general critique of bureaucratic operation and reasoning. Resulting from its specific use in the book, the phrase "Catch-22" is common idiomatic usage meaning "a no-win situation" or "a double bind" of any type
Life imitating art.
.
The talk of catch-22 reminds me of another item in the same paper, today's Suburban Life - the Udelson case.http://www.mysuburbanlife.com/riverside/news/x1806218445/Village-Board-denies-garage-variance
It seems that in this case, the village would get something that does not comply with village standards - and that would create a bad precedent (BAD) or it fights an apparently nice family, who recently adopted Riverside as a place to live and to raise their kids, in an expensive lawsuit that we all would have to pay (BAD).
Posted Wednesday Aug 20, 2008 13:14 # -
From the New York Times:
WexTrust Capital Accused of Fraud
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REPRINTS
SHAREBy DOW JONES
Published: August 11, 2008
The Securities and Exchange Commission charged WexTrust Capital and its affiliates with fraud on Monday, alleging that the company ran a Ponzi scheme that raised at least $255 million by targeting members of the Orthodox Jewish community.Related
S.E.C. announcement of charges in Wextrust case
The S.E.C. said WexTrust's principals, Steven Byers and Joseph Shereshevsky, deceived at least 1,196 investors since 2002. The defendants diverted at least $100 million to unauthorized purposes, according to the S.E.C.'s complaint.Mr. Shereshevsky, the agency said, is a convicted felon who pleaded guilty to bank fraud in 2003. He took the lead in soliciting investors through his wide-contacts in the Orthodox Jewish community, the S.E.C. said.
The S.E.C. asked for an emergency order to freeze the defendants' assets and place the WexTrust entities under the control of a receiver to safeguard assets.
—Affinity frauds are especially pernicious because the victims tend to let their guards down in circumstances where they might otherwise proceed with much more caution,— said Andrew M. Calamari, the S.E.C.'s associate director of enforcement.
The complaint said WexTrust entities conducted at least 60 securities offerings through private placements and created approximately 150 entities, ostensibly to fund commercial real estate ventures. Instead, the defendants allegedly diverted funds to pay returns to investors in prior offerings or to pay their own expenses.
Mr. Shereshevsky and Mr. Byers could not be reached for immediate comment.
I'll bet they can't be reached. So here we have 150 entities, 60 securities offerings and almost 1200 investors bamboozled. How many times do you think the poor little old Arcade building was touted as an "historic restoration project in a landmark village?" And how long do you think the law firms that act as receivers will drag this out to milk fees from the myriad lawsuits that will be filed by the investors? Guesstimates, anyone?
Posted Wednesday Aug 20, 2008 16:03 # -
Here's a bit more for you to ponder:
He Lost $100 Million
SEC Says Synagogue Members
Were Cheated in a Large 'Affinity Fraud' Case
By IANTHE JEANNE DUGAN
August 15, 2008; Page C1
Rabbi Chaim Silver of the B'nai Israel Congregation in Norfolk, Va., says members have called him often with a question about a congregant: "Can I trust Joseph Shereshevsky? I am planning to invest a lot of money with him."Joseph Shereshevsky (left) speaks to partner Steven Byers at an event in 2006.
The rabbi assured them: "He is the kindest, most generous, trustworthy man."Rabbi Silver and a number of Orthodox Jews were shocked by Monday's arrest of Mr. Shereshevsky and a business partner at WexTrust Capital, a Chicago-based private-equity firm. Federal prosecutors in New York charged them with raising more than $250 million through a Ponzi scheme -- mainly from Orthodox Jews. A spokesman for the firm declined to comment.
The Securities and Exchange Commission, in a civil lawsuit filed along with the criminal case, says that WexTrust diverted $100 million to run the company, cover personal expenses and pay off previous investors.
Andrew Sacks, an attorney for Mr. Shereshevsky, says the 52-year-old former chief operating officer at WexTrust had a "knack for raising money." But he didn't keep the company's books and "had no knowledge of any fraudulent activities."
Martin J. Siegel, a lawyer representing Mr. Shereshevsky in the fraud case, said: "When the evidence comes out it is going to be clear that Mr. Shereshevsky did not intentionally commit a crime."
Mr. Shereshevsky is being held without bail in Norfolk, where he lives. His business partner, Steven Byers, 46, of Oak Brook, Ill., was released on bail. Mr. Byers, who couldn't be reached to comment, was WexTrust's chief executive. Both men will be formally charged at a yet-to-be-scheduled hearing in New York.
Federal officials say WexTrust is one of the biggest "affinity" investment cases they have ever prosecuted. In these cases, firms raise money from people with similar backgrounds. Nearly 1,200 investors flocked to WexTrust, as word spread from Virginia to Chicago to the diamond dealers of Manhattan to Israel and South Africa. Much of the money came through Mr. Shereshevsky's deep ties to the Orthodox Jewish community, prosecutors allege.
Mr. Shereshevsky is the son of a prominent rabbi named Chaim Shereshevsky, who is now deceased. Investors say they were disarmed by Mr. Shereshevsky's faith, his endorsement by Rabbi Silver, and his reputation as a philanthropist. Mr. Shereshevsky supported medical research, schools, and made headlines by sending a private jet to Jamaica to rescue an Orthodox teen who said he was being abused at a reform school.
Using a network of mortgage brokers and salespeople, the firm also raised money from non-Jews. Tim Moore, a 39-year-old biomedical engineer in Virginia, borrowed against his home to invest $140,000 in WexTrust.
"I don't make much money, so I worked nights for six years to raise extra money," says Mr. Moore, who has a 3-year-old child. "Now I have to sell my dream house, or lose it, because I can't afford the payments."
WexTrust cobbled together about 60 "private placements" -- securities that aren't sold through public offerings, according to the SEC lawsuit filed against WexTrust on Monday, along with the criminal case by the U.S. attorney's office. Through these investments, the firm said it was buying real estate, diamond mines and other properties.
Mr. Moore's lawyer, John Russell Jr., says his client's money went into a WexTrust investment that purportedly functioned like a mutual fund, channeling money into dozens of projects.
Another investor said he was drawn by Mr. Shereshevsky's faith. This investor, a 75-year-old retired electronics entrepreneur in Ohio who invested hundreds of thousands of dollars, said he came across WexTrust shortly after the firm was formed in 2003. He heard from an acquaintance that the fund's returns were higher than the stock market.
In marketing material, WexTrust claimed it had underwritten more than $1 billion worth of deals since 1995.
One investor in Israel said he found out about WexTrust through an "eye-catching" ad in the Jewish Press, a weekly newspaper that caters to the Orthodox community. The ad, published in the Israeli edition, depicted a person sleeping soundly, with a message conveying that investors in WexTrust could rest assured their money was safe.
Mr. Shereshevsky got attention for philanthropy. In Westchester County, N.Y., he sponsored a golf tournament last summer to raise money for the International Jewish Bone Marrow Registry.
Last October, the principal of Norfolk's Maury High School canceled the band's appearance at a football game because he wanted to sell the 300 seats they would occupy. Mr. Shereshevsky bought the band's seats for the season.
In Norfolk, Mr. Shereshevsky and his wife bought a house near the B'nai Israel synagogue. According to Rabbi Silver, nearly half the congregation's 150 families live in that neighborhood. He had seven children and four grandchildren, and was known as kind and soft-spoken.
If someone from out of town was passing through and contacted the synagogue for a place to stay, the Shereshevskys opened their doors, Rabbi Silver says.
"He pays people's mortgages, pays to keep loved ones in a nursing home," Rabbi Silver says. "People trust him -- and you do business with people you trust."
Stanley and Nancy Peck, who also live in Norfolk, invested about $200,000 in a project Mr. Shereshevsky was managing. They had gotten to know him socially "when he began to mingle with the Jewish community of Norfolk," according to a federal lawsuit they filed last November.
Mr. Shereshevsky married their niece Elka and began calling them Uncle Stanley and Aunt Nancy. But when the couple decided to invest about $200,000 in a project he was managing, it turned out to be a "disastrous failure," the suit claims. He wasn't named as a defendant in the case.
The SEC alleges that WexTrust funneled money from investors into its operations, personal expenses of Messrs. Shereshevsky and Byers and to pay off previous investors. In 2005, the company raised more than $9 million to buy seven properties that were leased by federal government agencies. But the properties were never purchased, the SEC claims.
Similar patterns emerged in deals raised for diamond mines, hotels and other properties, the SEC says. As of December 2007, WexTrust had borrowed at least $74 million from its private placements. "We are in debt and I am working diligently to get us out of it," Mr. Shereshevsky wrote to a partner.
He added that every month, the company was spending $1 million more than it earned.
"We are on the verge of becoming a very strong company," he wrote. "We have to maneuver and do things that maybe we would not do if we were cash rich."
Comments: What lawyer will want to deal with a building with one tenant - Grumpy's - when a water pipe breaks or he needs more heat? The attornies for all parties will be milking legal fees out of this fiasco for a long, long time. But of course our Village Manager will be able to straighten this all out. Well good luck to her.
Posted Wednesday Aug 20, 2008 21:37 # -
More...
Source: The Virginian-Pilot)By Tom Shean, The Virginian-Pilot, Norfolk, Va.
Aug. 16--NORFOLK -- The majority of the bank accounts held by WexTrust Capital and its owners, which have been accused of securities fraud, are at a Wachovia Bank branch in Virginia Beach, according to court documents.A court order appointing a receiver for the Chicago-based investment firm and its affiliates listed 127 bank accounts at 21 banks, including 68 at the Wachovia branch on Independence Boulevard near Town Center.
The accounts include three at banks in Israel and three at banks in South Africa, according to the list.
The access that WexTrust co-owner Joseph Shereshevsky had to overseas funds became an issue at his bond hearing Wednesday in Norfolk's U.S. District Court. Citing the risk that Shereshevsky might flee the country, Magistrate Tommy Miller ordered
the Norfolk resident to remain in government custody.
Shereshevsky, WexTrust's former chief operating officer, was arrested Monday on charges of securities fraud related to the unauthorized diversion of investors' funds. A date for his arraignment in federal court in Manhattan, where the charges were filed, has not been set.
The Securities and Exchange Commission alleged Monday that Shereshevsky and WexTrust chairman Steven Byers of Oak Brook, Ill., bilked investors by means of a Ponzi scheme, using funds provided by recent investors to pay earlier investors in WexTrust's investments. In addition, the two co-owners wrongly used investors' funds for personal expenses, the SEC said.
In its complaint against the defendants, the SEC said that WexTrust raised $255 million from almost 1,200 investors. Shereshevsky, it said, brought in significant amounts of money by using his close ties to the Orthodox Jewish community, including the one in Hampton Roads.
The receiver, appointed Monday at the SEC's request, took control of the WexTrust Capital and WexTrust Securities offices in the Dominion Tower in downtown Norfolk. The office building's management firm, Harbor Group Management Co., has restricted access to the entire 22nd floor, where the WexTrust offices are.
The order appointing a receiver provided a detailed inventory of assets held by WexTrust, its affiliates and their owners. The lists included 98 investment entities, a Falcon 20 company plane and homes that Shereshevsky and Byers own. When it named a receiver, the U.S. District Court in Manhattan also froze the defendants' assets.
On a Web site that his office has created, receiver Timothy Coleman said that attorneys and others working under his direction secured WexTrust's offices, interviewed the firm's employees and analyzed business records.
At this time, it isn't necessary for investors to file a claim to protect their assets, Coleman said in a letter posted on the Web site. However, investors should hold onto evidence of their investments, including correspondence, e-mail, marketing materials, evidence of payments, notes and other documents, he said.
Coleman, who is with the New York-based law firm Dewey & LeBoeuf, said investors can contact his office by means of a toll-free line, (888) 518-2410, or by e-mail at wextrustreceiver@dl.com.
The receiver's Web site is www.wextrustreceiver.com.
Posted Wednesday Aug 20, 2008 21:54 # -
And the beat goes on...
McClatchy-Tribune Information Services
The owners of a Chicago-based real estate investment firm were arrested Monday on federal fraud charges, and U.S. regulators accused them of conducting a quarter-billion-dollar Ponzi scheme going back as far as 2005.
Steven Byers, 46, chief executive of WexTrust Capital LLC and an Oak Brook resident, and Joseph Shereshevsky, 51, a principal of WexTrust, were taken into custody and charged with conspiracy to commit securities fraud, the Justice Department said.
Simultaneously, the Securities and Exchange Commission alleged in a lawsuit that the two men had raised $255 million from about 1,200 people, many of them Orthodox Jews, and misappropriated the money.
The SEC also won an order Monday freezing the company's assets.
Byers, Shereshevsky and their lawyers could not be reached for comment. WexTrust is headquartered at 333 W. Wacker Drive.
"Our complaint alleges an affinity fraud of very large scale," said Andrew Calamari, associate director of enforcement for the SEC. "In this case, one of the defendants used his extensive connections in the Orthodox Jewish community to solicit more than $250 million from unsuspecting investors."
In affinity fraud, scammers target individuals with a common interest or belief, which may include a religious affiliation, to exploit their trust to obtain money.
That person in this case, according to court documents, was Shereshevsky, a resident of Norfolk, Va. Shereshevsky pleaded guilty to conspiracy to commit bank fraud in 1994, a fact not disclosed to investors he solicited, according to court papers.
Shereshevsky allegedly used the names Joseph Heller, Josie and Yossi.
WexTrust owns at least 120 entities formed to acquire real-estate interests, and it has conducted at least 60 private placements since 2005, according to the SEC. Byers owns 60 percent of WexTrust, and Shereshevsky owns 20 percent, the SEC said.
Prosecutors with the Southern District of New York, where many of the victims reside, allege the suspects raised money in private placements for real estate investments. In one deal they solicited investors to buy seven commercial buildings leased to the U.S. General Services Administration.
An FBI agent said in court filings that he interviewed the owners of the buildings. None of them had ever heard of WexTrust, Byers or Shereshevsky, according to the FBI.
A confidential informant within WexTrust told federal investigators that when the investors became suspicious, Byers told him to "blame it on the lawyer, blame it on something."
On another occasion, the informant said, he was instructed by Byers on how to deal with inquisitive investors: "When people call you ... all you have got to say is ... 'look, I wasn't there, I wasn't part of it, I don't know for sure.' "
According to court filings, the two suspects were raising money from new investors to pay a return to earlier investors. This is known as a Ponzi scheme, which typically collapses when not enough money can be found to satisfy obligations to investors.
In one instance, federal prosecutors said, Byers and Shereshevsky raised millions of dollars to buy a hotel in Phoenix, diverting much of the money to fund WexTrust.
WexTrust also was involved with diamond mines in South Africa and Namibia, according to SEC documents.
Shereshevsky and Byers were allegedly counting on the mines to yield money to satisfy investors, although how is not explained by the SEC.
On June 24 Byers sent the confidential informant an e-mail saying "under the worst [expletive] case scenario, I got to get enough money out of the diamond mine to pay" investors, according to documents.
If convicted, Byers and Shereshevsky face a maximum of five years in prison.
Posted Wednesday Aug 20, 2008 21:57 # -
Anyone care for some puff pastry?
About WexTrust Capital
WexTrust Capital is a globally diversified private equity and specialty finance company with a proven track record for protecting its clients' assets and delivering a superior return-on-investment through its diverse portfolio of principal investments. WexTrust Capital specializes in unique investment opportunities ranging from real estate to specialty finance and investment banking. Headquartered in Chicago, the company also maintains offices in New York; Norfolk, Va.; Atlanta; Boca Raton, Fla.; Nashville, Tenn.; Tel Aviv, Israel; and Johannesburg, South Africa. More information can be found at www.wextrust.com .
Posted Wednesday Aug 20, 2008 22:01 #
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