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Management resigns from US firm accused of US$1.2b Ponzi scheme
[WILMINGTON, Delaware] An independent management team resigned from the Woodbridge Group of Companies on Friday after the US Securities and Exchange Commission sought a court-appointed trustee to run the property firm that the regulator called a US$1.2 billion Ponzi fraud.
The team included Marc Beilinson as independent manager and Lawrence Perkins of SierraConstellation Partners LLC as chief restructuring officer, Woodbridge said in a statement. Mr Perkins will remain until the company hires a chief executive with homebuilding experience, it added.
The moves came hours after the conclusion of three days of hearings in Wilmington during which the SEC and the official committee of unsecured creditors pushed to replace the pair with an independent trustee.
The judge overseeing the case, Kevin Carey, scheduled closing arguments for Tuesday.
Mr Beilinson and Mr Perkins had taken over from company founder Robert Shapiro, who resigned as president, manager and CEO on Dec 1.
Mr Beilinson said in a statement he was departing after installing three members on the board of managers, who each joined on Wednesday: former US bankruptcy judges Robert Gerber and James Peck, and retired Latham & Watkins bankruptcy attorney Jan Baker.
Mr Perkins said in a statement he would continue to support the new board and work closely with creditors, vendors and employees.
Sherman Oaks, California-based Woodbridge filed for bankruptcy in December and was sued by the SEC to freeze its assets, accusing it of selling unregistered securities to raise funds to repay earlier investors.
Shapiro has denied the allegations. Perkins had testified last week he was investigating the SEC's claims.
The regulator accused the company of defrauding 8,400 investors, many of whom had invested their retirement savings.
The company told investors it was raising funds for luxury real estate and to extend loans to commercial property developers.
The SEC alleges the commercial property developers were actually entities controlled by Shapiro.
During the hearings that ended on Friday, attorneys for the SEC and the committee had pressed Perkins about agreements he struck potentially worth millions of dollars for Shapiro.
Perkins had testified that the agreements ensured Shapiro contributed properties to the company's bankruptcy estate and obtained his cooperation in finishing developments.
The SEC has said Shapiro misappropriated at least US$21 million in company funds for luxury goods. He was also accused of improperly commingling investor funds, using US$328 million to repay earlier investors and spending nearly US$300 million on commissions and operating expenses.