Friday, October 2, 2009

Steadivest scrum update

  • Synopsis
  • Travelstead Motion to Dismiss
  • McCraney Notice to Remove
  • Exhibits

Well, the Steadivest scrum is heating up as two of the defendants in the lawsuit have filed motions in court. The lawsuit claimed Steadivest and other defendants defrauded investors for millions of dollars in a sale of phony promissory notes. Defendant and Attorney Patrick McCraney, Jr. filed a motion to remove the lawsuit to federal court, claiming it belonged in the bankruptcy action. Fellow defendant Joel Travelstead filed a Motion to Dismiss and claimed he lost $200,000 to fellow defendant Marshall Wolfe. As this case has grown pretty complex, I've written a synopsis so that this case is easier for readers to follow.

Synopsis:
Steadivest is a "Family of companies" according to a letter written by its managing member, W. Marshall Wolfe. The family consists of Steadivest Capital, Steadivest Development, Steadivest Lending, Steadivest Properties, Steadivest Resources, and the Steadivest Contrarian Fund (Hereafter the "family" will be referred to as Steadivest.). It dabbled in mortgage lending, new construction, buying and selling real estate, renovating and flipping properties, and managing real estate portfolios for investors. It sold promissory notes to investors as well. Earlier post

Several individuals were connected with most of these companies: Marshall Wolfe, Patrick McCraney, Jr., and Jack Harrington. Patrick McRaney is listed as the registered agent for Steadivest Capital, LLC (formerly TFS, Tactical Financial Solutions) and the officer of the the Steadivest Contrarian Fund. Jack Harrington is listed as the member/officer of Steadivest Capital, Steadivest Resources, LLC and Steadivest, LLC. Marshall Wolfe is listed as the member/officer/director of Steadivest Capital, LLC, Steadivest Properties, the registered agent of Steadivest Development, LLC, and the officer of Steadivest Lending (now defunct). These individuals also were listed according to an SEC filing as the executive officers for a fund called the Investlinc/TFS Income Fund. Lee Paris was listed as a promoter of the fund and the majority owner was another company owned and operated by Wolfe. It should be pointed out this was a fund and not Investlinc Securities that is also owned by Mr. Paris.

Several investors sought a temporary restraining order against Steadivest in March. TRO post with copy of petition. Several days later Steadivest filed Chapter 11 bankruptcy, thus quashing the TRO request. The investors then filed a motion in bankruptcy court as creditors asking the Court to convert the Chapter 11 filing to a Chapter 7, alleging Wolfe was only filing bankruptcy for one company (where all the debts were placed) while operating his other companies. The Court agreed and converted the 11 to a 7 and all Steadivest companies were placed under the same filing.

The investors then filed a lawsuit in Rankin County Circuit Court claiming Wolfe, Harrington, McCraney, Investlinc/TFS Income Fund, Steadivest, Justin Adcock, and former partner Joel Travelstead committed fraud and operated a Ponzi scheme with their money. Earlier post, includes copy of lawsuit. Investlinc recently filed a Motion to Dismiss and claimed Wolfe was never an employee or officer of Investlinc and that he "fleeced" Investlinc as well. Investlinc claimed "As he did with the Steadivest Companies, Wolfe deceived, betrayed, and victimized the Investlinc Fund and its investors." Post on Motion to Dismiss filed by Investlinc. Several of the investors were close to Wolfe: his next-door neighbors, childhood friends, members of his church, and members of his wife's family.

It should also be pointed out Bancorp South fired Wolfe for selling unregistered securities (promissory notes) to his Bancorp South clients for a company he was operating "on the side" in 2004. The bank then reported his actions to the Securities Division of the Secretary of State. The State fined him $10,000 and suspended his license for one year. The State also fined MTW, the "side company" $10,000, of which Travelstead was a part-owner and cited Travelstead as an active participant in the violation. Post on discplinary actions. Travelstead ceased his association with the Wolfe/Steadivest companies in 2007 and now claims he was victimized by Wolfe as well.

Jackson Jambalaya also examined the deeds for dozens of properties owned by Steadivest in Hinds and Madison counties. The deeds of trust for many of them were suspicious in nature as they showed liens placed on them by Investlinc/TFS Income Fund only a few weeks before Steadivest filed its bankruptcy petition. JJ also discovered a warranty deed for a property in the Reunion subdivision in Madison County that was transferred from Steadivest to Jack Harrington, a member of Steadivest Capital. Post on possible shell games

Travelstead's Motion to Dismiss
Joel Travelstead filed a Motion to Dismiss on September 28, 2009 in Rankin County Circuit Court in response to the lawsuit filed against him by the Steadivest investors. The Motion states Travelstead severed all ties with these companies in 2007 and the Plaintiffs make no specific allegation of fraud or misrepresentation against him and that the action against him is vague. He claims he lost $200,000 after he left the company and has the same rights as they to recovery.
Copy of Motion to Dismiss

McCraney's Motion to Remove
McCraney filed in U.S. District Court in Jackson a Notice of Removal on September 30, 2009. The Notice argues all claims made by Plaintiffs are subject to binding arbitration agreements they allegedly signed. McCraney then argues the subject of the lawsuit is a matter for the Bankruptcy Court and the Court should determine if the Bankruptcy Court is the "appropriate forum". It should be noted McCraney listed Cynthia Speetjeens as counsel along with Judson Lee. Such an association requires no further comment. Copy of Motion to Remove

The pattern thus becomes more clear: several defendants are filing motions to dismiss and all claiming Wolfe victimized them as well. Translation: Everyone is throwing Wolfe under the bus. Wolfe's home is still for sale and its listing price was reduced from $879,900 to $749,000. It was first listed last fall for over a million dollars.

Exhibits
Several commentors accused this blog of favoring one side of the lawsuit by not including all of the exhibits filed by the Plaintiffs. Several have been posted already, here are the rest.
Exhibit 1 : A document prepared by Tactical Financial Solution (TFS). TFS later was renamed as Steadivest Capital and Jack Harrington and Marshall Wolfe were listed as members, McCraney as registered agent. The exhibit is 80 pages. Page 15 gives the bios of the management team.
Exhibit 2 : another document given to investors and prospects. It is 56 pages.
Exhibit 3 : more agreements, proformas, and information for investors

15 comments:

Anonymous said...

Kingfish, please continue to keep us updated on this. Thanks for all of the great work.

Anonymous said...

Incredible work, KF.

Anonymous said...

"Steadivest is a "Family of companies" according to a letter written by its managing member, W. Marshall Wolfe."

regarding a "family of businesses", you ain't seen NOTHING yet 'til you see the evans boys!

sincerely,
8.14.09@3:56pm

Anonymous said...

KF -

You know that anyone can file a lawsuit against anyone. Just because one party is on one side of the "v" and one party is on the other doesn't mean that one is right and one is wrong - or that one is good and one is bad. Just because the plaintiffs have lumped a bunch of people together as defendants doesn't mean that they were all in it together. Your statement that the defendants are trying to "throw wolfe under the bus" sure makes it sound like they were all in it together. Come on, man. Wolfe was driving his own bus and the judicial process will determine who was in the driver seat with him and who got taken for a ride. You are doing a really good job reporting on this case, but would you please be a little more careful with your characterizations and jumping to conclusions?

Anonymous said...

"doesn't mean that they were all in it together"

Explain how the fillings with the sos that show all are/were members or officers means otherwise? Black and white not a KF conclusion

Kingfish said...

Let me see. The various motions filed by defendants didn't have to say Wolfe fleeced or victimized them. They could have just kept to their arguments that there was a failure to state a claim, allegations were vague, no specific details provided, and so on. However, they went out of their way to state Wolfe screwed them over as well and that they should be entitled to recovery against him. They didn't have to do that and yeah, that is throwing him under the bus.

Kingfish said...

Don't forget the SEC filing as well.

I've also stated this is a lawsuit and a lawsuit is what one side claims the other side did. I've also posted all responses as well. I expect my readers to know these basic facts and that a lawsuit is not a statement of proof in and of itself.

Now the Bar's finding of fact in the Keith Shelton case, different story, hehe.

Anonymous said...

Funny that Travelstead is saying he was victim. seeing that he was one of the ORIGINAL 3 that started this ponzi scheme. MTW (Montgomery,Travelstead,and Wolfe) was where it all started. Steadivest did not actually take flight until after the two remaining partners, Travelstead and Wolfe seperated in 2007. It is hard to believe that Travelstead did not know what was going on after all he was the bookkeeper.

Kingfish said...

My understanding is he wasn't the bookkeeper. Yes, I know he is a CPA but I don't think he was the ledger guy for this operation. I could be wrong though. Those exhibits are rather interesting.

Anonymous said...

5:06 get your facts straight. Any fraud that occurred happened years after Travelstead was gone.

MTW was not a Ponzi scheme. If it were then plaintiff Ray Montgomery, who was one of the original owners, would be a defendant and not a plaintiff. The fact that Travelstead is owed money has nothing to do with when any fraud occurred. Also, MTW had a well-respected and independent (non-owner) CPA that kept the books, not Travelstead. This CPA would have no incentive to prepare anything other than accurate financials.

It is interesting to note that the complaint cites nothing substantive against any of the defendants other than Wolfe. Plaintiff's attorneys tend to throw everything that they can at all defendants unless they have nother to throw at them. Plaintiffs attorneys are also well-know for suing anybody that they think has money in the hopes that they will settle for a nuisance value. It looks like that is what is going on here. Got to love those plaintiffs attorneys that are "seeking the truth". Then again, maybe this plainfiffs attorney is working for free.

Anonymous said...

Good point about the plaintiff attorney 5:24. I assume that most of the JJ readers are conservative and I'm surprised none of them have picked up on this point. I also noticed that the complaint is about Wolfe and then simply lists other defendants.

Back to those good old plaintiff attorneys. Dicky Scruggs was the most well respected plainiff attorney in the state. Somebody please remind me where he is now?

Anonymous said...

KF -- I hope that the above comments start a broader conversation about our legal system and additional tort reform that is needed. In most European courts the losing party has to pay the legal fees for the prevailing party. This prevents plaintiff attorneys from filing frivolous lawsuits and also prevents them from naming a laundry list of defendants that they know have no liability.

By way of example, when a plainiff attorney files a medical malpractice suit, he tends to sue not only the doctor directly involved but also every doctor connected in any way shape or form to the other doctor (along with the hospital, nurses, and perhaps the mother of all of the doctors). They do this in an attempt to get money from parties that really have no fault. Unfortunately, some of these non-liable defendants settle simply to get out of having to spend much time and money defending the suit. In other words, if it will cost $50,000 to defend (and a whole lot of time and effort), why not pay the plainiff's attorney $25,000 to be dismissed. The Europeans have figured this out and as a result they don't have frivolous suits being filed like we do in the U.S.

Kingfish said...

1. Let us say alleged ponzi scheme. Right now that is an accusation and nothing has been proved.

2. Most of these defendants are members of some of the Steadivest LLC's. As members, are they not responsible for what other members do or can be held liable?

3. Travelstead was put on notice Wolfe was completely ethical when he got in trouble with the state. My question is why didn't travelstead bail out then instead of doing business with him for another three years (3 after the violation, 2 after the States action)? Wolfe was selling unregistered securities behind his employer's back and did it to two different employers. Travelstead is a CPA and can't simply claim ignorance. Having said that, those violations were for selling unregistered securities (something Ed Peters did as well. Too bad HE didn't get in trouble), which is a completely different game than what is alleged in the lawsuit.

As for MTW being a ponzi scheme and Mr. Montgomery's status, Mr. Montgomery sued Mr. Wolfe several years ago in federal court, alleging RICO violations and book-cooking. The case was settled and dismissed with prejudice. I'll post it up there today or tomorrow.

MTW was dissolved on October 16, 2008.

Kingfish said...

I should also add Montgomery amended his complaint to charging the defendant with securities fraud and claimed they were negotiating over buying out Montgomery's share. Here are the relevant documents:

Lawsuit

amended complaint

Exhibit

Order dismissing complaint citing settlement

Anonymous said...

KF -- based on your faulty logic (that is, a partner is responsible for another partner's action) Ray Montgomery would be liable for all of the things that he alleged in the original lawsuit since he was a partner of Wolfe's.

The fact is that partners may or may not be liable for other partners actions. If the other partners didn't take any actions in furtherance of any violation then they wouldn't be liable. The bottom line is that the plaintiffs attorney hammers Wolfe but no other defendants. Is it possible that this is so because there is nothing to hammer them with (other than they happened to be partners with him, as was Ray Montgomery).

Has it been your experience that most (if not all) plaintiffs attorenys sue everyone and their brother (and sometimes their mothers) in the hopes of getting nuisance settlements.

By the way, were is Dicky Scruggs?



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