Developments

June 16, 2014 Update

A hearing was held regarding the motion for Approval of Claim Procedures, Establishment of Claims Deadlines and Approval of Claim Form. The motion was subsequently approved and an Order entered.

May 19, 2014 Update

Judge Jenkins approved the sale of 18 properties included in the Multifamily Portfolio Sale to Cortland Acquisitions, LLC. The Court also set August 1, 2014, as a hearing date to consider the sale of the remaining properties in this portfolio.

May 9, 2014 Update

There is a motion pending to sell multi‐family properties to Cortland Acquisitions, LLC. A hearing on the motion will be held on May 19, 2014, at 9:30 a.m. in Judge Jenkins’ courtroom. Details can be found at the Multifamily Portfolio Sale tab.

April 25, 2014 Update

A hearing was held regarding the sale of the properties known as Tetonian and Stonebrook in Rexburg, ID. The sale was approved.

April 15, 2014 Update

The Receiver John A. Beckstead has accepted an assignment from The Church of Jesus Christ of Latter-Day Saints to serve in the Church’s Office of Area Legal Counsel – Pacific Area, based in Auckland, New Zealand. The Court was advised of this assignment last January. At a hearing yesterday afternoon, Judge Jenkins granted a Motion of the Securities and Exchange Commission to discharge Mr. Beckstead as Receiver to allow him to accept this assignment. The Court appointed Gil A. Miller of Rocky Mountain Advisory as the successor receiver, effective upon execution of the Court’s Order. The Order was signed today. Mr. Miller has now succeeded to all of the rights, powers and contracts of the Receiver.

Mr. Miller’s contact information is:
Rocky Mountain Advisory
215 South State, Suite 550
Salt Lake City, UT 84111
801-428-1600

Mr. Beckstead has been working with Mr. Miller for several weeks and will continue to be available to Mr. Miller for a short time to insure there will be no disruption in the business and affairs of the receivership. Mr. Miller will continue to use Holland & Hart and Fabian & Clendenin as his legal counsel.

February 28, 2014 Update

TAX RETURNS

K-1’s and similar reports for 2013 will not be available to investors in time to file income tax returns by the April 17, 2014 deadline. Investors should request extensions for filing their returns. These reports should be available well before the September 15, 2014 extended deadline.

This delay was caused by continuing analysis and issues concerning the Qualified Settlement Fund status under the Internal Revenue Code.

February 19, 2014 Update

The Receiver has determined the percentage allocations to each of the multi-family properties for the net proceeds from the pending sale to Cortland Acquisitions. A schedule of the percentages is posted under the Multifamily Portfolio Sale tab.

February 4, 2014 Update

The Receiver has entered into two contracts for the sale of the multi-family properties. Details can be found at the new Multifamily Portfolio Sale tab.

January 30, 2014 Update

The Receiver’s Eighth Quarterly Status Report as of December 31, 2013 has been filed with the Court and is available under the Receiver Reports tab of this website. As ordered by the Court, these reports will be filed within 30 days of the end of each calendar quarter.

November 1, 2013 Update

The Receiver filed his Seventh Quarterly Status Report with the Court on October 30, 2013. The document is available under the Receiver Reports tab of this website.

Persons interested in purchasing receivership properties should contact the broker indicated below:

Property Broker Contact Information
SLC 5600 West
Clearfield/Midtown
Bill Nicoloff, Principal
Brandon Wood, Agent
Newmark Grub ACRES
748 West Heritage Park Blvd., Suite 204
Layton, UT 84041
or
376 East 400 South, Suite 120
Salt Lake City, UT 84111
Phones: 801-416-1026 (office)
801-671-7324 (cell)
Email: bnicoloff@ngacres.com
bwood@ngacres.com
Parcels #7
Entrada Park – Parcel3
Cala Seniors
Brooklyn Crossing
Randell Curington
James M. Brown Partners
Phone: 972-386-3333
Email: rcurington@jamesmbrownpartners.com
Oahu, Hawaii (181 acres) David H. McCoy
65-1291 Kawaihae Road
Kamuela, HI 96743
Phone: 808-226-7877
Sanpete Co. Properties
Bradley Farms
Parcel #18139
Parcel #18139X1
Parcel #21181X
Pine Creek Ranch Lot 53
85 W. Center St.
210 W. Center St.
285 N. State St.
365 N. State St.
Sara Steadman
Tommy Dyches
Dyches Realty
Phone: 435-462-2844
Email: Steadman@cut.net
Sanpete Co. Properties
Circle J Turkey Farm
Allred Farm
D& D Farms/Cook
Parcel #24366X
Parcel #18127X
Parcel #18136
56 W. 100 N.
444 N. State St.
100 S. 300 E. Ephriam
Theressa Alder
John Eliason
Todd and Tiffany A. Tree
Sanpete Valley Realty, LLC
Phones: 435-283-6626 (Office)
435-835-3941 (Eliason)
435-283-6626 (Tree)
Emails: svrealty@cut.net (Alder)
tnttree@cut.net (Tree)
800 Acres in Juab County, Utah Jeffrey C. Anderson
Clear Water Realty, LLC
Phone: 801-423-1800
Email: j.andy@hotmail.com
Branson, MO (motel and land) Ryan Y. Murray
R. B. Murray
2225 S. Blackman Road
Springfield, MO 65809
Phone: 417-881-0600
Email: ryan@rbmurray.com
Villa Florence property, Boulder, NV Lewis J. Wardley
Jeff Sommers
Wardley Real Estate
Phone: 702-435-4900
Emails: lewis@wrevegas.com
jeff@wrevegas.com
Discovery Point Brandon D. Fugal
Executive Vice President
Coldwell Banker Commercial
6550 South Millrock Drive, Suite 200
Salt Lake City, Utah 84121
Main Line: 801-947-8300
Fax: 801-947-8301
Direct Line: 801-947-8328
Direct Line: 801-450-2462
Email: brandon.fugal@coldwellutah.com
Website: www.coldwellutah.com
Lot 33, Wolf Creek Ranch Will Lange
The Lange Group-Prudential Utah Real Estate
2200 Park Avenue, Bldg. B
Park City, UT 84060
Phone: 435-647-8040
Fax: 435-649-7853
Email: wlange@pru-utah.com
Greenville, TX (motel) Kim Jones
Keller Williams Rockwall
2101 Summer Lee Drive, Suite 209
Rockwall, TX 75032
Phone: 903-453-5907/972-772-7000
Fax: 972-772-7001
Email: kimjonesrealtor@yahoo.com
Bear Smokey Land Pending

August 29, 2013 Update

1.   Liquidation of Receivership Assets

Last April, the MSI Investor Group filed a Motion asking the Court for permission to present an alternative plan for liquidation of the receivership assets. The Investor Group plan provided for all of the real estate assets of the receivership to be transferred to investors in satisfaction of the claims of the investors. The Court held two hearings on the Investor Group Motion and rejected the plan. Among the reasons stated by the Court were that the plan was extremely complex and hard to understand, the plan was based on assumptions as to future events, the plan did not provide an option for higher bidders as required by federal statute, the plan was in effect a plan of reorganization which was not within the power of the Court, the Court had questions as to the financing for the plan and the appropriateness of some payments provided under the plan, and concerns about Cottonwood Residential’s involvement with the investors when Cottonwood had duties of loyalty to the Receiver arising from Cottonwood’s engagement by the Receiver to manage some of the receivership properties. The investor group then filed a Motion asking the Court to reconsider this decision and the Court again rejected the plan.

After rejecting the investor plan, the Court held a hearing on the Receiver’s Second Liquidation Plan. Some minor changes were made the plan to address concerns of the Court. The Amended Receiver’s Second Liquidation Plan, which can be viewed on the Significant Pleadings page of this website, was approved with a few procedural modifications. The Court also authorized the Receiver to engage Hendricks Berkadia Apartment Real Estate Advisors to market the multi-family apartment properties.

The Receiver has signed a Listing Agreement with Hendricks Berkadia and preparations for the marketing of the multi-family properties have begun. The Receiver is also signing listing agreements with a number of other brokers to market the other receivership properties.

2.   Ponzi Decision

On August 22, 2013, the Court issued its Memorandum Decision on the Receiver’s Motion to find that the entire Management Solutions enterprise was a Ponzi scheme and establish the start date of the Ponzi scheme. The Decision can be viewed on the Significant Pleadings page of this website. The Decision is lengthy and technical. Since its issuance, Judge Jenkins has referred to the Decision as an “evidentiary ruling”. The Decision found that funds of the investment companies were generally commingled, that funds were often taken from one company to pay the obligations of another company (in the words of the Decision, “Peter often paid Paul’s obligations”), and the investment entities were operated as one enterprise. The Court also found instances where properties were sold from one investor group to another investor group such that Wendell Jacobson was both the buyer and the seller. However, the Court declined to find that the entire enterprise was a Ponzi scheme and will require the existence of a Ponzi scheme to be demonstrated in connection with each transaction where its existence is an issue.

3.   Tax Returns

Tax returns for the receivership companies are being finalized and K-1’s should start going out to investors this week.

July 31, 2013 Update

1.   NOTICE TO TENANT-IN-COMMON OWNERS

It has come to the attention of the Receiver that the deeds concerning some tenant-in-common (“TIC”) interests in receivership properties may not have been recorded in the offices of the applicable county recorders. In these cases, the TIC interest may not be known to the Receiver. It is very important that the Receiver identify these interests. Below is a list of the receivership properties in which there are TIC interests known to the Receiver. This list does not include receivership properties that have been sold or abandoned by the Receiver. If you claim a TIC interest in any receivership property which has not been sold or abandoned by the Receiver, other than those properties listed below, IT IS VERY IMPORTANT THAT YOU PROMPTLY NOTIFY THE RECEIVER IN WRITING. Failure to notify the Receiver may result in forfeiture of your TIC interest.

This applies only to tenant-in-common interests or other interests where you received a signed deed conveying an interest in a property. Investors who only received a membership interest in a limited liability company or a partnership interest in a limited partnership do not need to respond. Only persons who claim a direct ownership interest in a property evidenced by a deed need respond.

Notice may be sent by email to information@managmentsolutionsreceivership.com or mailed to:
Management Solutions Receivership
P.O. Box 1290
Salt Lake City, Utah 84110 

If you have questions, you may send an email or leave a message at 801-799-5750 and someone will get back to you.

The properties which have not been sold or abandoned in which TIC interests are shown in the public records are:

  • View Apartments
  • Oak Hill Apartments
  • Madison Chase Apartments
  • Smokey Trail of Limon Apartments
  • Buffalo Run Apartments
  • Stonebrook Texas Apartments, Phase I
  • Toscana Apartments
  • Lake Ridge Apartments
  • Stonebrook Idaho Apartments
  • Parcel 21367X, Lot 20, Sanpete County, Utah

      Please respond promptly if this applies to you to insure that your interests are recognized.

2.   DISPOSITION OF RECEIVERSHIP PROPERTIES

      Pursuant to the direction of the Court, the Receiver has been proceeding with liquidation of all properties in accordance with the Receiver’s Second Liquidation Plan. As previously reported, the Receiver has selected Hendricks Berkadia Apartment Real Estate Advisors to market the multi-family apartment properties. On June 17, 2013, the Receiver filed a Motion for the Court to approve this engagement. This Motion is available under the Significant Pleadings Tab of this website. The Court has not acted on this Motion and it appears the Court is waiting until the scheduled August 14 hearing, discussed below. 

      On April 24, 2013, the Investor Group filed a motion asking for permission to file an alternative plan to dispose of the assets, which proposes that all of the real property assets be transferred to a company formed by the Investor Group in satisfaction of all receivership claims of the investors. This Motion is available under the Significant Pleadings Tab. The Receiver has negotiated changes to the proposal with the Investor Group which are outlined in a response filed by the Receiver. The Receiver has also filed a supplement to that response based on new information concerning TIC interests. The Receiver’s response and supplement are also available under the Significant Pleadings Tab. A hearing on the Investor Group Motion is scheduled for August 14, 2013.

      It is hoped that the August 14 hearing will provide direction on whether to continue with the Receiver’s liquidation plan or pursue the Investor Group plan.

3.   TAX RETURNS

      The Receiver has previously reported on the complicated issues concerning Settlement Fund status under the Internal Revenue Code. A new development in June in another case provided additional guidance which will allow a resolution of these issues in a manner that will not create a taxable event for investors during 2012. This resolution has allowed the Receiver’s accountants to begin preparation of the 2012 tax returns. This is a major process involving about 250 returns, complicated reconciliation to the pre-receivership tax returns, and allocation of receivership costs to each of these companies. A date by which K-1’s will be distributed cannot be projected yet. The Receiver’s accountants are sensitive to the September 15 filing deadline for extended returns and will distribute K-1’s as far in advance of that deadline as possible.

4.   SIXTH QUARTERLY STATUS REPORT

      The Receiver filed his Sixth Quarter Status Report on July 30, 2013. It is available under the Receivership Reports Tab.

June 10, 2013 Update

The Receiver is pleased to announce that he has selected Hendricks Berkadia Apartment Real Estate Advisors as the broker to sell the multi-family apartment properties in the receivership portfolio. Hendricks Berkadia will be the broker for Portfolios A, B and C identified in the Second Liquidation Plan of Receiver. This selection is subject to court approval. A motion seeking that approval will be filed shortly.

Hendricks Berkadia was created at the end of 2012 by the combining of Hendricks Partners and Berkadia Commercial Mortgage, a joint venture between Berkshire Hathaway and Leucadia National Corporation. Hendricks Berkadia brings tremendous experience and depth to this assignment. All of the brokers interviewed by the Receiver reported very high demand for these properties and limited inventory on the market. It is anticipated that there will be many interested, qualified buyers and numerous offers for the Portfolios.

May 1, 2013 Update

The Receiver filed his Fifth Quarterly Status Report with the Court on April 30, 2013. The document is available under the Receiver Reports tab of this website.

April 22, 2013 Update

The Second Liquidation Plan of the Receiver has been filed. It can be viewed here.

March 21, 2013 Update

INFORMATION CONCERNING K-1 FORMS FOR 2012 TAX RETURNS

The Order appointing the Receiver directs the Receiver to elect “Settlement Fund” status under the Internal Revenue Code. The Receiver previously announced that this election would be made as of December 31, 2012. The Investor Group believes this election will have significant adverse consequences for many of the investors and has had discussions with the Receiver and the SEC about alternatives to making this election. The alternatives present complicated tax issues which are difficult to resolve. These issues are being studied and it will take additional time to address them. At the request of the Investor Group, the Receiver has delayed making this election while these alternatives are explored. The tax returns for 2012 and accompanying K-1’s cannot be prepared until final decisions concerning the Settlement Fund election have been made. Any change to the current plan will also require approval of the Court. As a result, K-1’s for 2012 will not be available in the near future. Investors who need a K-1 to file their 2012 returns should seek an extension

February 15, 2013 Update

Due to a number of considerations, the Receiver has determined that he will no longer pursue the bulk sale of the properties. An Amended Liquidation Plan outlining how the Receiver proposes to liquidate the properties will be filed in about two weeks for court approval. Notice of filing of the Amended Liquidation Plan will be posted and the plan made available here.

January 30, 2013 Update

The Order appointing the Receiver directs him to obtain and maintain the status of a taxable “Settlement Fund” within the meaning of Section 468B of the Internal Revenue Code and related regulations. This election is being made effective December 31, 2012. This election has tax consequences for the receivership estate and for the investors. For more information about this and about K-1’s for investors for 2012, click here.

The Receiver filed his Fourth Quarterly Status Report with the Court on January 30, 2013. The document is available under the Receiver Reports tab of this website.

November 1, 2012 Update

The Receiver filed his Third Quarterly Status Report with the Court. The document is available under the Receiver Reports tab of this website

October 16, 2012 Update

The Receiver has previously announced a proposed bulk sale of almost all of the real property in the receivership estate with a target date of September 24, 2012 for execution of the sale documents. The sale documents were executed by the buyer shortly after the target date and an earnest money deposit made. However, on September 24, in a hearing on an unrelated matter, Judge Jenkins gave directions on what he would require in documents for sale of real property. The executed sale agreement did not comply with those directions. Subsequently, an additional discussion was held with Judge Jenkins concerning his directions.

The principal change required by Judge Jenkins was that all conditions precedent to the buyer’s offer, including due diligence inspection by the buyer, must be completed before presenting the sale agreement to the court for approval. The agreement presented to the court must be final and binding, with no outstanding contingencies (other than Court approval).

The Receiver had further negotiations with the bulk purchaser in light of these directions. The bulk purchaser has agreed to modify the sale agreement to meet these requirements. Additional changes relating to this modification are also being negotiated.

The Receiver anticipates finalizing the modified sale agreement shortly. The modified sale agreement will not be presented to the Court until after completion of due diligence by the buyer, which will take several months.

Once the modified sale agreement is finalized and signed, the Receiver intends to post an announcement, identify the buyer, outline the basic terms of the sale, and provide a schedule of target dates to complete the sale.

The sale agreement provides for a public auction of the properties for bids upon the same terms as provided in the sale agreement to determine if there any bidders willing to pay a higher price. The auction will be scheduled after the Court has approved the sale agreement.

September 7, 2012 Update

On September 7, 2012, the Receiver filed his Supplemental Liquidation Plan with the Court. The Report is available under the Significant Pleadings tab of this website. The Report contains an update and additional information concerning sale of the receivership assets.

July 31, 2012 Update

On July 30, 2012, the Receiver filed his Second Quarterly Status Report with the Court. The Report is available under the Receiver Reports tab of this website. The Report contains important information concerning sale of the receivership assets which you are encouraged to review.

June 4, 2012 Update

On May 31, 2012, the Receiver filed an Updated Report of Receiver as of May 31, 2012 (the “Update”). The Update consists of updated lists of material assets of the receivership, claims against third parties, a chart of the receivership companies, a bank account roster, and a list of creditors. A list of the investors and the amounts invested was also filed but, at the request of the investors to protect their privacy, this list was filed under seal, which means it is not available to the public. A copy of the Update, without the list of investors, has been posted under the Significant Pleadings tab of this website.

At a hearing on June 1, 2012, the Court approved the First Declaration and Application for Interim Compensation of Receiver and Professionals and Reimbursement of Expenses dated May 8, 2012, filed by the Receiver, and authorized payment of those amounts. When the Court signs the Order from this hearing, it will also be posted under the Significant Pleadings Tab.

April 30, 2012 Update

The Receiver’s First Quarterly Status Report as of March 31, 2012 has been filed with the Court and is available under the Receiver Reports Tab of this website. As ordered by the Court, these reports will be filed within 30 days of the end of each calendar quarter.

March 12, 2012 Update

The Liquidation Plan of Receiver was filed with the Court on this date and is available under the Significant Pleadings Tab. This plan is required by the Order appointing the Receiver. Attached to the Liquidation Plan is a list of the assets of the receiver identified at this time, excluding potential claims which are under investigation.

January 26, 2012 Update

The operations of the receivership are gradually transitioning from an “all hands on deck” crisis mode to a more structured, effective operation. This transition will continue for some period of time. The Receiver continues to find assets that were not previously known.

Operating cash flow is becoming more predictable but the numbers are still not firm. Operating cash flow refers to income received from apartments, offices, retail properties and other sources and expenses incurred to operate and maintain those properties, pay employees, and other expenses. Some properties are profitable and a few are losing money. Some properties, such as undeveloped land, generate expenses such as mortgage payments and taxes but no income. In accordance with receivership principles, all income and all expenses are being consolidated into a common pool. On a consolidated basis, the margin of income over expenses is very small and there may be a loss some months.

The Receiver has found that many bills and obligations of companies placed in receivership were seriously delinquent when the receiver took over. Generally, obligations incurred prior to appointment of the receivership are not being paid and those creditors will have an opportunity to submit a claim for payment of pre-appointment obligations as part of the Liquidation Plan. The amount of unpaid pre-appointment obligations identified to date that are not being paid exceed $500,000. Pre-appointment obligations of certain critical vendors, such as utility companies, and mortgages, have been paid.

No payments have been made to investors, to the Receiver, or to professionals engaged by the Receiver. The operating cash flow report does not include any of these obligations.

On a positive note, preliminary indications are that many of the properties have significant equity. This is encouraging for future payments to investors and creditors but distributions of these payments will not occur until some of these properties are sold. Distributions to investors and creditors will be made periodically whenever sufficient funds are available, rather than waiting until all properties have been sold.

The Receiver has identified several Jacobson family members who received a salary and insurance benefits from a receivership company but had no job. These persons have been terminated, along with other persons whose jobs have been eliminated. This has resulted in a reduction of the monthly payroll of about $50,000.

The Receiver has been able to seize funds in transit and from other transactions, as well as funds in bank accounts, that would not have been available to investors and creditors if a receivership was not in place. The total of these funds is in the range of $2.5 million.

With approval of the Court, the Receiver has engaged Deloitte Financial Advisory Services as forensic accountants to investigate the assets and operations of the companies and persons in the receivership. The primary responsibilities of Deloitte are to locate assets, trace the status and disposition of those assets, prepare an inventory of assets, identify potential claims that could be asserted by the Receiver to recover assets, and prepare a record of funds paid in by investors and funds paid out to investors. This is a massive job that will take some time to complete.

The Receiver has engaged Cottonwood Residential, a professional property management company, to take over management of the multi-family residential properties. This will be effective February 1, 2012. This was done for several reasons, including to improve the efficiency and costs of operating these properties, to provide a reliable accounting record for potential purchasers, and to comply with the requests of investors and lenders.

The Receivership has only been in place for six weeks but, as you can see, it has been an extremely busy and intense six weeks. Much has been accomplished but much, much more remains to be done.

December 31, 2011 Update

The first priority of the Receiver has been to identify, seize and secure the Receivership Assets. The Receivership Assets are varied and widespread. There are about 43 large apartment complexes located in 11 states with about 7,645 units, a residential subdivision under development in Texas, office buildings, retail shopping centers, a turkey and cattle ranch, several residences, raw land, ownership interests in other businesses, and contracts to manage income properties. Over 650 bank accounts have been identified. Records concerning these assets fill several rooms. The Receiver has not been able to locate a central accounting system providing consolidated financial information on all of the assets. It has been a massive task to identify and secure these assets. This has been the primary focus of the receivership for the first two weeks and will be ongoing for some time.

A second priority has been to insure the day-to-day property management functions continue without interruption. The on-site management of the income properties has been left intact and most of the supervisors remain in place.

The SEC actions froze many of the bank accounts of the Receivership Parties. While this action was prudent and necessary, it left the Receiver without funds to operate the properties, meet payroll (which was due two days after the Receiver was appointed), and pay mortgages. Retrieving funds from these accounts has been complicated and slow, requiring involvement of the legal departments at numerous banks. This was further complicated by bank personnel not being available during the holidays. Operational obligations are being met as necessary but cash flow remains difficult until the issues with frozen bank accounts are resolved. Preliminary indications are that cash flow going forward will be tight.

The receivership is now transitioning from professionals on the receivership team overseeing day-to-day operations to employees resuming those oversight functions. This involves an assessment of the qualifications of the supervisory employees, their involvement, if any, in the alleged misconduct and fraud, and their willingness to cooperate and work with the receivership team. The Receiver has also determined that some positions are not necessary. Six employees have been terminated and additional positions are being reviewed.

The next priorities of the Receiver will be to identify unprofitable properties and develop a strategy to stop the cash flow losses from those properties and to further streamline the operations and financial reporting. Valuations of the other properties will be obtained and a strategy developed for liquidation of those properties.