Agape World victims hit again
by David Winzelberg
Published: September 23rd, 2010
Hundreds of victims who received money in the months before the end of Long Island’s largest-ever alleged Ponzi scheme have been asked to give it back - even if they’d lost everything they had.
The bankruptcy trustee for creditors of Hauppauge-based Agape World have invoked an unforgiving federal statute, nicknamed the 90-day rule, and mailed summonses to anyone who got a check from the company within three months before its bankruptcy filing in February 2009. The trustee, Ken Silverman of Jericho-based Silverman Acampora, wants to put that money in a pool that will be distributed to nearly 6,500 victims with approved claims.
That’s not sitting well with the investors who got interest payments - totaling about $22 million in the final months of Agape’s collapse - but were still net losers in the alleged scam.
Real estate appraiser Dom DiColandrea, an Agape investor who received a summons, said going after the most recent payments is akin to grabbing low-hanging fruit.
“It’s a cost-cutting measure by the trustee,” DiColandrea said. “If they had to sift through the entire history, the legal expenses would surpass what they would recover.”
Another Agape victim, who sat in the company’s offices for hours to wait for interest payments she needed for living expenses, called the effort to reclaim the most recent funds, known as a clawback, “an assault.” The Smithtown woman, who didn’t want to be identified, had managed to get back a good portion of the $25,000 she initially invested, though now the trustee says she has to return it.
“You’re just being victimized again,” she said, “from those who are supposed to be helping.”
The trustee wouldn’t comment on the clawback effort or the order in which money is recovered.
But another attorney defending some Agape victims against the summonses said the trustee didn’t have to use the 90-day rule because it was really intended to claw back “preferential payments” made to friends and relatives just before a company goes under.
Attorney Joe Campolo of Campolo, Middleton and McCormick in Bohemia, said money is typically clawed back by a bankruptcy trustee only if it amounted to more than the investor’s total contributions, as was done in the Madoff case.
Campolo cited a client who had initially invested $400,000 into Agape and was convinced - by a $25,000 interest check - to put in another $600,000 just two months before Agape owner Nicholas Cosmo was arrested for fraud and the company went bankrupt. Now the trustee wants Campolo’s client to fork over that $25,000, even though he’s still out $975,000.
“That’s rubbing salt in his wound,” Campolo said. “It’s incredibly inequitable.”
So far, about 2,000 Agape victims have received disbursement checks equaling about three-quarters of a percent of their losses, less than a penny on the dollar. The trustee has auctioned off cars and property of former Agape employees and salespeople who feds say got at least $55 million in commissions on bogus or oversold bridge loan investments.
The trustee has also gone after some early Agape investors who made millions in the alleged scam. One of those, New Jersey businessman Eugene Beilis, had been investing in Agape since 2003 and received more than $21 million from the company, which the trustee has filed a lawsuit to get back.
Charged with defrauding investors of more than $400 million, Cosmo, 39, faces 30 years in jail and is due in a Central Islip courtroom today for a status conference on the case. Cosmo served 20 months in federal prison after being convicted of fraud in 1998. He founded Agape World upon his release in August 2000.
Victims will have their chance to vent about the trustee’s recovery efforts at the next bankruptcy proceeding scheduled for Thursday in Central Islip.