Slatkin Labeled a ‘Monster’ by His Creditors

Trustees in the massive bankruptcy case of money manager Reed Slatkin presented nearly three hours of slides and information in court Monday in an effort to explain the inner workings of Slatkin’s failed financial empire.

As foreshadowed by documents filed late Friday by the trustee in Slatkin’s Chapter 11 bankruptcy case, attorneys charged that Slatkin’s investment program was nothing more than a massive, well-connected Ponzi scheme that ensnared as many as 800 investors, including Hollywood actors and Internet moguls.

Attorneys also presented thousands of pages of documents, including a handwritten journal in which they allege Slatkin confesses to fabricating documents to mislead investors.

“The whole thing was built on a fabric of lies,” said Richard Wynne, an attorney with Kirkland & Ellis, which represents the creditor’s committee. “There have been a lot of questions from investors about whether this was a scam or a legitimate investment program that got caught up in the dot-com bubble. It was a complete scam and a fraud.”

During the packed bankruptcy hearing in Santa Barbara, creditors called Slatkin a “financial predator” and “monster.”

Brian Sun, Slatkin’s attorney, would not comment on the alleged Ponzi scheme or the alleged handwritten confession. He said Slatkin is cooperating with authorities to “make sure that they recover as much as possible for the [bankruptcy] estate.”

Bankruptcy trustee R. Todd Neilson said he expects to file paperwork by April to convert the bankruptcy proceeding to a Chapter 7 liquidation.

Slatkin took in more than $593 million over 15 years, but fabricated financial statements that led his investors to believe their money had grown to $778 million by the end of 2000, according to the trustee’s report.

In reality, Slatkin earned just $65 million in investment gains, according to the report.

He was able to maintain an illusion of profitability by falsifying investment reports and paying supposed “returns” to existing investors through new money pouring into his investment management firm--a classic Ponzi scheme, the report alleges.

The bankruptcy trustee, assisted by a team of accountants and attorneys, examined more than 2 million documents to prepare the report, which also noted where money had been paid out.

Specifically, a relative handful of investors--roughly 75 individuals--recovered more than $151 million more than they had invested with Slatkin, the report said.

Some speculated that recovering money from those “select few” investors may be a key to getting money back to the remaining investors, who entrusted retirement plans, college savings and inheritances to the now notorious money manager.

“A key issue will be what the trustee will do to get people to disgorge profits and preferences that were made over the years,” said Sun.

The trustee estimates that investors are owed roughly $250 million, but has identified only about $30 million in assets.