FREQUENTLY ASKED QUESTIONS |
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THE PURPOSE OF THIS SECTION IS TO PROVIDE VERY GENERAL ANSWERS TO QUESTIONS MORE FREQUENTLY ASKED AND SHOULD NOT BE RELIED UPON AS PROFESSIONAL ADVICE. ALL READERS SHOULD OBTAIN INDEPENDENT ADVICE FROM THEIR LEGAL COUNSEL. * * * * * The following are some of the questions most frequently asked by investors and creditors concerning the bankruptcy cases of Louis J. Pearlman and Trans Continental airlines, Inc. (the “Debtors”) and the case filed by the State of Florida, Office of Financial Regulation (“OFR”), against Trans Continental Airlines, Inc., Trans Continental Airlines Travel Service, Inc., Trans Continental Enterprises, LLC a/k/a Trans Continental Enterprises LLC, Louis J. Pearlman, Robert Fischetti and Michael Crudele, Defendants (“Defendants”) and Louis J. Pearlman Enterprises, Inc., Trans Continental Records, Inc., TC Leasing LLC, Trans Continental Talent, Inc., Fashion Rock, LLC, Trans Continental Travel Service, Inc., F.F. Station, LLC, Trans Country Music Group, Inc., Trans Continental Studios, Inc., Trans Continental Aviation, Inc., Aegis Consulting, Inc., and Kristin Finger, Relief Defendants (“Relief Defendants”) in the Amended Verified Complaint for Temporary and Permanent Injunction and Appointment of Receiver and the subsequent bankruptcy filings of Louis J. Pearlman, Debtor and Trans Continental Airlines, Inc., Debtor. * * * * * EISA Investor Questionnaire: For all individuals who are EISA Investors -- To assist the Trustee in his investigation to identify bank accounts, please download the “Investor Questionnaire” form, complete the questionnaire with as much information as you have and return it along with the requested relevant information. Send your information either by mail to the address listed on the form or by fax to (954) 374-6495. Note: This “Investor Questionnaire” is NOT a proof of claim form and is being requested for informational purposes only to assist the Trustee in his investigation. What has the State of Florida, Office of Financial Regulation (“OFR”) alleged that the Defendants did wrong? The OFR alleged in its Amended Verified Complaint for Temporary and Permanent Injunction and Appointment of Receiver (“Amended Verified Complaint”), and in other filings, that the Defendants violated the registration and anti-fraud provisions of Chapter 517, Florida Statutes, and the prohibitions against soliciting or receiving funds for deposit without being authorized to do business in the state of Florida as a financial institution. The Complaint further alleges that for at least 15 years, the Defendants offered and sold unregistered securities identified as the “Employee Investment Savings Account” program or “E.I.S.A.” The Complaint further alleges that the Defendants engaged in securities fraud by making a variety of misrepresentations that lulled individual E.I.S.A. investors into believing their investment “deposit” was safe, secure and residing in U.S. financial institutions, and were insured by the FDIC or other insurance guaranteed the investment. See Amended Verified Complaint for Temporary and Permanent Injunction and Appointment of a Receiver. Are these criminal charges? Although the OFR has alleged violations of Chapter 517 and Chapter 655, Florida Statutes, this is still a civil matter. While the OFR has civil enforcement authority only in the State of Florida, it is cooperating with the concurrent investigations of several federal agencies, the F.B.I. and the I.R.S. What is a Receiver? Section 517.191(2) , Florida Statues, provides that “in addition to all other means provided by law for the enforcement of any temporary restraining order, temporary injunction, or permanent injunction issued in any such court proceedings, the court shall have the power and jurisdiction, upon application of the office, to impound and to appoint a receiver or administrator for the property, assets and business of the defendant, including, but not limited to, the books, records, documents and papers appertaining thereto. Such receiver or administrator, when appointed and qualified, shall have all powers and duties as to custody, collection, administration, winding up, and liquidation of said property and business as shall from time to time be conferred upon her or him by the court. In any such action, the court may issue orders and decrees staying all pending suits and enjoining any further suits affecting the receiver’s or administrator’s custody or possession of the said property, assets and business or, in its discretion, may with the consent of the presiding judge of the circuit require that all such suits be assigned to the circuit court judge appointing the said receiver or administrator.” What is a Bankruptcy Trustee? A Trustee is an appointee of the Federal Bankruptcy Court and is subject to the rules and regulations of the United States Bankruptcy Code. His/her duties include marshalling the assets of the debtors to maximize recovery and preserve the estate for the benefit of creditors. Chapter 11 Bankruptcy includes businesses and individuals who may be operating or non-operating entities. In this case, the Chapter 11 bankruptcy was an Involuntary Proceeding brought about by some of the major creditors who sought to restrict the Debtors from any further depletion of their assets. Who is in charge of the affairs of Pearlman and Trans Continental Airlines, the Trustee or the Receiver? On March 27, 2007, Soneet R. Kapila was appointed Chapter 11 Trustee of the bankruptcy estates of Louis J. Pearlman and Trans Continental Airlines, Inc. Since that time, Mr. Kapila has been appointed Trustee in other related cases [see “Related Cases” tab.] As he is appointed, the Trustee will take over control of the assets and affairs of the additional entities. What happens now that a Trustee has been appointed? Following the rules of the Bankruptcy Code, the Trustee held the “first meeting of creditors” (Section 341 meeting) on April 30, 2007. It was well attended by numerous creditors. The United States Trustee and the Trustee (in the cases of Louis J. Pearlman and Trans Continental Airlines, Inc.) provided an overview and status of the administration of the case in addition to answering the creditors’ questions. [See Status Report #2] How can I find out what is happening in the bankruptcy cases? The Trustee has established this website which will be frequently updated as new developments occur in the case. You should also check the links provided to other websites which are posting information relating to the cases; however, the Trustee cannot attest to the completeness or accuracy of information posted on other sites. How much time do I have to file a claim? The claims bar date has been extended to January 30, 2008. How can I file a claim? Your claim should be filed before the claims bar date (presently January 30, 2008) with the United States Bankruptcy Court, Middle District of Florida in the cases in cases in which I have been named Trustee. [See Related Cases tab.] Bankruptcy Clerk’s Office For claims against the remaining defendants and relief defendants named in the Amended Verified Complaint, you should file separate claims with the Receiver. Please feel free to visit the Receiver’s website at www.t-con.com for information regarding filing claims with the Receiver. If I invested in Pearlman/TCA and then I received back all of my funds from that investment, do I have to disclose this? Yes. You must disclose both, your investment and the subsequent distributions you received. It is important for the Trustee to have an accurate picture of your entire investment transaction. What if I took money out and then re-invested it? You must disclose your original principal investment as well as any distribution of that principal plus any interest you may have received. If you made a subsequent investment of these funds, you must also list the amount and date of such investment. What should I do if many of my investments took place a number of years ago and I no longer remember or have records to support how much and when I invested? You may need the assistance of your bank to provide you with statements for the approximate period in time you believe you made your investment(s). A review of the prior bank statements for this period may help you remember when and how much you invested. It is important to note that the claim form acts as a sworn statement and is punishable as an act of perjury. Any individual who knowingly files a false claim will be dealt with appropriately. Accordingly, you must be forthright and accurate in filing out your claim form. To the extent you cannot locate the exact amounts of your investment after a diligent search, please let us know that you are aware of previous dealings, but cannot locate the records. What should I do if my bank does not customarily provide me with my canceled checks? Most banks are typically required to keep an electronic copy of your canceled checks for seven years. If you know the date and amount of the check in question, you should ask your bank to research the check and provide you with a copy of both the front and back sides of the check(s). [Some banks may charge a small fee for this service.]
Why is it necessary to provide a copy of the back side of the check? The reverse side of the check shows how and when the check was negotiated. Some banks provide their customers with a copy of the front of the check along with their monthly statements. While the front of the check shows the payee and the date the check was drafted, it does not show how and when the check was actually negotiated. This information is found on the back of a canceled check by examining the stamps placed there by the institutions that were responsible for negotiating and honoring the check. This information helps identify the account where your funds were actually deposited and may help us locate a previously unknown account. What if my bank no longer maintains a copy of the check I wrote to make my investment? Will a copy of the original contract showing the amount I invested and/or a copy of the account statement be accepted as proof of my investment? While helpful, copies of your contract and/or account statements are not the best evidence of your claim. It is therefore important that you make every effort to obtain independent documentation to substantiate your claim. What other form of backup documentation is acceptable? What about letters acknowledging receipt of my funds? As mentioned previously, documentation of this sort is helpful but may not provide the best evidence of your investment. In the event there is a discrepancy between your claim and the Trustee’s records, this documentation will help us resolve any discrepancies. What if I didn’t pay or invest by check? Banks also maintain wire transfer and other transaction records for a number of years, depending on the regulations of the state in which your bank is located. This document is usually not provided to an investor at the time of his/her transaction. Please ask your bank or credit union or other institution to provide you with a copy of the wire confirmation or transaction slip. Similar to a canceled check, wire transfer records will help us verify your claim more quickly by telling us which account your funds were sent. If I invested in an IRA account in addition to my regular investment, do I need to complete two claim forms? Yes. It is important to track each investment separately and as two separate claims. If I had an investment in my name alone as well as a joint investment with my spouse or another person, do I need to complete a second claim form for the joint investment? Yes. Please list on a separate claim form, all investments in which you were listed as a co-account holder with another person. If I invested through a trust, do I need to provide a separate claim form? Yes. If your investment was made in the name of a trust or was held jointly with another investor such as a family member (excluding custodial accounts for minor children), you should complete separate claim forms. With respect to a self-directed IRA account, would a statement from the custodian be acceptable as a proof of claim, in lieu of a copy of the check or wire transfer? The transfer record, typically, a wire transfer, is the preferred form of documentation for IRA investments. However, if the transfer record is unavailable please provide any other documents you have which you believe support your claim. What should I do if the IRA custodian that transferred my IRA money is no longer in business? Please do your best to provide any other documents which support your claim. What happens if I cannot obtain the required back-up documentation before the claims bar date? You should submit your claim form prior to the claims bar date with all of the documentation that you have been able to gather. You may supplement your documentation after you submit your claim. I submitted an affidavit explaining the source of funds I invested. Do I still need to submit a claim to the Bankruptcy Court? Yes. An affidavit or other statement cannot be used as a substitute for the claim form. Will I receive a written confirmation that my claim has been received? If you want confirmation that your claim has been received by the Clerk’s office, you should send a duplicate copy of your claim form and all attachments with a self-addressed stamped envelope, along with your original claim form, to the Clerk requesting that the duplicate copy be date stamped and returned to you. The claims approval process may take several months given the number of investors/creditors we anticipate will file claims. I downloaded a copy of the Claim Form from the Trustee’s website and completed and mailed it in. I have since received another copy of the claim form in the mail. Should I fill it out again and resubmit it? No. Copies of the Claim Form were mailed to each creditor/investor after it was posted on the Trustee’s website. This was done to ensure that all creditors/investors were given an equal opportunity to receive notice and file their claims. Many creditors/investors chose to proceed with filing of their claims before this mailing took place. Because both forms are identical, there is no need to resubmit your claim, provided the original claim was properly filed with the Federal Bankruptcy Clerk’s Office in Orlando. The Claims Bar Date has passed and I did not receive confirmation from the Trustee that my claim was received timely. Should I resubmit my claim form just to make sure it is on file? The Trustee does not receive or acknowledge the claims filed. If you have already sent your claim form to the Bankruptcy Clerk’s Office in Orlando, there is no need to resubmit it. Your name will be placed on a mailing list of creditors/investors and you will receive all the required noticing protocols prescribed by the bankruptcy process. When can I expect a distribution? Currently, we cannot project a distribution date. This case involves a large investor/creditor class with investments that total in the hundreds of millions of dollars. There is a lengthy history of investment in a diverse and complex group of holdings. Moreover, the books and records are disorganized and in many instances incomplete. All of these elements indicate a long-term resolution that could encompass several years. How do I contact the Trustee? Due to the large number of potential claims against the estate, the Trustee is not able to immediately return inquiries via telephone. However your concerns are very important to him. The recommended method of communication is via email to Pearlman@kapilaco.com. All emails will be acknowledged when received. Also, refer to the Trustee’s First Status Report dated April 19, 2007. [See Status Reports tab]
The FBI has possession of certain records of these bankruptcy debtors. How does this impede the investigation of the recovery of assets? The Trustee is cooperating with the FBI. There are other avenues that may be utilized to gain access to similar records which may be of value, albeit with added effort and some time delay. I was introduced to this investment by a sales agent or a broker or some other intermediary. Are these intermediaries liable personally or professionally? This is the subject of each individual fact specific legal analysis for which you need to seek independent legal advice. If these agents were not “licensed” to deal in these securities, misrepresented them and continued to sell them even though the OFR had notified Trans Con not to offer them any more, aren’t they liable personally and professionally? This is the subject of each individual fact specific legal analysis for which you need to seek independent legal advice. Wouldn’t a good paper trail to follow be the bank accounts of all the T-con officers and the agents and why aren’t their assets seizable since they are also guilty of gross illegalities? While this may present an avenue for asset recovery which the Trustee is and will investigate, the legal process to achieve this is complicated and time consuming. How broadly are you planning to stake your claim to any recoveries that investors make from third parties? If, for example, an investor wins a judgment against an independent sales agent who sold the EISA plan, or wins a judgment against others involved in the scam, would you (as Trustee) sue the investor to claim the award for the bankruptcy estate? These questions raise complex legal issues that would require some in-depth analysis on the rights and claims of the individual investors as opposed to the rights and claims that I have as the Chapter 11 Trustee for Pearlman, TCA and other related companies for which I may be named Chapter 11 Trustee in the future. These are complex legal questions that require the advice of a lawyer and depend on the facts that exist for each case. Each investor may have a different fact scenario. I am not in a position to provide legal advice. On the theory of “constructive trust”, do you have an opinion on whether EISA investors could be considered to have placed their money with Trans Continental as a trustee rather than as a borrower? If you as a trustee were to accept this theory and the judge would agree, would you apply the same treatment to all the EISA investors or only to those that submitted a constructive trust argument with their claim forms? This question raises a complex legal theory that cannot be easily or generally stated. The ability of any investor to pursue a constructive trust claim against an estate will depend heavily on the facts of each individual case.Do I need to file separate claims in all the cases? At the present time, we suggest that initial claims be filed in the Trans Continental Airlines, Inc., case for those who invested in the EISA accounts. Other individuals or entities who have case-specific claims against Louis J. Pearlman or any of the other companies in which I have been named Trustee, should file in those cases as well. Louis J. Pearlman & Trans-Continental Airlines (“TCA”) FAQs – General Tax Matters
WE STRONGLY SUGGEST THAT YOU CONSULT WITH YOUR TAX ADVISOR TO DETERMINE THE PROPER TAX TREATMENT OF TRANSACTIONS ASSOCIATED WITH YOUR INVESTMENT/BANKRUPTCY CLAIM
Am I able to deduct the amount I am owed as a loss on my income tax return? Your ability to deduct amounts you invested is dependent upon the value of your bankruptcy claim, the initial treatment of your investment and how your tax returns were prepared in the past relative to such investment. For this reason, neither the Trustee nor his professionals can provide you with specific tax advice concerning the preparation of your personal tax return. We urge you to seek the advice of a competent tax professional concerning the tax reporting of your investment(s) with Mr. Pearlman, TCA and/or related entities. What is the value of my bankruptcy claim? The Trustee does not have enough information to determine how much of your investment may be returned to you or when such a distribution is likely to occur. Until the Trustee and his professionals have completed their forensic investigation and analyzed the outstanding claims against the bankruptcy estates the Trustee and his professionals will not be able to make this determination. What is the tax basis of my investment/bankruptcy claim? The Trustee does not have enough information to determine the tax basis of your investment. Generally your tax basis is comprised of the cash you invested adjusted for amounts returned to you and any pass-through income, gains, losses deductions, etc. The Trustee does not have enough information to determine your tax basis in your investment/bankruptcy claim. You should seek the advice of a competent tax professional concerning your tax basis questions. Should I provide my social security number (“SSN”) or my business’ taxpayer identification number (“TIN”) if my investment was an IRA or SEP? No, generally the IRA custodian has a separate TIN and that is the identifying number that should be associated with an IRA, SEP or other pension claim. If you do not have that identifying number we suggest you contact your IRA custodian prior to submitting a Form W-9 to the Trustee. Why is it necessary to identify my IRA or SEP investment as such? Even though the money owed to you and/or your IRA represents a claim in a bankruptcy estate, the IRS provides different tax treatment for IRA investments and/or distributions from such IRA investments. It is critical that you identify your claim as IRA investment if your investment was originally recorded as an IRA contribution. If I have an IRA or SEP investment, will distribution be made to me personally or will I be able to rollover my distribution(s)? If the bankruptcy estate makes a distribution, you will be asked in advance to choose whether you desire rollover treatment or if you will waive the required 10% income tax withholding. Will I have to report taxable income as a result of the Bankruptcy Trustee’s operation of the Pearlman or TCA bankruptcy estates? Currently, it is not clear how funds you invested were utilized and recorded by Mr. Pearlman or TCA. Until the Trustee has analyzed all the facts and traced usage of the funds it is not possible to determine what additional tax reporting may be necessary in connection with your investment. Will I have to report taxable income as a result of distribution(s) I receive from the Bankruptcy Trustee? The taxability of any distribution(s) you may receive is dependent on the nature of your original investment, the amount of any distribution(s) you may have received in the past, as well as how you have reported such amount(s) on your prior year income tax returns. We urge you to seek the advice of a competent tax professional concerning the tax reporting of any potential distribution(s).
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