Utsick Receiver Says The ‘P’ Word

As receiver Michael Goldberg moves closer to completing the claims process for creditors and investors in Jack Utsick’s Worldwide Entertainment, the attorney now declares the operation in fact, if not provably with intent, functioned as a "Ponzi scheme."

Goldberg’s assertion in a January 18th letter to creditors comes after nearly two years of vigorous objections to press reports using the term in describing the operations of WE and The Entertainment Group Fund. Both are Utsick companies that were sued, along with the Florida promoter and two partners, by the Securities and Exchange Commission in April 2006.

The SEC alleged a $300 million fraud perpetrated against investors between 1998 and 2004, and simultaneously announced a settlement that included putting the four defendants into receivership. Goldberg has been working to untie Utsick’s international Gordian knot of business dealings ever since.

With the reconstruction of company financial statements by accountants finalized, Goldberg wrote to creditors that "it has been determined that contrary to representations made to you, Worldwide sustained annual operating losses as far back as 1995. Accordingly, the only way Worldwide was able to make distributions to investors was by continuing to raise money from new investors.

"Thus, although we do not have evidence of whether it was intended to be a Ponzi scheme, Worldwide falls within the textbook definition of a Ponzi scheme whereby money from new investors is used to pay distributions to earlier investors," Goldberg concluded.

In a November progress report to creditors, Goldberg noted that the SEC was in the process of trying to negotiate a settlement with Utsick and predicted an agreement would be reached "shortly." No reports as of press time indicate that any such agreement has been reached.

Because of a "dearth of records maintained by Worldwide and TEGFI," Goldberg was forced to retain a forensic accountant to recreate a database of investor account information to assist in verifying claims. The forensic accountant gave Goldberg his first accounting of investor payments and receipts in September.

Goldberg predicted that by the end of November, he expected approximately 900 of "the most complex and involved claims" will remain to be verified. However, he further anticipated bringing the claims verification process to a close sometime "in or around" February, with initial creditor distributions to follow in the spring.