Scientology's Reed Slatkin


Restitution may come slowly for creditors



Hundreds of creditors will have to wait at least six months before recovering any money entrusted to bankrupt investment manager Reed E. Slatkin -- and they may recover only a few pennies on the dollar.

It will take considerable time and effort to thoroughly investigate what happened with investors' funds, then to find and collect all of Mr. Slatkin's available assets, said Richard Wynne, a Los Angeles attorney leading the creditors committee.

As the tedious process begins in earnest, the man at the center of it is cooperating and could save investigators time, said Brian A. Sun, one of Mr. Slatkin's attorneys.

"We believe a substantial amount of expense and time can be avoided if the parties sit down and work together," Mr. Sun said Wednesday from his Los Angeles law firm. "We are cooperating."

For example, Mr. Slatkin informed the creditors committee of certain assets that need timely examination, Mr. Sun said. That included notification that a deadline is approaching for Mr. Slatkin to purchase approximately 25,000 shares of EarthLink stock at less than $4 per share.

Shares of EarthLink, the large Internet service provider that Mr. Slatkin co-founded, closed Wednesday at $12.63. At that price, 25,000 shares would be worth about $315,000 which, Mr. Sun explained, could be turned over with other assets to repay creditors.

"That's an indication of the kind of cooperation we're willing to provide," Mr. Sun said.

"He is cooperating," Mr. Wynne said, "but we want much more cooperation."

While Mr. Slatkin is helping on some fronts, many other requests made to his lawyers have gone unanswered, Mr. Wynne added. Lists of his vehicles, boats, artwork, copies of sale and escrow documents, the contents of his safe deposit boxes, and much more are being requested by the creditors.

Mr. Wynne said he and his team do not believe it is prudent to rely on Mr. Slatkin's records in any case, so they are attempting to build an independent database of investor records.

Thousands of hours already have been expended in the investigation, Mr. Wynne said in a June 14 letter to hundreds of creditors and other interested parties.

"Two six-person teams, one in New Mexico, where one of Mr. Slatkin's bookkeepers resides, and one in Los Angeles and Santa Barbara, have been working for the last several weeks" reviewing boxes of documents, Mr. Wynne's letter said.

The initial analysis is expected to take several months, and it will be at least six to nine months before distributions can be made to general unsecured creditors, he added.

A small group of investors who have no means of support other than the funds they entrusted to Mr. Slatkin may get a small return sooner. Those people, Mr. Wynne said, are in dire need of prescription drugs or other medical treatment, and he believes the creditors committee is morally obligated to try to obtain funds for them first.

The estimates of creditors' total claims range from $300 million to $600 million, but it is impossible so far to know how many claims there are, or the value of the assets, Mr. Wynne said.

In his letter to creditors, he claimed that there is slightly more than $30 million in stock and brokerage accounts and there appear to be records of about $100 million that Mr. Slatkin put into real estate limited partnerships and other investments, Mr. Wynne's letter said.


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