Scientology's Reed Slatkin

Slatkin assets help pay for lawyers working against him
Santa Barbara News-Press

The legal team that uncovered the scope of the $593 million Reed Slatkin financial scandal will receive its first payments since beginning to unravel the massive case last May.

U.S. Bankruptcy Court Judge Robin Riblet on Wednesday awarded approximately $2.8 million to seven of the eight legal firms and consultants, who had requested $4.4 million in fees and expenses.

Money to pay these bills comes out of the Slatkin estate. Its assets -- ranging from stock to a wine collection to Mr. Slatkin's real estate holdings -- are being discovered and sold to raise money, some for legal expenses and some to repay investors.

Although the money comes from a common pool, no one objected because the creditors are impressed with the efforts of former FBI agent and court-appointed trustee R. Todd Neilson and his team, plus Richard Wynne's team at the Los Angeles law firm Kirkland & Ellis.

"Without this effort, there would be no way for the innocent victims to gain any recovery at all -- so that's why it's been a bargain," said John Poitras of Santa Ynez, who lost $15 million to Mr. Slatkin. "I told both Todd (Neilson) and Rick (Wynne) way back that I was very happy they were leading our team -- it is even more true today. This whole thing could have easily gotten out of control and been a complete failure in lesser hands."

Mr. Poitras, who reviewed all of the expenses and fees, said he is "extremely pleased" with the performance of the entire team.

"I believe the costs are reasonable, if not a bargain," he said.

More expenses are coming, but do not include fees for any of the attorneys defending Mr. Slatkin. Investors stand to receive only a fraction of their investments, minus legal expenses -- all of which are a matter of public record.

The sizable sums reflect the nature of the case: 2 million documents, about 800 victims, more than 7,000 hours of investigation, and numerous assets to evaluate and sell, all without significant cooperation from Mr. Slatkin.

Among the assets recently sold was Mr. Slatkin's wine collection, which was appraised at $35,000 but sold for $133,614.

Mr. Neilson said Wednesday that he has purchase offers for Mr. Slatkin's Goleta house on Kellogg Avenue and for a property near Solvang.

Mr. Neilson also sold some of Mr. Slatkin's EarthLink stock for $3.2 million. He plans to sell millions of dollars of additional EarthLink stock this year.

Mr. Slatkin spent 15 years perfecting and perpetrating a scheme that eventually took in $593 million from about 800 people, investigators said, including Hollywood celebrities, Internet moguls and hundreds of families who entrusted him with their life savings, college tuition and retirement funds.

These revelations are in a December report detailing the inner workings of the scheme, run since 1986 by Mr. Slatkin from his Goleta office and Hope Ranch estate. A News-Press review of court records found approximately 75 people in Santa Barbara County among the investors.

Mr. Slatkin received $593 million from investors from 1986 to 2001 and distributed $535 million to investors, the report said. That left $59 million. However, 450 investors received $195 million more than they invested, so, adding the two sums together, investigators believe Mr. Slatkin duped people out of $255 million.

Mr. Slatkin has not been charged with any crime. While he has provided limited assistance to investigators, the trustee said, he has not agreed to formal questioning under oath. Mr. Neilson said he will continue investigating and seeking more assets, and wants to have a liquidation plan ready by April.


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