http://news.newspress.com/toplocal/slatkins0621.htm

Slatkin's assets targeted in probe

Investments: Hope Ranch home could help in repaying army of creditors

6/21/01

By MARK VAN DE KAMP

NEWS-PRESS STAFF WRITER

Bankrupt investment manager Reed E. Slatkin could lose his Hope Ranch
estate and other property, more than $1 million in artwork and
collectibles, and even his La Cumbre Country Club membership as a
bankruptcy trustee's team continues to track and seize his assets.

Digging deeper into Mr. Slatkin's records, the team led by
court-appointed trustee R. Todd Neilson of Los Angeles is aggressively
trying to piece together an accurate picture of his financial affairs by
July 23 and take title of his assets, which would eventually be sold to
reimburse creditors.

Federal regulators allege that Mr. Slatkin defrauded hundreds of people
of at least $230 million through his unregistered investment advisory
business. Attorneys this week revised upward the number of creditors to
as many as 850 from an earlier figure of 500, and they maintain that
claims could reach $600 million.

Approximately 75 of the creditors live in Santa Barbara County,
according to a News-Press review of newly filed court records.

As a prelude to possible sale, the trustee inspected Mr. Slatkin's Hope
Ranch home Wednesday afternoon to evaluate how well the buildings and
property are being maintained. That property at 4480 and 4484 Via
Esperanza is assessed at $3.4 million, but properties typically sell for
much more than their assessed values.

A 100-acre undeveloped property owned by Mr. Slatkin in the Santa Ynez
Valley also has been inspected.

The trustee's team is also reviewing procedures for selling Mr.
Slatkin's membership at La Cumbre Country Club in Hope Ranch., which is
graced by tennis courts and an 18-hole golf course. A club official said
regular memberships, when sold, typically command more than $100,000.

The trustee's team has learned that Mr. Slatkin owns numerous valuable
collectibles, including art by painters Albert Bierstadt and Thomas Hart
Benton. In a letter to Mr. Slatkin's attorneys, the trustee demands
those pieces and other works be turned over to him immediately.

Mr. Slatkin voluntarily declared Chapter 11 bankruptcy on May 1, listing
debts in excess of $100Êmillion. Creditors, attorneys and the
court-appointed trustee have expressed frustration that he has not met
court requirements to provide a complete list of his assets, expenses
and financial affairs in the seven weeks since then.

Now the trustee's team is busy gathering that information. In addition
to the property inspections, it is reviewing approximately 320 boxes of
Mr. Slatkin's documents that were turned over by federal agents and an
accounting firm.

Chapter 11 allows a debtor to remain in possession of his assets, at
least temporarily, while he attempts to reorganize.

As of this week, Mr. Neilson has identified an "extensive list of
securities, mortgages and promissory notes" that apparently are not in
brokerage accounts and has demanded they be turned over. He also has
ordered 39 brokerage firms and banks to freeze all of Slatkin's accounts
and turn over all liquid assets, according to court filings.

Hundreds of creditors will be invited to a July 30 meeting in Santa
Barbara, perhaps at a hotel or the U.S. Trustee's Office, to discuss the
case. Many creditors, some of whom individually entrusted Mr. Slatkin
with more than $1 million, are wondering how much they will recover;
their attorney has warned them that it may be pennies on the dollar.

Mr. Slatkin is an eight-year Hope Ranch resident and a co-founder of
EarthLink, a large Internet service provider. He resigned from its board
of directors in April.

Mr. Slatkin, who is not registered as a financial adviser, has said that
he was running an investment club for friends and acquaintances, not a
business. He began his activities in 1985, collecting money from
friends, business partners and fellow members of the Church of
Scientology, according to court documents, attorneys and regulators.

Investors say he promised big returns -- as much as 60 percent per year
-- but federal investigators suspect he merely repaid some people with
money coming in from later investors, a type of fraud known as a Ponzi
scheme.

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