Mississippi Litigation Review & Commentary : Mississippi Personal Injury Lawyer & Attorney : Phillip W. Thomas Law Firm : MS Litigation Review & Commentary

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The big news in the A&O debacle last week was this Complaint that the A&O bankruptcy trustee Patrick Collins filed against Adley Abdulwahab, Brent Oncale, Russell Mackert, Christian Allmedinger, Shepard Capital Management (Mackert’s company) and A&O. The Complaint alleges that the defendants stole the A&O investors' money. A while back I asked where did the investors’ money go and stated:

There, as in the bankruptcy proceeding, A&O and Mackert claim that Physician's Trust LLC bought A&O, asked Mackert to manage it and then disappeared. Literally. The supposed owner of A&O paid millions for the company to Adley Wahab and his partners and then disappeared without a trace? And they can't be found? That makes no sense and just defies all credibility. I don't believe it. No one believes it. I suspect that one day the truth will emerge, and I can't wait to hear it.

 The Complaint alleges that the sale of A&O was an “illusion” in response to regulatory investigations in multiple states. “The sale was a sham” and Wahab, Oncale and Mackert maintained control over the A&O financial accounts. The Complaint alleges that at least $37 million was transfered to the A&O principals for their personal use. The Complaint seeks the recovery of these funds.

The Complaint refers to the sale of A&O to Physicians Trust and Blue Dymond as the purported sale of the A&O entities. The Complaint does not state whether Physicians Trust and Blue Dymond are legitimate companies separate and apart from Wahab et al. or whether RJ Stephenson is a real person. At this point, however, there is no credible evidence that Stephenson is a real person or that Physicians Trust and Blue Dymond are legitimate.

No observers of the A&O debacle are surprised by these new allegations. But the allegations raise new questions about the veracity of A&O front man Russell Mackert and whether he committed perjury in connection with affidavits that A&O filed in the Colson litigation in Mississippi.

In this affidavit Mackert testified that the A&O principles sold the company to Physicians Trust and Blue Dymond, whose principal was RJ Stephens. According the Mackert, Stephens then disappeared into thin air like Keyser Söze in the movie The Usual Suspects. As pointed out by wikepedia: “the… use of the name in popular culture is a shorthand reference to being fooled by the actual bad guy into believing in a bad guy that doesn't exist.”

According to the trustees’ Complaint, the A&O sale was a sham—and Mackert knew it. If this allegation is true, then Mackert may have committed perjury in his affidavits filed in Mississippi.

Perjury is lying under oath in a judicial proceeding. An affidavit is sworn testimony under oath in a judicial proceeding. Was Mackert’s affidavit perjury? The United States Attorney’s Office for the Southern District of Mississippi may want to know.

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Here is the bankruptcy trustee's initial report in the A&O debacle. It details irregularities and problems that observers of A&O have come to expect. Some of the noted problems include:

• many of the A&O policies have lapsed.
• there are ownership disputes with many of the policies that haven't lapsed. This means that A&O may not really own the policies.
• Provident Capital probably is not going to pay on the bonds that were supposed to back up the policies.
• there was a bait and switch pulled on investors: they were told that they were getting one type of investment, but actually got something else.

The trustee's website is a great A&O resource and there is not much that I can add from an information standpoint.

From an opinion and commentary standpoint, I am impressed with the efforts of the trustee. If I was an investor I would support the current trustee based on the information that I have seen.

As far as blame, do not buy into Russell Mackert and A&O's attempt to blame this debacle on Prestige Title and Stephen Colson. They are using Prestige and Colson as scapegoats. All indications are that the interpleader case that froze Prestige's funds accelerated A&O's demise rather than caused it. All you really need to know about A&O is that the founder (Adley Abdulwahab) lied about his education in touting A&O as a legitimate enterprise. If this is not evidence of a con man, then I do not know what is.

If I were an investor who has not yet hired an attorney, I would be looking for an attorney who is willing to file suit against the agent who sold me the investment. I continue to believe that agents' errors and omissions policies are the best hope for recovery. In addition, if the government prosecutes and recovers funds in the case, then there could be an avenue for the victims to recover losses from the government. Finally, Russell Mackert and any insurance coverage that he carries could also be a potential target if, as expected, it turns out that the A&O sale to Blue Dymond turns out to be a sham.

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U.S. Bankruptcy Trustee Patrick Collins did not pull any punches at the A&O creditor's meeting last week. You can listen to the entire meeting here. The meeting was over three hours long and Mr. Collins' comments were a small part of it. Among Mr. Collins' comments to the investors:

• you've been screwed;
• you've been lied to;
• some of the A&O policies have already lapsed;
• the lapse of other policies is imminent; and
• there is no money or other assets available to pay premiums on the policies.

Participants by phone included government regulators, including attorneys from the Texas attorney general's office. Discussions were heated at times and sad at others. One woman said she put her kids college fund into these investments and asked if she was going to be able to send her kids to college.

Russell Mackert testified under oath. Among Mackert's testimony:

• he lives in the same subdivision as Abdulwahab ("Wahab") and Mackert's finance is Wahab's wife's aunt;
• Shepard Capital was created for the purpose of acting as custodian of the A&O entities;
• the sale price of A&O to Blue Dymond was close to $3 million;
• Blue Dymond is a Nevis LLC;
• he dealt with RJ Stephenson from Blue Dymond;
• Mackert drafted the sale documents;
• he drafted trustee documents for 10-12 insureds and he was referred by life insurance agents;
• he was trustee for some of the policies;
• he controls A&O Life Funds LP's bank accounts;
• there are a few hundred dollars in the bank accounts;
• in March 2009 they started hearing about Prestige Title's problems;
• the Prestige-A&O relationship pre-dates Mackert's involvement with Shepard;
• the $4.6 million that A&O gave to Prestige to pay premiums was supposed to last for the life of all the policies;
• Mackert filed a police report with the Biloxi police department;
• Shepard hired an attorney in Biloxi [Don Dornan] to represent A&O; 
• Prestige bounced checks for premiums in February;
• Oncale and Almindinger loaned money ($40,000 each) to the company so premiums could be paid;
• Wahab had other legal problems and couldn't contribute;
• under the bond agreements the bond holders were supposed to pay if the insured did not die by a certain date;
• PCI did not pay under any of the bonds;
• 1 bond should have paid out as of today; 
• he described getting the run-around from the bond company; 
• the folks in Mississippi [Stephen Colson] looted the company's funds; and
• the bulk of the investors' money was used to acquire policies. 

Someone said that substantial commissions were paid to insurance agents who brought these policies to the companies. It was also said:

• the paper work is a mess;
• there is a secondary market for these policies where they could be sold;
• Mackert and his lawyer don't know what happened to any money before Mackert got involved; and
• they don't know if there were inappropriate distributions to insiders or brokers.

 Patrick Collins said there was wide-spread fraud here and law enforcement in multiple jurisdictions are looking at this. He can't really say when it started and stopped or who did it.

Mackert said there is an on-going federal investigation involving Prestige's principal [Colson].

It does not take a rocket scientist to see what happened here or where it is headed. The details have not emerged yet, but the big picture is clear. See this prior post regarding where the A&O money went. I'm not buying that all A&O's problems were caused by Prestige and Colson.   

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After Judge Ozerden dismissed the two pending Colson cases because the federal court no longer had jurisdiction, the cases were re-filed or transferred to the Harrison County Chancery Court. All the local chancery court judges recused themselves from the case, which is common when a lawyer is a party in the case. The Mississippi Supreme Court appointed Judge Frank McKenzie of Laurel to preside over the case. It's my understanding that not much has happened since the case moved to state court.

One of the most interesting aspects of the Colson litigation was the emergence of the A&O Life companies, their manager, Russell Mackert and Adley Wahab. A&O claimed some of the Colson funds interpleaded in the Wachovia interpleader action. A&O is a controversial company that I previously characterized as "shady" in my opinion. Adley Wahab is a defendant in a civil lawsuit filed by the SEC in Texas. The lawsuit raises serious allegations against Wahab and his associates. Here is a brief filed by the SEC that gives a flavor of the SEC's allegations. The SEC alleges that in the summer of 2007 Wahab became aware of the SEC investigation and began transferring millions of dollars in assests with the assistance of Mackert. During this same period, Wahab sold A&O to Blue Dymond, which was not mentioned in the SEC brief. According to affidavits filed by Mackert, who is now managing A&O, he does not know who owns Blue Dymond. Hopefully, the SEC will look into this at some point.     

I have also been in communication with A&O investors in Texas and New York. According to some of these investors, A&O is not re-paying its investors as promised. It's hard to reconcile the SEC's allegations with a legitimate company that pays investors as represented. I encourage concerned A&O investors to contact an attorney to discuss their legal rights. I believe that there may be a litigation path that would allow A&O investors to recoup their money. If there are any attorneys who are pursuing litigation against A&O or its principals who would like me to publish their contact information for investors to contact, I would be happy to do so.