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In re Calvert

United States District Court, W.D. Washington, Seattle

May 14, 2015

IN RE MARK CALVERT, AS BANKRUPTCY TRUSTEE FOR THE MERIDIAN INVESTOR TRUST

FINDINGS OF FACT & CONCLUSIONS OF LAW (THIS ORDER PERTAINS TO CALVERT V. KOOSHIAN, NO. C12-1594RAJ, AND TO THE CONSOLIDATED ACTION AS A WHOLE.)

RICHARD A. JONES, District Judge.

I. INTRODUCTION

The court heard this matter in a bench trial on October 27 and October 28, 2014. This order constitutes the court's findings of fact and conclusions of law, in accordance with Rule 52(a)(1) of the Federal Rules of Civil Procedure. The Clerk shall SEVER this case ( Calvert v. Kooshian, No. C12-1594RAJ) from this consolidated action, shall post this document in the severed case in addition to the consolidated case, and shall enter judgment for the Trustee, Mark Calvert, in the severed case.

Because this disposition resolves the last pending member case in this consolidated action, the clerk shall TERMINATE the consolidated action and any member case that remains open.

II. MEMORANDUM OF DECISION[1]

A. The Meridian Funds and Dr. Kooshian's Investment in Them

1. Darren Berg Operated the Meridian Funds as a Ponzi Scheme from the Inception of the First Fund.

In December 2004, Defendant George Steven Kooshian invested $1.7 million in a Ponzi scheme. In February 2012, this court sentenced the perpetrator of that scheme, Darren Berg, to 18 years in prison based on Mr. Berg's guilty pleas to counts of wire fraud, money laundering, and bankruptcy fraud. The principal vehicles for Mr. Berg's scheme were the Meridian Mortgage investment funds, funds he touted to the public as real estate investment conduits. In reality, the Meridian Funds (there were at least eight of them) had little or no real estate investment activity. From the inception of the first Meridian Fund, Mr. Berg used his investors' money to pay his personal expenses, purchase property for himself, and to fund other ventures. He kept an extensive series of falsified records. The trial testimony of Mark Calvert, who was appointed the bankruptcy trustee of the consolidated Meridian Funds (and other entities under Mr. Berg's control) in July 2010, established Mr. Berg's fraud at a level of detail that the court need not repeat for purposes of its decision today. His testimony was bolstered by the testimony of Randy Sugarman, an experienced accountant and certified fraud examiner whom the Trustee hired to review the Meridian Fund records and other records pertaining to Mr. Berg's scheme. Their testimony at trial was more than adequate to establish by a preponderance of the evidence that Mr. Berg operated the Meridian Funds as a Ponzi scheme from their inception in 2001, and that Mr. Berg defrauded investors in the Meridian Funds from the Funds' inception.

The testimony of the Trustee and of Mr. Sugarman is bolstered by Mr. Berg's plea agreement, which the court admitted into evidence. See In re Slatkin, 525 F.3d 805, 812 (9th Cir. 2008) (holding Ponzi scheme operator's plea agreement to be admissible in fraudulent transfer action despite hearsay objection). In that agreement, Mr. Berg admitted to using proceeds of the Meridian Funds for a variety of unlawful purposes. He also admitted that while he told his investors that he was using their money for various real estate transactions, he in fact used that money for his other business ventures as well as his personal expenses. He admitted to using his investors' funds to pay off earlier investors, but he also admitted to taking about $100 million of his investors' money for his personal benefit. Although the term "Ponzi scheme" does not appear in the plea agreement, the plea agreement serves as Mr. Berg's admission that he operated a Ponzi scheme from at least 2001 to 2010. See Slatkin, 525 F.3d at 812 (holding operator's plea agreement to be proof of a Ponzi scheme).

2. Dr. Kooshian's Relationship with Mr. Berg

Dr. Kooshian was a Meridian Fund investor, but he also had a personal relationship with Mr. Berg. They met in approximately 2002 because they had homes near each other near Palm Springs, California. By 2003, they began to socialize with some frequency. Dr. Kooshian and his partner accompanied Mr. Berg and his partner on a trip to Florida and the Caribbean Sea in 2004, along with several other people. Mr. Berg paid for at least a substantial portion of that trip. Dr. Kooshian flew several times in private jets with Mr. Berg. He spent at least one weekend aboard Mr. Berg's yacht. Mr. Berg paid for a trip to Fiji as a Christmas present for Dr. Kooshian in 2005. Dr. Kooshian became friendly with Mr. Berg's family, including his mother and sister. Dr. Kooshian had keys to Mr. Berg's home near Palm Springs.

Dr. Kooshian also performed services for Mr. Berg. He bought and sold vehicles for Mr. Berg. Dr. Kooshian, who was once a licensed physician, prescribed medicine for Mr. Berg and received large payments from him for medical services. He looked at investment property on Mr. Berg's behalf. He shared a gardener with Mr. Berg and often paid for the gardener's services. Mr. Berg frequently wrote Dr. Kooshian sizeable checks for these services.

3. Dr. Kooshian's Investment in the Meridian Funds from 2004 to 2009

Mr. Berg introduced Dr. Kooshian to the Meridian Funds with the promise of a fixed annual return of 12%, distributed in monthly payments, with the ability to withdraw the initial investment at any time. In December 2004, Dr. Kooshian invested $1.7 million in the Meridian Funds. At the time, Dr. Kooshian estimated his net worth at between $4 million and $5 million. The Meridian investment was, by a factor of nearly 20, the largest single investment he had made in his life. Prior to making the investment, he asked Mr. Berg many questions and also asked many questions of Mr. Berg's partner. He looked at the website Mr. Berg created for the Meridian Funds. It is not clear if he reviewed any documents. He signed one document when he made the investment, but he did not receive a copy of it despite asking Mr. Berg for a copy. He received no statements or any other documentation of his investment. Although Dr. ...


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