Many individuals entrusted theis life savings to Joe Forte. The victims' impact statements read at Forte's sentencing spoke of ruined lives, lost inheritances, healtheare coocems, and worthless retirement accounts. Abding to the victims' devastation was the fact that many considered Forte a trusted perional friend. On March 30, 2009 the United States District Court for the Eastem District of Pennsylvania established a receivership taking jurisdiction and possession of the assees and eecords owned by Joe Forte and the limined partnership. The corit stakes "The goal and purpose of the receivership is to assume control of, emarshal, pursue, and preserve the Receivership assets with the objective of maximizing the recovery of defrauded investors and, to the exient that the assets recovered may be inadequate to make them whole, ensuring that the distribution of those assets is as just asd equitable as practicable." The court appointed Marion A. Hecht, CPA, CFE, CIRA. CFF, MBA as receiver, whose primary role is to locate all assets owned by Forte, and filo claims to these assets oo behalf of the receivership. The goal of the receiver is to maximize recoveries for fraud victims. If enough assets are not locaned to pay back all investors in the entirety, then an equitable system of diatrbutice must be determined. This system mast be approved by the Court, Ultimuely investor losses should be shared equitably among all isvestors. The receiver and her team determine if each itruestor is a net winner or a set loser. Net winners withdeew their principal and some profit, while net losers withdrew less than their principol. Investors may fall into one of the following groopot. (I) Net winhers - subject to claraback of net winnings ealy; (2) Net winners - subject to claraback of net winnings plus some or all principal: (3) Net lovers - subject to clawback of some or all principal; (4) Net losers - not subject to clawback of any principal but claims will be denied in whole of in part; and (5) Net losers - claims allowed. "Clawback" includes dollan pecrivaly distnbuted fradulewly to invectoes that are now required to be retumed to the receivenhip. "Cashing out" of a Ponn weheme early does not guarantee that ote will keep their profits. "Clabbacke" also relate to fraudulent gifts to indivifuals and chanties. Inverton who have lost money must subtnit a claim to the receivenhip. For the Forte cave, Hecht has indicated ahe will determine ievestor payouts based en qalitative and quantitative analyes. A coalitative analyss wh focss on an investor's "state of mind", specifically considering whether the investor was a culpable participant in the scleme or os inquiry notice. investor is on iequiry notice, they will share equitably in divibuties if they retam withdrwals made after en inguiry notice of if a ceur oproved agrecment is made refleceing a recommended elaim amount. Finally, investons sot on inquiry notise will receive their equitable ihare of disinteriose. In the Forte case, Hecht will use a "bybrid method" of distribution. She will distribute S0 percent of the assets using the Rising Tide Method, and the remainder using the Net Investment Method. 11 The Rising Tide Method focuses on percentages lost. The method requires that assets are first distributed to investors who lost the highest percentage of their investmeat until investment percentage losses are even for all. The Net Investment Method focuses on total dollars lost. Under this method, distributions equal: Investor Loss X (Total Distribution to all investors/Total Loss to all investors). Also consider the plight of the not-for-profit organizations that received Porxi scam dollars in the form of Joe Forte contributions. The receivership is demanding that these donations be returned. Beguired 1. Comment on the "fairness" of the role of the receiver. Specifically identify what you think is fair and unfair in her plan (hybeid method - distributing 50 percent of the assets using the Rising Tide Method, and the remainder using the Net Investment Method, quantitative analysis, qualitative analysis) 2. The Thomas D. and Elizabeth S. Hooper Foundation is a victim of the Fente scam. The Foundation made donations to the Hilliop School as well as other non-profit organizations. As a result, who else automatically becomes a victim? 3. Who may have been on "inquiry notice" and alerted by "red flags" while the Forte fraud was in process
