Ohio Department of Commerce v. Joanne C. and Alan C. Schneider
August 26, 2016: On August 26, 2016, the Receiver, Matthew L. Fornshell, filed his Supplement to Receiver’s Reports filed December 4, 2015, and August 1, 2016, with the Court.
August 2, 2016: On August 1, 2016, the Receiver, Matthew L. Fornshell, filed his Receiver’s Report to the Court Pursuant to L. Rule 26(B) with the Court.
April 12, 2016: On April 11, 2016, the Receiver, Matthew L. Fornshell, filed his Receiver’s Report to the Court Pursuant to L.Rule 26(B) with the Court.
April 7, 2016: On April 6, 2016, the Receiver Matthew L. Fornshell, filed his Receiver’s Application for the Payment of Administrative Claims with the Court.
February 12, 2016: On February 11, 2016, Honorable Judge Jose A. Villanueva of the Cuyahoga Common Pleas Court entered three Orders on this matter: 1) Order Denying CCI’s Supplemental Motion for Summary Judgment; 2) Order Denying the Home Savings and Loan Company’s Supplemental Motion for Summary Judgment; and 3) Order Finding the City of Parma Heights’ Special Assessment is not Valid.
December 4, 2015: On December 4, 2015, the Receiver, Matthew L. Fornshell, filed his Receiver’s Report to the Court Pursuant to L. Rule 26(B) with the Court.
August 5, 2015: On August 5, 2015, the Receiver, Matthew L. Fornshell, filed his Receiver’s Application for the Payment of Administrative Claims and his Receiver’s Report to the Court Pursuant to L.Rule 26(B) with the Court.
November 19, 2014: The Receiver, Matthew L. Fornshell, filed his Receiver’s Application for the Payment of Administrative Claim and Receiver’s Report to the Court Pursuant to L. Rule 26(B) with the Court.
July 16, 2014: The Receiver, Matthew L. Fornshell, filed his Receiver’s Application for the Payment of Administrative Claims with the Court today.
July 14, 2014: The Receiver, Matthew L. Fornshell, filed his Receiver’s Report to the Court Pursuant to Local Rule 26(B) with the Court today.
April 16, 2014: The Receiver, Matthew L. Fornshell, filed his Receiver’s Application for the Payment of Administrative Claims and Receiver’s Report to the Court pursuant to L. Rule 26(B) with the Court today.
December 11, 2013: The Receiver, Matthew L. Fornshell, filed his Receiver’s Report to the Court Pursuant to L. Rule 26(B) and Receiver’s Application for the Payment of Administrative Claims with the Court today.
August 23, 2013: The Receiver, Matthew L. Fornshell, filed his Receiver’s Application for the Payment of Administrative Claims with the Court today. July 23, 2013: The Receiver, Matthew L. Fornshell, filed his Receiver’s Report to the Court Pursuant to L. Rule 26(B) with the Court today.April 30, 2013 - The Receiver, Matthew L. Fornshell, filed his Brief in Opposition to City of Parma Heights’ Motion for Leave to File Motion for Summary Judgment Instanter with the Court today.
April 18, 2013 - The Receiver, Matthew L. Fornshell, filed his Receiver’s Report to the Court Pursuant to L. Rule 26 (B) with the Court today.
March 7, 2013 - The Receiver, Matthew L. Fornshell, filed his Motion to Approve Certain Investor Distributions and to Deny an Additional Distribution with the Court today.
December 18, 2012 - Numerous investors have telephoned the Receiver in recent weeks seeking an update or status report regarding the receivership. To that end, the receivership remains in effect until lien priority and validity issues are resolved among those entities claiming to have a security interest in some or all of the remaining funds held by the Receiver. The Eighth District Court of Appeals recently affirmed an earlier decision by Judge Villanueva finding the Home Savings Bank has a first priority position with respect to certain properties that previously comprised the Cornerstone development. Home Savings Bank has sought additional clarification from the Court of Appeals regarding that decision. It is unknown if other entities claiming a security interest in the Cornerstone properties will seek a further appeal of that decision. Additionally, motions for summary judgment remain pending regarding the validity of liens filed by entities claiming to have security interest in the Cornerstone properties.
As indicated in the Receivership Report filed on December 13, 2012, as of November 30, 2012, the Receivership is currently holding total deposits of $8,460,878.93. These deposits cannot be disbursed to any creditors of the Receivership until the pending litigation among the purported secured creditors is resolved. Given the nature and extent of the secured creditor claims, the Receiver does not believe that much, if any, of the remaining Receivership assets will be available for distribution to unsecured creditors of the Receivership, including former investors of the Schneiders. Until the claims of the purported secured creditors are resolved, the Receiver anticipates little activity in the Receivership and will, therefore, not be posting periodic updates. Interested parties should assume that the lack of future updates means that there is nothing new to report. Please do not attempt to telephone the Receiver directly as he will have nothing new to report and doing so merely adds to the expense of the Receivership estate.
December 18, 2012 - On December 14, 2012, the Receiver, Matthew L. Fornshell, filed his Receiver’s Application for the Payment of Administrative Claims with the Court.
December 13, 2012 - On December 12, 2012, the Receiver, Matthew L. Fornshell, filed his Receiver’s Report to the Court Pursuant to L. Rule 26(B) with the Court.
August 13, 2012 – The Receiver, Matthew L. Fornshell, filed his Application for the Payment of Administrative Claims with the Court today.
July 9, 2012 – The Receiver, Matthew L. Fornshell, filed his Receiver’s Report to the Court Pursuant to L. Rule 26(B) with the Court today.
July 6, 2012 - The Receiver, Matthew L. Fornshell, filed his Motion to Reinvest Real Property Liquidation Accounts with the Court on this date.
May 15, 2012 - The Receiver, Matthew L. Fornshell, filed his Receiver’s Motion to Transfer Unclaimed Funds with the Court on this date.
April 18, 2012 - The Receiver, Matthew L. Fornshell, filed his Application for the Payment of Administrative Claims with the Court on this date.
April 12, 2012 - The Receiver, Matthew L. Fornshell, submitted his Report ot the Court pursuant to L. Rule 26(B) on April 12, 2012, with an update of the receipts and disbursements relating to the operation of the Receivership. The Report can be viewed by clicking this: http://schneiderreceivership.com/wp-content/uploads/2012/04/columbus-_4077081-v1-receiver_s_report_filed_4_12_12.PDF
February 3, 2012 - Numerous investors have recently inquired about whether or not the receivership will be issuing a Form 1099 to investors who received a distribution from the receivership in 2011. The Receiver has considered the issue and has determined that the issuance of a Form 1099 to investors is not required since the distribution is considered to be a return of principal. However, the receivership cannot give tax advice and recommends that individuals having questions about this issue consult with their account or other tax professional. Recently, several investors have requested copies of their investment documents. Going forward, the receivership will not incur the expense of making and sending copies of paperwork to Schneider investors.
December 27, 2011 - In response to inquiries from several investors regarding the potential for further distributions, please note that we do not expect that any additional funds will become available for distribution to the unsecured creditor investors. In the unlikely event that additional funds were to become available, such funds would be nominal in amount and payable across the entire class of unsecured creditors, not just to unsecured investor creditors. Many investors have also contacted my office with tax related inquiries. We cannot provide tax advice, and recommend that you consult with a lawyer or tax professional.
December 13, 2011 – On December 12, 2011, the Receiver mailed disbursements to investors of their pro rata share of proceeds from the FirstMerit Settlement Fund.
November 17, 2011 – On November 16, 2011, Judge Villanueva issued a Journal Entry approving the Receiver’s Motion for Approval of Final Proposed Schedule of Allowed Unsecured Claims of Investors. The November 16, 2011 Journal Entry can be viewed Here.
Please be assured that the Receiver and his staff are working hard and disbursements to the investors of their pro rata share are expected to be made before year’s end. The Receiver cannot provide the exact date that disbursements will be mailed, so please do not contact the Receiver, his staff, or his attorneys, seeking this information.
October 11, 2011 — On October 7, 2011, the Receiver filed his Motion for Approval of Final Proposed Schedule of Allowed Unsecured Claims of Investors. In his Motion, the Receiver requested that the Court: (1) approve the Final Proposed Schedule of Allowed Unsecured Claims of Investors; and (2) authorize disbursement to Investors of their pro rata share of proceeds from the FirstMerit Settlement Fund.
September 19, 2011 — The time period to appeal the Court’s order approving the FirstMerit settlement expired on September 15, 2011, with no appeals having been filed. Accordingly, pursuant to the terms of the FirstMerit Settlement Agreement the settlement has now become “final.” The Receiver is actively working to resolve final objections to the proposed list of Allowed Investor Claims. It is the Receiver’s objective to file a motion with the Court before September 30th seeking the Court’s approval of Allowed Investor Claims as well as the proposed distribution to those investors from the FirstMerit settlement. Once the Court approves the list of Allowed Investor Claims the Receiver will be authorized to distribute the FirstMerit settlement payment to those investors with approved claims. The Receiver cannot provide an exact date when this will happen because the Court’s schedule will dictate when a ruling will be issued, so please do not contact the Receiver or his staff seeking this information. As always, please continue to monitor this website for the most current information.
August 30, 2011 — On August 29, 2011, Judge Villanueva issued a Judgment Entry granting the May 27, 2011 Motion of Defendant The Home Savings and Loan Company of Youngstown, Ohio to Partially Vacate the Opinion and Order Regarding the Priority of Liens Dated May 16, 2011. The Judgment Entry makes certain corrections to the May 16, 2011 Opinion and Order and concludes that Home Savings and Loan Company has priority of its liens as against all lienholders. The full text of the August 29, 2011, Judgment Entry may be viewed here.
August 17, 2011 — On August 15, 2011, Judge Villanueva conducted an evidentiary hearing to determine the reasonableness and fairness of the proposed FirstMerit settlement. On August 16th, Judge Villanueva issued an Order approving the FirstMerit Settlement Agreement finding that it is fair and reasonable.
As a result of the Court’s Order approving the Settlement Agreement, Schneider investors with claims approved by the Court on a future date will receive a disbursement from the settlement fund. The gross amount of the settlement fund is $10.5 million. That amount will be reduced by 25%, plus litigation costs, to compensate and reimburse the lawyers that diligently pursued this litigation for the benefit of investors. That reduction has yet to be finalized, but it will be at least $2.625 million.
The Settlement Agreement requires FirstMerit to pay the Receivership the full amount of the Settlement Payment within 5 business days of the Court’s order, so on or before August 23, 2011. However, the Receivership cannot distribute the Settlement Payment to anyone until the period to appeal the Court’s Order approving the Settlement Agreement has expired. The Receivership believes that the time to appeal the Court’s Order approving the Settlement Agreement will expire on September 15, 2011.
Assuming no appeal is filed, the Receiver will complete his work determining the validity of investor claims and will present the Court with a final proposed schedule of allowed investor claims for its approval. If the proposed schedule of allowed investor claims is approved by the Court, the Receiver will thereafter begin processing checks to investors for their distributive share of the Settlement Payment. It is impossible for the Receiver to provide an exact date upon which disbursements will be made, but it is the Receiver’s goal to make all such distributions before the end of 2011.
If, however, an appeal to the Court’s Order approving the Settlement Agreement is filed, then no distributions will be made until such an appeal is resolved. Again, the Receiver cannot predict how long it might take to resolve such an appeal, but it would very likely extend into 2012.
Please continue to visit this website for further updates as they become available. Calling the Receiver or his counsel will not result in additional information and will only increase the expense to the Receivership.
July 20, 2011 – On July 20, 2011, the Receiver and FirstMerit filed a Joint Motion For Approval of Negotiated Settlement. A copy of the Settlement Agreement is attached as Exhibit 1 to the Joint Motion. The Court has scheduled a hearing on the Joint Motion for Monday, August 15, 2011 at 2:00 p.m.
The Receiver will serve notice of the hearing and the terms of the settlement upon all Investors included in the Proposed Schedule of Allowed Unsecured Claims of Investors filed with the Court by the Receiver on June 30, 2008. A copy of the Notice may be viewed here. The Notice sets forth the procedures and schedule for Investors to object to or comment in favor of the proposed settlement, to address the Court at the scheduled hearing, or to decline to participate in the settlement.
Pursuant to the Settlement Agreement, FirstMerit shall pay Ten Million Five Hundred Thousand Dollars ($10,500,000.00) in exchange for: (a) dismissal with prejudice of all claims alleged in this action on behalf of the Receiver and the Investors; (b) a release of all claims that Investors participating in the settlement might have against FirstMerit arising from or related to their investment with the Schneiders; and (c) an order that permanently bars, enjoins, and restrains the Investors (except for the Young Plaintiffs and any Investors who decline to participate in the settlement) from pursuing any such claims against FirstMerit.
The Receiver estimates that, after payment of fees and expenses, the settlement will provide Investors with approximately seventeen percent (17%) of the Proposed Schedule of Allowed Unsecured Claims of Investors filed with the Court by the Receiver on June 30, 2008. This settlement is intended to benefit those Investors included in the Proposed Schedule of Allowed Unsecured Claims of Investors filed with the Court by the Receiver on June 30, 2008, which can be viewed here. Investors will remain eligible to receive further distributions, if funds become available from other sources.
June 10, 2011 — On May 16, 2011, Judge Villaneuva issued an Opinion and Order deciding issues raised in the various motions for summary judgment filed by parties claiming secured status in connection with the Cornerstone Properties: the “Ruby Property” (Permanent Parcel No. 473-24-012), the “Garnet Property” (Permanent Parcel No. 473-25-086), and the “Pearl Property” (Permanent Parcel Nos. 473-25-001, 473-25-005, and 473-25-008). In the Opinion and Order Judge Villanueva made the following determinations: (1) the previously established 10% secured creditor allocation has priority over all other parties claiming a secured interest in the litigation; (2) Home Savings and Loan Company is entitled to priority as to the Ruby Property and the Garnet Property; (3) the Lienholders (defined as Cleveland Construction, Inc., Harrington Electric Company, and all other contractors, subcontractors, materialmen, or laborers) are entitled to priority as to the Pearl Property; and (4) the City of Parma Heights is not entitled to assert a claim of priority as against Home Savings and Loan Company or the Lienholders.
On May 27, 2011, Home Savings and Loan Company filed a motion seeking to partially vacate the Opinion and Order. On June 1, 2011, Cleveland Construction, Inc. filed its opposition to Home Savings and Loan Company’s motion.
The Opinion and Order also set a pretrial conference for June 17, 2011 at 11:00 a.m. for the purpose of addressing all remaining issues related to this litigation, including issues relating to the validity of liens and the disbursement of funds in the control of the Receiver, and to establish a framework for resolving all other outstanding factual and legal matters.
The Opinion Order can be viewed here.
April 21, 2011 — Significant progress has taken place in the Receiver’s lawsuit against FirstMerit Bank since I last posted on this subject on February 14, 2011.
In late February, Judge Villanueva granted my motion to set a new final pre-trial conference, and it was scheduled and held on April 14, 2011. At the hearing, the Court indicated that it was going to deny FirstMerit’s motion to have the case thrown out before trial. In their written motion and at the hearing, FirstMerit argued (among other things) that the Receiver was legally prohibited from pursuing investors’ claims against the bank. In denying the motion, Judge Villanueva was effectively confirming the authority he gave me to pursue these claims almost five years ago. Now the claims can proceed to trial, which the Court scheduled for September 7, 2011. My lawyers and I have a lot of preparation to complete before the trial starts, but we feel as if we did all the necessary investigation and will be ready to proceed. I intend to testify, and I retained two very qualified experts to testify about the bank’s conduct. I have also identified a group of investors to act as witnesses at the trial. Those who are listed have already been contacted by my lawyers. I obviously cannot call as a witness every one of you, which would make trial unnecessarily long, but I chose investors who were willing to testify and who represented a broad cross-section of the total. The courtroom is clearly not big enough to handle the number of people who may wish to watch, but for those investors interested in attending the trial you are certainly welcome to come to Judge Villanueva’s courtroom and claim a seat in the gallery. It is also my intention to periodically post updates about the trail’s progress on this website, so I recommend that you visit periodically as I will not be available to return calls or emails during the trial.
In another interesting development, many of you have seen in the news that the trustee for Bernie Madoff, the New York financier who was recently convicted of operating a Ponzi scheme, has filed a lawsuit similar to mine against several large financial institutions on behalf of those defrauded investors. I will be monitoring that case to see where it leads.
The other case against FirstMerit which is being pursued by several Schneider investors on their own has died in the Court of Appeals, at least insofar as it purported to be a lawsuit on behalf of all of you. I still do not know if those investors intend to pursue a further appeal to the Ohio Supreme Court. However, I was told at the final pre-trial hearing that the lawyer for those investors intended to contact each of you and ask you to hire him so that he could represent you personally. I do not know if that will happen or not. Regardless, I intend to pursue claims on your behalf, and at this point, my case is the only claim against FirstMerit still pending on behalf of all investors.
I also learned that FirstMerit has about $20 million of insurance which may cover our claims. The two insurance companies have denied that their policies cover the claims and FirstMerit is fighting for coverage in a separate process. This particular development should not delay our trial date, but I thought you should know.
Finally, FirstMerit has threatened to try to move our case to another judge, yet again. I will not be surprised if such a motion is filed, but it is procedurally the kind of motion that can be ruled on in time to avoid a further postponement of trial. Although I cannot say with absolute certainty that FirstMerit will not be successful in delaying this trial yet again, at the moment we are prepared to try this case beginning September 7, 2011.
February 14, 2011 — Several investors have written or telephoned me in recent weeks inquiring about the status of the receivership in general and specifically about the First Merit litigation.
The receivership continues to remain in a holding pattern while Judge Villanueva considers arguments from various creditors regarding their respective claims to the balance of the proceeds realized from the sale of the Schneiders’ assets. The Judge must determine which creditors are entitled to receive some or all of the more than $8 million which has been held in escrow for several years now. That money has been invested, and reinvested, into a series of insured bank CDs in an effort to preserve capital, while yielding some small rate of return on the principle. I do not know when the Judge will issue his decision.
As was disclosed in December 2010, the First Merit litigation was returned from federal court at the end of November and is now back with Judge Villanueva. Prior to First Merit transferring the case to federal court, all of the pretrial investigation and pretrial preparation had been completed and the case was scheduled to go to trial at the end of October 2010. The delay resulting from the transfer to federal court caused us to lose that trial date. In early December, I filed a motion with Judge Villanueva to schedule a final pre-trial conference so that a new date for trial can be set and a resolution reached in this long pending case. I am waiting for the Judge to rule on that request.
You may also recall that independent of the case against First Merit, a handful of Schneider investors also sued First Merit in what is commonly called a “class action.” In that case, the judge (a different judge from Judge Villanueva) initially certified a “class” against First Merit, which essentially would have allowed that handful of investors to pursue claims against First Merit on behalf of all the Schneider investors. First Merit appealed the “class” certification and recently was successful in reversing that decision, which means that the handful of investors in that case can no longer pursue claims against First Merit on behalf of all the Schneider investors. These investors could appeal this decision to the Ohio Supreme Court, or try to restyle their case in some way to make it viable as a class action, but I do not know what they are planning to do at this point. In any case, my lawsuit against First Merit is now the only pending case that seeks to recover damages against First Merit on behalf of all the receivership’s creditors, including all the Schneider investors. Regardless, the investor class action never really advanced beyond the class certification state while the case that I am pursuing against First Merit is ready for trial on the earliest possible date on the Court’s calendar.
December 7, 2010 — On November 23, 2010, Judge Patricia A. Gaughan, United States District Court for the Northern District of Ohio, granted the Receiver’s Motion to Remand the case against First Merit Bank. The case against First Merit Bank is now back in the Cuyahoga County Common Pleas Court pending before Judge Villanueva. On December 1, 2010, counsel for the Receiver filed a Motion to Reset the Final Pretrial Conference. The Receivership is hopeful that the trial will be rescheduled during the first quarter of 2011.
November 2, 2010 — The trial against First Merit Bank was scheduled to begin on October 25, 2010 in the Cuyahoga County Common Pleas Court before Judge Villanueva. However, in September, on the eve of the final pre-trial conference, First Merit Bank transferred the case to federal court claiming that a federal issue of law was present in the case such that the federal court had exclusive jurisdiction. This strategy effectively canceled the October 25th trial date because once a case is removed from state court to federal court, the state court judge loses any authority over the case. Counsel for the receivership has filed a motion with the federal court asking for the case to be transferred back to Judge Villanueva for trial.
You may recall that First Merit Bank already attempted this strategy once before, several years ago. Like here, the receivership filed a motion asking the court to transfer the case back to state court, and that motion was granted. The case is currently pending before the same federal judge that heard and granted the earlier motion. The receivership has asked the court to consider and rule on the motion as quickly as possible.
The Receiver believes that First Merit Bank’s strategy is nothing more than a tactic designed to delay an inevitable trial in this case.
August 31, 2010 – Today Joanne Schneider was resentenced to 10 years in prison by Judge Shirley Saffold. Joanne Schneider was given credit for time served (1.5 years) leaving her with 8.5 years to serve in prison.
As you may recall, the State of Ohio filed an appeal challenging the original sentence of 3 years in prison. In May, 2010, the Court of Appeals issued its judgment reversing and vacating the 3 year prison sentence of Joanne Schneider and remanded the case back to the trial court for resentencing. State v. Joanne Schneider, 8th Dist. No. 93128, 2010-Ohio-2089. The Court of Appeals found that Joanne Schneider’s 3 year prison sentence was contrary to law, and that the trial court erred when it sentenced Joanne Schneider to only 3 years in prison. On remand to the trial court, Judge Shirley Saffold sentenced Joanne Schneider to 10 years in prison.
August 12, 2010 — Activity in the receivership continues to be extremely modest. The asset liquidation was completed several years ago and we await rulings from the Court as to how the remaining liquidation proceeds should be distributed. Until such rulings are issued there will be very little to report in this regard.
The receivership’s litigation against First Merit Bank remains ongoing. First Merit recently filed its motion for summary judgment and depositions of the parties’ expert witnesses are ongoing. Trial in the First Merit litigation is scheduled to begin on October 25, 2010.
May 17, 2010 — On May 13, 2010, the Court of Appeals issued its Judgment reversing and vacating the prison sentence of Joanne Schneider, and remanding the case back to the trial court for resentencing. State v. Joanne Schneider, 8th Dist. No. 93128, 2010-Ohio-2089.
For those who were not aware, the State of Ohio filed an appeal in Joanne Schneider’s criminal case challenging the sentence imposed. The state argued that “[t]he trial court’s three-year sentence was contrary to law when [Joanne Schneider] entered a guilty plea to engaging in a pattern of corrupt activity when the most serious offense in the pattern of corrupt activity is a felony of the first degree, as indicated, which pursuant to R.C. 2929.14(D)(3)(a) mandates that the trial court shall impose a minimum term of incarceration of ten-years [sic].” 2010-Ohio-2089, at ¶2. The Court of Appeals found that the most serious corrupt activity Joanne Schneider was convicted of “in the pattern of corrupt activity,” namely, false representations in the sale of securities under R.C. §1707.44(B)(4) in an amount over one hundred thousand dollars, was a first degree felony, and, accordingly that a ten-year prison term was mandatory. 2010-Ohio-2089, at ¶13. Therefore, the Court of Appeals found that Joanne Schneider’s three-year prison term was contrary to law, and that the trial court erred when it sentenced Joanne Schneider to only three years in prison.Joanne Schneider’s resentencing has not yet been scheduled. Persons interested in attending the resentencing should check the Court’s docket or with the prosecutor’s office. The case number is CR-05-472739.
January 28, 2010 — The receiver continues to receive telephone inquiries from investors regarding the First Merit litigation and the status of the receivership. The following is intended to provide investors with an update.The Receivership remains engaged in litigation with First Merit. The parties have been engaged in general fact discovery. On January 28, 2010, the case schedule was amended as follows:
- Fact discovery shall be completed by March 1, 2010
- The Receiver’s expert report is due on March 15, 2010
- First Merit’s expert report is due on May 17, 2010
- Expert depositions shall be completed by June 18, 2010
- Dispositive motions are due on July 16, 2010
- Oppositions to dispositive motions are due on August 16, 2010
- Reply briefs are due on August 27, 2010
- Final pre-trial is set for September 20, 2010 at 9:00 a.m.
- Trial is set for October 25, 2010 at 9:00 a.m.
With respect to the administration of the receivership, the claims process remains unchanged. As discussed in earlier updates and reports to the Court, the trial scheduled for May 21, 2009, to determine issues of priority as among Home Savings, the Receiver, Parma Heights Land Development, LLC, the holders of Mechanic’s Liens, and the City of Parma Heights, as well as issues related to the priority and validity of the alleged assessments by the City of Parma Heights, was cancelled after the Court announced that it would resolve these claims based on summary judgment motions. At this time, the parties await rulings on the issues raised in the parties’ summary judgment motions. To the extent the Court’s rulings leave any priority issues unresolved, those issues, if any, will be addressed at a later date by the Court. Certain of the secured creditors have previously indicated that these issues are of such importance that a loss at trial would certainly result in an appeal. Any appeal will necessarily delay a final resolution of claims for an undeterminable additional period.
Investors should keep in mind that regardless of which secured creditor is ultimately determined to have a valid lien and first priority to the liquidation proceeds, the amount of the secured claims exceeds the value of the liquidation proceeds. What this means for investors and other unsecured creditors is that most, if not all, of the remaining liquidation proceeds will ultimately be disbursed to the secured creditors.
As most interested parties know, the Receivership has now entered its sixth year. It is our hope that many of the issues discussed above can be resolved in 2010.
September 16, 2009 — The receiver continues to receive telephone inquiries from investors and their various representatives, e.g. attorneys and accountants, regarding the status of the receivership, the First Merit litigation, and whether or not investor losses can be claimed on investor tax returns.
With respect to the status of the receivership and the First Merit litigation please refer to the quarterly reports the receiver files with the court. These reports are located in the “Filing Index 2009″ link on the right hand side of this web page. These reports include the latest information on the status of this case and all of the then current financial information.
As for inquiries regarding the tax deductibility of investment losses, the receiver is not able to provide advice or guidance in that regard. Every creditor of the receivership has received notice of what the receiver believes is owed to that creditor. (If for some reason you have not received this notice these documents are located in the “Filing Index 2008″ link.) That amount may or may not be each creditor’s final loss in this case depending on how various motions pending before the court are resolved and the outcome of the First Merit litigation. Interested parties should also feel free to check the court’s civil case docket on-line (http://cpdocket.cp.cuyahogacounty.us/TOS.aspx) for updates on the status of pending motions and new filings. The case number is 2004-548887.
June 24, 2009 — On June 11, 2009, the Court of Appeals issued an Opinion affirming Judge Matia’s Order that awarded summary judgment to Defendant Roetzel & Andress, L.P.A. (”R & A”) in the receiver’s action asserting legal malpractice and other claims against R & A. The Court of Appeals also affimed Judge Matia’s order denying R & A’s counterclaim against the receiver for frivolous conduct and sanctions under R.C. §2323.51. This decision by the Court of Appeals represents the conclusion of the litigation against R & A.
March 17, 2009 — On March 12, 2009, Joanne Schneider was sentenced to three (3) years in prison by Judge Eileen A. Gallagher. Three years was the minimum sentence the Judge could have imposed. For those who are not aware, the criminal prosecution of Joanne and Alan Schneider is entirely separate from the receivership. The receiver has not been involved in any plea negotiations or prosecution of the Schneiders. Investors taking issue with the pleas and sentences should contact the Cuyahoga County Prosecutors Office or Judge Gallagher’s chambers. The receivership will continue to prosecute its cases against First Merit Bank and Roetzel & Andress. It will also work to finalize the creditor claims process.
March 6, 2009 – Joanne Schneider is scheduled to enter a plea in her criminal case on March 12 at 9 a.m. It is the receiver’s understanding that Mrs. Schneider may also be sentenced by the Court on that date. This process is open to the public and investors are welcome to attend.
February 26, 2009 – Today Judge Eileen Gallagher sentenced Alan Schneider to five years probation and 1,000 hours of community service for his participation in the Schneider Ponzi scheme.
February 25, 2009 — On February 25th, the sentencing of Alan Schneider was moved to Noon on February 26th from the previous time of 1 p.m.
February 16, 2009 — Alan Schneider’s sentencing is scheduled for 1:00 p.m. on February 26, 2009. Sentencing is open to the public and investors are welcome to attend.Also, in an Entry dated January 28, 2009, the Ohio Supreme Court dismissed FirstMerit’s Complaint against Judge Villanueva seeking a writ of prohibition. As you may recall, in its Complaint, FirstMerit asked the Ohio Supreme Court to issue an order stating that Judge Villanueva lacked authority to authorize the receiver to sue FirstMerit on claims against FirstMerit relating to Schneider investors. The dismissal of FirstMerit’s Complaint against Judge Villanueva means that the Receiver’s claims against FirstMerit relating to the investors can now proceed before Judge Villanueva.
February 2, 2009 — On January 28th, Alan Schneider pled guilty to two counts of theft and four counts of selling unregistered securities in violation of the Ohio Securities Act. According to a Plain Dealer article of January 29, 2009, the prosecutor, Dan Kasaris, stated that Alan Schnieder could go to prison for 6 month to 7.5 years, but that prison is not mandatory. Alan Schneider is scheduled to be sentenced on February 26, 2009. Sentencing is open to the public and investors are welcome to attend, and as a victim, may be permitted to make a statement to the court. Sentencing dates sometimes change, so investors interested in attending Alan Schneider’s sentencing should check the court docket or with the prosecutor’s office as the sentencing date approaches. The case number for Alan and Joanne Schneider is CR-05-472739.Joanne Schneider’s criminal trial is scheduled to begin on Feburary 2, 2009. However, according to the same Plain Dealer article, last week Joanne became “distressed” during a hearing and was taken away on a stretcher and admitted to a psychiatric ward of Southwest General Health Center. The receiver has no information on whether or not her trial will be delayed as a result of this event. Events relating to the administration of the receivership remain unchanged since the last update on December 29, 2008.
December 29, 2008 — Receivership estate creditors may recall that in October a mediation was conducted in an effort to resolve ongoing disputes among the secured creditors regarding the priority and validity of their purported liens against the sale proceeds of various receivership properties. Portions of that mediation remained ongoing through November and much of December. Unfortunately, the secured creditors were unable to arrive at a compromise to resolve the important issues. As a result, the secured creditors will have to conduct discovery and file motions on these issues over the next several months. Should a trial on the issue of priority be necessary, it will occur in May 2009. Certain of the secured creditors have also indicated that these issues are of such importance that a loss at trial would certainly result in an appeal. What this means for investors and other unsecured creditors is that any determination on the distribution of liquidation proceeds could be delayed for many more months and perhaps another year. Investors should keep in mind that regardless of which secured creditor is ultimately determined to have a valid lien and first priority to the liquidation proceeds, the amount of the secured claims exceeds the value of the liquidation proceeds. What this means for investors and other unsecured creditors is that most, if not all, of the remaining liquidation proceeds will ultimately be disbursed to secured creditors. On the litigation front, the receivership remains engaged in litigation with Roetzel & Andress and First Merit Bank. The R&A litigation is currently pending in the Court of Appeals. Oral arguments in the R&A appeal will likely be heard in the first half of 2009. A decision on the appeal would follow during the second half of 2009. The First Merit litigation is now pending before Judge Villanueva and the Ohio Supreme Court. Following Judge Villanueva’s orders denying First Merit’s motions to dismiss, First Merit filed a new lawsuit in the Ohio Supreme Court against Judge Villanueva asking the court to issue an order stating that Judge Villanueva lacked authority to authorize the Receiver to sue First Merit on claims against First Merit relating to Schneider investors. If First Merit is successful the Receiver’s claims against First Merit relating to the investors would be dismissed. The litigation before the Ohio Supreme Court should be resolved in the first half of 2009. As most interested parties know, this receivership has entered its fifth year. Although much remains to be done, it is our hope that many of the issues discussed above can be resolved in 2009.
December 10, 2008 – Today the Receiver filed his Report to the Court Pursuant to Local Rule 26 summarizing the status of the case and providing updated financial information through November 30, 2008. (See Receiver’s Report to Court Pursuant to Local Rule 26 and the Receiver’s Application for the Payment of Administrative Claims).
October 29, 2008 – Since the last update in August, the Court held a status conference on September 19th to address the claims of secured creditors and establish a schedule to resolve those claims. The Court did create a calendar to resolve secured claims and ordered the secured creditors and receivership to mediate those same issues before October 24th. (View the September 19th Journal Entry) To that end, the secured creditors and the receiver participated in a two day mediation on October 16th and 17th in Cleveland, Ohio. Although the two days of mediation did not result in a resolution of the secured creditor claims, that process remains ongoing. In the event the mediation is not successful those issues will go to trial in the Spring of 2009. Until the secured creditor claims are resolved the receivership will not be able to determine how much of the asset liquidation proceeds may be available for distribution to unsecured creditors and investors. In addition to addressing the claims issues, the receivership has been busy pursuing the Roetzel & Andress (R&A) and First Merit litigation. As you may recall, the R&A litigation was stalled by a pending claim against the receivership for frivolous litigation. That court recently ruled in the receivership’s favor on this issue by denying that claim. The receivership is now able to pursue its appeal of that court’s earlier decision granting summary judgment in favor of R&A. The appeal should be fully briefed before year’s end and scheduled for oral argument in the first half of 2009. The First Merit litigation has also resumed following Judge Villanueva’s denial of various outstanding motions filed by First Merit. Discovery will be ongoing in this case for some period and it is our expectation that this case would proceed to trial as quickly as circumstances permit.
August 18, 2008 — Since the last update, the receivership remains busy in the claims process. (View Receiver’s Report to Court filed July 24, 2008.) Secured and unsecured creditors of the receivership have submitted claim forms to the receiver and the receivership has articulated its initial position on claim values and priority. The receivership is currently reviewing objections from secured creditors on issues of priority, claim validity and value. The Court has scheduled a status conference for September 19th to address unresolved issues relating to secured creditor claims. (View Notice of Status Conference.) It is anticipated that the Court will establish a schedule at the status conference for resolving any claim disputes so that distributions of receivership liquidation proceeds can be distributed to creditors as soon as possible.The receivership also remains involved in litigation with First Merit Bank and Roetzel & Andress. The receivership is awaiting rulings from the Court on various pending motions filed by First Merit. As was disclosed in an earlier update, the receivership’s case against Roetzel & Andress was dismissed earlier this year when the Court granted Roetzel & Andresses summary judgment motion. The receivership has been unable to appeal that order to date because of the existence of a claim against the receivership for frivolous litigation by Roetzel & Andress. Naturally, the receivership has vigorously defended against this claim. As long as that claim remains pending, the receivership’s appeal will be delayed. The day-to-day activity in the receivership is relatively nominal at this point. Much of what remains to be done is judicial in nature, so it is very difficult for the receiver to predict when final distributions will be made and when this matter will be closed. The periodic updates on this site, or the Court’s docket, remain the best place to get current information on the status of the receivership. Attempting to call the receiver directly to seek status updates will not result in more current information and is more costly to the receivership.
July 1, 2008 – On June 30, 2008, the Receiver filed the Revised Proposed Schedules of Allowed Unsecured Claims [View Receiver’s Revised Proposed Schedules of Allowed Unsecured Claims; View Exhibit A; View Exhibit B; View Exhibit C]. Court approval of the amount of the Allowed Unsecured Claim constitutes allowance of such Claim. However, Unsecured Creditors should not interpret the allowance of such Claim as a guarantee of payment. Section IV of the Court’s Findings and Order of Distribution sets forth the procedure for the payment of claims and provides as follows: “Unsecured creditors will be paid Pro Rata from the Receivership Assets remaining after payment of Allowed Administrative and Secured Claims.”
June 15, 2008 — On June 13, 2008, pursuant to Section 3(B)(2) of the Court’s Findings and Order of Distribution dated December 21, 2007, the Receiver filed the initial proposed distribution of sale proceeds, from the sale of receivership property, to non-investor claimants claiming a secured position. [View Receiver’s Initial Proposed Distribution of Sale Proceeds to Non-Investor Claimants]. Interested parties have sixty (60) days from June 13, 2008 to comment on the initial proposed distribution.
April 29, 2008 – On April 22, 2008, the Eighth Appellate District granted the Receiver’s Motion to Dismiss Appeal of Appellants Cleveland Construction, Inc. and The Home Savings & Loan Company of Youngstown, Ohio. Accordingly, the Appeal challenging the December 21, 2007 Findings and Order of Distribution is dismissed.
April 16, 2008 – Receivership Update Since the last update most of the receivership’s time has been spent assessing claims of secured and unsecured creditors. Unsecured creditors, which include the Schneider investors, have had the opportunity to review and object to the receivership’s initial proposed allowance for unsecured claims. The receivership has reviewed and considered all the filed objections and anticipates filing a revised schedule of allowed unsecured claims in the near future. Unsecured creditors should understand that even though the receivership is recommending to the court that certain unsecured claims should be allowed, that does not mean that the unsecured creditors will be receiving that amount of money. Receivership creditors need only review the periodic financial reports filed with the Court by the receiver to understand that the receivership does not have sufficient funds to return all amounts owed to them by the Schneiders. (All of these reports appear on this website.) Moreover, unsecured creditors should understand that there are significant amounts of claims against the funds under the receiver’s control that are that held by secured creditors. Assuming the secured creditors claims are valid, an important issue the receiver and its counsel are in the process of reviewing, as a matter of law those creditors will have a priority interest in the liquidation proceeds from assets in which they have a security interest. Those secured interests appear to exceed the value of the total liquidation proceeds.In addition to assessing the claims of creditors, counsel for the receivership continues to pursue litigation against Roetzel & Andress and First Merit Banks. As you are probably aware, the Court dismissed the receivership case against Roetzel & Andress last year. The receivership will be appealing that decision. Roetzel & Andress has asked the court to find that the receivership acted frivolously in bringing that action. Naturally, we disagree with any such assertion and will vigorously defend against those claims. The First Merit litigation will begin to move forward now that Judge Villanueva has denied First Merit’s motion to vacate its earlier order authorizing the receiver to initiate the litigation. Judge Villanueva also authorized the receivership to amend its complaint against First Merit.
January 23, 2008 – The Home Savings and Loan Company of Youngstown, Ohio and Cleveland Construction, Inc. filed a Notice of Appeal challenging the December 21, 2007 Findings and Order of Distribution. The filing of the Appeal may delay any distributions to be made under the Plan for many months.
January 23, 2008 — Receiver’s Letter to Unsecured Creditors
January 22, 2008 – On January 22, 2008, the Receiver filed Proposed Schedules of Allowed Unsecured Claims on behalf of Investors and Non-Investor Unsecured Creditors. Proposed Schedules of Allowed Unsecured Claims, Exhibit 1, Exhibit 2A, and Exhibit 2B. If you have an objection to the amount of your Proposed Allowed Unsecured Claim, you must file a written objection with the Court. Phone calls, emails, or other correspondence sent to the Receiver and/or his staff is not sufficient notice of an objection.
January 9, 2008 — Most creditors and investors have already submitted documentation evidencing their claim against the Schneider Receivership. The Receiver has this information, and you need not resubmit your claim. However, if you have not submitted such documentation, please complete the appropriate claim form (the Creditor Claim Form; or the Investor Claim Form), and send to Matthew L. Fornshell, Receiver, 250 West Street, Columbus, Ohio 43215.
January 6, 2008 — We have received numerous phone calls from investors with questions regarding the Plan of Distribution Approved by Judge Villanueva on December 21, 2007. We expect that many of the Schneider investors have similar questions and have posted some of the more frequently asked questions and their answers below. Do I need to send in any documents? No. Most investors have already submitted documentation evidencing their investment(s) with Joanne Schneider. However, if you have not submitted any documentation to the Receiver evidencing your investment(s) with Joanne Schneider, please send the documentation to: Schottenstein, Zox & Dunn Co., L.P.A., Attn: Katherine Manghillis, 250 West Street, Columbus, Ohio 43215.
How much money will I get back? The Receiver is in the process of preparing a schedule of Investors’ Allowed Claims. Your Allowed Claim is equal to the amount you invested minus any amounts you received in interest or principal payments. For example, if you invested $50,000.00 with Joanne Schneider, and you received $10,000.00 in interest payments, your Allowed Claim would be $40,000.00.
When will I get a check? Unfortunately, it is not possible to provide an exact timeline at this time. All parties have thirty (30) days from the entry of the Order Approving the Receiver’s Proposed Plan of Distribution to file an Appeal. If an appeal is filed challenging the Plan, any distributions would likely beÂ delayed for many months to possible a year. In addition after the Receiver submits the Schedule of Investors’ Allowed Claims, each investor has thirty (30) days to object to the Allowed Claim. It is our hope that distribution will take place in the second quarter of 2008.
What if my Allowed Claim is incorrect? Once you receive the schedule of Allowed Investor Claims you should review it against your records for accuracy. If you feel that an error has been made, you will have an opportunity to object to the Receiver’s calculation of your allowed claim.
December 26, 2007 — On December 21, 2007, Judge Villanueva issued an Opinion and Order Granting Receiver Matthew L. Fornshell’s Motion for Summary Judgment to Set Aside Certain Fraudulent Transfers to Defendants 1-332. The Court found that the Schneiders perpetrated their Ponzi scheme by accepting monies from “investors” (Defendants 1-332 and others) in return for promised rates of return, and in the specific case of Defendants 1-332, exchanges of various mortgages and cognovit promissory notes in favor of Defendants 1-332 (the “transfers”). The Court went on to conclude that the transfers furthered the Schneiders’ Ponzi Scheme, were incurred without an exchange of reasonably equivalent value and must be set aside to effectuate a lawful, equitable and efficient distribution of assets to all creditors in these Receivership proceedings.
Also on December 21, 2007, Judge Villanueva issued the Court’s Findings and Order of Distribution. After considering the Receiver’s Proposed Plan of Distribution, objections to the Proposed Plan, the Receiver’s Omnibus Respons to Creditors’ Objections to Receiver’s Plan of Distribution, and the arguments heard at the January 6, 2006, hearing, the Court approved the Proposed Plan, as modified in the December 21, 2007 Order of Distribution.
December 12, 2007 — On December 11, 2007, Judge Matia issued a decision granting Roetzel & Andress’ summary judgment motion in the litigation initiated against it by the Receiver. What that means is that the Judge decided that there are no issues of material fact in dispute and that as a matter of law Roetzel & Andress should win and the case should not go to trial to be heard by a jury. Naturally, we are disappointed in the outcome and disagree with the Court’s decision. As such, the Receivership will be appealing Judge Matia’s decision with the hope that it is reversed by the appellate court and sent back to Judge Matia for trial.
October 4, 2007 - Letter to Schneider Investors from Receiver
September 10, 2007- On September 7, 2007, the Court heard oral argument on the motions filed by FirstMerit seeking to vacate the Court’s earlier order authorizing the receivership to pursue the litigation against FirstMerit Bank on behalf of the Schneider investors and to stay the litigation. The Court has given the parties until Friday, September 21, 2007, to submit supplemental memoranda on the motions. After the Court has an opportunity to review the supplemental memoranda, a ruling will be issued.
August 30, 2007 - Since the last web update, the status of the liquidation and disbursement of liquidation proceeds remains unchanged. The receivership is anticipating that the Court will rule on various pending motions in the near future that will direct the receiver in how to distribute the liquidation proceeds.
In other matters, in recent weeks the receivership has settled two important matters that will add more than $2.3 million to the receivership estate. First, litigation with B&W Ltd. settled for $110,000. This settlement was approved by the court and the settlement amount has been paid. Second, the receivership settled its contempt action against McGill Property Group LLC and John McGill for $2.2 million. The Court approved the settlement and McGill is required to pay the settlement amount to the receivership within 30 days of the Court’s order becoming final and non-appealable.
The receivership also continues in its litigation with the Schneider’s former law firm, Roetzel & Andress, and First Merit Bank. The Roetzel & Andress trial is currently scheduled for the week of October 22nd. Finally, the Court has scheduled a hearing in the First Merit litigation to hear arguments on motions filed by First Merit seeking to vacate the Court’s earlier order authorizing the receivership to pursue the litigation against First Merit Bank on behalf of the Schneider investors and to stay the litigation. That hearing is scheduled for September 7, 2007, at 11:00 a.m. in Judge Villanueva’s court room on the 20th Floor of the Cuyahoga County Court of Common Pleas.
May 24, 2007 - In recent weeks the receivership has received numerous inquiries seeking information on the current status of the receivership. It is understandably frustrating that this process has now been on going for over two years. Since the receivership’s last update in February there has not been much activity to report. The liquidation is complete and the receivership continues to hold approximately $9 million in liquidation proceeds while it awaits rulings from the court directing how and to whom these proceeds should be distributed. The receivership also continues its ongoing litigation with Roetzel & Andress and First Merit Bank. The Roetzel & Andress litigation is scheduled for trial this coming August. The First Merit litigation is now consolidated before Judge Villanueva and will likely continue for some period. Otherwise, the receivership is attending to administrative matters such as the preparation and filing of tax returns for the receivership. An update letter reflecting much of the foregoing will be sent out to each investor in the coming week.
February 22, 2007 - On February 20, 2007, the Receivership closed on the sale of the Cornerstone Development in Parma Heights. The net sale proceeds were approximately $6.5 million. Those proceeds, along with the proceeds from the sale of other real estate assets, are being held in separate escrow accounts until further order of the Court directing the receiver how and to whom the liquidation proceeds should be distributed.
February 5, 2007 - February 2nd was the last day to appeal the order approving the sale of Cornerstone. With no appeal having been filed, the closing on Cornerstone must happen with 15 days of expiration of the appellate deadline: February 17th. However, the buyer has agreed to pay the receivership a fee equal to 1% of the purchase price, or $79,000, for a one time 31 day extension to complete certain environmental studies for its lender. The buyer has not yet requested the extension, but is permitted to do so if additional time is necessary. It is important to understand that the results of an environmental study have no impact on whether or not this buyer is obligated to close the transaction.
Also, last week the court presiding over the Receivership’s litigation with Roetzel & Andress scheduled the case to go to trial on August 27, 2007.
January 30, 2007- Letter to Schneider Investors from Receiver (PDF)