SEC Case Declaration of Receiver Matthew Greenblatt W Exhibits

Case 3:11-cv-00078-JBA Document 446-1
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UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT
SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. FRANCISCO ILLARRAMENDI, HIGHVIEW POINT PARTNERS, LLC and MICHAEL KENWOOD CAPITAL MANAGEMENT, LLC, Defendants, and HIGHVIEW POINT MASTER FUND, LTD., HIGHVIEW POINT OFFSHORE, LTD., HIGHVIEW POINT LP, MICHAEL KENWOOD ASSET MANAGEMENT, LLC, MK ENERGY AND INFRASTRUCTURE, LLC, and MKEI SOLAR, LP, Relief Defendants.
11-CV-00078 (JBA)
ECF CASE DECLARATION OF MATTHEW GREENBLATT
I, Matthew Greenblatt, pursuant to 28 U.S.C. 1746, hereby declare as follows: 1. I am a Senior Managing Director at FTI Consulting, Inc. (FTI) where I have
worked for more than 13 years. I have more than 17 years of experience in accounting, auditing and litigation consulting services, including forensic accounting and fraud investigations. I am a Certified Public Accountant, Certified in Financial Forensics, and a Certified Fraud Examiner. I am a member of the American Institute of Certified Public Accountants, the New York State Society of Certified Public Accountants and the Association of Certified Fraud Examiners. I have spoken on multiple panels in the area of forensic accounting and investigations, and currently serve as an adjunct professor with New York University in its forensic accounting
certificate program. 2. FTI Consulting is the financial advisor to the Court-appointed receiver John J.
Carney, Esq. (the Receiver), assisting him in his on-going investigation (the Investigation) mandated by the Amended Order Appointing Receiver dated June 22, 2011. I make this
declaration summarizing information based on my personal review and analysis of voluminous documents and financial records and upon information communicated to me by other FTI forensic accountants and professionals relating to their review of the voluminous documents and financial records. 3. I make this Declaration for the limited purpose of providing certain evidentiary
support for the Receivers Motion for an Order Expanding the Receivership to Include the Highview Point Master Fund, Ltd., Highview Point Offshore Fund, Ltd., and Highview Point, L.P. I have not included all of the information known by me or by other FTI professionals about this matter, FTIs forensic investigation, or that is relevant to the proceedings. General Background 4. The prior testimony before this Court of Francisco Pancho Illarramendi
(Illarramendi), and his admissions in his plea proceedings, reflect that Illarramendi engaged in a massive Ponzi scheme (the Fraudulent Scheme) originally devised to conceal losses sustained investing money for HVP Offshore and other entities, and eventually done to hide increasing losses of the funds he managed. Attached hereto as Exhibit A is a true and correct copies of relevant excerpts of Illarramendis prior testimony in this case. Attached as Exhibit B are true and correct copies of Illarramendis criminal plea agreement, excerpts of the transcript of his plea allocution and the Stipulation of Offense Conduct executed in connection with his guilty plea. 2
5.
Highview Point Partners, LLC (HVP Partners), a Delaware entity, was created
in August 2004 and began operating under an LLC Agreement in May 2005, executed by Illarramendi, Francisco Frank Lopez (Lopez) and Christopher Luth (Luth), each as members with a one-third interest in HVP Partners. The LLC Agreement, which enumerates one specific purpose for HVP Partners, namely acting as the investment manager of Highview Point Offshore Fund, Ltd. is attached hereto as Exhibit C. 6. Highview Point Offshore Fund, Ltd. (HVP Offshore) was incorporated in the
Cayman Islands in September 2004, approximately one month after the creation of HVP Partners. Operations commenced in May 2005, within one week of the execution of the HVP Partners LLC Agreement. Lopez was one of five directors of HVP Offshore in May 2005, nominally appointed by Ogier Nominees (Cayman) Limited. Three of the other four directors were employees of Ogier Fiduciary Services (Cayman) Limited, including Vijayabalan Murugesu, David Sargison, and Andrew Eastabrook. 7. The HVP Partners principals Illarramendi, Lopez and Luth directed the
process of setting up the funds and appointing directors. Emails show that Ogier & Boxalls, and the U.S. law firm Seward & Kissel LLP, took direction from Luth when executing registration and other formation decisions. 8. The investment management agreement between HVP Offshore and HVP
Partners (the Offshore IMA) was signed by Lopez on behalf of HVP Offshore, and Illarramendi on behalf of HVP Partners. The Offshore IMA gives HVP Partners the right and duty to make all investment decisions for [HVP Offshore]. This includes the authority to purchase, hold, sell, sell short, cover and otherwise deal in securities and financial instruments of any sort and rights therein, including restricted and privately issued securities, on margin or 3
otherwise. It also includes the right of HVP Partners to enter into, make, and perform any other contracts, agreements or other undertakings on behalf of HVP Offshore, effectively granting HVP Partners unfettered power to bind HVP Offshore in agreements with third parties (i.e., to make business decisions). The Offshore IMA explicitly included the right of HVP Partners to enter into contracts, agreements, or other undertakings with persons, firms or corporations affiliated with [HVP Partners]. There is also a section of the Offshore IMA that permits the entire agreement granting powers to HVP Partners relating to the operations of HVP Offshore to be assigned at HVP Partners will, without the prior written consent of [HVP Offshore], to any other entity controlled by Illarramendi, Lopez and Luth. Notably, the
Offshore IMA specifically states that HVP Offshore does not have any right of assignment without prior written consent of HVP Partners. A true and correct copy of the Offshore IMA is attached hereto as Exhibit D. 9. In addition to Lopez and the employees of Ogier Fiduciary Services (Cayman)
Limited, another director of HVP Offshore at the time of its commencement was Luis Bethart, an investment advisor of Quadrant, a company associated with Oswaldo Cisneros (Cisneros). Although Quadrant was originally named co-investment manager along with HVP Partners, HVP Partners had exclusive authority to execute trades and open accounts on behalf of HVP Offshore. An email shows that Quadrant was listed as a co-manager primarily for tax reasons. By the end of 2005, Quadrant had resigned the title of investment manager, leaving HVP Partners as the sole investment manager for HVP Offshore. 10. By April 2006, the business changed its structure to a master-feeder structure,
by creating the Highview Point Master Fund, Ltd. (the Master Fund), turning HVP Offshore into an offshore feeder, and creating Highview Point, L.P. as a domestic feeder (collectively with 4
the Master Fund and HVP Offshore, the HVP Funds). 11. The Master Fund was incorporated in the Cayman Islands in January 2006. Its
directors were Lopez and three employees of Ogier Fiduciary Services (Cayman) Limited, including at various times Vijayabalan Murugesu, David Sargison, Scott Dakers, Evan Burtton and Thomas Parsons. On April 1, 2006, the effective date of the new master-feeder structure, the Master Fund entered into an investment management agreement with HVP Partners (Master Fund IMA). The Master Fund IMA grants HVP Partners the same investment and contracting powers over the Master Fund as the Offshore IMA granted over HVP Offshore. It also includes the same assignments clause, permitting assignment to another entity controlled by Illarramendi, Lopez and Luth. As in the Offshore IMA, the Master Fund does not have such assignment rights. Also like the Offshore IMA, the Master Fund IMA is signed by Illarramendi and Lopez, with Lopez signing for the Master Fund. A true and correct copy of the Master Fund IMA is attached hereto as Exhibit E. 12. Ogier, a law firm representing HVP Offshore and the Master Fund, addressed
correspondence to the HVP Funds at the Stamford, Connecticut office of HVP Partners. The Credit Lyonnais Bond Deal 13. Based upon my review of documents and the testimony and admissions of
Illarramendi, it is apparent that Illarramendi began the Fraudulent Scheme at least as early as October 2005 when he caused losses from the purchase and sale of a Credit Lyonnais bond with a nominal value of $50 million (the Calyon Bond) to be concealed on the books of HVP Offshore. (See Exhibit A at 359.) 14. Prior to executing the transaction, Illarramendi obtained funds from a group of
investors, including HVP Offshore, to complete the purchase of the Calyon Bond. In executing the transaction, HVP Offshore transferred approximately $18.8 million to an investment account in the name of CNI Securities. Lopez, and his sister Carolina Lopez, transferred approximately $2.5 million to the same account. Other investors, including Pamac Securities, Goldenbird, Nazri Corp., and BCT Bank International (BCT Bank), committed additional monies equaling approximately $28.9 million, for a total of approximately $50.2 million. BCT Bank committed the funds based upon a loan to HVP Partners. 15. On or about October 12, 2005, Illarramendi caused approximately $49.3 million
to be transferred from the bank account of CNI Securities to Banco Federal de Venezuela. In exchange, the Calyon Bond was transferred to CNI Securities. On or about October 14, 2005, the Calyon Bond was delivered from CNI Securities to an HVP Offshore account at the Royal Bank of Canada. 16. Of the remaining approximately $900,000 of funds sent to CNI Securities,
approximately $35,000 was taken by CNI as its fee, approximately $19,000 was used for accrued interest, approximately $170,000 was transferred to a bank account in the name of Northwestern International Ltd., an entity believed to be controlled by Moris Beracha (Beracha), and approximately $675,000 was sent to a bank account in the name of HVP Partners. 17. Illarramendi sold the Calyon Bond on or about October 14, 2005 to Royal Bank
of Canada for approximately $46.5 million, which was transferred to an HVP Partners account in the form of cash and Venezuelan bonds. 18. Despite the fact that the Calyon Bond transaction resulted in a loss, HVP Partners
transferred cash to each investor, other than HVP Offshore, in amounts greater than each investors initial investment. For example, Lopez, and his sister Carolina Lopez, received 6
approximately $2.55 million for their $2.5 million investment. Because Illarramendi distributed positive returns to the other investors, HVP Offshore only received approximately $14.1 million in cash and bonds for its original investment of approximately $18.8 million. Although only $14.1 million in value was received by HVP Offshore, its books and records were falsified to reflect the receipt of approximately $19.3 million of value from the investment. The difference between the $19.3 million falsely recorded and the $14.1 million in value actually received constituted a cash shortfall of approximately $5.2 million absorbed by HVP Offshore, which Illarramendi described to the Court as the beginning of the hole that his Fraudulent Scheme concealed. The Cover-Up at HVP Offshore With the Creation of a Fictitious Investment In Ontime1 19. The documents that I reviewed reflect that Illarramendi initially covered the
approximately $5.2 million shortfall by causing a fictitious investment in Ontime to be falsely entered on the books and records of HVP Offshore and described in the HVP Offshore trade blotter as ONTIME_OVERS2.2 However, no proceeds from the Calyon Bond transaction were transferred to Ontime. As described below, later, false entries were utilized to make it appear that this fictitious investment in Ontime had been redeemed with a profit even though no such legitimate redemption occurred. 20. On or about December 19, 2005, Ontime transferred approximately $7.4 million
to HVP Offshore. Notwithstanding that this transfer did not come from the liquidation of any
Ontime is an entity linked to Illarramendis brother-in-law, Rufino Gonzalez-Miranda.
The $5.2 million hole that was concealed by Illarramendi was bundled with other purported investments in Ontime, for a total purported investment of $7.0 million recorded on the trade blotter of HVP Offshore.
investment by Ontime, the transfer was falsely recorded in the books and records of HVP Offshore as a redemption of the corresponding fictitious investment described above. Ontime also transferred $30,000 to an account in the name of Illarramendi and Maria Josephina Gonzalez-Miranda (Illarramendis wife) on or about November 21, 2005. 21. Ontimes payment to HVP Offshore, which was falsely recorded by HVP
Offshore as a redemption of a fictitious investment, was funded, in part, by approximately $5.5 million that had been transferred to Ontime from a bank account in the name of HVP Partners during the time period November 3, 2005 through December 1, 2005. 22. HVP Partners transfers to Ontime were funded, in part, by a $5 million loan from
BCT Bank on or about November 16, 2005. Lopez was a director of the holding company that owns BCT Bank. 23. This $5 million loan from BCT Bank was repaid, in part, with roughly $5 million
advanced by an entity known as Goldenbird, which characterized its advance in a spreadsheet as one of many payments listed as the Highview Point Special Situation. Notably, the Highview Point Special Situation transactions were reflected in the spreadsheet as being paid back with interest. None of these Highview Point Special Situation transactions were recorded in the HVP Funds books and records. I understand from my review of documents, that Goldenbird was an entity associated with Cisneros. Use of Off-Book Options Trading 24. On at least five occasions between November 2005 and August 2006,
Illarramendi caused the diversion of assets of the HVP Funds to entities he effectively controlled for purposes of directing further transactions with the proceeds of these diversions. Thereafter,
Illarramendi utilized the proceeds of these transfers to engage in a speculative, off-the-books trading strategy which focused primarily on options trading (Off-book Trading Strategy). The Off-book Trading Strategy sought to capitalize on the volatility in the markets for stocks like Google, Yahoo and others. The execution of these trades, however, resulted in further net losses of approximately $28 million. Notably, by transferring money from the HVP Funds to these entities to execute the Off-book Trading Strategy, the existence of the speculative options trades and the significant losses sustained as a result were not reflected in the books and records of the HVP Funds. Because these losses continued to be concealed from investors, they caused the hole to grow dramatically. By the end of August 2006, the hole stood at over $33 million, more than one third of the $95 million net asset value of the HVP Funds. 25. Entities used by Illarramendi to effectuate the Off-book Trading Strategy included
HVP Partners, Naproad Finance S.A. (Naproad), and HPA, Inc. (HPA). 26. HVP Partners Wachovia Securities account statement indicates that by December
31, 2005, it had gained approximately $1 million as a result of the Off-book Trading Strategy. 27. HPA Inc.s Wachovia Securities Account statement indicates that, between
December 2005 and February 2006, it had lost approximately $6.1 million as a result of the Offbook Trading Strategy. 28. Naproads Wachovia Securities Account statement indicates that between January
and August 2006, it had lost approximately $14.3 million as a result of the Off-book Trading Strategy. 29. In August 2006, Illarramendi received an e-mail informing him that another
account where he effectuated his Off-book Trading Strategy had lost approximately $8.6 million
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as a result of the Off-book Trading Strategy. First Naproad Transaction 30. The following is a summary of facts related to the falsification of the books and
records of HVP Offshore relating to a fictitious investment in Naproad, which was described in the HVP Offshore trade blotter as NAPROAD, and utilized to further the Fraudulent Scheme. 31. On or about January 5, 2006, HVP Offshore transferred approximately $5.5
million to a bank account in the name of Naproad and falsely recorded that transfer in its books and records as a purchase of a fictitious investment in Naproad. 32. Naproad did not utilize the money received from HVP Offshore for any
investment. Rather, on or about January 6, 2006, Naproad transferred approximately $5.2 million to Goldenbird, apparently to repay, with interest, an earlier advance from Goldenbird to HVP Partners that was characterized as a Highview Point Special Situation transaction and which is described in 23 above. 33. Also, on or about January 13, 2006, Naproad also made the following transfers:
$50,000 to a bank account in the name of Illarramendi, $5,000 to a bank account in the name of Adela Illarramendi, and $100,000 to a bank account in the name of Luth. 34. Several months later, on or about April 5, 2006, Naproad transferred
approximately $5.7 million to HVP Offshore. Notwithstanding that these funds did not come from the liquidation of any investment, HVP Offshore falsely recorded in its books and records the receipt of the approximate $5.7 million as the redemption of the fictitious investment in Naproad. Notably, on the same day of the $5.7 million transfer, Naproad also transferred $100,000 to a bank account in the name of Illarramendi.
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35.
Naproads transfers to HVP Offshore and Illarramendi were funded, in whole or
in part, by transfers to Naproad totaling approximately $15.8 million, from March 31 through April 4, 2006, from various entities, of which at least $11.8 million were secured by promissory notes with HVP Partners. These funds, which constituted other peoples money loaned to HVP Partners and transferred to HVP Offshore, were commingled with other investor funds in HVP Offshores account. 36. From my review of financial records and other documents, it is apparent that in
many cases the execution of transfers of money obtained from other entities to any of the HVP Funds bank accounts to assist in concealing the hole, had the effect of enlarging the hole because entities or persons who provided funds ultimately used in these transfers for the most part expected to receive their money back with additional profits. Lopez Learns of the Fraudulent Scheme 37. In his testimony from the May 25, 2011 hearing before this Court, Illarramendi
admitted that he informed Lopez about the Fraudulent Scheme during 2006. (See Exhibit A at 360-365.) According to that testimony, rather than exposing the Fraudulent Scheme, Lopez instructs Illarramendi to fix the problem. (id.). The Fraudulent Scheme continued and grew for several more years after that. Commingled Funds Tainted All Subsequent Investments 38. The Investigation conducted by the Receiver and FTI has confirmed multiple
instances where money received from others, which the HVP Funds falsely recorded as redemptions of fictitious investments, was used to invest in what otherwise might have appeared to be legitimate investments. The use of commingled funds to make these investments tainted
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those investments and the corresponding profits received. The following are two examples of this occurring. 39. As described in 20, HVP Offshore, on December 19, 2005, received $7.4
million from Ontime, which was falsely characterized as the redemption of the fictitious investment in Ontime. Based on my review of the HVP Offshore account statements, it is evident that prior to, and following this date, the HVP Offshore account entered into certain purchase and sale transactions which left HVP Offshore with balances less than $7.4 million in the account. As such, cash received from Ontime was used to fund, in part, the trading activity conducted by HVP Offshore to purchase this bond. 40. On April 29, 2010, Illarramendi caused the Michael Kenwood Venezuela Fund
(MKV) to transfer approximately $34 million to the Master Fund, which the Master Fund falsely recorded as the redemption of a prior fictitiously recorded investment in MKV that never actually occurred. The $34 million transfer to the Master Fund is part of the $180 million in transfers this Court found that the Commission has preliminarily shown that the Highview Funds likely do not have a legitimate claim to (Doc #276 at 9-10.) Shortly after the Master Fund received the $34 million transfer from MKV some of those funds were utilized to invest in four securities. These securities transactions utilizing funds commingled from MKV ultimately yielded profits to the Master Fund. Concealment of the Hole Through The Falsification of Additional Fictitious Investments In the Books and Records of the HVP Funds 41. During 2006, Illarramendi continued to cover up the hole and execute the
Fraudulent Scheme by falsely creating fictitious investments on the HVP Funds books and records, and thereafter making false entries in its books and records reflecting the purported
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redemption of the fictitious investments.
Many times these falsely recorded redemptions
occurred contemporaneously with the receipt of money from another entity that was commingled with that of the HVP Funds. Examples relating to the falsification of investments in Pamac Securities (Pamac), Ontime and Naproad and the commingling of funds are briefly summarized below. Pamac 42. On or about June 2 and June 14, 2006, false entries were entered in the Master
Funds books and records purporting to record $10 million and $4 million investments in Pamac which were described in the Master Funds trade blotter as PAMAC2. An examination of the financial records of the Master Fund reflects that no such investment was made in Pamac. 43. In reality, the $10 million entry related directly to a transfer to a proprietary
account of BCT Bank, to pay back loans made to HVP Partners to further the Fraudulent Scheme. The $4 million entry related directly to a transfer to Pamac, used in part to pay back obligations to third parties. 44. On or about August 28, 2006, a false entry was entered in the Master Funds
books and records inaccurately reflecting the redemption of the fictitious investment in Pamac for approximately $14.7 million. However, no monies were actually received by the Master Fund at this time. Instead, as will be described in more detail below, at the same time as this fictitious redemption was recorded, a new fictitious investment in Naproad Finance, S.A. was simultaneously falsely recorded in the books of the Master Fund, which included the amount of this falsely recorded redemption. Ontime
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45.
On or about June 6, 2006, a false entry was entered in the Master Funds books
and records purporting to record a $4 million investment in Ontime which was described in the Master Funds trade blotter as ONTIME3. 46. In reality, this entry related directly to a transfer of approximately $4 million to
Ponter Investments, S.A., to pay back a loan made to HVP Partners to further the Fraudulent Scheme. 47. On or about August 28, 2006, a false entry was entered in the Master Funds
books and records inaccurately reflecting the redemption of the fictitious investment in Ontime for approximately $4.2 million. However, no monies were actually received by the Master Fund from Ontime at this time. Instead, as will be described in more detail below, at the same time as this fictitious redemption was recorded, a new fictitious investment in Naproad Finance, S.A. was simultaneously falsely recorded in the books of the Master Fund, which included the amount of this falsely recorded redemption. Naproad Finance, S.A. 48. As referenced above, both of the falsely recorded redemptions of the fictitious
Pamac and Ontime investments, were covered with the false creation of a new fictitious investment in the books and records of the Master Fund purportedly in Naproad Finance, S.A. The Master Funds trade blotter described this fictitious investment as NAPROADFI. 49. On or about August 28, 2006, a false entry was entered in the Master Funds
books and records to inaccurately reflect that a purported investment of $20 million had been made in Naproad. On or about the same date, the Master Fund transferred only approximately $1.1 million in cash to Naproad. The rest of the fictitious investment consisted of the false book
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entries, described in 44 and 47 above, that in effect rolled over the fictitious investments in Pamac and Ontime into the purported investment in Naproad Finance S.A. For example, on or about August 28, 2006, Illarramendi sent an e-mail to the HVP Funds administrator GlobeOp indicating that the $14.7 redemption from Pamac and the $4.2 redemption from Ontime, neither of which actually occurred, should be transferred via book entry to reflect an investment in Naproad. Tens of Millions of Dollars from the HVP Funds Are Utilized to Engage In Venezuelan Currency Arbitrage Trades 50. During 2007 and 2008, money transferred from the HVP Funds was, at times,
utilized to engage in high risk Venezuelan currency arbitrage transactions from which the HVP Funds received little, if any, profits. My review of documents indicates that certain funds related to PDVSA3 (the PDVSA Funds4) and Beracha received millions of dollars of profits from these transactions and that proceeds from the transactions may have been utilized to pay bribes to a former official of PDVSA. I briefly summarize only some of the details relating to one such transaction in October 2007. 51. During the period of October 2, 2007 to October 9, 2007, the Master Fund,
directly and through transfers to Ontime, sent approximately $26 million to BM Financial. In connection with these transfers, false entries were made in the books and records of the Master Fund inaccurately recording a purported investment in Ontime of $26 million which was
The Venezuelan state-owned oil company, Petroleos de Venezuela S.A., and related entities collectively referred to herein as PDVSA.
4 3
The PDVSA Funds include APJ International Limited; Asociacion Civil Administradora de los Fondos de Pensiones de los Jubilados de Petroleos de Venezuela, S.A. y sus Filiales; Fondo Prevision Trabajadores de Petroleos de Venezuela S.A. y sus Filliales; and PDVSA Institucion Fondo de Ahorros are collectively referred to herein as the PDVSA Funds.
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described in the Master Funds trade blotter as ONTIMEUSD. In addition to the $26 million received from the Master Fund, BM Financial also received approximately $10 million from BCT Bank, which were the proceeds of a loan provided to HVP Partners, and approximately $2 million from Lopezs sister, Carolina Lopez, through transfers to Ontime, for a total of approximately $38 million. 52. Documents reviewed reflect that BM Financial converted the dollars to
Venezuelan Bolivars (VEF) at a favorable permuta exchange rate, turning approximately $36.5 million of the invested monies into VEF worth approximately $89.5 million (USD) at the official government exchange rate. According to documents reviewed, BM Financial purchased VEFdenominated bonds with the Venezuelan Bolivars obtained. 53. BM Financial sent the VEF-denominated bonds to the PDVSA Funds, which in
turn sent U.S. dollar-denominated bonds worth approximately $47.6 million to HPA, an entity controlled by Illarramendi, providing a net benefit to the PDVSA Funds of approximately $41.9 million, calculated based upon the official government exchange rate. HPA then sold the bonds for market value, making a profit of approximately $11.1 million for the investor group.5 54. The Master Fund thereafter received a $26.75 million cash transfer as a result of
this Venezuelan currency arbitrage transaction. A false entry was recorded in the books and records of the Master Fund inaccurately reflecting that this transfer was a redemption of the falsely recorded Ontime investment. 55. Emails between Illarramendi and Beracha reveal that they kept track of the profits
Before the profit was distributed, the proceeds were immediately used to fund another Venezuelan currency arbitrage transaction again executed through BM Financial and the PDVSA Funds.
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and distributions thereof for each Venezuelan currency arbitrage transaction separately. 56. Of the approximately $11.1 million of profit from the permuta transaction
described above, more than $10.5 million was transferred to or retained by Beracha or entities which emails suggest Beracha controlled. 57. One such entity is Hermitage. An email between Illarramendi and Beracha notes
that approximately $7.3 million was to be paid to Hermitage as earmarked for black. Additional emails and information evidence that black is actually Juan Montes, an official at PDVSA. In addition, emails between Illarramendi and Beracha indicate that approximately $1.5 million sent to BM Financial, but not used to fund the Venezuelan currency arbitrage transaction, was to be sent to black (Juan Montes) directly by Beracha. Attached as Exhibit F are true and correct copies of these emails. Hotelera Playa Minas Early Redemption 58. Attached as Exhibit G is a true and correct copy of the Confidential Explanatory
Memorandum of HVP Offshore. This document evidences the 90-day redemption policy of HVP Offshore. (See Exhibit G at p 22.) Documents I reviewed, some of which are described below, reveal that in October 2008, Illarramendi and others apparently circumvented the 90-day redemption policy of HVP Offshore and arranged to favorably redeem an investor, Hotelera Playa Minas, off-the-books, prior to the expiration of 90 days. 59. In or about September 2008, Alvaro Martin (Martin), on behalf of Hotelera
Playa Minas, sought an immediate redemption of his investments in HVP Offshore, which would not have been permissible under the 90-day redemption policy. 60. An email I reviewed indicates that Lopez made an agreement with Martin,
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whereby Martin would cancel his September 30, 2008 redemption request and instead reapply for a December 31, 2008 withdrawal. 61. On or about October 20, 2008, Ontime transferred approximately $2.8 million to a
bank account held by Hotelera Playa Minas which appears to be the functional equivalent of an early redemption of Hotelera Playa Minas investment in HVP Offshore. Ontimes funding of this transfer followed the receipt of approximately $3.6 million from Elmont Properties, an entity connected to Cisneros, on or about October 17, 2008. 62. On or about December 22, 2008, Lopez sent an email to Martin instructing Martin
to transfer the money that he would receive from the conforming 90-day HVP Offshore redemption in January 2009 to an account at BCT Bank in the name of Flight Services, Inc., apparently to avoid Hotelera Playa Minas from being compensated twice for its investment in HVP Offshore. 63. On or about January 15, 2009, HVP Offshore transferred approximately $2.3
million to a bank account held by Hotelera Playa Minas. On or about January 16, 2009, Martin confirmed that he would transfer those funds to Flight Services, Inc., as instructed. 64. On or about January 22, 2009, Flight Services, Inc. transferred approximately
$2.3 million to Ontime. More Than a Quarter of a Billion Dollars of Capital From the MK Funds6 and Certain of the MK Entities7 Were Transferred To or For the HVP Funds Without
6
The MK Funds refers to the following funds: MK Special Opportunity Fund; MKV; and Short Term Liquidity Fund, I, Ltd. (the MK Funds).
The MK Entities refers to the following entities: The Michael Kenwood Group, LLC; Michael Kenwood Capital Management, LLC; Michael Kenwood Asset Management, LLC; MK Energy and Infrastructure, LLC; MKEI Solar, LP; MK Automotive, LLC; MK Technology, LLC; Michael Kenwood Consulting, LLC; MK International Advisory
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The Receipt of Any Benefit in Return 65. The Investigation has revealed that well in excess of a quarter of a billion dollars
of capital from the MK Funds and certain MK Entities was transferred to or for the HVP Funds without the receipt of any benefit in return from the HVP Funds. This net amount in excess of $250 million greatly exceeds the $164 million in net principal that investors claim to have invested in the HVP Funds. Notably, millions of dollars of principal contributed by investors in the HVP Funds was lost in Illarramendis various attempts to cover up the hole. MKV Monies Used by Fidevalores to Pay HVP Partners Principals and Others 66. Illarramendi caused MKV to transfer money to Fidevalores Sociedad de Corretaje
de Titulos Valores, S.A. (Fidevalores) which was used to make significant payments to Luth, Illarramendi, Illarramendis wife, and an entity controlled by Odo Habeck, who was one of the principals of the Michael Kenwood Group (MK Group). Fidevalores is an entity I understand is controlled by Illarramendis brother-in-law, Rufino Gonzalez-Miranda. A true and correct copy of an email describing this transaction is attached hereto as Exhibit H. 67. On or about June 16, 2009, MKV transferred approximately $4 million to a bank
account in the name of Fidevalores. 68. On or about June 16, 2009, Illarramendi sent a letter to Fidevalores requesting
that Illarramendi and his wife be paid $500,000. Attached hereto as Exhibit I is a true and correct copy of that letter.
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Services, LLC; MKG-Atlantic Investment, LLC; Michael Kenwood Nuclear Energy, LLC; MyTcart, LLC; TUOL, LLC; MKCM Merger Sub, LLC (the MK Entities).
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69.
On or about June 18, 2009, Fidevalores transferred $1.1 million to a bank account
in the name of Luth, purportedly for MK Group Consulting Fees. 70. On or about June 18, 2009, Fidevalores transferred $500,000 to a bank account in OGH
the name of OGH Advisors, LLC, purportedly for MK Group Consulting Fees. Advisors, LLC is an entity controlled by Odo Habeck. 71.
Prior to these transactions, in May 2009, Illarramendi caused MKV to transfer
money to Fidevalores which was used to make significant payments: $500,000 to Illarramendi and his wife, $500,000 to entity controlled by Odo Habeck and $935,000 to an entity hired to build Illarramendis residence in Connecticut. MKV Funds Used by Underhill to Pay Individuals Associated with HVP Partners and MK Group 72. Illarramendi caused MKV to transfer approximately $4 million to Underhill
Investments, S.A. (Underhill), an entity believed to be related the Lopez family, for the purpose of making payments to Luth, Lopez, Illarramendi and an employee of HVP Partners. 73. On or about March 24, 2010, Illarramendi sent an email to Lopez. In the email,
Illarramendi instructed Lopez to tell Carolina to send $1,267,000 to, as translated, us 3, which appears to be a reference to Luth, Lopez and Illarramendi; $105,000 to BP; and $50,000 to LB. Attached hereto as Exhibit J is a true and correct copy of the email. 74. On or about March 25, 2010, MKV transferred approximately $4 million to a
bank account in the name of Underhill. 75. On or about March 29, 2010, Illarramendi sent an email to Lopez modifying the
instructions in the March 24 email, indicating that BP should instead be paid $155,000. On or about April 6, 2010, $155,000 was wired from Underhill into an account in the name of an 20
Filed 02/02/12 Page 21 of 22
employee of HVP Partners with the initials BP. 76. On or about April 6, 2010, bank records I have reviewed confirm that $1,267,000
was wire transferred from Underhill to an account in the name of Luth. 77. On or about April 6, 2010, bank records I have reviewed confirm that $1,267,000
was wire transferred from Underhill to an account in the name of Illarramendi. HVP Funds Monies Used by Ontime to Pay HVP Partners Principals and Others 78. In January 2009, the Master Fund transferred funds to Ontime which then paid
$480,000 each to Luth and Illarramendi, $50,000 to Victor Chong, HVP Partners Chief Financial Officer and Chief Compliance Officer (Chong), and $400,000 to Illarramendis contractor. 79. Again, in February 2009, the Master Fund transferred funds to Ontime which then
paid $75,000 to Luth, $100,000 to Illarramendi and another $400,000 to Illarramendis contractor. HVP Funds Monies Used by Naproad to Pay HVP Partners Principals and Others 80. In January 2008, the Master Fund transferred funds to Naproad which then paid
$60,000 to Chong. 81. In January 2008, Naproad made transfers of $133,000 to each of Illarramendi,
Luth, Argenta Management Inc., and an entity associated with Lopez. These transfers were primarily funded with loans that were subsequently repaid using funds derived from Venezuelan currency arbitrage transactions that utilized money from the Master Fund. Extensive Commingling of Funds To and From HVP Funds and Various Entities 82. By August 2006, money received from the following entities had been 21
Filed 02/02/12 Page 22 of 22
EXHIBIT A
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1 2 3 4 5 6 7 8 9 10 11 BEFORE: 12 13 14 15 16 17 18 19 20 21 22 23 24 25
UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT * * * * * * * * * * * * * * * Case No. 11cv78(JBA) * * * * * * MAY 25, 2011 * * * *
SECURITIES AND EXCHANGE COMMISSION, Plaintiff, vs. FRANCISCO ILLARRAMENDI, ET AL Defendant. * * * * * * * * * * * * * *
TRANSCRIPT OF EVIDENTIARY HEARING VOLUME II THE HONORABLE JANET BOND ARTERTON, U.S.D.J. RUA KELLY, ESQ KATHELEEN SHIELDS, ESQ CARLOS COSTA-RODRIGUES, ESQ LEEANN GAUNT, ESQ. United States Security and Exchange Commission 33 Arch Street Boston, MA 02110 JOHN GLEASON, ESQ. Gleason & Koatz 122 East 42nd Street New York, NY 10168 CARL LOEWENSON, ESQ RONALD WHITE, ESQ. Morrison & Foerster 1290 Avenue of the Americas New York, NY 10104 MICHAEL SWARTZ, ESQ Highview Point Schulte Roth & Zabel 919 Third Avenue New York, NY 10022
Appearances: FOR THE PLAINTIFF:
FOR THE DEFENDANT FRANCISCO ILLARAMENDI:
FOR THE DEFENDANT HIGHVIEW POINT PARTNERS:
FOR THE DEFENDANT HIGHVIEW POINT MASTER FUND, HIGHVIEW POINT OFFSHORE, LTD:
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that -- this was from information in those transaction reports, and this is what we accumulated. Q. So, we've seen here two instances of
investors essentially getting more out of the Master Fund than they put in. Did you do any additional
analysis to determine whether any investors received more back from the Master Fund than they had contributed? A. I did not. I limited it to the procedures
performed to compile this list. Q. So, what we don't know from Exhibit G is
how many investors redeemed and essentially made a profit on their investment? A. Q. I have not calculated that. I'm sorry, I meant to go through one other
set of -- I'm going to take you back to an exhibit of yours we already looked at. Let me just figure I think we can
out which of those exhibits it is. do it with Exhibit B. A. Q. Yes.
And I'd like to direct you to the third
line of data on Exhibit B, which is your sort of summary of the MKV X 2010 transactions. A. Yes.
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Q.
And what you've indicated were the total
proceeds from that set of transactions of 94 plus million dollars. A. Q. Yes, that's correct. I'd like to have you look at Mr.
Greenblatt's presentation concerning that transaction, and that is Plaintiff Exhibit 9, and the piece of it I want to ask you first about is, it's your understanding, sir, isn't it, that the $94 million proceeds were received back into the Master Fund in two chunks, essentially a $34 million chunk on April 29th and a $60 million chunk on May 10th; is that correct? A. Q. That's my recollection. Okay. And it's that $34 million piece that Were some of the documents
I want to start with.
that you reviewed in connection with your analysis records from the Highview Master Fund Deutsche Bank account? A. I did have those. I did have bank
statements from that bank, yes. MS. SHIELDS: approach, your Honor? THE COURT: Q. Yes. May I have permission to
I have for you what we've marked for
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identification as Plaintiff's Exhibit 13.
Have you
seen the Deutsche Bank records that are the first -let's see, three pages of Plaintiff's Exhibit 13? A. I don't recall. I went through many bank
statements. Q.
I don't personally recall this one.
Would you agree with me, sir, that the
$34 million payment that was made into the Highview Point Master Fund on April 29th is shown on the first page of Plaintiff's Exhibit 13, about three quarters of the way down? A. Q. I do see the amount of $34,145,000, yes. And perhaps it might be easier if you look
at Plaintiff's Exhibit 9, which is the presentation. I can direct you to the wire transfer order that matches up there and perhaps give you some additional comfort. Exhibit 9. A. Q. Yes, I found page 28. And you see that is the wire transfer It's page 28 of Plaintiff's
payment order reflecting the payment of that $34 million plus amount from the Michael Kenwood Venezuela Fund into the Highview Master Fund Deutsche Bank account? A. Q. Yes, I agree this is the wire transfer. And what we have is the Deutsche Bank
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account statement sort of showing those funds arrived; is that right? A. That's correct, that's on Plaintiff's
Exhibit 13. Q. And you'll observe on the first page of
Plaintiff's Exhibit 13 that prior to the Deutsche Bank's account -- prior to the Deutsche Bank account's receipt of those funds, there was approximately $8.7 million in that account? A. Yes, 8.7 million appears to be the balance
immediately preceding this deposit. Q. And then if you look at pages 2 and 3 of
Plaintiff's Exhibit 13, you'll observe, and we've highlighted them so you can see them more easily, you'll see that there are four transactions, four essential purchases that are reflected in the Deutsche Bank account in the amounts of $9.8 million, $9.8 million, $5.6 million, and $3.9 million. A. Do you see those purchases?
I do see those disbursements from the bank
accounts, yes. Q. And those four purchase, those are all
purchases that you -THE COURT: Is there an difference --
you use the word "purchases," he uses the word
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"disbursements."
Is this of any significance? I can use the word
MS. SHIELDS: "disbursements." Q.
Essentially funds going out of the Deutsche
Bank account. A. Q. A. Q. Yes. For some purpose. Yes. And those four disbursements are Yes?
disbursements that you have analyzed as four, I think what you've called them, securities trades; is that right? A. check. I would have to go through -- I'd have to I don't recall of all of the securities
trades these four numbers. Q. Okay. Well, perhaps we can do it this way.
If you look at pages 4 and 5 and 6 and 7 of Plaintiff's Exhibit 13, those are the wire transfer payment orders that correspond to those disbursements. them. A. Thank you. I've reviewed the four wire I'll give you a moment to look at
transfers. Q. And do you agree that those are the wire
transfer orders that correspond to those four
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disbursements? A. They match in dollar amount to the four
disbursements. Q. And those are all from the Highview Point
Master Fund Deutsche Bank account? A. Q. Yes, they appear to be, yes. Then if you look at the last two pages of
Plaintiff's Exhibit 13, is it fair to say what is reflected -- that those are pages from the Highview Point Master Fund's trade blotter? A. They do appear to be the pages from the
trade blotter, yes. Q. And if you look at the highlighted entries
on both of those pages, that shows how these, the four disbursements, were characterized on the Master Fund's trade blotter; is that right? A. Q. A. Q. If I may just have a moment. Certainly. I've reviewed the four pages. And do those pages show how these
disbursements were characterized on the trade blotter of the Master Fund? A. I have matched the dates to the same period
and I've matched the dollars for three of them directly to the book net amount and one of them to
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the book net amount plus accrued interest. would -- they do represent the same dollars. Q. A. Q. And -Dollar amounts, if I may.
So, it
And these entries on the trade blotter,
fair to say that these are entries that you would have put into the securities trades bucket when you sort of grouped investments from the trade blotter together? A. From my recollection, they would be in the
securities bucket. Q. So, you would agree with me, sir, wouldn't
you, that without this $34 million that came into the Master Fund from the Michael Kenwood Venezuela Fund, the Master Fund would not have had enough money to engage in these securities trades? fair? A. If I -- they would only have -- just Is that
mathematically, the fund would only have had $8.7 million, and I think the aggregate of what was purchased after the receipt of substantially these funds totals about 28 to 30 million dollars of securities. As to the availability of funds, this So, I would
was limited to this one bank account. just qualify my answer that way.
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Q.
So, they could have gotten funds from
somewhere else, but if this is the bank account they had to use, they couldn't have made these securities trades without the $34 million? A. They could not have made all four. They
may have been able to make individual ones. Q. Fair enough. MS. SHIELDS: So I think -- if I may,
your Honor, have just a moment to consult with my colleagues. Q. I have just sort of two summary questions And that is to again sort of make
for you, sir.
sure that we're all clear about the scope of your testimony. It's not your testimony, is it, sir,
that there was no commingling of funds between the Master Fund and any of the Michael Kenwood funds, is it? A. I haven't done any procedures that would
address anything related to commingling. Q. And similarly, it's not your testimony that
there was no fraud in connection with the Master Fund? A. It's not my testimony that there was no
fraud, that is correct. MS. SHIELDS: Thank you. I have no
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it's about 70 years if it got to be -- you know, there is a column and a line and I'm not -Q. So the right side of the line? MR. WITNESS: THE COURT: THE WITNESS: Q. I'm sorry? The grid. Exactly, the grid.
So, on the far end of the grid is 70 years;
to the best of your knowledge? A. Q. Correct, correct. As a result of the fraud you've pled guilty
to, the liabilities for the funds that you managed exceeded the assets to pay those liabilities by hundreds of millions of dollars, right? A. That's being calculated, as I understand
it, but my understanding is that yes, that would be about adequate. Q. You've referred to this as the hole in your
plea allocution? A. Q. Yes, I believe so. And the hole could, in your estimation, be
in excess of $300 million? A. Q. I believe so, yes. During the time you committed this fraud,
from say 2005 through 2010, you were managing principal at Highview Point Partners, right?
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Q.
Can you talk a little bit about how the
circumstances in which the fraud began, when what you referred to as the hole started to develop? A. In approximately mid-October 2005, I was in
Venezuela to enter into supposedly a transaction to purchase a credit linked note from a Venezuelan financial institution through the arbitrage that I have described in my testimony in answering to Mr. Loewenson's questions. And as a result of that,
because of a number of issues, the bank that was purchasing the note from us backed out of the transaction, and because of market events that resulted in us, or me, having to sell the security at a much lower price than I had intended initially, and a loss being effectively incurred, in part by Highview Point Master Fund, or at the time it wasn't Master Fund, it was just Highview Point Offshore, and in part by others, that contributed to the transaction. that. And it's a lot more elaborate than
In the interest of time, I could go into a
lot more detail, but I don't want to either -- I don't know if it's relevant to do that. tell me. THE COURT: That's how it started. You can
We'll go on from October '05.
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Q.
The only question I have about the hole is
how much it was at that time? A. When all was said and done in that first
part of it, I believe the hole was approximately $5 million, but it wasn't from -- the hole from the transaction. Q. At some point did you disclose the
existence of the hole to any of your partners who were principals? A. At a later date, after I had tried to
recover the money and had failed to do so, thereby larging -- or increasing -- I don't think larging is a word, I'm sorry -- increasing the amount of the mismanagement between assets and liabilities to approximately $30 million, I described -- I disclosed the situation to Mr. Lopez. I don't know,
that may have been, you know, at the end of the summer of 2006 perhaps. Q. Can you talk a little bit more about that
conversation. A. It was -- after reaching that point I
decided to approach first my father and then Mr. Lopez, and eventually both of them together, to discuss the matter and to get advice on what would be the best course of action.
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Q. A.
What did you say to Mr. Lopez exactly? That through -- because of that transaction
initially, and my subsequent actions to try and recover the money, I had reached a point where, due to market transactions and other things that had -it's a long story, so I can discuss it whenever you guys want, but I want to be as efficient as possible -- there had been a significant hole, let's call it, creator, differential creator, loss created by me, and the circumstances that totaled approximately $30 million, part of which was money that essentially was Highview Point's money and part of which was money from other investors that participated in transactions with us. Q. And how did you -- how did you describe
this to Mr. Lopez? A. Well, it was a few years ago, but I believe I, you know,
I just told him, look, I messed up.
lost this money in this transaction where Calyon backed out of the trade, and then I tried to make it up through doing options trading and other transactions, and they didn't go well and, unfortunately, you know, the loss is growing. Q. A. How did Mr. Lopez react? He was very taken aback. He was not happy.
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And we discussed at that time whether or not we should approach first the lead investor, or the investors, and my father recommended that we approach the lead investor to disclose to him what had happened, and then Frank asked me that him and I should go to the office and leave my father. We
were meeting, at a hotel at a restaurant in a hotel in Manhattan near where I lived, and we went to the office and we discussed it, and he felt it would be a very bad thing for his reputation, for a number of things, and myself as well, and, you know, so he asked that we try to figure out a different way of fixing the problem and that I work to fix the problem. Q. And by the way, you mentioned before that What was his title at
Mr. Lopez had been your boss. Credit Suisse; if you know? A.
Over the years when I first arrived at
Credit Suisse Frank, was a director of Latin America Group. So without necessarily having a reporting
line direct to him, he was a superior member of the team. Subsequent to that, over the years he became
head of Latin America, Latin American Investment Banking, or the Emerging Markets Group. We were
never really clear on what the exact titles were at
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Credit Suisse, but he was head of the team I worked in. Q. A. Pretty high up at Credit Suisse? Well, as high as you can get without going
into I think management of the firm in terms of -you know. Q. So, you indicated that he was of the view
that the Master Fund couldn't disclose the loss to investors. Is that what you testified to just now? MR. LOEWENSON: Your Honor, consistent
with your prior ruling, I'll object to the leading. THE COURT: Q. Sustained.
What happened -- how did you react to Mr.
Lopez's directive that the investor should not be told about the loss the fund had sustained? respond? A. I agreed that I would do everything, my Did you
best efforts and everything in my power to resolve the situation. I -- how I reacted? Are you asking
me to qualify my reaction? good one. Q.
Because it wasn't a very
Did he ask you to do anything specifically Did he ask
other than to just keep on keeping on? you to do anything? A.
I don't recall the exact details of the
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conversation, but, you know, we'll have to figure out how we, you know, fix it. it, basically. And, you know -- fix
And then he -- obviously we agreed
that I would never tell anybody about it, and then -- I'm sorry, I didn't know these were going to be the circumstances under which this was going to be discussed, but I think under the circumstances I can't honor that commitment. the extent of it. But I think that was
And then essentially I went to
work on trying to solve the problem, which obviously didn't work out very well. Q. How did you and Mr. Lopez go about trying
to keep this loss concealed? A. Well, it's not that we went about together Once he was
trying to keep the loss concealed.
informed and once I agreed that I would, you know, try to work through it, we didn't talk much about it except on occasion, you know. And the idea was I
would try to raise as much money as possible to be able to make it so that the gains from those -- from that additional money would eventually cover the loss, and that I would use everything in my power, you know, all the people I knew in government in Venezuela or other investors to see if I could raise enough money.
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But I think that at some point in time -- because this resulted in what I call kind of the third bucket of investors, or the investors who were not Michael Kenwood investors or Highview Point Master Fund, being essentially created, you know, that existed or growing, at some points some investors participated in that that he brought in and that were in and out of the transactions, or the pot, as I would call it. Q. You just used the term "third bucket." Can
you -- and I believe you said that it was investors who were neither Highview nor Michael Kenwood; is that right? A. It was either investors that were neither
Highview nor Michael Kenwood, or additional money from investors that were in Highview or that were in Michael Kenwood that that money was not subscribed to either Highview or Michael Kenwood. if that clarifies. Q. What was the -- what was the reason for I don't know
getting those investors from what you called the third bucket? A. Why did you need the money from them?
The way that I tried to solve the problem
was to run what I called a unified, let's say, treasury function where the money, no matter where
EXHIBIT B
Case 3:11-cv-00078-JBA Document 446-3 Filed 05/05/11 Page 1 2 of 23 Case 3:11-cr-00041-SRU Document 10 Filed 02/02/12 Page of 14
U.S. Department of Justice
United Slales Allorney DislriclofConnecticut
Briell McMaholl Federal Bllildillg

9/5 Lafi,ye"e Bou/evard. Room J09 Bridgeporr, COllnecticut 06604
(203) 696-3000 Fnt (203) 579-5550
March 7, 20 II John P. Gleason, Esquire Gleason & Koatz, LLP 122 E. 42" d Street New York, NY 10168
Re:
United States v. Francisco IIIarramendi Criminal No.
Dear Mr. Gleason: This letter confirms the plea agreement between your client, Francisco Illarramendi (the "defendant"), and the United States Attorney's Office for the District of Connecticut (the "Government" or "this Office") concerning the referenced criminal matter.
THE PLEA AND OFFENSE

The defendant agrees to waive his right to be indicted and to plead guilty to a five-count information charging him in Counts One and Two with wire fraud, in violation of 18 U.s.C. 1343, and in Count Three with securities fraud, in violation of 15 U.S.c. 78j(b) & 78ff, 17 C.F.R. 240.1 Ob-5, and in Count Four with investment adviser fraud, in violation of 15 U.S.c. 80b-6 & 80b-17, and in Count Five with conspiracy to obstruct justice, obstruct an official proceeding and to defraud the U.S. Securities and Exchange Commission, in violation of 18 U.S.c. 371.
Counts One and Two: Wire Fraud

The defendant understands that, to be guilty of the offenses charged in Counts One and Two (wire fraud), the following essential elements of the offense must be satisfied: I. That there was a scheme or artifice to defraud or to obtain money and property by means of materially false and fraudulent pretenses, representations or promises; That the defendant knowingly and wilfully participated in the scheme or artifice to defraud, with knowledge of its ft'audulent nature and with intent to deft'aLld; and
2.
John P. Gleason, Esquire March 7, 2011 Page 2 3. That in execution of or in furtherance of that scheme, the defendant used, or caused the use of, wires in interstate or foreign commerce.
Count Three: Securities Fraud
The defendant understands that, to be guilty of the offense charged in Count Three (securities fraud), the following essential elements of the offense must be satisfied: I. That in connection with the purchase or sale of securities, the defendant (a) employed a device, scheme or artifice to defraud, or (b) made an untrue statement of a material fact or omitted to state a material fact which made what was said, under the circumstances, misleading, or (c) engaged in an act, practice or course of business that operated, or would operate, as a fraud or deceit upon a purchaser or seller; That the defendant acted willfully, knowingly and with the intent to defraud; and That the defendant knowingly used, or caused to be used, any means or instruments of transportation or communication in interstate commerce or the use of the mails in furtherance of the fraudulent conduct.
2. 3.
Count Four: Investment Adviser Fraud
The defendant understands that, to be guilty of the offense charged in Count Four (investment adviser fraud), the following essential elements of the offense must be satisfied: I. That the defendant was acting as an investment adviser with respect to clients or potential clients; That the defendant (a) employed a device, scheme, or artifice to defraud clients or prospective cl ients, or (b) engaged in a transaction, practice, or course of business which operated as a fraud or deceit upon a client or prospective client, or (c) engaged in an act, practice, or course of business which was fraudulent, deceptive or manipulative; That the defendant acted willfully and knowingly and with intent to defraud; and That the defendant used the mails or another instrumentality of interstate commerce.
2.
3. 4.
John P. Gleason, Esquire March 7,2011 Page 3

Count Five: Conspiracy
The defendant understands that, to be guilty of the offense charged in Count Five (conspiracy to obstruct justice, obstruct an official proceeding and to defraud the U.S. Securities and Exchange Commission), the following essential elements of the offense must be satisfied: 1. That two or more persons entered into an agreement to commit an offense against the United States; That the defendant knowingly participated in the conspiracy with the specific intent to commit at least one of the offenses that were the objects of the conspiracy; and That during the course of the conspiracy, one of the members of the conspiracy committed an overt act in furtherance of the objectives of the conspiracy.
2.
3.
THE PENALTIES
With respect to the charges of wire fraud in Counts One and Two of the information, each of those offenses carries a maximum penalty of20 years of imprisonment and a $250,000 fine. In addition, under 18 U.S.c. 3583, the Court may impose a term of supervised release of not more than three years to begin at the expiration of any term of imprisonment. The defendant understands that, should he violate any condition of the supervised release, he may be required to serve a fwther term of imprisonment of up to two years with no credit for time already spent on supervised release. With respect to the charge of securities fraud in Count Three of the information, the offense carries a maximum penalty of 20 years of imprisonment and a $5,000,000 fine. In addition, under 18 U.s.C. 3583, the Court may impose a term of supervised release of not more than three years to begin at the expiration of any term of imprisonment. The defendant understands that, should he violate any condition of the supervised release, he may be required to serve a further term of imprisonment of up to two years with no cred it for time already spent on supervised release. With respect to the charge of investment adviser fraud in Count Four of the information, the offense carries a maximum penalty of five years of imprisonment and a $10,000 fine. In addition, under 18 U.S.C. 3583, the Court may impose a term of supervised release of not more than three years to begin at the expiration of any term of imprisonment. The defendant understands that, should he violate any condition of the supervised release, he may be required to serve a fllrther term of imprisonment of up to two years with no credit for time already spent on supervised release.
John P. Gleason, Esquire March 7, 20 II Page 4 With respect to the charge of conspiracy in Count Five of the information, the offense carries a maximum penalty of five years of imprisonment and a $250,000 fine. In addition, under 18 U.S.c. 3583, the Court may impose a term of supervised release of not more than three years to begin at the expiration of any term of imprisonment. The defendant understands that, should he violate any condition of the supervised release, he may be required to serve a further term of imprisonment of up to two years with no credit for time already spent on supervised release. With respect to the five charges in the Information, defendant understands that the total maximum sentence he could receive if the sentences were imposed consecutively is 70 years of imprisonment. The defendant also is subject to the alternative fine provision of 18 U.S.c. 3571. Under this section, the maximum fine that may be imposed on the defendant for each count of conviction is the greatest of the following amounts: (I) twice the gross gain to the defendant resulting from the offense; (2) twice the gross loss resulting from the offense; or (3) (a) $5,000,000 (with respect to Count Three); or (b) $250,000 (with respect to Counts One, Two and Five); or (c) $10,000 (with respect to Count Four). In addition, the defendant is obligated by 18 U.S.c. 3013 to pay a special assessment of $100 on each count of conviction for a total special assessment of $500. The defendant agrees to pay the special assessment to the Clerk of the Court on the day the guilty plea is accepted. The defendant is also subject to restitution, as discussed below. Unless otherwise ordered, should the Court impose a fine or restitution of more than $2,500 as part of the sentence, interest will be charged on the unpaid balance of the fine or restitution not paid within 15 days after the judgment date. 18 U.S.c. 3612(f). Other penalties and fines may be assessed on the unpaid balance of a fine or restitution pursuant to 18 U.S.c. 3572 (h), (i) and 3612(g). Restitution In addition to the other penalties provided by law, the Court must also order that the defendant make restitution under 18 U.S.c. 3663A, and the Government reserves its right to seek restitution on behalf of victims consistent with the provisions of 3663A. The scope and effect of the order of restitution are set forth in the attached Rider Concerning Restitution. Restitution is payable immediately unless otherwise ordered by the Court. The defendant agrees to work with the receiver appointed in SEC v. Illarramendi, ef aI., 3:11-cv-00078 (lBA) (hereafter, the "SEC Action"), and with the SEC in an effort to make restitution. The defendant's refusal to cooperate with the receiver and the SEC renders this agreement voidable by the Government.
John P. Gleason, Esquire March 7, 2011 Page 5 Forfeiture The defendant understands that, as pal1 of the SEC Action, there is a freeze on his assets. Notwithstanding this, the defendant understands that, as a result of his entry ofa guilty plea to the count(s) of wire fraud in the Information, he may be subject to forfeiture to the United States of America, pursuant to 18 V.S.c. 981 (a)( 1)(C) and 28 U.s.C. 2461 (c). Such forfeiture may include, but not be limited to, all right, title, and interest he maintains in any and all property, real or personal, which constitutes or is derived from proceeds traceable to violations of 18 V.S.C. 1343, and/or a sum of money equal to the total amount of proceeds obtained as a result of the offenses. Moreover, he further understands that, ifany of the above-described forfeitable property, as a result of any act or omission of the defendant, cannot be located upon the exercise of due diligence, has been transferred, sold to, or deposited with a third party, has been placed beyond the jurisdiction of the court, has been substantially diminished in value, or has been commingled with other property which cannot be divided without difficulty, it is the intent of the United States, pursuant to 21 U .S.c. 853(p), as incorporated by 28 V.S.C. 2461 (c), to seek forfeiture of any other property of said defendant. The defendant understands and agrees that by virtue of his plea of guilty he waives any rights or cause of action to claim that he is a "substantially prevailing party" for the purpose of recovery of attorney fees and other Iitigation costs in any related forfeiture proceeding pursuant to 28 V.S.c. 2465(b)(I).
THE SENTENCING GUIDELINES

Applicability The defendant understands that the Court is required to consider any appl icable Sentencing Guidelines as well as other factors enumerated in 18 U.S.c. 3553(a) to tailor an appropriate sentence in this case and is not bound by this plea agreement. The defendant agrees that the Sentencing Guideline determinations will be made by the Court, by a preponderance of the evidence, based upon input from the defendant, the Government, and the United States Probation Office. The defendant further understands that he has no right to withdraw his guilty plea ifhis sentence or the Guideline application is other than he anticipated, including if the sentence is outside any of the ranges set forth in this agreement. Acceptance of Responsibility At this time, the Government agrees to recommend that the Court reduce by two levels the defendant's adjusted offense level under 3E 1.1 (a) of the Sentencing Guidelines, based on the defendant's prompt recognition and affirmative acceptance of personal responsibility for the offense. Moreover, because the Government anticipates that the offense level determined by the advisory Guidelines prior to the adjustment for acceptance of responsibility will be greater than
John P. Gleason, Esquire March 7,2011 Page 6 level 16, the Government intends to file a motion with the Court pursuant to 3E 1.1 (b) recommending that the COLll1 reduce defendant's adjusted offense level by one additional level based on the defendant's prompt notification of his intention to enter a plea of guilty. The above-listed recommendations are conditioned upon the defendant's full, complete, and truthful disclosure to the Probation Office of information requested, of the circumstances surrounding his commission of the offense, of his criminal history, and of his financial condition through the submission of a complete and truthful financial statement. The defendant understands that the Court is not obi igated to accept the Government's recommendations on the reductions. The Government will not make the recommendations if the defendant engages in any acts which, in the Government's view, (1) indicate that the defendant has not terminated or withdrawn from criminal conduct or associations (Sentencing Guideline 3E 1.1); (2) could provide a basis for an adjustment for obstructing or impeding the administration ofjustice (Sentencing Guideline 3C 1.1); or (3) constitute a violation of any condition of release. Moreover, the Government wi II not make the recommendations if the defendant seeks to withdraw his plea of guilty or takes a position at sentencing, or otherwise, which, in the Government's assessment, is inconsistent with affirmative acceptance of personal responsibility. The defendant understands that he may not withdraw his plea of guilty if, for the reasons explained above, the Government does not make one or both of the recommendations. Stipulation Pursuant to 6B 1.4 of the Sentencing Guidelines, the defendant and the Government have entered into a stipulation, which is attached to and made a part of this plea agreement. The defendant understands that this stipulation does not set forth all of the relevant conduct and characteristics that may be considered by the Court for purposes of sentencing. The defendant understands that this stipulation is not binding on the Court. The defendant also understands that the Government and the United States Probation Office are obligated to advise the Court of any additional relevant facts that subsequently come to their attention. Defendant understands and agrees that his admissions in the Stipulation of Offense Conduct section are material cond itions of th is plea agreement. If the defendant seeks to withdraw from any of the admissions set forth in the Stipulation of Offense Conduct, the Government will deem defendant's effort to withdraw fi'om the admissions as a material breach ofthis plea agreement and the Government may void all or part of this agreement, including, but not limited to, the non prosecution provisions of this agreement.
John P. Gleason, Esquire March 7, 20 I I Page 7 Guidelines Stipulation The Government and the defendant have no agreement and, thus, do not stipulate as the defendant's applicable Guidelines range or fine range. The Government and the defendant do stipulate that the defendant is a Criminal History Category I. Because the Government and the defendant do not stipulate as to the applicable Guidelines range, there is no stipulation or agreement as to the final Guidelines offense level applicable to the defendant. The defendant expressly understands that his final Guideline offense level, fine range and criminal history category will be determined by the Court. He also understands that the parties' calculations regarding his criminal history category are subject to final determination by the Court. The defendant further expressly understands that he will not be permitted to withdraw the plea of guilty if the Court imposes a sentence outside the Guidelines range or fine range determined by the Court or if the Court determines that his criminal history is different than that stipulated by the parties. In the event the Probation Office or the Court contemplates any sentencing calculations different from those stipulated by the parties, the parties reserve the right to respond to any inquiries and make appropriate legal arguments regarding the proposed alternate calculations. The defendant reserves the right to request a downward departure from the applicable Guideline Sentencing range on any basis including, but not limited to, the arguments that defendant is entitled to a downward depaIture pursuant to Guideline 5K2.16 (Voluntary Disclosure of Offense), reserves the right to seek a non-Guidelines sentence and reserves the right to challenge and oppose any sentencing motion filed by the Government. The Government expressly reserves the right to respond to, challenge and oppose any sentencing motion filed by the defendant. Moreover, the Government expressly reserves the right to defend any sentencing determination, even if it differs from that stipulated by the parties, in any post-sentencing proceeding. Appeal Rights Regarding Sentencing The parties reserve their respective rights to appeal and to oppose each other's appeal of the sentence imposed as permitted by 18 U.S.c. 3742. Information to the Court The Government reserves its right to address the Court with respect to an appropriate sentence to be imposed in this case. Moreover, the Government will discuss the facts of this case, including information regarding the defendant's background and character, 18 U.S.c. 3661, with the United States Probation Office and will provide the Probation Officer with access to material in its file, with the exception of grand jury material.
John P. Gleason, Esquire March 7, 201 I Page 8

WAIVER OF RIGHTS
Waiver of Right to Indictment The defendant understands that he has the right to have the facts of this case presented to a federal grand jury, consisting of between sixteen and twenty-three citizens, twelve of whom would have to find probable cause to believe that he committed the offense set forth in the information before an indictment could be returned. The defendant acknowledges that he is knowingly and intelligently waiving his right to be indicted. Waiver of Trial Rights and Consequences of Guilty Plea The defendant understands that he has the right to be represented by an attorney at every stage of the proceeding and, if necessary, one will be appointed to represent him. The defendant understands that he has the right to plead not guilty or to persist in that plea if it has already been made, the right to a public trial, the right to be tried by ajury with the assistance of counsel, the right to confront and cross-examine the witnesses against him, the right not to be compelled to incriminate himself, and the right to compulsory process for the attendance of witnesses to testify in his defense. The defendant understands that by pleading guilty he waives and gives up those rights and that, if the plea of guilty is accepted by the COLll1, there will not be a further trial of any kind. The defendant understands that, ifhe pleads guilty, the Court may ask him questions about each offense to which he pleads guilty, and if he answers those questions falsely under oath, on the record, and in the presence of counsel his answers may later be used against him in a prosecution for peljury or making false statements. Waiver of Statute of Limitations The defendant agrees that, should the conviction following defendant's plea of guilty pursuant to this plea agreement be vacated for any reason, then any prosecution that is not timebarred by the appl icable statute of Iimitations on the date of the signing of th is plea agreement (including any indictment or counts the Government has agreed to dismiss at sentencing pursuant to this plea agreement) may be commenced or reinstated against defendant, notwithstanding the expiration of the statute of limitations between the signing of this plea agreement and the commencement or reinstatement of such prosecution. The defendant agrees to waive all defenses based on the statute of limitations with respect to any prosecution that is not time-barred on the date the plea agreement is signed.
Case 3:11-cv-00078-JBA Document 446-3 Filed 05/05/11 Page 910 of 23 Case 3:11-cr-00041-SRU Document 10 Filed 02/02/12 Page of 14
John P. Gleason, Esquire March 7, 2011 Page 9

ACKNOWLEDGMENT OF GUILT AND VOLUNTARINESS OF PLEA
The defendant acknowledges that he is entering into this agreement and is pleading guilty freely and voluntarily because he is guilty. The defendant further acknowledges that he is entering into this agreement without reliance upon any discussions between the Government and him (other than those described in the plea agreement letter), without promise of benefit of any kind (other than the concessions contained in the plea agreement letter), and without threats, force, intimidation, or coercion of any kind. The defendant further acknowledges his understanding of the nature of the offense to which he is pleading guilty, including the penalties provided by law. The defendant also acknowledges his complete satisfaction with the representation and advice received from his undersigned attorney. The defendant and his undersigned counsel are unaware of any conflict of interest concerning counsel's representation of the defendant in the case. . The defendant acknowledges that he is not a "prevailing party" within the meaning of Public Law 105-119, section 617 ("the Hyde Amendment") with respect to the count of conviction or any other count or charge that may be dismissed pursuant to this agreement. The defendant voluntarily, knowingly, and intelligently waives any rights he may have to seek attorney's fees and other litigation expenses under the Hyde Amendment.
SCOPE OF THE AGREEMENT
The defendant acknowledges that this agreement is limited to the undersigned parties and cannot bind any other federal authority, or any state or local authority. The defendant acknowledges that no representations have been made to him with respect to any civil or administrative consequences that may result from this plea of guilty because such matters are solely within the province and discretion of the specific administrative or governmental entity involved. Finally, the defendant acknowledges that this agreement has been reached without regard to any civil tax matters that may be pending or which may arise involving him.
COLLATERAL CONSEQUENCES
The defendant further understands that he will be adjudicated guilty of each offense to which he has pleaded guilty and will be deprived of certain rights, such as the right to vote, to hold public office, to serve on ajury, or to possess firearms. The defendant understands that pursuant to section 203(b) of the Justice For All Act, the Bureau of Prisons or the Probation Office will collect a DNA sample from the defendant for analysis and indexing. Finally, the defendant understands that the Government reserves the right to notify any state or federal agency by which he is licensed, or with which he does business, as well as any current or future employer of the fact of his conviction.
Case 3:11-cv-00078-JBA Document 446-3 Filed 05/05/11 Page 10 ofof 23 Case 3:11-cr-00041-SRU Document 10 Filed 02/02/12 Page 11 14
John P. Gleason, Esquire March 7, 2011 Page 10

SATISFACTION OF FEDERAL CRIMINAL LIABILITY; BREACH
The defendant's guilty plea, ifaccepted by the Court, will satisfy the federal criminal liability of the defendant in the District of Connecticut as a result of his participation in his wire fi'aud and securities fraud scheme to defraud clients of his investment advisory business between in or about 2008 and 20 II and his efforts to obstruct a lawful investigation by the U.S. Securities and Exchange Commission and the related civil case filed in this district, which conduct forms the basis of the information in this case. The defendant understands that this paragraph satisfying his criminal liability in the District of Connecticut is limited to criminal conduct which he or his counsel has disclosed to the Government as of the date this plea agreement is executed. The defendant understands that if, before sentencing, he violates any term or condition of this agreement, engages in any criminal activity, or fails to appear for sentencing, the Government may void all or part of this agreement. If the agreement is voided in whole or in part, defendant will not be permitted to withdraw his plea of guilty.
NO OTHER PROMISES
Apart from any other written agreement signed by the parties to this agreement, the defendant acknowledges that no other promises, agreements, or conditions have been entered into other than those set forth in this plea agreement, and none will be entered into unless set forth in writing, signed by all the parties. This letter shall be presented to the COUI1, in open court, and filed in this case. Very truly yours, DAVID B. FEIN UNITED STATES ATTORNEY
~~ 7~
RICHARD 1. EO-ITER SENIOR IGATION COUNSEL PAUL A. MU I-IY ASSISTANT UNITED STATES ATTORNEY
John P. Gleason, Esquire March 7,2011 Page II The defendant certifies that he has read this plea agreement letter and its attachment(s) or has had it read or translated to him, that he has had ample time to discuss this agreement and its attachment(s) with counsel and that he fully understands and accepts its terms.
~~-
FRANCISCO ILLARRAMENDI The Defendant
2-M
Date Date
1 have thoroughly read, reviewed and explained this plea agreement and its attachment(s) to my client who advises me that he understands and accepts its terms.
J HN P. GLEASON, ESQ. Attorney for the Defendant
Filed 02/02/12 Page 13 of 23
Page Intentionally Blank
Case 3:11-cv-00078-JBA Document 446-3 Filed 02/02/12 Page 14of 59 Case 3:11-cv-00078-JBA Document 190-2 Filed 05/10/11 Page 2 of 23
L
1
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT
- - - x
UNITED STATES OF AMERICA No. 3:11CR-41(SRU) 915 Lafayette Boulevard Bridgeport, Connecticut March 7, 2011 FRANCISCO ILLARRAMENDI
- - - - - - - - - - - - - - - - x
vs.
WAIVER AND PLEA
B E FOR E: THE HONORABLE STEFAN R. UNDERHILL, U. S. D. J.
A P PEA RAN C E S:
FOR THE GOVERNMENT: OFFICE OF THE UNITED STATES ATTORNEY . 915 Lafayette Boulevard, Room 309 Bridgeport, Connecticut 06604 BY: PAUL A. MURPHY, AUSA FOR THE DEFENDANT: GLEASON & KOATZ, LLP 122 East 42nd Street New York, New York 10168 BY: JOHN P. GLEASON, ESQ.
Susan E. Catucci, RMR Official Court Reporter 915 Lafayette Boulevard Bridgeport, Connecticut 06604 Tel: (917)703-0761
Case 3:11-cv-00078-JBA Document 190-2 446-3
Filed 05/10/11 Page 41 of 59 02/02/12 15 23

40
need you to tell me that, so please listen carefully to his summary of the government's proof. 3 4 5 6 7 8 9 10 11 12 MR. MURPHY: Your Honor, if the defendant were
to proceed to trial, the government would prove that from in or about 2006 until about February 8, 2007, he engaged in a scheme to defraud the investors and creditors of hedge funds and entities he advised and he also engaged in a scheme to defraud the SEC. One of the objects of the scheme was to obtain money and property from investors and creditors without disclosing the truth about the performance of the funds and the assets under management of the funds. Another
13
14 15 16
object of the scheme was to conceal from the investors and creditors the hole that existed between the fund assets and liabilities, which has been estimated at exposing investors to potential losses in the hundreds of millions of dollars. Throughout the scheme to defraud, the defendant, among other things, used money provided by new investors to the Funds to payout the returns to earlier 'investors; created fraudulent documents to mislead and deceive his investors, creditors and the SEC about the existence of the Funds' assets; made false representations to his investors and creditors in an effort to obtain new investments from them and to prevent them from seeking to
.17
18 19 20 21 22 23 24 25
'" . . . . .
. . -
Filed 05/10/11 Page 42 of 59 02/02/12 16 23

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1 2 3 4 5 6 7 8 9 10 11 12
liquidate their investments; and comingled the investments in each individual hedge fund with investments in the other hedge funds witpout regard to their structure, stated purpose or investment limitations, and thus, treated all investments in the Funds as a single source to provide returns to the investors. By way of example, in 2010, the defendant used approximately $53 million from two funds he managed and controlled, by transferring the money to entities affiliated with the Michael Kenwood Group, an entity he also controlled, without disclosing the use of this money to all of the investors. Thereafter, in an effort to
13
14 15 16 17 18 19 20 21 22 23 24 25
generate a sufficient return to fill the hole in the Funds' assets, the defendant used the approximately $53 million to invest in private equity companies. The
investments were made in the name of entities affiliated with the MK Group, and not in the name of the Funds. In 2010 and the early part of 2011, the scheme to defraud involved creating documents falsely attesting to the fact that one of the funds had approximately $275 million in assets. These bogus documents included an
asset verification letter prepared by an accountant purporting to attest to the existence of these fictitious assets. The evidence would show the letter furthered the
scheme by seeking to prevent and forestall the discovery
Filed 05/10/11 Page 43 of 59 02/02/12 17 23

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
of the hole in the Funds' assets. With respect to the Counts One and Two, Your Honor, the government would prove that each of the two wires set forth in those counts furthered the fraudulent scheme and that each of the wires involved material misrepresentations. As for the securities fraud charge, Your Honor, the United States would prove the existence of the fraud scheme as described above. It would also prove the fraud
scheme was done willfully and knowingly and was in connection with the purchase and sale of securities and it would prove that the defendant accomplished the fraudulent scheme through the use of means of cOmmunication in interstate commerce and the use of the mails. As for the investment adviser fraud charge, the U. S. would
prov~
the defendant acted as an investment
adviser and in that capacity he willfully and knowingly perpetrated the scheme to defraud clients as described in the information, and that he did so through the use of mails and other instrumentalities in interstate commerce. Finally, if the conspiracy charge were to proceed to trial, the U. S. would prove that the defendant and others had an agreement to create the fictitious assets as noted above, as reflected in the Fictitious Asset Verification Letter which is charged in the
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
. .-L..-
Information.
The United States would prove that this
letter was false and that it was created for the purpose of misleading anyone who questioned the assets of the defendant's Funds, specifically the Short Term Liquidity Fund. The letter falsely represented that the Short Term
Liquidity Fund had outstanding credits worth at least $275 million through loans that it had purportedly made to approximately 15 Venezuelan companies. The U. S. would prove the following manner and means of the conspiracy and overt acts in furtherance of the conspiracy: A. That the Short Term Liquidity Fund at no
time lent $275 million to Venezuelan companies. B. That the Short Term Liquidity Fund did not
have loan agreements with these Venezuelan companies. C. That the representation in the letter about
those loans was completely false. D. That the defendant agreed with others to
fraudulently prepare the letter and create false documents to substantiate the false letter. E. That the defendant caused a $1 million
payment to be made to a coconspirator to further the conspiracy. F. That the defendant -- that knowing that the
letter was false, the defendant caused it to be presented

-,--'
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to the United States Securities and Exchange Commission during an enforcement directed review. G. That after the SEC filed a civll lawsuit
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
against the defendant and others in this district, the defendant caused this letter to be presented to court appointed business advisors. And H. That one of the deendant's
coconspirators made false statements to the SEC about the existence of the loans, when they knew that no such loans existed. In short, Your Honor, the government would establish all the elements of each of the offenses charged in the information beyond a reasonable doubt. THE COURT: Thank you.
Mr. Illarramendi, was there anything Mr. Murphy
said when he was describing your conduct that you think is inaccurate? THE DEFENDANT: THE COURT: says that you did? THE DEFENDANT: THE COURT: Yes. No.
.So you agree with everything that he
And you've already indicated that
the stipulation of offense conduct is accurate? THE DEFENDANT: THE COURT: Yes.
Mr. Murphy, any further inquiry
... ..
Filed 02/02/12 Page 20 of 23
STIPULATION OF OFFENSE CONDUCT The defendant, Francisco Illarramendi, and the Government stipulate to the following offense conduct that gives rise to the defendant's agreement to plead guilty to the information: The defendant acted as an investment adviser to certain hedge funds. In or about 2006, the defendant lost millions of dollars of the money he was charged with investing. Rather than disclose to his investors the truth about the losses incurred, the defendant intentionally chose to conceal this information by engaging in a scheme and artifice to defraud and mislead his investors and creditors to prevent the truth about the losses from being discovered. As a result of the scheme described below, the hedge funds ("the Funds") and related entities managed and advised by the defendant currently have outstanding liabilities that greatly exceed the true value of their assets, exposing the investors and creditors to the risk of su ffering losses of hundreds of millions of dollars. From in or about 2006 to on or about February 8, 20 I I, the defendant engaged in a scheme to defraud his investors, creditors and the United States Securities and Exchange Commission ("SEC") by means of materially false and fraudulent pretenses, representations and promises. In furtherance of this scheme, the defendant caused to be transmitted, by means of wire communications in interstate and foreign commerce: (a) fraudulent documents, including a bogus debt instrument and a phony letter purporting to have been issued by an investment bank; and (b) a fictitious asset verification letter falsely representing that one of the hedge funds, the Short Term Liquidity Fund ("STLF"), had at least $275 million in credits as a result of outstanding loans, when the defendant and others knew it did not have any such credits. The defendant made materially false and misleading representations and omissions to investors, creditors and the SEC about the true performance of the Funds, the assets under management by the Funds and the transactions being conducted by the Funds and related entities. The defendant: (a) used money provided by new investors to the Funds to payout the returns he promised to earlier investors; (b) created fraudulent documents to mislead and deceive his investors, creditors and the SEC about the existence of the Funds' assets; (c) made false representations to his investors and creditors in an effort to obtain new investments from them and to prevent them from seeking to liquidate their investments; (d) commingled the investments in each individual hedge fund with investments in the other hedge funds without regard to their structure, stated purpose or investment limitations and thus, treated all investments in the Funds as a single source to provide returns to investors; and (e) engaged in transactions that were not in the best interests of the Funds and agreed to pay kickbacks to persons connected with those transactions. During 20 I0, the defendant used approximately $53 million from two funds he managed and controlled, by transferring the money to entities affiliated with the Michael Kenwood Group, LLC ("MK Group"), an entity that he also controlled, without disclosing the use of this money to all of the investors. Thereafter, in an effort to generate a sufficient return to fill the hole in the Funds' assets, the defendant used the approximately $53 million to invest in private equity companies. The investments were made in the name of entities affiliated with the MK Group, and not in the name of the Funds.
In 20 10, the defendant made a further attempt to conceal the hole in the assets of the Funds by creating fictitious assets purportedly worth at least $275 million. Specifically, he made an agreement with an accountant and others to create a fraudulent and fictitious letter (hereafter, "the Fictitious Asset Verification Letter") that would falsely represent that STLF had at least $275 million in credits as a result of outstanding loans. The defendant arranged for the creation of this Fictitious Asset Verification Letter to further mislead and deceive investors and the SEC regarding whether there was sufficient capital and credit to protect the investors of STLF. The defendant and others caused the fictitious asset verification letter prepared by the accountant to be provided to the SEC. The letter containing materially false loan representations was used: (a) to deceive and defraud the SEC; (b) to prevent the SEC from discovering the truth; and (c) to further conceal the hole that existed within the Funds. In an effort to make the accountant's letter appear to be a truthful and accurate representation, the defendant also created a letter on STLF letterhead that was backdated to an earlier date that purported to be a request from him to the accountant for a verification of outstanding receivables of STLF. The written stipulation above is incorporated into the preceding plea agreement. This stipulation does not set forth all of the facts relevant to the offenses committed by the defendant. The defendant and the Government reserve their right to present additional relevant offense conduct to the attention of the Court in connection with sentencing.
~~~"
FRANCISCO ILLARRAMENDI The Defendant
RICHARD J. HECHTER SENIOR LITIGATION COUNSEL
~/ 7~
PAUL A. MU HY ASSISTANT U.S. ATTORNEY
RIDER CONCERNTNG RESTITUTION The Court shall order that the defendant make restitution under 18 U.S.c. 3663A. The order of restitution may include: I. If the offense resulted in damage to or loss or destruction of property ofa victim of the offense, the order of restitution shall require the defendant to: A. Return the property to the owner of the property or someone designated by the owner; or B. If return of the property is impossible, impracticable, or inadequate, pay an amount equal to: The greater of (I) the value of the property on the date ofthe damage, loss, or destruction; or (II) the value of the property on the date of sentencing, less the value as of the date the property is returned. 2. In the case of an offense resulting in bodily injury to a victimA. pay an amount equal to the costs of necessary medical and related professional services and devices related to physical, psychiatric, and psychological care; including non-medical care and treatment rendered in accordance with a method of healing recognized by the law of the place of treatment; B. pay an amount equal to the cost of necessary physical and occupational therapy and rehabi Iitation; and
C. reimburse the victim for income lost by such victim as a result of such offense;
3. In the case of an offense resulting in bodily injury that results in the death of the victim, pay an amount eq ual to the cost 0 f necessary funeral and related services; and 4. In any case, reimburse the victim for lost income and necessary child care, transportation, and other expenses incurred during participation in the investigation or prosecution of the offense or attendance at proceedings related to the offense. The order of restitution has the effect of a civil judgment against the defendant. In add ition to the court-ordered restitution, the court may order that the conditions of its order of restitution be made a condition of probation or supervised release. Failure to make restitution as ordered may result in a revocation of probation, or a modification of the conditions of supervised release, or in the defendant being held in contempt under 18 U.S.C. 3583(e). Failure to pay restitution may also result in the defendant's re-sentencing to any sentence which might originally have been imposed by the Court. See 18 U.S.C. 3614; 3613A. The Court may also order that the defendant give notice to any victim(s) of his offense under 18 U.S.c. 3555.
EXHIBIT C
LIMITED LIABILITY COMPANY AGREEMENT OF HIGHVIEW POINT PARTNERS, LLC
This Limited Liability Company Agreement (the "Agreement") dated as of May 26, 2005, of Highview Point Partners, LLC, is entered into by and among Frank H. Lopez ("Lopez"), Francisco A. Illarramendi ("lllarramendi") and Christopher Luth ("Luth") and all of the parties hereafter who sign this Agreement to become members. Lopez, Illarramendi and Luth and each such subsequent member will be referred to individually as a "Member" and collectively as the "Members". The Members hereby form a limited liability company pursuant to and in accordance with the Limited Liability Company Act of the State of Delaware, as amended from time to time (the "LLCA"), and hereby agree as follows: 1. Name. The name of the limited liability company formed hereby is Highview
Point Partners, LLC (the "Company"). 2. Term. The term of the Company shall continue until December 31, 2035,
provided, however, that if an entity for which the Company acts as an investment manager or general partner shall continue beyond such date, then the term of the Company shall likewise be extended. 3. Purpose. The Company is formed for the purpose of acting as the investment
manager of Highview Point Offshore, Ltd. (the "Fund"), and engaging in any other lawful act or activity for which limited liability companies may be formed under the LLCA. 4. Members. The mailing addresses of all the members shall be clo Highview Point
Partners, LLC, 909 Third Avenue, 5th Floor - Suite 520, New York, NY 10022, unless otherwise provided by the Member. 5. Powers, Duties, etc. The business and affairs of the Company shall be managed
by Lopez, Illarramendi and Luth (the "Managing Members"), with each such Managing Member entitled to one vote; provided, however, that a Managing Member will lose its right to vote if he is not actively involved in the Company's business for more than 90 consecutive days. In the event of the death,
permanent disability or retirement of a Managing Member, the other Managing Members shall become
the remaining Managing Members. The Managing Members or their designees shall have the power to do any and all acts necessary or convenient to, or for the furtherance of, the purposes described herein, including all powers, statutory or otherwise, possessed under the LLCA, including, without limitation, the ability to (i) open and close bank, brokerage and custodian accounts, (ii) enter into, perform and carry out contracts and undertakings of any kind, (iii) employ or otherwise engage Members, contractors, consultants, advisors, attorneys and accountants and pay reasonable compensation for such services, and (iv) to act for the Company in all matters. In the event that the Managing Members disagree with respect to a particular issue, the decision of a majority of the Managing Members shall govern the issue, except that the unanimous approval of the Managing Members shall be required for each of the following actions: (1) any amendment to Section 6 to this Agreement; (2) the termination, dissolution or liquidation of the Company; (3) entering into an agreement to sell all or substantially all of the business or assets of the Company to unrelated parties; and (4) the admission of an additional member to the Company. Notwithstanding the foregoing, any Managing Member, without the prior consent of the other Managing Members, may make immaterial decisions or may incur any expense or liability which is less than $2,500 on behalf of the Company. 6. Interests of a Member. (a) Each Member may have the following interests in the
Company (each as defined below): (i) a Capital Account, (ii) a Fee Interest, and (iii) a Goodwill Interest. (b) A "Capital Account" shall be established on the books of the Company for each Member. The Capital Account of each Member shall be an amount equal to such Member's initial capital contribution, any additional capital contributions made to the Company by such Member and any net profits of the Company allocated to such Member, less any net losses of the Company allocated, and distributions, if any, made, to such Member. (c) A "Fee Interest", if assigned to a Member by the Managing Members, in their sole discretion, shall mean the Member's allotted percentage interest in any management and/or incentive allocation or fee amounts for any fiscal year paid to the Company from the Fund and any other affiliated funds paying an management fee and/or incentive allocation or fee for which the Company provides services (collectively, the "Managed Funds"). Initially, Lopez, Illarramendi and Luth shall have a Fee Interest of 33.33% each.
(d) Unless the Managing Members decide otherwise, the Managing Members shall be allotted a 100% percentage interest in any distributions (in excess of the Members' remaining Capital Accounts) made upon the sale of all or substantially all of the Company's business or assets, which percentages shall initially be 33.33% each to Lopez, Illarramendi and Luth (the "Goodwill Interest"). 7. Capital Contributions. Each Member has made an initial cash capital contribution
to the Company as follows: Lopez Illarramendi Luth 8. $10,000 $10,000 $10,000
Additional Contributions. Each Member may (i) be required to make additional
capital contributions to the Company in such amounts and at such times as determined by the Managing Members and (ii) make voluntary capital contributions to the Company on a quarterly basis and at such other times as the Managing Members shall permit. 9. Allocation of Net Profits and Net Losses. Except for the Company's net profits
allocated as a portion of the Fee Interest and a Goodwill Interest, the Company's net profits, if any, for each year shall be allocated among the Members in proportion to their respective Capital Account balances. The Company's net losses, if any, for each year shall be allocated among the Members in proportion to their respective Capital Accounts 10. Distributions. (a) Distributions, if any, shall be made to the Members at the times
and in the aggregate amounts as determined by the Managing Members. Subject to Section 6 above and the discretion of the Managing Members, such distributions shall be allocated among the Members in the same proportion as their then Capital Account balances. (b) With respect to each fiscal year in which the Company anticipates an allocation among the Members of items of taxable income and gain in excess of items of taxable deduction, loss and the loss equivalent of tax credits (determined by dividing the amount of the credits by the combined highest marginal Federal income tax rate and state income taxes for federal income tax purposes (the "Combined Rate") applicable to any individual or corporate taxpayer Member (or if the Member is a limited liability company, the members of such limited liability company) determined without
regard to alternative minimum taxes), the Tax Matters Member (which initially will be Lopez) shall, if a Member requests, cause to be distributed from time to time during such fiscal year to each Member out of available cash an amount of money equal to such Member's anticipated estimated tax amount. 11. Assignments. A Member may not assign in whole or in part any interest that he
may have in the Company without the consent of the Managing Members. 12. Withdrawal of a Managing Member. (a) (i) A Managing Member may voluntarily withdraw all or any portion of its
Capital Account from the Company upon at least 60 days' advance written notice as of the end of each calendar quarter or at such other times as the Managing Members may in their sole discretion permit; provided, however, that a withdrawal may be refused, if the Managing Members determine that it may jeopardize the Company's financial condition. (ii) The majority of the Managing Members may require a Managing Member to withdraw at any time for "cause" upon at least 30 days' prior written notice. For purposes of this Agreement, "cause" shall mean (A) a finding by a court or other governmental body or a plea or similar agreement admitting that an act or omission constitutes a felony under the laws of the United States or any state thereof (or an equivalent crime in another jurisdiction) or a violation of the securities laws of any governmental or self regulatory body, (8) a material breach of this Agreement or any Company policy, or (C) fraudulent behavior. (iii) Upon the death of a Managing Member or the disability of a Managing Member (i.e., the 90
th
consecutive day that such Member cannot perform services for the
Company), such Managing Member shall be deemed to have completely withdrawn from the Company as of the end of the quarter in which such death or disability took place. (b) Upon any withdrawal discussed in Section 12(a) above, the withdrawing Managing Member will be paid (i) the withdrawn portion of his Capital Account balance at such times and only to the extent that the Company is able to withdraw such amounts from the Managed Funds and (ii) any other amounts specified in Section 12(c) below. Subject to Section 12(c) of this Agreement, if the withdrawal of a Managing Member is a complete withdrawal, then the withdrawn Managing Member, following such withdrawal date, shall no longer have any role in the management of the Company.
(c) In addition to the amounts set forth in Section 12(b) above, a completely withdrawing Managing Member shall be entitled to the following amounts (and no other amounts) under the following circumstances: (i) Upon the death or disability of a Managing Member --- 100% of its Fee Interest and Goodwill Interest for the fiscal year in which such withdrawal is effective, 66 and 2/3% for the first full fiscal year thereafter, 33 and 1/3 % for the second full fiscal year thereafter, and no Fee Interest and Goodwill Interest for any year thereafter (ii) Upon a Managing Member's voluntary withdrawal --- for the fiscal year in which such withdrawal is effective the lesser of 66 and 2/3% of the Managing Member's Fee Interest and Goodwill Interest earned through (A) the withdrawal date or (8) the end of the year, multiplied by a fraction whose numerator is the day of the year such withdrawal occurred and whose denominator is 365, 33 and 1/3 % for the first full fiscal year thereafter, and no Fee Interest and Goodwill Interest for any year thereafter (iii) Upon a Managing Member's involuntary withdrawal for cause such Managing Member shall not be entitled to any amounts under this Section 12(c)). (d) A Managing Member shall cease to be entitled to any payments pursuant to Section 12(c), if such Member violates Section 15 below. 13. Withdrawal of a Member other than a Managing Member. (a) (i) A Member that is not a Managing Member may voluntarily withdraw all
or any portion of its Capital Account from the Company upon at least 60 days' advance written notice as of the end of each calendar quarter or at such other times as the Managing Members may in their sole discretion permit; provided, however, that a withdrawal may be refused, if the Managing Members determine that it may jeopardize the Company's financial condition. (ii) The Managing Members may require that any non-Managing Member withdraw from the Company, in whole or in part, at any time and for any or no reason. (iii) Upon the death or the disability (as defined in Section 12) of a nonManaging Member, such Member shall be deemed to have completely withdrawn from the Company as of the end of the quarter in which such death or disability took place.
(b) Upon a withdrawal, the withdrawing non-Managing Member will be paid the withdrawn portion of his Capital Account balance as of the withdrawal date at such times and only to the extent that the Company is able to withdraw such amounts from the Managed Funds and such nonManaging Member shall not be entitled to any other amounts from the Company or its remaining Members unless agreed to otherwise by the Managing Members. 14. Admission of Additional Members. (a) Additional Members of the Company may be admitted to the Company with the consent of the Managing Members. (b) Upon the admission of additional Members to the Company, the Managing Members will determine, in their sole discretion, each new Member's Interest, and Lopez, Illarramendi and Luth's Interests in the Company will be pro rata diluted accordingly. 15. Restrictive Covenants. (a) Unless consented to by a majority of the Managing
Members (which consent may be withheld for any reason in the Managing Members' sole discretion), during the term hereof and for the six (6) month period commencing with the sooner of (x) the termination or expiration thereof or (y) the Member's complete withdrawal from the Company, each Member agrees, individually and on behalf of any current or future affiliate, not to: (i) directly or indirectly, actively or inactively, either as principal, agent, independent contractor, consultant, director, officer, employee, employer, advisor (whether paid or unpaid), stockholder, partner, member or in any other individual or representative capacity whatsoever, either for his own benefit or the benefit of any other person or entity (A) solicit, hire, entice, induce, recruit or employ, or associate with or engage in any business relationship with, any person or entity who at any time during the term of this Agreement was employed or engaged as an attorney, accountant, producer, advisor, consultant, representative, independent contractor or agent of the Company or any of its affiliates, or (8) solicit, recruit, represent, consult or act for, or provide any service or advice to any person or entity who was a client of the Company or any of its affiliates during the term hereof or is about to become a client of the Company or any of its affiliates, or (ii) enter into the employment of, or become involved, affiliated or associated with, or act as a consultant, director or officer of, or invest or acquire at least a 5% interest in, or deal with, or render any service or advice to or in connection with any person or entity that competes with the Company or any of its affiliates is then
engaged (for purposes hereof, "compete" shall mean utilizing, undertaking or implementing an investment strategy substantially similar to the strategy employed by the Company for the Managed Funds). (b) The Company and each Member acknowledge that the restriction provisions of this Section 15 are reasonable and necessary and that the Company will be irrevocably damaged if such covenants are not specifically enforced. Accordingly, each Member and the Company agree that, in addition to any other relief or remedies available to the Company, the Company shall each be entitled to seek and obtain an appropriate injunction or other equitable remedy from a court with proper jurisdiction for the purposes of restraining the other party from any actual or threatened breach of such covenants, and no bond or security will be required in connection therewith. If any of such provisions is deemed invalid or unenforceable, such provision shall be deemed modified and limited to the extent necessary to make it valid and enforceable. 16. Liability of Members. The Members shall not have any liability for the obligations
or liabilities of the Company except to the extent provided in the LLCA. 17. Amendments to the Agreement. This Agreement may be amended at any time
with the unanimous consent of the Managing Members. 18. Governing Law. This Agreement shall be governed by, and construed under, the
laws of the State of Delaware, all rights and remedies being governed by said laws. 19. Counterparts. This Agreement may be executed in more than one counterpart
with the same effect as if the Members executing the several counterparts had all executed one document. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have duly executed this Agreement as of the date set forth above.
Managing Member:
Name i:H~pef4
e. Francisco A. tIIarramendi
23108.0001 #572741
EXHIBIT D
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EXHIBIT E
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EXHIBIT F
Subject: Re: Hello panchito No buddy, Ill give you the 10bs [bs = bolivares] here, you will tell me if in bs or if I convert them. You already made the .25 from the bonds when you sold them, and as you reported 74.10 to me. We agreed that you will keep that .10 and wed report 74. Are we clear now?
Subject: RE: Hello panchito Buddy, assuming 11056415.49, if I take out my 525k and your 1,686,283.10 I have 8,845,132.29 remaining, from which you tell me to send 7,269,716.50 to black and then 1,548,415.89 remain, which you are going to send since you already have them. Then that gives us zero. Where do I get the 10 bs from and the other .25 and .10 you are saying from the bonds, or are they included in the 525k?
Subject: Hello panchito Here is the settlement of the first operation. Profit $11056415.49 $525 thousand are yours. You keep that + the .25 from the sale of the bonds +.10 also from the sale of the bonds + 10bs 2) You are going to send $1686283.10 to my account at hsbc. The instructions are
3) You have blacks $7296716.50 which will be sent on Monday, I will give you the instructions for the new account I am opening for him at hsbc 4) For the first operation you sent me $38mm and we used $36451584.50 in other words $1548415.5 remain which I will send to him. If you add $525 thousand + $1686283.10 + $1548415.5 + $7296716.50 that is $11056415.49. Please let me know if its clear to you.
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EXHIBIT G
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EXHIBIT H
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EXHIBIT J
From: Francisco Illarramendi [fillarramendi@highviewpoint.com] Sent: Monday, March 29, 2010 2:28 p.m. To: flopez@highviewpoint.com Subject: RE: Tell Carolina As discussed, put BP at 155 and well get LB in later. Regards. -----Original Message----From: Frank H. Lopez [mailto:flopez@highviewpoint.com] Sent: Wednesday, March 24, 2010 12:13 p.m. To: fillarramendi@highviewpoint.com Subject: Re: Tell Carolina Copied -----Original Message----From: Francisco Illarramendi To: Frank Lopez Reply To: fillarramendi@highviewpoint.com Sent: March 24, 2010 11:52 a.m. Subject: Tell Carolina 3,956 1,267 us 3. 105 BP 50 LB Regards. Sent via BlackBerry by AT&T Sent by a wireless BlackBerry device
N01334-E00201821
Lopez, Frank
UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT
SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. FRANCISCO ILLARRAMENDI, HIGHVIEW POINT PARTNERS, LLC and MICHAEL KENWOOD CAPITAL MANAGEMENT, LLC, Defendants, and HIGHVIEW POINT MASTER FUND, LTD., HIGHVIEW POINT OFFSHORE, LTD., HIGHVIEW POINT LP, MICHAEL KENWOOD ASSET MANAGEMENT, LLC, MK ENERGY AND INFRASTRUCTURE, LLC, and MKEI SOLAR, LP, Relief Defendants.
11-CV-00078 (JBA) ECF CASE [PROPOSED] ORDER
[PROPOSED] ORDER EXPANDING THE RECEIVERSHIP TO INCLUDE HIGHVIEW POINT MASTER FUND, LTD., HIGHVIEW POINT OFFSHORE FUND, LTD., AND HIGHVIEW POINT LP WHEREAS this matter has come before this Court upon motion of the Receiver, John J. Carney Esq. (the Receiver), for an order expanding the Receivership to include Highview Point Master Fund, Ltd. (Master Fund), Highview Point Offshore Fund, Ltd. (HVP Offshore), and Highview Point LP (HVP LP) in the Receivership Estate; WHEREAS this Court finds that based on the record in these proceedings, the expansion of the receivership and the modification of the original order appointing the Receiver to include Master Fund, HVP Offshore, and HVP LP is necessary and appropriate to achieve equity; and
WHEREAS this Court has subject matter jurisdiction over this action and personal jurisdiction over Master Fund, HVP Offshore Fund, and HVP LP; and venue properly lies in this district. NOW THEREFORE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED THAT: 1. This Court hereby takes exclusive jurisdiction and possession of the assets, of whatever kind and wherever situated of Master Fund, HVP Offshore (HVP Offshore; and HVP LP. 2. This Court hereby continues to maintain exclusive jurisdiction and possession of the assets, of whatever kind and wherever situated, of the entities and assets subject to the Courts Temporary Order Freezing Assets and Modified Temporary Order Freezing Assets, entered January 28, 2011 and February 2, 2011, respectively (Doc. # 36, Doc. # 59)(collectively Original Freeze Orders). 3. The Orders appointing a Receiver entered on February 3, 2011 and amended March 1, 2011, June 22, 2011, July 5, 2011 and January 4, 2012 (respectively, Doc. # 66, Doc. #118, Doc. #279, Doc. # 287 and Doc #423)(the MK Receiver Orders) continue in full force and effect and nothing in this Order shall be construed to limit the powers or duties granted the Receiver under the MK Receiver Orders. 4. The Court amends its definition of the Receivership Estate as set forth in the Original Freeze Orders to include all assets under the direct or indirect control of the entities known as the Master Fund, HVP Offshore and HVP LP as well as the previous entities included within the definition.
5. The Court amends its definition of the Receivership Entities as set forth in the Original Freeze Orders to include the entities known as the Master Fund, HVP Offshore and HVP LP as well as the previous entities included within the definition. 6. Until further order of this Court, John J. Carney, Esq., of Baker & Hostetler LLP is hereby appointed to serve without bond as receiver (the Receiver) for the Receivership Estate and continues to be empowered with all authority, privileges and immunities as set forth in the Original Freeze Orders and MK Receiver Orders. 7. The Motion of the Receiver is GRANTED.
SO ORDERED, This Date: ________________, 2012
_________________________________________ THE HONORABLE JANET BOND ARTERTON UNITED STATES DISTRICT JUDGE

SEC Case Declaration of Receiver Matthew Greenblatt W Exhibits

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Case 3:11-cv-00078-JBA Document 446-1

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UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

ECF CASE DECLARATION OF MATTHEW GREENBLATT

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Ontime is an entity linked to Illarramendis brother-in-law, Rufino Gonzalez-Miranda.

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Naproads transfers to HVP Offshore and Illarramendi were funded, in whole or

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redemption of the fictitious investments.

Many times these falsely recorded redemptions

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continued from previous page

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Prior to these transactions, in May 2009, Illarramendi caused MKV to transfer

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SECURITIES AND EXCHANGE COMMISSION, Plaintiff, vs. FRANCISCO ILLARRAMENDI, ET AL Defendant. * * * * * * * * * * * * * *

Appearances: FOR THE PLAINTIFF:

FOR THE DEFENDANT FRANCISCO ILLARAMENDI:

FOR THE DEFENDANT HIGHVIEW POINT PARTNERS:

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