SEC v. Pacific West Capital Group, Inc., et al

Case Summary:

On February 16, 2018, Thomas C. Hebrank of E3 Advisors was appointed permanent receiver for PWCG Trust (“Defendant”), pursuant to an Order entered by the United States District Court for the Central District of California in an action against Defendant filed by the Securities and Exchange Commission.

Document Links (PDF Format):

Case Updates:

 

Summary

The Receiver filed a plan with the Court on November 15, 2018 to propose a long-term strategy for maximizing the value and addressing the cash flow needs of the PWCG Trust portfolio. On December 7, 2018, the Court approved the Receiver’s proposal. The Court ruled as follows:

 

“The Court, having considered the motion for (A) Approval of Pooling of Receivership Assets, (B) Authority to Pay Policy Premiums from Pooled Funds, and (C) Authority to Sell or Surrender Certain Policies (“Motion”) of Thomas C. Hebrank (“Receiver”), Court-appointed receiver for PWCG Trust, and good cause appearing therefor, hereby orders as follows: 

 

  1. The Motion is granted; 
  2. The Receiver’s proposal to pool the assets of the receivership estate into one common fund, as described in the Motion, is approved; 
  3. The Receiver is authorized to pay premiums for all insurance policies held by PWCG Trust from the pooled funds; and 
  4. With respect to the 34 insurance policies listed on Exhibit B to the Declaration of Thomas Hebrank in Support of the Motion (“Negative Value Policies, the Receiver is authorized to surrender the Negative Value Policies to the insurance carriers for their cash value or sell them to one or more third parties without further order of the Court.”
The Receiver is working with the PWCG Portfolio manager, itm/21stto implement the Court’s order.

 

Funding Insurance Premiums
With the Court’s approval, all premium payments are being paid from the pooled PWCG Trust reserve funds. Accordingly, no investor billings are being sent out for premium payments.  All policies remain current and active, none have defaulted or lapsed.

 

Policy Maturities and Future Distributions
There have been a few policy maturities since the start of the receivership. The Court has ruled that the Receiver hold and pool these funds along with the other remaining cash reserves, to be used to pay premiums for the portfolio moving forward. As reported in the Receiver’s motion (link is below), premium payments are expected to outpace policy maturities for several years, with additional funds needing to be borrowed in order to prevent policies from lapsing. When surplus funds become available, which is not expected to occur for approximately five to seven years based on projections regarding cash flow and policy maturities, distributions will be made to investors. The Receiver will propose that distributions be based on amounts invested (including cash calls), and not based on interests in specific policies, consistent with the Court’s approved pooling of reserves and death benefits for all policies. Please review the following filing for a further discussion of these issues:

In addition, the Receiver issued his Third Interim Report which contains further status updates on this case.

 

FREQUENTLY ASKED QUESTIONS:

 

Who is the Receiver? Why was there a Receiver appointed? Thomas C. Hebrank was appointed by the Federal District Court on February 16, 2018. The Receiver was appointed after a complaint was filed by the Securities and Exchange Commission against Pacific West Capital Group, Inc. (“Pacific West”); Andrew B. Calhoun IV; PWCG Trust, et al. Your life insurance investment interest was created by PWCG, and is one of the subjects of the litigation between the SEC and PWCG.

 

Who can I talk to about my investment? You can periodically visit the Receiver’s website for additional updates as far as the case, Receiver’s Reports and other legal filings (www.ethreeadvisors.com/cases/pwcg). The Receiver and his staff are happy to take your questions, however to keep expenses low we ask that you check the FAQ or website first. Please direct inquiries to the Receiver to pwcg@ethreeadvisors.com.

 

Do I still need to make premium call, administrative fee or other payments? The Receiver has suspended the collection of both investor premium calls and shortfall payments, as well as the $200 or other administrative fees.

 

Do I still own interests in specific policies? The Court has approved the “pooling” of all investor policy interests meaning that all premium payments and all policy maturities are pooled together for the benefit of all of the investors. Once sufficient surplus funds become available, which is expected to occur in approximately five to seven years (based on current projections), the Receiver will propose that distributions be made to investors based on total amounts contributed by investors (including cash calls). It is important to understand that, due to the insufficiency of cash reserves set up by PWCG, if the reserves and death benefits for the policies were not pooled, and the Receiver was unable to borrow funds to meet anticipated cash needs over the next few years, the vast majority of the policies would lapse, meaning investors would recover little or nothing. Therefore, the pooling and anticipated borrowing is critical to maximizing the recovery from the policies for investors.

 

Will the Receiver be collecting the Final Judgments against defendants Pacific West Capital Group, Inc.; Andrew B. Calhoun IV; and Andrew Calhoun Jr.? Copies of the Final Judgments against Andrew B. Calhoun IV, Andrew Calhoun, Jr. and Pacific West Capital Group, Inc. can be found at the below links under Court Filings. These Final Judgments were entered in favor of the Securities and Exchange Commission on June 15, 2018 and June 26, 2018.

 

The SEC is responsible for collecting each of these Judgments. The Receiver will not engage in direct collection activities with regard to these Judgments. It should be noted that if the SEC is successful in recovering money from these Defendants, it is possible that the recovered funds will be turned over to the Receiver. In other words, in the normal course of a federal equity receivership, the SEC will turn over funds that are collected on judgments to the Receiver for distribution to the investors who were victims of the underlying wrongdoing. In the meantime, the Receiver will continue his work pursuant to the Court’s orders to maximize the recovery and distribution to investors in connection with the PWCG Trust.

 

Initial Investor Notification Letter

–––

Court Filings:

 

Sign Up to Receive Case Updates

* indicates required


–––

Email Thomas C. Hebrank: pwcg@ethreeadvisors.com