Wiand v. Waxenberg
| Decision Date | 19 March 2009 |
| Docket Number | No. 8:05-CV-1856-T-27TBM.,8:05-CV-1856-T-27TBM. |
| Parties | Burton W. WIAND, as Receiver for Howard Waxenberg Trading L.L.C., HKW Trading LLC, and HKW Trading Fund I LLC, Plaintiffs, v. Zelda J. WAXENBERG, individually and as Trustee of the Zelda Waxenberg Family Trust, Defendant. |
| Court | U.S. District Court — Middle District of Florida |
Carl Richard Nelson, Gianluca Morello, Maya M. Lockwood, Fowler White Boggs, PA, Tampa, FL, for plaintiffs.
Douglas Jules Titus, Jr., George & Titus, PA, Tampa, FL, for defendant.
Christopher E. Martin, Securities & Exchange Commission, Miami, FL, for Amicus S.E.C.
BEFORE THE COURT are: (1) Defendant's Motion for Summary Judgment (Dkt.139), to which the Receiver has responded in opposition (Dkt.147); (2) the Receiver's Motion for Summary Judgment (Dkt.142), to which the Defendant has responded in opposition (Dkt.149); (3) Defendant's Motion in Limine to Exclude the Expert Opinion Testimony and Report of Expert Witness Stephen S. Oscher and Oscher Consulting, P.A. (Dkt.141), to which the Receiver has responded in opposition (Dkt.150); and (4) the Receiver's Motion to Strike the Expert Report and Testimony of Lloyd Morgenstern (Dkt.143), to which Defendant has responded in opposition (Dkts.146, 164). Defendant's motion for summary judgment is GRANTED IN PART as set forth herein, and the parties' motions are otherwise DENIED.
On June 9, 2005, the Securities and Exchange Commission ("SEC") filed an enforcement action against Howard Waxenberg Trading, LLC, HKW Trading LLC, HKW Trading Fund I LLC, Downing & Associates Technical Analysis, and the Estate of Howard Waxenberg. (Case No. 8:05-cv-1076-T-24TBM, Dkt. 1). The SEC alleged that Howard Waxenberg ("Mr.Waxenberg") operated a Ponzi scheme between 1990 and 2005, involving approximately 200 hundred investors. (Id., ¶¶ 1-2). Shortly before that action was filed, Mr. Waxenberg committed suicide. (Id., ¶ 9).
In the course of the enforcement action, the Honorable Susan C. Bucklew appointed Burton W. Wiand as the Receiver over Howard Waxenberg Trading, LLC, HKW Trading LLC, HKW Trading Fund I LLC, Downing & Associates Technical Analysis, and the Estate of Howard Waxenberg (collectively, "the Receivership Entities") (Case No. 05-cv-1076, Dkts. 10, 44). The appointing Orders authorized the Receiver to take possession of the Receivership Entities' assets and to:
institute such actions and legal proceedings, for the benefit and on behalf of the [Receivership Entities] and their investors and other creditors, as the Receiver deems necessary against those individuals, corporations, partnerships, associations and/or unincorporated organizations, which the Receiver may claim have wrongfully, illegally or otherwise improperly misappropriated or transferred monies or other proceeds directly or indirectly traceable from investors in the [Receivership Entities]. (Dkt. 10 at 2-3).
The Receiver ultimately initiated eighty-five ancillary actions against investors, seeking to recover payments made by Mr. Waxenberg to those investors. The Receiver seeks to distribute recovered funds pro rata among all investors.
The instant case was the first ancillary case filed. It was commenced on October 5, 2005 against Mr. Waxenberg's wife, Zelda Waxenberg ("Mrs.Waxenberg") in her individual capacity. (Dkt.2). The Receiver later added Mrs. Waxenberg in her capacity as Trustee of the Zelda Waxenberg Family Trust ("the Trust"). (Dkt.20). In the Second Amended Complaint, the Receiver seeks to recover three types of payments made to Mrs. Waxenberg1: (1) "return of principal" in the amount of $921,500.00, which represents Mrs. Waxenberg's principal investment with Mr. Waxenberg that he returned to her in 2003 and 2004; (2) "false profits" in the amount of $150,167.82, which represents Mrs. Waxenberg's purported earnings on her principal investment; and (3) "other transfers" in the amount of $799,784.05, which were not made in connection with Mrs. Waxenberg's investment, but were purportedly for the Waxenbergs' household and family expenses. The Receiver brings claims pursuant to Florida's Uniform Fraudulent Transfer Act ("FUFTA"), Fla. Stat. §§ 726.101 et seq. (Counts I, III, and V) and for unjust enrichment (Counts II, IV, and VI).2 (Dkt.65).
In the instant cross-motions for summary judgment and cross-motions to strike expert testimony, the parties primarily dispute three issues that are central to the Receiver's FUFTA and unjust enrichment claims: whether Mr. Waxenberg was operating a Ponzi scheme, whether Mrs. Waxenberg received payments from Mr. Waxenberg in good faith, and whether Mrs. Waxenberg supplied reasonably equivalent value for the payments. Based on the issues presented, the Court undertakes a brief review of Mr. Waxenberg's investment activities and Mrs. Waxenberg's participation in, and knowledge of, her husband's activities.
The Waxenbergs were married in 1982. (Z. Waxenberg Dep. at 33).3 Mr. Waxenberg was a trader and Mrs. Waxenberg, a licensed real estate broker in California, bought and sold investment properties. (Z. Waxenberg Dep. at 21-23, 55). The Waxenbergs moved to California in 1985, where Mr. Waxenberg "did his own trading" "with his own companies." (Z. Waxenberg Dep. at 55-56, 68). They lived together until Mr. Waxenberg moved to Florida in 2002, to live with the Waxenbergs' two sons while they attended a sports academy in Bradenton, Florida. (Z. Waxenberg Dep. at 31-32, 41; Morello Dec, Exh. A at 7-8, 25).
In January 1984, while the Waxenbergs were living in New York, Mr. Waxenberg was "permitted to resign" from Jeffries & Company in New York City for "[v]iolation of firm policies re options trading and other trading irregularities." (Z. Waxenberg Dep. at 54; Morello Dec, Exh. C). In June 1986, the National Association of Securities Dealers, Inc. ("NASD") brought a complaint against Mr. Waxenberg based on an alleged "scheme to defraud" Jeffries by falsifying firm order tickets. (Morello Dec, Exh. D). In March 1987, the NASD Board of Governors barred Mr. Waxenberg from association with any NASD member, noting that Mr. Waxenberg's "misconduct is especially egregious because it involved a deliberate attempt to perpetrate a fraud." (Morello Dec, Exh. F at 2). Mrs. Waxenberg testified that she had no knowledge of Mr. Waxenberg's problems with the NASD until after this action was filed. (Z. Waxenberg Dep. at 57).4
Mrs. Waxenberg contends that throughout their marriage, she and Mr. Waxenberg maintained independent financial lives, filing separate tax returns and sharing no ownership in real property or bank accounts. (Z. Waxenberg Dep. at 118, 178). Mrs. Waxenberg represents that she believed at all times that Mr. Waxenberg's investment activities were legitimate. (Dkt. 139, Exh. 1 at 25). Specifically, Mrs. Waxenberg contends that Mr. Waxenberg was "brilliant," constantly studied trading literature, and periodically attended conferences on securities and trading. (Id. at 24; Goellnitz Dep. II at 87). Mr. Waxenberg also wrote a newsletter on trading for a period of time, which both private investors and brokerage houses purchased. (Dkt. 139, Exh. 1 at 24; Goellnitz Dep. II. at 77-78). Mrs. Waxenberg states that Mr. Waxenberg would typically arise between 4:00a.m. and 4:30a.m. to prepare for the opening of the markets, and that she observed him in contact with traders and clients, saw checks on his desk for substantial sums of money, and occasionally observed him preparing charts and graphs related to trading. (Dkt. 139, Exh. 1 at 24). Mr. Waxenberg explained to her that he was successful in futures and options trading because he was able to leverage the market and was disciplined in applying his investment strategies. (Id. at 25).
2. Mr. Waxenberg's investment activities
Between 1990 and his death in May 2005, Mr. Waxenberg, "in combination with one or more of [the Receivership Entities]," raised $135 million in connection with 238 investor accounts. (Oscher Dec. ¶ 17). Mr. Waxenberg operated his investment activities through Downing & Associates Technical Analysis ("DATA"), a fictitious "d/b/a" for Mr. Waxenberg, as well as three limited liability companies (collectively, "the Receivership LLCs"): Howard Waxenberg Trading, LLC ("HWT")7HKW Trading LLC ("HKW Trading"), and HKW Trading Fund I LLC ("FUND I").5
According to the contracts that Mr. Waxenberg provided to investors, he sold units or interests in three investment funds: The Downing & Associates Fund (operated by DATA), the Howard Waxenberg Trading LLC Fund One (operated by HWT), and the HKW Trading Fund I LLC (operated by HKW Trading). (Morello Dec, Exhs. G-I). The investment contracts essentially provided that Mr. Waxenberg would trade index futures and options.6 Each calendar quarter, investors received statements reflecting their beginning balances, withdrawals, deposits, interest earned, management fee, net income, and ending balances ("investor statements"). (Oscher Dec. ¶ 21, Exh. 7). Each quarter, investors also received a distribution of the "interest earned" on their investment, unless the interest was reinvested. (Oscher Dec. ¶¶ 23-24).
Debbie Goellnitz, Mr. Waxenberg's only employee, testified that she had no indication that Mr. Waxenberg was operating an illegal investment scheme, and that until the first quarter 2005, he timely paid all bills. (Goellnitz Dep. I at 22-23; Dep. II at 94, 97-98). Paul Rampell, another investor, testified that there was no indication of anything illegal, nor were than any deviations from Mr. Waxenberg's investment plan. (Rampell Dep. at 23, 73-74). Nonetheless, the Receiver contends that between at least 1990 and 2005, Mr. Waxenberg was operating a sizeable Ponzi scheme.7
According to Steven Oscher, the Receiver's accounting expert, Mr. Waxenberg pooled all...
To continue reading
Request your trial
-
Wiand v. Cloud
...like other UFTA schemes, a receiver may proceed under two theories, actual fraud or constructive fraud. See e.g. Wiand v. Waxenberg, 611 F.Supp.2d 1299, 1318–19 (M.D.Fla.2009); In re World Vision Entertainment, Inc., 275 B.R. 641 (M.D.Fla.2002). And in count I, the Receiver proceeds under b......
-
In re Inc.
...re R.M.L., Inc., has been applied in this Circuit by U.S. District Courts and U.S. Bankruptcy Courts in Florida. See Wiand v. Waxenberg, 611 F.Supp.2d 1299, (M.D.Fla.2009) (“In assessing whether value was given, the totality of the circumstances are examined....”); Goldberg v. Chong, Case N......
-
William F. Perkins, in His Capacity of Int'l Mgmt. Assocs., LLC v. Lehman Bros., Inc. (In re Int'l Mgmt. Assocs., LLC)
...School Endowment v. Bayou No Leverage Fund, LLC (In re Bayou Group, LLC), 439 B.R. 284, 310–13 (S.D.N.Y. 2010) ; Wiand v. Waxenberg, 611 F.Supp.2d 1299, 1319–20 (M.D. Fla. 2009) ; Gredd v. Bear, Stearns Securities Corp. (In re Manhattan Investment Fund, Ltd.), 359 B.R. 510, 522–24 (S.D.N.Y.......
-
Wiand v. Morgan
...like other UFTA schemes, a receiver may proceed under two theories, actual fraud or constructive fraud. See e.g. Wiand v. Waxenberg, 611 F.Supp.2d 1299, 1318–19 (M.D.Fla.2009); In re World Vision Entertainment, Inc., 275 B.R. 641 (M.D.Fla.2002). And in count I, the Receiver proceeds under b......