The Portland Business Trial of the Century, as far as it has progressed, continued apace in U.S. District Court during the last week.
If convicted, Aequitas Capital Management executives Robert Jesenik Andrew MacRitchie Brian Rice could face decades of prison time. Jesenik, the founder and CEO of Aequitas Capital Management, is responsible for compliance. MacRitchie was in charge of fraud. Rice, who was a former Key Bank Market President, managed relationships between registered investment advisors.
Brian Oliver, the No. 2 executive of Lake Oswego's firm, testified this week. The government will call 45 witnesses to testify, including the No. 2 executive of the Lake Oswego firm. Oliver, along with two former officers, has also pleaded to various charges.
The Portland Business Journal will cover the trial. This week's news is summarized below.
Bob Holmen, Aequitas' general counsel and Aequitas capital management's chief legal officer, had a private discussion with Oliver in the late summer of 2015.
Holmen, hired three months earlier, raised concerns with Oliver regarding inaccurate and misleading marketing materials given to investors. He cited the overstatement in the collateral amount that would be used to back the loans.
He said that his job was keeping me out of prison. I had never considered that what we told investors might be criminal.
Aequitas collapsed in March 2016 with more than $600,000,000 owed to investors. A receiver was only able to recover half of that amount by selling assets.
Attorneys Tuesday continued to interrogate Oliver. One of the most important arguments took place when witness Brian Oliver was not in the room.
The U.S. Government and the attorneys for Jesenik MacRitchie Rice had a disagreement about how to use Oliver's plea agreement from 2019 with the government in court. Oliver's 2019 plea agreement was a tool for jurors who were evaluating his credibility as a testimony.
Oliver, who was unable to recall specific details when questioned on Tuesday, said that he agreed with Rice and Aequitas attorney Bob Holmen regarding the necessity of cutting expenses. Oliver, who in an email discussed cutting costs, still seemed to be planning on using the corporate jet.
Jesenik assumed Oliver would use the corporate jet, or "CJ" as it was clarified by the court in an email chain where Oliver suggested cost-cutting and mentioned someone offhandedly.
Oliver replied: "You are point?" (sic) LOL -- touche."
According to MacRitchie’s lawyer, MacRitchie took a commercial flight for an anniversary in 2015.
Oliver described Jesenik's resistance to cost-cutting. Oliver quoted Jesenik saying that Aequitas could not reduce to the point where it hindered growth.
Robert Zamarripa, a businessman from Rancho Santa Fe in California, recalled Wednesday how his golfing buddy introduced him to Aequitas after he sold his company for $270m. The friend said that Aequitas invested in bad debts from hospitals, which it bought at a discounted rate and then collected. It paid investors interest, but the hospitals had recourse clauses that would allow them to buy the debt back if a patient defaulted.
Zamarripa, during his testimony, said that it sounded as if Zamarripa was making a secure, safe bet. He would invest 12 million dollars with Aequitas over the course about three years.
Zamarripa said that if he had known, as the case of the government alleges, that his money was going to be used to pay previous investors, he would never have invested in Aequitas.
"To me, this is a classic Ponzi Scheme, if people are using their money to pay others. Zamarripa said that the scheme was not adding value. I thought that 100% of my money was going to be used for receivables.
On Thursday, a witness described the moment when she realized that something was wrong.
Vanessa DeHaan is a former Aequitas Risk and Compliance associate who said that she flagged to management what she believed were Ponzi-like payment before she left in 2015. DeHaan was with Aequitas less than one year starting in October 2014. She worked for Deloitte in Illinois and Northwest Trust Asset Management.
She attended company meetings and reviewed records to understand her concerns.
DeHaan said that at one meeting a superior told her to treat the company as if it were a "credit-card addict." She also saw an inter-company lending of over $100 million at another meeting. Someone in the room was surprised.
DeHaan, who has a background in auditing, wondered, "Will my employer go bankrupt?"
DeHaan, when reviewing bank statements, found a few transactions that appeared to be money paid by new investors to past investors. The largest transaction allegedly exceeded $4 million.