UNITED STATES DISTRICT COURT |
|||
| Plaintiff, | |||
| vs. | 05-CV-355 | ||
| $2,300,577.10 IN UNITED STATES CURRENCY, ET AL., |
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| Defendants. | |||
| --------------------------------------------x | |||
Transcript of a Proceeding held on July 6, 2005, at the James Hanley Federal Building, 100 South Clinton Street, Syracuse, New York, the HONORABLE NORMAN A. MORDUE, United States District Judge, Presiding.
| A P P E A R A N C E S | |
| For Plaintiff: | UNITED STATES ATTORNEY'S OFFICE James T. Foley U.S. Courthouse Room 231 445 Broadway Albany, New York 12207-2924 BY: THOMAS A. CAPEZZA, ESQ. Assistant U.S. Attorney |
| Also Present: | Kenneth Titus, Sr. Linda Sadr |
(Open Court, 10:08 a.m.)
THE COURT: Next one, Judi.
THE CLERK: Case Number 2, United States of America versus 2 million --
THE COURT: Redwood Trust case.
THE CLERK: The Redwood Trust case. Please note your appearances for the record.
MR. CAPEZZA: Your Honor, good morning, for the United States, Assistant U.S. Attorney Thomas Capezza. Also present with me, your Honor, is Ms. Jane Traver, paralegal on the case.
THE COURT: Okay. Good morning.
MS. TRAVER: Morning.
MR. CAPEZZA: Your Honor --
THE COURT: I had the impression there was going to be an appearance this morning by Mr. Titus.
MR. TITUS: Yes, your Honor.
THE COURT: Oh, come up here, sir.
MR. CAPEZZA: Your Honor, just briefly by way of background, the United States filed a civil forfeiture complaint on March 21st, 2005 alleging that more than $2.3 million in funds that were seized as well as checks and money orders were the proceeds of a scheme to use the mails to defraud investors. Briefly, your Honor, the complaint states that in essence more than 900 persons paid approximately $3,000 each to obtain a line in a queuing scheme whereby their mortgages would be paid off in full. The period of time alleged is September 2003 to December 2004, the complaint alleges that more than $4 million was received by Redwood Trust and Mr. Titus and less than 2 percent of that was used to pay off one mortgage during that entire period of time. The complaint further alleges that Mr. Titus instructed his subordinates not to accept payments by mail because that would constitute mail fraud. Your Honor, based on the time period that's alleged and also the claims that were received, we have yet to receive a claim or an answer from Mr. Titus. We have, however, endeavored to identify all of the proposed or potential victims in this case and we have received approximately 500 responses, either in the form of a petition for remission or a claim. The issue before the Court today is whether or not Mr. Titus is himself making a claim to this property and if not, then we'll go forward, continue to identify the remaining investors with a view to forfeiting the funds so as to return the money to those investors.
THE COURT: Mr. Titus?
MR. TITUS: Yes, your Honor. I'd like to say that part of those funds belong to Redwood Trust, and you'll have to forgive me, I'm on medication for sciatic nerve here and I'm kind of drugged up so I'm not really thinking too clearly so -- but for the record I would like to say that it's my opinion that these -- this money was derived from organized crime activities perpetrated by the U.S. Postal Inspector and the IRS office, that I've gone through the information that I got from the government and I find that it's full of fraudulent claims. There's no basis in fact for very many of the things that they're claiming in there, and it's kind of like somebody has a crystal ball and they just put down what they want to. They're claiming that I have bank accounts that I don't have, they're making a lot of claims, I've gone down each paragraph and it seems that as I go down them, each one has errors on those. Right now I'm in no position to argue a case, I'd like to get an attorney for this to protect the money that part of which belongs to Redwood Trust, which has been given Redwood Trust by contract between the clients and myself. Right now our clients are looking to file a class action suit against the government for seizing funds that have been held in our trust by way of contract from our clients and they've interfered with that contract. We right now have places we could put that money that would take care of these mortgages and we're being prohibited from doing that because they've seized these funds.
THE COURT: Well, let me ask you, are you -- from what you're saying, you're making a claim for the funds then also?
MR. TITUS: Yes, your Honor.
THE COURT: You are.
MR. TITUS: I'm claiming that they've been taken from us from illegal activity on the part of the government and in fraudulent statements within the body, embodiment of this whatever you call it, that's been sent out to me. And at some point, those will probably all be covered in the court case in Albany and I think that at this time it would be kind of remiss to be deciding what's going to happen to money that hasn't been decided if there's going to be a crime. And I'd also like to say that the gentleman here says that 500 people have responded, well, I'm appalled at how the government has handled this case, in that they instructed us that we could not use our computers at the office to notify people of anything. They did serve me with papers, they do not notify any of my clients at all, they think they're going to get it through osmosis in the air, I guess, and only because we have a rep that has a web site that allows us to put something up there to inform them, we've been able to inform some of our reps that were also clients. Now some of the people out there that were just clients and were not reps also, they don't know about that site, so they're not finding out. In addition to that, some of the people that had sent in their paperwork was getting a call from the post office, the postmaster, and they were telling them that they need to go on the web site, they sent them a letter saying that this money was possible fraudulent activity and they're telling them they've got to go on the web site and fill out a form that says it is derived from fraudulent activity or they can't get their money back. Now some reps have called me and said, look, I'd like to just leave my money there if that's going to be good for you and I said, no, claim your money because I said with what they're doing, they're trying to get default on the money so they can just take it, it's all about taking the money is what it's about, you want to put in a claim to get your money, those 500 people are people that I informed and they're getting information from the postmaster stating that they must turn in this other form or they won't get their money. Now it's asking them to make a legal decision, it's asking them to commit perjury because I haven't been charged with any crime, none's been proven, so to have them state the funds are fraudulent to begin with would be making a false statement, that would be filing a false report and the government --
THE COURT: It's not a false statement if there's a good faith basis to believe in it. It may come out, maybe down the road you may --
MR. TITUS: Well, it could be further down the road that they might say that it's fraud but at this point it's not so they would be guessing that maybe it is and the reps right now don't feel, some reps say I don't want to fill that out because that's fraud, they're trying to get us to make a false statement and we're not going to do it. And they're telling them that they have to fill that out, stating that it is fraudulent funds before they can get a refund so a lot of people never sent that in. So there's a lot of people out there that have never been notified, there's a thousand people and only half of them have been sent in. I'm sure the others would like to know that this is happening so they can put claim to their money. If they take all the money, if my clients get their money back and it doesn't go to the government, then I'm a happy camper, but I don't want the government getting the money because they failed to notify. I see in here it says that they may notify them and that was like real good language that they may, and the fact is they didn't, and I think, I think it's incumbent upon the government to give fair notice to people to make claim on funds instead of just plain seizing the funds.
THE COURT: Thank you, sir. Mr. Capezza.
MR. CAPEZZA: Your Honor, thank you. The issue before the Court today is whether or not Mr. Titus is making a claim to the property. With respect to the government's endeavors, we have a web site that we've put up that we've used to notify various parties. The postal service pursuant to the criminal investigation has began notifying parties as well. No one is being asked to decide in a form whether or not this is fraud. All we've asked is that people submit documentation showing that they made a payment to Redwood Trust, it's not for them to say that this is fraud or not. It's simply saying, they have a fund or they have an interest in the funds that have been seized. With respect to whether or not the government is going to seize this money or forfeit this money, the issue really right now is is Mr. Titus making a claim on behalf of himself. If the answer to that question is yes, then the litigation goes forward, we'll serve him with a Notice of Deposition and he will contest, as it is his right, that this is not the proceeds of mail fraud. If he prevails, the money will go back to Mr. Titus and -- or Redwood Trust in which case then he can do with it what he chooses, but if he does not prevail, then the government will forfeit the money with a view to returning the funds to those investors because we've met our burden and established that it's mail fraud proceeds. So the issue, your Honor, is whether or not Mr. Titus today having been given notice of this hearing, having known for several months of this hearing, is he making a claim to the money on behalf of himself.
THE COURT: I think you indicated you were.
MR. TITUS: No, I'm not, I'm making a claim for the money on behalf of Redwood Trust as trustee for the trust.
MR. CAPEZZA: That's fine, your Honor. What we will do is we will submit to the Court an order, the order will bar all claims of Mr. Titus and anyone else with the exception of Redwood Trust and also --
THE COURT: And he as trustee.
MR. CAPEZZA: Yes, and also all investors in the Redwood Trust program. To the extent that someone may decide that they have actually made a claim to the property or have submitted $3,000 or whatever funds, their claim would be preserved as well.
THE COURT: That seems reasonable.
MR. TITUS: Yes, your Honor. I would like to say, too, that part of the funds was from people that have sent in money in denominations of 25,000 and one was up to 100,000 as part of that money and that was -- and where we were going to put the money into a program that would have given him back a very high return per month and --
THE COURT: Was that 100 every 14 days, 100 percent turnover? Was that where you were going to receive -- I read in the complaint about there was a claim that you could turn the money, in 14 days, make 100 percent what you earned, is that --
MR. TITUS: That was something else, your Honor.
THE COURT: Okay.
MR. TITUS: That was an investment that I was looking at. Actually, this was -- this was a very good return and these people gave the money with the idea that if we couldn't place that in a program, it could give what we was looking to get. There was another -- there was other people that were doing the same, similar thing, using the same method that I was going to use, and my deal with them was that, the contract with them was that if we couldn't place that money to give them that return, they would get their money returned, get a refund and so I think as part of these funds that are here, those people that made those investments not part of the Redwood Trust, where we were looking to help people with their mortgages, those people should have their funds returned to them, they have a list of those and they were not part and parcel to what they're claiming is illegal activity. This was funds that was brought in separately to be invested and I'd like to see those funds go back to those people intact.
MR. CAPEZZA: Your Honor, the complaint does include allegations relating to what Mr. Titus is referring to, the Blessings program, that's also the subject of this civil forfeiture proceeding so to the extent that Mr. Titus is making a claim on behalf of Redwood Trust as the trustee, that will be litigated part and parcel with the mortgage program. Moreover, your Honor, to the extent that Mr. Titus is making a claim as trustee on behalf of Redwood Trust, I'd just like the record to reflect that I'm serving Mr. Titus with a Notice of Deposition for his deposition on July 28th and 29th in Albany, New York.
THE COURT: The record will reflect that. All right. Anything further then at this time?
MR. CAPEZZA: Nothing further, your Honor. We will submit to the Court for its consideration an order barring all claims with the exception of Redwood Trust and also certified investors in the programs identified in the complaint.
THE COURT: Fine.
MR. TITUS: Your Honor, I think there's someone in the court at this time that has appeared, come from another state to make claim for the money because she was -- she was not notified by the government so she heard at a late date and so she's here to make claim and she has a sizable amount of money that she's put in so I'd like -- I'd like her to be heard.
MS. SADR: Your Honor, thank you, my name is Linda Sadr.
THE COURT: Could you, Linda --
MS. SADR: S-a-d-r.
THE COURT: Okay.
MS. SADR: Thank you, sir, and I have approximately $131,000 of my client -- I represent my client, I've funded this program for each one of my clients for --
THE COURT: Are you a representative?
MS. SADR: I -- yes, sir, thank you. And we did not none of us out of 51 of us, we did not anyone receive this court notice and I got it by hands down, somebody passing it to someone else. The Court didn't notify any of our clients and that's a lot of clients to miss. I'm going to assume that they were negligent on a whole lot of other people. And on this statement it says in order to avoid forfeiture of the property any person claiming an interest, this is the Court's document, I believe the prosecutor's, and any person claiming an interest in or right against the property must file and then it gives how many days you have to file and then how many days you have to submit another group of paperwork, and we've just received this and this is a 20-hour-round-trip drive to get here because I'm on the -- excuse me, or in the alternative they must appear in the United States District Court today. So I'm not sure who's filed claims to this, we would like to protect our clients' money, we have never had any reason to not believe that we would get our money back from Mr. Titus through this entire group --
MR. CAPEZZA: Your Honor, with respect to that claim, we have seized the funds from Redwood Trust and Mr. Titus, that's the proposed or that's the interested party that we have served, also made notice on a web site. With respect to the clients that Ms. Sadr is speaking about, we will honor those claims to the extent that they can corroborate that they made a payment to Redwood Trust. They are not the subject of this forfeiture proceeding. The goal of the United States is to forfeit the funds from Redwood Trust and Mr. Titus with a view to returning those funds to people who made payments to Redwood Trust in these programs.
THE COURT: So she is protected then?
MR. CAPEZZA: Correct, to the extent that she can corroborate that but we need some documentation that says who the interested party is and what documentation they have to show that they in fact made a payment to this fund. That's all we're asking for. We're not asking that they make a statement that Mr. Titus did anything wrong, simply that they make a statement that they in fact made a payment to this fund and whatever corroborating documentation that they can offer.
MS. SADR: I apologize, your Honor, it was my understanding that if I submitted the document that I personally saw, it actually implements Mr. Ken Titus and the Redwood Trust group as doing potential illegal activities. It's not my place to make that judgment. My group was asked to sign this, these documents in order to submit our names with a claim on our funds and we didn't think that was appropriate. It was saying that this gentleman or his group is guilty before we had even made it to court, or implement a potential guilt and that we wanted our money back. Up to this point for the last year requested our money which is owed directly to Redwood Trust, requested money, within 10 business days, they had the money back in hand. We never had an issue getting our money back from the company. Apologize, sir. And also we were with the understanding there was a potential that if we went through this direction, we would not get the full refund, we would get the remaining percentage of what was left after costs.
THE COURT: That's possible.
MS. SADR: That's why we didn't want to go through this direction because we were at this point always able to get the full refund and now to put us in a position now getting a percentage of our refund because the government, I'm not sure the government, sir, I don't know what group has stepped in and put their hands on it but because their hand is now on it, 131,000 may turn into $42,000.
THE COURT: Mr. Capezza, you want to address that?
MR. CAPEZZA: Sure, your Honor. With respect to people getting all of their money back or a portion of their money back from the government, I'll simply say the allegations in the complaint say that Redwood Trust received more than $4 million. The government seized $2.4 million, given the total value, we do not have all of the money. In terms of Mr. Titus returning funds, neither does he have all of the money to return all of the funds if everyone asked for those funds. Is he capable of returning funds to one or two or individual investors? Yes, but with respect to his ability to return all of the funds to all of the investors, he doesn't have that, even if we were to return $2.4 million to him. Among the allegations in the complaint are that he used $400,000 of those funds to finance a loan for someone else to use as collateral. Now he does not have all of the funds. So does this one person obtain all of their money back if Mr. Titus had it? Yes. Could Mr. Titus return all of the funds to all of the investors? No. Because he does not have it. They received more than $4 million, we seized $2.4 million, this is the best effort to the extent that these represent proceeds of mail fraud to in essence return the funds on a pro rata basis to all of the victims, if they turn out to be victims, and that will be equitable to all of the investors and not just a handful of investors that might have the insight to be able to obtain a refund from Mr. Titus. With respect to the documentation that the government requests, we simply want to make sure that people who made a payment to Redwood Trust can corroborate that they in fact made a payment so that they're due a payment.
THE COURT: You're not looking for some statement by them that they were -- the money was wrongfully taken from them or it was some impropriety in the nature of why they gave the money?
MR. CAPEZZA: No. All I'd like to know, your Honor, is can you corroborate that you made a payment on XYZ date. With respect to other investors --
THE COURT: For example, send me a copy of the check?
MR. CAPEZZA: Yes, that would be fine, your Honor, so that we can show that this investor made a payment on this date so that we're not refunding money to persons who don't deserve money which would diminish the pool of assets available to be returned to investors. Also, your Honor, I would just point out to the extent that Mr. Titus claims that other people aren't here or haven't been given notice, your Honor, we have received contact from a number of investors who have told us Mr. Titus has in fact e-mailed them and discouraged them from cooperating with the government and so to the extent that some parties may not be aware of this, your Honor, there are a number of parties who have been discouraged from participating. I'm not interested in forfeiting the funds from legitimate investors who maybe made a decision to invest believing that the outcome would be that their mortgage would be paid off. We're simply interested in forfeiting the funds from Mr. Titus in Redwood Trust so that those funds, if they're proven to be mail fraud proceeds, can then be returned on a pro rata basis to those individuals that have been defrauded.
MS. SADR: Your Honor, I apologize, thank you, sir. I would just like a copy of whatever it is that he's saying that it does not implicate or steer the assets of clients towards the direction to believe that we're now signing the paper or actually agreeing to their statement.
THE COURT: Everything he said has been taken down by this court reporter, transcript.
MS. SADR: I apologize, I meant he said that he sent out a letter or there's a letter somewhere that doesn't give us the impression that we're implicating someone of any illegal action, that would be great.
MR. TITUS: Numerous calls, your Honor, that people complain that they're actually getting calls from the postal department stating that they have to fill that out or they cannot get their funds and I have not discouraged anyone from coming after their money. As a matter of fact people are calling me and I'm telling them, you go after those funds because I don't want them forfeited. They're going to get forfeited to the government and I thought this would all happen before my court case came up and I want to make sure if they had money coming they would get their money. What I did discourage is that they fill out and that they contact their attorney if they have any reservations about the form that's stating that there was fraud committed when they don't know if there's fraud committed for sure. They were actually making a statement there was fraud committed and they're telling them they have to fill that out. Now he's saying we took in $4 million, $4 million, a third of that which belongs to Redwood Trust as part of our fee and he's saying that we received that money. We didn't receive that money, a lot of that money went directly to a third-party processor not even in our name and went to them. Now they know all the people because they have my records, they have all the people who paid, they know who actually paid money, and in addition to that, if I ever sent in -- I've got a web site, a party has a web site that we put on there the fact that they could claim the money. First, it was under admiralty law, that they had to fill this out under admiralty law and rules and sections this and that, they had to go to an attorney to do this and finally one of the reps called Mr. Capezza, I believe it is, prosecutor in Albany, and he said all you have to do is send a letter stating that you participated and send proof of like a canceled copy of your bank check, and that would suffice, then they are told that they have to go to a web site and fill out this other form, so it's been very confusing to these people. And the fact is a lot of people that were not reps, that were just clients, we didn't have them, what we had was we had a web site that we had captured 2,000 of our own reps because it was only for reps. We had the names of 2,000 people out of 6,000 reps and we were able to send e-mails out to them because we were prohibited from using our e-mail at the office which we could have e-mailed everyone but we were told by the postal inspector and the IRS that we couldn't use our system to send out e-mails to these people which would have went to everyone. Now they have a list of our clients and they also have a list of which ones that paid. So they know there's a lot that have paid that haven't sent them anything because they have the records right there. I would like these people notified. I would like each one of these people to receive a letter and something straight forward, you know, send a letter, copy of your bank check, and to claim your money because there's these 500 other people that are sitting out here that aren't even knowing about this and they can't make claim and I don't want to see that happen. I been very adamant from the beginning, that was the first thing that I brought up with my attorneys, that I was very upset about this, my clients were not able -- excuse me, were not able to put in to, you know, make claim for their funds and they're playing these games with, well, we got these forms, now we have this, now you got to have this. These people are getting very upset, they're getting very confused over this situation. I figured more people would be here today, but some says this is like a losing battle, fight with these people. But I think most of the people that knew about it, knew where to send it, has sent it, but the others just don't know and I can't get ahold of them and now my system at work, that's all shut -- at the office is all shut down so now I can't e-mail, but they have the list of all those people and I'd like to see a letter or something go out to these people to notify that they have a right to put a claim in on this money. I mean them depriving them of their money is -- has got to be just as bad as what they're claiming that -- what I'm doing.
THE COURT: Well, the government is of the position that it was not a proper source of raising money.
MR. TITUS: I'm sorry?
THE COURT: The government's position is that there's been fraud here to these people, am I right?
MR. CAPEZZA: Yes, your Honor.
THE COURT: So with that, they've got the Redwood Trust, now they're giving notice to people, you don't believe the notice is adequate apparently.
MR. TITUS: Well, they said they have a web site someplace and I don't know where it's at. I mean, I haven't seen it.
THE COURT: The government has an obligation to try to ferret out each person that did contribute and their goal seems to be they'll get notified of all the people that gave money and then they will attempt to on a pro rata basis pay everybody back.
MR. TITUS: If they're notified I'm going to be happy, your Honor, but right now they haven't been notified and that would have to be extra effort on their part because they know who's put in claims now so the others need to be notified, that at least they have a chance to put a claim for that money.
MR. CAPEZZA: Judge --
MR. TITUS: I don't have the records for that, they've seized all my records so I have no ability to do that. We were prohibited from doing that when we could do it.
MR. CAPEZZA: Judge, the principal point here is forfeiting the funds from Redwood Trust and Mr. Titus and with respect to other claimants or potential claimants or interested parties we have, we want to return those funds to them, their funds are not in jeopardy. The one point that I think Mr. Titus has to clarify is this. On one hand he says, I want everyone to have notice so that they can get their money back, yet on the other hand he says, I'm claiming on behalf of Redwood Trust the funds. Well, according to Mr. Titus, who does the money belong to, does it belong to the investors or does it belong to Redwood Trust? And I think he characterized a third of the $4 million as Redwood Trust's fee, well, who does the money belong to, and he should clarify, does he want all of the money to go back to investors, in which case him filing a claim on behalf of Redwood Trust will actually inhibit that from happening because then we can't return the funds to investors because we have to litigate the claim of Redwood Trust. On the other hand, if he's saying I as the trustee of Redwood Trust have an interest in the $4.2 million or whatever you've seized as a third of Redwood Trust's fee, well then he is competing with these individuals that actually made payments to Redwood Trust to see whose interest is greater. Our view is the money should go back to these investors because it's the proceeds of fraud. Now the issue of fraud has to be litigated, I give you that, but with respect to Mr. Titus, he has to make a decision, is he making a claim on behalf of Redwood Trust and thereby competing with the potential investors who would get their money back, or is he saying that Redwood Trust really doesn't have an interest because it should go back to investors, that's what I'm unclear about.
MR. TITUS: My view is that Redwood Trust has -- is entitled to a third of the funds.
MR. CAPEZZA: And if that's the case, your Honor, he can't return all of the funds to the investors because all of the money that came in, a third of that is going to Redwood Trust, and I'll just point out they paid off one mortgage in more than a year. So they're claiming more than a million dollars in fees to pay off one mortgage. He can't return the funds. He can't return all of the funds.
MR. TITUS: By contract, we had the right to use those funds to settle a mortgage. There was no time limit, no date certain when that was to be done. It was open-ended and the government has stepped in and interfered with the contract between two parties for us to perform the service that we were offering. Right now we have a company that we could move about a third of our clients into that have the ability to do what we was going to do, they're already set up, money is coming in, and they're set up in a little different way in that they pay the mortgage off in two years, and in three months the client stops paying the mortgage and they start paying the payments and in two years they're paid off. Now we didn't have to pay this mortgage off ourself, in the beginning that wasn't the way it was. They sent money to a processor somewheres and what happened was a third went to us. We had sent in about 50 or 60 to a processor. When that processor couldn't deliver because they ended up they got shut down, at that point a lot of companies that were doing the same thing got shut down across America and what happened is at that point I had like $50,000, 40, $50,000 in the bank that I could have just put in my pocket and walked away and said, folks, we can't do this thing, because they can't deliver, and I guess we just can't do it, and I could have walked away with 40, 50,000 at that time. These people said, look, can you figure out somebody else that can help us. There's other methods, right now there's a group of attorneys, that's 80 attorneys that just go into court and based on the fraud in the contracts for mortgages, that's the end of the mortgage, and it's all done in the courtroom, in a federal court and we could be placing these people with them right now with these funds and we could be delivering on our contract. The funds, there's one reason too why I'm claiming this. They're claiming in Albany they want to put me in prison for 10 years. I'm 200 percent disabled. I have three ruptured disks and Social Security has me listed as a hundred percent disabled for that, I have leukemia, VA has me listed a hundred percent disabled for that. They're wanting to put me in jail for 10 years, that's a death penalty for me, if I can't take natural stuff, I won't last but a couple years. So I've got to fight. Your time is also based on how much money's involved because a third of the money's mine, well then it's not $4 million and I'm claiming a third because it was a third, however, if I was convicted which I don't believe I'm going to be, that money will then, I want it to go to the clients because they've interfered with this contract and in the past we've given back over a half million dollars to people that wanted the money. Now, I'll tell you, we just got in a whole shipment of devices to go on computers that we were going to market that cost us $22,000. They're claiming that I was going to run off with the money, in addition to what they're saying here, they're claiming I was going to run off with the money and send it to England. Now if I was going to steal the money, I don't think the month before I'd be spending 20 some thousand dollars on devices that we were marketing through our company. We are a retail function there also.
THE COURT: Are you presently under indictment?
MR. TITUS: They're going -- probably Friday or the first of next week they're looking to indict me. I want to be present at the indictment, and they're telling me that I -- my lawyer's telling me I can't be present at that.
THE COURT: Well, you have a lawyer that represents you on that matter?
MR. TITUS: I have two public pretenders.
THE COURT: Two?
MR. TITUS: Two public defenders from Albany.
MR. CAPEZZA: They're aware of this proceeding, your Honor, they've indicated to the government that they don't represent Mr. Titus on the civil matter.
THE COURT: Yeah, this is a civil matter.
MR. CAPEZZA: Your Honor --
THE COURT: We're getting a little bit away from, though, what the situation is.
MR. CAPEZZA: Just bring some closure to this. As I understand it, Mr. Titus is making a claim to the funds as a representative of Redwood Trust. He believes that his claim as a trustee of Redwood Trust is superior to that of the persons who actually invested in Redwood Trust for that third fee. What we will do is this: The government will submit to the Court a proposed order barring all claims with the exception of Redwood Trust and with the exception of all certified investors in Redwood Trust. To the extent that anyone who has not filed a claim with the United States and does not want to file a petition for remission or anything can document their claim with us, we will honor that, as long as we can, first, forfeit the funds, and second, corroborate that they in fact made a payment to Redwood Trust. For the time being, though, your Honor, we will focus on Mr. Titus' claim that his interest is superior to that of the investors and litigate whether or not he has an interest and whether or not these are the proceeds of fraud. If the answer is to the question of -- that they're the proceeds of fraud is true, then Mr. Titus will forfeit his interest and we will return the funds to the investors that we've been able to certify, but we can't get to that point right now because Mr. Titus is claiming a third of the funds as Redwood Trust's fee. That's his right, that's fine, we'll do that. But we've served him with a Notice of Deposition for July the 28th and 29th and we'll begin to litigate his claim that Redwood Trust is owed these funds as their fee for having accepted these queuing fees.
THE COURT: Ms. Sadr, she is protected in this matter because she need only provide proof that they did make contributions toward the fund?
MR. CAPEZZA: Your Honor, the order that we will submit to the Court has as its stated exception any claims by certified investors, anyone that can certify that they've made a payment. That's all we're asking for. The rules of admiralty and maritime claims require that they file a verified claim. To the extent we haven't received a claim, as a technical matter they're time barred but we're going to waive the time because they're present and if anyone else can identify that they in fact made a payment to Redwood Trust and corroborate that with documentation, it's our goal to honor that payment if we forfeit the funds. We simply do not want to pay people that did not make a payment to Redwood Trust which would thereby minimize the available funds for the people who actually did make a payment.
THE COURT: Fine.
MR. CAPEZZA: But first, your Honor, we'll litigate Mr. Titus' claim on behalf of Redwood Trust that Redwood Trust and not the investors is owed this money.
MR. TITUS: Your Honor, I think that he's talking about litigating this whether I have right to the funds or not, I'm not looking to take the funds, I'm looking to leave the funds there. If we were to be acquitted, which we should be, then the funds would just be turned over to us and that would be a moot point. If I'm convicted, then the funds, I would stipulate that those funds could go into -- remaining in the funds gets distributed out to the representatives, or out to the clients and so I don't see that there's a need for this and all this will be gone over in the criminal court because we're going to have to establish in criminal court that I had this one-third equity in the money that had come in. And the problem is, in them doing this, I have no representation at all because it's a civil action and I have no funds because they've seized my funds. I get -- I'll be getting a pension from the VA to take care of my needs which is 800 something a month, I can't afford an attorney, and because this isn't criminal, I'd be not represented on this at all so I'd like this to be handled in the criminal part of the case and I will stipulate that I'm not going to be grabbing any funds anyhow but I want to make it in the criminal part, I want to make it, have the view that if a third of those funds were to come to Redwood Trust to begin with because that's really part of the criminal case. If I had a third of money coming to me, I haven't spent a third of the money so there's more than a third of the money still left in that pot. When we started out in business, a third of the money came to us to operate the company on, that was the agreement because we said when he had to have money to operate on and two-thirds went to whoever the processor was, but if someone wanted their money back in the meantime we'd give it back but then to make a statement if everyone wanted their money back tomorrow, you couldn't give it, well they came up with an idea that said, it's like the bank, if everyone made a run on the bank tomorrow, they would have insurance, they would have FDIC, well, big deal. They only have a 3 percent reserve. That was a very poor example for them to bring up to me because I know the difference. They only have a 3 percent reserve and how come when all those banks went bankrupt down south, the government had to put the money in, because they don't have it in those states so the banks all went bankrupt tomorrow, they don't have the money either. And people don't expect that I would have to come up with all the money and I never would. This is just a way that they can get in -- they don't like what I'm doing, that I'm helping people with mortgages. They made a claim to the gals in the office that they're shutting down all companies that have to do with mortgage elimination or settlement. They don't like the idea that I'm involved in programs, they're seizing funds all over the country, shutting those down, and so this just isn't about that I did something wrong. It's about how can they put Redwood Trust out of business so they're not doing what we don't want them to do. If they came and talked to me and said, look, we don't like this and tried to work something out, there's something else that I could do, I could get the funds back to the people. We had -- we had a basketball player was going to give us, it was either 6 or $7 million, 1 million to be used to invest and the other was to be used to pay off mortgages. That amount would have made up any difference that they're talking about. They prohibited me from sending a check for a corporate note that was worth $115 million that by contract I already contracted to send the money for by the end of January and when I sent the check, the postal inspector intercepted that check and prohibited me from securing that corporate note that I could have used as collateral for whatever I wanted, I could have sold it, I could have used it for a line of credit, to back that up. So I had security to do that, to back what I'm doing so this -- and they know that. They know that. They shouldn't even be coming after me but they're shutting me down because they don't like what I'm doing.
THE COURT: Well, here's the way it stands right now. Your claims are going to be protected until it's litigated, you've indicated to me that if you are found -- if it is found to be a fraudulent concept, your whole plan you put together, that you're going to back off on any claim to the one-third, you did that.
MR. TITUS: Yes, your Honor.
THE COURT: But that still doesn't stop the government from wanting to go forward and depose you under oath as to exactly -- well, whatever their questions are about your interest in the trust.
MR. TITUS: Well, in all fairness, your Honor, I don't think it's fair that they pursue me on something that they know that I'm not going to have legal representation on and that I know the law on and with my medical conditions and the medications I have to take, that's not fair to me. I'm going to have an attorney to defend me in the criminal action where that would be gone into anyhow and resolved prior to, you know, them coming to a decision as to where the money's going to go, so that would all be worked out in due time anyhow without an extra case there where I'm really going to have no representation into this matter.
MR. CAPEZZA: Judge, presently the only case that has been issued is the civil forfeiture matter.
THE COURT: There is no criminal matter at the present time.
MR. CAPEZZA: There is no criminal indictment, your Honor. Now what I will do is, I will make Mr. Titus' attorneys on the criminal matter, no criminal indictment but on the criminal matter, aware of this deposition. They will do whatever they choose to do. If they think that he, in his interest has no -- it's not in his interest to testify, they'll use whatever options are available to them. But the only case that has been filed with the Court, your Honor, is the civil forfeiture matter, and to the extent that there are hundreds of potential victims out there, it's our goal to get that money forfeited and back to them as quickly as possible. To the extent that Mr. Titus wants to litigate this either criminally or civilly, that's going to delay that. But what we will do is we will make his attorneys aware of our notice of deposition, they will choose to do whatever is available to them and we will issue to the Court an order that preserves the interest of Redwood Trust as well as anybody who can document that they in fact made a payment to Redwood Trust as part of the programs identified in the civil complaint.
THE COURT: Fine. Thank you.
THE CLERK: Court stands adjourned.
(Court Adjourned, 10:52 a.m.)
C E R T I F I C A T I O N
I, JODI L. HIBBARD, RPR, CRR, CSR, Official Court Reporter in and for the United States District Court, Northern District of New York, DO HEREBY CERTIFY that I attended the foregoing proceedings, took stenographic notes of the same, and that the foregoing is a true and correct transcript thereof.
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JODI L. HIBBARD, RPR, CRR, CSR
Official U.S. Court Reporter