81025104 SEC Case Declaration of Receiver Matthew Greenblatt w Exhibits

1

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,

11-CV-00078 (JBA)

v. ECF CASE

FRANCISCO ILLARRAMENDI, HIGHVIEW POINT PARTNERS, LLC and MICHAEL KENWOOD CAPITAL MANAGEMENT, LLC,

DECLARATION OF MATTHEW GREENBLATT

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.

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

Case 3:11-cv-00078-JBA Document 446-1 Filed 02/02/12 of 22

2

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 Receiver’s 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, FTI’s 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 Illarramendi’s prior testimony in this case. Attached as Exhibit B

are true and correct copies of Illarramendi’s criminal plea agreement, excerpts of the transcript of

his plea allocution and the Stipulation of Offense Conduct executed in connection with his guilty

plea.


3

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


4

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


5

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


6

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

investor’s initial investment. For example, Lopez, and his sister Carolina Lopez, received


7

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

1 Ontime is an entity linked to Illarramendi’s brother-in-law, Rufino Gonzalez-Miranda. 2 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.


8

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 (Illarramendi’s wife) on or about November 21, 2005.

21. Ontime’s 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,


9

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 Off-

book Trading Strategy.

28. Naproad’s 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


10

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.


11

35. Naproad’s 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 people’s money loaned to HVP

Partners and transferred to HVP Offshore, were commingled with other investor funds in HVP

Offshore’s 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


12

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


13

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 Fund’s 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 Fund’s

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


14

45. On or about June 6, 2006, a false entry was entered in the Master Fund’s books

and records purporting to record a $4 million investment in Ontime which was described in the

Master Fund’s 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.


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 Fund’s trade blotter described this fictitious investment as “NAPROADFI”.


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


15

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 Funds”4) 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

3 The Venezuelan state-owned oil company, Petroleos de Venezuela S.A., and related entities collectively referred to herein as “PDVSA.” 4 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.”


16

described in the Master Fund’s 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 Lopez’s 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 VEF-

denominated 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

5 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.


17

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,


18

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. Ontime’s 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”). 7 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

continued on next page…


19

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 Illarramendi’s 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, Illarramendi’s 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 Illarramendi’s 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.

…continued from previous page

Services, LLC; MKG-Atlantic Investment, LLC; Michael Kenwood Nuclear Energy, LLC; MyTcart, LLC; TUOL, LLC; MKCM Merger Sub, LLC (the “MK Entities”).


20

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

the name of OGH Advisors, LLC, purportedly for “MK Group Consulting Fees.” OGH

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 Illarramendi’s 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


21

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 Illarramendi’s

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 Illarramendi’s

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


EXHIBIT A

Case 3:11-cv-00078-JBA Document 446-2 Filed 02/02/12 Page 1 of 18

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

219

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

* * * * * * * * * * * *

SECURITIES AND EXCHANGECOMMISSION,

Plaintiff,

vs.

FRANCISCO ILLARRAMENDI, ET AL

Defendant.

* * * * * * * * * * * * * *

*************

Case No. 11cv78(JBA)

MAY 25, 2011

TRANSCRIPT OF EVIDENTIARY HEARINGVOLUME II

BEFORE: THE HONORABLE JANET BOND ARTERTON, U.S.D.J.

Appearances:FOR THE PLAINTIFF:

FOR THE DEFENDANTFRANCISCO ILLARAMENDI:

FOR THE DEFENDANTHIGHVIEW POINTPARTNERS:

FOR THE DEFENDANTHIGHVIEW POINT MASTERFUND, HIGHVIEW POINTOFFSHORE, LTD:

RUA KELLY, ESQKATHELEEN SHIELDS, ESQCARLOS COSTA-RODRIGUES, ESQLEEANN GAUNT, ESQ.United States Security andExchange Commission33 Arch StreetBoston, MA 02110

JOHN GLEASON, ESQ.Gleason & Koatz122 East 42nd StreetNew York, NY 10168

CARL LOEWENSON, ESQRONALD WHITE, ESQ.Morrison & Foerster1290 Avenue of the AmericasNew York, NY 10104

MICHAEL SWARTZ, ESQHighview PointSchulte Roth & Zabel919 Third AvenueNew York, NY 10022


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

297

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. I have not calculated that.

Q. 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

out which of those exhibits it is. I think we can

do it with Exhibit B.

A. Yes.

Q. 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.


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

298

Q. And what you've indicated were the total

proceeds from that set of transactions of 94 plus

million dollars.

A. Yes, that's correct.

Q. 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. That's my recollection.

Q. Okay. And it's that $34 million piece that

I want to start with. Were some of the documents

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: May I have permission to

approach, your Honor?

THE COURT: Yes.

Q. I have for you what we've marked for


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

299

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. I don't personally recall this one.

Q. 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. I do see the amount of $34,145,000, yes.

Q. 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. It's page 28 of Plaintiff's

Exhibit 9.

A. Yes, I found page 28.

Q. And you see that is the wire transfer

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. Yes, I agree this is the wire transfer.

Q. And what we have is the Deutsche Bank


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

300

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. Do you see those purchases?

A. 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


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

301

"disbursements." Is this of any significance?

MS. SHIELDS: I can use the word

"disbursements."

Q. Essentially funds going out of the Deutsche

Bank account.

A. Yes.

Q. For some purpose. Yes?

A. Yes.

Q. And those four disbursements are

disbursements that you have analyzed as four, I

think what you've called them, securities trades; is

that right?

A. I would have to go through -- I'd have to

check. 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. I'll give you a moment to look at

them.

A. Thank you. I've reviewed the four wire

transfers.

Q. And do you agree that those are the wire

transfer orders that correspond to those four


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

302

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. Yes, they appear to be, yes.

Q. 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. If I may just have a moment.

Q. Certainly.

A. I've reviewed the four pages.

Q. 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


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

303

the book net amount plus accrued interest. So, it

would -- they do represent the same dollars.

Q. And --

A. Dollar amounts, if I may.

Q. 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? Is that

fair?

A. If I -- they would only have -- just

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

was limited to this one bank account. So, I would

just qualify my answer that way.


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

304

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

for you, sir. And that is to again sort of make

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


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

355

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: I'm sorry?

THE COURT: The grid.

THE WITNESS: Exactly, the grid.

Q. So, on the far end of the grid is 70 years;

to the best of your knowledge?

A. Correct, correct.

Q. 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. Yes, I believe so.

Q. And the hole could, in your estimation, be

in excess of $300 million?

A. I believe so, yes.

Q. During the time you committed this fraud,

from say 2005 through 2010, you were managing

principal at Highview Point Partners, right?


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

359

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. And it's a lot more elaborate than

that. 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. You can

tell me.

THE COURT: That's how it started.

We'll go on from October '05.


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

360

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.


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

361

Q. What did you say to Mr. Lopez exactly?

A. 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 just told him, look, I messed up. I, you know,

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. How did Mr. Lopez react?

A. He was very taken aback. He was not happy.


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

362

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

Mr. Lopez had been your boss. What was his title at

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


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

363

Credit Suisse, but he was head of the team I worked

in.

Q. Pretty high up at Credit Suisse?

A. 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: Sustained.

Q. 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? Did you

respond?

A. I agreed that I would do everything, my

best efforts and everything in my power to resolve

the situation. I -- how I reacted? Are you asking

me to qualify my reaction? Because it wasn't a very

good one.

Q. Did he ask you to do anything specifically

other than to just keep on keeping on? Did he ask

you to do anything?

A. I don't recall the exact details of the


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

364

conversation, but, you know, we'll have to figure

out how we, you know, fix it. And, you know -- fix

it, basically. 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. But I think that was

the extent of it. 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

trying to keep the loss concealed. Once he was

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.


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

365

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. I don't know

if that clarifies.

Q. What was the -- what was the reason for

getting those investors from what you called the

third bucket? Why did you need the money from them?

A. 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-cr-00041-SRU Document 10 Filed 05/05/11 Page 1 of 14

U.S. Department of Justice

United Slales AllorneyDislriclofConnecticut

Briell McMaholl Federal Bllildillg9/5 Lafi,ye"e Bou/evard. Room J09Bridgeporr, COllnecticut 06604

March 7, 20 II

John P. Gleason, EsquireGleason & Koatz, LLP122 E. 42"d StreetNew York, NY 10168

Re: United States v. Francisco IIIarramendiCriminal No.

Dear Mr. Gleason:

(203) 696-3000

Fnt (203) 579-5550

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-countinformation 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, 17C.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 officialproceeding and to defraud the U.S. Securities and Exchange Commission, in violation of 18U.S.c. § 371.

Counts One and Two: Wire Fraud

The defendant understands that, to be guilty of the offenses charged in Counts One andTwo (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 bymeans of materially false and fraudulent pretenses, representations or promises;

2. That the defendant knowingly and wilfully participated in the scheme or artificeto defraud, with knowledge of its ft'audulent nature and with intent to deft'aLld; and



John P. Gleason, EsquireMarch 7, 2011Page 2

3. That in execution of or in furtherance of that scheme, the defendant used, orcaused 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 statementof 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 courseof business that operated, or would operate, as a fraud or deceit upon a purchaseror seller;

2. That the defendant acted willfully, knowingly and with the intent to defraud; and

3. That the defendant knowingly used, or caused to be used, any means orinstruments of transportation or communication in interstate commerceor the use of the mails in furtherance of the fraudulent conduct.

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 orpotential clients;

2. That the defendant (a) employed a device, scheme, or artifice to defraud clientsor prospective cl ients, or (b) engaged in a transaction, practice, or course ofbusiness 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;

3. That the defendant acted willfully and knowingly and with intent to defraud; and

4. That the defendant used the mails or another instrumentality of interstatecommerce.



John P. Gleason, EsquireMarch 7,2011Page 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. Securitiesand Exchange Commission), the following essential elements of the offense must be satisfied:

1. That two or more persons entered into an agreement to commit anoffense against the United States;

2. That the defendant knowingly participated in the conspiracy with the specificintent to commit at least one of the offenses that were the objects of theconspiracy; and

3. That during the course of the conspiracy, one of the members of the conspiracycommitted an overt act in furtherance of the objectives of the conspiracy.

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 $250,000fine. In addition, under 18 U.S.c. § 3583, the Court may impose a term of supervised release ofnot more than three years to begin at the expiration of any term of imprisonment. The defendantunderstands that, should he violate any condition of the supervised release, he may be required toserve a fwther term of imprisonment of up to two years with no credit for time already spent onsupervised release.

With respect to the charge of securities fraud in Count Three of the information, theoffense carries a maximum penalty of 20 years of imprisonment and a $5,000,000 fine. Inaddition, under 18 U.s.C. § 3583, the Court may impose a term of supervised release of not morethan three years to begin at the expiration of any term of imprisonment. The defendantunderstands that, should he violate any condition of the supervised release, he may be required toserve a further term of imprisonment of up to two years with no cred it for time already spent onsupervised 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. Inaddition, under 18 U.S.C. § 3583, the Court may impose a term of supervised release of not morethan three years to begin at the expiration of any term of imprisonment. The defendantunderstands that, should he violate any condition of the supervised release, he may be required toserve a fllrther term of imprisonment of up to two years with no credit for time already spent onsupervised release.



John P. Gleason, EsquireMarch 7, 20 IIPage 4

With respect to the charge of conspiracy in Count Five of the information, the offensecarries 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 thanthree years to begin at the expiration of any term of imprisonment. The defendant understandsthat, should he violate any condition of the supervised release, he may be required to serve afurther term of imprisonment of up to two years with no credit for time already spent onsupervised release.

With respect to the five charges in the Information, defendant understands that the totalmaximum sentence he could receive if the sentences were imposed consecutively is 70 years ofimprisonment. 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 eachcount of conviction is the greatest of the following amounts: (I) twice the gross gain to thedefendant 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, Twoand 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 topay 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 otherwiseordered, should the Court impose a fine or restitution of more than $2,500 as part of thesentence, interest will be charged on the unpaid balance of the fine or restitution not paid within15 days after the judgment date. 18 U.S.c. § 3612(f). Other penalties and fines may beassessed 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 thedefendant make restitution under 18 U.S.c. § 3663A, and the Government reserves its right toseek restitution on behalf of victims consistent with the provisions of § 3663A. The scope andeffect 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 agreesto 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. Thedefendant's refusal to cooperate with the receiver and the SEC renders this agreement voidableby the Government.




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 tothe count(s) of wire fraud in the Information, he may be subject to forfeiture to the United Statesof America, pursuant to 18 V.S.c. § 981 (a)( 1)(C) and 28 U.s.C. § 2461 (c). Such forfeiture mayinclude, 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 18V.S.C. § 1343, and/or a sum of money equal to the total amount of proceeds obtained as a resultof the offenses. Moreover, he further understands that, ifany of the above-described forfeitableproperty, as a result of any act or omission of the defendant, cannot be located upon the exerciseof due diligence, has been transferred, sold to, or deposited with a third party, has been placedbeyond the jurisdiction of the court, has been substantially diminished in value, or has beencommingled with other property which cannot be divided without difficulty, it is the intent of theUnited States, pursuant to 21 U.S.c. § 853(p), as incorporated by 28 V.S.C. § 2461 (c), to seekforfeiture of any other property of said defendant.

The defendant understands and agrees that by virtue of his plea of guilty he waives anyrights or cause of action to claim that he is a "substantially prevailing party" for the purpose ofrecovery of attorney fees and other Iitigation costs in any related forfeiture proceeding pursuantto 28 V.S.c. § 2465(b)(I).

THE SENTENCING GUIDELINES

Applicability

The defendant understands that the Court is required to consider any appl icableSentencing Guidelines as well as other factors enumerated in 18 U.S.c. § 3553(a) to tailor anappropriate sentence in this case and is not bound by this plea agreement. The defendant agreesthat the Sentencing Guideline determinations will be made by the Court, by a preponderance ofthe evidence, based upon input from the defendant, the Government, and the United StatesProbation Office. The defendant further understands that he has no right to withdraw his guiltyplea ifhis sentence or the Guideline application is other than he anticipated, including if thesentence 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 levelsthe defendant's adjusted offense level under § 3E 1.1 (a) of the Sentencing Guidelines, based onthe defendant's prompt recognition and affirmative acceptance of personal responsibility for theoffense. Moreover, because the Government anticipates that the offense level determined by theadvisory Guidelines prior to the adjustment for acceptance of responsibility will be greater than



John P. Gleason, EsquireMarch 7,2011Page 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 levelbased 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 circumstancessurrounding his commission of the offense, of his criminal history, and of his financial conditionthrough the submission of a complete and truthful financial statement. The defendantunderstands that the Court is not obi igated to accept the Government's recommendations on thereductions.

The Government will not make the recommendations if the defendant engages in any actswhich, in the Government's view, (1) indicate that the defendant has not terminated orwithdrawn from criminal conduct or associations (Sentencing Guideline § 3E1.1); (2) couldprovide 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 towithdraw his plea of guilty or takes a position at sentencing, or otherwise, which, in theGovernment'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 reasonsexplained 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 Governmenthave entered into a stipulation, which is attached to and made a part of this plea agreement. Thedefendant understands that this stipulation does not set forth all of the relevant conduct andcharacteristics that may be considered by the Court for purposes of sentencing. The defendantunderstands that this stipulation is not binding on the Court. The defendant also understands thatthe Government and the United States Probation Office are obligated to advise the Court of anyadditional relevant facts that subsequently come to their attention.

Defendant understands and agrees that his admissions in the Stipulation of OffenseConduct section are material cond itions of th is plea agreement. If the defendant seeks towithdraw from any of the admissions set forth in the Stipulation of Offense Conduct, theGovernment will deem defendant's effort to withdraw fi'om the admissions as a material breachofthis plea agreement and the Government may void all or part of this agreement, including, butnot limited to, the non prosecution provisions of this agreement.



John P. Gleason, EsquireMarch 7, 20 I IPage 7

Guidelines Stipulation

The Government and the defendant have no agreement and, thus, do not stipulate as thedefendant's applicable Guidelines range or fine range. The Government and the defendant dostipulate that the defendant is a Criminal History Category I. Because the Government and thedefendant do not stipulate as to the applicable Guidelines range, there is no stipulation oragreement as to the final Guidelines offense level applicable to the defendant.

The defendant expressly understands that his final Guideline offense level, fine range andcriminal 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 theCourt. The defendant further expressly understands that he will not be permitted to withdraw theplea of guilty if the Court imposes a sentence outside the Guidelines range or fine rangedetermined by the Court or if the Court determines that his criminal history is different than thatstipulated by the parties.

In the event the Probation Office or the Court contemplates any sentencing calculationsdifferent from those stipulated by the parties, the parties reserve the right to respond to anyinquiries and make appropriate legal arguments regarding the proposed alternate calculations.The defendant reserves the right to request a downward departure from the applicable GuidelineSentencing range on any basis including, but not limited to, the arguments that defendant isentitled to a downward depaIture pursuant to Guideline § 5K2.16 (Voluntary Disclosure ofOffense), reserves the right to seek a non-Guidelines sentence and reserves the right to challengeand oppose any sentencing motion filed by the Government. The Government expresslyreserves the right to respond to, challenge and oppose any sentencing motion filed by thedefendant. Moreover, the Government expressly reserves the right to defend any sentencingdetermination, even if it differs from that stipulated by the parties, in any post-sentencingproceeding.

Appeal Rights Regarding Sentencing

The parties reserve their respective rights to appeal and to oppose each other's appeal ofthe 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 appropriatesentence to be imposed in this case. Moreover, the Government will discuss the facts of thiscase, 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 withaccess to material in its file, with the exception of grand jury material.



John P. Gleason, EsquireMarch 7, 201 IPage 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 toa federal grand jury, consisting of between sixteen and twenty-three citizens, twelve of whomwould have to find probable cause to believe that he committed the offense set forth in theinformation before an indictment could be returned. The defendant acknowledges that he isknowingly 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 everystage 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 thatplea if it has already been made, the right to a public trial, the right to be tried by ajury with theassistance of counsel, the right to confront and cross-examine the witnesses against him, the rightnot to be compelled to incriminate himself, and the right to compulsory process for theattendance of witnesses to testify in his defense. The defendant understands that by pleadingguilty 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 questionsabout each offense to which he pleads guilty, and if he answers those questions falsely underoath, on the record, and in the presence of counsel his answers may later be used against him ina prosecution for peljury or making false statements.

Waiver of Statute of Limitations

The defendant agrees that, should the conviction following defendant's plea of guiltypursuant 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 sentencingpursuant to this plea agreement) may be commenced or reinstated against defendant,notwithstanding the expiration of the statute of limitations between the signing of this pleaagreement and the commencement or reinstatement of such prosecution. The defendant agreesto waive all defenses based on the statute of limitations with respect to any prosecution that isnot time-barred on the date the plea agreement is signed.




ACKNOWLEDGMENT OF GUILT AND VOLUNTARINESS OF PLEA

The defendant acknowledges that he is entering into this agreement and is pleading guiltyfreely and voluntarily because he is guilty. The defendant further acknowledges that he isentering into this agreement without reliance upon any discussions between the Government andhim (other than those described in the plea agreement letter), without promise of benefit of anykind (other than the concessions contained in the plea agreement letter), and without threats,force, intimidation, or coercion of any kind. The defendant further acknowledges hisunderstanding of the nature of the offense to which he is pleading guilty, including the penaltiesprovided by law. The defendant also acknowledges his complete satisfaction with therepresentation and advice received from his undersigned attorney. The defendant and hisundersigned counsel are unaware of any conflict of interest concerning counsel's representationof the defendant in the case. .

The defendant acknowledges that he is not a "prevailing party" within the meaning ofPublic Law 105-119, section 617 ("the Hyde Amendment") with respect to the count ofconviction or any other count or charge that may be dismissed pursuant to this agreement. Thedefendant voluntarily, knowingly, and intelligently waives any rights he may have to seekattorney'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 andcannot bind any other federal authority, or any state or local authority. The defendantacknowledges that no representations have been made to him with respect to any civil oradministrative consequences that may result from this plea of guilty because such matters aresolely within the province and discretion of the specific administrative or governmental entityinvolved. Finally, the defendant acknowledges that this agreement has been reached withoutregard 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 towhich he has pleaded guilty and will be deprived of certain rights, such as the right to vote, tohold public office, to serve on ajury, or to possess firearms. The defendant understands thatpursuant to section 203(b) of the Justice For All Act, the Bureau of Prisons or the ProbationOffice will collect a DNA sample from the defendant for analysis and indexing. Finally, thedefendant understands that the Government reserves the right to notify any state or federalagency by which he is licensed, or with which he does business, as well as any current or futureemployer of the fact of his conviction.




SATISFACTION OF FEDERAL CRIMINAL LIABILITY; BREACH

The defendant's guilty plea, ifaccepted by the Court, will satisfy the federal criminalliability of the defendant in the District of Connecticut as a result of his participation in his wirefi'aud and securities fraud scheme to defraud clients of his investment advisory business betweenin or about 2008 and 20 II and his efforts to obstruct a lawful investigation by the U.S. Securitiesand Exchange Commission and the related civil case filed in this district, which conduct formsthe basis of the information in this case. The defendant understands that this paragraphsatisfying his criminal liability in the District of Connecticut is limited to criminal conduct whichhe 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 ofthis agreement, engages in any criminal activity, or fails to appear for sentencing, theGovernment may void all or part of this agreement. If the agreement is voided in whole or inpart, 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, thedefendant acknowledges that no other promises, agreements, or conditions have been enteredinto other than those set forth in this plea agreement, and none will be entered into unless setforth 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. FEINUNITED STATES ATTORNEY

~~RICHARD 1. EO-ITER 7~SENIOR IGATION COUNSEL

PAUL A. MU I-IYASSISTANT UNITED STATES ATTORNEY



2-M r !Date

John P. Gleason, EsquireMarch 7,2011Page II

The defendant certifies that he has read this plea agreement letter and its attachment(s) orhas had it read or translated to him, that he has had ample time to discuss this agreement and itsattachment(s) with counsel and that he fully understands and accepts its terms.

~~-FRANCISCO ILLARRAMENDIThe Defendant

1have 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

Date


Page Intentionally Blank


Case 3:11-cv-00078-JBA Document 190-2 Filed 05/10/11 Page 2 of 59,

L

UNITED STATES DISTRICT COURTFOR THE DISTRICT OF CONNECTICUT

- - - x

1

UNITED STATES OF AMERICA

vs.

FRANCISCO ILLARRAMENDI

- - - - - - - - - - - - - - - - x

No. 3:11CR-41(SRU)915 Lafayette BoulevardBridgeport, Connecticut

March 7, 2011

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 309Bridgeport, Connecticut 06604

BY: PAUL A. MURPHY, AUSA

FOR THE DEFENDANT:

GLEASON & KOATZ, LLP122 East 42nd StreetNew York, New York 10168

BY: JOHN P. GLEASON, ESQ.

Susan E. Catucci, RMROfficial Court Reporter915 Lafayette Boulevard

Bridgeport, Connecticut 06604Tel: (917)703-0761



need you to tell me that, so please listen carefully to

his summary of the government's proof.

3 MR. MURPHY: Your Honor, if the defendant were

4 to proceed to trial, the government would prove that from

5 in or about 2006 until about February 8, 2007, he engaged

6 in a scheme to defraud the investors and creditors of

7 hedge funds and entities he advised and he also engaged in

8 a scheme to defraud the SEC.

9 One of the objects of the scheme was to obtain

10 money and property from investors and creditors without

11 disclosing the truth about the performance of the funds

12 and the assets under management of the funds. Another

13 object of the scheme was to conceal from the investors and

14 creditors the hole that existed between the fund assets

15 and liabilities, which has been estimated at exposing

16 investors to potential losses in the hundreds of millions

.17 of dollars.

18 Throughout the scheme to defraud, the defendant,

19 among other things, used money provided by new investors

20 to the Funds to payout the returns to earlier 'investors;

21 created fraudulent documents to mislead and deceive his

22 investors, creditors and the SEC about the existence of

23 the Funds' assets; made false representations to his

24 investors and creditors in an effort to obtain new

25 investments from them and to prevent them from seeking to

40

'" .....

.. .• -



1 liquidate their investments; and comingled the investments

2 in each individual hedge fund with investments in the

3 other hedge funds witpout regard to their structure,

4 stated purpose or investment limitations, and thus,

5 treated all investments in the Funds as a single source to

6 provide returns to the investors.

7 By way of example, in 2010, the defendant used

8 approximately $53 million from two funds he managed and

9 controlled, by transferring the money to entities

10 affiliated with the Michael Kenwood Group, an entity he

11 also controlled, without disclosing the use of this money

12 to all of the investors. Thereafter, in an effort to

13 generate a sufficient return to fill the hole in the

14 Funds' assets, the defendant used the approximately

15 $53 million to invest in private equity companies. The

16 investments were made in the name of entities affiliated

17 with the MK Group, and not in the name of the Funds.

18 In 2010 and the early part of 2011, the scheme

19 to defraud involved creating documents falsely attesting

20 to the fact that one of the funds had approximately

21 $275 ·million in assets. These bogus documents included an

22 asset verification letter prepared by an accountant

23 purporting to attest to the existence of these fictitious

24 assets. The evidence would show the letter furthered the

25 scheme by seeking to prevent and forestall the discovery

41



1 of the hole in the Funds' assets.

2 With respect to the Counts One and Two, Your

3 Honor, the government would prove that each of the two

4 wires set forth in those counts furthered the fraudulent

5 scheme and that each of the wires involved material

6 misrepresentations.

7 As for the securities fraud charge, Your Honor,

8 the United States would prove the existence of the fraud

9 scheme as described above. It would also prove the fraud

10 scheme was done willfully and knowingly and was in

11 connection with the purchase and sale of securities and it

12 would prove that the defendant accomplished the fraudulent

13 scheme through the use of means of cOmmunication in

14 interstate commerce and the use of the mails.

15 As for the investment adviser fraud charge, the

16 U. S. would prov~ the defendant acted as an investment

17 adviser and in that capacity he willfully and knowingly

18 perpetrated the scheme to defraud clients as described in

19 the information, and that he did so through the use of

20 mails and other instrumentalities in interstate commerce.

21 Finally, if the conspiracy charge were to

22 proceed to trial, the U. S. would prove that the defendant

23 and others had an agreement to create the fictitious

24 assets as noted above, as reflected in the Fictitious

25 Asset Verification Letter which is charged in the

42



43

1 Information. The United States would prove that this

2 letter was false and that it was created for the purpose

3 of misleading anyone who questioned the assets of the

4 defendant's Funds, specifically the Short Term Liquidity

5· Fund. The letter falsely represented that the Short Term

6 Liquidity Fund had outstanding credits worth at least $275

7 million through loans that it had purportedly made to

8 approximately 15 Venezuelan companies.

9 The U. S. would prove the following manner and

10 means of the conspiracy and overt acts in furtherance of

11 the conspiracy:

12 A. That the Short Term Liquidity Fund at no

13 time lent $275 million to Venezuelan companies.

14 B. That the Short Term Liquidity Fund did not

15 have loan agreements with these Venezuelan companies.

16 C. That the representation in the letter about

17 those loans was completely false.

18 D. That the defendant agreed with others to

19 fraudulently prepare the letter and create false documents

20 to substantiate the false letter.

21 E. That the defendant caused a $1 million

22 payment to be made to a coconspirator to further the

23 conspiracy.

24 F. That the defendant -- that knowing that the

25 letter was false, the defendant caused it to be presented•. .-L..- -,- --'



1 to the United States Securities and Exchange Commission

2 during an enforcement directed review.

3 G. That after the SEC filed a civll lawsuit

4 against the defendant and others in this district, the

5 defendant caused this letter to be presented to court

6 appointed business advisors.

7 And H. That one of the de£endant's

8 coconspirators made false statements to the SEC about the

9 existence of the loans, when they knew that no such loans

10 existed.

11 In short, Your Honor, the government would

12 establish all the elements of each of the offenses charged

13 in the information beyond a reasonable doubt.

14 THE COURT: Thank you.

15 Mr. Illarramendi, was there anything Mr. Murphy

16 said when he was describing your conduct that you think is

17 inaccurate?

18 THE DEFENDANT: No.

19 THE COURT: .So you agree with everything that he

20 says that you did?

21 THE DEFENDANT: Yes.

22 THE COURT: And you've already indicated that

23 the stipulation of offense conduct is accurate?

24 THE DEFENDANT: Yes.

25 THE COURT: Mr. Murphy, any further inquiry

... ..

44



STIPULATION OF OFFENSE CONDUCT

The defendant, Francisco Illarramendi, and the Government stipulate to the followingoffense 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 thandisclose to his investors the truth about the losses incurred, the defendant intentionally chose toconceal this information by engaging in a scheme and artifice to defraud and mislead hisinvestors and creditors to prevent the truth about the losses from being discovered. As a resultof the scheme described below, the hedge funds ("the Funds") and related entities managed andadvised by the defendant currently have outstanding liabilities that greatly exceed the true valueof their assets, exposing the investors and creditors to the risk of su ffering losses of hundreds ofmillions of dollars.

From in or about 2006 to on or about February 8, 20 I I, the defendant engaged in ascheme to defraud his investors, creditors and the United States Securities and ExchangeCommission ("SEC") by means of materially false and fraudulent pretenses, representations andpromises. In furtherance of this scheme, the defendant caused to be transmitted, by means ofwire communications in interstate and foreign commerce: (a) fraudulent documents, including abogus 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, theShort Term Liquidity Fund ("STLF"), had at least $275 million in credits as a result ofoutstanding loans, when the defendant and others knew it did not have any such credits.

The defendant made materially false and misleading representations and omissions toinvestors, creditors and the SEC about the true performance of the Funds, the assets undermanagement by the Funds and the transactions being conducted by the Funds and relatedentities. The defendant: (a) used money provided by new investors to the Funds to payout thereturns he promised to earlier investors; (b) created fraudulent documents to mislead and deceivehis investors, creditors and the SEC about the existence of the Funds' assets; (c) made falserepresentations to his investors and creditors in an effort to obtain new investments from themand to prevent them from seeking to liquidate their investments; (d) commingled the investmentsin each individual hedge fund with investments in the other hedge funds without regard to theirstructure, stated purpose or investment limitations and thus, treated all investments in the Fundsas a single source to provide returns to investors; and (e) engaged in transactions that were not inthe best interests of the Funds and agreed to pay kickbacks to persons connected with thosetransactions. During 20 I0, the defendant used approximately $53 million from two funds hemanaged and controlled, by transferring the money to entities affiliated with the MichaelKenwood Group, LLC ("MK Group"), an entity that he also controlled, without disclosing theuse of this money to all of the investors. Thereafter, in an effort to generate a sufficient return tofill the hole in the Funds' assets, the defendant used the approximately $53 million to invest inprivate equity companies. The investments were made in the name of entities affiliated with theMK 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 Fundsby creating fictitious assets purportedly worth at least $275 million. Specifically, he made anagreement 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 creationof this Fictitious Asset Verification Letter to further mislead and deceive investors and the SECregarding whether there was sufficient capital and credit to protect the investors of STLF. Thedefendant and others caused the fictitious asset verification letter prepared by the accountant tobe 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) tofurther conceal the hole that existed within the Funds. In an effort to make the accountant'sletter appear to be a truthful and accurate representation, the defendant also created a letter onSTLF letterhead that was backdated to an earlier date that purported to be a request from him tothe accountant for a verification of outstanding receivables of STLF.

~/RICHARD J. HECHTER 7~SENIOR LITIGATION COUNSEL

FRANCISCO ILLARRAMENDIThe Defendant

The written stipulation above is incorporated into the preceding plea agreement. Thisstipulation 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 offenseconduct to the attention of the Court in connection with sentencing.

~~~"

~PAUL A. MU HYASSISTANT U.S. ATTORNEY



RIDER CONCERNTNG RESTITUTION

The Court shall order that the defendant make restitution under 18 U.S.c. § 3663A. The order ofrestitution may include:

I. If the offense resulted in damage to or loss or destruction of property ofa victim of theoffense, 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 equalto:

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 propertyis returned.

2. In the case of an offense resulting in bodily injury to a victim-

A. pay an amount equal to the costs of necessary medical and related professional services anddevices related to physical, psychiatric, and psychological care; including non-medical care andtreatment rendered in accordance with a method of healing recognized by the law of the place oftreatment;

B. pay an amount equal to the cost of necessary physical and occupational therapy andrehabi 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, payan 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, andother expenses incurred during participation in the investigation or prosecution of the offense orattendance at proceedings related to the offense.

The order of restitution has the effect of a civil judgment against the defendant. In add ition tothe court-ordered restitution, the court may order that the conditions of its order of restitution bemade a condition of probation or supervised release. Failure to make restitution as ordered mayresult in a revocation of probation, or a modification of the conditions of supervised release, or inthe defendant being held in contempt under 18 U.S.C. § 3583(e). Failure to pay restitution mayalso result in the defendant's re-sentencing to any sentence which might originally have beenimposed by the Court. See 18 U.S.C. §§ 3614; 3613A. The Court may also order that thedefendant give notice to any victim(s) of his offense under 18 U.S.c. § 3555.


EXHIBIT C


LIMITED LIABILITY COMPANY AGREEMENTOF

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.

2


$10,000

$10,000

$10,000Luth

(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

8. 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

3


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 90th 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.

4


(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 non

Managing 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.

5


(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 non

Managing 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

6


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]

7


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

N e. Francisco A. tIIarramendi

23108.0001 #572741

8


EXHIBIT D


EXHIBIT E


EXHIBIT F


Subject: Re: Hello panchito No buddy, I’ll 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 we’d 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 black’s $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 it’s clear to you.


EXHIBIT G


EXHIBIT H


EXHIBIT I


EXHIBIT J


From: Francisco Illarramendi [[email protected]] Sent: Monday, March 29, 2010 2:28 p.m. To: [email protected] Subject: RE: Tell Carolina As discussed, put BP at 155 and we’ll get LB in later. Regards. -----Original Message----- From: Frank H. Lopez [mailto:[email protected]] Sent: Wednesday, March 24, 2010 12:13 p.m. To: [email protected] Subject: Re: Tell Carolina Copied -----Original Message----- From: Francisco Illarramendi To: Frank Lopez Reply To: [email protected] 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,

11-CV-00078 (JBA)

v. ECF CASE

FRANCISCO ILLARRAMENDI, HIGHVIEW POINT PARTNERS, LLC and MICHAEL KENWOOD CAPITAL MANAGEMENT, LLC,

[PROPOSED] ORDER

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.

[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 Court’s 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


81025104 SEC Case Declaration of Receiver Matthew Greenblatt w Exhibits

Documents

Transcript of 81025104 SEC Case Declaration of Receiver Matthew Greenblatt w Exhibits