UNITED STATES DISTRICT COURT FOR THE SOUTHERN … 462... · 10. In March 2016, the Court in the...

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF FLORIDA

CASE NO. 14-CV-80468-MIDDLEBROOKS

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

v.

JCS ENTERPRISES, INC. d/b/a JCS

ENTERPRISES SERVICES, INC., T.B.T.I., INC.,

JOSEPH SIGNORE, and PAUL L. SCHUMACK, II,

Defendants.

____________________________________________/

RECEIVER’S MOTION FOR TRANSFER OF FUNDS RECENTLY DEPOSITED

WITH THE CLERK OF COURT, WITH INCORPORATED MEMORANDUM OF LAW

James D. Sallah, Esq., not individually, but solely in his capacity as the Court-appointed

Receiver (the “Receiver”) for JCS Enterprises Inc., d/b/a JCS Enterprises Services Inc. (“JCS”),

T.B.T.I. Inc. (“TBTI”), My Gee Bo, Inc., JOLA Enterprise Inc. (“JOLA”), and PSCS Holdings,

LLC (“PSCS”) (collectively, the “Receivership Entities” or “Receivership Estate”), through

undersigned counsel, respectfully moves this Court for an Order requiring the Clerk of Court for

the Southern District of Florida (the “Clerk”) to transfer to the Receiver the below-described funds

recently deposited with the Clerk, for the benefit of the Receivership Estate.

BACKGROUND1

1. Defendant Paul Schumack (“P. Schumack”) and his wife, Christine Schumack (“C.

Schumack”) (collectively, the “Schumacks”), were each (pre-receivership) 50% owners of TBTI.

1 A summary of this section is incorporated within the Declaration of Melissa Davis, one of the

Receiver’s accountants, which is attached as Exhibit A.

Case 9:14-cv-80468-DMM Document 462 Entered on FLSD Docket 10/01/2020 of 15

2

2. The Schumacks had filed joint tax returns since their marriage in or around

1993. As further discussed below, the Schumacks initially did not file a tax return for tax years

2014 or 2015 because the Receiver had been appointed and neither had any income.

3. On September 6, 2013 (pre-receivership), the Schumacks’ accountant mailed a

$500,000 check issued by C. Schumack to the IRS with Form 1040-ES “Payment Voucher

#4.” The check was drawn on TBTI’s Bank of America account for tax year 2012 with the memo

“2012-1040.”

4. Shortly after the Receiver’s appointment, on June 23, 2014, the Receiver, through

his counsel, emailed the IRS, through its counsel, and requested the return of the $500,000 because

TBTI had paid the Schumacks’ tax liability for tax year 2012 and the source of those funds was

the victims of the Ponzi scheme who had invested through TBTI. A copy of the TBTI check is

attached as Exhibit B.

5. On June 24, 2014, the IRS’s counsel responded and suggested that sovereign

immunity barred the Receiver from seeking the funds from the IRS.

6. On September 2, 2014, the Receiver contacted the IRS’s Collections Department

to provide additional notice of the Receivership and the issued Order of Preliminary Injunction

and Other Relief against Defendant Joseph Signore and Paul L. Schumack II (DE 47).

7. On September 19, 2014, the Court approved an Assignment and Assumption

Agreement dated September 17, 2014, between the Receiver and the Schumacks (DE 118-1, 119).

As part of the Assignment and Assumption Agreement, the Schumacks agreed to turn over nearly

all their assets to the Receiver, including the Receiver’s right to obtain prepayment of their personal

income tax returns of approximately $500,000.


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8. Specifically, the Schumacks agreed, and the Court required, that the Receiver

receive for the benefit of the Receivership Estate and its victims “all title, rights, and ownership

interests in any monies paid to the Department of Treasury, Internal Revenue Service, from

T.B.T.I. Inc.” and “any title, rights, and ownership interests in any monies received from the

Department of Treasury, Internal Revenue Service, for the tax years 2012 to present.” (DE 118-

1, 119). This expressly includes the subject funds of $517,331.86 currently held by the Clerk.

9. On December 7, 2015, in the criminal case styled United States v. Joseph Signore,

et al., Case No. 14-CR-80081-HURLEY (the “Criminal Case”), Joseph Signore and P. Schumack

were found guilty of many crimes in connection with their operation of the Receivership Entities.

10. In March 2016, the Court in the Criminal Case sentenced each defendant, including

P. Schumack, among other things, to a term of imprisonment and to pay restitution to the victims

in the amount of $31,080,698.73. The Receiver is required to pay restitution to the victims through

the Court-approved claims process in this case. For restitution tracking purposes, the Court also

ordered the Receiver to inform the Clerk of any monies paid to victim investors through the

Receiver’s claims process in accordance with his duties under this Court’s Receivership Order.

(See DE 771 in the Criminal Case.)

11. Due to the fact that it was proven that TBTI was operating a Ponzi scheme, in April

2016, the Receiver filed Amended U.S. Corporation Income Tax Return and Amended Annual

Summary and Transmittal of U.S. Information for TBTI for 2012. The 2012 amended return

reduced the amount of income reported to Paul Schumack for 2012 to $0. The amended return

also included Statements A and B that explained in detail the nature of the Receivership and the

Criminal Case.


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12. In turn, the Schumacks filed an amended Form 1040 for 2012 reporting the income

from TBTI as $0 and requesting an additional refund of $186,938, which equated to a total refund

of more than $500,000.

13. The purpose of the amended returns was to correct the facts and request the IRS to

turn over the prior tax prepayments made for tax year 2012 by the Schumacks because the source

of those funds was TBTI and ultimately the victims of the Ponzi scheme who had invested through

TBTI.

14. As part of the amended TBTI tax returns filed by the Receiver, in July 2016, the

Receiver requested a Prompt Assessment to the IRS under Section 6501(d) of the Internal Revenue

Code for tax year 2012. Typically, the IRS has three (3) years to respond if it does not agree with

the information reported in a tax return. By requesting prompt assessment, it reduces the amount

of time the IRS has to respond to 18 months if the IRS did not accept the amended tax return.

15. On September 16, 2016, the IRS responded to the Receiver’s request for Prompt

Assessment and represented that the return would be accepted as filed and no further action would

be required if the IRS did not send a tax due notice by February 4, 2018. This means that

subsequent to February 4, 2018, the IRS could not, and thus still cannot, challenge the amended

returns that the Receiver filed for TBTI, which also extends to the Schumacks’ individual tax

filings showing their loss, or the underlying tax refund.

16. During P. Schumack’s incarceration, C. Schumack moved out of Florida. The IRS

allegedly sent C. Schumack a tax refund of approximately $500,000 to her former Florida address

and the check was ultimately returned to the IRS as unclaimed.

17. In or around August 2019, C. Schumack learned that there was an alleged balance

owed by her to the IRS. The IRS had filed a substitute tax return when it did not receive any 2014


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individual tax return. In order to dispute the substitute return, and the balance due, C. Schumack

needed to file a tax return for tax year 2014.

18. On October 10, 2019, the IRS Taxpayer Advocate Service corresponded with and

informed C. Schumack that she needed to file the 2014 tax return by November 1, 2019, and the

issue would likely be resolved by January 2020.

19. On October 11, 2019, C. Schumack corresponded with and informed the IRS

Taxpayer Advocate Service that (a) the Schumacks had overpaid their taxes for tax year 2012 by

more than $500,000; and (b) the Receiver was entitled, and was trying, to obtain these funds from

the IRS.

20. On October 13, 2019, C. Schumack emailed the Receiver regarding the issues

involving the IRS Taxpayer Advocate Service discussed in paragraphs 16-18 above.

21. On October 25, 2019, the Receiver’s accountants from KapilaMukamal sent the

IRS Taxpayer Advocate Service various relevant documents regarding the tax refund issue,

including TBTI’s Amended IRS Form 1120S, the Amended Receivership Order, the Receiver’s

request for Prompt Assessment, the IRS’s response, and the correspondence between the IRS

Taxpayer Advocate Service and C. Schumack.

22. On October 27, 2019, the Receiver agreed to pay the Schumacks’ accountant for

filing their individual tax returns for tax years 2013, 2014 and 2015, as well as amending for 2012,

based on the Receiver’s amended returns for TBTI, because (a) the Schumacks could not afford

the expense and (b) the IRS had put a hold on the approximate $500,000 prepayment pending

resolution of the 2014 substitute tax return the IRS had filed for the Schumacks.

23. On or around February 12, 2020, C. Schumack received a letter from the IRS

Taxpayer Advocate Service that provided there was no longer any balance due for tax year 2014.


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The letter also provided that that the IRS was evaluating whether the refund of the approximate

$500,000 could be sent directly to the Receiver.

24. On March 13, 2020, the Receiver sent a letter enclosing multiple Court documents

to the IRS Taxpayer Advocate Service and demanded that he promptly receive the approximate

$500,000 prepayment.

25. On June 11, 2020, the Receiver, through his counsel, contacted the Assistant United

States Attorney in the Criminal Case regarding the status of the IRS issue, including that the IRS

Taxpayer Advocate Service intended to transfer the approximate $500,000 to the U.S. Treasury’s

Bureau of Fiscal Services, who in turn would transfer the funds to the Clerk through the Treasury

Offset Program. The Assistant United States Attorney recommended that the Receiver contact a

certain Assistant United States Attorney in the Financial Litigation Unit for the Southern District

of Florida.

26. On July 13, 2020, the IRS acknowledged the 2012 amended tax return and the

overpayment due of more than $500,000.

27. On August 3, 10, 12, 13 and 14, 2020, the Receiver’s counsel repeatedly

communicated with the Clerk’s office and the Financial Litigation Unit. During this period, the

Receiver provided the information requested by the Clerk’s office and the Financial Litigation

Unit, specifically the names of claimants and amounts received from the Receiver’s recent first

distribution of $6 million in this case for purposes of tracking restitution in the Criminal Case.

28. During this period, the Receiver was told that: (a) on or around August 13, 2020,

the Clerk received the subject tax funds totaling $517,331.86 from the Bureau of Fiscal Services;

and (b) the subject funds would be held by the Clerk until September 3, 2020, before transfer to

the Receiver.


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29. On September 3, 2020, the Receiver’s counsel and Clerk’s office communicated

several times regarding transferring the funds to the Receiver, but ultimately the Clerk’s office,

through a supervisor in charge of restitution in criminal matters (including the Criminal Case),

would not transfer the funds to the Receiver. Specifically, the restitution supervisor stated that the

Clerk has an “internal policy” of holding substantial funds received for seven (7) months from the

date of receipt and for the Receiver to make the request again in seven (7) months in or around

March 2021.

30. On September 11, 2020, the Receiver sent the letter attached as Exhibit C to Angela

Noble, who is the Court Administrator- Clerk of Court. In the Receiver’s letter, the Receiver

explained his immediate entitlement to the funds, including much of the above information, and

asked Ms. Noble to expedite the transfer of funds to him or provide the legal authority supporting

the Clerk’s purported policy of holding the funds for seven (7) months.

31. On September 21, 2020, Ms. Noble responded to the Receiver with the letter

attached as Exhibit D explaining that she is unable to transfer the subject funds. Although Ms.

Noble confirmed that there was not an internal policy, there is a purported six (6) month

requirement to hold the restitution funds under the Treasury Offset Program pursuant to a

purported written agreement between the Department of Justice, Executive Office for United

States Attorneys, Debt Collection Management Staff and the Administrative Office of the United

States Courts.2

32. Ms. Noble did not attach a copy of the purported written agreement, but quoted

language purportedly within the agreement requiring the Clerk “to hold a TOP offset that will be

2 The Receiver says “purported” repeatedly herein, not out of disrespect, but as discussed below,

because Ms. Noble is unable to provide a copy of the agreement for the reasons discussed below.


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applied to a federal or non-federal restitution debt for six months from the date of the Treasury

offset date before disbursing funds to a victim.” Ms. Noble also stated that if the Clerk was to

transfer the funds to the Receiver before the expiration of the six-month holding period, the Clerk

could be exposed to liability for a reversal, specifically if the IRS reverses all or part of the offset.

33. After confirming the agreement was not publicly available, the Receiver requested

that Ms. Noble provide a copy of the purported written agreement regarding the purported six-

month rule. The Receiver obviously wanted to review the agreement, including to confirm if there

were any express exceptions to the purported six-month rule. Ms. Noble confirmed she would

request a copy from the Administrative Office of the Courts. Ms. Noble ultimately confirmed that

she unfortunately could not produce the document to the Receiver because it is a nonpublic,

internal document with the Department of Justice. The relevant emails regarding the above are

attached as Exhibit E.

MEMORANDUM OF LAW

I. Equity Receivership Standard

The Court’s power to supervise an equity receivership and determine the appropriate action

to be taken in the administration of the receivership is extremely broad. SEC v. Elliott, 953 F.2d

1560, 1566 (11th Cir. 1992); SEC v. First City Fin. Corp., 890 F.2d 1215, 1230 (D.C. Cir. 1989).

The Court’s wide discretion derives from the inherent powers of an equity court to fashion relief.

Elliott, 953 F.2d at 1566 (citing SEC v. Safety Fin. Serv., Inc., 674 F.2d 368, 372 (5th Cir. 1982)).

Without question, the Court is empowered as a court of equity to grant the requested prompt

transfer of the subject funds by the Clerk to the Receiver.

II. Requested Relief

The Receiver appreciates the Clerk’s, and specifically Ms. Noble’s, work and prompt


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communications on the subject issue. The Receiver is also mindful of the Clerk’s concern

regarding a possible IRS reversal and resulting possible liability. However, as discussed below,

an IRS reversal should not occur. Given the Clerk has done everything in her power at this time

regarding this issue, the Receiver requests this Court’s assistance to promptly obtain the subject

funds.

A. The IRS Should Not Reverse

The IRS should not reverse this issue, whether fully or partially. The subject

TBTI/Schumack refund was a result of TBTI amending its tax return and the IRS has accepted the

amended tax return and acknowledged the $500,000-plus overpayment from tax year 2012. In

addition, the amount of time for the IRS to reject the amended tax return has passed. The

Receiver’s accountant has attested to the above. (See Exhibit A.)

Beyond the IRS issue, there should not be any other viable third-party claims. The

Amended Receivership Order (DE 19) includes a classic receivership stay that expressly prohibits

any third parties from seeking receivership property (i.e., the subject funds).

Based on the above reality that there should not be an IRS reversal regarding the subject

funds, the purported nonpublic secret guidelines for holding the subject funds for six months

should not even apply. The Receiver requests such findings in the attached proposed Order to

assist the Clerk and quell its concerns.

B. This Court’s and the Criminal Court’s Prior Orders

Requiring the Receiver to Obtain the Funds

The Clerk’s purported requirement of holding funds for a period of time cannot supersede

prior Court Orders entitling the Receiver to these funds now or a new requested proposed Order

explicitly requiring the Clerk to promptly transfer the subject funds to the Receiver. As stated

above, there are already two issued Orders that require the Receiver to obtain the subject funds


10

and disburse them to the victims.3

First, and as stated above, regarding the Assignment and Assumption Agreement dated

September 17, 2014, the Schumacks agreed, and the Court required, that the Receiver receive for

the benefit of the Receivership Estate and its victims “all title, rights, and ownership interests in

any monies paid to the Department of Treasury, Internal Revenue Service, from T.B.T.I. Inc.” and

“any title, rights, and ownership interests in any monies received from the Department of Treasury,

Internal Revenue Service, for the tax years 2012 to present.” (DE 118-1, 119).

Second, in the Criminal Case, the Court ordered P. Schumack, among others, to pay

restitution to victims in the amount of $31,080,698.73, and for the Receiver to pay the restitution

to the victims. The subject funds are part of the ordered restitution that the Receiver is required to

make to the victims.

C. The Receiver Is Prepared to Promptly Finish This Receivership

The subject funds are the final receivership asset that the Receiver is owed. The Receiver

is prepared to make a second and final distribution to approved claimants, but he cannot do that

until he receives the subject funds from the Clerk. The Receiver anticipates filing that motion

within thirty (30) days of receiving the subject funds. Once the Receiver makes a second and final

distribution, the Receiver can wind down and close the Receivership, including filing a final report,

motion to discharge himself and his professionals, and a final fee application. The Receiver

anticipates submitting those final filings within forty-five (45) to sixty (60) days of completing the

second distribution. If the Receiver receives the subject funds promptly, the Receiver anticipates

3 Obviously, there is a third order – the Amended Receivership Order – that entitles the Receiver

to the subject funds, but the two Orders discussed below specifically contemplate the subject funds.


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closing the Receivership by February 2021 (the expiration of the purported six-month holding

period).

III. Conclusion

There is no reason for the Receivership’s hundreds of victims to indefinitely wait until

February 2021 for the Clerk to transfer the funds under the subject circumstances, including the

reality that there should not be any IRS reversal affecting the Clerk. As the record supports, the

Receiver has done everything in his power to informally obtain the funds for many years.

However, it is now clear that Court-intervention is required to ensure the Receiver promptly

obtains these funds without any further delay. Therefore, the Receiver is filing this Motion for an

Order requiring the Clerk to promptly transfer the subject funds to the Receiver, so the Receiver

can promptly finish his job with a second/final distribution and close the Receivership, which he

anticipates completing on or before February 2021 (assuming this Motion is promptly granted).

Attached as Exhibit F is a proposed Order granting this Motion. The Receiver will also

be serving a copy of this Motion on the Clerk at the time of filing this Motion.

WHEREFORE, the Receiver respectfully requests that this Court issue the attached

proposed Order, which requires the Clerk of Court to promptly transfer to the Receiver the

$517,331.86 received on or around August 13, 2020.

LOCAL RULE 7.1(a)(3) CERTIFICATE

The undersigned for the Receiver has conferred with:

1) Anthony Natale, Esq., counsel for Paul L. Schumack, II, who has not provided his

position as of this filing;

2) Alise Johnson, Esq., counsel for the U.S. Securities and Exchange Commission, which

does not oppose this Motion; and


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3) Assistant United States Attorney Ellen Cohen, counsel for the United States of

America, which does not oppose this Motion.

The undersigned counsel has also contacted Non-Party Christine Schumack, who does not

oppose this Motion. In addition, the undersigned has been unable to confer with Defendant Joseph

Signore and Non-Party Laura Grande, who are both incarcerated.

Dated: October 1, 2020 Respectfully Submitted,

SALLAH ASTARITA & COX , LLC

Counsel for the Receiver

3010 N. Military Trail, Suite 210

Boca Raton, FL 33431

Tel.: (561) 989-9080

/s/Patrick J. Rengstl

Jeffrey L. Cox, Esq.

Fla. Bar No. 173479

[email protected]

Patrick J. Rengstl, P.A.

Fla. Bar No. 0581631

[email protected]

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on October 1, 2020, I electronically filed the foregoing document

with the Clerk of the Court using CM/ECF. I also certify that the foregoing document is being

served this day on all counsel of record or pro se parties and non-parties who may have an interest

in the Motion identified on the attached Service List in the manner specified, either via

transmission of Notices of Electronic Filing generated by CM/ECF or in some other authorized

manner for those counsel or parties or non-parties who are not authorized to receive electronically

Notices of Electronic Filing.

/s/Patrick J. Rengstl


mailto:[email protected]


13

SERVICE LIST

Securities and Exchange Commission v. JCS Enterprises, Inc. et al.

Case No. 14-80468-CIV-MIDDLEBROOKS

Via Email and U.S. Mail

Angela E. Noble

Court Administrator- Clerk of Court

United States District Court, FLSD

400 North Miami Avenue

Miami, FL 33128

Via CM-ECF

James N. Robinson, Esq.

White & Case LLP

Southeast Financial Center

200 South Biscayne Boulevard, Suite 4900

Miami, FL 33131-2352

Email: [email protected]

Counsel for First Data Merchant Services, LLC

Via U.S. Mail

Joseph Signore

Register Number 05081-104

FCI Coleman Low

Federal Correctional Institution

P.O. Box 1031

Coleman, FL 33521

Pro Se Defendant

Via U.S. Mail

Laura Grande-Signore


RRM Miami

401 N Miami Avenue

Miami, FL 33128

Non-Party

Via U.S. Mail and Email

Christine Schumack

23268 Largo Mar Circle,

Boca Raton, Florida 33433


Non-Party




14

Via CM-ECF

Andrew Schiff, Esq.

Alise Johnson, Esq.

U.S. Securities and Exchange Commission

801 Brickell Avenue, Suite 1800

Miami, FL 33131

305-982-6385

Fax: 305-536-4154


Counsel for the Plaintiff

Via CM-ECF

Anthony Natale, Esq.

Federal Public Defender

150 W. Flagler St., Ste. 1700

Miami, FL 33130

Telephone: (305) 530-7000 ext. 101


Counsel for Defendant Paul L. Schumack, II

Via CM/ECF

Albert L. Frevola, Jr.

Conrad & Scherer, LLP

633 South Federal Highway

Fort Lauderdale, FL 33301

Telephone: (954) 847-3324


Counsel for Individual Investors Michelle Robinson,

Robert Rosa, Raymond R. Burkemper, Phillipe Garnier,

Hilary Horn, and Todd Russo

Via CM/ECF

Matthew Sarelson, Esq.

Matthew Seth Sarelson, P.A.

1000 Brickell Ave., Ste. 920

Miami, FL 33131

Telephone: (305) 773-1952


Counsel for Individual Investors Michelle Robinson,

Robert Rosa, Raymond R. Burkemper, Phillipe Garnier,

Hilary Horn, and Todd Russo

Via CM/ECF

Stephen Carlton, Esq.

Ellen Cohen, Esq.

Assistant U.S. Attorneys






15

500 S. Australian Ave., Ste. 400

West Palm Beach, FL 33401

Tel.: (561) 820-8711 Ext. 3053

Fax: (561) 659-4526

Email: [email protected]; [email protected]

Counsel for Intervenor United States Attorney Ariana Fajardo Orshan

Via CM/ECF

Scott Hawkins, Esq.

Jones Foster Johnston & Stubbs

505 S Flagler Drive

Suite 1100 PO Box 3475

West Palm Beach, FL 33402-3475

Tel.: (561) 650-0460

Fax: (561) 650-0436


Counsel for Non-Party Chad Matsen




EXHIBIT A

Case 9:14-cv-80468-DMM Document 462-1 Entered on FLSD Docket 10/01/2020 Page 1 of 6

EXHIBIT 1


.Mi I

IRS

•■.VJ

092731

Department of the TreasuryInternal Revenue ServiceAustin, TX 73301-0025

092731.250780.369951.13670 1 AB 0.419 370

CHRISTINE SCHUMACK%LESLEYJ JOHNSON1000 S FEDERAL HWY STE 200

FORT LAUDERDALE FL 33316-1237

Notice CP49

Tax Year 2012

Notice date July 13, 2020Social Security number XXX-XX-6797To contact us 800-829-8374

Page 1 of 1 CAF 9H

We applied $50,045.22 of your 2012 overpayment to an unpaid balance

Refund due: $516,883.60

We applied $50,045.22 of your 2012 Forms Summary1040 overpayment to an amount owed for Overpayment for 2012 -$524,825.002014. Interest we owe you -42,103.82As a result, your refund has been reduced Amount applied to tax owed for 2014 50,045.22to $516,883.60, Refund due $516,883.60

What you need to do Your refund• If you haven't already received a refund check for $516,883.60, you should receive it

within 2-3 weeks as long as you don't owe other tax or debt we're required tocollect.

Additional information • Visitwww.lrs.gov/cp49• For tax forms, instructions, and publications, visit www.irs.gov/forms-pubs or call

BOO-TAX-FORM (800-829-3676).• You can contaa us by mall at the address at the top of this notice. Be sure to include

your Social Security number, the tax year, and the form number you are writingabout.

• Keep this notice for your records,We're required to send a copy of this notice to both you and your spouse. Each copycontains the information you are authorized to receive. Please note; Only one refundwill be Issued.

If you need assistance, please don't hesitate to contact us.


EXHIBIT B


EXHIBIT C


September 11, 2020

VIA U.S. AND ELECTRONIC MAIL Angela E. Noble, Clerk of Court – Southern District of Florida Wilkie D. Ferguson, Jr. U.S. Courthouse 400 North Miami Avenue Miami, Florida 33128 Email: [email protected]

Re: United States of America v. Joseph Signore, Laura Grande Signore, Paul Schumack, and Craig Allen Hipp (Case No. 14-80081-CR-Hurley)

Dear Ms. Noble:

Please be advised that I am the Court-Appointed Receiver for JCS Enterprises, Inc., T.B.T.I., Inc., and certain related entities in a parallel civil case (Case No. 14-80468 Civ-DMM) to the criminal matter referenced above. Pursuant to the Judgment and Amended Judgment entered by the Honorable Daniel T.K. Hurley, I am required to collect funds from the Clerk of the Court pertaining to restitution, which will ultimately be distributed to the victims of the criminal matter. See D.E. 771 in Case No. 14-80081-CR-Hurley. I am writing to request that you expedite the turnover of certain funds paid as restitution via the Treasury Offset Program, or in the alternative provide the legal authority by which the Clerk of Court is continuing to hold the funds.

My professionals and I have been working toward collecting a prepayment of U.S. individual taxes by one of the defendants (i.e. Paul Schumack) in 2013. Over the course of the past six years the IRS has held these funds for various reasons. Recently, the IRS released the funds to the U.S. Treasuries Bureau of Fiscal Services. Subsequently, on August 13, 2020, the Bureau of Fiscal Services transferred the funds (i.e. $517,331.86) to the Clerk of Court for the Southern District of Florida through the Treasury Offset Program.

My counsel, Robert Carey, has recently been in touch with Ms. Dania Toledo and learned of an “internal policy” at the Clerk’s Office with regard to holding funds for seven months in cases where the funds exceed a set amount. I believe that the explanation given for this policy is that there are potential issues with regard to third parties making claims against the funds at some point in the future, and therefore the Clerk’s office suspends payment of the funds for a period of time. As explained below, under no conceivable scenario could a third-party make a claim for these funds.

By way of background, the funds were originally paid to the IRS directly from T.B.T.I.,

Inc. – a Ponzi scheme – and one of the Receivership Entities which I now control. Defendant


Angela E. Noble, Clerk of Court – Southern District of Florida September 11, 2020 Page 2 of 2 Schumack and his wife Christine, entered into an Assignment Assumption Agreement (“AAA”) on the 17th day of September, 2014. On September 19, 2014 the Honorable Judge Middlebrooks signed an Order granting the Receiver’s Motion for approval of the AAA. The purpose of the AAA was to transfer rights to various assets from the Schumacks’ to the Receivership Estate including the following:

“4) To the extent assignable, all title, rights and ownership interests in any monies paid to the Department of Treasury, Internal Revenue Service, from T.B.T.I. Inc.”, and “5) To the extent assignable, any title, rights, and ownership interests in any monies received from the Department of Treasury, Internal Revenue Service, for the tax years 2012 to the present”. See attached March 13, 2020, Letter to the IRS Taxpayer Advocate Service and Exhibits.

Due to the fact that it was proven that T.B.T.I. Inc. was operating a Ponzi Scheme, I filed

Amended Returns for T.B.T.I. Inc., as did the Schumacks for their individual tax returns, in an effort to cause turnover of the funds from the IRS, which ultimately was successful, albeit indirectly. Again, the source of these funds are the victims of the Ponzi scheme who invested through T.B.T.I.

Yesterday I spoke with AUSA Ellen Cohen, the lead attorney in Case No. 14-80081-CR-Hurley, who was also unaware of this policy at the Clerk’s office, and is similarly interested in closing out the Receivership Estate and seeing the funds returned to the victims.

Please be advised if we are unable to expedite the transfer of these funds to the Receivership

Estate, we will have no choice but to seek the appropriate relief from the Court.

Best Regards, James D. Sallah, Court Appointed Receiver

Cc: AUSA Ellen Cohen, Lead Counsel – U.S. v. Joseph Signore, et al.

AUSA Vivian Rosado, Financial Litigation Unit Ms. Dania Toledo, Paralegal to Clerk of Court Ms. Idania Leon, Financial Manager to Clerk of Court Mr. Kevin Kappes, Chief to Clerk of Court Mr. Jeffrey Cox, Lead Counsel to Receiver Mr. Robert Carey, Esq., Counsel to Receiver

Encls. 2020-03-13 Letter from Robert Carey to the IRS Taxpayer Advocate Service. Copy of T.B.T.I. Inc. check 18517 for $500,000 to the Department of the Treasury.


EXHIBIT D


AIt is our honor and duty to provide the support necessary to enable the Court as an institution to fulfill its constitutional, statutory, and societal responsibilities for all who seek Justice.@


SOUTHERN DISTRICT OF FLORIDA

Angela E. Noble 400 North Miami Avenue, Room 8N09 Court Administrator · Clerk of Court Miami, Florida 33128-7716

(305) 523-5100 September 21, 2020

VIA ELECTRONIC MAIL James D. Sallah, Esq Sallah Astarita Cox, LLC 3010 N. Military Trail, Suite 210 Boca Raton, FL 33431 Re: United States of America v. Joseph Signore, et. al. (Case No. 14CR80081) Dear M. Sallah: I write in response to your letter of September 11, 2020 in which you request that I expedite the payment of restitution via the Treasury Offset Program (TOP) or provide legal authority for holding these funds. I have discussed this matter with my staff and reviewed information provided by a member of the Finance and Accounting Department of the Administrative Office of the United States Courts. It appears that a member of my staff may have incorrectly indicated to you that the practice of holding these funds is an internal Clerk’s Office policy. It is not. In 2012, the Department of Justice, Executive Office for United States Attorneys, Debt Collection Management Staff and the Administrative Office of the United States Courts entered into a written agreement regarding the collection and processing of all criminal debts in the Treasury Offset Program (TOP). (A copy of this agreement should be obtained from one of these two agencies.) Under the agreement, Clerks of Court are required “…to hold a TOP offset that will be applied to a federal or non-federal restitution debt for six months from the date of the Treasury offset date before disbursing funds to a victim.”

Under the agreement, any loss to the Court resulting from a reversal will be reimbursed by the TOP Security Fund “… when due diligence is exercised and procedures noted in this [Memorandum of Understanding] are followed.” Disbursing TOP funds less than six months after the date of the offset would expose me to liability for any loss resulting from a reversal. Though I understand your position that the offset will not be reversed, you cannot guarantee that the IRS will not reverse all or a portion of the offset at


AIt is our honor and duty to provide the support necessary to enable the Court as an institution to fulfill its constitutional, statutory, and societal responsibilities for all who seek Justice.@

some future date. Though third-party claims are the most common reason for reversal, TOP receipts may be reversed for other reasons. Ultimately, I am bound by this agreement and must hold the funds for six months.

Please feel free to contact me if I can be of further assistance.

Sincerely,

Angela E. Noble Court Administrator ∙ Clerk of Court

c. Ellen Cohen, Assistant United States Attorney Kevin Kappes, Chief Deputy Clerk· Administration


EXHIBIT E


EXHIBIT F



FOR THE SOUTHERN DISTRICT OF FLORIDA

CASE NO. 14-CV-80468-MIDDLEBROOKS

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

v.

JCS ENTERPRISES, INC. d/b/a JCS

ENTERPRISES SERVICES, INC., T.B.T.I., INC.,

JOSEPH SIGNORE, and PAUL L. SCHUMACK, II,

Defendants.

____________________________________________/

ORDER GRANTING RECEIVER’S MOTION FOR TRANSFER OF

FUNDS RECENTLY DEPOSITED WITH THE CLERK OF COURT

THIS CAUSE came before the Court upon the Receiver’s Motion for Transfer of Funds

Recently Deposited with the Clerk of Court (the “Motion”) (DE 462). Having reviewed the Motion

and the record in this case, the Court finds granting the Motion is in the Estate’s best interests.

Accordingly, it is hereby

ORDERED AND ADJUDGED as follows:

1. The Receiver’s Motion is GRANTED.

2. The subject funds at issue were a result of TBTI amending its tax return, and the

IRS has accepted the amended tax return and acknowledged the $500,000-plus overpayment from

tax year 2012. In addition, the amount of time for the IRS to reject the amended tax return has

passed.

3. Similarly, there should not be any other viable third-party claims. The Amended

Receivership Order (DE 19) includes a receivership stay that expressly prohibits any third parties

from seeking receivership property, which includes the subject funds.


2

4. Because there should not be any IRS reversal or any other third-party reversal

regarding the subject funds, the Clerk of Court does not need to hold the subject funds for six (6)

months under the Treasury Offset Program.

5. The subject funds are part of the ordered restitution that the Receiver is required to

make as soon as possible to the victims. The Court also required that the Receiver receive for the

benefit of the Receivership Estate and its victims “all title, rights, and ownership interests in any

monies paid to the Department of Treasury, Internal Revenue Service, from T.B.T.I. Inc.” and

“any title, rights, and ownership interests in any monies received from the Department of Treasury,

Internal Revenue Service, for the tax years 2012 to present.” (DE 118-1, 119).

6. Within ten (10) calendar days of this Order, the Clerk of Court shall transfer to the

Receiver, James D. Sallah, the funds deposited from the Bureau of Fiscal Services on or around

August 13, 2020, in the amount of $517,331.86.

7. Funds in the amount of $517,331.86 shall be made payable to “James D. Sallah,

Receiver” and sent to the Receiver’s mailing address: James D. Sallah, 3010 N. Military Trail,

Suite 210, Boca Raton, FL 33431.

DONE AND ORDERED in Chambers in West Palm Beach, Florida this _______ day of

___________________, 2020.

_______________________________

DONALD M. MIDDLEBROOKS

UNITED STATES DISTRICT JUDGE

Copies to: Counsel of Record

Joseph Signore


FMC Lexington

Federal Medical Center

P.O. Box 14500

Lexington, KY 40512


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