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A federal judge has approved a plan to liquidate Riverton-based American Pension Services, whose owner is facing criminal charges for allegedly taking $24 million of client retirement funds.
U.S. District Judge Robert Shelby OK'd the proposal by a court-appointed receiver to transfer 5,500 self-directed IRA and 401(k) accounts holding assets of $366 million to Equity Trust Co. of Westlake, Ohio.
But account holders are required to hold back 10 percent of the value of their accounts in cash to cover the loss of $24.7 million that owner Curtis L. DeYoung of Draper misappropriated and for possible expenses of the receivership, Shelby said in his order.
DeYoung, 58, was indicted by a federal grand jury last week on 15 charges of mail fraud, each carrying a possible 20-year prison sentence. He is scheduled to make his first court appearance March 25.
The Securities and Exchange Commission sued DeYoung and American Pension Services in April 2014. The complaint alleged that DeYoung had illegally taken $24 million of client monies and embarked on a series of failed investments— some of which were fraudulent themselves — and also used it for personal salaries, retirements funds or loans, leaving the company insolvent.
He allegedly hid the insolvency in 2009 by making a bogus bookkeeping entry to show an addition $24 million in APS' accounts that they did not contain.
The court-appointed receiver, Los Angeles attorney Diane Thompson, proposed that the shortfall be made up by charging each account holder 6.75 percent to cover the DeYoung misappropriations with an additional 3.25 percent for possible future expenses.
A number of the 5,500 account holders had objected to the plan for various reasons. Some were not APS clients at the time of the thefts and others held only assets and had no cash in their accounts that could have been taken.
But Shelby ruled that tracing losses back to specific account holders, including many who were no longer with APS, might cost at least $4 million and stretch the process out for many more months and cause further delays in winding up the company.
"The only fair and equitable way to recognize and/or realize the loss caused by DeYoung's wrongful conduct is to apply the loss equally among all classes of APS clients regardless of how the client's asset is held, whether in cash, stocks, bonds, real estate, limited partnerships, limited liability companies, promissory notes, and/or other asset forms," Shelby said in his order approving the liquidation plan.
Account holders who do not have sufficient cash in their accounts to cover the 10 percent holdback will be required to sell assets to meet that obligation or can put the required amounts directly into their accounts, Thompson said.
Shelby also approved her proposal to move all the accounts to Equity Trust, which is to pay the receivership $1.7 million, waive account holder fees for a year and termination fees for nine months.
Thompson told APS clients that moving the first group of accounts to the new company will likely take eight to 12 weeks.