The receiver unwinding Minneapolis money manager Trevor's Cook's mammoth Ponzi scheme filed a motion Wednesday seeking to have former Piper Jaffray Trust President L. Edward Baker found in contempt of court for trying to purge a $3.75 million debt to the receivership in bankruptcy court.
Sanctions sought for Cook associate
L. Edward Baker listed a $3.75 million debt to the receivership when he filed for bankruptcy protection.
Baker founded a company called Mesa Holdings in an effort to create a network of independent financial advisory firms. Cook put $3.75 million of his investors' money into Mesa between September 2008 and June 1, 2009, the receiver said in court filings Wednesday.
Cook sued Baker last year seeking to get his money back. Receiver R.J. Zayed of Minneapolis took over the lawsuit when he was appointed in November to recover assets for Cook's 1,200 investors.
Baker's bankruptcy attorney, Michael Kallas, could not be reached for comment Wednesday. But he has defended Baker's Chapter 7 petition as proper and accused the receivership of harassment.
The receiver said in court filings that he met with Baker and his attorneys in May to discuss a settlement, and explicitly told Baker that the receivership had a claim on any money that flowed to him or Mesa from Cook's investors. He said he told Baker that the money was under a freeze order imposed by Chief U.S. District Judge Michael Davis.
Even so, the receiver says, Baker filed a Chapter 7 bankruptcy petition on June 11, listing a debt to the receivership of $3,757,728.75. As a result of the bankruptcy petition, the receivership has had to spend more money trying to recover the cash from Baker and Mesa.
A bankruptcy judge rejected the receiver's efforts to exempt the $3.75 million debt from Baker's bankruptcy proceedings. Zayed is appealing that ruling.
Meantime, he wants Baker held in contempt, saying his actions cost the receivership money for specialized bankruptcy attorneys -- expenses that will continue as long as the liquidation petition remains active.
By filing for bankruptcy protection, Baker not only violated Davis' orders, he also tried to extract the receivership's claim out from under Davis' jurisdiction, Zayed wrote.
In addition, Zayed said that if the claim is discharged in the bankruptcy process, the receivership might also be precluded from recovering the money from other entities, such as insurers.
If Davis finds Baker in contempt, Zayed wants him to order Baker to pay his attorneys' fees related to the bankruptcy petition, and he wants the $3.75 million debt excised from the bankruptcy proceedings.
Dan Browning • 612-673-4493
The work reduction begins in April and it is not clear how long it is expected to last.