Stipulation and Settlement Agreement between the United States and Woodbridge Liquidation Trust, as approved by order of the United States Bankruptcy Court for the District of Delaware entered September 17, 2020

The United States of America (the “United States”) and Petitioner Woodbridge Liquidation Trust, by and through its trustee, Michael I. Goldberg, (“Petitioner” or the “Liquidation Trust”) (together, the “Parties”) stipulate and agree, subject to the Court’s approval, in the above-captioned matter as follows:

1.         From in or around July 2012, through in or around December 2017, in the Southern District of Florida and elsewhere, Defendant Robert Shapiro (the “Defendant”) and his co- conspirators engaged in a conspiracy to commit mail and wire fraud in violation of 18 U.S.C. §§ 1341, 1343 and 1349, to defraud investors and obtain money and property by materially false and fraudulent pretenses, representations, and promises in connection with the sale of promissory notes and units, by: (a) soliciting and causing others to solicit millions of dollars in investor funds under false and fraudulent pretenses, representations and promises; (b) intentionally failing to utilize investor funds in the manner that they, their co-conspirators and others had promised; (c) misappropriating and converting investor funds for their own benefit and the benefit of others without the knowledge and authorization of the investors; and (d) making false statements and engaging in other fraudulent activities designed to conceal the commission of the offense. See Shapiro’s Stipulated Factual Proffer 1-2, ECF No. 140.

2.         The Defendant and his co-conspirators fraudulently convinced thousands of investors to invest more than $1.29 billion in the following entities (collectively, referred to as the “Woodbridge Entities”):

(i)          Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth) (“Woodbridge Group of Companies”);

(ii)        Woodbridge Mortgage Investment Fund 1, LLC; Woodbridge Mortgage Investment Fund 2, LLC, Woodbridge Mortgage Investment Fund 3, LLC, Woodbridge Mortgage Investment Fund 3A, LLC, Woodbridge Mortgage Investment Fund 4, LLC, Woodbridge Commercial Bridge Loan Fund 1, LLC, and Woodbridge Commercial Bridge Loan Fund 2, LLC (the “Woodbridge Fund Companies”);

(iv)        Woodbridge Structured Funding, LLC (a/k/a Woodbridge Structured Funding of Florida, LLC) (“WSF”);

(viii)     RS Protective Trust (“RS Trust”), which was the holding trust for the assets of Woodbridge, WMF, WSF, and more than 270 limited liability companies (the “RS Trust LLCs”).

See id. at 2-3 & n.1-8, 7.

(i)          All assets on deposit in account number 4040774877 at Alpine Bank, held in the name of Carbondale Basalt Owners LLC;

(ii)         All assets on deposit in account number 8900003424 at Alpine Bank, held in the name of Davana Sherman Oaks Owners LLC;

(iii)        All assets on deposit in account number 8970196989 at Alpine Bank, held in the name of Midland Loop Enterprises LLC;

(iv)        All assets on deposit in account number ###-###-#### at Capital One Bank, held in the name of Jeri Shapiro;

(v)         All assets on deposit in account number 80-27009771 at East West Bank, held in the name of Davana Primrose Ventures LLC;

(vi)        All assets on deposit in account number 20-27007984 at East West Bank, held in the name of Jeri L Shapiro;

(vii)       All assets on deposit in account number 80-27010068 at East West Bank, held in the name of Reliance Marketing Solutions LLC;

(viii)      All assets on deposit in account number 80-27010381 at East West Bank, held in the name of Settlement Depot LLC;

(ix)        All assets on deposit in account number X96-267462 at Fidelity Cash Management, held in the name of Jeri Shapiro;

(x)         All assets on deposit in account number ###-###-#### at Regions Bank, held in the name of Commercial Bridge Lenders LLC;

(xi)        All assets on deposit in account number 2010131932 at Timberline Bank, held in the name of Golden Mesa Ventures LLC;

(xii)       All assets on deposit in account number 2010131940 at Timberline Bank, held in the name of Golden Primrose Ventures LLC;

(xiii)      All assets on deposit in account number ###-###-#### at US Bank, held in the name of Jeri Shapiro;

(xiv)      One (1) 18-karat, white gold, bangle bracelet, with 550 round diamonds (12.50 carats) and 1,434 black diamonds (24.92 carats);

(xv)       One (1) pair of 18-karat, white gold, drop earrings, with 1,344 round-cut diamonds (13.80 carats);

(xvi)      One (1) pair of 18-karat, white gold, button earrings, with 162 round diamonds (13.89 carats);

(xvii)     One (1) pair of 18-karat, white gold, drop earrings with 99 yellow sapphires (1.10 carats), 117 tsavorites (1.18 carats), 125 blue sapphires (1.38 carats), 124 blue diamonds (1.36 carats), 120 amethysts (1.24 carats), 120 pink sapphires (1.18 carats), and 125 orange sapphires (1.26 carats);

(xviii)    One (1) pair of 18-karat, white gold, drop earrings with 22 emeralds (35.53 carats) and round-cut diamonds (7.18 carats);

(xxvii)   One (1) 18-karat, white gold, bangle bracelet with round diamonds (1.5 carats);

(xxviii)  One (1) pair of 14-karat, white gold, drop earrings with two black diamonds (61.81 carats), two icy grey diamonds (23.92 carats), two rose-cut diamonds (.36 carat), and 266 round diamonds (1.63 carats);

7.           In addition, the Defendant’s wife, Jeri Shapiro, executed a Consent to Forfeiture, in which she consented to the forfeiture of the Directly Forfeitable Assets and the Substitute Assets I, and waived and withdrew any claim she may have to such property. See Jeri Shapiro’s Consent to Forfeiture, ECF No. 143. Jeri Shapiro also agreed to take all steps requested by the United States for the forfeiture of all assets identified, whether by the United States or by her, which are or may be subject to forfeiture, including by consenting to all orders of forfeiture. Id. 10.

9.           On October 15, 2019, the Court entered an Order that preliminarily forfeited, subject to third-party interests, the Directly Forfeitable Assets, the Substitute Assets I, and the following additional substitute property (the “Substitute Assets II”):

(i)          check and resulting proceeds from East West Bank Check # 827015508, dated March 06, 2019 from Davana Primrose Ventures to Summit Sherman Oaks LLC in the amount of $250,000.00;

(ii)         check and resulting proceeds from East West Bank Check # 827015548, dated April 01, 2019 from Davana Sherman Oaks to Jeri Shapiro in the amount of $250,000.00; and

(iii)        check and resulting proceeds from East West Bank Check # 827015549, dated April 01, 2019 from Davana Sherman Oaks to Jeri Shapiro in the amount of $250,000.00.

See Order, ECF No. 170. The Court also imposed a forfeiture money judgment on the Defendant, which amount was later amended to be $470,000,000 in U.S. currency and which represented the value of the proceeds traceable to Count 1 of the Indictment. See Am. Forfeiture Money Judgment, ECF No. 174.

10.         On October 16, 2019, the Court sentenced the Defendant to a total of 300 months of imprisonment, that is, 240 months for Count 1 of the Indictment and a consecutive 60 months for Count 2 of the Indictment. See Judgment, ECF No. 175.

12.         Notice of the criminal forfeiture of the Directly Forfeitable Assets, the Substitute Assets I, and the Substitute Assets II was posted on an official government internet site (www.forfeiture.gov) for a period of 30 days. See Decl. of Publication, ECF No. 183.

13.         Direct notice was sent to any person who reasonably appeared to be a potential claimant with standing to contest their forfeiture, or such person was on actual notice of the forfeiture.

14.         The notice described the Directly Forfeitable Assets, the Substitute Assets I, and the Substitute Assets II, and advised that any person, other than the Defendant, asserting a legal interest in the such assets may petition the Court for a hearing to adjudicate the validity of that person’s alleged interest, within 60 days of the first day of publication or within 30 days of receipt of notice, whichever is earlier. Fed. R. Crim. P. 32.2(b)(6); 21 U.S.C. § 853(n)(2).

15.         On March 13, 2020, the Liquidation Trust filed its Verified Claims and Petition for Adjudication of Interests (“Petition”). See Petition, ECF No. 193.

16.         In the Petition, the Liquidation Trust claimed the Directly Forfeitable Assets, the Substitute Assets I, and the Substitute Assets II as property of the Woodbridge Entities’ bankruptcy estates, which property was vested in the Liquidation Trust pursuant to the First Amended Joint Chapter 11 Plan of Liquidation of Woodbridge Group of Companies, LLC and its Affiliate Debtors (the “Bankruptcy Plan”). See id. at 2-3.

17.         The Bankruptcy Plan was confirmed by the United States Bankruptcy Court for the District of Delaware (“Bankruptcy Court”) on October 26, 2018, in In re Woodbridge Group of Companies, LLC, et al., Case No. 17-12560 (Bankr. D. Del.). See id.; Petition’s Exhibit A, ECF No. 193-1 (“Order Confirming First Amended Joint Chapter 11 Plan,” the Bankruptcy Court Order); Petition’s Exhibit B, ECF No. 193-2, (“First Amended Joint Chapter 11 Plan of Liquidation,” the Bankruptcy Plan).

18.         In confirming the Bankruptcy Plan, the Bankruptcy Court found that: (i) beginning no later than July 2012, through December 1, 2017, the Defendant used his web of more than 275 limited liability companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide; (ii) the Ponzi scheme involved the payment of purported returns to existing investors from funds contributed by new investors; and (iii) the Ponzi scheme was discovered no later than December 2017. See Petition’s Exhibit A at 16 (page 15 of the Bankruptcy Court Order).

19.         Pursuant to the Bankruptcy Plan, the Liquidation Trust was automatically vested on February 15, 2019, with the Woodbridge Entities’ bankruptcy estates’ rights, title, and interests in, among other assets, non-real-estate-related assets or entities that may be transferred or otherwise provided, directly or indirectly, to or for the benefit of the Liquidation Trust.

20.         Under the Bankruptcy Plan, the Liquidation Trust is obligated to identify the assets of the Woodbridge Entities’ bankruptcy estates and take affirmative steps to recover all such assets for the benefit of its beneficiaries, the vast majority of whom are victims of the Defendant’s fraudulent scheme and conspiracy. See Petition 2-3.

21.         The vast majority of the beneficiaries of the Liquidation Trust are victims of Shapiro’s fraud schemes. See Petition 3. The Liquidation Trust beneficiaries include the holders of allowed claims in Class 3 and Class 5, as defined in Section 3.4 and Section 3.6 of the Bankruptcy Plan. See Petition’s Exhibit B, ECF No. 193-2 (Bankruptcy Plan, § 3.4 Class 3: Standard Note Claims, and § 3.6 Class 5: Unit Claims). There are a total of approximately 7,940 claims in Class 3 and Class 5, which each represent a pecuniary loss as a direct result of the illegal acts that were committed in the course of Defendant’s offense that was the underlying basis for the forfeiture of the Directly Forfeitable Assets, the Substitute Assets I, and the Substitute Assets II. Class 3 and Class 5 claims were used to calculate the amount for the restitution judgment that was imposed against the Defendant.

22.         Class 3 and Class 5 claims have not been otherwise fully compensated for their pecuniary losses. Under the Bankruptcy Plan, the Liquidation Trust shall first distribute assets to each holder of Class A Liquidation Trust Interests, which includes Class 3 and Class 5, on a pro rata basis until the aggregate amount of all distributions equals the product of (i) the total number of Class A Liquidations Interests and (ii) $75.00. See Petition’s Exhibit B, ECF No. 193-2 (Bankruptcy Plan, § 1.19 Class A Liquidation Trust Interests; and § 1.84 Liquidation Trusts Interest Waterfall).

23.         As a result of the Court’s Order and authorized searches of Defendant and his wife’s residence and storage facility, the United States has located and is currently in custody of the property listed in Exhibit A (collectively, the “Subject Assets”).

24.         The following Directly Forfeitable Assets and Substitute Assets I identified in the Order are either duplicative of other assets or have not been recovered, and therefore, are not included among the Subject Assets (collectively, the “Released Assets”):

(a)         All assets on deposit in account number ###-###-#### at US Bank, held in the name of Jeri Shapiro;

(b)         One (1) 18-karat, white gold, bangle bracelet, with 550 round diamonds (12.50 carats) and 1,434 black diamonds (24.92 carats);

(c)         One (1) pair of 18-karat, white gold, drop earrings with 99 yellow sapphires (1.10 carats), 117 tsavorites (1.18 carats), 125 blue sapphires (1.38 carats), 124 blue diamonds (1.36 carats), 120 amethysts (1.24 carats), 120 pink sapphires (1.18 carats), and 125 orange sapphires (1.26 carats);

(d)         One (1) pair of 18-karat, rose gold, golden pearl earrings with round-cut diamonds (.39 carat);

² This is a duplicative asset. The asset is already more fully identified in line 18 of Exhibit A, as one (1) platinum ring with certified Colombia emerald-cut emerald (9.54 carats), eight trapezoid- cut diamonds (2.09 carats), and 166 round-cut diamonds (1.42 carats), seized from residence at 4030 Longridge Avenue.

(h)         All assets on deposit in account number ###-###-#### at Regions Bank, held in the name of Lionshare Lending LLC; and

25.         The Liquidation Trust stipulates and understands that the Released Assets are not in the United States’ custody, consents to the United States seeking the Court’s release of them from forfeiture, and withdraws any claim in its Petition for the Released Assets.

26.         It is a primary goal of the United States Department of Justice to recover assets through forfeiture that may be used to compensate victims who have incurred a pecuniary loss as a direct result of the commission of the offense underlying such forfeiture.

27.         The Parties share the common goal of locating and distributing assets to the victims of the Defendant’s fraud conspiracy in a timely and cost-effective manner.

28.         The Parties have agreed to resolve this matter consistent with the sound policy favoring settlement of legal disputes without resort to unnecessary litigation.

29.         Petitioner believes that this Stipulation and Settlement Agreement (the “Agreement”) is in the best interests of the Liquidation Trust and its beneficiaries.

30.         The Court has jurisdiction over the Parties, the Subject Assets, and the subject matter of the Agreement.

32.         “Bankruptcy Case” means In re Woodbridge Group of Companies, LLC, et al., Bankruptcy Case No. 17-12560 (BLS) (Bankr. D. Del.).

33.         “Bankruptcy Court” means the United States Bankruptcy Court for the District of Delaware, which is presiding over the Bankruptcy Case.

34.         “Bankruptcy Plan” means the First Amended Joint Chapter 11 Plan of Liquidation of Woodbridge Group of Companies, LLC and its Affiliated Debtors, confirmed by the Bankruptcy Court on October 26, 2018, in the Bankruptcy Case. See Petition’s Exhibit B, ECF No. 193-2.

35.         “Collateral Source Recoveries” means any amount recovered by a Qualifying Victim under an order of restitution, as set forth in 18 U.S.C. § 3664(j)(2), or any compensation from any other source with respect to the such loss, as set forth in by 18 U.S.C. § 3664(j)(1). Collateral Source Recoveries shall be calculated on a gross basis, with no reduction or credit for prejudgment interest, attorney’s fees, or costs.

36.         “Criminal Case” means the above-captioned case, United States v. Shapiro, Case No. 19-20178-CR-CMA, including all forfeiture ancillary proceedings.

38.         The “Court” means the United States District Court for the Southern District of Florida, which is presiding over the Criminal Case.

39.         The “Directly Forfeitable Assets” means the specific property alleged to be directly subject to forfeiture in the Indictment, ECF No. 3, in the Criminal Case.

 

40.         “Effective Date” means the first business day after the date when the following events have all occurred: (i) entry of an order by the Court approving the Agreement that is final and non-appealable; (ii) the expiration of the notice period under 21 U.S.C. § 853; and (iii) either the conclusion of all related criminal matters as the Subject Assets are also being held in federal custody as evidence in the Criminal Case, or if the United States determines, in its sole discretion, that any of the Subject Assets are no longer required for evidentiary purposes.

41.         The “Liquidation Trust” means Woodbridge Liquidation Trust, by and through its trustee, Michael I. Goldberg.

42.         “Net Sale Proceeds” shall be calculated by deducting from the sale prices of the Subject Assets any direct costs or expenses incurred for their seizure, maintenance, disposition, and distribution to any Qualifying Victim, including costs incurred solely to fulfill Petitioner’s obligations of providing notice to Qualifying Victims and of making reports to the United States under this Agreement. In calculating Net Sale Proceeds, no deduction shall be made for any indirect cost or expense incurred by Petitioner, including, but not limited to, Trustee fees, attorney’s fees, the fees of professionals and other persons retained by the Trustee not directly incurred as a result of the sale and distribution of the Subject Assets to Qualifying Victims; any taxes imposed on the Liquidation Trust; indemnity reserves; and any other bankruptcy-related costs or expenses that were not directly incurred as a result of the sale and distribution of Subject Assets to Qualifying Victims.

43.         “Order” refers to the preliminary order of forfeiture entered on October 15, 2019, in which the Court forfeited, subject to third-party interests, the Subject Assets. See Order, ECF No. 170.

45.         “Petition” means Petitioner Woodbridge Liquidation Trust’s Verified Claims and Petition for Adjudication of Interests, which was filed on March 13, 2020, and in which Petitioner claimed the Subject Assets. See Petition, ECF No. 193.

46.         “Petitioner” is the “Liquidation Trust,” and is referred to as either Petitioner or Liquidation Trust in this Agreement.

47.         “Qualifying Victim” means (a) a person or entity with an outstanding restitution balance in the Criminal Case as a result of the restitution judgment in the amount of $478,912,763 entered by the Court in the Defendant’s Amended Judgment, ECF No. 178 and which was calculated based on allowed claims in Class 3 and Class 5 at the time; (b) a person or entity that otherwise meets the qualifying criteria set forth in 28 C.F.R. § 9.8(b) by demonstrating (1) a pecuniary loss of a specific amount that has been directly caused by the criminal offense, or related offense, that was the underlying basis for the forfeiture, and the loss is supported by documentary evidence including invoices and receipts, that (2) the pecuniary loss is the direct result of the illegal acts and is not the result of otherwise lawful acts that were committed in the course of the criminal offense, that (3) the person or entity did not knowingly contribute to, participate in, benefit from, or act in a willfully blind manner towards the commission of the offense, or related offense, that was the underlying basis for the forfeiture, that (4) the person or entity has not in fact been compensated for the wrongful loss of the property by the perpetrator or others, and that (5) the person or entity does not have recourse reasonably available to other assets from which to obtain compensation for the wrongful loss of the property; or (c) consistent with 28 C.F.R. § 9.2, a person or entity that purchased units of the Liquidation Trust from a person or entity that meets the criteria set forth in either subsections (a) or (b) above.

48.         The “Released Assets” are the assets that were identified in the Order, but are either duplicative of other preliminarily forfeited assets or have not been recovered.

 

50.         The “Subject Assets” means the specific assets that are subject to this Agreement, which are listed in the attached Exhibit A.

51.         The “Substitute Assets I” are the specific assets listed as substitute property in the Defendant’s Plea Agreement, ECF No. 139, that the Defendant agreed to forfeit.

52.         The “Substitute Assets II” are the specific assets later identified as the Defendant’s substitute property that were preliminarily forfeited pursuant to 21 U.S.C. § 853(p) in the Order, ECF No. 170.

54.         The “United States” means the United States of America, by and through the United States Attorney’s Office for the Southern District of Florida.

55.         The terms of the Agreement are subject to the approval of the Court, and any violation of any term or condition shall be construed as a violation of an order of the Court.

56.         The United States agrees to seek the Court’s approval of the Agreement after the Agreement is executed by the Parties.

57.         Within 30 days after the Effective Date, or such other time by agreement of the Parties, the United States agrees to release the Subject Assets to Petitioner in full settlement and satisfaction of Petitioner’s claim(s) arising from and related to the seizure, detention, or forfeiture of the Subject Assets.

58.         Petitioner agrees to take the Subject Assets in their existing condition “as is, where is, and with all faults” with respect to all facts, circumstances, conditions and defects, and agrees that the United States will not be responsible for any costs and/or expenses that have been incurred or will be incurred related to the Subject Assets.

59.         Petitioner agrees that the United States has no obligation to inspect for, repair or correct any such facts, circumstances, conditions or defects or to compensate Petitioner for same as the United States has specifically bargained for the assumption by Petitioner of all costs and risk of conditions with respect to the Subject Assets and the Parties have structured the terms of the Agreement in consideration thereof.

60.         Upon the United States’ release of the Subject Assets, Petitioner, its agents, heirs, relatives, and assigns hereby withdraw all claim(s) and waive any defense(s) in this matter that it has or might have against the United States, the United States Attorney’s Office for the Southern District of Florida, the United States Department of Justice, the Federal Bureau of Investigation, the United States Marshals Service, and all agents, officers, and employees thereof, (the “Released Parties”) relating to the restraint, seizure of, the commencement of forfeiture proceedings against, or the forfeiture of the Subject Assets, including any claim(s) for lost profits or interest.

61.         Upon release of the Subject Assets, Petitioner agrees to hold harmless and fully indemnify the Released Parties from all claims pertaining to this matter and the Subject Assets.

62.         Petitioner agrees to sell, liquidate, transfer, or otherwise dispose of the Subject Assets, or any part thereof or interest therein, upon such terms designed to maximize the value of the Net Sale Proceeds and by commercially reasonable means.

63.         Petitioner agrees to distribute the Net Sale Proceeds on a pro rata basis to each Qualifying Victim, up to the outstanding amount of the pecuniary loss of that Qualifying Victim. No distribution shall be made for any amount Petitioner knows to have been already recovered by a Qualifying Victim for the same pecuniary loss, or any compensation from any other source with respect to such loss.

64.         Petitioner shall publish a notice to all Qualifying Victims advising that by accepting the distribution, each Qualifying Victim submits under penalty of perjury that the Net Sale Proceeds distributed to said Qualifying Victim would not result in the receipt of funds in excess of the outstanding amount of the pecuniary loss of that Qualifying Victim.

65.         Petitioner shall provide the United States the following information regarding the Subject Assets and the distribution of Net Sale Proceeds to Qualifying Victims: (a) a list of the Net Sale Proceeds for each of the Subject Assets; and (b) a list indicating the amount distributed to each Qualifying Victim from the Net Sale Proceeds. If requested by the United States, Petitioner also agrees to provide supporting documentation for each of these lists.

67.         The Agreement shall be governed by and construed in accordance with the federal law and, where applicable, the laws of the State of Florida, without giving effect to any principles of conflicts of law.

68.         Petitioner has read and fully understand each provision of the Agreement, and has freely and voluntarily signed into the Agreement.

69.         The Agreement may be executed in one or more counterparts, each of which when executed and delivered shall be an original, and all of which when executed shall constitute one and the same instrument.