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-----Original Message-----From:
Rjsattorny@xxxxxxx <<A
href="mailto:Rjsattorny@xxxxxxx";>Rjsattorny@xxxxxxx>To:
Date: Wednesday, November 29, 2000 12:56 PMSubject:
INTRUST UPDATE: ARTICLE IN TODAY'S NEWSPAPER <FONT
face=arial,helvetica>
Independent Trust Corp. sale faces challenge
November 29, 2000 <FONT color=#000000
face=Arial lang=0 size=3 FAMILY = SANSSERIF>BY TAMMY WILLIAMSON BUSINESS
REPORTER
<FONT color=#000000
face=Arial lang=0 size=2 FAMILY = SANSSERIF>The proposed sale of Independent
Trust Corp., which was shut down by regulators in April after $68.1 million
of client money was stolen, may have hit a snag just days before the sale
was expected to be approved in court.
Pacific Financial Group Inc., an investment adviser in Bellevue, Wash., is
challenging the sale of the Orland Park company to former Banco Popular
trust executive James Boyd, according to court documents filed last week.
The sale was expected to be approved today.
Pacific Financial, which manages more
than $400 million of assets, has 822 clients with $82 million invested with
Independent Trust, also known as Intrust. Pacific Financial contends that
Boyd's proposal to buy the company for $2.5 million would unfairly delay
clients who want to pull out their money as soon as possible.
Boyd is proposing that he have
discretion to prevent withdrawals for up to six months, a provision that
Pacific Financial calls "unconscionable."
Pacific said it plans to
"recommend to each and every one of its clients that such clients
transfer the custody of their accounts to a new custodian" once the
now-frozen assets of Intrust customers are released.
Pacific Financial attorney John
Rizzardi of Seattle said Tuesday that the company doesn't oppose a sale, and
that Pacific Financial is "primarily interested in answers to a lot of
our questions." He said he was
talking to Intrust's court-appointed receiver, PricewaterhouseCoopers, late
Tuesday about "working out our issues" before deciding whether to
appear in court today to protest the sale.
Cook County Circuit Judge Sidney
Jones III earlier this year ordered that accounts opened before April 23,
1999, be frozen, meaning clients can't withdraw money unless they show a
hardship, to prevent a mass exodus of clients pulling out their money.
There are about 17,000 investment
accounts at Intrust. The accounts
will be unfrozen sometime early next year, observers say, after the court
decides how much to assess customer accounts to make up the shortfall and
recover some $68 million in missing funds.
One estimate is that Intrust clients
will be charged 6 percent of the value of their accounts, though the court
has not yet ruled on an amount.
Boyd's proposal says if he buys
Intrust, he's entitled to collect a termination fee from clients who pull
out their money, and that he would have 180 days to complete the transfer of
money out of Intrust to other custodians of clients' choosing.
"Either . . . the purchaser is
woefully understaffed and undercapitalized to accommodate this custodial
function, or, is most interested in continuing to extract management fees by
prolonging any legitimate transfer or termination request," Pacific
Financial's documents said. The company said a transfer should be able to be
completed in 30 days. Only three of
Pacific Financial's clients, though, are affected by the court's order
earlier this year to freeze the assets of Intrust while Pricewaterhouse
sorts out the mess. A criminal
investigation into the missing money is still pending.
Pricewaterhouse, which will still be
Intrust's receiver if the court approves the sale, supports the sale to
Boyd. "The sale is not in the
best interests of its account holders," Pacific said in court
documents. "The receiver has brought forward a transaction that appears
fraught with present and potential future problems." Pacific Financial
estimated Boyd would be "inundated with over 5,000 to 7,000 transfer
requests immediately" following a court ruling to unfreeze assets.
In the meantime, Boyd, 59, has settled
in at Intrust's office in Orland Park. He said Monday he anticipated the
court's approval and the completion of the sale by Friday. He outlined his
plans to protect investors who stick it out at Intrust, which he will rename
Millennium Trust Corp. Boyd said he
is planning to mail a letter to investors by early next week announcing the
name change and outlining the new types of investment accounts from which
clients can choose, including accounts with federal deposit insurance.
The company also will hold what's
called a Fidelity bond, which protects clients' investments in case of theft
up to $10 million for each occurrence.
"Had there been something like
this here before, the accountholders would not have had to go through
this," Boyd said. He said he
wants Intrust to expand its business and double revenue within five years.
Boyd will not have a direct role in
recovering the missing money. That responsibility lies with Pricewaterhouse.
To persuade customers to keep their
money with Intrust, he plans to freeze their trust fees for two years,
rather than charge them the higher fees Millennium Trust plans to assess new
customers. He also plans to keep the
48 people now working at Intrust, offering them similar pay with improved
health care and retirement perks. Boyd said he has no plans to renew a bonus
that employees will receive in early December, said to be equivalent to 25
percent of their salary as incentive to stay at the company.
Boyd could not be reached for
comment Tuesday. Pacific Financial
also criticized Pricewaterhouse for not disclosing any other offers for
Intrust. <FONT color=#000000 face=Arial lang=0 size=1 FAMILY =
SANSSERIF>AS ALWAYS, PLEASE CHECK THE WEB SITE FOR MORE
DETAILS www.intrust.com
<FONT color=#000000 face=Arial lang=0 size=3 FAMILY =
SANSSERIF>LAW OFFICES OF ROBERT J. SHELIST <FONT color=#0f0f0f face=Arial lang=0 size=2 FAMILY =
SANSSERIF>
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