Trudeau Civil Case Document 837 and 839 Reciever and FTC 03-14-14

GIN Network Truth (the smart group)
UNITED STATES DISTRICT COURT FOR

THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FEDERAL TRADE COMMISSION,
Plaintiff,
v.
KEVIN TRUDEAU,
Defendant.
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Case No.: 03-C-3904
Hon. Robert W. Gettleman
RECEIVERS SECOND MOTION FOR
INTERIM APPROVAL OF FEES AND EXPENSES
Robb Evans & Associates, LLC (the Receiver), in its capacity as court-appointed
receiver over the assets of Kevin Trudeau and the Trudeau Entities, respectfully submits this
second interim fee application seeking approval to pay fees and expenses of the Receiver and
professionals retained by the Receiver, including the law firm Hiltz Wantuch & Zanzig LLC
(HWZ). In this application, the Receiver seeks approval of fees and expenses incurred during
the period from October 1, 2013 through December 31, 2013 (the Second Interim Period). In
further support of its motion, the Receiver states as follows:
BACKGROUND
1. On August 7, 2013, the Court entered the Order Appointing a Receiver and
Implementing Ancillary Relief [Dkt. # 742] (the Receivership Order) appointing Robb Evans
& Associates LLC as receiver over the assets of Defendant Kevin Trudeau (Trudeau), the
Trudeau Entities, and any affiliates or subsidiaries thereof controlled by Trudeau or any Trudeau
Case: 1:03-cv-03904 Document #: 837 Filed: 03/14/14 Page 1 of 10 PageID #:15256
2
Entity.
1
In appointing the Receiver, the Court adopted the FTCs recommendation that any such
receiver should be a forensic accountant with asset-tracing experience.
2. Under the Receivership Order, the Receiver was authorized to retain attorneys and
other professionals as the Receiver deemed advisable or necessary in the performance of the
Receivers duties. (Receivership Order at V(6).) Pursuant to such authority, the Receiver
retained the law firm of Hiltz Wantuch & Zanzig LLC (HWZ) to represent the Receiver and
assist it in carrying out its duties in the matter.
3. Pursuant to the terms of the Receivership Order, the Receiver and its
professionals are entitled to reasonable compensation for the performance of duties undertaken
pursuant to this order and for the cost of actual out-of-pocket expenses they incur. (Receivership
Order XII(1).) If approved, such compensation is to be paid first from assets recovered
pursuant to the Receivership Order, and then, if necessary, from the Escrow Account described
in the Receivership Order. (Id. at XII(4) & (5).)
4. On November 21, 2013, the Court granted the Receivers First Motion for
Approval of Fees and Expenses covering the period from August 7, 2013 through September 30,
2013, approving the Receivers professional fees of $289,405.40, out-of-pocket expenses of
$17,869.92 and HWZs legal fees of $42,486.
5. In this Motion, for the Second Interim Period, the Receiver seeks approval of its
professional fees totaling $246,315.50 and out-of-pocket expenses of $15,030.12. In addition,
the Receiver seeks approval of legal fees and expenses totaling $76,770.16, which includes
$9,419.99 to Liechtenstein and Australian law firms who assisted the Receiver with its
investigation of overseas accounts.
1
Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the
Receivership Order.
3
6. As reflected in the financial report accompanying the Receivers most recent
report filed on January 28, 2014 [Dkt. #815] and reattached here as Exhibit A, during the Second
Interim Period, the Receiver has collected additional net funds of totaling $1,846,214.94 before
Receivers fees and expenses.
7. Accordingly, the Receiver has more than sufficient funds to pay the professional
fees and expenses, including legal fees, requested herein from assets recovered pursuant to the
Receivership Order, without needing to draw on the Escrow Account. Indeed, even after
applying all professional fees and expenses sought here, as of December 31, 2013, the
receivership estate still has a net balance of approximately $2.5 million, excluding an additional
$2.7 million in credit card reserve accounts.
OVERVIEW OF RECEIVERS ACTIVITIES AND FEES
8. During the Second Interim Period, the Receiver continued to shift its activities
from assuming control over the various Trudeau Entities located in the United States and abroad
to conducting a more detailed forensic review of the known assets of the Receivership Estate and
the past income of Trudeau and the Trudeau entities, identification of previously unknown
assets, and continued management of Trudeau Entities, including the Global Information
Network (GIN).
9. The Receiver has maintained detailed records of the billable time it has devoted to
this matter and for which it is now seeking authority to pay. Attached as Exhibits B, C and D to
this application are comprehensive invoices for October 2013, November 2013 and December
2013, prepared by the Receiver (and redacted for privilege) setting forth the specific tasks
performed and the time spent performing those tasks by the Receivers timekeepers. The
Receiver also prepared and submitted supplemental reports on October 25, 2013 [Dkt. # 785],
4
November 18, 2013 [Dkt. # 796], and December 19, 2013 [Dkt. # 805] further detailing its
certain of its activities and investigation. As reflected in more detail in its invoices and reports to
the Court, the Receiver provides the following overview of its activities during the Second
Interim Period:
10. The Receiver has continued to manage the Trudeau Entities, including the Global
Information Network (GIN). As part of the continuing control, the Receiver has worked with
those entities management and staff while overseeing those entities operations. The Receiver
has adjusted staffing levels, including retaining a chief operating officer, to ensure appropriate
resources are available to operate the Trudeau Entities while minimizing expenses.
11. Having been authorized to operate the Trudeau Entities legally, the Receiver
completed its review of GINs marketing claims and commission program. The Receiver
removed claims from its websites that it deemed false and misleading, including income claims
and references to the GIN Council. The Receiver analyzed GINs commission program,
including conferring with experts from the FTC. Determining that it likely constituted an
impermissible pyramid scheme, the Receiver caused GINs management to terminate the
program and develop new programs consistent with the GINs social and educational objectives.
The Receiver also coordinated with GINs management regarding operational issues related to
the Family Reunion Event held in Washington, D.C. during October 2013.
12. The Receiver continued investigating various overseas accounts held by Trudeau
or the Trudeau entities. As a part of the work, the Receiver retained overseas counsel to advise
the Receiver with respect to foreign banking laws and request turnover of accounts and account
information. The Receiver also continued to attempt to coordinate with Mr. Lee Kenny and
other Trudeau associates regarding the overseas Trudeau Entities and related firms, including
5
GIN FDN, Website Solutions Switzerland, Global Sales Solution, Future Transactions Company,
and Office Pool.
13. The Receiver reviewed and analyzed banking records from the various institutions
holding past or present accounts for Trudeau or the Trudeau Entities. The Receiver coordinated
with its counsel to issue subpoenas for additional bank records of third parties that appear to have
received substantial funds from the Trudeau Entities, including those of Mr. Trudeaus wife.
14. The Receiver continued and intensified its review of corporate records of the
Trudeau Entities that had been stored at the Trudeau Entities Westmont offices.
15. The Receiver met with and otherwise corresponded with Trudeau and his counsel
to continue to coordinate the turnover of known receivership assets and to further identify and
investigate the possible existence of any other assets.
16. Throughout the Second Interim Period, the Receiver participated in a number of
hearings (and corresponding effort to prepare for such hearings) addressing the status of
Trudeaus compliance with the Courts orders. In connection with these hearings, the Receiver
solicited Trudeaus cooperation, followed up on any new information, prepared pleadings and
supplemental reports to the Court, and coordinated its efforts with the FTC.
17. On November 18, 2013, certain members of GIN filed a motion to intervene
seeking inter alia to reverse the Receivership Order. The Receiver coordinated with the FTC in
providing a legal response to the motion. Further, the Receiver conducted discussions with the
proposed intervenors regarding their interests, including a possible sale of GIN.
18. The Receiver prepared coordinated with tax counsel for Trudeau to provide
requested information in connection with IRS proceedings.
6
19. The Receiver retained and worked with a licensed real estate broker to market
certain real property located in Ojai, California. The Receiver investigated and worked to
resolve issues related to certain encumbrances on the Ojai real property. The Receiver also
secured and maintained the personal property located at the Ojai, California and Oak Brook,
Illinois residences.
20. During the Second Interim Period, the Receivers personnel collectively devoted
1,024.6 hours to this matter (347.9 hours in October 2013, 382.9 hours in November 2013, and
293.8 hours in December 2013), incurring fees totaling $246,315.50, for an effective blended
rate of approximately $240.40 per hour. The principal members of the Receivers firm and
senior associates working on this matter billed at an hourly rate of $301.50. All of the fees
charged by the Receiver in this matter reflect a 10% discount from the firms private sector rates.
As required by the Receivership Order, the compensation sought in this motion is consistent with
the rate structure and terms outlined in Exhibit 1 of the FTCs Statement With Respect to the
Appointment of a Receiver [Dkt. #730]. (See Receivership Order XII(2).)
21. In addition to the professional fees sought by the Receiver, the Receiver has also
incurred $15,030.12 in out-of-pocket expenses during the three-month Second Interim Period.
The majority of these expenses are costs associated with travel by the Receivers personnel to
Chicago to meet with management of the Trudeau Entities in Westmont, Illinois. Such travel
expenses total $11,107.77. The remaining expenses for which the Receiver seeks reimbursement
are as follows: $7.78 for investigative search costs; $357.46 for office telephone and supplies;
$1,482.44 for postage and delivery expenses; $1,537.91 for subpoena and document
reproduction, and 536.76 for website support.
7
OVERVIEW OF LEGAL SERVICES AND FEES
22. Receivers counsel maintained detailed records of the billable time for which the
Receiver now seeks authority to pay. Attached as Exhibit E to this Motion is a comprehensive
invoice prepared by HWZ (and redacted for privilege) setting forth the specific tasks performed
and the time spent performing those tasks by HWZs timekeepers.
23. As reflected in the detailed invoice, during the Second Interim Period, HWZ
provided the following services to the Receiver:
Advised the Receiver concerning its authority and obligations under the
Receivership Order.
Conferred and coordinated with parties on behalf of Receiver, including FTC and
counsel for Trudeau.
Prepared, served and prosecuted on the Receivers behalf subpoenas to various
financial institutions seeking to locate assets or potential assets of the receivership
estate.
Prepared and filed various pleadings, including pleadings regarding imposition of
coercive sanctions and responses to statements filed by FTC and Trudeau.
Assisted the Receiver in revising, finalizing and filing Receivers Second and
Third Supplemental Reports.
Attended multiple hearings before the Court in connection with imposition of
coercive sanctions and subsequent hearings affording Trudeau opportunity to
purge contempt.
Advised the Receiver regarding motion to intervene filed by certain member of
GIN.
Conferred and corresponded with counsel for proposed intervenors on behalf of
Receiver regarding pending motion to intervene and intervenors related interests.
Coordinated with tax counsel for Trudeau regarding document requests.
Advised Receiver regarding responses to various entities asserting claims against
receivership estate for pre-receivership obligations.
8
24. During the three months comprising the First Interim Period, HWZ expended
184.3 hours on this matter (109.4 hours in October 2013, 27.6 hours in November 2013, and 47.3
hours in December 2013). Blair Zanzig, one of HWZs members, was principally responsible
for providing these services. For the services outline above and as detailed in the attached
invoices, HWZ has invoiced the Receiver for fees totaling $67,350.17. For similar matters, Mr.
Zanzig ordinarily bills $400 an hour, but in recognition of the interests of consumers in this case,
HWZ has agreed to discount such rates by 10%. Thus, HWZs invoice reflects an effect rate of
$360 per hour for attorney time. The Receiver believes these rates are comparable, if not less
than, those the Receiver has seen in connection with other comparable matters.
25. In addition to its professional fees, HWZ has incurred out-of-pocket expenses of
$1,002.17, consisting of court costs associated with obtaining certified copies of the
Receivership Order, overnight courier fees, and PACER charges.
26. Further, in connection with its attempts investigation of overseas bank accounts,
the Receiver retained the Liechtenstein law firm Holzhacker and the Australian law firm
Meridian Lawyers (collectively, Overseas Counsel). Overseas counsel primarily advised the
Receiver with respect to foreign banking disclosure laws and prepared documents requesting
turnover of foreign accounts held by receivership entities. Attached as Group Exhibit F to this
Motion are invoices prepared by Overseas Counsel setting forth the specific tasks performed and
the time spent performing those tasks. Collectively, Overseas Counsel has incurred fees and
expenses totaling $9,419.99
WHEREFORE, Receiver respectfully requests the Court enter an Order (a) approving
the fees and expenses incurred by the Receiver Robb Evans & Associates LLC for the Second
Interim Period in the amount of $261,345.62; (b) approving the legal fees and expenses incurred
9
by Receivers counsel Hiltz Wantuch & Zanzig LLC for the Second Interim Period in the
amount of $67,350.17; (c) approving legal fees and expenses incurred by Overseas Counsel
totaling $9,419.99; (d) approving the Receiver to immediately pay all such approved fees and
expenses from funds held by the Receiver; and (d) grant the Receiver such further relief as the
Court deems just and proper.
Dated: March 14, 2014 Respectfully submitted,
ROBB EVANS & ASSOCIATES LLC,
RECEIVER
By: /s/ Blair Zanzig
(One of Its Attorneys)
Blair R. Zanzig (No. 6273293)
John F. Hiltz (No.6289744)
Kathy Wantuch (No. 6294034)
HILTZ WANTUCH & ZANZIG LLC
53 West Jackson Blvd., Suite 205
Chicago, Illinois 60604
Telephone: 312.566.9008
Fax: 312.566.9015
Counsel for Robb Evans & Associates, Receiver
CERTIFICATE OF SERVICE
I, Blair R. Zanzig, an attorney, hereby certify that, on the 14
th
day of March 2014, I
caused a true and correct copy of the foregoing Receivers Second Motion For Interim Approval
of Fees and Expenses to be served through the Courts Electronic Case Filing System on the
following:
Kimball Richard Anderson
kanderson@winston.com
Thomas Lee Kirsch, II
tkirsch@winston.com
Katherine E. Rohlf
kcroswell@winston.com
Michael Mora
mmora@ftc.gov
Jonathan Cohen
Jcohen2@ftc.gov
Amanda B. Kostner
akostner@ftc.gov
David OToole
dotoole@ftc.gov
/s/ Blair R. Zanzig
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS


Plaintiff,

v.

KEVIN TRUDEAU,

Defendant.

)
)
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)
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)
)
)
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)

Case No. 03-C-3904


FTCS STATEMENT IN ADVANCE OF THE MARCH 19 STATUS CONFERENCE

I. INTRODUCTION
In advance of the upcoming status conference, the FTC raises certain issues regarding the
interview with Trudeau on February 4. Put bluntly, when the FTC and Receiver interviewed
Trudeau (at his counsels insistence), he was no more candid about his assets than he has been
over the past decade. His unrelenting dishonestly underscores the need to continue coercive
incarceration before he begins serving his criminal sentence.

II. THE FEBRUARY 4 INTERVIEW
During the February 4 interview, Trudeau made numerous demonstrably false statements,
several of which highlight the likelihood that he continues to control significant wealth offshore.
Among other things:

Trudeau represented that his net profits from the Coral Calcium infomercial
campaign were probably zero. PXA 5. However, in 2004, a prominent
Chicago accounting firm (Kroll) calculated Trudeaus net profit as
approximately $23 million (including money that went to entities Trudeau
controlled).
1
To the FTCs knowledge, neither Kroll nor anyone else was able
to determine where this money went.
2

1
Under the Courts Receivership Order, this financial document is Receivership property.
See DE742 (Aug. 7, 2013) at 5(3) and XIII(4) (giving the Receiver control over Trudeaus
financial records and other documents). The FTC has a copy, but understands that the Receiver
is analyzing it and will make it available to the Court if requested.
2
During the interview, Trudeau denied that his general financial condition deteriorated at

2

Trudeau stated that K.T. Corporation (the Isle of Man-based holding company
that indirectly owns many Trudeau entities)
3
cannot provide the Receiver with
account statements because it never had any bank accounts. PXA 7.
However, in 2004, Trudeau testified that K.T. Corporation had accounts with
Anglo-Irish Bank and Citibank. PXA:1 at 67:12-69:10.

With respect to Marc Lanes critical 2007 Asset Protection Planning email
in which he credits the offshore structure for the relatively favorable
settlement to which the FTC previously agreed, PXA:2, Trudeau denied any
knowledge regarding what offshore structure Lane meant. PXA 8. This is
inconsistent with the substantial evidence the FTC presented regarding
Trudeaus role in his asset protection efforts.

To provide one additional illustration, Trudeau gave a third, entirely new story
regarding the missing gold bars and coins. This time, Trudeau stated that his
wife, then an NYU graduate film student, sold the gold periodically to cover
student filmmaking expenses. See PXA 9. Putting aside why Trudeau
failed to offer this particular story until last month, if this story were true,
there should be quite a bit of evidence bolstering it, including, among other
things, evidence of large periodic deposits in his wifes accounts, and records
of tens of thousands of dollars spent on (implausibly expensive) student film
production. To the FTCs knowledge, no such records exist.
Again, these are only selected examples of dubious or false representations made during the
February 4 interview.

III. CONCLUSION
Requiring Trudeau to disclose (and turn over) his assets fully before he begins his
criminal sentence is consumers best hope for substantial relief. Because, once again, Trudeau
has been dishonest, the FTC asks the Court to continue the status quo until Trudeau either
complies fully or establishes to the Courts satisfaction that he will never comply. Indeed, taking
pressure off (without legal justification) just as it builds is not in consumers interests.

all from 2003 (following the Kroll report) through 2007 (the earliest time when the FTC is aware
that any records exist). PXA 6. Trudeau also denied any significant expenses during that
period, such as the acquisition of a company or other expenditure that might explain where the
$23 million went. See id.
3
See PXA:3. K.T. Corporation sits atop much of Trudeaus asset protection regime, one
level below the KMT Fiduciary Trust itself. See id. (showing that, prior to the Receivership,
K.T. Corporation was wholly owned by the asset protection trust, and that K.T. Corporation
directly or indirectly owned twelve other entities).

3
Dated: March 14, 2014

David OToole (dotoole@ftc.gov)
Federal Trade Commission
55 West Monroe Street, Suite 1825
Chicago, Illinois 60603-5001
Phone: (312) 960-5601
Fax: (312) 960-5600
Respectfully Submitted,

/s/ J onathan Cohen
Michael Mora (mmora@ftc.gov)
J onathan Cohen (jcohen2@ftc.gov)
Amanda B. Kostner (akostner@ftc.gov)
600 Pennsylvania Ave., N.W. M-8102B
Washington, DC 20580
Phone: 202-326-3373; -2551; -2880
Fax: 202-326-2551

4
CERTIFICATE OF SERVICE

I, J onathan Cohen, hereby certify that on March 14, 2014, I caused to be
served true copies of the foregoing by electronic means, by filing such documents through the
Courts Electronic Case Filing System, which will send notification of such filing to:

Kimball Richard Anderson
kanderson@winston.com

Thomas Lee Kirsch, II
tkirsch@winston.com

Katherine E. Rohlf
kcroswell@winston.com

Blair R. Zanzig
bzanzig@hwzlaw.com

/s/ J onathan Cohen
J onathan Cohen (jcohen2@ftc.gov)
Attorney for Plaintiff

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS


Plaintiff,

v.

KEVIN TRUDEAU,

Defendant.

)
)
)
)
)
)
)
)
)
)
)
)

Case No. 03-C-3904


EXHIBITS RELATED TO FTCS STATEMENT IN ADVANCE OF THE MARCH 19
STATUS CONFERENCE

Case: 1:03-cv-03904 Document #: 839-1 Filed: 03/14/14 Page 1 of 20 PageID #:15451

FTC
EXHIBIT A


FTC PXA:1

PXA:1
PXA:1
PXA:1
PXA:1
PXA:1
PXA:1

FTC PXA:2

LANE_000954
ATTORNEY'S EYES ONLY CONFDENTAL NFORMATON
FTCX 20-Y
PXA:2
LANE_000955
ATTORNEY'S EYES ONLY CONFDENTAL NFORMATON
FTCX 20-Y
PXA:2

FTC PXA:3

FTCX 13-L PXA:3 at 1

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