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Chattanooga: Lawyers send bill for Rivas fund search

By: Monica Mercer
(Contact)

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Lawyers and investigators have spent more than 1,000 hours and billed about $230,000 for trying to recover millions lost to an accused local scam artist who promised huge returns by investing in the foreign currencies market.

Documents made public Friday detail the work done since May by a local law firm, a bankruptcy trustee and several investigators, all of whom are trying to recoup the estimated $31 million authorities say Luis H. Rivas swindled from investors.

He is scheduled to stand trial here Dec. 15 and is charged with 19 crimes ranging from wire and bankruptcy fraud to money laundering. He has pleaded not guilty to all charges.

Tracking down Mr. Rivas’ assets is part of an involuntary bankruptcy action filed against him by a federal judge and is separate from his criminal charges.

To find the money, however, has taken time and financial resources for work such as interviewing creditors, talking to former employees and tracking down leads on where to find Mr. Rivas’ assets, according to the documents.

The law firm of Patrick, Beard, Schulman and Jacoway has billed $124,000 for about 500 hours, according to court filings. Bankruptcy trustee Grey Steed has billed $87,000 for about 400 hours, and five separate investigators have billed about $17,000 for 261 hours of work, court papers show.

About $4 million in cash and other assets has been recovered so far. A U.S. bankruptcy judge must approve the fees, which will come out of whatever money is recouped.

One local investor, who cited legal reasons for not wanting his name published, said he thought the money being billed to get back the $250,000 he lost was the even “bigger scam.”

“Why should we have to pay the U.S. to get our money back?” the angry investor said by telephone Friday.

The investor’s frustration is indicative of many victims’s responses, Mr. Steed said. Some investors have wondered why Mr. Rivas isn’t simply being allowed to go on investing to “win” all their money back.

“Mr. Rivas fled the area. He had no intent of paying the money back,” Mr. Steed cautioned Friday.

Mr. Rivas ran the scheme from Chattanooga, according to the federal criminal indictment against him, in which he faces 19 counts of fraud. Three hundred of the 500 or so investors across the country who lost money to Mr. Rivas were from local surrounding areas.

Mr. Rivas had offices in four other locations in the Southeast, including Knoxville. In his various office locations, about 200 employees would lure investors with promises of monthly returns as high as 10 percent. But the FBI alleges Mr. Rivas did not actually invest a majority of the money he took in, instead using it to finance a lavish lifestyle.

The involuntary bankruptcy case against Mr. Rivas was filed in May amid worries that he was in the process of liquidating his assets and fleeing the country. He was caught in June in Topeka, Kan., and has been incarcerated ever since in South Carolina, where he is facing a second criminal indictment alleging fraud.

Mr. Steed said the work he and his colleagues have done get people’s money back is necessary. Mr. Rivas currently has no money and cannot even pay the $250,000 bond to get himself out of jail.

Even if Mr. Rivas is eventually convicted and forced to pay restitution, investors likely would never see any of their money again without the civil bankruptcy procedures designed to seize Mr. Rivas’ remaining assets, Mr. Steed said.

The deadline to file a claim is Nov. 19, and Mr. Steed said, “We’re hopeful of making a significant return to everyone.”

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