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Scientologist and accused Ponzi schemer learns government has 13 MILLION documents on him

[David Gentile and Judge Diane Gujarati]

We tried to listen in on a court hearing held in Brooklyn Tuesday, but there was a technical issue and the telephonic system failed to work properly. To make up for it, the court yesterday put a transcript of the hearing on line, and we really appreciate it.

That transcript shows that David Gentile, the Scientologist money manager we’ve been hearing about for a couple of years now, learned on Tuesday that the government has 13 million documents of evidence that he ran a $1.8 billion Ponzi scheme that will be turned over to his defense attorneys in the next few weeks.

13 million!

There were a few other notable moments in Tuesday’s hearing that we wanted to show you. Gentile and two of his associates, Jeffry Schneider and Jeffrey Lash, are each facing multiple counts related to what went on at GPB Capital, their private equity firm. They were charged on January 29, their indictment was unsealed on February 4, and they were arraigned on February 9. Now, US District Judge Diane Gujarati wanted to get a sense of the scope of the case so she could begin thinking about scheduling matters.

She asked Assistant US Attorney Lauren Elbert to give a basic description of the case, which we think really helps explain what this is all about. Here’s what Elbert said.

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JUDGE GUJARATI: I would like to turn to Ms. Elbert to provide a brief summary of the case, and then I will also ask you what the status of discovery is. But if you can tell me just briefly about this case.

MS. ELBERT: Certainly, Your Honor. This case involves a private equity fund called GPB Capital that offered a number of funds in which investors could invest money. And the three funds that are sort of central to the indictment are GPB Holdings I, GPB Holdings II, and GPB Automotive Portfolio. And those funds, all for various periods, were pitched to investors as offering opportunity to invest in privately-held private equity businesses, but received monthly liquidity in the form of a monthly distribution payment. And so the investors were led to believe that their invested capital would go on to support the growth of these businesses, but they would get back this monthly payment targeted to be equivalent to 8 percent of their invested capital per year, and the investors were told that these payments were made from cash flow spun off by the private businesses held by the funds. So the idea was that these businesses — to take Automotive Portfolio as an example, was invested in car dealerships, that these car dealerships were sufficiently profitable, that the profits would be paid back to investors sort of equivalent to a dividend in the targeted amount of 8 percent per month. But in reality, and starting in or around August 2015 and continuing through December 2018, the distribution payments for those three funds were in substantial part paid through investor capital rather than the cash flow of the portfolio companies, and this is because the portfolio companies underperforms the projections of the fund.

And then there’s an additional component of the scheme which alleges that the defendants inflated — artificially inflated the revenue of two of the funds for two audit years through the use of fraudulent performance guarantees. So essentially, they included, in their annual revenue for the fund, income that was not earned by the portfolio companies or that was received in connection with a legitimate performance guarantee, but was made to appear as though it was received that way so that the income numbers would be artificially high. And that’s a very brief summary of the allegations in the indictment.

In terms of discovery, Your Honor, immediately following the arrest of the defendants in this case, we provided a proposed protective order to the defense. Our initial discovery production, which we expect to make this week, includes search warrant returns that were the result of a search executed at GPB’s offices some time ago. And those returns include information, private, you know, personal identifying information for various investors and various other individuals. We are negotiating that protective order.

I believe that we will be able to submit it to the Court for entry within the next day or so. And within a day or two after that, we’ll be in a position to make our initial production, which will be over 300,000 documents largely deriving from this search warrant return. And then in about a week or two, we should be able to make a second substantial production, which is a production of documents that we received from the Securities and Exchange Commission which has a related case pursuant to an access request letter, and that will be about an additional 6 million documents. So we are geared up and ready to go with making very large productions within the next couple of weeks.

And later, trying to help the court judge how quickly to schedule the next hearing, Elbert revealed more…

MS. ELBERT: Based on what we have today that we’re ready to produce, I think we should be in a position to get everything turned around within, you know, to be conservative, six weeks. And there’s a possibility that we’ll get additional materials in as we go that we’ll produce on a rolling basis, but I think we have everything pretty well prepared to be produced over the next, I’d say, six weeks, roughly. But it is going to be substantial. I think in total what we have now, we’re looking at roughly 13 million documents to turn over. And so in view of that, I can’t anticipate what kind of technological hurdles we might run into that I don’t expect at this time. But it is going to be a substantial amount. So even if we get everything out in six weeks, it will give the defense, you know, much to review.

That is a lot of evidence to sift through. But Judge Gujarati set the next pretrial conference for April 29, and got the two sides to agree that when a trial is held it would last about five weeks.

Another interesting moment occurred when the judge asked defense attorneys if they planned to file motions that would tend to complicate the schedule. Gentile’s defense attorney, Matthew Menchel, then offered this intriguing glimpse of what he’s planning…

MR. MENCHEL: Your Honor, we are considering a potential motion that involves the fact that one of the employees in this case, a gentleman by the name of Mr. Cohn,
apparently without knowledge to the company, had been arrested and charged and had been reinserted into the company and, it’s our understanding, had sat in on a number of meetings that involved attorney-client communications. We don’t have a lot of details on that yet, but potentially there could be some kind of a motion around that depending upon what discovery shows us.

“While Michael Cohn was working as a compliance examiner in the Enforcement Division of the US Securities and Exchange Commission, he allegedly accessed classified information on SEC computers about an investigation into GPB Capital — at the same time that he was interviewing for a job with GPB Capital to become its chief compliance officer,” says Jeffrey Augustine, who has been covering the David Gentile story for us for a couple of years now. “Cohn shared the SEC information with GPB executives during the interview process. It got him the job, at $400,000 a year, a considerable increase over the $145,000 or so he was likely earning as a midrange GS15 government employee. And the move was good for GPB as well: It issued a press release and hyped Cohn’s SEC background, hoping to create the impression with investors that Cohn could get GPB Capital into full compliance with SEC rules.

“What Cohn didn’t realize is that when he accessed the GPB materials while at the SEC an internal red flag was triggered. Cohn was not authorized to access that information, and the SEC notified the FBI, who put him under surveillance. A year after he went to work for GPB Capital, Cohn was very publicly indicted and arrested in October 2019. But it looks like, from what he told the judge, that Gentile’s attorney suspects Cohn had been ‘reinserted’ into the company as part of the FBI investigation. He’s hinting here that Cohn wore a wire to gather evidence in order to get a lighter sentence. We don’t know if that’s what will come out in those millions of pages of evidence, but we do know that Cohn pleaded guilty in September to one misdemeanor charge of stealing government property,” Jeffrey says.

“The Scientology-like aspect to this particular matter is David Gentile’s attorney claiming that Cohn was arrested and then sent back into GPB Capital Holdings to gather incriminating data. L. Ron Hubbard was always having this same problem of SMERSH sending in undercover agents to destroy Scientology organizations. David Gentile should have been sec-checking his staff on the e-meter to find their hidden crimes, one supposes.”

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We look forward to the April 29 hearing, and hopefully this time the audio system will work.

 
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Luke Catton on Narconon shrinkage

Narconon whistleblower Luke Catton discusses our recent news about the Scientology rehab network shrinking to only five clinics in the US.

 

 
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Source Code

“I just had a phone call from California, by the way: A girl who was on the handbook — fifteen hours, really, on the handbook, running it through — went down to a secretarial course (never seen a typewriter before), sat down and read the chart, spent ten minutes reading the chart, sat down at the typewriter with blank keys and started writing at twenty-five words a minute. Here sits an atom bomb. That atom bomb is a complete threat to this whole society, culture, your body, your civilization.” — L. Ron Hubbard, February 18, 1952

 
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Avast, Ye Mateys

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“REGRET: I am sorry that Ethics has to be stepped up. But each day a few more omissions land on my desk. The FSO and FAO have not formed up and the FB and myself are having to carry the load.” — The Commodore, February 18, 1971

 
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Overheard in the FreeZone

“LRH cared a lot. He had four staff answering his letters in accordance with his instructions — I knew them and saw the confidential issues. I remember one thing particularly that showed his caring. A staff member was in love with a girl and went psychotic when she married another man. He started sticking his fingers into electric sockets until he collapsed. The Guardian’s Office had him offloaded and put into a psychiatric hospital in the USA. LRH heard about what they had done and ordered them to have him extricated from the hospital and brought back to the Apollo. When he arrived back LRH C/Sed his case daily ensuring that he was brought back to sanity. He was given a simple job for a while after he was sane again and then chose to leave the Sea Org.”

 
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Past is Prologue

1998: John Travolta’s claim to have influenced U.S. President Clinton’s opinion on Scientology and Germany was the subject of NBC’s ‘Meet The Press’ televisions show. “RUSSERT: What this says, Mr. Berger, is that John Travolta, was seduced by the president, and has created, a movie called ‘Primary Colors,’ which in the words of ‘George’ magazine, is a ‘celluloid valentine’ to the president, because you helped him out… on his pet cause of Scientology. SANDY BERGER: It sounds to me, Tim, like you’re getting, you’re getting, developing your own conspiracy theories here. The fact is there has been an issue about, the treatment of Scientology, in a number of countries, Germany in particular. The State Department Human Rights report was critical of the Germans in terms of discrimination against Scientologists. I did meet with a delegation including Mr. Travolta to indicate that we would continue, to discuss with the German government our belief that one should not be discriminated against on the basis purely of, of belief. And that’s, that’s the long and the short of it.”

 
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Random Howdy

“I was just ruminating that Manson probably got the idea for ‘creepy crawl’ from some Scientology experience.”

 

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Full Court Press: What we’re watching at the Underground Bunker

Criminal prosecutions:
Danny Masterson charged for raping three women: Masterson arraigned Jan 20. Next conf to set prelim, March 24.
Jay and Jeff Spina, Medicare fraud: Jay’s sentencing delayed to March 2.
Hanan and Rizza Islam and other family members, Medi-Cal fraud: Trial scheduled for May 20 in Los Angeles
David Gentile, GPB Capital, fraud: Charged in Brooklyn federal court on Feb 4. Arraigned on Feb 9. Pretrial conference set for Apr 29.

Civil litigation:
Luis and Rocio Garcia v. Scientology: Oral arguments were heard on July 30 at the Eleventh Circuit
Valerie Haney v. Scientology: Forced to ‘religious arbitration.’ Petition for writ of mandate denied Oct 22 by Cal 2nd Appellate District. Petition for review by state supreme court denied Dec 11.
Chrissie Bixler et al. v. Scientology and Danny Masterson: Dec 30, Judge Kleifield granted Scientology’s motions to compel arbitration. March 8: Status conference.
Matt and Kathy Feschbach tax debt: Eleventh Circuit ruled on Sept 9 that Feshbachs can’t discharge IRS debt in bankruptcy. Dec 17: Feshbachs sign court judgment obliging them to pay entire $3.674 million tax debt, plus interest from Nov 19.
Brian Statler Sr v. City of Inglewood: Second amended complaint filed, trial set for Nov 9, 2021.

Concluded litigation:
Author Steve Cannane defamation trial: Trial concluded, Cannane victorious, awarded court costs.
Dennis Nobbe, Medicare fraud, PPP loan fraud: Charged July 29. Bond revoked Sep 14. Nobbe dead, Sep 14.
Jane Doe v. Scientology (in Miami): Jane Doe dismissed the lawsuit on May 15 after the Clearwater Police dropped their criminal investigation of her allegations.

 
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SCIENTOLOGY BLACK OPS: Tom Cruise and dirty tricks

The Australian Seven News network cancelled a 10-part investigation of Scientology and its history of dirty tricks. Read the transcripts of the episodes and judge for yourself why Tom Cruise and Tommy Davis might not have wanted viewers to see this hard-hitting series by journalist Bryan Seymour.

SCIENTOLOGY: FAIR GAME

After the success of their double-Emmy-winning, three-season A&E series ‘Scientology and the Aftermath,’ Leah Remini and Mike Rinder continue the conversation on their podcast, ‘Scientology: Fair Game.’ We’ve created a landing page where you can hear all of the episodes so far.

LEAH REMINI: SCIENTOLOGY AND THE AFTERMATH

An episode-by-episode guide to Leah Remini’s three-season, double-Emmy winning series that changed everything for Scientology watching. Originally aired from 2016 to 2019 on the A&E network, and now on Netflix.

SCIENTOLOGY’S CELEBRITIES, from A to Z

Find your favorite Hubbardite celeb at this index page — or suggest someone to add to the list!

 
Other links: Scientology’s Ideal Orgs, from one end of the planet to the other. Scientology’s sneaky front groups, spreading the good news about L. Ron Hubbard while pretending to benefit society. Scientology Lit: Books reviewed or excerpted in a weekly series. How many have you read?

 
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THE WHOLE TRACK

[ONE year ago] In Scientology’s Sea Org, the terror originates inside your own head
[TWO years ago] Is Beck divorcing Scientology along with his wife? Here’s the evidence for and against.
[THREE years ago] Scientology opened an ‘Ideal Org’ in Salt Lake City yesterday. We have its secret plans.
[FOUR years ago] Augustine: Why is it so hard to find a Scientologist in good standing?
[FIVE years ago] David Miscavige wastes no time once the stay is lifted in Monique Rathbun’s lawsuit
[SIX years ago] TAMPA SHOWDOWN: Scientology’s religious exception faces mini-trial today
[SEVEN years ago] Going three feet back of your head: Scientology’s Original Operating Thetan Level Six!
[EIGHT years ago] Tom Cruise Under Oath: We Have His Deposition Questions!
[NINE years ago] Scientology Campout: Commenters of the Week!

 
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Scientology disconnection, a reminder

Bernie Headley (1952-2019) did not see his daughter Stephanie in his final 5,667 days.
Valerie Haney has not seen her mother Lynne in 2,216 days.
Katrina Reyes has not seen her mother Yelena in 2,720 days
Sylvia Wagner DeWall has not seen her brother Randy in 2,240 days.
Brian Sheen has not seen his grandson Leo in 1,260 days.
Geoff Levin has not seen his son Collin and daughter Savannah in 1,151 days.
Christie Collbran has not seen her mother Liz King in 4,458 days.
Clarissa Adams has not seen her parents Walter and Irmin Huber in 2,326 days.
Carol Nyburg has not seen her daughter Nancy in 3,100 days.
Jamie Sorrentini Lugli has not seen her father Irving in 3,904 days.
Quailynn McDaniel has not seen her brother Sean in 3,220 days.
Dylan Gill has not seen his father Russell in 11,786 days.
Melissa Paris has not seen her father Jean-Francois in 7,705 days.
Valeska Paris has not seen her brother Raphael in 3,873 days.
Mirriam Francis has not seen her brother Ben in 3,454 days.
Claudio and Renata Lugli have not seen their son Flavio in 3,715 days.
Sara Goldberg has not seen her daughter Ashley in 2,753 days.
Lori Hodgson has not seen her son Jeremy and daughter Jessica in 2,466 days.
Marie Bilheimer has not seen her mother June in 1,991 days.
Julian Wain has not seen his brother Joseph or mother Susan in 346 days.
Charley Updegrove has not seen his son Toby in 1,521 days.
Joe Reaiche has not seen his daughter Alanna Masterson in 6,072 days
Derek Bloch has not seen his father Darren in 3,221 days.
Cindy Plahuta has not seen her daughter Kara in 3,541 days.
Roger Weller has not seen his daughter Alyssa in 8,396 days.
Claire Headley has not seen her mother Gen in 3,515 days.
Ramana Dienes-Browning has not seen her mother Jancis in 1,871 days.
Mike Rinder has not seen his son Benjamin and daughter Taryn in 6,174 days.
Brian Sheen has not seen his daughter Spring in 2,280 days.
Skip Young has not seen his daughters Megan and Alexis in 2,682 days.
Mary Kahn has not seen her son Sammy in 2,554 days.
Lois Reisdorf has not seen her son Craig in 2,137 days.
Phil and Willie Jones have not seen their son Mike and daughter Emily in 2,632 days.
Mary Jane Barry has not seen her daughter Samantha in 2,886 days.
Kate Bornstein has not seen her daughter Jessica in 13,995 days.

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Posted by Tony Ortega on February 18, 2021 at 07:00

E-mail tips to tonyo94 AT gmail DOT com or follow us on Twitter. We also post updates at our Facebook author page. After every new story we send out an alert to our e-mail list and our FB page.

Our new book with Paulette Cooper, Battlefield Scientology: Exposing L. Ron Hubbard’s dangerous ‘religion’ is now on sale at Amazon in paperback and Kindle formats. Our book about Paulette, The Unbreakable Miss Lovely: How the Church of Scientology tried to destroy Paulette Cooper, is on sale at Amazon in paperback, Kindle, and audiobook versions. We’ve posted photographs of Paulette and scenes from her life at a separate location. Reader Sookie put together a complete index. More information can also be found at the book’s dedicated page.

The Best of the Underground Bunker, 1995-2020 Just starting out here? We’ve picked out the most important stories we’ve covered here at the Underground Bunker (2012-2020), The Village Voice (2008-2012), New Times Los Angeles (1999-2002) and the Phoenix New Times (1995-1999)

Other links: BLOGGING DIANETICS: Reading Scientology’s founding text cover to cover | UP THE BRIDGE: Claire Headley and Bruce Hines train us as Scientologists | GETTING OUR ETHICS IN: Jefferson Hawkins explains Scientology’s system of justice | SCIENTOLOGY MYTHBUSTING: Historian Jon Atack discusses key Scientology concepts | Shelly Miscavige, 15 years gone | The Lisa McPherson story told in real time | The Cathriona White stories | The Leah Remini ‘Knowledge Reports’ | Hear audio of a Scientology excommunication | Scientology’s little day care of horrors | Whatever happened to Steve Fishman? | Felony charges for Scientology’s drug rehab scam | Why Scientology digs bomb-proof vaults in the desert | PZ Myers reads L. Ron Hubbard’s “A History of Man” | Scientology’s Master Spies | The mystery of the richest Scientologist and his wayward sons | Scientology’s shocking mistreatment of the mentally ill | The Underground Bunker’s Official Theme Song | The Underground Bunker FAQ

Watch our short videos that explain Scientology’s controversies in three minutes or less…

Check your whale level at our dedicated page for status updates, or join us at the Underground Bunker’s Facebook discussion group for more frivolity.

Our non-Scientology stories: Robert Burnham Jr., the man who inscribed the universe | Notorious alt-right inspiration Kevin MacDonald and his theories about Jewish DNA | The selling of the “Phoenix Lights” | Astronomer Harlow Shapley‘s FBI file | Sex, spies, and local TV news | Battling Babe-Hounds: Ross Jeffries v. R. Don Steele

 

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