Bleidt case may spur a host of suits
The court-appointed receiver trying to recover money for victims of confessed investment swindler Bradford C. Bleidt may unleash a barrage of lawsuits against deep-pocketed organizations including Sovereign Bank and Bank of America in an effort to recover more of the $25 million he stole from clients.
The lawsuits may also target brokerages that had relationships with Bleidt, employees of Bleidt's former businesses, and those who received funds from phony investment accounts, according to a court report filed by David A. Vicinanzo, an attorney with Nixon Peabody LLP.
"The Receiver believes that the prosecution of litigation against third parties . . . and their respective insurance carriers may result in substantial recoveries to fund distributions to defrauded investors and other creditors," wrote Vicinanzo in the 20-page report.
Kevin M. Fitzgerald, an attorney with Nixon Peabody who represents the receivership, said firms that were affiliated with Bleidt's money management businesses may be partially responsible for the scam. "There are some potential claims arising from how Mr. Bleidt's activities were carried out, how they were supervised, and whether they complied with industry standards," he said.
The receiver is also pursuing possible claims against the banks where Bleidt maintained funds, said Fitzgerald, since the activity in the accounts -- money coming in from investment clients, and money going out to fund the radio station and personal expenses -- might have raised warnings. "We're looking at issues of general standards of care and negligence and regulatory issues," he said.
The receiver is in discussion with many of these organizations that might be sued, Fitzgerald said, and seeks to settle without filing suits. If necessary, it might be possible to group Bleidt's clients together in a single case like a court-sanctioned class action.
At a hearing last week, Bleidt said he was represented by attorney Gregory Oberhauser of Lowell. Calls to Oberhauser's office were not returned. Officials from Bank of America could not be reached for comment. A Sovereign Bank spokeswoman declined to comment.
At issue is whether Vicinanzo, appointed by a judge to take over Bleidt's businesses and raise money to provide restitution to victims, can generate substantial cash from the mess Bleidt left behind when he sought to take his own life in November. Bleidt stole more than $25 million from about 140 investors, according to Vicinanzo's latest analysis. There was only $196,828 left in cash from Bleidt and his businesses in November 2004. The rest of the money went to purchase WBIX-AM, a Boston radio station; cover losses at Bleidt's money-management businesses, and support an affluent lifestyle, according to the report.
The biggest asset remains WBIX. Bleidt bought the station for $10 million from owner Alexander Langer. However, he paid only $3.05 million in cash, giving Langer a promissory note for the rest. According to Langer, Bleidt did not make the required payments on the note.
Langer agreed in December to manage the station, keeping it on the air without tapping into any of the receiver's cash, according to the report. Keeping the station running is crucial to maintaining its value to a prospective buyer.
Fitzgerald said the station could fetch close to the previous sale price of $10 million, but a lot depends on the terms offered by a prospective buyer, since the receiver wants to return money to investors as quickly as possible.
Langer, who is first in line to receive money from the sale of the station, has agreed to share some of the money from the sale with defrauded investors, said Fitzgerald.
"I commend him," said Fitzgerald. "He's somebody whose work you can rely on. He's been a straight shooter with us."
According to the report, the receiver has started marketing the station.
In early November, Bleidt threw a lavish party to celebrate WBIX's move to 24-hour-a-day broadcasting and its upcoming sale to entrepreneur Christopher Egan. But the next day, he sent tapes to his wife, mother, business associates, and regulators confessing to having stolen "millions" of dollars from clients over many years. He then attempted suicide, but wound up with a broken neck in a locked ward at Massachusetts General Hospital.
The Securities and Exchange Commission, which had received one of the taped confessions, sought an emergency court order freezing Bleidt's assets, and filed civil charges against Bleidt. Separately, the US attorney filed criminal charges against Bleidt, alleging he committed mail fraud in his investment scam.
The receiver's report also said that Boston Globe columnist Steve Bailey, who cohosted a morning show on the radio station, filed a claim against Bleidt, one of his businesses, Asset Plus Asset Management, and an affiliated brokerage. Bailey filed his claim with the National Association of Securities Dealers, an industry group and self-regulatory body. The nature of Bailey's claims was not clear from the receiver's report.
In a Feb. 2 letter, Bailey told NASD he wouldn't pursue claims against Bleidt or Asset Plus Asset Management. Bailey declined to comment on the matter.
Jeffrey Krasner can be reached at email@example.com.