WILMINGTON, Del., Jan 19 (Reuters) - A turnaround specialist has resigned as chief restructuring officer of the Woodbridge Group of Companies, a property development firm the U.S. Securities and Exchange Commission has charged is a $1.2 billion Ponzi fraud, a company attorney said on Friday.
Lawrence Perkins of SierraConstellation Partners LLC was hired by Woodbridge in October, replacing the company’s founder, after the SEC began investigating Woodbridge’s fund raising.
Woodbridge filed for bankruptcy in December and was subsequently sued by the SEC to freeze its assets, accusing it of selling unregistered securities to raise funds to repay earlier investors.
The regulator accused the company of defrauding 8,400 investors, many of whom invested their retirement savings in the company’s unregistered securities that were meant to raise funds for luxury real estate and to extend loans to commercial property developers.
The SEC alleges the commercial property developers were actually entities controlled by Woodbridge’s founder, Robert Shapiro.
Perkins’ resignation will be effective once a replacement is hired, Sean Beach, an attorney for Young Conaway Stargatt & Taylor, which represents Woodbridge, said after a hearing in Wilmington.
Beach declined to comment on the timing of a replacement.
Perkins declined to comment in an email to Reuters.
Beach spoke at the conclusion of three days of testimony over a request by the SEC and the official committee of unsecured creditors for an independent, court-approved trustee to replace Woodbridge’s management.
Perkins had testified last week that he was investigating the fraud allegations.
Attorneys for the SEC and the creditors’ committee had pressed Perkins about agreements he struck potentially worth millions of dollars for Shapiro.
The SEC has said Shapiro misappropriated at least $21 million in company funds for luxury goods. He was also accused of improperly comingling investor funds and using $328 million to repay earlier investors, spending more than $100 million on commissions and payroll and $172 million on operating expenses.
Shapiro has denied the fraud allegations.
Perkins testified last week that, as part of the agreements, Shapiro contributed properties to the company’s bankruptcy estate and promised to cooperate with unfinished real estate developments.
Woodbridge and several groups of purported victims of the alleged fraud argued against appointing a trustee, which they said would delay resolution of the case and drive up costs by bringing in another team of professionals.
The court scheduled closing arguments over the request for an independent trustee for Tuesday. (Reporting by Tom Hals in Wilmington, Delaware; Editing by Paul Simao)