Norfolk, VA – A federal judge in Manhattan ruled Thursday that a Norfolk businessman arrested last month on fraud charges and detained by the government can be released on a $10 million bond.
Ten relatives and friends of the defendant, Joseph Shereshevsky, agreed to sign the bond, Martin J. Siegel, a New York attorney who is representing Shereshevsky, said after the bail hearing. Each of the 10 will have to be interviewed by the U.S. attorney’s office in Manhattan to determine that they are financially responsible, Siegel said. Only five of the 10 can be family members, he said.
The U.S. attorney for the Southern District of New York and the Securities and Exchange Commission contend in separate complaints that Shereshevsky and others defrauded almost 1,200 investors in WexTrust Capital by diverting $100 million to unauthorized purposes. Shereshevsky is part owner of the Chicago-based investment company and until recently had been its chief operating officer.
The U.S. attorney and the SEC also named WexTrust’s majority owner and chairman, Steven Byers of Oak Brook, Ill., as a defendant in their suits. Byers, who was arrested in the Chicago area, was released last month after posting a $4 million bond.
Shortly after Shereshevsky was apprehended in Norfolk, a federal magistrate in Norfolk ordered that he remain in custody. Because of his frequent overseas travel and his foreign contacts, Shereshevsky presented a risk of fleeing the country to avoid prosecution, Magistrate Tommy Miller said in his order.
Shereshevsky, who has been held at a federal detention facility in Brooklyn, appealed Miller’s order, which is why the bail hearing was conducted Thursday, Siegel said.
Earlier this week, Shereshevsky’s attorneys asked that he be released on a $5 million bond. As part of their proposed bond, Shereshevsky’s father-in-law, Alan Verschleisser, agreed to put up two properties that he owns in Baltimore, including his primary home, as security. Shereshevsky’s gardener, Lisa Handke, also agreed to put up her Norfolk home as security, according to the court filing.
Shereshevsky’s family is in the process of working out certain details for his release with his attorneys and the U.S. attorney’s office, Siegel said. The conditions for his release require that Shereshevsky be confined to his home and be subject to electronic monitoring. He is allowed to leave home under certain conditions but must be accompanied by a security guard, Siegel said.
About 30 people attended the bail hearing, which lasted about an hour and 15 minutes, the attorney said.
Also on Thursday, the court-appointed receiver for WexTrust and its affiliates said he plans to hold “town hall” meetings with investors in Norfolk and Chicago next week or shortly afterward.
Timothy Coleman, the receiver, said he has checked on the condition of several WexTrust real estate holdings in the United States and its diamond-mining operations in southern Africa. These assets have “substantial value,” but WexTrust, he said, has almost no cash on hand to adequately protect its properties.
“There is barely enough cash to keep the lights on,” so investors shouldn’t expect any dividend payments in 2008, Coleman said during a meeting of WexTrust investors in Manhattan.
“I cannot tell you how much will be distributed or how long the case will last,” he told the gathering of 30 or so people and 88 others who listened in by phone.
Coleman said he believed he had located WexTrust’s assets in the United States but said he still was trying to determine the locations of certain assets in southern Africa. To do that, he replaced Shereshevsky and Byers by appointing two new directors to the board of WexTrust affiliate Pure Africa Minerals Ltd. in South Africa. Coleman plans to hold an emergency meeting of the affiliate’s board next week to preserve Pure Africa Minerals’ assets, he said.
Coleman, who was appointed by the U.S. District Court in Manhattan to track down and protect WexTrust assets, reminded investors that he cannot dispose of any assets without the court’s approval. It might be appropriate to sell some of WexTrust’s real estate holdings quickly, but he has no plans to recommend the disposition of properties at “fire-sale” prices, Coleman said.