A federal judge this week approved the formation of a victim representation team in the TelexFREE case, heralding a “major step forward” for the hundreds of thousands allegedly defrauded by the company, according to one of the attorneys appointed to the posts.
Judge Timothy S. Hillman, who is overseeing the class action suits that have been filed against TelexFREE, on Tuesday allowed the plaintiffs’ request to appoint an interim lead class counsel and interim executive committee to organize their efforts.
“For the first time, there will be an appointed, specific representative for the victims” of TelexFREE, said lawyer William Baldiga, one of the attorneys tapped for the executive committee. “This is a major step forward.”
Until now, Baldiga added, the alleged victims, estimated by the government to number around 785,000, had no mechanism through which they could have their voices heard in the multiple legal cases involving TelexFREE. The company, which had its U.S. headquarters in Marlborough, along with its operators are facing charges they ran an international pyramid scheme that raised hundreds of millions of dollars over the past two years.
Joining Baldiga on the executive committee will be attorneys Ronald Dardeno, D. Michael Noonan, R. Alexander Saveri, and William L Coulthard, according to records filed in U.S. District Court in Worcester. The group has not met, Baldiga said, “but we’ve been talking a lot about next steps already.” The committee will likely officially meet for the first time sometime next week, Baldiga said.
The lead class counsel in the case will be the law firm of Bonsignore, which will work closely with the executive committee.
Among their first tasks will be to shepherd a consolidated class action combining all the lawsuits that have been filed since TelexFREE collapsed last spring. The majority of the existing suits were entered by residents of Massachusetts, which has been the locus of most of the court activity surrounding the company. There are dozens of defendants listed in the combined cases, including TelexFREE, its alleged executives and top promoters, several banks, and other associated companies.
According to Hillman’s order, the lead class counsel and executive committee will be responsible for coordinating and representing the plaintiffs in those cases. Because they are class action suits, the appointed attorneys will also be an important go-between for the thousands of other alleged victims, many of whom lost thousands to tens of thousands of dollars when TelexFREE reportedly closed their accounts in March.
Opening a line of communication with those people, a lot of whom authorities say were immigrants targeted by TelexFREE, will be a challenge.
“We’re going to be working with the bankruptcy trustee to coordinate that,” Baldiga said, referring to Stephen B. Darr, who has been tasked by the government with overseeing TelexFREE’s Chapter 11 bankruptcy.
Baldiga added that the executive committee also looks forward to cooperating with the federal government, which is going after TelexFREE on two separate fronts: the Securities and Exchange Commission is pursuing a civil complaint against the company, while the U.S. Justice Department has lodged criminal charges against its co-owners, James Merrill of Ashland and Carlos Wanzeler, formerly of Northborough.
In related news, a status report last week in the criminal case against Merrill and Wanzeler painted a picture of a determined international investigation into the company.
The joint report, filed by U.S. Attorney Carmen Ortiz’s office and Merrill’s lawyer, Robert Goldstein, in U.S. District Court in Worcester, revealed Brazilian authorities “have been aggressively investigating TelexFREE’s operations in that country,” executing nine search warrants to date.
“By the end of January 2015 the government should have a better idea of what this production will entail,” said the report, which also updated the court on the voluminous data collection U.S. investigators are conducting in the case.
Before its downfall this past year in the U.S., where the company is facing accusations of running a worldwide pyramid scheme, TelexFREE’s first cracks appeared in Brazil last July, when a court in the state of Acre ordered its shutdown.
But the South American country is also where Wanzeler allegedly fled to this past spring to avoid arrest in the U.S. He and Merrill, who is under home confinement, are charged with wire fraud and conspiracy to commit wire fraud.
Scott O’Connell can be reached at 508-626-4449 or [email protected] Follow him on Twitter: @ScottOConnellMW