Want to save money? Keep that car on the road

When my husband and I went car shopping recently, the salesman joked that our 1994 Camry was getting so old we'd soon be sending it off to college. In fact, it had already been to college and come back. When our daughter graduated, I gave her my newer Corolla, took back the Camry and drove it for two more years. It had 165,450 miles on it when we passed it on to our son this month. Consumer Reports says its useful life isn't anywhere near over. The magazine, in a feature in its October issue, says if you've got a reliable car and take care of it, it should last 200,000 miles or more, saving you many thousands of dollars compared to buying a new car every five years.

What kind of car should you get? Consumer Reports says these are the best bets, based on at least three years of model reliability data: Honda Civic, CR-V or Element; Lexus ES or LS; Toyota 4Runner,  Highlander, Land Cruiser, Prius or RAV4. These vehicles are rated as bad bets: BMW 7-Series; Infinit QX56; Jaguar S-Type or X-Type; Mercedes-Benz M-Class (V8) or SL; Nissan Armada or Titan; Volkswagen Touareg or Volvo XC90 (6-cyl).

The magazine's survey of readers found 6,769 who had vehicles with 200,000 or more miles on their odometers, including a 1994 Ford Ranger pickup driven 488,000 miles.

Have you driven a vehicle more than 200,000 miles? Tell about it in a comment to this post.

(Photo credit: Getty Images)   

New York case update

A few people have who asked about what's going on in the New York lawsuit against the State of Florida, Gov. Charlie Crist, various banks and numerous others related to the Lou Pearlman-Trans Continental investment scheme. So far as I can determine, nothing of significance will be happening until Oct. 3, when there will be oral arguments on the state's motion to dismiss the case. You can view this motion and the lawsuit itself in my previous update. Here are a few documents filed since that update:

State of Florida defendants' filing asking to delay discovery until after some of the issues in the motion to dismiss have been resolved.

Wachovia Bank filings: One, Two,  Three. The bank says that it (and apparently other defendants) never have been properly served in the case. It said either they should be served or the case against them should be dimissed. It wants the judge to order the plaintiffs to provide "a very specific statement of what it was exactly that the plaintiffs believe each bank did to which of the plaintiffs." It said the plaintiff's lawyer promised to do that back in July, but instead of doing it, has "harassed all defendants and the court with a constant barrage, on an almost daily basis, of baseless, inappropriate, arcane, fantastic, procedurally deficient, often unsworn, sometimes incomprehensible, and ultimately completely unproductive, motions and correspondence." The second document is a transcript of a July 11 hearing in the case.

Judge approves Fischetti examination

The bankruptcy judge gave the OK to creditors who want to quiz Robert Fischetti and require him to turn over documents. The examination is supposed to take place Sept. 18.

Another real estate sale for Pearlman bankruptcy

Soneet Kapila has a deal to sell a condo Lou Pearlman owned in Atlantic City, N.J. for $335,000. The condo had been listed for $425,000. SunTrust has a first mortgage of $188,648, which will have to be satisfied, but from there things get a little sticky. WDL Airship has a second mortgage of a whopping $588,888 on the property based on a note that was supposed to be paid off in 1997. Apparently it still has to be determined whether WDL has a right to any proceeds on this property. Kapila proposes dividing whatever is left after paying the mortgages and sale expenses between the bankruptcy estate and Orlando lawyers Cheney Mason and William Pringle, who got a judgment against Pearlman for unpaid legal fees.

Here is Soneet Kapila's latest letter to creditors

Soneet Kapila has a deal to sell Lou Pearlman's Windermere mansion

Soneet Kapila filed this motion in the bankruptcy court today, asking for approval to sell Lou Pearlman's Windermere home to John Choi for $7.1-million. The property has been listed since June 1 for $8.5-million by Sotheby's International Realty. Choi has put down $175,000 in escrow for the property, which would be sold as is, free of liens and encumbrances. Choi, 41, is an Orlando plastic surgeon who already lives in the neighborhood. Dr. Choi said he plans to live in the house.

The sale won't be a windfall for the bankruptcy estate. Bank of America has first dibs on the property to satisfy a first mortgage on which it was owed $5.3-million several months ago, plus assorted fees. It also has been paying the expenses to maintain the property, for which it will now be reimbursed. What's left after paying off Bank of America will be set aside for the court to decide how to allocate it. First International Bank and Trust has a second mortgage, on which it was owed $8.4-million several months ago. However, the mortgage is only secured by the vacant land next door to Lou's house. Cheney Mason and William Pringle also may have an interest in the property based on their court judgment. 

Kapila calls the sale "a necessary step toward a reorganization plan" and says it will benefit the estate by reducing the outstanding debt. 

St. Petersburg Times story

(Photo credit: Phelan Ebenhack special to the St. Petersburg Times)

Saturday's auction grossed $280,000

Soneet Kapila reports that the auction of Lou Pearlman's personal effects grossed $280,000 before expenses. While that's just a drop in the bucket compared to $314-million, it has to be considered a good result. The previous auction of Trans Continental items brought $220,000 after expenses. The money will help finance the hunt for Lou's assets.

The most expensive item sold was the Cadillac Escalade golf cart, which went for $10,340, including the buyer's premium. Some other interesting sales: Anakin Skywalker statue, $1,100; Baldwin baby grand piano, $3,850; Bushmaster AR 15 gun, $1,430. Every single item sold. As has been mentioned in comments here, the AV equipment brought unexpectedly good prices and even Lou's clothes sold well considering their limited resale potential.

Kapila says there were 300 registered bidders, with 178 bidders online from around the world. About 400 people attended.  The auction went on for more than nine hours.

Here are some great photos from the Radaronline site. Lou was well armed.

Money question of the week: How have you been affected by problems in the mortgage market?

Have you found it more difficult to get a mortgage? Are you caught in an adjustable rate loan you can't refinance? Been unable to sell a house because your would-be buyer can't get a mortgage? Seen your high-yield bond fund take a hit?

A sampling of responses to this question will be published in the Sunday Money section. Comments must include your first and last names and city. If you don't want to answer here, you can email your comment to me.

(Photo credit: Getty Images)

Currency trading for dummies?

Books about money and investing come across my desk every day. Yesterday it was The Naked Truth About Your Money and the newest Dummies book, Currency Trading for Dummies. Although the first one has no naked pictures whatsoever, it does use bright colors and consumer-friendly language to try to appeal to the young and clueless. I found the mere existence of the Dummies book pretty shocking. One interpretation of the title might be that any casual investor who takes up currency trading is a dummy. I can just picture some guy reading the book, thinking he knows how it all works and being quickly separated from his money. However, I can assure you that no actual dummy could possibly understand this book. Other topics in the same vein include Futures & Options for Dummies and Hedge Funds for Dummies. Then again maybe those hedge fund gurus at Bear Stearns would have done better had they read the Dummies book first.

(Photo credit: Dummies.com)

Auction day report

I won't be at the auction today, but I'll be very curious about how it went. If you go or if you bid online, please share your experiences in the comments.

Does Social Security cheat working women?

Specifically, married working women. I'm one of them so this question is of personal interest to me. Since one-earner couples were the norm when Social Security was created, it's not surprising that the system was set up for their benefit. Compared to two-earner couples with the same combined level of earnings, the one-earner couples receive more benefits.

How can that be? Here's an example: Joe earns $34,200 a year and his wife Susie stays home. At retirement, their Social Security benefit is $1,350 for Joe and $650 for Susie, or $20,025 total. When one of them dies, the survivor gets $1,350 (100% of the higher benefit.) Compare that to Bob and Barbara, who each earn $17,100, or $34,200 combined. At retirement, they each get a benefit of $875, or $1,750 total ($275 less than Joe and Susie) and when one dies, the survivor's benefit is just $875 ($475 less than Joe or Susie). Both couples paid the same amount in Social Security taxes. This example comes from an issue brief on Women and Social Security, published by the American Academy of Actuaries.

How could this inequity be fixed? One idea proposed in the past would be to cut the 50% spousal benefit for one-earner couples to 33% and increase the survivor benefit for two-earner couples to 75% of the total benefit paid when both were alive. Another idea would be to eliminate the spousal benefit entirely and instead add a couple's earnings together each year and split them evenly between them for the purpose of calculating benefits. I like that second idea myself.

What do you think?

(Photo credit: Getty Images) 

   

Frustrated banks going after Robert Fischetti

A group of six small banks--Bank Forward, McVille State Bank, Dakota Western Bank, Bank of Hazelton, Wadena State Bank and Bank of Bozeman--is asking the judge to compel Robert Fischetti to answer questions about where their money went and to produce these documents. Here is the order they have in mind. The banks say Lou Pearlman and Trans Continental Airlines owe them millions and that Fischetti held himself out as a TCA officer. They note that Fischetti has refused to talk to Soneet Kapila, claiming his fifth amendment right against self incrimination.

Don't like your electric bill? Maybe you'd like the stock better

Investment analyst Richard Band gives Progress Energy stock the thumbs up in the August issue of his Profitable Investing newsletter. He notes the recent upgrade in the company's credit ratings by bond-rating service Fitch, which cited strong cash flow, sound operations and 'historically favorable state regulatory environments." He also said the Progress Energy dividend is one of the industry's safest and called the stock a buy at $48 or less. He also recommends Inegrys Energy, parent of Wisconsin Public Service at $53 or less, and NICOR, a Chicago area gas utility, at $44 or less.

I am not personally recommending any stocks, but thought you might be interested to know what he has to say about a local utility.

(Photo credit: Progress Energy)

Scamster caught in Greece after 19 months on the lam

A fugitive hedge fund manager has been arrested in Greece following an international manhunt. Angelo Haligiannis, former president of Sterling Watters Capital Advisors, disappeared while out on bail and failed to show for his sentencing on securities fraud charges in January 2006. He had been ordered to pay $15.6-million in restitution and a $15-million penalty.

It really is rather remarkable that Lou Pearlman was found as soon as he was.

Housing slump has a long way to run

Don't hold your breath waiting for the real estate market to rev up. Wachovia economist Mark Vitner says Florida's housing market may be approaching a bottom, but it won't improve appreciably until 2009 or later. One in every 431 households in Florida is in some stage of foreclosure, according to RealtyTrac. The good news: That's not as bad as it was in June. Nevada's situation is the worst in the country.

(Photo credit: Getty Images)

New trial date March 3

The judge formally approved Lou Pearlman's request for an extension of the trial date. A brief "status conference," a discussion involving the judge and attorneys, was held this morning. Lou did not attend. The next conference is set for Nov. 15. No word on any superseding indictment.

Sean van der Wilt released from contracts

Bankruptcy Judge Arthur Briskman has released Sean van der Wilt from his management, recording and publishing contracts with various Trans Continental entities. However, all intellectual property (such as copyrights and licenses for songs and recordings) remain part of the bankruptcy estate. Presumably another record company could buy them, although Sean's lawyer says that's unlikely. He said Sean is free to re-record the same songs with another record company. Trans Continental would get royalties if he sells records that include songs he wrote while under contract to them. The companies and van der Wilt basically gave up any claims against each other, so they can't recoup any of the investment made in his career and he can't sue them for nonperformance. Here's the judge's ruling. "He's certainly relieved to be free from this," said Jason Turner, Sean's lawyer. Turner said the trustee wasn't even sure if Trans Continental still had Sean's recordings. Turner said the only way those recordings, if found, would be valuable, is if Sean became a famous recording star. So wish him luck!

(Photo credit: Sean van der Wilt)

Here's a report on the money

For those wondering about the finances of this bankruptcy, here are a few of the financial reports Soneet Kapila filed today in the bankruptcy cases: Louis Pearlman, Trans Continental Airlines, Louis J. Pearlman Enterprises LLC. As you can see, there's not a lot of money there. I think that the $220,700 income shown on the TCA report represents proceeds from the auction. Also, I think that the $250,000 that was frozen while in transit to Germany remains frozen by the bank and is not shown on the financials. You will note that Kapila and the lawyers and accountants he has hired have not submitted any bills for their professional services so far.   

Update: Here's how Soneet Kapila responded to my inquiry about professional fees:

1. professionals would be paid in accordance with the bankruptcy rules. They will have to file fee applications which would need court approval. At present all professionals are putting in effort but no payments have been requested.

Money question of the week: Are there investments public pension funds just shouldn't make?

We don't want to support terrorism, but could we be hurting our pension plans by saddling them with restrictions on investing? The state of Florida recently prohibited the Florida State Board of Administration from investing in companies that do business with Iran and Sudan, as my column today discusses. Gov. Charlie Crist thinks this is a great idea. But Alicia Munnell, director of the Center for Retirement Research at Boston College, has major concerns. So does Governing.com columnist Girard Miller in this column. And Pensions & Investments columnist Edwin Burton chimes in.

What do you think? Please include your first and last names and your city with your comment.

(Photo credit: Getty Images)

How much should the creditors' committee keep secret?

The creditors' comittee in the Lou Pearlman/Trans Continental bankruptcy has asked the bankruptcy judge to declare that it does not have to share confidential or privileged information with other creditors. The committee's filing says releasing this information "likely would cause serious harm" to the bankruptcy estate and (horrors!) discourage Soneet Kapila from sharing his secrets with them. The bankruptcy law requires the committee to "provide access to information" to creditors. They want the judge to say they don't have to provide access to nonpublic information about the debtor's financial condition or performance, business operations, the value of his assets, the sale of his assets, any causes of action related to the estate and, of course, anything protected by attorney-client privilege. In other words, if you aren't on the committee, you're not likely to find out anything that you don't already know from reading this blog!

 

Julian Benscher has a deal to take over Lou Pearlman life insurance policies

Julian Benscher, who once ran an airship business with assets he bought from Lou Pearlman and who sold Pearlman his Windermere home, has worked out a deal with trustee Soneet Kapila to buy three of Pearlman's insurance policies. The largest is a $3-million term life insurance policy that expires in 2013. The two others are $1-million (each) whole life policies. Benscher will pay the premiums, which add up to $14,185 a year. In addition, he will reimburse the trustee for premiums paid by Trans Continental after the two whole life policies were set up last year. If Pearlman dies before the term policy expires, the bankruptcy estate will get 30% of the net proceeds. On the other two policies, the bankruptcy estate will get 15%.

Benscher said he knew Pearlman had multiple life insurance policies as "key man" for various companies and security for loans. After investigating, he found most of them had lapsed, but he was able to prevent lapsing on three of them by bringing the premiums up to date. "I'm not an actuary, but I've seen fitter people than Lou," he said. " I knew there was no way the trustee would be willing to make those premium payments. I would be willing to do so and they could get some benefit." Benscher was originally the beneficiary on one of the policies as security for money Pearlman owed him, but Pearlman removed his name without telling him. The deal is subject to court approval.

Kapila also asked the court to once again extend the deadline for objecting to a discharge of debts. This extension would be for six months.

 

UPDATE:

Kapila's request for an extension has been approved.

The Orlando Sentinel reported on the insurance policies 8/21/07.

Here's a little music to go with your stock market meltdown

If you're looking for a little levity during this gloomy time in the markets, you might enjoy this Youtube clip by country singer "Merle Hazard." He sings "My H-E-D-G-E-F-U-N-D went bankrupt today" in a takeoff on Tammy Wynette's D-I-V-O-R-C-E." Singer "Merle" indicates he is affiliated with Shayne & Co. in Nashville.

Lou Pearlman asks for 6-month continuance of bank fraud trial

We all knew there wasn't going to be a trial Sept. 4. Lou Pearlman filed a motion this morning, unopposed by federal prosecutors, for a continuance of the trial "for a minimum of 180 days, which would put it in March at the earliest. As part of the process, he waived his right to a speedy trial. Lou's public defender Fletcher Peacock says the government served him with a request July 22 for thousands of documents and emails related to the case. He estimates it will take several months to organize and review the materials.

Bankruptcy judge approves motion to compel Rene Chamberlain to testify

Judge Arthur Briskman granted Soneet Kapila's motion to compel former Trans Continental attorney Rene Chamberlain to turn over documents related to Trans Continental and appear for deposition. However, he did not award attorney's fees as Kapila requested for Chamberlain's failure to show at the previously-scheduled deposition. The report from yesterday's hearing makes no mention of what sanctions might be imposed for Chamberlain. The judge has reserved the right to decide that at a later date.

Sure 9.15% sounds like a good deal, but maybe you'd like to check a little further

Home builder Levitt Corp. has an ad in today's Times for investment notes with yields that start at 6.25% for 12 months and go up to 9.15% for 48 months. Of course there's more to the story than the "no fees or commissions" that are part of the ad. These notes are IOUs from a company that is having a tough time coping with the slump in the housing market. BFC Financial Corp. of Fort Lauderdale today called off its plans to acquire Levitt, which last week reported a $58-million quarterly loss. That sent the stock tumbling. Sure, the notes might turn out to be a good deal; just don't forget about the risk that's part of the equation.

Auction photos now online

Ewald Enterprises has now put the auction items up on Proxibid with photos so you can see more of what Lou bought/made/had given to him. The artwork at left is attributed to Lou. Is it his mother? Golda Meir? As in the previous auction, there's a wide variety of stuff, from the baby Grand piano to life-size Star Wars figures, to boxes and suitcase full of Lou's clothing, to boy band memorabilia, to furniture and household items. If your name starts with P, you might be able to score a bargain on monogrammed door mats. You can bid in person or online Aug. 25. See Aug. 8 blog entry for details. The last auction raised around $200,000 after expenses.

Although most of the items are from Lou's home, that's not where the bankruptcy trustee Soneet Kapila found them. Lou kept some in a 5,000-square-foot warehouse and most of the rest were being held by unnamed others in a storage unit and two PODs.

In other news, the bankruptcy judge approved Soneet Kapila's request to hire a Dutch lawyer and law firm to assist in investigations in the Netherlands.

(Photo credit: Ewald Enterprises)

Be careful around people who think they're smarter than everyone else

The recent meltdown in the mortgage-backed securities market has me wondering why it took people so long to figure things out. When mortgage brokers were pushing adjustable rate loans on people with bad credit who couldn't afford to buy a home, couldn't anyone see that foreclosures were bound to surge? When hedge funds were using borrowed money to buy same mortgage-backed securities, didn't anyone ask what would happen if prices fell? Now hedge funds are admitting they've lost billions of dollars. Some have folded. In other cases, their sponsors (such as Goldman Sachs) are investing billions more trying to shore up the funds. Daniel Gross has an amusing column today in which he notes that events that hedge fund managers think will only come around once every 10,000 years seem to happen every few years. I guess it's easy to ignore common sense when there's a lot of money to be made.

Money Question of the Week: Will you make any changes in your investments as a result of the recent stock market turmoil?

Tell us what you think of the current investment climate. 
A sampling of responses to this question will be published in the Sunday Money section of the Times next Sunday, Aug. 19. Comments must include your first and last names and city. If you don't want to answer here, email your comments to me.

(Photo credit: Getty Images)

CFO Alex Sink taking a look at Trans Continental situation

The Trans Continental investment scam revealed a serious weakness in the way Florida regulates insurance agents, Chief Financial Officer Alex Sink said Friday.

"Our laws are written as if we're back in the old days when insurance agents sold insurance and brokers sold securities," she said. "They're all basically financial services providers."

Sink heads the Department of Financial Services, which regulates insurance agents, and is one of four Cabinet members with jurisdiction over the Office of Financial Regulation, which regulates brokers and securities sales.

Sink will review oversight issues as she works on next spring's legislative proposals.

"My role and mission is to safeguard our citizens' money and their assets," she said. "Clearly we've got a situation that's been exposed in a very unfortunate way in which our citizens' assets were not protected. It's incumbent upon all of us to go back and try to figure out what went wrong, why it went wrong and is there anything we could have done as a governmental authority to have avoided it."

(This story ran in today's St. Petersburg Times on the front of the Money section, alongside my story about "Pearlman agents tricked many.")

(Photo credit: Alex Sink official photo)

Sale of unregistered securities: A problem that won't go away

Many agents who sold Lou Pearlman's Trans Continental Airlines investment previously sold other scams--viaticals, pay phone deals and promissory notes--that prompted state action against them for sale of unregistered securities. My story in Sunday's paper focuses on two of them, Steve Rodd and Bill Kress of Churchill Financial. However, this isn't a problem that just involves them or even that just involves those who sold Trans Continental.

Here is information on state actions against some other financial advisers for sale of unregistered securities. Actions are by the Florida Office of Financial Regulation (securities regulators) with additional actions by the Department of Financial Services (insurance agent regultors) shown in parentheses. The ones marked ** are currently licensed as insurance agents. You will note that Michael Crudele is the only one of these who actually had his insurance license suspended. It was reinstated before he gave it up voluntarily.

     **1.       William Kress.  Case #3161-S-2/01  Default Final Order rendered 11/30/01  Sale of unregistered securities (ABS viaticals) when he was not registered to sell securities.  Fined $33,000.

** 2.   Steven B. Rodd. Case #3193-S-2/01.  Final Order rendered 7/7/03.  Sale of unregistered securities (ABS viaticals) when he was not registered to sell securities.  Ordered to pay $500 restitution to ABS receiver and prohibited from any license issued by OFR for a 5 year period.

  Case #0219-I-4/98.  Default Final Order rendered 5/27/98.  Sale of unregistered securities (GFI promissory notes) when he was not registered to sell securities.  Fined $3,652.

  Case #0161n-I-9/97.  Final Order rendered 3/13/98.  Sale of unregistered securities (an FLIC promissory note) when he was not registered to sell securities.  Fined $500.

** 3.   Gary V. Leone.  Case #3165-S-2/01.  Final Order rendered 1/23/02.  Sale of unregistered securities (ABS viaticals) when he was not registered to sell securities.  He will cease violating the securities laws and cooperate in related proceedings.

** 4.   Samuel Troncalli.  Case #0161e-I-9/97.  Final Order rendered 5/6/98.  Sale of unregistered securities (FLIC promissory notes) when he was not registered to sell securities.  Fined $17,500, payable at $5,500 down and $1,000 per month.

** 5.   Craig Goodie.  Case #3070d-S-1/01 and 3070e-S-1/01.  Final Order rendered 1/6/03.  Sale of unregistered securities (of AiO Technologies) when he was not registered to sell securities.  Will never apply for any license DBF issues.  Will pay no less than $137,936.91 and provide other consideration to receiver.

(DFS Action: Craig Joseph Goodie A100484: 10-18-91 Administrative Complaint:  Misrepresentation (retirement policy with free life insurance/annuity in lieu of term life) - 11-19-92 $1500 penalty)

(DFS Action: 05-11-01 Administrative Complaint:  Misappropriation of Funds - 02-04-04 probation of 1 year; restitution as stated in Banking & Finance Administrative Proceeding for the sale of unregistered securities)

** 6. Stephen Todd Muench.  Case #0588-I-5/01.  Default Final Order rendered 9/12/01.  Sale of unregistered securities (Chemical/Alliance investment contracts) when he was not registered to sell securities.  Made untrue statements or omitted material facts.   Fined $5,000.

          7.   Michael Joseph Crudele.  Case #0594-I-5/01.  Final Order rendered 5/15/02.  Sale of an   unregistered security (one Chemical/Alliance investment contract) when he was not registered to sell securities.  Made untrue statements or omitted material facts.  Fined $250.

(DFS Action: Michael Joseph Crudele A058586: 07-15-96 Emergency Order of Suspension - Misappropriation of Funds 07-15-96 Administrative Complaint:  Misappropriation of Funds - convinced insurance client to invest in Zuma Corporation (recycled automobile tires) - 02-17-98 six month suspension (2-17-98/8-27-98) - 12-15-98 Licenses reinstated)

8.  Richard Blackey.  Case #3108-S-2/01.  Final Order rendered 1/30/02.  Sale of unregistered securities (ABS viaticals) when he was not registered to sell securities.  Payment of $2,500 restitution to the receiver, $500 down and the balance within 6 months.

** 9.  Gilbert B. Swarts/Suncoast Financial Services of North America, Inc.  Cases #3204-S-2/01, 3095-S-2/01, 3095a-S-2/01  Default Final Order rendered 1/31/02.  Sale of unregistered securities (ABS viaticals) when he was not registered to sell securities and securities fraud.  Fined $635,000 in one case and $24,000 in another.

(DFS Action: Gilbert Bradley Swarts A258981 03-07-94 Administrative Complaint:  Misrepresentation (Met Life retirement plans) - 08-27-96 $1000 penalty and must take target ethics course within 6 months of date of order).

** 10.  Robert J. Myers.  Case #3026-S-10/00, 3026a-S-10/00, 3026b-S-10/00, 3059-S-2/01, 3179-S-2/01.  Final Order rendered 2/20/02.  Sale of unregistered securities (ABS viaticals, securities fraud) when he was registered to sell securities, sale of brokered CDs with fraudulent representations.  Fined $5,000, 90 day (securities) license suspension, and 2 year Registration Agreement.

Should I keep my credit card account open even though it's costing me a fortune in fees?

Q. Last fall I went through a Chapter 7 bankruptcy due to medical bills. I've worked very hard since then to rebuild my credit, and I'm doing pretty good now. I've paid all my bills on time, and I am even making extra payments on my car loan. In February I received my first "pre-approved" credit card notice in the mail. The card, with a $400 credit limit, had about $200 worth of fees tacked on just to open the account, plus a monthly $9.95 "Maintenance fee."  I went ahead and got the card, because I knew I had to start rebuilding my credit somewhere. Now I have received another offer for a card with a $500 credit limit, but with no annual fees and no monthly maintenance fees. Would it be damaging to my credit rating to close the first account (because I'm losing $120 a year in fees) and open the new one?

A. Apply for the no-fee card and once you have it, close the other account. If there were no fees, I would recommend keeping the first account open with a zero balance, but under the circumstances, you should close it. It will not affect your credit score significantly to close it because it's a new card rather than one you've had for years and it has a low credit limit. Credit scores are partly based on the length of your credit history and the amount of debt you have in relationship to your available credit. The two things that are helping your credit the most are the passage of time and your responsible behavior in paying your bills on time. Once you have this card, wait for a while before applying for another one. Frequent card applications are negative for your score and as time goes by, you will be getting better offers.

(Photo credit: Getty Images)

Chamberlain's a no show and Kapila isn't going to take it any more

Lou Pearlman's former lawyer Rene Chamberlain still hasn't produced the documents related to Trans Continental Airlines that the bankruptcy court ordered her to turn over to trustee Soneet Kapila. Further, she agreed to be deposed by Kapila, then failed to show. She didn't call either. Kapila says "this latest episode is the last in Chamberlain's apparent bad-faith attempt to thwart the trustee from securing valuable information for the administration of this estate and discovery of assets." He wants her sanctioned and ordered to pay attorney's fees and costs in connection with the deposition. And, of course, he wants the documents and the deposition.Here is Kapila's motion . A hearing on the motion will be next Wednesday.

Also, Kapila has been appointed trustee in two additional cases, Trans Continental Television Productions and Trans Continental Management.

Lou hoping to get out on bond

That's according to a report today from WFTV-TV. The station talked to David Siegel, who visited the jail. Lou says he wasn't hiding out because everyone knew where he was.

It's auction time again! More gold records! furniture! art work!

Here is the long-awaited list of items scheduled to be included in the Aug. 25 auction of Lou Pearlman's personal property. There's a treasure trove of memorabilia, including a framed gold 45 of "Crying in My Sleep" by cousin Art Garfunkel, who is pictured here. There's lots of stuff from the Backstreet Boys plus items from US5, OTown, Natural, *NSYNC, Take 5, B4-4, Encore, Aaron Carter and New Kids on the Block. There is a bunch of art work, mostly prints, posters, photos, but even some artwork said to be by Lou himself. There also should be a high level of interest in the certificate naming Lou a "20th Century Republican Leader". Many items are furnishings from Lou's home in Windermere, including Royal Doulton fine bone china and crystal (dinner for 40 anyone?), the Century Furniture dining room table with 10 chairs and sideboard, sofas and chairs, a Baldwin baby grand piano, refrigerator, washer and dryer, tanning bed, wrought iron patio furniture, beds and bedding, silk plants and flowers, electronics and even "bathroom supplies."  You can see some of the furniture in these photos of Lou's house.

The auction will start at 10 a.m. Saturday, Aug. 25, at 7075 Kingspointe Parkway, Orlando, and is expected to last well into the afternoon. Preauction inspection will be Friday, Aug. 24 from 10 a.m. to 3 p.m. and one hour prior to auction. Items may be picked up the day of the auction or the following Sunday or Monday. A 12% buyer's premium will be added to the auction price with a 2% discount for cash payments. Visa and Mastercard are accepted. The trustee has the right to remove items from the list before the auction at his discretion. Auctioneer Bob Ewald said online bidding also will be available through Proxibid, but I don't see any details on the Web site yet. Here are some photos of auction items.

(Photo credit: Associated Press/St. Petersburg Times files, 2003

Money question of the week: Should insurance companies be allowed to use credit scores to determine your premium?

Insurance companies say it works because people with low credit scores file more claims. But opponents say it isn't fair to charge two people with the same driving records different rates just because one has a lower credit score. Using credit-based scores has a disproportionate impact on minorities. For more details, see the post I had last month on this topic.

Now I want to know what you think because the Times' Sunday Money section is launching a new feature designed to get reader opinions in the paper and promote interactivity with the Web. Each week we'll post a question in the newspaper and on this blog, then publish a selection of responses the following Sunday. Responses to this qusetion will be published Aug. 12. One key difference from the normal blog format: You must include your first and last names and your city. Responses without them will be deleted from the question of the week post. If you are shy about posting to the blog, you can send me an email, but again you must include first and last names and city. We are hoping that you will give us your opinion, your personal experience (if relevant) or both.

I chose this first topic because it got a good response previously on the blog. If you were one of the previous posters, feel free to repeat your post here with your identification. 

(Photo credit: Getty Images)

The New York Lawsuit

I thought some of you might be interested in seeing some of the documents from the lawsuit filed by a group of out-of-state investors against Gov. Charlie Crist, Atty. Gen. Bill McCollum, Danielle Brooks, Jerry McHale as well as Lou Pearlman and numerous others. It was filed in the U.S. District Court for the Southern District of New York and is so long that it is broken into parts.

Lawsuit and exhibits: Part 1, Part 2, Part 3, Part 4   

State's motion to dismiss filing

The investors have responded with numerous affidavits. Here is a sample. 

Most recently, Tatonka Capital filed motion to dismiss.

That should keep you busy reading for a while!

Here's another reason not to buy investments you don't completely understand

Sometimes I feel like a broken record, but I can't say it enough: If you don't completely understand an investment, don't buy it. And if you're a broker and you don't completely understand it, don't sell it. In today's paper I write about the damage done by brokers at Brookstreet Securities who sold their clients particularly risky CMOs (collateralized mortgage obligations). If that weren't bad enough, they sold them on the margin, which then magnified their customers' losses when the securities were devalued in June. Yet these were pitched to customers as safe government bonds. Clients were decimated and because of the huge amount of borrowed money involved, Brookstreet ended up going under. The brokers immediately signed up with other firms. Whether they learned their lesson or whether anything will happen to them remains to be seen.

I've come to the conclusion that if you're not a sophisticated investor, you should stick with mutual funds, CDs and money market accounts and just say no when somebody tries to sell you something else.   

FYI: Here is an article about how problems in the subprime market have affected the market for higher quality asset-backed securities. People who thought they were buying high-quality investments have been hurt by what has happened.

Yes, the state is still investigating

Danielle Brooks may be leaving, but the state Office of Financial Regulation is still working with the feds on the investigation into the Trans Continental Airlines investment scheme. The new lead investigator will be Kevin Maslowski, who works in OFR's Tampa office. If you get a call from Kevin, be sure to return it. Other investigators also will be assisting. For those who have suggested all sorts of wild theories on Danielle's departure, I can report that her boss says she's got a better job in another state. "I wish we could keep her" said Bob Rosenau, chief of financial investigations for OFR. "She's a quality person."

Some of you may be interested to know that OFR has 450 open investigations and 51 investigative positions, although not all of them are currently filled. About one third of those investigations involve unregistered securities like EISA, a third are mortgage-related and a third are other issues such as advance fee scams.

 

Friday bankruptcy court update

Soneet Kapila wants to employ another accounting firm, J.H. Cohn, to analyze "avoidance actions," which means Lou Pearlman's attempts to put assets where creditors can't reach them. Fraudulent and preferential transfers are a primary target. The idea is to bring the money or other assets back into the bankruptcy estate to benefit creditors.

There have been concerns about filing an action to make Pearlman's debts nondischargeable. Judge Briskman has now extended the deadline  to Oct. 10 for objecting to the dichargeability of debts. It could be extended further.

Investigation update

I just learned that state investigator Danielle Brooks has given notice and will be moving away. She put in an incredible amount of time and effort on this case and others who have been involved speak very highly of her work. I'm sure that those who will be carrying on the investigation will miss her.

Federal prosecutors have told the court to expect a superseding indictment against Lou Pearlman, according to a this brief report from today's hearing. A superseding indictment would be expected to include additional charges and possibly additiona defendants. The judge granted Pearlman's request for additional time to file pre-trial motions.

If you were a Trans Continental Airlines investor, by now you've probably received the letter from the U.S. attorney's office and a questionnaire to be mailed back to the FBI. I encourage you to fill it out, paying special attention to the questions about how you sent and received payments, the nature of the malings you received and conversations with your agent. It's obvious that investigators are looking for information to support charges of mail fraud and wire fraud. I know that some of you saved voice mail messages from your agents as Trans Continental was collapsing. Here's your chance to do something with them. Also they're asking about reports you made to police departments.

I heard from one investor who was upset that the state is working with federal prosecutors on the case. His conclusion was that the state had abdicated its responsibilities. I don't see it that way at all. It is common for investigators to work together to avoid duplication of effort.

One area I have been concerned about is licensing of insurance agents. Have any of you had any response from the Department of Financial Services regarding complaints you made about Trans Continental agents who were licensed as insurance agents? If so, I'd like to hear about it.