In re Raejean S. Bonham dba World Plus
Bankruptcy No. F95-00897
Unofficial Web Site

Larry D. Compton, Trustee
Office of the Trustee
400 D Street, Suite 210
Anchorage, AK 99501
Tel. (907) 276-6660 Fax (907) 258-3348
Email: ComptonAK@compuserve.com

In re: RAEJEAN BONHAM dba WORLD PLUS; WORLD PLUS, INC. and ATLANTIC PACIFIC FUNDING; Debtor

Case no. F95-00897-HAR Chapter 7

Since the inception of this case the Trustee has filed the required "180-Day Reports" with the Court that have been available for examination by creditors and interested parties. Creditors have been served with numerous pleadings regarding various issues, but have never been fully advised on the status of this case. On the third anniversary of the case, the Trustee believes that it would be appropriate and informative to provide to all creditors a summary accounting of the income and expenses for the bankruptcy estate and a status report of the significant activities of the case.

SUMMARY OF ASSET DISPOSITION, INCOME AND EXPENSES OF THE ESTATE

1. Assets of the Estate: All non-exempt assets of the estate have been liquidated. They are summarized as follows:

Sale of the debtor's residence, vehicles, equipment, boat, motorcycles, office furniture and equipment, and personal property	$439,149
Sale of one set of copies of debtor's records and Trustee's data-base to the State of Alaska	21,385
Interest received on estate's trust accounts	20,585
Funds collected from judgements and settlements related to efforts to recover preferential and fraudulent transfers	2,235,599
GROSS RECEIPTS	$ 2,716,718

2. Disbursements of the Estate: During the course of the administration of the estate there have been costs to the estate, as approved by the court as follows:

Payments to creditors with perfected security interests in assets sold by the Trustee and direct selling costs	$274,011
Payments to Trustee's general counsel for fees and expenses as approved by the Court	519,359
Payments to Special Counsel for fees and expenses related to Bonham Recovery Actions as approved by the Court	873,120
Miscellaneous administrative expenses	30,641
TOTAL DISBURSEMENTS	$ 1,697,131

3. Balance in Trust

Balance in Trust accounts as of January 15, 1999

$ 1,019,587

When the Trustee was appointed to this case in December 1995 there was a substantial effort to determine what assets could be recovered for the benefit of the creditors. James DeWitt, of the law firm of Guess & Rudd in Fairbanks, was employed to assist in the task of sorting through thousands of documents and financial transactions to determine the magnitude of the case, what the nature of the debtor’s business was and why so many "investments" were required to operate a small travel office.

Physical assets were identified and sold. The debtor’s refusal to cooperate, failure to surrender records, in fact her repeated efforts to hinder and block the administration of the case caused substantial legal and administrative fees to perform even the most routine transactions. Guess & Rudd analyzed the business and investment activities and concurred with the Trustee that the debtor had operated a "Ponzi Scheme". It was determined that bankruptcy courts throughout the country consistently found that payments to investors of a "Ponzi Scheme" were subject to recovery by the Trustee. Because there have been so many "Ponzi Schemes" in recent years, there are very recent decisions to support the Trustee’s case.

The debtor had used no conventional method of bookkeeping. The Trustee recognized that all financial transactions back to 1987 would need to be reconstructed from cancelled checks and reconciled with bank statements. With no funds in the estate to work with, he had to find a firm that would work on a contingency fee basis to reconstruct the records, file the recovery actions, litigate them, collect the funds, and settle all 1,300 claims filed with the Court.

Cabot Christianson, a bankruptcy attorney in Anchorage with the firm of Bundy and Christianson, was employed under a contingency fee agreement by which he would be paid thirty per cent of the funds collected, plus out of pocket expenses approved by the Court. Over the course of 18 months Bundy & Christianson identified and filed over 600 recovery actions, seeking repayment of approximately $17 million representing some or all of the payments that were disbursed by the debtor to the investors the debtor chose to repay.

The process to litigate these issues has been painfully slow for the estate and the defendents. The Trustee and Mr. Christianson developed a blanket settlement formula that could be applied consistently and the Court approved it. The formula is basically to pay back 100% of all net gains and preferences (payments received within 90 days of the bankruptcy), plus 20% of whatever else was received by the debtor that was not net gains or preferences. As of January 15, 1999, nearly 200 of the defendents (investors) have settled their cases with the Trustee for a total amount of about $2.6 million. $2,235,599 has been received by the Trustee to date.

At the same time, Mr. Christianson has been reviewing the claims filed to determine exactly how much each creditor is entitled. For creditors that filed claims and are defendents in a recovery action, a claim will be allowed in an amount equal to all the funds they invested, less all the payments they received, plus any repayment to the Trustee. For other investors, their claim will be allowed in an amount equal to their investment without the benefit of any earned interest. Delta Airlines won a judgement in the Federal District Court in Atlanta for more than $9 million for sales of Delta frequent flier tickets by Bonham and World Plus in violation of Delta’s rules, and for punitive damages. Because all unsecured claims are to be paid on a prorata basis, the Delta claim would have absorbed a huge portion of the distribution. The Trustee negotiated with Delta and settled their claim. The settlement approved by the Court is that Delta will share in a percentage of the disbursements until they have been paid $2 million maximum. The percentage that they will be paid is less than what they would have received as their prorata share.

The Trustee participated in a concession by the Internal Revenue Service for the benefit of the creditors. The IRS issued a policy statement about World Plus investors allowing the investors to deduct their losses immediately. Prior to that statement the IRS was taking the position that no deduction was allowed until the distributions were complete and net investment losses known, possibly years later.

The Trustee and his counsel reported all known civil, criminal, and bankruptcy crimes to the appropriate authorities. The SEC successfully obtained a judgement against the debtor for $2.3 million, the State Attorney General ordered an independent counsel to investigate state crimes, and the U.S. Attorney General indicted the debtor on over 60 counts of white-collar crime. The debtor plea bargained for two counts and was recently sentenced to 60 months in federal prison for mail fraud and money laundering. While numerous bankruptcy crimes were identified and reported, the U.S. Attorney General declined to prosecute them.

The Trustee filed a motion to deny the debtor her discharge. The Court ruled in the Trustee’s favor. This means that none of her obligations to investors/creditors are erased with the bankruptcy and she may never try to discharge them in the future. In light of her conviction and restitution, judgements from the SEC and Delta Airlines, etc., it is not likely that creditors will ever be able to collect their losses from the debtor. However, should she ever see a windfall, i.e., win a lottery, any creditor can assert a claim against her.

James DeWitt, on his own time and without charge to the estate, has maintained an Internet Web Site to inform interested parties of the facts of the case. All recent pleadings, attorney fee applications, orders from the Court, settlements and other pertinent facts are posted on this web site "http://www.ptialaska.net/~compton". There are hundreds of inquiries daily to that web site. There is a link at this website which explains in detail the trustee’s settlement formula, and which contains sample settlement documents and examples.

Bankruptcy Judge Herbert Ross has ruled that World Plus, Inc. and Atlantic Pacific Funding Corporation are alter egos of Raejean Bonham for purposes of this bankruptcy. That is, she co-mingled funds to the degree that there is no distinction between them. This allows the Trustee to treat all investors similarly regardless of which of these entities the investor/creditor has a claim against. Many investors believe that the trustee cannot or should not be able to sue net losers. Judge Ross ruled in the "Duncan" adversary that the trustee could sue net losers. Judge Ross has also orally ruled for the trustee on his motion for summary judgement and for final partial judgement against net gainers and preference recipients. Judge Ross has recently ruled that the Trustee can not assert the State of Alaska usury laws in calculating amounts to be recovered. Usury would have applied only to interest received within two years of the bankruptcy, and only on contracts of $25,000 or less.

These adversary actions are being administered by the court as a "mega case," in which all similar arguments are being decided for all cases concurrently. Defendants have raised certain defenses to the recovery actions and each defense is being litigated. It is a painfully slow process and some aspects may be appealed before judgements can be collected on. The Trustee has a fiduciary responsibility to assert all remedies available to generate a meaningful distribution to the creditors. The Trustee believes that these actions have merit and that he will prevail in the recovery of several million dollars.

The most significant source to repay creditors in this case is the recovery actions being litigated by Cabot Christianson. A substantial amount of effort and expense was incurred at the inception of this case to initiate these actions, as seen in the accounting provided above. However, creditors should be aware that all those expenses have been paid for and there will be little left for Mr. DeWitt to do. In other words, the heavy up front costs have been paid for. Since Mr. Christianson’s efforts are on a contingency fee basis of 30% and the Trustee’s statutory fee at this point is 3%, creditors can be assured that about 65% of all future settlements and court awards for the recovery actions will be distributed. That is in addition to the $1,019,587 currently in the Trust account. It is still too early to give any kind of prediction as what per cent of each creditor’s allowed claim will be paid because not all claims have been adjudicated.

The Trustee wants to make a distribution NOW to the creditors of the funds on hand, but cannot because of the claims filed by the Bonham Recovery Action (BRA) defendants. In round numbers, there is the equivalent of about $12 or $13 million of allowed general unsecured claims, including the Delta claim. In addition, the BRA defendants have filed about $28 million of claims. Judge Ross has held that the BRA defendants’ claims will be resolved in the BRA cases, so for now, more than two-thirds of any distribution would have to be escrowed for the BRA defendants’ claims. My attorneys are continuing to ask the Court to disallow the BRA defendants’ claims, to free up sufficient cash to make a significant interim distribution now.

DATED this 21st day of January, 1999.

/s/ Larry D. Compton, Trustee

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