Washington State Department of Financial Institutions

Federal Savings LLC Update

Most Recent Information

Investors are starting to receive their investment funds with interest by mail. On October 4, 2007 Judge Bruce Hilyer signed the Order Granting Stipulated Petition for Approval of Proposed Distribution Plan Regarding Supplemental Interest Payment, Contingent Upon Receipt of Funds from the State of Nevada. This authorized the payment of interest due to investors per their individual Certificate Agreement. Funds controlled by the State of Nevada had been transferred to the escrow account prior to the signing of this Order. Investors began receiving their funds back on October 12, 2007 and the last of the checks should be mailed by October 16, 2007.

On August 30, 2007 Judge Bruce Hilyer signed the Amended Order Granting Stipulated Petition for Approval of Proposed Distribution Plan, Contingent Upon Receipt of Funds from the State of Nevada. View the Order (PDF)*. Pursuant to this Order, distribution of funds to investors will take place within 30 days of funds that are currently in possession of the State of Nevada being deposited into the escrow account established to consolidate investor funds. The transfer of funds from Nevada to the escrow account should occur in mid to late September according to Nevada officials. The Order states that each investor identified will receive the principal amount of their investment back.

Background Information

On March 8, 2007, DFI entered a Summary Order to Cease and Desist and Notice of Intent to Impose Fines against Federal Savings and others. View Cease and Desist Order (PDF).* DFI alleged that Federal Savings violated the Washington State Securities Act for the sale of unregistered securities, offering and selling securities while not be registered and securities fraud. On March 21, 2007, DFI filed a Complaint for Temporary Restraining Order, Preliminary Injunction, Permanent Injunction and Appointment of Receiver in King County Superior Court. On March 21, 2007, the Ex Parte Commissioner issued an Order Granting Motion for Temporary Restraining Order and Granting Motion for Order to Show Cause.

On April 10, 2007, DFI and Federal Savings filed a Stipulated Motion to Consolidate Show Cause Hearings. The parties agreed that both the receivership show cause hearing and the preliminary injunction show cause hearing should be addressed at the same time on May 4, 2007. The Court ruled in favor of the stipulated motion on April 18, 2007.

On May 4, 2007, the Court entered a Stipulation, Order and Injunction, which ruled that Federal Savings may neither withdraw, transfer, assign, convert, conceal … or otherwise dispose of any investor funds, nor destroy or dispose of any records. The Order charged the parties to continue working toward an informal restitution plan and to submit a proposed order for monetary distribution by August 15, 2007 or DFI and Federal Savings would agree to the appointment of a receiver in the matter.

On May 14, 2007 DFI and Federal Savings entered into a Consent Order settling the March 8, 2007 Cease and Desist Order. View Consent Order (PDF).* Federal Savings neither admitted nor denied the facts alleged by DFI and agreed to reimburse DFI $4,500 in investigative costs. Reimbursement for investigative costs has been paid.

* This document is a PDF file, and you will need Adobe Acrobat Reader to view it. If you don't already have Acrobat Reader installed on your computer, you may download it for free from Adobe.