Judge appoints administrator of St. Petersburg trust fund that lost $100 million

A federal judge ruled that the St. Petersburg nonprofit that filed for bankruptcy last month was found to be missing more than $100 million from a trust fund established primarily for disabled people with severe medical needs. A trustee was appointed to take over.

Judge Roberta Colton on Tuesday appointed bankruptcy attorney Michael Goldberg as a trustee to oversee the struggling Special Needs Trust Management Center, which filed for Chapter 11 bankruptcy in February.

Beth Latham, a spokeswoman for the organization, said her appointment follows the recent resignation of the nonprofit’s three-member board of directors. It may also indicate further concerns about the case on the part of the U.S. Trustee Program, a division of the Department of Justice. The program had already appointed an in-house lawyer to oversee the proceedings.

The nonprofit’s bankruptcy filing accuses its founder, Leo Govoni, of withdrawing about half of the $200 million in trust assets it oversees through unauthorized loans. In February, more than 1,500 individuals and families received letters from the center informing them that trust funds set aside from compensation awarded for medical malpractice and traffic accidents were empty or severely depleted. About 900 trusts had balances of less than $500.

Mr. Goldberg, a Fellow of the American College of Bankruptcy, is based in the Fort Lauderdale office of Akerman LLP, a firm with more than 700 attorneys in 24 cities across the United States. He heads the company’s fraud and recovery practice, which focuses on investor fraud, including Ponzi schemes and abuse of the EB-5 immigrant investor visa program, according to the company’s website.

A complicated case awaits him.

From 2009 to 2020, Mr. Govoni transferred the missing funds to his Boston Finance Group, using a line of credit established while he was chairman of the nonprofit organization, according to the bankruptcy filing. But the center has been unable to find documentation showing the loan was approved by the nonprofit’s board of directors.

Most of the loan funds were sourced from the trust, which allocated a portion of the loan as an “investment.”

According to the bankruptcy filing, center officials discovered documents related to the loan and found it was supposed to be repaid by early 2017. According to the bankruptcy filing, the entire amount, except for some interest, is still owed. The statute of limitations for debts in Florida is five years.

Mr. Govoni denies the charges.

The appointment of a trustee also leaves nonprofits with the monumental task of managing the rest of their finances and pursuing missing funds.

In November, the center hired Perspective Advisory Services to provide restructuring advice and asked the court for permission to appoint three bankruptcy attorneys at up to $460 an hour, according to court records. The court filed a motion to maintain control of the trust bank account and also asked the court to appoint Hill Ward Henderson as special litigator for the purpose of litigating Mr. Govoni and his business partners.

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“The Center for Special Needs Trust Management does not object to the appointment of a trustee and continues to strive for a seamless transition of their knowledge and experience to support the management and recovery of as many trust funds and assets as possible. ,” the nonprofit said in a statement provided to the Tampa Bay Times.

The involvement of Tampa-based firm Hill Ward Henderson, which specializes in corporate litigation, was opposed by a group of creditors, including families who lost trust fund money. In a challenge filed with the court, they said the firm had previously represented Govoni and his wife, Jane Govoni, in a dispute with his neighbor. Mr. Hill Ward Henderson also currently serves as President of Momentum Bank, a Texas chartered bank where the trust funds are held.

In a class-action lawsuit filed by a Palm Beach County family whose trust fund for their disabled son is among those missing, the bank is named along with Mr. Govoni, his company and a business partner. Several affected families told the Times they had already joined the lawsuit.