Stuart MacMillan, named interim CEO of TelexFree as the Ponzi scheme collapsed, now demands $88,333.51 in fees and $18,755.94 in expenses. Chapter 11 Trustee Stephen Darr strongly opposes this claim, stating MacMillan seeks payment for leading a "nonexistent business."
TelexFree took in fifty million dollars during its last months of operation. This occurred even after legal counsel advised management in August 2013 that they were running a pyramid scheme. Despite this warning, company executives still paid themselves over $10,000,000.
As regulators prepared to shut down TelexFree for operating as a Ponzi scheme, owners Carlos Wanzeler and James Merrill began to enact an exit strategy. TelexFree then owed affiliates $5 billion in promised returns. The company had no significant retail revenue, and new affiliate investment had dried up amid rumors of a pending compensation plan change.
The initial phase of this exit strategy required Wanzeler and Merrill to disappear from public view. Stuart MacMillan, an individual largely unknown at the time, was appointed "interim CEO." Shortly after MacMillan's appointment, TelexFree filed for Chapter 11 bankruptcy, attempting to preempt US regulators in court.
Before the bankruptcy proceedings moved to Massachusetts and came under the control of the Department of Justice via a court-appointed Trustee, MacMillan appeared before a panel of judges in Nevada. He had been appointed at the last minute. The company intended to present MacMillan as "clean" and detached from any wrongdoing, while Wanzeler and Merrill remained out of sight as TelexFree sought to escape liability.
Perhaps the most unusual part of MacMillan's interim CEO role was his testimony supporting TelexFree's bankruptcy application. He was not a VoIP specialist. MacMillan could not identify any of TelexFree's competitors or state whether its product was competitive. He also did not know how much of TelexFree's stated revenue was actual cash versus non-cash bookkeeping entries in the back office. This was the individual, on paper, leading TelexFree at that critical juncture.
TelexFree's bankruptcy proceedings were soon dismissed. Control of the company passed to the Department of Justice.
Despite his admitted lack of knowledge regarding TelexFree's operations, MacMillan is now demanding payment for fees and expenses. The $88,333.51 in fees and $18,755.94 in expenses cover the period from the bankruptcy petition date until the Trustee's appointment.
Chapter 11 Trustee Stephen Darr opposes MacMillan's claims. In his September 15 filing, Darr wrote that MacMillan "has not provided any detail or description of services that he allegedly provided or benefit ostensibly conferred upon the estates from these services." Darr argued that if MacMillan directed TelexFree in opposing government efforts, the Trustee's motion, or the venue motion, then he conferred no benefit upon the estates.
