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To Receiver

Its time for k-1's and tax returns for 2006. It is that time of the year. I now have good idea how to handle my pinnacle gains and losses in my tax return. But I have received no k-1's from receiver so far. Will receiver be sending them in time to meet the deadline for tax returns? I have a tax refund coming, so I prefer to submit my returns early. I hate to have my accountant prepare my tax returns and than have to prepare amended ones again and again in view of what receiver may send us later. Please let us know what and when we should expect from the receiver.

It is just waiting game for now until some new news develops.

Taxum

Following people also got paid from your $$$. They all made money out of your $$$

- 40-50 employees
- Landlord - 22K per month
- $300 per night at the JW Marriot
- Limo drivers
- Full time security guards
- WSJ and other pubs
- Lawyers
- Receiver
- many others

To think that you can go back and collect your $$$ from any of them is unrealistic.

The issue of 'net winners' will raise lengthy litigations and delays. They invested in good faith, did nothing illigal and got paid as per their legally enforcable agreement at the time and decided not to rollover their money. Their agreement with pdp expired and no longer in force. They are no longer debtor or creditor or partner with pdp. Receiver has to deal with only those creditors and debtors who have outstanding claims against PDP at the time receiver is appointed. It is no different than bankruptsy proceedings where only creditors who have outstanding claims have to stand before a receiver - their claims can not be met by recalling other creditors who got paid before bankruptsy or asking them to return profit portion of the payments received before bankruptsy. You can count on this issue to be hotly contested if receiver pursues it.

Corbin

My comments relate to 2005(Pinnacle started taking partners around Oct 2005) - I doubt anybody would have recovered their investment plus made profit on top of it in year 2005, unless they chose to have one term partnership and not rolled-over - only such investors would qualify for k-1. For 2006, many investors would qualify to receive k-1. But we are not talking about 2006.

Receiver

Your FAQ mentions that your team will correct defective K-1 issued by Pinnacle. It however does not address why such k-1
needs to be issued at all if 25% profit distrinution are going to be treated as return of capital, thus having no tax obligations. I can understand if 1099 will need to be issued for referral fees received by investors, but why k-1? What is your rationale for issuing k-1?

Why are we being sent K-1 if profits are supposed to be treated as return of capital by the receiver? Why should there be any tax obligation if receiver is treating 25% returns as return of capital? What is the point of sending us K-1? We are being scammed from both sides - on the one had we are supposed to pay taxes on money received form pinnadcle as if that was real income for us but on the other hand, receiver would treat money received by investors as return of capital. Receiver should clarify why we are asked to pay taxes when there is no income, only return of capital.

Contractually, each partnership expired after 90 or 60 days. Rollover, if any, created brand new set of partnership with whatever capital amount investor chose to have invested in new partnership. It has nothing to do with how this capital was derived by investor. Thus money due to an investor is money investor had in his/her capital account at the end of 60-day partnership. Receiver can not take past earnings from previous expired partnerships in his calculations to calculate amount owed to investors. In that case, paying taxes on income and K-1 are justified. We need clarifications from receiver on issue of K1.

Yag

Friend of mine personally visited pinnacle on 5th for consulting project and he came out convinced to invest in it. The new team of lawyers were working on details in order to make it public within couple of weeks. Pinnacle had large pool of satisfied investors and pinnacle had nothing to lose by offering consulting services to them

Wheather pinnacle had sufficient funds or not, wheather it ran a fraud or ponzi scheme or not are pure speculations at this point. They are allegations but not proven yet. They may or may not be true. And now, they may be hard to prove or disprove as SEC's actions have created self-fulfilling prophesy and altered realities. In 2-3 weeks, we all would have found it out, but now we have no way to find out the truth. Now we are given an altered reality as truth.

Somebody in accounting is really goofing up k-1. A friend of mine received a K-1 for wrong amount in the name of corporation that did not exist in 2005, Same way, another friend got K-1 for 2005 even though he opened the account only in 2006. Another friend got K-1 for more amount than he earned in 2005. One guy who made money in 2005 did not receive his k-1 at all. What is going on? Who is going to correct such defective k-1? Not to mention all the tax-preparation fees investors will have to fork out to file amended tax returns with penulty and interests perhaps. Is pinnacle accounting staff purposely goofing off or they really have no clue who invested what and when and how much they earned? Implications with IRS can be serious for some investors.

This pinnacle vs SEC reminds me of another episode with a bank that occured in another country in which my dad lost $2m. I will not name the country, bank or local currency because they are not relevent. The bank had deposits of over $4,500m and was considered the largest private bank in the province and local economy benefited and depended heavily on it. It was rock solid bank with solid history for over 20years. The owner/CEO of the bank had made unauthorized loan to his family worth $200m(hardly 5% of total bank portfolio) which he would have repaid in due time. But somehow influential media got the wind of such loan and soon Bank regulators got involved and overnight, they locked down the bank and froze the bank assets, and threw all directors in jail without bail and appointed a receiver. There was panic among over 10s of thousands of depositors who had their entire life savings in the bank. But they could do nothing for years as the bank remained locked-up for years. The receiver had no clue about extent and complexities of bank's operations and those who were in the best of knowledge and position to recover bank loans were thrown in jail for a year before prosecutor could bring the case to court which eventually acquitted all the directors except owner/CEO. But in the mean time, loan recovery fell wayside due to mismanagement, ineffeciency and fraud as many loan-holders found ways to trick or bribe their way out of loans, in the end banks was left with hardly any money to pay up depositors. Eventually, central/treasury bank stepped in and started paying up from its own coffers - not full deposit amount but partial amount with a ceiling of $100k per depositor (most depositors had multiple accounts with aggregate total way over $100k) and that too after 4 years of delay, most larger depositors had to wait even more years to get back small part of their deposits. Thousands of families, retirees, poor folks got ruined for life in the process. All because media and bank regulators saw a technical violation and jumped the gun to protect the depositors but their action ended up blowing up the whole bank and majority of its depositors of their life savings. I know this is largely unrelated to our pinnacle scenerio. But since it happened to my family and now it is happening to me all over again, i could not help relate both events that have effected me.