The irrevocable trust

In 2023, Christopher Linscott, CFE, CPA, CIRA, arranged a donation of $250,000 to the ACFE Foundation — the single largest donation to the foundation ever. Here’s the story of how a Ponzi scheme that bilked thousands of military veterans and retirees became the impetus for that donation.

In 2021, Arizona firm, Shurwest, was facing 38 lawsuits in both state and federal courts and had 140 claims totaling more than $197 million against it. The company wouldn’t be able to meet the demands of its creditors, so it filed for Chapter 11 bankruptcy. Shurwest, an independent marketing firm that sells financial products to retirement planners, had found itself in this situation because one of its former employees was connected to a nationwide Ponzi scheme that had defrauded thousands of retirees and U.S. military veterans out of hundreds of millions of dollars. And now many of those victims were plaintiffs in multiple suits to recover money they’d lost. The employee, Melanie Jo Schulze-Miller, had used her company’s computers to sell unsecured securities that were part of the plot. Shurwest’s management insisted that Schulze-Miller had gone “rogue” to sell the products, even forming her own side business to participate in the scheme. [See “Some Creditors Miffed By Shurwest’s ‘Sham Bankruptcy’ Plan,” by John Hilton, InsuranceNewsNet, April 6, 2022 and “Shurwest, LLC v. Howard,” United States District Court Eastern District of Kentucky Central Division Lexington, No. 5:19-CV-180-REW (E.D. Ky. Mar. 19, 2021), Casetext.]

During a Chapter 11 bankruptcy, an organization stays in business while restructuring its debts, and the court might stay (stop) litigation against the debtor company. This allows the company to manage its assets, reduce costs, work on settlements with plaintiffs and pay claimants. In some cases, a third party will purchase the creditors’ claims, and the third party then acts as the creditors. Christopher Linscott, CFE, CPA, CIRA, founder and director of consulting for Tucson, Arizona-based accounting firm Keegan Linscott & Associates, had an idea that could compensate the victims and contribute to the field of anti-fraud education. So Linscott, with funding from a party friendly to Shurwest, formed a trust to buy the claims, pay the victims and name the ACFE Foundation the beneficiary of the trust. In 2023, that trust donated $250,000, making it the single largest contribution to the ACFE Foundation since its inception in 2005.

“What made sense to me in this case since it was derived out of a Ponzi scheme was to make the ACFE Foundation a beneficiary,” Linscott tells Fraud Magazine. “Maybe we can help prevent or limit these frauds in the future by using that money for education.”

Linscott sat down for an interview with Fraud Magazine shortly after the donation was made to discuss the formation of the Claims AF Irrevocable Trust (the “AF” stands for anti-fraud) and the massive fraud that inspired the trust’s impressive donation.