In re EPD Investment Co. Kirkland v. Rund: Forensic Accounting Reconstruction, Ponzi Scheme Investigation, and Ninth Circuit Bankruptcy Decision

Background and Overview of the EPD Investment Ponzi Scheme Litigation

In re EPD Investment Co. arose from the collapse of EPD Investment Co., LLC and related bankruptcy proceedings involving its owner, Jerrold S. Pressman. The litigation focused on whether EPD operated as a Ponzi-style investment operation between 2003 and 2010 and whether certain financial transfers connected to John C. Kirkland and the Bright Conscience Trust could be challenged in bankruptcy proceedings.

Creditors filed an involuntary Chapter 7 bankruptcy petition against EPD Investment Co. on December 7, 2010. The bankruptcy court later entered the order for relief on February 9, 2011. Pressman subsequently filed his own voluntary Chapter 7 petition on February 1, 2012, and the bankruptcy court later ordered substantive consolidation of the EPD and Pressman estates on June 4, 2012. Jason M. Rund was appointed as the Chapter 7 trustee and began investigating the company’s financial history and the movement of investor funds through the business.

The trustee later filed litigation seeking to recover allegedly fraudulent transfers involving John Kirkland and the Bright Conscience Trust. The case eventually proceeded to a jury trial in federal district court after the reference was withdrawn from the bankruptcy court. During that trial, financial evidence and expert testimony were presented to examine whether EPD generated legitimate investment profits or instead relied on incoming investor funds to satisfy earlier obligations.

On July 3, 2019, the jury returned a verdict concluding that EPD operated as a Ponzi scheme during the relevant period. At the same time, the jury determined that certain mortgage-related payments received by John Kirkland were made in good faith and for reasonably equivalent value. Poshow Ann Kirkland, acting as trustee of the Bright Conscience Trust, later appealed because the Ponzi-scheme finding could have preclusive effects in related bankruptcy claims litigation involving the trust. On August 23, 2024, the United States Court of Appeals for the Ninth Circuit affirmed the judgment.

Timeline and Key Legal Developments in In re EPD Investment Co.

2003–2010 – Investment Operations Later Examined in Ponzi Scheme Litigation

During this period, EPD Investment Co. operated as an investment business managed by Jerrold Pressman. Years later, the company’s financial activity during these years became central evidence in the bankruptcy litigation. Financial records reviewed during the case indicated that the business consistently lost money and maintained negative net equity. Evidence presented in the litigation also suggested that payments to earlier investors were frequently funded with money obtained from newer participants rather than from legitimate investment returns. These financial patterns became a central factor in the trustee’s argument that the business operated as a Ponzi scheme.

December 7, 2010 – Creditors File Involuntary Chapter 7 Bankruptcy Petition

Several creditors initiated an involuntary Chapter 7 bankruptcy case against EPD Investment Co. in federal bankruptcy court. The bankruptcy court later entered an order for relief on February 9, 2011, formally beginning the Chapter 7 liquidation process. The filing placed the company’s financial affairs under court supervision and allowed the trustee to begin examining EPD’s records, financial transactions, and relationships with investors and lenders.

February 1, 2012 – Pressman Files Personal Bankruptcy

Jerrold S. Pressman filed a voluntary Chapter 7 bankruptcy petition in February 2012. Because Pressman personally controlled EPD Investment Co., his bankruptcy case became closely tied to the company’s financial collapse. On June 4, 2012, the bankruptcy court ordered substantive consolidation of the Pressman and EPD estates, combining their assets and liabilities for purposes of administering the bankruptcy proceedings.

October 31, 2012 – Trustee Initiates Fraudulent Transfer Adversary Proceeding

As part of the trustee’s investigation into EPD’s financial history, Jason M. Rund filed an adversary proceeding on October 31, 2012 against John C. Kirkland and Poshow Ann Kirkland, acting as trustee of the Bright Conscience Trust dated September 9, 2009. The complaint sought to recover certain transfers that the trustee alleged were fraudulent under federal and state law. The trustee argued that the transfers occurred while EPD was operating as a Ponzi scheme and therefore diminished the assets available to other creditors.

December 2011 – February 2013 – Bright Conscience Trust Files Bankruptcy Claims

During the bankruptcy proceedings, the Bright Conscience Trust filed several proofs of claim based on financial interests assigned by John Kirkland. These claims sought repayment from the bankruptcy estate based on obligations allegedly owed by EPD or Pressman. The trustee challenged aspects of these claims during the broader adversary litigation. The dispute over the claims later became connected to the legal consequences of the Ponzi-scheme finding returned by the jury.

June–July 2019 – Jury Trial Examines Financial Evidence and Expert Testimony

After the district court withdrew the reference from the bankruptcy court to allow a jury trial, the case proceeded to a six-day trial in federal district court during June and July 2019. During the trial, the trustee presented testimony from forensic accounting expert Thomas Jeremiassen. He reconstructed EPD’s financial records and analyzed the company’s sources and uses of cash between 2003 and 2010. His analysis addressed whether investor funds were used to pay earlier investors, a financial pattern often examined in Ponzi scheme investigations. John Kirkland presented rebuttal testimony from financial expert J. Michael Issa, who reviewed the accounting evidence and offered an alternative interpretation of the financial transactions examined by the trustee’s expert.

July 3, 2019 – Jury Determines EPD Operated as a Ponzi Scheme

At the conclusion of the trial, the jury determined that EPD Investment Co. operated as a Ponzi scheme during the relevant period. The jury also found that certain transfers were made with the intent to hinder, delay, or defraud creditors. However, the jury also concluded that John Kirkland received specific mortgage-related payments in good faith and for reasonably equivalent value. Because of this finding, Kirkland prevailed on those particular transfer claims.

August 23, 2024 – Ninth Circuit Court of Appeals Affirms the Judgment

The case later reached the United States Court of Appeals for the Ninth Circuit. In a decision issued on August 23, 2024, the appellate court affirmed the district court’s judgment. The Ninth Circuit concluded that the evidence presented at trial was sufficient to support the jury’s determination that EPD functioned as a Ponzi scheme. The court also rejected challenges related to jury instructions and evidentiary rulings involving the expert testimony presented at trial.

Expert Witness Analysis: Financial Experts in the EPD Investment Litigation

1. Forensic Accounting Expert Witness – Thomas Jeremiassen (Trustee’s Expert)

   Thomas Jeremiassen served as the trustee’s retained forensic accounting expert. He reviewed EPD’s financial records, bank statements, investor files, and tax documents in order to reconstruct the company’s financial activity between 2003 and 2010. His analysis focused on identifying the sources and uses of cash and determining whether investor funds were used to pay earlier investors. The trustee relied on this financial reconstruction to support the argument that EPD operated as a Ponzi scheme rather than a legitimate investment enterprise.

2. Financial Analysis Expert Witness – J. Michael Issa (Rebuttal Expert for Kirkland)

   J. Michael Issa testified as a rebuttal financial expert for John Kirkland. He examined the financial evidence presented by the trustee’s expert and offered an alternative interpretation of the accounting records and financial transactions. His testimony addressed how the financial data should be interpreted when evaluating the transfers at issue and whether the conclusions presented by the trustee’s expert were supported by the available records.

3. Bankruptcy Expert Witness

   Complex bankruptcy litigation often involves financial professionals who analyze solvency, creditor claims, and the financial structure of the entity involved. These experts may evaluate financial records, transaction histories, and the movement of funds to help courts understand disputed transfers and the economic condition of the business during the relevant period.

Key Legal and Forensic Accounting Insights from the EPD Investment Case

1. Financial Analysis in Ponzi Scheme Litigation

   The litigation demonstrates how financial analysis can play a central role in determining whether a business operated as a legitimate investment enterprise or as a Ponzi scheme. Courts often examine the relationship between incoming investor funds and outgoing payments to evaluate whether a business generated genuine profits.

2. Reconstruction of Incomplete Financial Records

   The case illustrates how forensic accounting reconstruction can assist courts when financial records are incomplete or disputed. By analyzing available bank records, tax filings, and transaction data, experts may reconstruct how money moved through an organization.

3. Flow-of-Funds Examination

   In financial fraud litigation, courts frequently examine how money moved between investors and the company. Flow-of-funds analysis can help determine whether payments to earlier participants were funded by legitimate earnings or by new investor contributions.

4. Good-Faith Defense in Fraudulent Transfer Litigation

   Even when a company is determined to have operated as a Ponzi scheme, individual recipients of payments may still assert a good-faith defense. Courts may evaluate whether the recipient acted in good faith and whether reasonably equivalent value was provided for the transfer.

5. Role of Expert Financial Testimony

   Expert financial testimony can assist courts in understanding complex financial structures and disputed accounting evidence. In this case, competing expert analyses helped the jury evaluate the financial patterns underlying the trustee’s Ponzi-scheme allegations.

Conclusion

The events of the EPD Investment litigation developed over many years, beginning with the company’s financial collapse and the involuntary bankruptcy filed by creditors in December 2010. As the bankruptcy proceedings progressed, the trustee investigated the company’s financial history and pursued litigation to recover transfers involving John Kirkland and the Bright Conscience Trust.

The dispute reached a significant stage during the six-day jury trial in 2019, where financial records and expert testimony were used to examine whether EPD operated as a legitimate investment enterprise or relied on incoming investor funds to satisfy earlier obligations. The jury concluded that the company operated as a Ponzi scheme while also determining that certain payments received by Kirkland were made in good faith and for reasonably equivalent value. The litigation later proceeded through additional appellate review. In August 2024, the Ninth Circuit affirmed the judgment, leaving the jury’s findings intact and bringing a lengthy period of litigation concerning EPD Investment Co.’s financial practices to a close.