Professional Documents
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Document Page 1 of 52
Chapter 11 Cases
Judge Kathleen H. Sanberg
v.
Defendants.
COMPLAINT
Douglas A. Kelley, in his capacity as the Trustee of the PCI Liquidating Trust (“the PCI
Liquidating Trustee”), by and through his undersigned legal counsel, for his Complaint against
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Defendants Steve Goran Stevanovich (“Stevanovich”) and the University of Chicago (the
NATURE OF ACTION
1. The Trustee brings this adversary proceeding to protect the value of the PCI
Liquidating Trust (the “Trust”) against further diminution at the hands of Defendant Stevanovich.
2. As the Court is aware, in October 2010 and April 2016, the Trustee commenced
two adversary proceedings (Nos. 10-04396 and 16-04044) against Stevanovich to avoid transfers
of the debtors’ property to Stevanovich and other defendants and to recover said property for the
3. Since filing those actions, Stevanovich repeatedly represented to the Court he has
been experiencing financial difficulties, largely due to the alleged detrimental impact of those
made substantial monetary gifts to the University totaling over a million dollars and has committed
5. At the same time Stevanovich promised to give away millions of dollars to the
University, he has remained a defendant in the adversary proceedings pending before this Court.
Trust beneficiaries made up primarily of the victims of the Petters Ponzi scheme.
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8. Based on the Trustee’s existing claims against Stevanovich, the Trustee now brings
this proceeding pursuant to the Illinois Uniform Fraudulent Transfer Act, 740 ILCS 160/1 et seq.
(“IUFTA”) and Title 11 of the Unites States Code (the “Bankruptcy Code”) to preserve the value
of the Trust’s claims against Stevanovich and to maximize distributions to Trust beneficiaries by
(i) avoiding the transfers and obligations that Stevanovich has made to or incurred for the benefit
of the University and to the detriment of creditors’ rights, (ii) enjoining Stevanovich from making
further payments to the University to the detriment of his creditors, and (iii) recovering the
9. The facts alleged by the Trustee in this pleading are based upon information and
PARTIES
10. Plaintiff is the trustee for the Trust, which was created pursuant to Article 8 of the
Second Amended Chapter 11 Plan of Liquidation dated April 8, 2016 (the “Second Amended Plan”
or the “Plan”). See Second Amended Chapter 11 Plan of Liquidation (Case No. 08-45257, Docket
No. 3263).1
11. Under Article 8 of the Plan, Debtor Petters Company, Inc. (“PCI”) and PCI’s
affiliates (together with PCI, the “Debtors”) contributed virtually all of their assets (including all
pending lawsuits, and all potential claims and causes of action belonging to the bankruptcy estates)
to the Trust.
1
This Court confirmed the Plan on April 15, 2016. See Findings of Fact, Conclusions of Law and
Order Confirming the Second Amended Chapter 11 Plan of Liquidation, dated April 8, 2016 (Case
No. 08-45257, Docket No. 3305) (the “Confirmation Order”).
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12. Under Section 8.9 of the Plan, the PCI Liquidating Trustee has the power to
prosecute all claims and causes of action belonging to the Trust, including any pending or potential
14. Stevanovich is, and at all times relevant herein was, a hedge fund investment
manager, adviser and promoter who was the manager of some of the largest investors in the Petters
Ponzi scheme.
15. At all relevant times, Stevanovich was the founder, president, manager, and/or
managing director of the management companies that manage, inter alia, the Westford Special
Situations Master Fund, L.P., the Epsilon Global Master Fund, L.P., the Epsilon Global Master
Fund II, L.P., the Epsilon Global Master Fund III, L.P. and related funds (collectively the
“Westford Funds”).
16. The University, at all relevant times, was and is a duly organized and existing
corporation chartered under the laws of the State of Illinois, with its principal place of business in
Chicago, Illinois.
17. This Court has subject matter jurisdiction over this adversary proceeding pursuant
to 28 U.S.C. § 1334. The claims asserted in this Complaint arise under Bankruptcy Code and are
related to cases pending before this Court under the Bankruptcy Code.
18. The jurisdiction of this Court is also proper under the Plan and the Confirmation
Order, under which the Court retained exclusive jurisdiction to issue injunctions and such other
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orders as may be necessary or appropriate to advance the Trustee’s duty to preserve or enhance
19. Section 11.1(c) of the Plan provides for the retention by the Court of exclusive
jurisdiction to, inter alia, “issue injunctions or take such other actions or make such other orders
as may be necessary or appropriate to restrain interference with the Plan or its execution or
implementation by any Person,” and “to issue such orders as may be necessary for the
implementation, execution, performance and consummation of the Plan and all matters referred to
herein.” Second Amended Plan § 11.1(c), at 58; see also Confirmation Order ¶ 34, at 42-43
(providing for the Court’s “exclusive jurisdiction over all matters arising out of or related to the
Chapter 11 Cases and the Plan to the fullest extent permitted by law…”).
20. A key feature of the Plan that is instrumental to its implementation is the creation
of the Trust, which is charged with, inter alia, preserving and enhancing the value of the Trust’s
21. In its Findings of Fact and Conclusions of Law, the Court found it may properly
retain jurisdiction “[t]o hear, determine and adjudicate on a non-exclusive basis, any and all Trust
22. This present action falls within the Plan’s definition of “Trust Claims,” which are
“all Claims and Causes of Action asserted, or which may be asserted, by or on behalf of the Chapter
11 Trustee, the Debtors or the Estates, in respect of matters arising prior to the Effective Date,
including any pending or potential Avoidance Actions…” Second Amended Plan § 1.1 at 18.
23. This adversary proceeding is a core proceeding pursuant to 28 U.S.C. § 157(b) (2)
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24. Venue of this adversary proceeding in this Court is proper pursuant to 28 U.S.C.
§ 1409.
25. The Trustee has authority to assert the claims herein pursuant to 11 U.S.C. §§ 323
and 1142(a) of the Bankruptcy Code and Article 8.9 of the Plan.
26. Defendants are subject to personal jurisdiction pursuant to Fed. R. Bankr. P. 7004.
27. Each of the Defendants herein has established minimum contacts with the United
States.
28. Where a federal statute or rule provides for nationwide service of process, as does
Rule 7004, a federal court has personal jurisdiction over any defendant having minimum contacts
29. This Court has personal jurisdiction over Defendants based on their contacts with
30. On October 11, 2008 (the “Petition Date”), Debtor PCI filed a voluntary petition
for relief in this Court under Chapter 11 of the Bankruptcy Code. Between October 11, 2008 and
October 19, 2008, PCI’s affiliates filed voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code. Those cases are now jointly administered before this Court.
31. On October 8, 2010, Douglas A. Kelley, then acting in his capacity as the Chapter
11 trustee, filed an adversary complaint against Stevanovich and the funds and management
companies he controlled. See Douglas A. Kelley, in his capacity as the court-appointed Chapter
11 Trustee of Debtor Petters Company, Inc. and PL Ltd., Inc. v. Westford Special Situations Master
Fund, L.P. et al., Adv. P. No. 10-04396 (the “Initial Transferee Action”).
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32. In the Initial Transferee Action, the Trustee asserts that, from approximately 2001
through 2007, Stevanovich and other defendants loaned approximately $2.5 billion to the Debtors
under 344 separate promissory notes. See Am. Compl. ¶ 114 (Adv. P. No. 10-04396, Docket No.
89).
33. Rates of return on the defendants’ promissory notes ranged from 12% to 48% on
34. During that time, the Debtors made net payments to the defendants in the amount
of approximately $2.8 billion, resulting in false profits for the defendants of approximately $323
35. Of the transfers made to the defendants, 19 of them, adding up to $85.5 million,
were made within two years of the Petition Date. Id. ¶ 122, Ex. J.
36. In the Initial Transferee Action, the Trustee seeks to recover the Debtors’ transfers
made to the defendants, including Stevanovich, as fraudulent transfers and under other theories.
37. On April 6, 2016, the Trustee commenced another adversary proceeding against
Stevanovich and other defendants seeking to recover more than $398 million from those
Fund Ltd. (“Capital Strategies”), n/k/a Barrington Capital Group Ltd., pursuant to section 550(a)
of the Bankruptcy Code. See Douglas A. Kelley, in his capacity as the court-appointed Chapter
11 Trustee of Debtor Petters Company, Inc. and PL Ltd., Inc. v. Steven G. Stevanovich et al., Adv.
38. This Court had avoided approximately $398 million in transfers to Capital
Strategies as an “immediate transferee.” See Order Granting Trustee’s Application for Entry of
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Default Judgment Against Defendant Capital Strategies Fund Ltd. (Case No. 10-04396, Docket
No. 120).
I. This Court Grants the Trustee’s Request to Conduct Rule 2004 Examination
Concerning any Transfers or Donations by Stevanovich to the University |
39. After filing the Initial Transferee Action, the Trustee learned Stevanovich had made
40. On January 10, 2017, the Trustee moved this Court for an order authorizing a Rule
2004 examination of Stevanovich and the University regarding the $10 million gift “and any other
transfers or donations Mr. Stevanovich may have made to the University of Chicago since
September 24, 2008.” Notice of Hearing and Verified Motion for Order Authorizing Rule 2004
Examinations of Steve Goran Stevanovich and the University of Chicago at 1 (Case No. 08-45257,
41. In its Rule 2004 Motion, the Trustee argued that, given the pending adversary
proceedings against Stevanovich, “the Trustee is a ‘creditor’ of Mr. Stevanovich under state
fraudulent transfer laws,” and that “the Trustee may possess a claim to avoid [the $10 million
donation] as a fraudulent transfer under state law.” Rule 2004 Motion at 15.
42. IUFTA defines “creditor” as “a person who has a claim,” and defines a “claim” as
“a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed,
43. In his opposition to the Rule 2004 Motion, Stevanovich argued that he could not be
a subject of a Rule 2004 examination because the Trustee was not a judgment creditor of
Stevanovich.
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Stevanovich within the meaning of the applicable state law on fraudulent transfers.
45. At the January 25, 2017 hearing on the Rule 2004 Motion, counsel for Stevanovich
admitted that the “claim that the trustee has to money that Mr. Stevanovich might owe him is the
lawsuit that’s pending [in the adversary proceedings].” Transcript of Proceedings at 13:18-19
46. By order dated January 25, 2017, the Court granted the Trustee’s Rule 2004 Motion
to examine Stevanovich and the University, inter alia, on whether the $10 million pledge violated
applicable state law on fraudulent transfers. Order Granting Motion for 2004 Examination (Case
II. Documents Produced by Stevanovich and the University Show that Stevanovich
Transferred Substantial Funds to the University and Has Promised to Transfer Even
More |
47. Following the Court’s order granting the Rule 2004 Motion, the University and
Stevanovich produced documents to the Trustee showing that on or around April 30, 2014, the
University recorded a pledge from Stevanovich for $10 million (the “$10 Million Pledge”), though,
on information and belief, no part of that pledge has yet been paid to the University.
48. Stevanovich and the University formalized that pledge by letter dated May 12,
2014.
49. Since being sued in the Initial Transferee Action, Stevanovich has transferred $1.4
million to the University under a preexisting pledge, though, as of 2012, Stevanovich had stopped
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50. Apart from the $10 Million Pledge, the University also expects to receive from
Stevanovich $2.8 million on account of the earlier pledge (the “$2.8 Million Pledge”), whereby
Stevanovich promised to make annual payments of $700,000 from 2012 through 2015.
51. While he was in default of his $2.8 Million Pledge, Stevanovich made periodic gifts
52. When Stevanovich made the pledges and each transfer described above, he was
insolvent or would have been rendered insolvent by incurring those obligations to the University.
53. In opposing the Rule 2004 Motion, Stevanovich admitted that since becoming the
subject of the Initial Transferee Action in 2010, he has suffered a “detrimental impact” with respect
to “[his] personal finances” and that the assets of his Westford Funds also suffered. Steve G.
Stevanovich’s Opp’n to Motion for an Order Authorizing Rule 2004 Examination at 13 (Case No.
08-45257, Docket No. 3705) (the “Opp’n to Rule 2004 Motion”). Specifically, in his supporting
for an Order Authorizing Rule 2004 Examination (Dkt. No. 3700), dated January 20, 2017
(“Stevanovich Dec.”) ¶ 4); see also Epsilon Defendants’ Memorandum in Opposition to Trustee’s
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Motion to Modify Scheduling Order at 21 (Adv. P. No. 10-04396, Docket No. 180) (highlighting
that the “total loss of liquidity as a result of the costs of defending [the Initial Transferee Action]
and the inability to raise new funds has caused the Westford Funds to cease all payments to the
54. Consistent with those admissions about his financial troubles at the relevant time,
Stevanovich repeatedly informed the University he could not fulfil his pledge commitments in the
55. For example, by email dated December 22, 2014, a University representative
informed his colleague that Stevanovich “is going to give us securities – privately held which we
will need to hold and sell at the appropriate time – which would be when [Stevanovich] tells us.”
Ex. C at UChicago_0008718. The email stated the University expected “to receive payment over
the next 3-5 years but not clear how much each year.” Ex. C at UChicago_0008718.
56. By the end of 2016, Stevanovich paid no part of the $2.8 Million Pledge or the $10
Million Pledge, which, according to the University’s representatives, prompted the chairman of
the University’s Board of Trustees, Joseph Neubauer, to question the reason that the University
had accepted Stevanovich’s pledge as well the University’s “due diligence process in making
certain that the donors have the financial capacity to make his/her gifts.” Ex. D at
UChicago_0001209.
57. On or about December 9, 2016, Mr. Neubauer spoke to Stevanovich about his
financial condition and then emailed the University stating that “it was not possible for
Stevanovich to make his payment since 2010 and ongoing,” partly due to the pendency of the
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58. In that email, dated December 21, 2016, Mr. Neubauer summarized Stevanovich’s
[Stevanovich] tried to sell some illiquid assets, but it did not work out. In 2015 he
agreed to a 5 year payout on his pledge and hopes to get some liquidity in 2017 ...
He will need at least 2-3 years to gain additional liquidity and intends to pay his
pledges in full once his liquidity is restored.
Ex. E at UChicago_0000121.
59. By email dated December 26, 2016, Stevanovich confirmed to Mr. Neubauer that
“liquidity is still an issue for me at this time.” Despite his confessed liquidity problems,
UChicago_0008293.
60. In response, Mr. Neubauer wrote to the University, stating “[as] I suspected it may
be a while until we see some real personal cash from Steve. However he is trying and we should
continued to experience liquidity issues, noting that he was engaged in a “restructuring of his
investments into a holding company,” which evidently “delayed access to the liquidity that would
expected “the valuations of his two most promising companies to skyrocket, giving him both short-
term liquidity and exceptional levels of personal wealth in the long-term.” Id. One of those
“promising companies” was a company named “Skyworks,” which Stevanovich claimed had a
63. Just two months after Stevanovich made that representation to the University, an
involuntary bankruptcy petition was filed against Skyworks Global, Inc. based upon its failure to
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pay salaries and office rent. See In re General Aeronautics Corp., Chapter 11 Case No. 17-28510
III. The University Accepted Stevanovich’s $10 Million Pledge After the Trustee
Sued Stevanovich |
64. At all relevant times, and significantly prior to accepting the pledge, the University
knew that Stevanovich was a defendant in a multi-billion dollar lawsuit arising out of his
involvement in the Petters Ponzi scheme and that the pendency of that litigation could affect the
pledge.
65. By email dated April 7, 2014—that is several weeks before the University accepted
“reiterated that there is no possibility for clawback for a gift he might make from the Petters
that “[a]ny gift [Stevanovich] made—cash, securities, future gift or past giving to the Center—
66. On April 8, 2014, another University representative wrote to her colleagues, noting
that “the fact that [Fidelity Charitable] is declining [Stevanovich’s] potential gift (at least initially)
due to potential clawback concerns should raise red flags with us as well.” Ex. H at
UChicago_0008678.
67. On April 9, 2014, Stevanovich emailed the University and asked if the University
had expressed its concern to Fidelity Charitable about the contemplated pledge being subject to a
responded that “this concern about clawback did not come from us,” and explained his colleague
“contacted Fidelity about [Stevanovich’s] potential stock gift [and] only said in passing on the
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phone that [Stevanovich was] involved in a legal matter that had ‘been in the news.’” Ex. I at
UChicago_0008692.
68. The Trustee re-alleges and incorporates by reference the preceding paragraphs 1-
69. The Trustee is a creditor of Stevanovich and has a claim against Stevanovich in the
pending Initial Transferee Action and the Subsequent Transferee Action. In the former action,
Stevanovich admitted that the Trustee filed the Initial Transferee Action “seeking, among other
70. IUFTA provides that an obligation is fraudulent if incurred with actual intent to
hinder, delay or defraud any creditor of the debtor. 740 ILCS 160/5(a)(1).
71. Section 3(b) of the IUFTA provides that “[a] debtor who is generally not paying his
72. In determining actual intent, courts look to the non-exclusive badges of fraud set
forth in the IUFTA, among other considerations. See 740 ILCS 160/5. Here, the $10 Million
Pledge bears multiple badges of fraud, including: (i) Stevanovich incurred the $10 Million Pledge
after the Trustee sued him in the Initial Transferee Action; (ii) by its very nature, the $10 Million
Pledge is a voluntary gift for which Stevanovich receives no consideration that is reasonably
equivalent to the value of the incurred obligation; and (iii) Stevanovich was insolvent when, or
became insolvent shortly after, he incurred the obligation of the $10 Million Pledge.
73. Based on the foregoing, the $10 Million Pledge to the University was incurred with
the intent to hinder, delay or defraud the Trustee and the creditors on whose behalf the Trustee is
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pursuing the Initial Transferee Action and the Subsequent Transferee Action. The $10 Million
74. The Trustee re-alleges and incorporates by reference the preceding paragraphs 1-
75. Section 5(a)(2) of the IUFTA provides, in relevant part, that an “obligation incurred
by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after … the
obligation was incurred, if the debtor made the transfer or incurred the obligation: … without
receiving a reasonably equivalent value in exchange for the … obligation, and the debtor:
(A) was engaged or was about to engage in a business or a transaction for which the
remaining assets of the debtor were unreasonably small in relation to the business
or transaction; or
(B) intended to incur, or believed or reasonably should have believed that he would
incur, debts beyond his ability to pay as they became due.
76. The $10 Million Pledge constituted an incurrence of an obligation within the
77. Stevanovich incurred the obligation of the $10 Million Pledge to the University as
78. Stevanovich incurred the obligation of the $10 Million Pledge while lacking the
financial ability to fulfill that pledge, as evidenced by his failure to pay any part of that pledge or
the pre-existing $2.8 Million Pledge for years since incurring those obligations.
79. As set out above, Stevanovich admitted that he was unable make good on those
pledges due to his inability to generate sufficient cash flow. When Stevanovich incurred the $10
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Million Pledge, he incurred an obligation for which his assets were unreasonably small in relation
80. Stevanovich’s decision to incur the $10 Million Pledge while he remained in default
of his preexisting $2.8 Million Pledge shows that Stevanovich intended to incur, or believed or
reasonably should have believed that he would incur debts beyond his ability to pay as they became
due.
81. The $10 Million Pledge is a fraudulently incurred obligation pursuant to 740 ILCS
160/5(a)(2).
82. The Trustee re-alleges and incorporates by reference the preceding paragraphs 1-
83. Section 6(a) of the IUFTA provides, in relevant part, that an obligation is fraudulent
“as to a creditor whose claim arose before … the obligation was incurred if the debtor … incurred
the obligation without receiving a reasonably equivalent value in exchange for …the obligation
and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer
84. Section 3(b) of the IUFTA provides that “[a] debtor who is generally not paying his
85. The Trustee’s claim within the meaning of the IUFTA arose, at the latest, when the
Initial Transferee Action was commenced in 2010, which was well before Stevanovich pledged
86. The $10 Million Pledge constituted an incurrence of an obligation within the
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87. Stevanovich incurred the $10 Million Pledge to the University as a gift for which
88. Given the evidence of his financial difficulties and demonstrated failure to make
scheduled payments, as set out above, Stevanovich was insolvent at the time of the $10 Million
89. The $10 Million Pledge is a fraudulently incurred obligation pursuant to 740 ILCS
160/6(a)(1).
90. The Trustee re-alleges and incorporates by reference the preceding paragraphs 1-
91. The Trustee is a creditor of Stevanovich and has a claim against Stevanovich the
92. IUFTA provides that a transfer is fraudulent if made with actual intent to hinder,
93. Section 3(b) of the IUFTA provides that “[a] debtor who is generally not paying his
94. As set forth above, in 2014 and 2015, Stevanovich made three monetary gifts to the
95. In determining actual intent, courts look to the non-exclusive badges of fraud set
96. Here, each of the Transfers bears multiple badges of fraud, including: (i)
Stevanovich made each of the Transfers to the University after the Trustee sued him in the Initial
Transferee Action; (ii) by its very nature, each of the Transfers is a voluntary gift for which
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Stevanovich received no consideration that is reasonably equivalent to the value of the transfer;
(iii) Stevanovich disclosed none of the Transfers to the Trustee when he made them; and (iv)
Stevanovich was insolvent at the time of each of the Transfers or became insolvent shortly after
97. Each Transfer was made with the intent to hinder, delay or defraud the Trustee and
the creditors on whose behalf the Trustee is pursing the Initial Transferee Action and the
Subsequent Transferee Action. The Transfers are fraudulent pursuant to 740 ILCS 160/5(a)(1),
and as such may be recovered by the Trustee pursuant to, without limitation, 740 ILCS 160/9(b).
98. The Trustee re-alleges and incorporates by reference the preceding paragraphs 1-
99. Section 6(a) of the IUFTA provides, in relevant part, that a transfer is fraudulent
“as to a creditor whose claim arose before the transfer was made … if the debtor made the transfer
… without receiving a reasonably equivalent value in exchange for the transfer … and the debtor
was insolvent at that time or the debtor became insolvent as a result of the transfer ...” 740 ILCS
160/6(a).
100. The Trustee’s claim within the meaning of the IUFTA arose, at the latest, when
the Initial Transferee Action was commenced in 2010, which was well before Stevanovich made
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102. Given the foregoing evidence of his financial difficulties and demonstrated failure
to make scheduled payments on prior pledges to the University, Stevanovich was insolvent when
he made each of the Transfers or became insolvent as a result of each of those Transfers.
103. Each of the Transfers to the University is fraudulent pursuant to 740 ILCS
160/6(a)(1) and as such may be recovered by the Trustee pursuant to, without limitation, 740
ILCS 160/9(b).
(Against Stevanovich)
104. The Trustee re-alleges and incorporates by reference the preceding paragraphs 1-
105. Section 105(a) of the Bankruptcy Code empowers a bankruptcy court to exercise
its equitable powers, and to fashion relief that is necessary or appropriate to carry out the provisions
of the Bankruptcy Code, including utilizing that broad grant of power to enjoin both the Debtors
and non-debtors from taking actions that may affect the amount of property in the Debtors’ estate.
106. Pursuant to 11 U.S.C. § 105(a), Fed. R. Bankr. P. 7001(7) and 7065, and all other
applicable law, the Trustee seeks to enjoin Stevanovich from making any gifts or charitable
contributions to the University, including any part of the $10 Million Pledge and the $2.8 Million
Pledge, pending the resolution of the Initial Transferee Action and the Subsequent Transferee
Action, and the full satisfaction of any judgment for the Trustee and against Stevanovich that may
107. The Trustee’s claim satisfies all prerequisites for injunctive relief.
108. First, injunctive relief is necessary here to prevent irreparable harm to the Trustee
for which there is no adequate remedy at law because monetary transfers by Stevanovich because
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of his pledges to the University will, inter alia, cause any judgment against Stevanovich in the
Initial Transferee Action and the Subsequent Transferee Action to become uncollectable and/or
will result in severe delay and unrecoverable expense to the Trustee in collecting such judgment
109. Second, the Trustee is likely to succeed on the merits of its avoidance claims as
Stevanovich incurred the substantial pledge obligations and made monetary transfers to the
University after having been sued in the Initial Transferee Action and that Stevanovich received
no equivalent value in return for those obligations and transfers. As set forth above, Stevanovich
was insolvent at the time of making the transfers and incurring the obligations or became insolvent
110. Third, the balance of equities supports injunctive relief here because the requested
injunction is narrowly tailored to restrain payments by Stevanovich solely to the University and
places no restrictions on Stevanovich’s use of assets in the ordinary course of business or for
everyday needs.
111. The injunction would cause no prejudice to the University, which, as described
above, was at the very least aware that the $10 Million Pledge could be rendered avoidable and, in
any event, is not entitled to any payments ahead of the Trust while Stevanovich is insolvent.
Conversely, without the injunction, any dissipation of assets by Stevanovich would cause
substantial harm to the Trustee as he would have to expend the Trust’s resources to institute costly
112. The need for injunctive relief is particularly heightened here because, according to
the University’s records, Stevanovich has told the University he intends to begin making payments
towards his pledges as soon as discovery ends in the Initial Transferee Action and that he has been
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“avoid[ing] any giving to the University because he doesn?t [sic] want the Trustee to use it as a
113. Lastly, injunctive relief would promote the public interest by empowering the
Trustee to defend creditors’ interests and to protect the Trust from further diminution at the hands
of Stevanovich.
(Against Stevanovich)
114. The Trustee re-alleges and incorporates by reference the preceding paragraphs 1-
115. Section 8(a)(3)(A) of the IUFTA provides for injunctive relief against further
disposition by the debtor or a transferee, or both, of any asset transferred or of other property.
116. To obtain injunctive relief under Illinois law, a party “must prove it has a clear and
ascertainable right in need of protection, irreparable harm will result if injunctive relief is not
granted, and no adequate remedy at law exists.” Neuros Co. v. KTurbo, Inc., No. 08-CV-5939,
117. Here, the Trustee has a clear and ascertainable right in need of protection by virtue
118. As shown above, in the absence of injunctive relief, the Trustee will suffer
119. The Court should enjoin Stevanovich from making any gifts or charitable
contributions to the University, including any part of the $10 Million Pledge and the $2.8 Million
Pledge, pending the resolution of the Initial Transferee Action and the Subsequent Transferee
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Action, and the full satisfaction of any judgment for the Trustee and against Stevanovich that may
f. Order such other and further legal and/or equitable relief as may be just and
proper.
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EXHIBIT A
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Message
From: Heather McClean [hmcclean@uchicago.edu]
Sent: 12/22/2014 8:39:37 AM
To: Denise Chan Gans [dchangans@uchicago.edu]
Subject: Fw_ stevanovich LOG.pdf
From:
To:
subject:
Date:
Heather McClean
Denise Chan Gans
Fw: stevanovich LOG
Monday, December 22, 2014 8:39:37 AM
Can we discuss re the equities? I think you answered this before. will check my messages.
From: Kenneth Manotti <kmanotti@uchicago.edu>
Sent: Monday, December 22, 2014 8:31 AM
To: Heather McClean
Subject: RE: stevanovich LOG
Hi Heather:
Thanks.
He is now interested in designating the 10M to name the Institute for the Formation of
Knowledge_ (I need to confirm he exact_title).
,•-•-•-•-•-•-•- -. .-•- -•-•- -•-~ ~-•- •-•- -•-•-•-•-•-• -•-• •-•- -•
Redacted
He is going to give us securities - privately Tield which we will need to hold and sell at the
appropriate time - which would be when he tells us.
We expect to receive payment over the next 3-5 years but not clear how much each year.
Can you prepare a revised LOG to reflect the designation and the payment plan?
Do you see any issues with the private securities source?
Ken
From: Heather McClean
Sent: Monday, December 22, 2014 7:48 AM
To: Kenneth Manotti; Cheri Chenoweth
Subject: RE: stevanovich LOG
Ken,
I've attached the version of the agreement that they eventually signed. This is what was sent to Paul I
and I believe he filled in the pledge amount ($10NIM) and changed the due date to 2019. I've attached
the signed version we have as well. Is this what you were looking for?
From: Kenneth Manotti
Sent: Friday, December 19, 2014 6:39 PM
To: Cheri Chenoweth; Heather McClean
Subject: stevanovich LOG
Confidential UChicago_0008718
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can you please locate the latest LOG that I sent him and resend to me as a word
document?
Thanks,
Ken
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EXHIBIT D
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Message
From: Ciaran Escoffery [/O=THE UNIVERSITY OF CHICAGO/OU=EXCHANGE ADMINISTRATIVE GROUP
(FYDIBOHF23SPDLT)/CN=RECIPIENTS/CN=CESCOFFERY]
Sent: 4/11/2017 6:50:28 PM
To: Kenneth Manotti [kmanotti@uchicago.edu]
Subject: Fwd: Joe N phone call
Ciaran S. Escoffery
Senior Director, Strategic Planning and Board Relations
University of Chicago
FYI only
UChicago_0001207
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He was not happy (?) that I did not tell him that we
had been discussing Dec. 31,2019 as a potential
campaign end date.
His issue was that I told Dennis Keller this and not
him.
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Joe then asked me why we accepted Steve's pledge to
SIFK and asked about our due diligence process in
making certain that the donors have the financial
capacity to make his/her gifts.
Ken
Ken Manotti
1.773.702.0685 (office)
Redacted
UChicago_0001209
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Message
From: Kim Taylor [/O=THE UNIVERSITY OF CHICAGO/OU=EXCHANGE ADMINISTRATIVE GROUP
(FYDIBOHF23SPDLT)/CN=RECIPIENTS/CN=KIMTAYLOR918]
Sent: 12/21/2016 6:44:37 PM
To: Joseph Neubauer [neubauer-joe@nextegggroup.com]; Kenneth Manotti [kmanotti@uchicago.edu]
Subject: Re: Steve Stevanovich Pledge Payments
Joe -
Best,
Kim
Kim Taylor
Vice President and General Counsel
The University of Chicago
5801 S. Ellis Ave; Suite 619
Chicago, IL 60637
773-702-7749
kimtaylor@uchicago.edu
DISCLAIMER: This message (including attachments, if any) contains confidential and proprietary information, some or all of which may be legally
privileged or otherwise protected from unauthorized use, disclosure, distribution or copying. It is for the intended recipient only. If you are not the
intended recipient, you may not use, disclose, distribute, copy, print or retain this message or any part of it. If you have received this message due
to an addressing, transmission or other error, please so notify the sender immediately by replying to this message and then please delete this
message from your computer.
Ken —
1
I spoke with Steve Stevanovich on December 9" regarding his two commitments to the Capital Campaign, i.e. remaining
-- --- -- --- -- --- -- --- --- -- Redacted...................................
.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-...-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-....bnd the $10MM commitment(made in
April 2014)for The Stevanovich Institute on the Formation of Knowledge.
He explained that several factors combined to cause his funds to be illiquid. The bankrupt Petters Fund, which was
accused of a Ponzi scheme is Minneapolis, drew Stevanovich's funds Epsilon Investment Management and Westford
Asset Management into the suit in 2010. The Trustee was seeking to recover money from Stevanovich's, which was a
feeder fund into the Petters Fund. Thus it was not possible for Stevanovich to make his payments since 2010 and
ongoing.
As to the Institute for Knowledge, he stated that he told the University that "I don't have any liquid assets." He tried to
sell some illiquid assets, but it did not work out. In 2015 he agreed to a 5 year payout on his pledge and hopes to get
some liquidity in 2017. The SEC cleared him of any misconduct. He will need at least 2-3 years to gain additional
liquidity and intends to pay his pledges in full once his liquidity is restored. "I owe the University of Chicago quite a bit
and intend to do even more once I have liquidity". He intends to convert his "fund structure" to a holding company (a la
Berkshire Hathaway) and have liquidity thereafter.
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Redacted
I thanked him for sharing this information, and we will catch up again in 2017.
Joe
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EXHIBIT F
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Message
From: Kenneth Manotti [/O=THE UNIVERSITY OF CHICAGO/OU=EXCHANGE ADMINISTRATIVE GROUP
(FYD160HF23SPDLT)/CN=RECIPIENTS/CN=KMANOTTI]
Sent: 12/29/20161:39:09 PM
To: Joseph Neubauer [neubauer-joe@nextegggroup.com]; Robert J. Zimmer [rzimmer@uchicago.edu]
Subject: RE: Stevanovich Institute on the Formation of Knowledge building is
Joe — thank you again for taking the time to speak with him about this.
Ken
From:Joseph Neubauer[mailto:neubauer-joe@nextegggroup.com]
Sent:Thursday, December 29, 2016 9:25 AM
To: Robert J. Zimmer <rzimmer@uchicago.edu>; Kenneth Manotti <kmanotti@uchicago.edu>
Subject: Fwd:Stevanovich Institute on the Formation of Knowledge building is
As I suspected it may be a while until we see some real personal cash from Steve. However he is trying and we
should stay with him next year.
Hi Joe,
Understood. I can't make that commitment as yet, but will try to work towards it in 2017.
In the meantime, one way that I can bring funding into the University now is thru the
Stevanovich Center for Financial Mathematics. Last year(in November of2015)I was able to
get a financial firm (Ortec: http://www.ortec-finance.com)interested in providing funding to the
Center. I then discussed this with Per Mykland who is the Faculty Director ofthe Center. Per
did follow up and discuss internally, but the discussion stalled as we needed a way to structure
this as a donation rather than income to the University. During the summer,Rocky Kolb (the
Center falls under the Physical Sciences Division)suggested that since UChicago does an
evaluation ofthe mission of their Centers & Institutes every five years and since it has now been
ten years without a mission evaluation for the Center, he suggested that during the 2016-2017
school year we try to find a solution as part ofthat mission review. For whatever reason, the
mission review was not able to start this fall, however, Bob Zimmer pointed out that various
UChicago departments(IME,Chemistry, etc..) already work with outside companies who in turn
provide funding. During the last Trustee board meeting this past November I discussed the issue
with Kim Taylor and she suggested a way forward using the Booth Lab courses as a
model. Rocky is meeting with Doug Skinner in the first week of January to discuss the Booth
Lab courses and how we might be able to use a similar portal. I am hoping that this will now
move forward. Ortec is still interested and I have other Wall Street type firms that are interested
as well. If the momentum starts to slow again, I may need to ask your help.
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Thank you,
Steve
Steve, thanks very much for your generous offer to assist the Institute on the Formation of
Knowledge. In my opinion the most helpful financial assistance that they can use is a three year
cash payment of$250000 annually for expendable funds while your significant liquidity is
restored. If you can make this additional cash commitment and start it next year that will be very
much appreciated. Thx for continuing to support the U of C
M Joe,
I hope you are enjoying your holiday. Ijust had a thought re our last call re the unforeseen
expenses for the SIFK building renovation. I understand that what is really needed is cash to fix
the problem. As I mentioned, while I am working on it and getting closer to accomplishing it,
liquidity is still an issue for me at this time. What I wanted to ask is if increasing my pledge
could help with this issue in any way? I know that the repairs need cash, but I don't know if a
pledge increase can help in any way with internal allocations? If that can help in any way,I'm
happy to do so.
Thank you,
Steve
[cid:2EOB85D9-7694-4592-8E06-DEA78B5F5D6C]
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CONFIDENTIALITY NOTICE: The information in this electronic mail transmission is legally
privileged and confidential information intended only for the use ofthe individual or entity
named above. If the reader ofthis message is not the intended recipient, you are hereby notified
that any dissemination, distribution or copy ofthe transmission is strictly prohibited. If you have
received this transmission in error, please delete the message and notify us immediately.
This communication is for informational purposes only. This communication is not intended as
an offer or solicitation for the purchase or sale of any financial instrument or as an official
confirmation of any transaction. An investment in the Fund involves a high degree of risk. It
should not be assumed that an investment in the Fund will be profitable or that the performance
ofthe Fund will equal its past performance. Actual investment results may vary. All market
prices, data and other information are not warranted as to completeness or accuracy and are
subject to change without notice. Any information contained in, or attached to this
communication is qualified in its entirety by the certain Offering Memorandum or Private
Placement Memorandum ("Offering Documents")relating to the Fund. In the case of conflicting
information, only the Offering Documents shall govern. Interested parties should not rely on any
information contained herein that is in conflict with the Offering Documents.
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EXHIBIT G
THE UN 1 VERS I TY OF Prospect Actions and Entity Notes
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CHICAGO Document Page 43 of 52 X
Action Date Due Date Date Added Lead Participants Team Contact Type Status
7/26/17 7/28/17 Seeley, Paul A. Booth Principal Gifts Visit Done
Action Summary
Steve shared update on legal troubles, busines prospects, and plans for giving
Action Text
***ACTION TEXT ABRIDGED***
Seeley met Steve for lunch at Volare to get his news and tee up a first meeting with Madhav Rajan. Steve explained the hold-up of his pledge
payments and annual giving. The Petters bankruptcy suit is still ongoing. Steve withdrew from the settlement process that he initiated two years
ago because the outcome of a similar case turned the suit in his favor. Since then the presiding judge retired and was replaced, the trustee
overseeing the suit was replaced by a committee of creditors, and the law firm engaged by the trustee was replaced twice. The new judge is
motivated to clear the case from the court by expediting the calendar of discovery and settlement. Steve has avoided any giving to the University
because he doesn?t want the Trustee to use it as a sign of profligacy or invite further harassment from the Trustee?s law firm. Apparently, the
University received a subpoena from the Trustee asking for information about Steve?s giving. Discovery is supposed to conclude on January 1,
ending the need to withhold all giving. Settlement is supposed to conclude by March 1.
The restructuring of his investments into a holding company has also delayed access to the liquidity that would allow him to begin payment of his
open pledges. Apparently, this requires separate deals for his hundreds of investors, both domestic and international, who all reside in different
jurisdictions with different tax strategies depending on the type of entity. Steve?s primary investors are pension funds(McKinsey, Bridgestone,
Shell, and City of Seattle were some he mentioned). He did not have a timeline for when he expected these negotiations to close.
Steve also expects the valuations of his two most promising companies to skyrocket. giving him both short-term liquidity and exceptional levels of
personal wealth in the long-term. ADP is a company that desulpherizes crude oil using a catalyst, using much lower levels of heat, energy, and
waste products than the current industrial methods. He is about to launch a test site next to Marathon refinery in Ohio and if successful could
lead to a full-on, refinery wide deal. Argonne connections have been helpful identifying advisors. Skyworks is the gyrocopter manufacturer
formerly known as Groen. Steve is exploiting the potential military applications and markets of the technology, hired a former general as CEO
and recruited Senator Byron Dorgan, fellow member of the Argonne Board, to his advisory board. He is also exploring Argonne battery
technologies and electric engine prototypes to make develop a fully electric gyrocopter. Current valuation of ADP is $700M. Skyworks, $1.76.
He thinks these could both be multi-billion dollar companies. Oil companies, for example, spend $3 trillion a year on desulpherization.
Steve opened up a conversation about his current thinking about philanthropy. He doesn?t want to use his wealth to set up a foundation and was
openly critical of the Bill Gates approach to funding small projects here and there without a cumulative impact. He wants to partner with the
University do something transformative in the same way as, but on a much larger scale than the Pearson brothers. He said his prior to the
University was useful, but in no way transformative. He wants to create ?a legacy,? but one that would probably not bear his name as a brand,
but would not be anonymous either (like Homer). He doesn?t want to name or endow an existing structure, such as the College, and he doesn?t
believe in scholarships, saying he paid his own way and others should as well. A nine-figure gift could be possible in the next five-ten years.
Quick update on his daughters. Alexandra, the budding marine, developed conservative political views in her freshman year in the College and
became a pariah for her freshman roommates and on the girls tennis team. She?s now an English major, developing an interest in creative
writing, and living at home.
Note Summary/Description
1000395765 Katarina Stevanovich attended Pine Crest School
Entity Note Text
1000395765 Katarina Stevanovich attended Pine Crest School
*ton
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Depending on how Ken responds, you might let him know about Steve's offer to have his attorneys
speak with us. This might address any concerns about accepting/counting a pledge and/or payments
at this point, but is separate from the whole question of whether we can accept his closely held
stock as a gift asset.
Denise
x 2-0882
r en,
I know there has been a lot of activity surrounding Steve and his pledge over the past week. Paul
and Heather have been handling it beautifully.
I want to chime in to share what I said to Paul last night about this. I do not know the details of the
situation as well as Paul does, but the fact that Fidelity is declining a potential gift (at least initially)
due to potential clawback concerns should raise red flags with us as well. I am guessing that Andy
Alper and necessary individuals on the Board know about the situation. It would be my
recommendation that before we(a)count a signed pledge agreement,(b) agree to name anything in
recognition for a pledge from Steve and (c) accept any pledge payments from Steve, we have
confirmation from the Board that they are comfortable accepting a gift from Steve Stevanovich at
this point. This would protect us/the University later if any questions are raised and in a worst case
scenario would show that a deliberate decision was made. Perhaps this is all already in place. I do
riot see this as much as a legal risk (although being the subject of clawback suit is a legal risk) as
much as one of reputation,/fiduciary duty/corporate responsibility.
I'd be happy to reach out to Russ for his opinion also, if you like.
Denise
x 2-0882
Hi Ken,
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I just had a short call with Steve who asked me about my conversation with Fidelity on Friday. He
was upset to hear about Fidelity's concerns about the Petters suit. He said that he and his attorneys
would be able to overcome any concerns Fidelity might have if they were able to brief them on the
situation. However, they can't disclose any of the relevant information unless Fidelity signs a
confidentiality agreement protecting this personal information. It seems there's confusion about
what the confidentiality agreement covers: this personal/legal information or the possible
transaction of donating his shares to the Fidelity DAF. Steve has no issues with the confidentiality of
the latter.
Steve reiterated that there is no possibility for clawback for a gift he might make from the Petters
bankruptcy court. My sense is that he'd like some reassurance the University has no such concern.
Any gift he made—cash or securities, future gift or past giving to the Center—would be vulnerable
to such a clawback claim.
Steve's attorney is supposed to talk to Fidelity later this morning, early afternoon.
Paul
Paul Seeley
Executive Director, Regional Major Gifts
University of Chicago
7th Floor
5235 South Harper Court
Chicago, IL 60615
w. 773-702-8884
m. 773-612-7544
http://www.uchicago.edu
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Message
From: Paul Seeley [/O=THE UNIVERSITY OF CHICAGO/OU=EXCHANGE ADMINISTRATIVE GROUP
(FYDIBOHF23SPDLT)/CN=RECIPIENTS/CN=PSEELEY]
Sent: 4/9/2014 9:44:03 AM
To: 'Steve'[steve@email_-path.com]
Subject: RE: Redacted
Steve,
This concern about: clawback did not come from us. My colleague who contacted Fidelity about your potential stock gift
only said in passing on the phone that you were involved in a legal matter that had "been in the news."
Thanks for your offer to make your attorneys available to the University (our general counsel) if we wart more
information.
Paull
Paul Seeley
Executive Director, Regional Major Gifts
University of Chicago
.cn
Floor
523.5 South Harper Court
Chicago, IL 60615
w. 773-702.-8884
-- --- Redacted -- -
http://www.uchicago.edu
Hi Paul,
Please see the below from John. I told him to see if the NDA with Fidelity works before reaching out to the
other person you suggested. We will reach out to the other person if the process with Fidelity stalls for some
reason.
As an aside, as you can see below, Fidelity told John that it is UChicago that has the issue with the claw
back. Please let me know if you would like me to arrange for my Petters counsel to speak with any UChicago
counsel re this. As an aside, we have already informed the US Trustee in the Petters matter about this potential
donation.
Thanks,
Steve
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Date: April 8, 2014 at 5:19:03 PM EDT
To: Steve <steve@email-gath.com>
Steve:
Fidelity Charitable has agreed the NDA is the next step and they are preparing a new draft. looks like they have agreed
with all our proposed changes. We will send it to you for review upon receipt.
They mentioned the UoC had issues with the Petters claw back and that was holding up the N CL's. Now back on track.
Would you want to stay with Fidelity Charitable at this point? Or change to Charitable Solutions LLC?
1ohnM
Hi John,
I don't know if you heard back from the Fidelity Charitable guy re signing a proper confidentiality agreement,
but here is another person that with whom the University works to whom you can reach out.
Thank you,
Steve
Steve,
Here's another contact we have who provides the same type ofservice as Fidelity.
Pahl
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consulting firm www.emergencyassistmicefdn.org - a national charity for employee-to-employee
giving allowing employers to private label employee emergency assistance and disaster relief
funds.
Paul Seeley
Executive Director, Regional Major Gifts
University of Chicago
7th Floor
5235 South Harper Court
Chicago,IL 60615
w. 773-702-8884.........
Redacted
iiip .7www.uchicago.edu
Original Message
From: Steve Stevanovich [mailto:Steve cr sgsfunds.com]
Sent: Tuesday, April 08,2014 3:51 PM
To: Kenneth Manotti
Cc: Paul Seeley
Subject: Re: Redacted
Thanks Ken. Let me know ifthere is a plan B if Fidelity refiises to sign a confidentiality
agreement. Are there any other companies with which the University works? I don't understand
why they would refuse to sign a confidentiality agreement, it seems like such a minor thing. Why
is it so important to them to publish my private information? Its like someone there wants to be
able to write a book!
Hi Steve:
Redacted
._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._.
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Redacted
............................................................................................................
I
I know that I have sent you a lot ofinfonnation about possible areas for support. I hope ...................
._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._.__._._._._._.__._. it has been
informative and helpful; ._._. ---- ---- ---- _....................................................
Redacted_._._._._._._._._._._._._._._._._._._._._................
.Redacted
L...............................................................................................................................
I look forward to continuing our conversation. If at all possible, I hope we can finalize your intent
before the May retreat in Paris.
With regards
Ken
Ken Manotti
Vice President
Alumni Relations and Development
University of Chicago
:
1 773.702.0686
_._._._._ ---------------------,
Redacted
_._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._._.
-Redacted
...........................................................
...._._._._.__._._._._._._._._._._._._._._._._._._._._._._._._._._.
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and other information are not warranted as to completeness or accuracy and are subject to change
without notice. Any information contained in, or attached to this communication is qualified in its
entirety by the certain Offering Memorandum or Private Placement Memorandum ("Offering
Documents")relating to the Fund. In the case of conflicting information, only the Offering
Documents shall govern. Interested parties should not rely on any information contained herein that
is in conflict with the Offering Documents.
This message contains confidential information intended only for the use ofthe addressee(s) named above and
may contain information that is legally privileged. If you are not the addressee, or the person responsible for
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This message contains confidential information intended only for the use ofthe addressee(s) named above and
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Confidential UChicago_0008966