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Full title: Declaration of David Alfaro (RE: related document(s)594 Motion Miscellaneous Relief). Filed by Debtor Professional Financial Investors, Inc. (Marum, J.) (Entered: 04/29/2021)

Document posted on Apr 28, 2021 in the bankruptcy, 54 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

It is my understanding that Ms. Albanese is the trustee of an irrevocable trust holding PFI shares and the trustee of a revocable trust holding PISF shares.On September 29, 2020, the SEC filed a complaint against Mr. Wallach alleging 2 that he “misappropriated more than $26 million from investors as part of a larger fraudulent 3 scheme, devised by PFI’s now deceased founder, in which approximately $330 million was raised4 from more than 1,300 investors in PFI,…PISF…and other related entities” from at least 5 September 2015 through May 2020.21 The SEC also alleged that “a significant portion of investor6 funds was used in a Ponzi-like fashion to pay existing investors.Also, according to the SEC, 7 Mr. Casey and Mr. Wallach knew that the revenues generated by PFI properties could not meet th8 obligations of PFI and PISF to pay interest and distributions, but that they hid the truth from 9 investors, and continued to falsely reassure investors, even during the COVID-19 pandemic, that 10 PFI had the financial reserves to survive.23 11 III. Casey and Mr. Wallach represented to investors with respect to how the PISF Notes would be 17 secured, in its complaint, the SEC alleges that Mr. Wallach “made verbal representations to these 18 investors that monies raised would be primarily used to purchase real property and make 19 improvements to real property already owned by PFI or PISF.”49 Additionally, in the Class Actio20 Complaint, Plaintiff investors characterized the PISF Notes as allowing “investors to participate i21 PFI’s real estate projects without participating in any specific deal” and further allowing 22 “investors to share in profits from the rental and ultimate sale of the properties managed and 23 owned by [the Company].”50 24 25 48 As more fully 6 enumerated under Sections VI and VII of this Declaration, the evidence suggests that this same 7 technique was followed by Mr. Casey and Mr. Wallach to continue their Ponzi-like activities by 8 avoiding the need to pay existing investors interest and principal when due—while at the same 9 time raising new capital from banks and new investors to obfuscate mounting losses within the 10 PFI Enterprise.

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1 SHEPPARD, MULLIN, RICHTER & Richard A. Lapping (SBN: 107496) HAMPTON LLP TRODELLA & LAPPING LLP 2 A Limited Liability Partnership 540 Pacific Avenue Including Professional Corporations San Francisco, CA 94133 3 ORI KATZ, Cal. Bar No. 209561 Telephone: (415) 399-1015 J. BARRETT MARUM, Cal. Bar No. 228628 Facsimile: (415) 651-9004 4 MATT KLINGER, Cal. Bar No. 307362 Email: Rich@TrodellaLapping.com GIANNA SEGRETTI, Cal. Bar No. 323645 5 Four Embarcadero Center, 17th Floor Conflicts Counsel for Debtors and Counsel foSan Francisco, California 94111-4109 Professional Investors 28, LLC and PFI 6 Telephone: 415.434.9100 Glenwood, LLC Facsimile: 415.434.3947 7 Email: okatz@sheppardmullin.com bmarum@sheppardmullin.com 8 mklinger@sheppardmullin.com gsegretti@sheppardmullin.com 9 Counsel for Debtors 10 UNITED STATES BANKRUPTCY COURT 11 NORTHERN DISTRICT OF CALIFORNIA, SAN FRANCISCO DIVISION 12 In re Case No. 20-30604 13 PROFESSIONAL FINANCIAL (Jointly Administered) 14 INVESTORS, INC., a California corporation, et al., Chapter 11 15 Debtors. DECLARATION OF DAVID ALFARO 16 17 I, David Alfaro, declare and state as follows: 18 1. Except as otherwise indicated herein, the facts set forth in this Declaration are 19 within my personal knowledge or are based upon information provided to me by the Debtors’ 20 employees or advisors and maintained in the ordinary course of the Debtors’ business. If called 21 upon to testify as a witness, I could and would testify competently thereto. 22 2. I submit this Declaration to provide background and other relevant financial, 23 accounting, and operational information (as defined in ¶1) to assist Michael Goldberg, the 24 independent director of Professional Financial Investors, Inc. (“PFI”) and Professional Investors 25 Security Fund, Inc. (“PISF,” and together with PFI and other related entities, including limited 26 partnerships and limited liability companies, the “Company”), in his determination of whether or 27

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1 not the Company was operated as a Ponzi scheme by Kenneth Casey and Lewis Wallach from at 2 least January 1, 2007 until Mr. Casey’s death in May 2020. 3 3. I serve as a Senior Managing Director at FTI Consulting, Inc. (together with its 4 wholly owned subsidiaries, agents and independent contractors, “FTI” 1) and, as such, am 5 authorized to make this declaration of behalf of FTI. 6 I. EXPERIENCE AND QUALIFICATIONS 7 4. I am over the age of 21 years and am legally competent to make this Declaration. 8 copy of my Curriculum Vitae (“CV”), which summarizes my education and relevant work 9 experience, is attached hereto as Appendix A. As more fully enumerated in my CV, I have 10 provided testimony in numerous matters involving alleged federal trademark infringement, 11 misappropriation of trade secrets, unfair competition, intentional interference with prospective 12 business, breach of fiduciary obligation, theft, fraud, RICO,2 and other similar allegations, which 13 depended upon the recovery and analysis of financial, accounting, human resource, and 14 operational data. 15 5. I regularly provide privileged consulting and expert witness services to financial 16 institutions, investment organizations, and corporations relating to enterprise-wide operations, 17 including the assessment of their conformance to policies and procedures and the identification 18 and quantification of breaches thereon that may have resulted in various forms of customer and / 19 or investor harm. 20 6. During my professional career I have provided services on over 200 engagements, 21 over 100 of which have been investigative in nature, including landmark cases such as Bernie 22 Madoff, Scott Rothstein, Enron, and many more high-profile Ponzi or Ponzi-like cases where my 23 involvement was not of public record. 24 25 1 FTI is a global business advisory firm with offices in major business centers in the United 26 States and around the world. The firm provides forensic accounting, financial and economic analyses, strategic financial advisory services, and other business consulting solutions to man27 of the world’s largest business enterprises and top 100 law firms. 2

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1 7. In the capacity of investigator and fact finder, I have been designated and approve2 by the Financial Industry Regulatory Authority (“FINRA”) as the independent third-party 3 examiner over a major financial institution to review and assess alleged violations of federal 4 securities laws. I have also been approved by the Federal Trade Commission (the “FTC”) as the 5 independent compliance monitor over a large financial services company to conduct biennial 6 reviews of the company’s end-to-end operations, including their debt servicing. As the current 7 monitor, I regularly provide the FTC with a periodic and objective assessment of the company’s 8 compliance with their settlement with the government, which includes investigating ongoing 9 complaints of alleged wrongdoing received by the FTC, the Consumer Financial Protection 10 Bureau (“CFPB”), Better Business Bureau, and other Federal and State agencies. 11 8. Over my career, and in relation to investigations that I have conducted, I have 12 provided formal and informal testimony to the Federal Bureau of Investigation (the “FBI”), the 13 U.S. Securities and Exchange Commission (the “SEC”), the U.S. Department of Justice (the 14 “DOJ”), the U.S. Attorney’s Office, the U.S. Department of the Treasury, the U.S. Department of 15 the Interior, the CFPB, the FTC, FINRA and other Federal agencies. I have also provided formal 16 testimony in Federal and State Courts (See Appendix A). 17 II. THE EVENTS LEADING UP TO OR AROUND FTI’S RETENTION 18 9. PFI and PISF are real estate investment firms specializing in multi-unit residential 19 and commercial properties in Northern California. At the time of Mr. Casey’s death, PFI and PIS20 collectively owned or had interests in entities that in turn owned approximately 71 properties.3 21 PISF’s primary activity was raising capital through notes purportedly secured by limited 22 partnership interests of certain limited partnerships that each owned real property (“PISF Notes”). 23 10. Shortly after Mr. Casey’s death in early May 2020, concerns arose regarding the 24 structure and investment practices of the Company. These concerns were identified by Eric 25 Sternberger of Ragghianti Freitas LLP, counsel representing Charlene Albanese, the trustee of Mr26 27 3

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1 Casey’s estate and Mr. Casey’s ex-wife.4 Based on his review of the Company’s financial records2 in mid-May 2020, Mr. Sternberger suspected that Mr. Casey, along with PFI’s then President, Mr. 3 Wallach, may have engaged in fraudulent conduct in connection with the operation of the 4 Company. Subsequently, on behalf of the Trustee, Mr. Sternberger alerted law enforcement 5 agencies about this potential fraud.5 6 11. Shortly after being alerted of the potential fraud, the FBI commenced an 7 investigation into suspected wire fraud, embezzlement, and money laundering involving both PFI 8 and PISF, as well as Mr. Casey and Mr. Wallach.6 9 12. In June 2020, Mr. Sternberger, as the Company’s counsel, informed the investors 10 of the Company that: 11 (a) Questions existed involving the structure and investment history of 12 the Company;7 13 (b) The SEC is conducting a fact-finding investigation and that the 14 Company is working with the SEC to analyze the investors’ 15 investments;8 and 16 17 18 19 20 4 It is my understanding that Ms. Albanese is the trustee of an irrevocable trust holding PFI shares and the trustee of a revocable trust holding PISF shares. Mr. Casey was the trustor of 21 both trusts. Ragghianti Freitas LLP was retained by PFI pursuant to Ms. Albanese’s authority 22 as director of PFI and by PISF in her capacity as the trustee of the revocable trust. It is my further understanding that Mr. Sternberger was engaged by Ms. Albanese to assist with the 23 ownership transition and management of the Company. Source: “Memo to File” prepared by Eric Sternberger, dated May 27, 2020, p. 1. 24 5 Source: Declaration of Michael Hogan in Support of the Bankruptcy Filing and Early Case 25 Administration Motions, filed on July 26, 2020. 26 6 Source: Declaration of Federal Bureau of Investigation Special Agent Mario C. Scussel, datedSeptember 3, 2020, p. 2. 27 7 Source: Letters from Mr. Sternberger to the investors of the Company, dated June 4, 2020. 8

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1 (c) Michael Hogan of Armanino LLP (“Armanino”) had agreed to serv2 as the Chief Restructuring Officer (“CRO”) of PFI.9 3 13. In June and July 2020, Mr. Hogan informed the Company’s investors of corporate 4 governance changes involving the resignation of each of the PFI corporate officers as well as the 5 resignation of Ms. Albanese from the PFI board of directors once an independent director was 6 retained. In a July 14, 2020 letter, Mr. Hogan also indicated that the Company had insufficient 7 equity to permit the return of all of investors’ principal, and that the initial investigation of 8 irregularities identified complex investment relationships, including conversions from one 9 investment type to another creating complexities that would need to be addressed.10 10 14. On July 2, 2020, a class action complaint was filed in Marin County, California 11 Superior Court against PFI, PISF, Mr. Wallach, and Ms. Albanese (the “Class Action 12 Complaint”). The filing included the following claims: California statutory securities fraud, sale o13 unregistered securities, breach of fiduciary duty, negligent misrepresentation, and breach of 14 contract.11 15 15. On July 16, 2020, certain creditors of PISF commenced an involuntary Chapter 11 16 bankruptcy action against PISF, Case No. 20-30579 (the “PISF Case”).12 On July 26, 2020, PISF 17 filed a consent to the entry of an Order for relief in the PISF Case, which the court entered on 18 July 26, 2020.13 19 9 Source: Declaration of Michael Hogan in Support of the Bankruptcy Filing and Early Case 20 Administration Motions, dated July 26, 2020, p. 2, lines 7-10. Subsequently, in July 2020, MrHogan was appointed as the CRO of PISF. 21 10 Source: Letter from Mr. Hogan to the investors of the Company, dated July 14, 2020. 22 11 Source: Susan Aiken, individually and on behalf of all others similarly situated v. Professiona23 Financial Investors Security Fund, Inc., a California corporation; Lewis Wallach; and CharlenAlbanese, personal representative of the Kenneth J. Casey Estate, deceased, filed July 2, 202024 in Superior Court of the State of California In and For Marin County, Case No. 2001560. 25 12 Source: Official Form 205, Involuntary Petition Against a Non-Individual, United States Bankruptcy Court for the Northern District of California, Chapter 11, Professional Investors 26 Security Fund, Inc., filed July 16, 2020, Case No. 20-30579. 27 13 Source: Consent to Entry for Order for Relief, United States Bankruptcy Court for the Northern District of California, Chapter 11, Professional Investors Security Fund, Inc., filed

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1 16. On July 26, 2020 (the “Petition Date”), PFI filed a voluntary petition for relief 2 under chapter 11 of title 11 of the United States Code, Case No. 20-30604 (the “PFI Case”, and 3 together with the PISF Case, the “Bankruptcy Cases”) and sought joint administration with the 4 PISF Case, which the court granted on July 27, 2020.14 5 17. Also, on July 26, 2020, a declaration by Mr. Hogan was filed in support of the 6 bankruptcy filing. The declaration set forth, among other things, the following: 7 (a) “[O]ver a period of at least three decades, Mr. Casey appears to hav8 operated a fraudulent scheme in which investors loaned funds to the9 [Company], with a significant portion of those funds being used to 10 service the debt owed to existing investors and to personally enrich 11 Mr. Casey himself.” 15 12 (b) “Others associated with the [Company] also appear to have been 13 involved and benefitted from the scheme…” 16 14 (c) “The [Company], under their new management led by [Mr. Hogan],15 initiated a forensic review of the investments by and payouts of the 16 [Company], as well as their financial operations and reporting and 17 are continuing to review and analyze a significant number of 18 additional documents and conduct further investigation to determin19 the extent of such liabilities and assets.” 17 20 21 14 Source: Official Form 201, Voluntary for Non-Individuals Filing for Bankruptcy, United States Bankruptcy Court for the Northern District of California, Chapter 11, Professional 22 Financial Investors, Inc., filed July 26, 2020, Case No. 20-30604; Application Requesting Joint Administration of Chapter 11 Cases, United States Bankruptcy Court for the Northern 23 District of California, Chapter 11, Professional Financial Investors, Inc., filed July 26, 2020, 24 Case No. 20-30604; Order Directing the Joint Administration of Related Cases, United States Bankruptcy Court for the Northern District of California, Chapter 11, Professional Financial 25 Investors, Inc., filed July 27, 2020, Case No. 20-30604. 26 15 Source: Declaration of Michael Hogan in Support of the Bankruptcy Filing and Early Case Administration Motions filed on July 26, 2020, p. 4, lines 18-21. 27 16 Id., p. 4, lines 21-22. 17

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1 (d) “During the pendency of the SEC’s review, the [Company] 2 suspended making principal and/or interest payments to the PISF 3 Straight Lenders…also suspended payment on the second lien deed4 of trust. New debt financing and investments have also been 5 halted…”18 6 (e) “The finances of the [Company] are such that, without accepting 7 new investment or monies from PISF Straight Lenders, neither PIS8 nor PFI have sufficient cashflow to meet their monthly interest 9 obligations to the existing PISF Straight Lenders or the PISF Junior10 DOT Lenders, the PFI Junior DOT Lenders, or pay promised 11 quarterly returns to certain LLC members.”19 12 18. On August 10, 2020, Mr. Goldberg was appointed as the independent and sole 13 director of the Company. 14 19. On August 19, 2020, the United States Trustee appointed the official committee of15 the unsecured creditors (the “OCUC”) for the Bankruptcy Cases, pursuant to section 1102 of the 16 Bankruptcy Code.20 Since the financing activities of the Company involved a variety of different 17 types of fundraising, including a variety of reported debt instruments and equity interests, the 18 creditors subsequently formed various committees to evaluate the standing of their claims, which 19 include the Ad-hoc Committee of LLC Members, the Ad-hoc Committee of Deed of Trust 20 Holders, and other special sub-committees formed by the investor body (together with the OCUC,21 the “Committees”). 22 23 24 18 Id., p. 8, lines 10-13. 25 19 Id., p. 7, lines 24-28. Although Mr. Hogan described the DOTs as “Junior”, such description was not entirely accurate. 26 20 Source: Notice of Appointment of Official Committee of Unsecured Creditors, United States 27 Bankruptcy Court for the Northern District of California, Chapter 11, Professional Financial Investors, Inc., Professional Investors Security Fund, Inc., filed August 19, 2020, Case No. 20

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1 20. On September 29, 2020, the SEC filed a complaint against Mr. Wallach alleging 2 that he “misappropriated more than $26 million from investors as part of a larger fraudulent 3 scheme, devised by PFI’s now deceased founder, in which approximately $330 million was raised4 from more than 1,300 investors in PFI,…PISF…and other related entities” from at least 5 September 2015 through May 2020.21 The SEC also alleged that “a significant portion of investor6 funds was used in a Ponzi-like fashion to pay existing investors.”22 Also, according to the SEC, 7 Mr. Casey and Mr. Wallach knew that the revenues generated by PFI properties could not meet th8 obligations of PFI and PISF to pay interest and distributions, but that they hid the truth from 9 investors, and continued to falsely reassure investors, even during the COVID-19 pandemic, that 10 PFI had the financial reserves to survive.23 11 III. FTI’S RETENTION AND ASSIGNMENT OF WORK 12 21. Effective September 3, 2020, FTI began its forensic accounting analysis of the 13 Company. FTI was formally retained by the Company through an employment application 14 approved by the Bankruptcy Court on October 13, 2020.24 15 22. As further enumerated under Section IV of this Declaration, FTI was asked to 16 perform an investigation of the operations of the Debtors at the direction of Mr. Goldberg, which 17 included an evaluation of the historical finances of the Company (the “Assignment”). In addition 18 to the Assignment, FTI also fulfilled numerous tangential investigations in response to informatio19 requests made by the Committees and counsel for certain committees. 20 23. I and other FTI professionals working under my direction (collectively, the “FTI 21 Forensics Team”) have reviewed hundreds of thousands of paper and electronic records as well as22 performed numerous analyses in connection with the Assignment. Although our work related to 23 24 21 Source: Securities and Exchange Commission v. Lewis I. Wallach, Complaint dated 25 September 29, 2020, p. 1, lines 23-28, and p. 2, line 1. 26 22 Id., p. 2, lines 6-7. 23 Id., p. 10, lines 11-26, and p. 11, lines 1-4. 27 24 Source: Order Approving Debtors’ Employment and Retention of FTI Consulting, Inc. as

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1 the Ponzi scheme is substantively completed, residual work is ongoing. Any reference of “we”, 2 “our”, or “FTI” in this Declaration refers to the FTI Forensics Team. 3 IV. FTI SCOPE OF SERVICES & COMPANY RECORD KEEPING 4 A. Scope of Services 5 24. FTI’s work in connection with the Assignment was planned, supervised, and 6 staffed in accordance with applicable professional standards that are common practice in similarl7 sized investigations of this nature. FTI’s “Scope of Services” included, but were not limited to, th8 following:25 9 (a) Identifying, inventorying, and preserving relevant paper and 10 electronic information to support a forensic analysis of, but not 11 limited to, the Company’s:26 12 i. Current and historical financial reporting. 13 ii. Property purchases and refinancings. 14 iii. Movement of cash between the Company’s corporate 15 accounts. 16 iv. Investor entitlements. 17 v. Cashflow. 18 (b) Synthesizing and validating the information collected for the 19 purpose of supporting the Assignment, which included assessing an20 responding to allegations of fraud and/or other illegal activities, 21 including, but not limited to, tracing the depth and breadth of such 22 25 The complete scope of services rendered by FTI are not included in this Declaration—rather23 this Declaration focuses on FTI’s forensic findings associated with its investigation into the alleged Ponzi scheme. 24 26 In context of this effort and to support the broader Assignment, we also performed the 25 following: (i.) validating and augmenting existing inventories of the Company’s paper and electronic records as necessary; (ii.) scanning relevant paper documents and performing optic26 character recognition of scanned images as necessary; and (iii.) implemented a document 27 review platform. Although FTI has secured a copy of the Company’s available email data, wehave not conducted an email review to gain further insights into the business activities among

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1 activity (e.g., how far back such activity occurred and how 2 widespread such activity was). In context of this effort and to 3 support the broader Assignment, we also performed (or in some 4 instances are continuing to perform) the following: 5 i. Identified net cash in, net cash movement, and net cash out 6 by investor. 7 ii. Identified the nature of ownership rights across the various 8 properties subject to the Company’s direct or indirect 9 interests, including an assessment of the perfection (and in 10 some instances removal and re-perfection) of encumbrances11 (such as deeds of trust). 12 (c) Evaluating evidence related to the allegation that the Company’s 13 prior management engaged in fraudulent activity over a period of 14 multiple decades, including, but not limited to: 15 i. Performing a review of the Company’s corporate and 16 property bank accounts. 17 ii. Conducting an analysis of cash commingling across the 18 Company’s corporate accounts and across the properties in 19 which the Company has a direct or indirect interest. 20 (d) Assessing and responding to inquiries and/or ad-hoc requests 21 submitted by government agencies. 22 (e) Assessing and responding to ad-hoc requests by Mr. Goldberg, 23 Debtors’ Counsel, Counsel to certain Committees & Sub- 24 Committees, and investors. 25 (f) Regularly summarizing and presenting interim forensic findings to 26 Mr. Goldberg, Debtors’ Counsel, Counsel to each Committee, 27 Committees, and Sub-Committees.

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1 25. Although the FTI Forensics Team has spent a significant amount of time rendering2 the above Scope of Services in addition to fulfilling information requests submitted by interested 3 parties,27 Counsel to the Committees requested that we restrict this Declaration to only those facts4 that have been gathered thus far that are relevant to whether or not Mr. Casey and Mr. Wallach 5 operated PFI, PISF and related entities as a Ponzi scheme.28 6 B. Company Record Keeping 7 26. The Scope of Services performed by the FTI Forensics Team were (and continue t8 be) significantly impacted by the nature and form of the Company’s record keeping, which 9 necessitated a significant amount of manual review and extensive data reconciliation of financial, 10 accounting, and operations data. For example, the Company does not maintain an electronic 11 system to record or track all investor activity. Instead, a significant amount of investor activity an12 balances are tracked manually across myriad Microsoft Excel spreadsheets that have no uniform 13 structure across time.29 14 15 16 27 Interested parties include the Independent Director, Counsel to Committees, Committee Chairs, Committees, Sub-Committees, investors, and the SEC. 17 28 In context of this Declaration, “relevant facts” refer to attributes that are common to a Ponzi 18 scheme. For example, the Ninth Circuit Court of Appeals has described a Ponzi scheme as “…an arrangement whereby an enterprise makes payments to investors from the proceeds of a19 later investment rather than from profits of the underlying business venture, as the investors expected. The fraud consists of transferring proceeds received from the new investors to 20 previous investors, thereby giving other investors the impression that a legitimate profit-21 making business opportunity exists, where in fact no such opportunity exists.” See Auza v. United Dev., Inc. (In re United Dev. Inc.), 2007, p. 11, lines 24-28; Hayes v. Palm Seedlings 22 Partners (In re Agric Research) 916 F.2d 528, p. 1-2; (9th Cir. 1990) (Citing, Cunningham v. Brown, 265 U.S. 1, 7-8, 44 S.Ct. 424, 425, 68 L. Ed. 873 (1924); Wyle v. C. H. Rider & 23 Family (In re United Energy Corp.) 944 F.2d 589, p. 1 (9th Cir. 1991). 24 29 For example: (i.) unique account numbers are not ascribed to each investor, nor are unique identifiers ascribed to each investment; (ii.) transfers from one investment type to another are 25 not stored in a data-searchable format to efficiently qualify or quantify (as if were in a database)—but rather they are stored piecemeal across spreadsheets that require manual 26 review to determine the underlying amount of principal versus interest related to transferred 27 amounts; and (iii.) numeric and/or financial data recorded in the Excel spreadsheets are often combined with text, rendering summary computations near impossible without manual

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1 27. Additionally, a large volume of the Company’s operational and financial records is2 only available in hard copy or in an unstructured electronic file format,30 including the records 3 associated with the purchase of the underlying properties, operations of the properties, and debt 4 service. For example: 5 (a) The first complete year the Company has their accounting records 6 available in a structured accounting system is 2007, making it 7 exceedingly challenging for the FTI Forensics Team to assess the 8 Company’s operating activity in 2006 and prior. 9 (b) Payment data related to investor interest, distributions, principal 10 paydowns, and payoffs is not maintained in one central repository, 11 but rather in various unstructured repositories (e.g., excel 12 spreadsheets, third-party payment processor files, hardcopy investor13 files, etc.), all of which need to be reviewed or reconciled to develo14 a comprehensive payment history for each investor. 15 (c) Only a subset of bank statements was available in electronic format 16 and for only a limited time. For example, the FTI Forensics Team 17 identified over 300 bank accounts, only 87 of which have statement18 in electronic file format (none earlier than April 2015). Overall, the 19 FTI Forensics Team has identified approximately 112 bank account20 with complete statement histories, approximately 155 bank account21 with partial statement histories, and evidence of approximately 51 22 additional bank accounts, of which we have been unable to find any23 statement histories.31 24 30 Unstructured electronic file format refers to data that has no pre-defined format or 25 organization, rendering such data much more difficult to collect, process, and analyze. By waof example, the Company’s unstructured data includes spreadsheets, text documents, 26 communications, presentations, electronically stored images, and other similar types of record27 that were relevant to the investigation, and that required substantial manual review. 31 These 51 additional bank accounts were identified during FTI’s review of various account list

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1 V. BACKGROUND OF THE COMPANY 2 28. Mr. Casey founded PISF in November 1983 and served as its sole shareholder, 3 officer, and director until his death on May 6, 2020.32 Mr. Casey’s shares in PISF are held in a 4 revocable trust, and upon Mr. Casey’s death, Ms. Albanese became the trustee and beneficiary of 5 the trust.33 6 29. Mr. Casey founded PFI in August 199034 and was its sole officer, director, and 7 shareholder until 1998, when he relinquished his corporate positions and placed his shares in an 8 irrevocable trust for his ex-wife, Ms. Albanese.35 9 30. Unlike PISF, PFI was the arm of the Company that owned real properties and 10 managed operations, and also served as the property manager for the Company’s real properties. 11 31. Although PFI, PISF, and the related companies that owned or managed the 12 Company’s properties were separate entities, they appeared to be operated and managed as a 13 single enterprise—with overlapping staff, common accounting and record-keeping systems, and a14 common office space in Novato, California. The combined corporate activities of PFI and PISF 15 are referred to as the “PFI/PISF Corporate Activities” throughout this Declaration. The PFI/PISF 16 Corporate Activities and the activities of the underlying properties will be referred to as the “PFI 17 Enterprise” throughout this Declaration. 18 19 compiled to facilitate other forensic analyses of the Company’s records and was not a primarysource of information used to validate each investor’s net claim. Moreover, FTI does not 20 believe nor expects that the transaction histories associated with these 51 bank accounts woulmaterially change our conclusions or findings, should they be recovered. 21 32 Source: California State Certificate of Status / Incorporation for PISF; Declaration of Michael22 Hogan in Support of the Bankruptcy Filing and Early Case Administration Motions filed on July 26, 2020, p. 4, lines 6-8. 23 33 Source: Declaration of Michael Hogan in Support of the Bankruptcy Filing and Early Case 24 Administration Motions filed on July 26, 2020, p. 4, lines 10-12. 25 34 Source: California State Certificate of Status / Incorporation for PFI. Although on paper Mr. Casey abdicated control of PFI in 1998, it appears that he maintained complete de facto 26 control over PFI until his death in May 2020 (based upon the evidence reviewed by the FTI Forensics Team). 27 35 Source: Declaration of Michael Hogan in Support of the Bankruptcy Filing and Early Case

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1 A. Property Financing & Acquisitions 2 32. The Company raised capital to purchase residential and commercial rental 3 properties from banks and investors. Capital raised from banks was in the form of mortgage debt, 4 which was often refinanced. The Forensics Team observed that the proceeds from subsequent 5 bank mortgage refinancings were typically deposited directly into PFI/PISF corporate bank 6 accounts, of which only a portion was in-turn transferred to the refinanced property bank account7 for payment of debt service and operating expenses of the property on which the mortgage was 8 placed.36 9 33. Aside from bank mortgages, the Company also raised capital from investors to fun10 property acquisitions.37 Currently, the Company owns a direct or indirect interest in approximatel11 71 properties in California.38 Each of the 71 properties fall within the following direct or indirect 12 ownership interest categories: 13 (a) Limited Partnerships (“LPs”). Between 1983 and 1995, Mr. Casey 14 formed 18 LPs to acquire individual properties. In doing so, Mr. 15 Casey obtained mortgage debt from banks and raised additional 16 capital from investors to fund the LPs. The Company currently 17 maintains 10 of these LPs, the other 8 were liquidated. As of 2020, 18 the majority of the LP equity investors were bought out or converte19 their interests into other forms of investments offered by the 20 Company. 21 36 FTI’s observations are predicated upon probative sampling as we have not completed a 22 comprehensive assessment of all refinancings. 23 37 If adequate funds could not be raised from banks or investors for a particular acquisition, thenPFI would use available cash at the PFI Enterprise level to cover the remaining balance 24 necessary to purchase the property. Illustrative examples of this are found later in this 25 Declaration. 38 While in the capacity of CRO of the Company, Mr. Hogan obtained a Broker’s Opinion of 26 Value (“BOV”) for each property in the portfolio, which in aggregate totaled approximately 27 $550 million. The FTI Forensics Team has not qualified nor validated the BOVs, and thereforconsiders the aggregate amount to represent a proxy of the potential fair value of the

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1 (b) PFI Owned Properties. Between 2003 and 2019, PFI acquired 31 2 properties (including one property acquired as part of a limited 3 liability company owned in part by PFI). The properties acquired 4 were financed through traditional bank mortgage debt, DOT 5 Holders, and Tenancy in Common agreements (commonly referred 6 to as a “TIC,” and the co-owner referred to as a “TIC Holder”). 7 Current DOT Holders include investors who invested cash in 8 fractionalized notes and investors who exchanged and/or transferre9 all or a portion of their prior investments into newly acquired 10 properties.39 These cashless rollovers (“Rollovers”) required the PF11 Enterprise to source new cash equal to the designated transfer 12 amounts in order to fund the acquisition of each subject property.40 13 The primary means by which the PFI Enterprise was able to raise 14 new money appears to have been through PISF Notes—the proceed15 of which typically flowed through commingled PFI/PISF corporate 16 accounts to the escrow accounts. 17 (c) Limited Liability Companies (“LLCs”). Between 2013 and 2020, 18 Mr. Casey formed 30 LLCs to acquire individual properties. The 19 LLCs were generally structured in a manner that granted a 30% 20 ownership interest to PFI.41 The properties acquired were generally 21 22 39 The process by which investors moved and/or transferred their investments between 23 investment types is hereinafter referred to as “Investment Rollovers” and/or “Rollovers”—SeeInvestment Rollovers described below. 24 40 The raising of new money was substantively required because the older investment proceeds 25 had already been depleted to maintain and support the PFI Enterprise. 41 PFI holds a 20% membership stake in LLCs 20 and 21, 35% membership stake in LLCs 33 26 and 44, 40% membership stake in LLC 22 and 36, and 30% membership stake in all other 27 LLCs. These percentages represent the PFI general membership interest and is not inclusive of any additional PFI contributions (e.g., subsequent acquisition of other investor’s shares or

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1 financed through traditional bank mortgage debt, sale of 2 membership interests in the LLCs, and TIC Holders. The funding o3 the LLC properties also included Investment Rollovers. 4 34. The Company serves as the property manager for all 71 LP, PFI Owned, and LLC 5 properties in which it continues to hold a direct or indirect interest.42 6 B. Investor Types 7 35. FTI understands from the evidence that it has reviewed that Mr. Casey and Mr. 8 Wallach solicited investments from five types of investors: 9 (a) Deed of Trust Holders, for properties owned by PFI (“PFI DOTs” 10 and/or “DOT Holders”). Most investors in PFI-owned properties 11 were PFI DOTs (“PFI DOT Holders”) who had either a 12 subordinated debt behind the traditional bank lenders (i.e., the bank 13 mortgages on the properties) or a first priority deed of trust on real 14 properties owned by PFI.43 Generally, PFI DOTs were promised a 15 stated return ranging from approximately 9% to 10.5%.44 . 16 17 42 PFI was also entitled to an administrative and/or management fee. 18 43 During the course of its work, the FTI Forensics Team identified a common theme related to 19 the recordings of certain deeds of trusts associated with DOT Holders: DOTs were recorded, then subsequently released (commonly around refinancing), then subsequently re-recorded 20 (commonly around the completion of the refinancing). In some instances, the DOT was not rerecorded. Source: probative sampling of LexisNexis Real Property Voluntary Lien Transactio21 Reports. 22 44 Source: unstructured schedules that were used by the Company to manually track investor debbalances, distributions, and accrued interest (referred hereinafter as “Off-Ledger Schedules”). 23 These Off-Ledger Schedules were not maintained in a structured database system, rather the investor balances were tracked through manual notations in Excel spreadsheets (among other 24 unstructured documents). If the investor had elected to accrue interest rather than receiving 25 cyclical payments, their interest accrual would only be updated by the Company when there was a principal balance change—resulting in underreported accrued interest in the Company’s26 Off-Ledger Schedules. FTI calculated that the aggregated underreported accrued interest in thOff-Ledger Schedules across all applicable investors was approximately $21 million as of Jul27 2020. The Company also maintained a property management accounting system (“Yardi” and/or the “Yardi system”), although the Company also did not record the full accrued interes

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1 (b) Deed of Trust Holders, for properties owned by limited partnerships2 (“PISF DOTs”). These investors are similar to the PFI DOT 3 investors except their interests are secured by Deeds of Trust on the4 properties owned by the LPs. They were promised a stated return 5 generally ranging from approximately 9% to 10.5%.45 6 (c) Members in LLC’s managed by PFI (“LLC Members”). The LLC 7 arrangements did not promise a fixed distribution to investors—8 however—in practice the Company paid a consistent quarterly 9 distribution generally ranging from approximately 6% to 9%.46 This10 consistent distribution to LLC Members resulted in these 11 investments being akin to a debt arrangement as investors were 12 receiving a consistent cash payment that was not solely reliant on 13 the ultimate cashflows generated by the underlying property owned 14 by the LLC. 15 (d) TIC Holders to properties owned by PFI or the LLCs. Based on the 16 evidence that we have reviewed, the FTI Forensics Team has 17 observed that most of these investors did not remit funds directly to18 PFI but rather remitted their funding directly to the escrow agent 19 prior to settling the purchase. TIC Holders were promised a stated 20 interest rate generally of 6%.47 21 22 23 accounting records maintained in the Yardi system. In limited circumstances the stated return24 for certain PFI DOTs was less than 9% for properties without a bank mortgage. 45 Source: Off-Ledger Schedules. In limited circumstances the stated return for certain PISF 25 DOTs was less than 9% for properties without a bank mortgage. 26 46 Over 75% of LLCs consistently paid distributions of 6% to investors. The remaining LLCs paid distributions ranging from 6% to 9%. 27 47 The ownership interests of the TIC Holders was generally attached to the property by the

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1 (e) Noteholders to PISF (i.e., PISF Notes). Starting at least from the lat2 1980s or early 1990s, PISF raised funds from investors in the form 3 of notes called PISF Straight Notes or PISF Promissory Notes. 4 These notes are referred to as the PISF Notes throughout this 5 Declaration. The PISF Note Holders were promised a stated annual 6 interest rate generally ranging from 9% to 12%. Unlike the other 7 capital raising activities of the Company, which involved purported 8 ownership or security interests in specific properties, the PISF Note9 were purportedly collateralized by PISF’s equity interest in the LP 10 properties.48 However, FTI has found no evidence indicating that 11 PFI disclosed to investors that the LP properties were nearly and/or 12 fully encumbered by other debts at the time the PISF Notes were 13 issued or anytime thereafter—effectively rendering such 14 collateralization worthless. 15 36. Although we have not seen any direct evidence indicating what specifically Mr. 16 Casey and Mr. Wallach represented to investors with respect to how the PISF Notes would be 17 secured, in its complaint, the SEC alleges that Mr. Wallach “made verbal representations to these 18 investors that monies raised would be primarily used to purchase real property and make 19 improvements to real property already owned by PFI or PISF.”49 Additionally, in the Class Actio20 Complaint, Plaintiff investors characterized the PISF Notes as allowing “investors to participate i21 PFI’s real estate projects without participating in any specific deal” and further allowing 22 “investors to share in profits from the rental and ultimate sale of the properties managed and 23 owned by [the Company].”50 24 25 48 Source: Off-Ledger Schedules and PISF Notes agreements. 49 Source: Securities and Exchange Commission v. Lewis I. Wallach, Complaint dated 26 September 29, 2020, p. 6, lines 23-26. 27 50 Source: Susan Aiken, individually and on behalf of all others similarly situated v. ProfessionaFinancial Investors Security Fund, Inc., a California corporation; Lewis Wallach; and Charlen

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1 C. Investor Rollovers 2 37. PFI commonly allowed a practice of exchanging and/or transferring an investor’s 3 existing investment associated with a single property to an investment in another property within 4 the PFI Enterprise (i.e., Rollovers). Rollovers, in context of a Ponzi scheme, allow a Ponzi to 5 continue by avoiding the need to pay-out investors as debt increases over time. As more fully 6 enumerated under Sections VI and VII of this Declaration, the evidence suggests that this same 7 technique was followed by Mr. Casey and Mr. Wallach to continue their Ponzi-like activities by 8 avoiding the need to pay existing investors interest and principal when due—while at the same 9 time raising new capital from banks and new investors to obfuscate mounting losses within the 10 PFI Enterprise. 11 38. Rollovers in the PFI Enterprise generally included rolling over a note at maturity t12 a new note secured by the same collateral, transferring an investor’s interest from one investment 13 type to another (e.g., a DOT to a PISF Note), or from one property to another (e.g., from one DO14 property to a different DOT property). Moreover, we commonly observed instances where an 15 investor’s interest was rolled over multiple times, resulting in the deferral of actual cash payments16 to investors for years. Based upon the evidence reviewed, we estimate that approximately 60% of17 all investment accounts contain some form of Rollover.51 18 19 20 in Superior Court of the State of California In and For Marin County, Case No. 2001560, p.3, 21 lines 2-6. 51 Source: Off-Ledger Schedules. The Company did not utilize its accounting system to track 22 investor contributions, distributions, balances, and exchanges (such as Rollovers)—rather—23 such activity was manually recorded and maintained in unstructured files that regularly changed in format and content over time. These files, combined with the large number of 24 Rollovers, require a substantial amount of manual effort by FTI to identify and reconcile actuinvestor cash paid to PFI (versus accrued interest earned and not disbursed, then subsequently25 rolled over to a new investment, which often appears as new capital contributions in the unstructured files). Said otherwise, differentiating principal and interest requires a 26 comprehensive review of each investor’s history and any affiliated accounts to identify and 27 separate accrued interest from actual cash invested for the purpose of analyzing and calculating investor net claims. This comprehensive review is ongoing, and as such, the 60%

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1 39. There were three primary forms of Rollovers that we observed. The first form 2 involved taking an investor’s existing investment in a property and rolling over the investment at 3 loan maturity to a new note secured by the same property. The second form involved exchanging4 and/or transferring all or a portion of an investor’s interest from one investment to another—5 whereas the subsequent investment did not involve the acquisition of a new property into the PFI 6 Enterprise (i.e., cash distributions to the investor were avoided by rolling over the investor’s 7 principal and/or accrued interest). The third form of Rollover involved exchanging and/or 8 transferring all or a portion of an investor’s existing interests to a newly acquired property or to a 9 newly established LLC set up to acquire a new property.52 Similar to the first and second forms o10 Rollover, cash distributions were avoided—however—this particular form of Rollover typically 11 required the PFI Enterprise to also source new cash equal to the designated Rollover amount in 12 order to fund the acquisition of the subject property (i.e., the actual cash attributable to the 13 Rollover investment was typically not available as it had already been depleted by the PFI 14 Enterprise in an earlier period). 15 VI. SUMMARY OF RELEVANT FORENSIC ACCOUNTING FINDINGS 16 40. Based on our review of the Company’s available financial, accounting, and 17 operational records in context of our Assignment and the Scope of Services described herein, and 18 in consideration of the attributes that are common to a Ponzi scheme,53 we have found the 19 following to be true: 20 (a) The PFI Enterprise has negative equity and lacks liquidity: 21 i. Debts significantly exceed the BOV of the properties. 22 ii. Cashflows from the underlying properties are currently 23 inadequate to pay operating expenses, bank debt service, an24 investors without raising additional investor funds. 25 26 52 If the investor had unpaid interest that was included in the total amount of the Rollover, PFI did not differentiate interest from principal in the accounting of the amount rolled over to the 27 new investment. 53

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1 (b) Since at least January 1, 2007, debt interest and equity distributions 2 paid were dependent in large part upon raising new capital, since th3 cashflows from operations were insufficient: 4 i. Distributions included commingled funds raised from curren5 and new investors on an ongoing basis, a significant portion 6 of which came from the issuance of PISF Notes. 7 ii. Investors that were accruing unpaid interest in lieu of 8 receiving monthly payments helped enable the PFI 9 Enterprise to continue operating as the Company avoided th10 need to source new proceeds to cover such payments when 11 due (i.e., given the insufficiency of cash generated by the PF12 Enterprise to meet their total debt service obligations). We 13 estimate the total amount of accrued and unpaid interest due14 investors as of July 31, 2020 to be approximately $41.6 15 million (with approximately $39.6 million due to PISF Note16 holders).54 17 (c) Investor cash was commingled with other investor cash and 18 PFI/PISF corporate cash across the PFI Enterprise as a whole: 19 i. Funds were transferred to-and-fro based on cash needs 20 across the overall PFI Enterprise (e.g., between property 21 accounts and PFI/PISF accounts to service debt and expense22 obligations when due): 23 (1) Every individual property within the PFI Enterprise 24 periodically received transfers to its bank accounts 25 from PFI/PISF bank accounts. 26 27 54

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1 (2) Every individual property within the PFI Enterprise 2 periodically transferred cash to PFI/PISF bank 3 accounts. 4 ii. Commingled cashflows created intercompany receivables 5 and payables between all the properties and the Company, 6 but there were inadequate resources to settle these 7 intercompany obligations.55 8 iii. Funds were commonly commingled during the property 9 purchasing cycle. 10 iv. Funds were commonly commingled during each property’s 11 operating cycle. 12 v. Funds were commonly commingled at the PFI/PISF 13 Corporate Activities level. 14 (d) Mr. Casey and Mr. Wallach removed tens-of-millions of dollars 15 from the Company. 16 i. Funds were removed in various forms including, but not 17 limited to, reported operating expenses that were for the 18 personal benefit of both and other direct cash disbursements19 to, or on the behalf of, both that were not expensed, but 20 rather capitalized in various forms on the Company’s 21 balance sheet. 22 (e) The available evidence is consistent with attributes that are commo23 to a Ponzi scheme since at least January 1, 2007.56 24 25 26 27 55 For example, each property had an intercompany receivable and/or payable with the Compan56

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1 i. PISF Notes were a key instrument in raising funds to make 2 payments to previous investors in excess of the cashflows 3 generated by the properties since at least January 1, 2007. 4 (f) There is limited utility gained from establishing the commencement5 of the Ponzi prior to 2007 compared against the cost to investigate 6 further. 7 VII. BASIS AND EVIDENCE IN SUPPORT OF RELEVANT FORENSIC ACCOUNTING FINDINGS 8 A. The PFI Enterprise Has Negative Equity and Lacks Liquidity 9 1. Negative Equity 10 41. Equity in an entity represents the total assets the entity owns minus total liabilities 11 the entity owes to related or third-parties.57 As of July 2020, the Company and the properties it ha12 a direct or indirect ownership interest in have a total estimated negative equity of over $250 13 million based upon the BOV obtained by Mr. Hogan less the total reported interest-bearing debts 14 (See Chart 1 below). 15 16 17 18 19 20 21 22 23 24 25 57 As an illustration: assume entity A owns a single asset, a real estate property worth $500,000, and entity A owes only two liabilities, a first mortgage due to a bank in the amount of 26 $350,000 and a second mortgage due to a third-party investor in the amount of $100,000. In 27 this example, entity A’s equity is positive $50,000. Conversely, all else held equal, if the second mortgage due to a third-party investor is $250,000, then entity A’s equity is negative

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1 Chart 158 PFI/PISF’s Estimated Equity (in millions)
Table 1 on page 24. Back to List of Tables
Interest Bearing Debt Amount
Mortgage Debt59 ($309.5)
LLC and TIC Equity Membership Contributions, Net of Distributions60 ($112.8)
PISF Notes Debt, Including Accrued Interest61 ($276.6)
DOT and TIC Debt62 ($101.5)
Total Interest-Bearing Debt63 ($800.4)
BOV of Real Estate64 $549.5
Estimated Equity ($250.9)
7 Note: hereinafter, dollar amounts in parentheses “()” and/or red represent negative amounts. 8 42. Regardless of the underlying property’s actual cashflow, the PFI Enterprise 9 generally promised its investors fixed rates of return across all of the various investment types it 10 offered, including the membership interests in LLCs and TICs (i.e., investors were paid a 11 consistent cash return akin to a debt instrument). Accordingly,65 references to debt and debt 12 servicing in this Declaration include bank mortgage debt as well as returns promised to investors 13 across all PFI Enterprise investment types (collectively, “Debt Service”). 14 2. Lack of Liquidity 15 43. In 2019, the most recent full fiscal year prior to Mr. Casey’s death, the Company, 16 including the properties it has a direct or indirect interest in, lacked sufficient liquidity to service 17 existing debts without raising additional capital. In that year, the PFI Enterprise generated net 18 19 20 21 58 Amounts are based upon information obtained from (i.) the On-Ledger Records; (ii.) the Off-Ledger Schedules; and (iii) BOVs. 22 59 Source: On-Ledger Records. 23 60 Ibid. 24 61 Source: Off-Ledger Schedules. 25 62 Ibid. 26 63 Excludes other assets and liabilities, including working capital, as such amounts are relativelyinsignificant according to On-Ledger Records. 27 64 Source: BOVs, which were prepared in June 2020 and July 2020. 65

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1 operating income of $20.1 million,66 which was insufficient to service the approximate $47.0 2 million of the PFI Enterprise Debt Service.67 This deficit was funded by raising additional capital 3 with the largest cash inflow attributable to PISF Notes. 4 B. Since At Least January 1, 2007, Debt Interest And Equity Distributions Paid To Investors Were Dependent In Large Part Upon Raising New Capital, Sinc5 The Cashflows From Operations Was Insufficient 6 1. History Of Debts 7 44. Since 2007, the PFI Enterprise has raised debts that have consistently exceeded the8 funds needed to purchase properties. As illustrated in Chart 2, the combined debts raised from 9 bank mortgages (including subsequent refinancings), DOTs, PISF Notes, and LLCs since 2007 fa10 exceed the reported cost basis to acquire the underlying properties. 11 12 13 14 15 16 17 18 19 20 21 66 Source: On-Ledger Records. Net Operating Income (“NOI”) is defined as the individual 22 property’s revenues less operating expenses before reported interest, depreciation, amortization, and income taxes. In this context, interest includes mortgage, DOT, PISF Note, 23 and affiliate interest, as well as LLC and TIC distributions. During this same period, the PFI Enterprise reported $16.8 million spent in capitalized improvements and an increase in 24 mortgage debts due to refinancing bank mortgages of $8.3 million. 25 67 The interest expense recorded in the On-Ledger Records was $47.5 million. Included in this amount was $0.5 million of expenses identified as accrued interest, which has been excluded 26 to arrive at the estimated $47.0 million of Debt Service. Of note, we observed $12.6 million 27 paid to banks for mortgages, $33.2 million paid to investors via a third-party payment processor (Payroll Resource Group, or “PRG”), and $1.5 million paid to investors outside of

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1 Chart 268 Historical Debts from 2007 to July 2020 2 3 4 5 6 7 8 9 10 11 12 13 45. Because the majority of debts were interest-bearing, as debts increased so did the 14 ultimate required Debt Service due to investors and banks. The following section compares this 15 increasing level of Debt Service to the reported cash generated from operations. 16 2. Funds From Properties Were Insufficient To Cover Total Debt Service Obligations 17 46. By way of illustration, in fiscal year 2007, NOI of the PFI Enterprise was 18 approximately $3.3 million before Debt Service of approximately $11.4 million, leaving a cash 19 shortfall of approximately ($8.1) million.69 The issuance of approximately $4.7 million in DOTs 20 21 22 68 Source: On-Ledger Records (LLC and TIC Equity net of Distributions; Mortgage Debt; and 23 the Cost Basis of Acquired Property); Off-Ledger Schedules (PISF Notes and DOTs). The accrued interest obligation calculations recorded in these schedules were not completely 24 updated as of July 31, 2020, which we estimate to be approximately $21 million of 25 incremental accrued interest. The total estimated obligation for accrued interest as of July 202is approximately $41.6 million. LLC amounts include the equity portion owned by PFI, which26 was generally 30%. “Cost Basis of Acquired Property” includes the general ledger accounts for “Land” and “Building,” but excludes capital improvements of approximately $20 million 27 as of December 31, 2014 and approximately $61 million as of July 31, 2020. 69

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1 and approximately $3.5 million in PISF Notes70 in that same year provided the PISF Enterprise 2 adequate cash to substantially cover this deficit. At year-end, the reported cash was approximatel3 $0.5 million (See Chart 3).71 4 Chart 372 Primary Cash Inflows and Outflows in 2007 (in millions) 5 Primary Inflows and Outflows Amount Net Operating Income $3.3 6 Debt Service ($11.4) 7 Net Deficit ($8.1) 8 Capital Raised from DOTs $4.7 Capital Raised from PISF Notes $3.5 9 Total Capital Raised $8.2 10 47. In addition to 2007, we examined the On-Ledger Records that were maintained by 11 the Company from 2015 through 2019.73 In total, there were 58 properties within the PFI 12 Enterprise tied directly to investors during this five-year period:74 13 (a) Total NOI across all 58 properties was approximately $82.5 14 million;75 15 (b) Total Debt Service was approximately $157.6 million;76 16 17 18 70 Source: Off-Ledger Schedules. 19 71 Source: On-Ledger Records. 20 72 Source: On-Ledger Records and Off-Ledger Schedules. 21 73 FTI selected these years primarily due to the notable increase in total debts during this period (see Chart 2). 22 74 Excludes reported revenue and operating expenses associated with PISF, PFI Inc., 350 Ignaci23 (totaling 8 properties), PFI owned properties with no DOT investors (totaling 3 properties), and properties acquired in 2020. 24 75 The total NOI across the properties excludes PFI and PISF’s corporate expenses and income. 25 The addition of these amounts would decrease NOI from $82.5 million to $62.2 million. 76 Source: On-Ledger Records, which includes Debt Service attributable to PISF Notes 26 (approximately $54.7 million), DOT holders (approximately $41.4 million), and mortgages 27 (approximately $37.7 million); as well as distributions to LLC and TIC holders (approximatel$23.8 million). When including PFI/PISF Corporate Activities, Debt Service increases from

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1 (c) Total net deficit was approximately ($75.1) million.77 2 48. Chart 4 below shows this differential in NOI compared to Debt Service for the 58 3 properties. Note the “Net Deficit” at the bottom of the chart is the difference between “Total NOI4 (■) and “Total Debt Service” (■). 5 Chart 478 Investor Property NOI vs. Debt Service from 2015-2019 6 7 8 9 10 11 12 13 14 15 16 17 49. We evaluated the NOI of individual investor properties to identify the extent to 18 which each had sufficient NOI to pay their mortgage and investor debt obligations. This analysis,19 unlike the preceding analysis, excludes the interest paid to the PISF Note holders, which was 20 21 77 When including PFI and PISF, the deficit increases from ($75.1) million to ($97.0) million. 22 During this same period, the PFI Enterprise properties reported approximately $65.2 million spent in capitalized improvements and an increase in mortgage debts due to refinancing bank 23 mortgages of approximately $48.4 million. 24 78 Source: On-Ledger Records. • Excludes reported revenue and operating expenses of PISF, PFI, 350 Ignacio, and PFI 25 Properties with no DOT investors. 26 • Excludes accrued interest that was expensed per the On-Ledger Records for investors electing to defer their interest payments. 27 • Includes reported distributions from LLCs, including the portion paid to PFI, but does not

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1 approximately $54.7 million from 2015 to 2019.79 This analysis also excluded the net operating 2 loss by the PFI/PISF Corporate Activities, which is described in further detail later in this 3 Declaration. For the time period from 2015 through 2019, 47 of the 58 properties analyzed 4 reported insufficient NOI to pay the Debt Service specific to their individual properties (i.e., 5 before considering interest due to PISF Note holders).80 Of the 11 properties not reporting an 6 operating deficit after Debt Service for the entire period, 6 had at least one year within this five-7 year period that did report an operating deficit after Debt Service. For the remaining 5 properties,8 we evaluated the funds used to purchase the properties and observed that all five used funds 9 sourced from pooled PFI corporate bank account (i.e., commingled funds). Furthermore, all 58 10 properties had cash transfers both to and from these same corporate bank accounts during this tim11 period. 12 3. Cash From New Investors Was Used To Pay Existing Investors 13 50. As described above, the Company’s On-Ledger and Off-Ledger records indicate 14 that without the perpetual raising of capital from at least 2007,81 there was inadequate cash 15 generated by the properties to cover existing Debt Service. Setting aside Debt Service, the PFI 16 Enterprise also had insufficient cash to cover Investment Rollovers that were designated as a 17 source of funds to be used for acquiring new properties.82 The primary means for raising new 18 capital to pay for Debt Service and to cover Investment Rollovers was PISF Notes. As illustrated 19 in Chart 5, beginning in 1997 when the issuance of PISF Notes occurred more frequently, PISF 20 raised approximately $250 million in the intervening years before Mr. Casey’s death in May of 21 2020. Without such proceeds, the PFI Enterprise would not have been able to operate. 22 23 24 79 PISF Notes were not ascribed to specific properties but rather to PISF’s equity interest in the 25 basket of LP properties—therefore excluded from the analysis. 26 80 Source: On-Ledger Records 81 Primarily through the issuance of PISF Notes, but inclusive of capital the Company raised 27 through mortgage refinancings, DOTs, LLCs, and TICs). 82

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1 Chart 583 Net PISF Notes and Property Purchases from 1998 to 2020 (in millions)
Table 1 on page 30. Back to List of Tables
Period Net PISF Notes Property Purchases
1998 - 2002 $6.5 $0.0
2003 - 2006 $20.7 $1.5
2007 - 2012 $50.7 $2.1
2013 - 2020 $174.0 $314.9
5 6 51. In more recent years (2015 through 2019), the PFI Enterprise raised a total of 7 approximately $452.1 million in capital from banks and investors,84 including approximately 8 $125.7 million from issuing PISF Notes. These funds were used to purchase approximately $246. 9 million in properties and to pay approximately $159.1 million in Debt Service.85 The history of th10 PISF Notes and noteworthy events are depicted in Chart 6. 11 12 13 14 15 16 17 18 19 20 83 Source: Off-Ledger Schedules and On-Ledger Records. “Property Purchases” includes “Land21 and “Building”. Net PISF Note amounts reflect “as reported”, which include a portion of accrued interest. Net PISF Notes prior to 1998 were approximately $3.6 million. 22 84 Source: Off-Ledger Schedules and On-Ledger Records. Estimated funds raised were (i.) $48.423 million from refinancing mortgages, (ii.) $150.7 million from new mortgages, (iii.) $125.7 million from issuing PISF Notes, (iv.) $100.2 million from LLC Equity investors, and (v.) 24 $27.1 million from DOT investors. 25 85 The interest expense recorded in the On-Ledger Records was $165.9 million. Included in thisamount was $6.8 million of expense identified as accrued interest, which was excluded to 26 arrive at the estimated $159.1 million of Debt Service. We also observed (i.) $39.1 million 27 paid to banks for mortgages, (ii.) $119.5 million paid to investors via PRG, and (iii.) $2.8 million paid to investors outside of PRG (for a total of $161.3 million in observed payments

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1 Chart 686 History of PISF Notes and Noteworthy Events (in millions) 2 3 4 5 6 7 8 9 10 11 12 13 52. As of July 31, 2020, approximately 35% of the total principal balance of PISF 14 Notes were accruing interest that was due upon maturity versus paying interest at regular intervals15 prior to maturity.87 These investors provided cash inflows without subsequently burdening the 16 organization with an immediate need to service the stated interest obligation (i.e., interest 17 payments). The total principal balance of PISF Notes accruing interest as of July 31, 2020 was 18 approximately $83.7 million. The total estimated accrued interest owing to these investors as of 19 July 31, 2020 was approximately $39.6 million.88 20 21 86 Source: (i.) On-Ledger Records for mortgages, LLCs, TICs, property acquisitions (Land and 22 Building); and (ii.) Off-Ledger Schedules for DOTs and PISF Notes. Net PISF Notes amounts23 reflect “as reported” amounts which include a portion of accrued interest. The Off-Ledger Schedule for the year 2000 has not been located. Of the total property acquisitions between 24 2013 and July 2020, approximately $10.3 million relates to properties without investors. Property NOI and Property Mortgage / DOT Interest relate to properties with investors. 25 87 On a PISF Note Holder basis (as opposed to dollar basis), approximately 51% were accruing 26 interest. 27 88 The $39.6 million estimate includes both recorded and unrecorded accrued interest. Approximately $2.6 million of this amount is owing to investors that were historically

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1 C. Investor Cash Was Commingled With Other Investor Cash And PFI/PISF Corporate Cash Across The PFI Enterprise As A Whole 2 1. Funds Were Transferred To-And-Fro Based On Cash Needs Across The 3 Overall PFI Enterprise 4 53. Commingling of funds frequently occurs in fraud cases and is notably common in 5 Ponzi schemes. It often occurs when funds belonging to one investor are deposited into the same 6 bank account as funds that belong to a different investor such that an individual investor’s dollars 7 cannot be segregated from another investor’s dollars within the same bank account since money i8 fungible. Furthermore, FTI understands that the United States District Court, Central Division has9 found that the transfer of money between accounts of different entities to meet entities’ liabilities 10 qualifies under the definition of commingling.89 Specific to the PFI Enterprise, the organizational11 structure and movements of cash are complex and involved pervasive transfers of cash between 12 and across the property specific entity bank accounts and the PFI/PISF corporate bank accounts—13 thereby rendering the segregation of each investor’s dollars impossible. 14 2. Commingled Cashflows Created Intercompany Receivables And Payables Among All The Properties And PFI/PISF, But Inadequate Resources Exist 15 To Settle These Intercompany Obligations 16 54. Consistent with Ponzi-like activity, the Company used complex (multi-stepped, 17 multi-entity) transactions to pool cash across the PFI Enterprise, including cash raised from 18 investors and mortgage refinancings.90 More specifically, these multi-stepped intercompany 19 transactions were common practice to accumulate the cash resources necessary to fund debt 20 21 22 23 89 Wing v. Dockstader, 2010 WL 5020959 at *2, 5, and 9 (D. Utah 2010). 24 90 Simple (single-step, single-entity) transactions at the property-level have thus far been found to be generally accurate. These types of transactions generally involve recognition of a cash 25 receipt at the property level or a singular expenditure (e.g., payments for property repairs or maintenance). However, we have found notable exceptions. For example, certain expenditures26 recorded as an operating expense were reclassified and capitalized in the Company’s property 27 improvement account at year end, which appear to have been a technique employed by the Company to improve the financial health of the properties that were observed to have these

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1 service and pay certain property level operating expenses (commonly recorded as “due-to/due-2 from” in the On-Ledger Records maintained by the Company).91 3 55. For example, if an individual property had insufficient funds to cover a large 4 expenditure, the Company would transfer cash accumulated by PFI or PISF in its bank accounts t5 the property’s bank accounts. The preceding cash transfer activity was recorded in a series of 6 multi-stepped transactions, involving intercompany accounts (as it was common for PFI/PISF to 7 source “as needed” cash from other properties). This intercompany activity was generally not 8 transacted directly between the individual properties, but rather through the pooling of funds at th9 PFI/PISF corporate level and then redistributing the as needed cash to the individual properties. 10 According to the On-Ledger Records, every property had intercompany accounting transactions 11 with PFI/PISF, which is consistent with the bank statements that identified that every property ha12 bank transfers both to and from the PFI/PISF bank accounts.92 13 56. While tracing cashflow within the PFI Enterprise, we also observed that the 14 property-level intercompany accounts and the PFI corporate accounts do not reconcile, whereby 15 the reported intercompany payables / receivables disagree by a significant margin.93 16 3. Funds Were Commonly Commingled During The Property Purchasing Cycle 17 57. Within the PFI Enterprise, we consistently observed commingling of investor fund18 both during the property purchasing cycle and during the subsequent operating cycle. With 19 respect to the purchasing cycle, it was generally observed that acquired properties were financed 20 through (i.) mortgage debt and (ii.) DOT Holders and/or equity investors. However, it was 21 common practice for the Company to ascribe a portion of the financing to investors who intended 22 to roll over their existing investment(s) into the property being purchased (i.e., Rollovers). In 23 24 91 Servicing of mortgage debts was generally paid directly from the property’s bank account to 25 the lending bank; however, the proceeds in the property’s bank account may have been 26 sourced in part through intercompany transfers at the time of the mortgage payment. Source: Property and PFI/PISF bank statements. 27 92 On-Ledger Records. 93

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1 these circumstances, it was necessary for the Company to source the cash equal to the amount 2 designated for the Rollover, as the underlying investor’s principal (and any unpaid accrued 3 interest) had already been depleted within the PFI Enterprise.94 Although the Company pooled 4 cash from various sources within the PFI Enterprise to cover the Rollover, the primary source of 5 new cash came in the form of issuing PISF Notes. 6 58. Another form of commingling during the purchasing cycle involved the specific 7 bank accounts used to pool investor proceeds. When properties were purchased, certain investor 8 funds were deposited directly into the property’s designated bank account or directly into the 9 escrow account setup for the purchase. However, and in contrast, other investor funds were 10 commonly deposited directly into a PFI or PISF corporate bank account—commingled with 11 general funds pooled across the PFI Enterprise.95 At or near closing, the balance of funds were 12 transferred to the escrow account from either the specific property’s bank accounts, the PFI/PISF 13 corporate bank accounts, or both. The proceeds from the PFI/PISF corporate accounts were 14 undifferentiated from any other investor’s cash who may have made a deposit in the same bank 15 account but for a different investment (e.g., a PISF Note). 16 59. Illustration #1: LLC -Redacted- Property Purchase. In Redacted, the Company 17 established an LLC and arranged a bank mortgage and investor financing to purchase a property 18 for a total consideration of $20.5 million.96 The sources of funds raised for the acquisition of the 19 property included: 20 21 22 23 94 We observed that Rollovers were typically funded from various sources within the PFI Enterprise, including the issuance of PISF Notes and available cash transferred from property 24 accounts to PFI/PISF corporate accounts. 25 95 Although we have not performed a comprehensive review of check images, we have identifieexamples of checks deposited into accounts that were not designated as the payee (e.g., a 26 check written to a property bank account that was deposited into a PFI/PISF corporate account). 27 96 Source: Final Escrow Settlement Statement. This amount excludes closing-related costs of

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1 (a) Approximately $12.3 million was sourced through a traditional ban2 mortgage.97 3 (b) Approximately $6.8 million was sourced through raising new mone4 from investors.98 Of this amount: 5 i. Approximately $2.6 million was raised from TIC investors, 6 whose cash investment was deposited directly into the 7 designated escrow account.99 8 ii. Approximately $2.5 million was raised from non-TIC 9 investors, whose cash investment flowed through the LLC 10 bank accounts, then to the escrow account (i.e., investor 11 funds were not commingled within PFI/PISF corporate bank12 accounts).100 13 iii. Approximately $1.7 million was raised from non-TIC 14 investors, whose cash investment flowed through PFI/PISF 15 corporate bank accounts (i.e., investor funds were 16 commingled within PFI/PISF corporate bank accounts prior 17 to reaching the escrow account).101 18 (c) Approximately $3.1 million was sourced through contributions 19 made by PFI on behalf of investors who requested a Rollover.102 As20 previously stated, these Rollovers represented a non-cash transactio21 97 Source: Final Escrow Settlement Statement. 22 98 Source: Final Escrow Settlement Statement; PFI/PISF bank statements; property bank 23 statements; Off-Ledger Schedules; and On-Ledger Records. 24 99 Source: Final Escrow Settlement Statement and On-Ledger Records. 100 Of the $2.5 million, $2.3 million flowed through the LLC-specific bank account and $0.2 25 flowed through another LLC bank account. 26 101 Source: PFI/PISF bank statements; property bank statements; Off-Ledger Schedules; and On-Ledger Records. 27 102 Source: Off-Ledger Schedules; On-Ledger Records; and investor files maintained by the

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1 (meaning no new money was coming into the PFI Enterprise). As 2 such, the Company was forced to source the remaining $3.1 million3 from across the PFI Enterprise.103 4 60. Of the approximate $1.6 million in excess cash raised to purchase the property, 5 approximately $0.6 million was retained in the LLC’s cash account and $1.0 million was diverted6 to PFI.104 7 61. Illustration #2: PFI -Redacted- Property Purchase. In Redacted, PFI purchased a 8 property for a total consideration of $6.3 million.105 The sources of funds raised for the acquisitio9 of the property included: 10 (a) Approximately $4.0 million was sourced through a traditional bank 11 mortgage.106 12 (b) Approximately $1.7 million was sourced through contributions 13 made by PFI.107 14 (c) Approximately $0.7 million was sourced through contributions 15 made by PFI on behalf of investors who requested a Rollover.108 16 62. Similar to the preceding LLC property purchase example, this transaction also 17 involved investors that chose to roll over their existing investments into this property. In total, th18 Company sourced approximately $2.4 million of commingled funds from within the PFI 19 20 21 22 103 This process of sourcing cash across the PFI Enterprise to meet Rollover demands is another illustration of commingling of funds. 23 104 Source: On-Ledger Records and property bank statements. 24 105 Source: Final Buyer's Closing Statement. Excludes closing-related costs of approximately 25 $0.1 million. 26 106 Source: Final Buyer's Closing Statement. 107 Source: Final Buyer's Closing Statement and PFI bank statement. 27 108 Source: Final Buyer's Closing Statement; PFI bank statement; Off-Ledger Schedules; and

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1 Enterprise to purchase the property (including the $0.7 million that was attributable to the 2 investors with the non-cash Rollovers).109 3 63. Shortly after the property was acquired, the Company raised an additional $2.4 4 million from DOT investors (becoming part of total DOTs issued on the property). 5 Approximately 90% of the subsequent proceeds raised were deposited into the Company’s bank 6 accounts—becoming part of the pool of commingled funds used by the PFI Enterprise.110 By the 7 end of the same year the property was purchased, the debts against this PFI-owned property 8 totaled $7.02 million,111 which exceeded the property purchase price nine months earlier of $6.3 9 million.112 10 4. Funds Were Commonly Commingled During Each Property’s Operating Cycle 11 64. We also observed commingling of funds during the operating cycle following each12 property’s purchase. 13 65. Generally, the PFI Enterprise serviced its investor-related debts and the LLC 14 distributions by paying investors through PRG. We observed that the process used by the 15 Company to accumulate the cash necessary to fund debt interest payments (for the DOT investors16 and LLC distributions differed. 17 66. LLC Properties:113 We observed the LLC properties generally made payments 18 directly to PRG on a quarterly basis to fund the distribution payments to LLC members.114 We 19 20 109 Ibid. 21 110 Source: Final Buyer's Closing Statement; PISF bank statements, property bank statements; an22 Off-Ledger Schedules. 111 Calculated as the sum of (i.) bank mortgage totaling $3.96 million and (ii.) DOTs of $3.06 23 million. DOTs of $3.06 million comprises the sum of (i.) $0.66 million from Rollovers and 24 (ii.) $2.4 million raised from DOT investors post-acquisition. 112 Source: Final Buyer’s Closing Statement. 25 113 All figures contained in this paragraph represent post purchase cash transfer activity (i.e., it 26 excludes bank transfers made prior to, and including, the month the property purchase occurred). The LLC properties received a total of $61 million from PFI/PISF corporate bank 27 accounts and transferred a total of $41 million to PFI/PISF corporate bank accounts. 114

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1 also observed that the individual LLC properties regularly received cash transfers from PFI/PISF 2 corporate accounts prior to funding PRG, as the individual LLC properties typically had 3 inadequate cash to fund the entire payment to PRG when due.115 Specifically, we observed that 4 from 2013 to July 2020,116 the net cash transferred from PFI/PISF corporate bank accounts to the 5 LLC property bank accounts was $20 million, whereas the total investor payments through PRG 6 for this same period was $28 million.117 We also noted that every LLC property received transfers7 from PFI/PISF corporate bank accounts. 8 67. DOT Properties:118 Similar to the LLCs, funds were typically transferred from the 9 PFI/PISF corporate bank accounts to the DOT property bank accounts to ensure that each propert10 had enough cash to pay its DOT investors. However, unlike the LLCs, the DOT property bank 11 accounts did not directly pay PRG, but rather transferred the pool of commingled cash119 back to 12 PFI/PISF from which the Company would send the funds to PRG for disbursement. Specifically, 13 we observed that from 2015 to 2019,120 the PFI/PISF bank accounts sent $38 million to the DOT 14 property bank accounts, and then the DOT property bank accounts returned $70 million back to 15 the PFI/PISF bank accounts, which in turn sent $45 million to PRG.121 We also noted that every 16 17 115 Due to cash being fungible, we cannot quantify the exact portion of the funds transferred to 18 LLCs from PFI/PISF that were explicitly used to cover the deficit related to investor payment19 116 The first LLC purchase occurred in 2013. 20 117 Total LLC/TIC distributions per the Company’s On-Ledger Records was also $28 million (excluding LLC 28 and LLC 29). 21 118 In addition to all the DOT Properties—LLC 28, LLC 29, and 16194 Sonoma (TIC) are subjecto the same process described herein. 22 119 Cash generated by each property that was still in their property specific bank accounts and 23 cash transferred to the property accounts from PFI/PISF. 24 120 Time period limited by available bank statements. All figures contained in this paragraph represent post purchase cash transfer activity (i.e., it excludes bank transfers made prior to, an25 including, the month the property purchase occurred). 26 121 Total DOT interest expense per On-Ledger Records was $42 million (including LLC 28, LLC29, and 16194 Sonoma TIC distributions). Of note, the classification of DOT interest was not 27 consistently recorded in the Company’s On-Ledger Records as it was occasionally included inmortgage debt interest expense. We also observed that funds were transferred back and forth

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1 single DOT property received bank transfers from PFI/PISF and returned bank transfers to 2 PFI/PISF.122 3 68. In summary, we did not find any evidence that investors were informed that their 4 interest payments or equity distributions were sourced from other properties, contributions from 5 other investors, or being derived from commingled funds across the PFI Enterprise. 6 5. Funds Were Commonly Commingled At The PFI/PISF Corporate ActivitieLevel 7 69. For the years 2015 through 2019, we analyzed the NOI specific to the PFI/PISF 8 Corporate Activities in order to evaluate whether they provided cash to or consumed cash from th9 overall PFI Enterprise:123 10 (a) The Company’s reported revenue was $15.5 million, which mainly 11 consisted of: 12 i. $7.1 million in receipts from administrative and managemen13 fees PFI charged to the properties. 14 ii. $5.6 million in receipts from LLC distributions (representin15 PFI’s approximate 30% membership stake in LLCs).124 16 (b) The Company’s reported operating expenses were $35.9 million, of17 which $7.1 million were related to administrative and management 18 expenses PFI charged to the properties. We further enumerate thes19 expenses in subsequent paragraphs of this Declaration. 20 21 22 likely explains why the DOT properties sent $70 million to PFI/PISF despite only paying $45 23 million to investors. 24 122 Due to cash being fungible, we cannot quantify the exact amount of the funds received from PFI/PISF that were explicitly used to cover the deficit related to investor payments, bank debt,25 or operating expenses. 26 123 PFI/PISF Corporate Activities include PFI and PISF general ledger transactions noted in the Company’s On-Ledger Records that are associated with 350 Ignacio but exclude all other PFI27 owned properties. 124

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1 70. In summary, the PFI/PISF Corporate Activities generated a net operating loss from2 2015 to 2019 of $20.4 million—resulting in a net cash consumption from the PFI Enterprise.125 A3 such, and to support the PFI Enterprise, corporate bank accounts were regularly replenished with 4 commingled funds sourced from bank cash-out refinancings, new investments and/or new 5 investors, such as checks and wires deposited into PFI/PISF corporate bank accounts that were 6 designated for LLCs, the sum of which was only later transferred to the LLC bank accounts or 7 directly to an escrow account at or near the closing of the underlying property’s purchase. 8 D. Mr. Casey And Mr. Wallach Removed Tens-Of-Millions Of Dollars From ThCompany 9 71. Ponzi schemes often include misappropriation of company funds for personal use. 10 As such, we analyzed operating expenses of PFI and PISF from 2007 and 2019 to evaluate the 11 nature and change in expense levels over time.126 The purpose of this review was to assess the 12 likelihood and magnitude of funds removed from the Company that were possibly personal in 13 nature. We initiated this review by analyzing the trend-line over the years, noting a substantial 14 increase in more recent years. Accordingly, we focused our review on the most recent five years, 15 2015 through 2019. Within these years, we dissected the various operating expense categories to 16 determine activity that was possibly personal in nature. In addition to reviewing On-Ledger 17 Records maintained by the Company, we also analyzed bank disbursement activity from the 18 Company’s bank accounts from 2015 through August 2020 (to identify outgoing cash to Mr. 19 Wallach or Mr. Casey). 20 21 22 125 Ibid. 23 126 We did not evaluate whether any expenditures at the property level were made for personal reasons. For example, the PFI Enterprise had a practice of making capital improvements to th24 acquired properties and certain properties have a significant amount of capital improvements, and we also observed certain amounts initially reported as expenses being recharacterized and25 capitalized as property improvements, which had the effect of increasing the reported net income. While we analyzed bank disbursements and general ledger transactions, we did not 26 separately analyze whether disbursements reported as capital expenditures qualified for 27 capitalization. Furthermore, we did not separately analyze whether any costs capitalized withithe property improvement accounts were attributable to personal disbursements paid to or on

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1 1. Analysis Of PFI/PISF Operating Expenses 2 72. Total combined PFI/PISF operating expenses from 2007 through 2019 were $63.1 3 million, 72% of which related to salaries and personnel expenses (see Chart 7).127 4 Chart 7128 Total PFI and PISF Operating Expenses from 2007 to 2019 5 6 All Other Operating 7 Expenses, $17.9M , 28% 8 9 Total Personnel 10 Expenses, $45.2M , 72% 11 12 73. Our analysis found that in the initial years, from 2007 through 2014, the combined13 PFI/PISF operating expenses averaged $3.8 million annually.129 Conversely, beginning in 2015 14 and through 2019 the reported operating expense increased significantly resulting in a five year 15 average of $6.5 million.130 During this later period reported operating expenses peaked in 2018 at 16 $10.9 million.131 17 74. Total personnel expenses of $45.2 million during 2007 through 2019 are largely 18 comprised of salaries expense, which averaged $2.7 million annually.132 Chart 8 below illustrate19 reported salaries from 2010 through 2015 were below average in contrast to significantly greater 20 salaries in more recent years, including a relatively large increase in 2018 to $7.6 million. 21 22 23 24 127 Source: On-Ledger Records. 128 Ibid. 25 129 Ibid. 26 130 Source: On-Ledger Records. 27 131 Ibid. 132

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1 Chart 8133 PFI and PISF Personnel Expenses from 2007 to 2019 2 3 Total Salaries & Payroll Taxes 4 $10.0M Professional Fees - Mr. Casey $9.0M Admin Staff / Consultants 5 Health and Auto Expenses $8.0M Pension Expense 6 Average Salaries $7.0M 7 $6.0M Average Salaries & Payroll Taxes $2.7 million $5.0M 8 $4.0M 9 $3.0M 10 $2.0M $1.0M 11 $0.0 12 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 13 75. Total reported aggregated salaries expense between 2015 and 2019 for Mr. Casey 14 and Mr. Wallach were $1.2 million and $2.1 million, respectively.134 Total remaining salaries 15 expenses of $11.8 million was reported in the same period to other individuals.135 Additional 16 amounts paid to Mr. Casey and Mr. Wallach include: 17 (a) $5.8 million of reported professional fees136 were paid to Mr. Casey18 from 2007 to 2019 – a portion of which included forgiveness of loa19 balances that were outstanding to Mr. Casey and discussed further 20 below.137 21 22 23 133 Ibid. 24 134 Source: Individual payroll records. 135 Source: On-Ledger Records. 25 136 Recorded in the On-Ledger Records as “Prof. Fees Kc”. 26 137 Source: On-Ledger Records. The balance of the loans due to the Company by Mr. Casey in 27 July 2020 was reflected as a $4.7 million receivable per the On-Ledger Records (since this amount has been reflected as a receivable on the balance sheet, it is not reflected in the

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1 (b) $0.6 million was paid from PISF on Mr. Wallach’s behalf to reduce2 his 401(k) loan balance.138 3 76. Furthermore, we observed $4.2 million was recorded on the general ledger as 4 “salaries expense” by the username “lewis”.139 5 77. In addition to salary, Mr. Casey appears to have received a substantial amount of 6 cash benefits as observed from the On-Ledger Records. These additional outflows were initially 7 recorded as a PISF receivable due from Mr. Casey.140 According to the PISF On-Ledger Records,8 Mr. Casey received benefits from the following cash outflows from 2007 through 2020: 9 (a) $5.4 million disbursed from the Company directly to Mr. Casey’s 10 personal bank account.141 11 (b) $2.1 million reportedly received by Mr. Casey directly from 12 investors and never deposited into the Company’s bank accounts.14213 (c) $6.2 million disbursed to others on Mr. Casey’s behalf.143 14 78. These receivable balances do not appear to have ever been repaid by Mr. Casey. In15 fact, the evidence we collected indicates that these amounts were ultimately (i.) expensed and 16 included PFI/PISF’s operating expenses;144 (ii.) reflected as an equity distribution; or (iii.) remain17 unpaid. Specifically, as of July 31, 2020, $4.7 million remains unpaid and reportedly due from an 18 officer receivable account from Mr. Casey.145 19 20 138 Source: On-Ledger Records; PISF bank statement. 139 Source: On-Ledger Records. We have not yet been able to determine if the $4.2 million was 21 paid and to whom. 22 140 PISF general ledger account number 1177-00-000 (“Officer Due From”). 23 141 Source: On-Ledger Records; spreadsheet recovered from Mr. Casey’s personal hard drive thatdetailed the expenditures and “reimbursements” from PISF. 24 142 Source: On-Ledger Records. These proceeds were not deposited into the Company’s bank 25 accounts and include $1.6 million from PISF Note investors and $0.5 million from LLC investors. 26 143 Source: On-Ledger Records. 27 144 For example, $5.8 million was expensed as “Prof Fees Kc”. 145

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1 79. Chart 9 illustrates the remaining reported combined operating expenses reported 2 by PFI and PISF from 2007 through 2019. The notably higher expenses in 2018 primarily relate t3 increases in the cost ascribed to obtaining new investors,146 outside services,147 and donations 4 expense. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 146 Cost to bring on new investors consists of Finders & Association Fees, Promotions, Dues & Subscriptions, and Legal fees. 26 147 In 9, Outside Services in 2007, 2008, and 2018 exclude an intercompany entry between PISF 27 and PFI that created an expense on PISF’s books and corresponding “Admin Fee Income” on PFI’s books. Amounts were $1.3 million in 2007, $1.9 million in 2008, and $0.3 million in

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1 Chart 9148 PFI and PISF Operating Expenses (Excluding Personnel) from 2007 to 2019 2 $3.5M 3 Earthquake Insurance Donations 4 Misc Repairs & Maintenance Expense $3.0M Net Outside Services 5 Finder & Assoc Fees / Promotions/ Dues Subsriptions/ legal Rent Exp Corp/ Mgmt Fee/Office Expenses 6 $2.5M All Other Expenses Average (excludes 2018) 7 8 $2.0M 9 Average Operating Expenses Excluding 2018:$1.2M 10 $1.5M 11 $1.0M 12 13 $0.5M 14 15 $0.0 16 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 201917 2. Analysis Of Bank Statement Disbursements 18 80. In addition to reviewing the On-Ledger Records, we also analyzed the Company’s 19 bank statements from January 2015 through August 2020. Upon completing our review, we 20 identified $26.3 million of additional disbursements that were made to Mr. Wallach, Mr. Casey, 21 and their relatives that could not be identified in the On-Ledger reported operating expenses, or th22 officer receivable account (due from). 23 81. The largest number of disbursements (measured in dollars) relate to a real estate 24 investment of Mr. Wallach’s in Texas (commonly referred to as his personal “Liberty Lakes” 25 investments). Company records indicate that the payments made on behalf of Mr. Wallach were 26 27 148

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1 generally reflected as a reduction to the PISF Note investment balance as reported within the 2 Company’s On-Ledger Records. 3 82. Chart 10 itemizes the noteworthy bank disbursements that appear personal in 4 nature and attributable to Mr. Casey, Mr. Wallach, and/or other affiliated persons. In total, we 5 identified approximately $26.3 million of such disbursements. 6 Chart 10149 Disbursements Identified in Bank Statements that are not in PFI/PISF Operating Expenses between January 2015 and August 2020 (in millions)
Table 1 on page 46. Back to List of Tables
Disbursement Category Amount
Disbursements to Liberty Lakes (on behalf of Mr. Wallach) $15.1
Disbursements Attributed to Mr. Wallach $4.2
Disbursements to Credit Card Issuers $3.6
Disbursements Attributed to Mr. Casey $1.5
Purchases of Precious Metals $1.2
Disbursements to Relatives $0.7
Total Disbursements $26.3
13 83. In order to confirm the nature of the expenditures noted in Chart 10 and how they 14 flowed through the On-Ledger Records maintained by the Company, we conducted a probative 15 sample of disbursements in each category. In summary, we found that in many instances these 16 transactions were obfuscated by multi-step accounting transactions. In particular, we found that 17 the majority of dollars sampled were not expensed, but rather were recorded via a series of journa18 entry adjustments in the PISF general ledger to reduce cash while also reducing the general PISF 19 Notes payable balance—most of these entries were performed under the username “lewis”150 in 20 the Yardi system.151 21 84. FTI also analyzed the Off-Ledger Schedules of reported PISF Note obligations and22 estimated that the PFI Enterprise raised approximately $126 million from 2015 to 2019 from the 23 24 149 Source: PFI/PISF bank statements. Relatives refer to relatives of Mr. Wallach. 25 150 We understand “lewis” is the username assigned to Lewis Wallach. 26 151 Journal entry amounts and bank disbursement amounts did not align on a 1:1 basis, making 27 them particularly difficult to track. However, through forensic analysis, we were able to matcapproximately $9.3 million of disbursements to the reported PISF Notes general ledger

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1 sale of PISF Notes. The On-Ledger Records indicated the PISF Note obligation increased 2 approximately $96 million during this period. We observed a significant portion of this $30 3 million difference is attributable to recording certain cash disbursements attributed to Mr. Wallac4 as a reduction of the PISF Note balance on the On-Ledger Records.152 5 3. Mr. Wallach’s Involvement In The Day-To-Day Accounting 6 85. We understand from interviews of Company employees, that Mr. Wallach was 7 “hands on” and heavily involved with the day-to-day operations, including the accounting 8 functions supporting the PFI Enterprise. Based on this understanding, we focused part of our 9 forensic analysis on manual journal entries posted in the PFI/PISF On-Ledger Records. We also 10 analyzed the usernames ascribed to those entries as recorded by the Yardi system. Although we 11 cannot verify whether usernames were ever compromised or shared among employees, we did 12 observe that the most common username associated with entering manual journal entries was 13 “lewis.” From October 2006 to June 2020, the username “lewis” initiated 69% of all manual 14 journal entries (see Chart 11 for a summary of findings).153 15 16 17 18 19 20 21 22 23 24 25 152 Source: On-Ledger Records and Off-Ledger Schedules. 26 153 Statistics of PFI/PISF manual journal entry postings are based upon total dollars. When 27 looking at the number of journal entries entered, username “lewis” entered 51%. Details were obtained from the PFI/PISF On-Ledger Records. There were 20 other usernames with manual

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1 Chart 11154 % of Manual Journal Entries Posted in PFI/PISF On-Ledger Records by Username 2 3 4 5 All Other Users, 31% 6 7 "lewis", 69% 8 9 10 11 E. The Available Evidence Is Consistent With Attributes That Are Common To 12 A Ponzi Scheme Since At Least January 1, 2007 13 1. PISF Notes Were A Key Instrument In Raising Funds To Make Payments To Previous Investors In Excess Of The Cashflows Generated By The 14 Properties Since At Least January 1, 2007. 15 86. The primary records examined to determine when it could first be evidenced that 16 the scheme started were: (a) the On-Ledger Records, and (b) the Off-Ledger Schedules:155 17 (a) The first full year that On-Ledger Records are available with 18 revenue and expense transaction level detail for each property withi19 the PFI Enterprise is 2007.156 20 21 22 23 154 Source: PFI/PISF On-Ledger Records. 155 As noted above, individual investor investment balances are not tracked or maintained in a 24 structured accounting system—rather, they are manually tracked and maintained in Excel 25 spreadsheets. 156 Given this insufficiency of accounting data, we are unable to evaluate revenues and operating 26 expenses relative to the Debt Service requirements of the overall PFI Enterprise prior to 2007;27 nor are we able to sufficiently assess cashflow across the PFI Enterprise. Therefore, we are unable to accumulate sufficient evidence to determine whether Mr. Casey and Mr. Wallach

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1 (b) The Off-Ledger Schedules that were used to track investor balances2 are generally available from 1997 forward.157 3 87. An examination of the PFI Enterprise’s accounting records during 2007 identified 4 the following cash activity: 5 (a) The total Debt Service paid of $11.4 million158 is substantially mor6 than the $6.0 million of NOI associated with the underlying 7 properties,159 resulting in a cash shortfall of $5.4 million.160 The 8 results are similar if compared against the NOI of the PFI Enterpris9 as a whole.161 10 (b) The cash resources used to pay the returns (not covered by the NOI)11 were primarily sourced by issuing new DOTs and PISF Notes.162 12 (c) But for the issuance of new DOTs and PISF Notes, the Company 13 would not have been able to meet its obligations to investors in the 14 form of paid returns. 15 88. As illustrated in Chart 2, in 2007 the mortgage and DOT debts far exceeded the 16 reported cost basis of the properties held. 17 18 19 20 21 157 Most of the Off-Ledger Schedules that tracked investor balances have been located for all years starting with 1997, except for the year-ending December 31, 2000. 22 158 Source: On-Ledger Records in the form of Debt Service (i.e., mortgage interest, DOT interest,23 and PISF Notes interest). 24 159 Source: On-Ledger Records. 160 Ibid. 25 161 Source: On-Ledger Records. The total Debt Service paid to investors of $11.4 million 26 compared to the $3.3 million of NOI generated by the PFI Enterprise (including the underlyinproperties) results in a shortfall of $8.1 million. 27 162 Source: Off-Ledger Schedules. Total funds raised from issuing DOT debts and PISF Notes in

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1 2. The PISF Notes Outstanding As Of January 1, 2007, Are Relatively Insignificant In Comparison To The Current Claims Of The Existing 2 Investors 3 89. The amount of funds raised from PISF Notes in any given year prior to 2007 was 4 relatively insignificant to the current levels of debt maintained by the Company. In any given year5 prior to 2007, the increase in PISF Notes represents 1% or less of the current total debt.163 6 90. As of the beginning of 2007, the balance of the PISF Notes had grown to 7 approximately $31 million, representing 4% of the current total debt (see Chart 12).164 8 Chart 12165 History of PISF Notes Borrowings 9 10 11 12 13 14 15 16 17 18 19 20 91. In summary, at least as of January 1, 2007, the PFI Enterprise lacked liquidity (the 21 properties were not generating enough NOI to cover rising Debt Service). Moreover, only by 22 23 163 From the date of the first available Off-Ledger Schedule to 2006, the average annual increase in PISF Notes was 0.4% of the current total debt, calculated as average annual increase of $3 24 million divided by current total debt of approximately $800 million. 25 164 Calculated as December 2006 PISF Note balance of $31 million divided by current total debt of approximately $800 million. 26 165 Source: Off-Ledger Schedules and On-Ledger Records. As previously noted, the Company’s 27 On-Ledger Records and Off-Ledger Schedules understate the accrued interest obligations—which we estimate to be approximately $21 million as of July 2020. Off-Ledger Schedule for

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1 raising new funds from investors could the Company continue operating. In so doing, and 2 unbeknownst to the investors, the Company commingled all sources of funds by pooling resource3 across the PFI Enterprise to satisfy its financial obligations resulting in the obfuscation of money 4 and its traceability back to individual investors. 5 F. There Is Limited Utility Gained From Establishing The Commencement Of The Ponzi Prior To 2007 Compared Against The Cost Of Investigating 6 Further 7 1. Investors Receiving Interest Payments As Of January 1, 2007 8 92. Approximately 78% of the total amount of DOT and PISF Note investments as of 9 the beginning of 2007 were receiving interest payments.166 Because the interest rates earned on 10 those instruments were generally at or above 9%, and given the time that has elapsed since 2007, 11 virtually all of these investors have either fully recovered their principal investments or have 12 received returns in excess of their principal investment in the form of interest payments before the13 Company ceased making interest payments in 2020. Accordingly, it would be only under some 14 unexpected or unusual circumstance that any of the pre-2007 investors who were receiving intere15 payments would have a current net claim against the Company.167 16 2. Investors Not Receiving Interest Payments (Accruing) As Of January 1, 2007 17 93. It is our understanding from counsel that investors will not receive credit for unpai18 interest that purportedly accrued after the date the scheme is concluded to have commenced. 19 94. At the end of 2006, there were approximately $7.1 million and $13.1 million, in 20 PISF Note holder and DOT investments, respectively, that were accruing interest.168 21 22 23 166 This percentage excludes mortgage debts. Per the Off-Ledger Schedules, the DOT and PISF 24 Notes balances as of January 1, 2007 totaled approximately $90 million. 25 167 Investors prior to 2007 were generally receiving 9-12%. The LLC investors generally receive6% distributions, but these were not in place prior to 2013 and are therefore irrelevant to this 26 sensitivity analysis. Similarly, there is a limited population of DOT holders that were receivin6% (for cases when there was no bank mortgage on a property), such circumstances did not 27 exist as of 2007. 168

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1 (a) Analysis of these PISF Note holders revealed that 20 of these PISF 2 Note holders remain in 2020 and comprise less than 2% of the total 3 number of investors in 2020.169 4 (b) Analysis of these DOT investments revealed that in 2010, almost al5 of the DOT investors whose investments remained as of December 6 31, 2010 had been modified and they were no longer accruing 7 interest, rather they began receiving regular interest payments.170 8 Before the Company ceased making interest payments in 2020, 9 those investors would have had their principal fully paid back based10 on the stated interest rates of these debt instruments and the length 11 of time that has elapsed since 2007, and therefore likely would have12 been netted-out. 13 95. We assessed whether using a starting date prior to 2007 would have a significant 14 impact on the group of investors that accrued interest, and observed that any potential benefits 15 would be outweighed by the cost of further investigating the pre-2007 era. 16 (a) We selected 2003 as a potential alternative starting date based on th17 following: 18 i. The reported balance of PISF Notes prior to 2003 was 19 relatively insignificant (i.e., approximately $10 million).171 20 ii. In 2003, $8 million in PISF Notes were issued, representing 21 an increase of 80% from the previous year (i.e., this 80% 22 increase highlights the net proceeds from issuing PISF Note23 in years prior to 2003 were inconsequential).172 24 25 169 Ibid. 26 170 At the end of 2006, 225 DOT investors were accruing interest compared to the end of 2010, when only 4 DOT investors were observed to be accruing interest. 27 171 Source: Off-Ledger Schedule. 172

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1 (b) Between the beginning of 2004 and the end of 2006, we estimate 2 that a maximum of approximately $3 million of interest could have 3 accrued during this period, which is relatively insignificant to the 4 current level of debt of approximately $800 million. This estimate i5 based on the stated interest rates investors were earning during this 6 period and the total reported amount of PISF Notes reported 7 outstanding between 2003 and 2007.173 8 (c) Given the combined circumstances ascribed to non-interest accruin9 investors and interest accruing investors during the pre-2007 era 10 (and given the insufficiency of the available records), I do not 11 believe the cost associated with further investigating the pre-2007 12 era justifies the limited to marginal gain that may be reached (if 13 any). 14 VIII. THE PONZI-LIKE SCHEME EXTENDS TO NON-DEBTOR ENTITIES PROFESSIONAL INVESTORS 28, LLC AND PFI GLENWOOD, LLC 15 96. As with all the entities within the PFI Enterprise, the investments and financial 16 transactions specific to non-debtor entities Professional Investors 28, LLC (“LLC 28”) and PFI 17 Glenwood, LLC (“PFI Glenwood”) are inextricably entangled with those of the other entities 18 within the PFI Enterprise. For example, an outside investor in LLC 28 rolled over all but 19 approximately $50,000 of his investment from other previous investments in the PFI Enterprise. 20 Additionally, PFI and LLC 28 engaged in numerous intercompany transactions over the years. 21 When LLC 28 refinanced its property in May of 2020, the proceeds from the refinance were wire22 from the escrow account directly into a PFI corporate bank account rather than LLC 28’s account. 23 This in turn appears to have at least partially satisfied the numerous intercompany payables LLC 24 28 had owed to PFI. LLC 28, however, did not otherwise receive a benefit from the refinancing. 25 97. At the time of the PFI Glenwood purchase, two investors used Rollover 26 investments from PISF Notes to make their investments in PFI Glenwood (and as noted in Sectio27 173

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1 V, the Rollovers associated with property acquisitions were commonly drawn from comingled 2 funds). Moreover, proceeds these investors received from the refinance of the real property owne3 by PFI Glenwood were contributed directly to their PISF Notes. One of these particular investors4 further used proceeds from this refinance to fund an investment to Financial Investors 44, LLC 5 and eventually rolled over his investment in PFI Glenwood into his PISF Note investment. 6 98. I declare under the penalty of perjury under the laws of the United States of 7 America that to the best of my knowledge the foregoing is true and correct. Executed on April 29,8 2021, at San Francisco, CA. 9 10 David Alfaro 11 FTI CONSULTING, INC. 50 California Street, Suite 1900 12 San Francisco, CA 94111 Telephone: (415)-283-4220 13 SMRH:4818-3806-5382.3 14 15 16 17 18 19 20 21 22 23 24 25 26 27

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