OCP Development

December 5, 2006

SIXTH STATUS REPORT

Thank you for your patience in awaiting this report.

Settlement.We are pleased to report that David Monroe has accepted full responsibility for what happened at the Hawaii College of Pharmacy and a settlement of the case has been reached. As a result, a judgment has been entered against him and Pacific Educational Services Company which obliges them each to pay approximately $6.5 million in restitution and $7.5 million in civil penalties. The judgment is good for ten years and is renewable for an additional ten years. PES, Monroe and Criswell are also subject to a permanent injunction barring them from ever doing business in or from Hawaii.

The settlement terms are documented in a series of documents filed with the court and which are posted online athttps://www.hawaii.gov/dcca/ocp/udgi/lawsuits/hicp/ .

We believe the settlement essentially gives us virtually the same effective relief we would have obtained had we taken the matter to trial. Of course, there are never any guarantees at a jury trial and, in any event, trying the matter would have delayed resolution of the case for at least seven months and probably much longer.

Nothing in the settlement in any way impedes or restricts your individual private rights in this matter.

What happens Now?

The Co-Receivers have completed their work in identifying and retrieving assets. Soon they will estimate the fees and costs they anticipate will be necessary to wrap up their involvement and will set that amount aside. Pro-rata restitution checks payable to the individuals listed on the judgment have been made and will be mailed out on December 15 from our office. Students who paid the full $28,550 tuition will receive $6,597; those who paid $26,550 will receive $6,135 and those who paid only a $1,00 seat deposit will receive $231.

If you have moved, please email[email protected]with your new address asap.

Need Help Locating Former Students

We do not have addresses or contact information for the following students: Can Doan, Minh Thao Huynh-Dang, Sarah Nguyen, Christina Aquino, Denny Hiep Bui, Thao Chau, Bereket Ghebreslassie, Huong Nguyen, Kristine Nguyen, Van Thi Thu Nguyen, Robert Oloroso, Trang Pham, Thanh Van Phan, linh Tran, Phuong-Di Trang, Catherine Trinh and Ted Vo. If you know any of these people, please have them email [email protected] .

We are also missing contact information for many individuals who paid a $1000 seat deposit, but deferred attendance.  Again, if you are one of these people, please contact us.

If we are unable to locate an individual who is entitled to restitution, their check will eventually be sent to the state’s unclaimed property division

Co-Receivers’ Activities. The Co-Receivers have continued their efforts to locate and hold assets and to analyze the financial records of HICP. They have been filing monthly summaries of their activities with the court. Their summaries are also onlineat https://www.hawaii.gov/dcca/ocp/udgi/lawsuits/hicp/ .

Insurance.OnAugust 25, 2006, United States District Judge Susan Mollway issued her decision on a series of motions in the case filed by Executive Risk Indemnity, Inc. (ERII).

You may remember that ERII had issued a “Director and Officer” liability policy prior to the closure of HICP. For some time, ERII has been providing a defense to the suit filed by our office (i.e. paying for PES,Monroeand Criswell’s defense attorneys) under a reservation of rights. In November 2005, ERII filed a separate lawsuit in our federal court seeking a ruling that it was not obligated to indemnify PES,Monroeor Criswell for the claims in our pending state court suit and that it had no duty to continue paying for their defense.

Earlier this year, the Co-Receivers in our case were permitted to intervene in the ERII lawsuit and to argue that ERII was indeed ultimately liable to pay any restitution awarded in our case.

Several months ago, a series of motions were filed in the ERII case which sought rulings that would effectively decide the case. ERII, for its part, asked the court to rule in its favor. The Co-Receivers, in return, asked the court to rule in their favor. Alternatively, the Co-Receivers requested the judge abstain from ruling or to request that the Hawaii Supreme Court decide the question.

The key question in the case is whether such a policy provides coverage for restitution claims. This question has never been addressed by aHawaiicourt. Judge Mollway’s decision found in favor of ERII based largely on a series of cases which began inCaliforniain 1992.Her decision, although unfortunate, was not entirely unexpected. As a result, ERII will not be contributing any funds.

Finally. We would like to thank those of you that took the time and effort to file complaints with our office. We would especially like to thank Fabiola Killian who was the first person to come forward and advise us of the situation at HICP and the following students who gave their time for depositions: Tony Mai, Marjan Niknam, George Navarrete, Mailoan Nguyen, Clarence Batacan, John Pham andPejman Mesdaghi.