robb evans receiver of mx factors llc; bbh resources llc and jtl … · 2018-09-03 · robb evans...

ROBB EVANS Receiver of

MX Factors LLC; BBH Resources LLC and JTL Financial Group LLC

11450 Sheldon Street Sun Valley, California 91352-1121

Telephone No.: (818) 768-8100 Facsimile No.: (818) 768-8802

Securities and Exchange Commission v. MX Factors LLC, et al.

CASE No. EDCV 04-223 VAP (SGLx)

Notice of Motion and Motion for Order:

(1) Approving Final Report and Accounting;

(2) Approving Final Distribution of Receivership Assets;

(3) Approving Receiver’s and Professionals’ Fees and Expenses

from August 1, 2009 Through Closing;

(4) Authorizing Abandonment and Destruction of Records;

(5) Discharging Receiver;

(6) Relieving Receiver of All Duties and Liabilities;

(7) Authorizing the Turnover of Any Remaining Funds After the

Final Distribution to the Securities and Exchange Commission;

and

(8) Approving the Receiver’s Settlement with Settling Judgment

Debtors;

Memorandum of Points and Authorities;

Declaration of Gary Owen Caris in Support Thereof;

Declaration of Brick Kane in Support Thereof

Filed July 29, 2011

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

v.

MX FACTORS, LLC; BBH RESOURCES, LLC; JTL FINANCIAL GROUP, LLC; RICHARD M. HARKLESS; DANIEL BERARDI; THOMAS HAWKESWORTH; and RANDALL W. HARDING,

Defendants.

GARY OWEN CARTS (SBN 088918) e-mail: gcarisgmckennalong.com LESLEY AI\11\M HAWES (SBN 117101) e-mail: [email protected] MCKENNA LONG & ALDRIDGE LLP 300 South Grand Avenue, 14th Floor Los Angeles, CA 90071 Telephone: (213) 688-1000 Facsimile: (213) 243-6330

Attorneys for Permanent Receiver ROBB EVANS

CASE NO. EDCV 04-223 VAP (SGLx)

NOTICE OF MOTION AND MOTION FOR ORDER (1) APPROVING FINAL REPORT AND ACCOUNTING; (2) APPROVING FINAL DISTRIBUTION OF RECEIVERSHIP ASSETS; (3) APPROVING RECEIVER'S AND PROFESSIONALS' FEES AND EXPENSES FROM AUGUST 1, 2009 THROUGH CLOSING; (4) AUTHORIZING ABANDONMENT AND DESTRUCTION OF RECORDS; (7 DISCHARGING RECEIVER; (6 RELIEVING RECEIVER OF A L DUTIES AND LIABILITIES; (7) AUTHORIZING THE TURNOVER OF ANY REMAINING FUNDS AFTER THE FINAL DISTRIBUTION TO THE SECURITIES AND EXCHANGE COMMISSION; AND (8) APPROVING THE RECEIVER'S SETTLEMENT WITH SETTLING JUDGMENT DEBTORS,• MEMORANDUM OF POINTS AND AUTHORITIES AND DECLARATION OF GARY OWEN CARIS

DATE: August 29, 2011 TIME: 2:00 p.m. PLACE: Courtroom 2

MOTION FOR ORDER APPROVING RECEIVER'S FINAL REPORT AND ACCOUNTING AND RELATED

RELIEF

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG

ALDRIDGE LLP ATTORNEYS AT LAW

LOS ANGELES

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

LA:17860898.1

Case 5:04-cv-00223-VAP-SGL Document 387 Filed 07/29/11 Page 1 of 124 Page ID #:1213


RELIEF - 2 -

PLEASE TAKE NOTICE that on August 29, 2011 at 2:00 p.m., or as soon

thereafter as counsel may be heard in Courtroom 2 of the above-entitled court

located at 3470 Twelfth Street, Riverside, California, Robb Evans, the permanent

receiver ("Receiver") of MX Factors, LLC, BBH Resources, LLC, JTL Financial

Group, LLC and their subsidiaries and affiliates (collectively, the "Receivership

Defendants"), will and hereby does move the Court for the following relief:

1. An order approving the Receiver's Final Report and Accounting

attached collectively to the Declaration of Brick Kane as Exhibit 1 (collectively the

"Final Report") filed concurrently herewith;

2. An order approving the Receiver's final distribution of approximately

$247,000 to the investor and non-investor approved claimants' ("Final

Distribution") after payment of all remaining Receiver's administrative expenses;

3. An order approving and confirming all actions and activities taken by

or on behalf of the Receiver and all payments made by the Receiver in connection

with the administration of the receivership estate;

4. An order approving all receivership administrative expenses, including

the Receiver's fees and expenses and those of his professionals incurred in

connection with the receivership proceeding, including those previously paid to the

Receiver and his counsel, and approving and authorizing payment of all

administrative expenses and Receiver's and professionals' fees and expenses for the

period from August 1, 2009 through the closing of the receivership estate and the

discharge of the Receiver ("Final Expense Period"), as reflected in the Final Report,

to the extent any such administrative expenses and Receiver's and counsel's fees

and expenses remain unpaid, including Receiver's and counsel's fees and expenses

1 As explained in further detail in the motion and Declaration of Brick Kane, the total amount of approved claims have been adjusted from $39,577,911.90 to $39,124,331.82.

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &


LOS ANGELES

LA:17860898.1



RELIEF - 3 -

incurred and unpaid for the period from August 1, 2009 through the closing of the

estate;

5. An order authorizing the Receiver to abandon and destroy the records

of the Receivership Defendants and any other corporations or businesses under the

control of any of the Receivership Defendants in the possession, custody or control

of the Receiver unless, within 30 days after service of written notice to the

Securities and Exchange Commission ("SEC"), the Receiver has been served with a

written request by the SEC for possession of the records or a subpoena by a law

enforcement agency for the records, in which event the Receiver is authorized to

turn over the original records to the SEC or a law enforcement agency in response

to the request or subpoena;

6. An order, effective upon the completion of the Receiver's wind up of

the estate, payment of administrative expenses and Final Distribution as provided

herein, directing that the Receiver, his agents, employees, members, officers,

independent contractors, attorneys and representatives be: (a) discharged; (b)

discharged and released from all claims and liabilities arising out of and/or

pertaining to the receivership herein; and (c) relieved of all duties and

responsibilities pertaining to the receivership previously established in this action;

7. An order authorizing the Receiver to turn over any miscellaneous

remaining receivership funds to the SEC, to the extent that any funds remain or are

recovered after the Final Distribution to the investor and non-investor approved

claimants; and

8. An order approving the Receiver's proposed settlements of the

Receiver's judgments against investors and/or agents D. Betz for $12,600 and D.

O'Donnell for $20,000 (collectively, "Settling Judgment Debtors ") who prior to

the receivership received payments totaling more than the principal amount of their

investment and/or who received commissions or bonuses for the solicitation of

investments in the fraudulent scheme perpetrated by the Receivership Defendants,

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &


LOS ANGELES

LA:17860898.1


MOTION FOR ORDER APPROVING RECEIVER'S - FINAL REPORT AND ACCOUNTING AND RELATED

RELIEF 4

1 as follows:

Settling Judgment Debtor

Judgment Amount

Settlement Amount

Settlement Terms

Settlement Document

D. Betz $58,907.37 $12,600.00 Paid in full. No.

D. O'Donnell $183,323.06 $20,000.00 Paid in full. No.

TOTAL: $242,230.43 $32,600.00

2

3

4

5

6

7

This motion is made pursuant to Local Civil Rule 66-7 and 66-8 and is based

upon this notice of motion and motion, the notice of hearing, the memorandum of

points and authorities and declarations of Brick Kane and Gary Owen Caris filed in

support hereof, on such pleadings and files of the Court of which the Receiver may

request the Court take judicial notice, and upon such other pleadings and oral and

documentary evidence as may be presented at or before the time of the hearing on

the motion.

In addition, this motion is made on the grounds that (1) the proposed

settlements with the Settling Judgment Debtors are fair and equitable to the

receivership estate, and (2) resolution of the claims with the Settling Judgment

Debtors pursuant to the foregoing settlements is in the best interests of the

receivership estate and within the range of reasonableness for settlement of the

claims in question given: (a) the nature and amount of the claims against the

Settling Judgment Debtors; (b) the lack of collectability of the claims given the

Receiver's investigation of potential sources of recovery and the inability to collect

the judgments over a period of well over three years; and (c) other factors

warranting settlement with the Settling Judgment Debtors in the amount of the

settlement payments set forth, based on the Receiver's exercise of his business

judgment and discretion under the circumstances of this case.

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &


LOS ANGELES

LA:17860898.1


PLEASE TAKE FURTHER NOTICE that this motion will be posted on the

Receiver's website at robbevans.com/html/mxfactors.htm1. 2 Copies of this Motion

will be provided to any interested party upon receipt of a written request which may

be sent to: Robb Evans & Associates LLC, Attn: Cherrie Eustaquio, 11450

Sheldon Street, Sun Valley, CA 91352-1121; Telephone: (818) 768-8100;

Facsimile: (818) 768-8802.

1

2

3

4

5

6

7

Dated: July 28, 2011 Respectfully submitted,

MCKENNA LONG & ALDRIDGE LLP GARY OWEN CAMS LESLEY ANNE HAWES

8

9

10

By: /s/ Gajy Owen Canis Gary Owen Canis

Attorneys for Permanent Receiver, ROBB EVANS

2 Due to the voluminous nature of certain exhibits attached to the Receiver's motion which include all time records of the Receiver, his staff and his counsel, the voluminous time records will not be posted on the Receiver's website.

MOTION FOR ORDER APPROVING RECEIVER'S - 5 - FINAL REPORT AND ACCOUNTING AND RELATED

RELIEF

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &

ALDRIDGE LIP

ATTORNEYS AT LAW

LOS ANGELES

LA:17860898.1


1 TABLE OF CONTENTS 2

Page I. INTRODUCTION 6

A. Liquidation of Remaining Receivership Assets 6 B. Funds Available for Distribution and Wind Up of Receivership

Estate 7 C. Claims Procedures 7 D. Settlements and Judgments On Winning Investors Claims 10

II. THE RECEIVER REQUESTS APPROVAL OF THE RECEIVER'S FINAL REPORT AND FINAL FEE MOTION 11 A. Services of the Receiver 12 B. Services of the Receiver's Counsel 13

III. PROPOSED SETTLEMENTS WITH SETTLING JUDGMENT DEBTORS 14

IV. THE RELIEF SOUGHT IS APPROPRIATE TO ALLOW THE RECEIVER TO WIND UP THE ESTATE FORTHWITH 17

V. CONCLUSION 17

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 McKENNA LONG &


LOS ANGELES


RELIEF LA:17860898.1


1 TABLE OF AUTHORITIES

Page(s) CASES

In re A & C Properties, 784 F. 2d 1377 (9th Cir. 1986) 16

In re Woodson, 839 F. 2d 610 (9th Cir. 1988) 16

RULES

Federal Rules of Civil Procedure Rule 66 17

Federal Rules of Bankruptcy Procedure Rule 9019 16

Local Rules Rule 66-8 16

OTHER AUTHORITIES

2 Clark on Receivers (3d ed. 1992) § 383.1 17

3 Clark on Receivers (3d ed. 1992) § 655 15 § 770 16

13 Moore 's Federal Practice (Matthew Bender 3d ed. Rev. 2011) § 66.06[4][a] 17


RELIEF

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &


LOS ANGELES

LA:17860898.1


MOTION FOR ORDER APPROVING RECEIVER'S - FINAL REPORT AND ACCOUNTING AND RELATED

RELIEF - 6

1 MEMORANDUM OF POINTS AND AUTHORITIES

I. INTRODUCTION

The Securities and Exchange Commission ("SEC") commenced this action

against the Receivership Defendants as well as against Richard Harkless, Daniel

Berardi, Thomas Hawkesworth, and Randall W. Harding, who illegally and

fraudulently sold investments in violation of the securities laws and in furtherance

of an illegal Ponzi scheme. The Receiver was initially appointed as the temporary

receiver pursuant to a Temporary Restraining Order entered on February 26, 2004.

Thereafter, on March 9, 2004, the Receiver was appointed as permanent receiver

pursuant to multiple Preliminary Injunctions issued against the Receivership

Defendants and the other defendants in the case. Judgments have been entered

against all of the individual defendants and the Receivership Defendants in the SEC

Action in favor of the SEC. The judgments against the individual defendants range

in amounts from $10,977,125.36 to $42,401,948.02.

A. Liquidation of Remaining Receivership Assets

As reflected in the Receiver's Final Report, the Receiver has liquidated all of

the available tangible assets of the receivership estate, including those assets that

were in the estate when the Receiver was appointed and those assets that were

turned over to the estate. Over the term of the receivership, including $32,600 in

funds subject to the proposed settlements for which approval is sought herein, the

Receiver has recovered $5,752,989.41 for the benefit of the receivership estate. Of

that sum, with the proposed final distribution, the Receiver will have distributed to

allowed claimants over $4.1 million. The assets of the receivership estate

administered by the Receiver included several real estate assets, investment

interests in privately held companies and numerous claims against third parties,

including but not limited to claims against the winning investors and agents of the

Receivership Defendants.

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &


LOS ANGELES

LA: 17860898.1


B. Funds Available for Distribution and Wind Up of Receivership

Estate

As reflected at page 4 of the Receipts & Expenses by Month (hereinafter

"Final Accounting"), Tab 1 to the Final Report, after taking into account all

previously reported and approved fees and expenses, the fees and expenses of the

Receiver and his counsel incurred during the current expense period and the

estimated fees and expenses of the Receiver and his counsel through closing,

including fees and expenses for the preparation and filing of the Receiver's Final

Report and Accounting and this Motion, the Receiver estimates that there will be

approximately $247,000 3 available for distribution by the estate ("Final

Distribution"). This sum is in addition to the approximate $4 million that have

previously been distributed in the case. As discussed in greater detail below, the

Receiver seeks approval for the Receiver to distribute to the approved investor

claimants and approved creditor claimants the remaining assets of the receivership

estate when the Receiver closes the estate, after payment of all outstanding and

unpaid administrative expenses, including all fees and costs of the Receiver and his

counsel.

C. Claims Procedures

The Court previously authorized the Receiver to implement a claims filing

and allowance procedure pursuant to the Court's order entered March 10, 2005.

The Receiver implemented the claims procedure, and in November, 2005, the

Receiver filed his motion for a determination of various disputed investor claims, to

approve compromises of other claims and to approve an initial distribution of

receivership estate assets of approximately $3 million to be made pro rata on all

approved investor and creditor claims against the estate ("Initial Distribution

This distribution figure is based upon the assumption that the twoproposed settlements in this Motion will be approved and an additional $32,600 will be taken into the receivership estate for distribution to the approved claimants.


RELIEF

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &


LOS ANGELES

-7- LA717860898.1


Motion"). The Initial Distribution Motion was heard on December 5, 2005, and all

relief sought by the Receiver was granted by Court as reflected in the Court's

minute order entered December 8, 2005. On March 31, 2009, the Court approved

the Receiver's second motion for distribution ("Second Distribution Motion") of

approximately $1 million. The original amount of approved claims of investor and

non-investor creditors, $39,577,911.90, was reduced to $39,550,786.82 based on a

mutually agreed adjustment in an investor claim when that investor advised the

Receiver that the investor had actually made his investment for a different investor

and was therefore not entitled to receive a distribution. The other investor on

whose behalf the investment was made was a winning investor, and the total

approved claims of investors were reduced and adjusted accordingly.

In addition, with respect to 11 other losing investor accounts for which the

Receiver had originally provided approved claims, totaling $426,455 in claims, the

Receiver only had available partial investor names, generally without last names,

and incomplete addresses or no addresses at all pertaining to those accounts. The

Receiver has since searched the receivership records and used any available

resources to try to obtain complete investor names, addresses and contact

information pertaining to those accounts but has been unable to fully identify the

investors or their contact information. Further, although the Receiver has

maintained a web site for the case since its inception, no one has contacted the

Receiver to attempt to claim these investment accounts. As a result, the Receiver

has adjusted the approved claims of investors and non-investor creditors to

$39,124,331.82 which is comprised of 589 investors and 31 non-investor creditors.

In addition, as result of the foregoing, $43,106.07, which was previously approved

for distribution, will be distributed pro rata among all of the adjusted approved

claims of the investor and non-investor creditors as part of the Final Distribution.

The Final Distribution will distribute the remaining estate assets after payment of

administrative claims based on this adjusted approved claims figure. MOTION FOR ORDER APPROVING RECEIVER'S

FINAL REPORT AND ACCOUNTING AND RELATED RELIEF

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 McKENNA LONG Ir


LOS ANGELES

- 8 - LA:17860898.1



RELIEF - 9 -

Since the two distributions, the Receiver has liquidated all remaining tangible

assets of the estate and has prosecuted eight lawsuits against 51 third parties to

recover pre-receivership fraudulent transfers made by the Receivership Defendants

to "winning" investors and sales agents as fictitious profits in excess of the

investors' principal investments and purported sales commissions. These lawsuits

have now all been resolved by the Receiver through judgments and settlements.

As set forth in the Receiver's Initial Distribution Motion and Second

Distribution Motion, allowing the approved creditor claims to share pro rata in

distributions of the estate assets makes a de minimus impact on the amounts paid on

adjusted approved investor claims and is fair and equitable under the circumstances

as there is no compelling equitable basis for creditor claims to be subordinated in

this case.

The pro rata distribution plan previously proposed and approved by the Court

in connection with the Receiver's Initial Distribution Motion and Second

Distribution Motions treats similarly situated investors and non-investor creditors

alike by dividing the receivership assets available for distribution among the

investor and non-investor creditors according to the adjusted approved claims of

such creditors. The Receiver contends that under the facts and circumstances of

certain cases, subordination of non-investor creditors to an investor creditor class is

appropriate but believes that such a subordination in this case is not economically

efficient and that there are no overriding equitable grounds for differentiating

between investor and creditor claims under the facts and circumstances. The

Receiver's proposed plan for this Final Distribution of not less than $247,000 pro

rata among all adjusted approved investor and creditor claims is appropriate for

these reasons and is consistent with the Court's prior orders on the Receiver's

distribution motion. If $247,000 is distributed, it would represent a distribution on

adjusted approved claims of approximately 0.631 %, and will increase the

aggregate distributions to date on adjusted approved claims to approximately

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &

ALDRIDGE LLP

ATTORNEYS AT LAW

LOS ANGELES

LA:17860898.1


10.739%.

D. Settlements and Judgments On Winning Investors Claims

As set forth in the Final Report, to date and not including the two pending

settlements with D. Betz and D. O'Donnell, the Receiver has recovered over

$940,000 in total through all of the Receiver's collection efforts on his claims

against winning investors and agents, including settlements and judgments. With

respect to the collection on the judgments, previously the Receiver requested and on

September 29, 2009, the Court approved the sale of judgments the Receiver

obtained against various defendants ("Judgment Debtors") in the third party

litigation as to which the prospects of collection were uncertain and there was a

likelihood of significant delay and expense to attempt to enforce the judgments

through asset investigations, judgment debtor examinations and other procedures at

a point in time where there were no other assets of the estate to be administered. In

December 2009, the judgments were put up for sale at an auction through the

company, SecondMarket, Inc. SecondMarket offered the judgments pursuant to an

on-line auction with notice to its extensive database of contacts. However, the

Receiver was unsuccessful in selling the judgments and remains the holder of the

judgments against the Judgment Debtors in a total face amount of $3,975,333.39.

Although the judgments were not sold at auction, the judgments have some long-

term value and prospects for additional recoveries that make them assets of some

future monetary worth. With perfected judgment liens supporting the judgments,

the Receiver anticipates the judgments will have some long-term prospects for

recoveries. It is possible that Judgment Debtors' assets will be sold at some time

over the next several years and will provide additional recoveries to the

receivership estate. If, after the close of the receivership estate, any recoveries from

these judgments are received, the Receiver seeks Court approval to transfer those

sums to the SEC,

As discussed below, the Receiver and counsel made additional efforts to MOTION FOR ORDER APPROVING RECEIVER'S

- 10 - FINAL REPORT AND ACCOUNTING AND RELATED RELIEF

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &

ALDRIDGE LLP

ATTORNEYS AT LAW

LOS ANGELES

LA:17860898.1


recover value from the judgments prior to closing the estate by making offers to the

judgment debtors to accept a discounted settlement on their judgment amount. The

Receiver was able to reach settlements with two judgment debtors, D. Betz and D.

O'Donnell, whose settlements are submitted for approval in this motion. If

approved, the settlements will yield an additional aggregate recovery of $32,600 for

the estate. The Receiver previously recovered approximately $75,000 in post-

judgment collections.

II. THE RECEIVER REQUESTS APPROVAL OF THE RECEIVER'S

FINAL REPORT AND FINAL FEE MOTION

The Court previously approved and authorized the payment the fees and

expenses of the Receiver, the Receiver's counsel and other professionals for the

period from the inception of the receivership estate through July 31, 2009.

In addition to other relief, this motion seeks approval and authorization for

payment of fees and expenses of the Receiver, his staff and his attorneys for fees

and expenses incurred by the estate from August 1, 2009 through the closing of the

estate ("Final Expense Period"). As set forth in the Final Accounting, during the

period from August 1, 2009 through March 31, 2011, the Receiver incurred fees of

$6,951.22 and expenses of $8,107.47 for a total fees and expenses for the Receiver,

his members and staff of $15,058.69. The Receiver's fees for this twenty-month

expense period averaged less than $350.00 per month. In addition, the Receiver

incurred fees of $16,346.10 and costs of $1,195.10 for a total of $17,541.20 for the

services of his counsel, for twenty-month period from August 1, 2009 through

March 31, 2011. In addition, the Receiver's counsel, McKenna Long & Aldridge

LLP ("McKenna Firm"), has incurred fees and expenses in the sum of $34.65 from

April 1, 2011 through April 30, 2011. The McKenna Firm's fees and expenses

incurred from April 1, 2011 through April 30, 2011 are included as part of the

estimate to close on the Final Accounting attached as Tab 1 to the Receiver's Final

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &

ALDRIDGE LLP

ATTORNEYS AT LAW

LOS ANGELES


RELIEF LA:17860898.1


Report. The McKenna Firm's fees for this twenty-month period averaged less than

$820.00 per month.

The Receiver's Final Accounting includes an estimate of the receivership

expenses that will be incurred from April 1, 2011 through the closing of the estate.

As set forth in the Final Accounting, the Receiver estimates total closing expenses

to be $37,040.03, including Receiver's estimated fees and expenses of $20,440.03

and the McKenna Firm's estimated fees and costs of $15,000. The Receiver seeks

an order authorizing the Receiver to pay all actual expenses incurred by the

Receiver in winding up the estate from April 1, 2011 through closing, including all

actual fees and costs of the Receiver, the Receiver's members and staff and the

Receiver's counsel, prior to distribution of the net remaining receivership assets to

the approved investor claimants and approved creditor claimants.

The fees and costs of the Receiver for which approval is requested are set

forth in the Final Accounting attached as Tab 1 to the Receiver's Final Report,

which is Exhibit 1 to the Declaration of Brick Kane filed in support of this Motion.

The fees and expenses of the Receiver include the Receiver's senior staff fees

(Exhibit 2 thereto), financial reconstruction staff fees (Exhibit 3 thereto), support

staff fees and additional fees and expenses are itemized in the Final Accounting.

The fees and expenses of the McKenna Firm are attached hereto as Exhibits 1 and

2, respectively, to the Declaration of Gary Owen Canis.

During the Final Expense Period, the Receiver has continued to respond to

investor inquiries and to address other issues concerning the receivership estate,

including developing strategies for the collection and enforcement of judgments

obtained by the Receiver against third parties for recovery of receivership funds

fraudulently conveyed prior to the receivership.

A. Services of the Receiver

As discussed above, the Receiver requested and the Court approved the sale

of judgments the Receiver obtained against various Judgment Debtors in the third

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 12 - MOTION FOR ORDER APPROVING RECEIVER'S


MCKENNA LONG Sr ALDRIDGE LLP

ATTORNEYS AT LAW Los ANGELES

LA:17860898.1


party litigation as to which the prospects of collection are uncertain and based on

the likelihood of significant delay and expense to attempt to enforce the judgments


a point in time where there were no other assets of the estate to be administered.

The auction of the judgments went forward in December 2009. However, the

judgments failed to sell at the auction and the Receiver remains the holder of the

judgments against the Judgment Debtors.

In an effort to maximize the funds collected for the benefit of the

receivership estate, during this Final Expense Period, the Receiver offered to settle

with Judgment Debtors for a discounted amount based upon the Receiver's

independent analysis of various circumstances. The Receiver, with the advice of

counsel, determined reasonable settlement offers to send to the Judgment Debtors,

and offers were made to the Judgment Debtors. Using this approach, the Receiver

was able to settle with two Judgment Debtors, D. Betz and D. O'Donnell, subject to

Court approval, and collected an additional $32,600 for the benefit of the

receivership estate.

The Receiver also continued to address administrative issues regarding the

receivership estate, including responding to investor inquiries and performing bank

reconciliations. Further, most of the Receiver's expenses during this Final Expense

period were incurred for tax preparation for the two reporting periods covered

during this twenty-month expense period. The Receiver's fees and expenses in

connection with all of these services during the Final Expense Period total

$15,058.69.

B. Services of the Receiver's Counsel

During the Final Expense Period, legal services rendered by counsel have

included (a) preparation of and filing of a motion to approve the sale of judgments

and preparation of and filing of a motion to approve the Receiver's fees and

expenses for the period of August 1, 2008 through July 31, 2009; (b) appearance at

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28



MCKENNA LONG & ALDRIDGE LLP

ATTORNEYS AT LAW LOS ANGELES

LA:17860898.1


the motion to approve the sale of the judgments which was heard and granted on

September 28, 2009 and the motion to approve the Receiver's fees and expenses for

the period of August 1, 2008 through July 31, 2009, which was granted without a

hearing on January 19, 2010; (c) assisting the Receiver with the attempted sale of

judgments; (d) consulting with the Receiver about making discounted settlement

offers to the Judgment Debtors and preparing seven settlement letters to the

Judgment Debtors, as described above; and (e) assisting the Receiver with

settlements with two of the Judgment Debtors. For these services, the Receiver

incurred fees and costs to the McKenna Firm in the sum of $17,541.20.

III. PROPOSED SETTLEMENTS WITH SETTLING JUDGMENT

DEBTORS

This motion also seeks approval of the settlements with D. Betz and D.

O'Donnell (collectively the "Settling Judgment Debtors"). A schedule of the

settlements providing for payments to the receivership estate is attached as

Exhibit 4 to the Declaration of Brick Kane.

As set forth in the Declaration of Brick Kane, Deputy to the Receiver, in

support hereof, while the Receiver's procedures and the factors considered in the

Receiver's pre-judgment settlements generally included obtaining written financial

statements and/or other information to verify the financial condition of the settling

parties and evaluating the costs and risks of litigation and the defenses raised by the

defendants pre-judgment, the factors considered by the Receiver in settling the

judgments with the Settling Judgment Debtors focused on (a) the lack of

collectability of the claim given the Receiver's investigation of potential sources of

recovery and the inability to collect the judgments over a period of well over three

years; (b) any other information known that adversely affected the collectability of

the judgments, such as the health and age of the Judgment Debtors; (c) the probable

time delay in realizing on the judgments; and (d) the benefits to the estate and its

creditors of collection of sums from the Judgment Debtors prior to wind up and

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28



MCKENNA LONG &


LOS ANGELES

LA:17860898.1


closing of the estate so that those sums can be distributed to creditors in the Final

Distribution.

The percentage settled upon with each party varies based on the settlement

methodology described above. As to D. Betz ("Betz"), the Receiver was awarded a

default judgment against him in the amount of $58,907.37. In an effort to

maximize the funds collected for the benefit of the receivership estate, the Receiver

offered to settle with Betz (and other Judgment Debtors) at a discount from the

judgment amount based on a determination that obtaining a discounted cash

settlement on the judgment amount would generate more money for the estate than

alternative means of collection. The Receiver and Betz agreed to settle for $12,600,

and Betz has paid this amount to the Receiver.

As to D. O'Donnell ("O'Donnell"), the Receiver was awarded a default

judgment against her in the amount of $183,323.06. The Receiver made a similar

offer to settle with O'Donnell at a discount from the judgment amount based on a

determination that obtaining a discounted cash settlement on the judgment amount

would generate more money for the estate than alternative means of collection. The

Receiver and O'Donnell agreed to settle for $20,000, and O'Donnell has paid this

amount to the Receiver.

The leading treatise on receivership law states:

The only justification for the compromise of claims is that

it is done for the best interests of the receivership and the

estate under the control and possession of the court.

3 Clark on Receivers § 655 (3d ed. 1992)

The court appointing a receiver must use its discretion in

determining whether it is for the best interests of the

estate that the receiver be authorized to compromise a

claim, and when the appointing court has not abused its

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28



MCKENNA LONG & ALDRIDGE LLP

ATTORNEYS AT LAW

LOS ANGELES

LA:17860898.1


1

2

discretion in giving instructions to the receiver, its orders

will not be disturbed or reviewed in the appellate court.

3 Clark on Receivers § 770 (3d ed. 1992)

Pursuant to Local Rule 66-8, a receiver is directed to administer receivership

estates "as nearly as possible in accordance with the practice in the administration

of estates in bankruptcy." Under Rule 9019 of the Federal Rules of Bankruptcy

Procedure, the court in a bankruptcy case may approve a proposed compromise of

controversies after notice and an opportunity for hearing. Ninth Circuit decisions in

In re A & C Properties, 784 F. 2d 1377 (9th Cir. 1986) and In re Woodson, 839 F.

2d 610 (9th Cir. 1988) establish four factors the court must consider in ruling on the

approval of compromises in bankruptcy:

"(a) The probability of success in the litigation; (b) the

difficulties, if any, to be encountered in the matter of

collection; (c) the complexity of the litigation involved,

and the expense, inconvenience and delay necessarily

attending it; (d) the paramount interest of the creditors

and a proper deference to their reasonable views in the

premises."

In re A & C Properties, 784 F. 2d at 1381. See also In re Woodson, 839 F. 2d at

620.

The Receiver has evaluated each of the proposed settlements under the

factors identified in the Ninth Circuit cases cited above and the other considerations

outlined above as part of the Receiver's settlement methodology. As to the

settlements with the Settling Judgment Debtors, the settlements provide a fair and

reasonable recovery on the Receiver's claims.

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28



McKENNA LONG & ALIDIUDGE LLP

ATTORNEYS AT LAW

LOS ANGELES

LA:17860898.1


IV. THE RELIEF SOUGHT IS APPROPRIATE TO ALLOW THE

RECEIVER TO WIND UP THE ESTATE FORTHWITH

The Receiver seeks an order of the Court approving the Receiver's Final

Report and approving the Receiver's activities in the case. Court approval of the

Receiver's actions and requests for instructions is consistent with federal

receivership practice as required by Federal Rules of Civil Procedure, Rule 66. See,

2 Clark on Receivers, § 383.1 (3d ed. 1992). The Court has wide latitude in

supervising the Receiver and may provide for the administration of the receivership

as it deems appropriate. 13 Moore's Federal Practice, § 66.06[4][a], (Matthew

Bender 3d ed. Rev. 2011).

The relief sought in this motion will promote the orderly and prompt wind up

of the receivership estate in an expeditious and cost-effective manner. The relief

sought is customary and appropriate in closing a receivership estate and discharging

the receiver. The fees and expenses sought by the Receiver are reasonable under

the circumstances given the services rendered, and the scope of the case.

V. CONCLUSION

For the reasons set forth herein, the Receiver respectfully requests that the

Court grant relief as requested in the motion.

Dated: July 28, 2011 Respectfully submitted,

MCKENNA LONG & ALDRIDGE LLP GARY OWEN CARTS LESLEY ANNE HAWES

By: /s/ Gary Owen Canis Gary Owen Canis

Attorneys for Permanent Receiver, ROBB EVANS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27



28 MCKENNA LONG &


LOS ANGELES

LA:17860898.1


1 DECLARATION OF GARY OWEN CARIS

I, Gary Owen Canis, declare:

1. I am an attorney at law duly licensed to practice before all courts of the

State of California and the United States District Court for the Central District of

California, and a partner of McKenna Long & Aldridge LLP ("McKenna Firm"),

the attorneys for Robb Evans as permanent receiver ("Receiver") of MX Factors,

LLC, BBH Resources, LLC, JTL Financial Group, LLC and their subsidiaries and

affiliates ("Receivership Defendants"). I have been the attorney primarily

responsible for representing the Receiver since his appointment as temporary

receiver in February 2004, pursuant to the Court's temporary restraining order. I

have personal knowledge of the matters set forth in this declaration, and if I were

called upon to testify as to these matters, I could and would competently testify

based upon my own personal knowledge.

2. Attached hereto as Exhibits 1 and 2 are billing summaries reflecting

the services rendered, time spent and costs incurred by the McKenna Firm

pertaining to the main receivership action and the third party litigation matters,

respectively, for the twenty-month period from August 1, 2009 through March 31,

2011 ("Final Expense Period"), with the descriptions redacted where appropriate to

preserve the attorney-client privilege and attorney-work product privileges and any

other sensitive information the disclosure of which might adversely affect the

receivership estate. Attorneys' fees and costs incurred by the Receiver for the

services of the McKenna Firm during this period include fees of $16,346.10 and

costs of $1,195.10 for a total of $17,541.20. In addition, the Receiver has incurred

additional attorneys' fees and costs for the services of the McKenna Firm for the

month of April 2011 in the sum of $34.65. The McKenna Firm's fees for this

twenty-month period averaged less than $820.00 per month.

3. I have estimated that the Receiver will incur additional attorneys' fees

and costs for the services of the McKenna Firm in winding up the estate from April MOTION FOR ORDER APPROVING RECEIVER'S


2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &


LOS ANGELES

- 18 - LA:17860898.1


1, 2011 through the close of the estate in the sum of $15,000, which includes the

actual attorneys' fees and costs of $34.65 incurred in the month of April 2011 and

the McKenna Firm's estimated expenses for preparing and filing this Motion and

appearing at a hearing on the Motion.

4. I am lead counsel for the Receiver in this case, and I was the lead

litigation counsel in the eight related lawsuits filed by the Receiver against third

parties for recovery of receivership assets transferred by the Receivership

Defendants prior to the commencement of the receivership case. During the Final

Expense Period, my firm prepared and filed a motion to approve the sale of

judgments and the motion to approve the Receiver's fees and expenses for the

period of August 1, 2008 through July 31, 2009. In addition, my firm appeared at

the hearing on the motion to approve the sale of the judgments on September 28,

2009. The Receiver's motion to approve the Receiver's fees and expenses for the

period of August 1, 2008 through July 1, 2009 was granted without a hearing on

January 19, 2010.

5. My firm assisted the Receiver with the attempted sale of the judgments

against the various defendants ("Judgment Debtors") in the third party litigation

actions filed by the Receiver. Further, my firm consulted with the Receiver

regarding making discounted settlement offers to the Judgment Debtors and

prepared seven settlement letters to the Judgment Debtors. In response to the seven

letters sent to Judgment Debtors, my office received two responses and my firm

assisted the Receiver with finalizing the settlements with two of those Judgment

Debtors — D. Betz and D. O'Donnell.

6. I am a partner of the McKenna Firm and am familiar with the methods

and procedures used to create, record and maintain billing records for the firm's

clients. The billing summaries attached hereto as Exhibits 1 and 2 are prepared

from computerized time records prepared contemporaneously with the services

rendered by each attorney and paralegal billing time to this matter. These MOTION FOR ORDER APPROVING RECEIVER'S

- 19 - FINAL REPORT AND ACCOUNTING AND RELATED RELIEF

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &


LOS ANGELES

LA: 17860898.1


computerized records are prepared in the ordinary course of business by the

attorneys and paralegals employed by the firm who have a business duty to

accurately record their time spent and services rendered on the matters on which

they perform work. The time records are transferred into a computerized billing

program that generates monthly invoices under the supervision of the firm's

accounting department. Based upon my experience with the firm, I believe the

McKenna Firm's methods and procedures for recording and accounting for time

and services for its clients are reliable and accurate.

7. I have practiced law in the State of California for over 30 years and

have specialized in the representation of federal equity receivers in civil

enforcement actions filed by the Federal Trade Commission and the Securities and

Exchange Commission for more than eleven years. I am familiar with the billing

rates charged by attorneys in the Southern California area and believe the rates

charged by the McKenna Firm in this matter and the fees and expenses requested

for the Final Expense Period are fair and reasonable given the nature of the services

rendered, the time expended, the expertise of the attorneys and others performing

services in this matter, the rates charged by other firms and attorneys in the

Southern California area and other factors.

I declare under penalty of perjury that the foregoing is true and correct and

that this declaration was executed on July 28, 2011, at Los Angeles, California.

./s/ Gary Owen Canis

GARY OWEN CARTS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-20- MOTION FOR ORDER APPROVING RECEIVER'S


McKENNA LONG & ALDRIDGE LLP

ATTORNEYS AT LAW

LOS ANGELES

LA:17860898.1


Plaintiff,

v.

MX FACTORS, LLC; BBH RESOURCES, LLC; JTL FINANCIAL GROUP, LLC; RICHARD M. HARKLESS; DANIEL BERARDI; THOMAS HAWKESWORTH; and RANDALL W. HARDING,

Defendants.

GARY OWEN CARIS (SBN 088918) e-mail: [email protected] LESLEY ANI\ffi HAWES (STN 117101) e-mail: [email protected] MCKENNA LONG & ALDRIDGE LLP 300 South Grand Avenue, 14th Floor Los Angeles, CA 90071 Telephone: (213) 688-1000 Facsimile: (213) 243-6330

Attorneys for Permanent Receiver ROBB EVANS

1

2

3

4

5

6

7

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE CASE NO. EDCV 04-223 VAP COMMISSION, (SGLx)

DECLARATION OF BRICK KANE IN SUPPORT OF MOTION FOR ORDER: (1) APPROVING FINAL REPORT AND ACCOUNTING; (2) APPROVING FINAL DISTRIBUTION OF RECEIVERSHIP ASSETS; (3) APPROVING RECEIVER'S AND PROFESSIONALS' FEES AND EXPENSES FROM AUGUST 1, 2009 THROUGH CLOSING; (4) AUTHORIZING ABANDONMENT AND DESTRUCTION OF RECORDS; (5) DISCHARGING RECEIVER; (6) RELIEVING RECEIVER OF ALL DUTIES AND LIABILITIES; (7) AUTHORIZING THE TURNOVER OF ANY REMAINING FUNDS AFTER THE FINAL DISTRIBUTION TO THE SECURITIES AND EXCHANGE COMMISSION; AND (8) APPROVING THE RECEIVER'S SETTLEMENT WITH SETTLING JUDGMENT DEBTORS

August 29, 2011 2:00 p.m. Courtroom 2

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

DATE: TIME: PLACE:

1 DECLARATION OF BRICK KANE ISO RECEIVER'S MOTION FOR APPROVAL OF FINAL REPORT AND ACCOUNTING AND

RELATED RELIEF

28 MCKENNA LONG &

ALDRIDGE LLP

ATTORNEYS AT LAW LOS ANGELES

LA:17856739.1


I, Brick Kane, declare:

1. I am the President and Chief Operating Officer of Robb Evans &

Associates LLC, and a Deputy to Robb Evans, who has been appointed by this

Court as pettnanent receiver ("Receiver") of MX Factors, LLC, BBH Resources,

LLC, JTL Financial Group, LLC and their subsidiaries and affiliates ("Receivership

Defendants"). I have been one of the Receiver's deputies with primary

responsibility for the day-to-day supervision and management of the receivership

over the Receivership Defendants since the Receiver first began to act pursuant to

his appointment as temporary receiver in this matter on February 26, 2004. The

matters set forth in this Declaration are based upon my personal knowledge or have

been obtained by me in the course of my supervision and management of personnel

at Robb Evans & Associates, LLC who have performed tasks in connection with

this matter under my direction. If called upon to testify as to these matters, I could

and would competently testify thereto.

2. The Receiver was initially appointed as the temporary receiver

pursuant to a Temporary Restraining Order entered on February 26, 2004.

Thereafter, on March 9, 2004, the Receiver was appointed as permanent receiver

pursuant to multiple Preliminary Injunctions issued against the Receivership

Defendants and the other defendants in the case.

3. The Receiver has liquidated all of the available tangible assets of the

receivership estate, including those assets that were in the estate when the Receiver

was appointed and those assets that were turned over to the estate.

4. Attached hereto as Exhibit 1 is a true and correct copy of the

Receiver's Final Report and Accounting ("Final Report"). The Final Report

includes a summary of the Receiver's activities and the significant events of the

receivership and attaches as Tab 1 the Receipts & Expenses by Month ("Final

Accounting"), which provides the Receiver's financial summary of receipts and

expenses incurred in the case, including estimated fees and expenses of the

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &

ALDRIDGE LIP

ATTORNEYS AT LAW

LOS ANGELES


RELATED RELIEF LA:17856739.1


Receiver and his counsel to wind up the estate and close the receivership. After

taking into account all previously reported and approved fees and expenses, the fees

and expenses of the Receiver and his counsel incurred during the current expense

period and the estimated fees and expenses of the Receiver and his counsel through

closing, including fees and expenses for the preparation and filing of the Receiver's

Final Report and this Motion, the Receiver estimates that there will be

approximately $247,000 available for distribution by the estate ("Final

Distribution"). This distribution figure is based upon the assumption that the two

proposed settlements in the Motion will be approved and an additional $32,600 will

be taken into the receivership estate for distribution to the approved claimants. By

this Motion, the Receiver seeks approval for the Receiver to distribute to the

approved investor claimants and approved creditor claimants the remaining assets

of the receivership estate when the Receiver closes the estate, after payment of all

outstanding and unpaid administrative expenses, including all fees and costs of the

Receiver and his counsel.

5. The Court previously authorized the Receiver to implement a claims

filing and allowance procedure pursuant to the Court's order entered March 10,

2005. The Receiver implemented the claims procedure, and in November, 2005,

the Receiver filed his motion for a determination of various disputed investor

claims, to approve compromises of other claims and to approve an initial

distribution of receivership estate assets of approximately $3 million to be made pro

rata on all approved investor and creditor claims against the estate ("Initial

Distribution Motion"). The Initial Distribution Motion was heard on December 5,

2005, and all relief sought by the Receiver was granted by Court as reflected in the

Court's minute order entered December 8, 2005. In addition, on March 31, 2009,

the Court approved the Receiver's second motion for distribution ("Second

Distribution Motion") of approximately $1 million. The original amount of

approved claims of investor and non-investor creditors, $39,577,911.90, was 3

DECLARATION OF BRICK KANE ISO RECEIVER'S MOTION FOR APPROVAL OF FINAL REPORT AND ACCOUNTING AND RELATED RELIEF

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &


LOS ANGELES LA:17856739.1


reduced to $39,550,786.82 based on a mutually agreed adjustment in an investor

claim when that investor advised the Receiver that the investor had actually made

his investment for a different investor and was therefore not entitled to receive a

distribution. The other investor on whose behalf the investment was made was a

winning investor, and the total approved claims of investors were reduced and

adjusted accordingly.

6. In addition, with respect to 11 other losing investor accounts for which

the Receiver had originally provided approved claims, totaling $426,455 in claims,

the Receiver only had available partial investor names, generally without last

names, and incomplete addresses or no addresses at all pertaining to those accounts.

The Receiver has since searched the receivership records and used any available

resources to try to obtain complete investor names, addresses and contact

information pertaining to those accounts but has been unable to fully identify the

investors or their contact information. Further, although the Receiver has

maintained a web site for the case since its inception, no one has contacted the

Receiver to attempt to claim these investment accounts. As a result, the Receiver

has adjusted the approved claims of investors and non-investor creditors to

$39,124,331.82 which is comprised of 589 investors and 31 non-investor creditors.

In addition, as result of the foregoing, $43,106.07, which was previously approved

for distribution, will be distributed pro rata among all of the adjusted approved

claims of the investor and non-investor creditors as part of the Final Distribution.

The Final Distribution will distribute the remaining estate assets after payment of

administrative claims based on this adjusted approved claims figure.

7. Since the two distributions, the Receiver has liquidated all remaining

tangible assets of the estate and has prosecuted eight lawsuits against 51 third

parties to recover pre-receivership fraudulent transfers made by the Receivership

Defendants to "winning" investors and sales agents as fictitious profits in excess of

the investors' principal investments and purported sales commissions. These

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &


Los ANGELES




lawsuits have now all been resolved by the Receiver through judgments and

settlements.

8. As set forth in the Receiver's Initial Distribution Motion and Second

Distribution Motion, allowing the approved creditor claims to share pro rata in

distributions of the estate assets makes a de minimus impact on the amounts paid on

adjusted approved investor claims and is fair and equitable under the circumstances

as there is no compelling equitable basis for creditor claims to be subordinated in

this case.

9. The pro rata distribution plan previously proposed and approved by the

Court in connection with the Receiver's Initial Distribution Motion and Second

Distribution Motions treats similarly situated investors and non-investor creditors

alike by dividing the receivership assets available for distribution among the

investor and non-investor creditors according to the adjusted approved claims of

such creditors. The Receiver contends that under the facts and circumstances of

certain cases, subordination of non-investor creditors to an investor creditor class is

appropriate but believes that such a subordination in this case is not economically

efficient and that there are no overriding equitable grounds for differentiating

between investor and creditor claims under the facts and circumstances. The

Receiver's proposed plan for this Final Distribution of not less than $247,000 pro

rata among all adjusted approved investor and creditor claims is appropriate for

these reasons and is consistent with the Court's prior orders on the Receiver's

distribution motion. If $247,000 is distributed, it would represent a distribution on

adjusted approved claims of approximately 0.631%, and will increase the aggregate

distributions to date on adjusted approved claims to approximately 10.739%.

10. As set forth in the Final Report, to date and not including the two

pending settlements with D. Betz and D. O'Donnell, the Receiver has recovered

over $940,000 in total through all of the Receiver's collection efforts on his claims

against winning investors and agents, including settlements and judgments. With 5

DECLARATION OF BRICK KANE ISO RECEIVERS MOTION FOR APPROVAL OF FINAL REPORT AND ACCOUNTING AND RELATED RELIEF

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG Sr

ALDRIDGE LLP

ATTORNEYS AT LAW

LOS ANGELES

LA:17856739,1


respect to the collection on the judgments, previously the Receiver requested and on

September 29, 2009, the Court approved the Receiver's attempt to sell judgments

the Receiver obtained against various defendants ("Judgment Debtors") in the third

party litigation as to which the prospects of collection were uncertain and there was

a likelihood of significant delay and expense to attempt to enforce the judgments


a point in time where there were no other assets of the estate to be administered. In

December 2009, the judgments were put up for sale at an auction through the

company, SecondMarket, Inc. SecondMarket offered the judgments pursuant to an

on-line auction with notice to its extensive database of contacts. However, the

Receiver was unsuccessful in selling the judgments and remains the holder of the

judgments against the Judgment Debtors in a total face amount of $3,975,333.39.

The total amount of the judgments held against the Judgment Debtors will be

reduced to $3,663,862.40 if the Court approves the Receiver's proposed settlements

with two of the Judgment Debtors, D. Betz and D. O'Donnell ("Settling Judgment

Debtors") that are addressed in this Motion. Although the judgments were not sold

at auction, the judgments have some long-term value and prospects for additional

recoveries that make them assets of some future monetary worth. With perfected

judgment liens supporting the judgments, the Receiver anticipates the judgments

will have some long-term prospects for recoveries. It is possible that Judgment

Debtors' assets will be sold at some time over the next several years and will

provide additional recoveries to the receivership estate. If, after the close of the

receivership estate, any recoveries from these judgments are received, the Receiver

seeks Court approval to transfer those sums to plaintiff Securities and Exchange

Commission ("SEC").

11. By this Motion, the Receiver seeks approval and authorization for

payment of fees and expenses of the Receiver, his staff and his attorneys for fees

and expenses incurred by the estate from August 1, 2009 through the closing of the

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &


LOS ANGELES




estate ("Final Expense Period"). As set forth in the Final Accounting, during the

period from August 1, 2009 through March 31, 2011, the Receiver incurred fees of

$6,951.22 and expenses of $8,107.47 for a total fees and expenses for the Receiver,

his members and staff of $15,058.69. The Receiver's fees for this twenty-month

expense period averaged less than $350.00 per month. In addition, the Receiver

incurred fees of $16,346.10 and costs of $1,195.10 for a total of $17,541.20 for the

services of his counsel, for twenty-month period from August 1, 2009 through

March 31, 2011. In addition, the Receiver's counsel, McKenna Long & Aldridge

LLP ("McKenna Firm"), has incurred fees and expenses in the sum of $34.65 from

April 1, 2011 through April 30, 2011. The McKenna Firm's fees and expenses

incurred from April 1, 2011 through April 30, 2011 are included as part of the

estimate to close on the Final Accounting attached as Tab 1 to the Receiver's Final

Report. The McKenna Firm's fees for this twenty-month period averaged less than

$820.00 per month.

12. The Receiver's Final Accounting includes an estimate of the

receivership expenses that will be incurred from April 1, 2011 through the closing

of the estate. As set forth in the Final Accounting, the Receiver estimates total

closing expenses to be $37,040.03, including Receiver's estimated fees and

expenses of $20,440.03 and the McKenna Firm's estimated fees and costs of

$15,000. The Receiver seeks an order authorizing the Receiver to pay all actual

expenses incurred by the Receiver in winding up the estate from April 1, 2011

through closing, including all actual fees and costs of the Receiver, the Receiver's

members and staff and the Receiver's counsel, prior to distribution of the net

remaining receivership assets to the approved investor claimants and approved

creditor claimants.

13. The fees and costs of the Receiver for which approval is requested are

set forth in the Final Accounting attached as Tab 1 to the Receiver's Final Report,

which is attached hereto as Exhibit 1. The fees and costs are further detailed in the

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &

ALDRIDGE LLP

ATTORNEYS AT LAW

Los ANGELES




Receiver's redacted billing summaries, Exhibits 2 and 3 attached hereto.

Specifically, the senior staff fees are set forth in Exhibit 2, and financial

reconstruction staff fees are set forth in Exhibit 3. The fees and expenses of the

McKenna Firm are attached hereto as Exhibits 1 and 2, respectively, to the

Declaration of Gary Owen Canis filed in support of the Motion.

14. During the Final Expense Period, the Receiver has continued to

respond to investor inquiries and to address other issues concerning the receivership

estate, including developing strategies for the collection and enforcement of

judgments obtained by the Receiver against third parties for recovery of

receivership funds fraudulently conveyed prior to the receivership.

15. In addition, during the Final Expense Period, the Receiver requested

and the Court approved the Receiver's attempt to sell judgments the Receiver

obtained against various Judgment Debtors in the third party litigation. The auction

of the judgments went forward in December 2009. However, the judgments failed

to sell at the auction, and the Receiver remains the holder of the judgments against

the Judgment Debtors.

16. In an effort to maximize the funds collected for the benefit of the

receivership estate, during this Final Expense Period, the Receiver offered to settle

with Judgment Debtors for a discounted amount based upon the Receiver's

independent analysis of various circumstances. The Receiver, with the advice of

counsel, determined reasonable settlement offers to send to the Judgment Debtors,

and offers were made to the Judgment Debtors. Using this approach, the Receiver

was able to settle with the two Settling Judgment Debtors, D. Betz and D.

O'Donnell, subject to Court approval, and collected an additional $32,600 for the

benefit of the receivership estate.

17. The Receiver also continued to address administrative issues regarding

the receivership estate, including responding to investor inquiries and performing

bank reconciliations. Further, most of the Receiver's expenses during this Final 8


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &

ALDRIDGE LLP

ATTORNEYS AT LAW

LOS ANGELES

LA:17856739.1


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Expense period were incurred for tax preparation for the two reporting periods

covered during this twenty-month expense period. The Receiver's fees and

expenses in connection with all of these services during the Final Expense Period

total $15,058.69.

18. As President and Chief Operating Officer of Robb Evans & Associates

LLC, I am familiar with the methods and procedures used by the Receiver and his

staff and employees to record the time spent rendering services to receivership

estates over which the Receiver has been appointed. The records attached hereto as

Exhibits 2 through 3 are regularly prepared by the members, staff and employees of

the Receiver at or about the time of the services rendered and each of whom has a

business duty to accurately record the information regarding their services set forth

in these records. The records are reviewed by the Receiver's accounting staff and

summarized in the Receipts & Expenses by Month, attached hereto as Exhibit 1.

Based upon my experience with Robb Evans & Associates LLC, I believe the

Receiver's methods and procedures for recording and accounting for time and

services for the receivership estates over which Robb Evans and Robb Evans &

Associates LLC have been appointed are reliable and accurate.

19. The Receiver has established and followed certain procedures to

evaluate and settle his claims against the Settling Judgment Debtors, D. Betz and D.

O'Donnell. While the Receiver's procedures and the factors considered in the

Receiver's pre judgment settlements generally included obtaining written financial

statements and/or other information to verify the financial condition of the settling

parties and evaluating the costs and risks of litigation and the defenses raised by the

defendants pre-judgment, the factors considered by the Receiver in settling the

judgments with the Settling Judgment Debtors focused on (a) the lack of

collectability of the claim given the Receiver's investigation of potential sources of

recovery and the inability to collect the judgments over a period of well over three

years; (b) any other information known that adversely affected the collectability of 9

MCKENNA LONG &


LOS ANGELES


LA: 17856739.1


the judgments, such as the health and age of the Judgment Debtors; (c) the probable

time delay in realizing on the judgments; and (d) the benefits to the estate and its

creditors of collection of sums from the Judgment Debtors prior to wind up and

closing of the estate so that those sums can be distributed to creditors in the Final

Distribution. A schedule of the two settlements providing for payments to the

receivership estate by the Settling Judgment Debtors is attached hereto as Exhibit 4.

20. As to D. Betz ("Betz"), the Receiver was awarded a default judgment

against him in the amount of $58,907.37 on April 30, 2007. In an effort to

maximize the funds collected for the benefit of the receivership estate, the Receiver

offered to settle with Betz (and other Judgment Debtors) at a discount from the



alternative means of collection. The Receiver and Betz agreed to settle for $12,600,

and Betz has paid this amount to the Receiver.

21. As to D. O'Donnell ("O'Donnell"), the Receiver was awarded a

default judgment against her in the amount of $183,323.06 on April 30, 2007. The

Receiver made a similar offer to settle with O'Donnell at a discount from the



alternative means of collection. The Receiver and O'Donnell agreed to settle for

$20,000, and O'Donnell has paid this amount to the Receiver. The Receiver

believes both of the settlements with the Settling Judgment Debtors provide benefit

to the estate and creditors since they provide additional funds to include in the Final

Distribution that would not have been recovered through post-judgment collection

efforts without undue expense and delay, if at all.

22. The Receiver will cause a copy of this Motion to be posted on the

Receiver's website at www.robbevans.com/html/mxfactors.html, where interested

investors and creditors may review it in its entirety, exclusive of voluminous

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &


LOS ANGELES




exhibits. The Receiver will also provide copies of the Motion to any interested

party upon receipt of a written request which may be directed to the Receiver as set

forth in the notice of hearing on the Motion.

I declare under penalty of perjury that the foregoing is true and correct and

that this declaration was executed on July 21-1 , 2011, at Sun Valley, California.

BRICK KANE


RELATED RELIEF

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 MCKENNA LONG &


LOS ANGELES LA:17856739.1


robb evans receiver of mx factors llc; bbh resources llc and jtl … · 2018-09-03 · robb evans...

Documents