Federal Trade Commission v. Consumer Advocates Group Experts LLC et al

Filing 23

PRELIMINARY INJUNCTION WITH ASSET FREEZE, APPOINTMENT OF TEMPORARYRECEIVER AND OTHER EQUITABLE RELIEF by Judge Dean D. Pregerson (see document for specifics). (lc)

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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FEDERAL TRADE COMMISSION,

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Plaintiff,

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v.

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CONSUMER ADVOCATES GROUP
EXPERTS, LLC, a California limited
liability company, also d.b.a. Consumer
Advocates Group;
PARAMOUNT ASSET
MANAGEMENT CORP., a California
Corporation, also d.b.a. National
Financial Rescue Corp., National
Financial Rescue Group, and American
Forensic Loan Auditors;
ADVOCATES FOR CONSUMER
AFFAIRS EXPERT, LLC, a California
Limited Liability Company; and
RYAN ZIMMERMAN,

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Case No. CV12-04736 DDP(CWx)
PRELIMINARY INJUNCTION
WITH ASSET FREEZE,
APPOINTMENT OF TEMPORARY
RECEIVER AND OTHER
EQUITABLE RELIEF
Date: June 7, 2012
Time: 10:30 a.m.
Place: Courtroom 3, the
Honorable Judge
Dean D. Pregerson

Defendants.

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Page 1 of 45

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Plaintiff, the Federal Trade Commission (“FTC”), pursuant to Sections 13(b)
and 19 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. §§ 53(b) and
57b, and the 2009 Omnibus Appropriations Act, Public Law 111-8, Section 626, 123
Stat. 524, 678 (Mar. 11, 2009) (“Omnibus Act”), as clarified by the Credit Card

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Accountability Responsibility and Disclosure Act of 2009, Public Law 111-24,

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Section 511, 123 Stat. 1734, 1763-64 (May 22, 2009) (“Credit Card Act”), and

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amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act,

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Public Law 111-203, Section 1097, 124 Stat. 1376, 2102-03 (July 21, 2010) (“Dodd-

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Frank Act”), filed its Complaint for Permanent Injunction and Other Equitable

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Relief, and an Ex Parte Temporary Restraining Order with Asset Freeze,

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Appointment of Temporary Receiver, Expedited Discovery, and Other Equitable

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Relief, and Order to Show Cause Why Preliminary Injunction Should Not Issue, and

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Supporting Memorandum (“Memorandum of Points and Authorities in Support of

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Plaintiff’s Ex Parte TRO”), pursuant to Rule 65 of the Federal Rules of Civil

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Procedure.

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On May 30, 2012, this Court granted Plaintiff’s Ex Parte Application for a
Temporary Restraining Order and entered a Temporary Restraining Order (“TRO”)
with an Order to Show Cause Why a Preliminary Injunction Should Not Issue
against Defendants Consumer Advocates Group Experts, LLC (“CAG”), Paramount

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Asset Management Corporation (“Paramount”), Advocates for Consumer Affairs

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Expert, LLC (“ACA”), and Ryan Zimmerman (hereinafter referred to collectively as

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“Defendants”). All Defendants were served with the Summons, Complaint, TRO,

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and other related papers filed in this action on June 1, 2012.

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DISPOSITION

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Having duly considered the parties’ pleadings, papers, and argument, the

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Court hereby GRANTS the Preliminary Injunction against Defendants CAG,
Paramount, ACA, and Ryan Zimmerman.
FINDINGS OF FACT

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1.

This Court has jurisdiction over the subject matter of this case, and there

is good cause to believe it will have jurisdiction over the Defendants.

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2.

Venue lies properly with this Court.

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3.

There is good cause to believe that Defendants CONSUMER

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ADVOCATES GROUP EXPERTS, LLC, also d.b.a. Consumer Advocates Group;

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PARAMOUNT ASSET MANAGEMENT CORP., also d.b.a. National Financial

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Rescue Corp., National Financial Rescue Group, and American Forensic Loan

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Auditors; ADVOCATES FOR CONSUMER AFFAIRS EXPERT, LLC; and

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RYAN ZIMMERMAN have engaged in, and are likely to engage in, acts and

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practices that violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the

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Mortgage Assistance Relief Services Rule, 16 C.F.R. Part 322 (effective December

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29, 2010, except for Section 322.5, which became effective on January 31, 2011),

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recodified as Mortgage Assistance Relief Services (Regulation O), 12 C.F.R. Part
1015 (“Regulation O”) (effective December 30, 2011) (“MARS Rule”), and that the
FTC is therefore likely to prevail on the merits of this action.
4.

There is good cause to believe that immediate and irreparable damage to

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the Court’s ability to grant effective final relief for consumers in the form of

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monetary restitution and disgorgement of ill-gotten gains will occur from the

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transfer, dissipation, or concealment by Defendants of their assets or business

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records unless Defendants are restrained and enjoined by Order of this Court.

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5.

Good cause exists for continuing the appointment of the Temporary

Receiver over Corporate Defendants and the asset freeze imposed pursuant to the

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TRO in this case; permitting the FTC access to Defendants’ business premises at the
discretion of the Temporary Receiver; and the other equitable relief ordered herein.
6.

Weighing the equities and considering the FTC’s likelihood of ultimate

success, this Order is in the public interest.
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No security is required of any agency of the United States for issuance

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of a preliminary injunction. Fed. R. Civ. P. 65.

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ORDER

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DEFINITIONS

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For purposes of this Order, the following definitions shall apply:

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A.

“Asset” or “Assets” means any legal or equitable interest in, right to, or

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claim to, any real, personal, or intellectual property of any Defendant, or held for the

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benefit of any Defendant, wherever located, whether in the United States or abroad,

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including, but not limited to, chattel, goods, instruments, equipment, fixtures, general

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intangibles, effects, leaseholds, contracts, mail or other deliveries, shares of stock,

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commodities, futures, inventory, checks, notes, accounts, credits, receivables (as

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those terms are defined in the Uniform Commercial Code), cash, and trusts,
including but not limited to any trust held for the benefit of any Defendant, the
Individual Defendant’s minor children, if any, or the Individual Defendant’s spouse,
if any, and shall include both existing assets and assets acquired after the date of
entry of this Order.
B.

“Defendants” means the Individual Defendant and all of the Corporate

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Defendants, individually, collectively, or in any combination, and each of them by

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whatever names each might be known.

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1.

“Corporate Defendants” means Consumer Advocates Group Experts,
LLC, Paramount Asset Management Corp., and Advocates for

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Consumer Affairs Expert, LLC, and their successors, assigns, affiliates,

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or subsidiaries, and each of them by whatever names each might be

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known.

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by which he might be known.

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“Individual Defendant” means Ryan Zimmerman and any other names

C.

“Document” and “Electronically Stored Information” are synonymous

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in meaning and equal in scope to the usage of the terms in Rule 34(a) of the Federal

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Rules of Civil Procedure and include but are not limited to:

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1.

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stored, transcribed, taped, recorded, filmed, punched, or graphic matter or

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other data compilations of any kind, including, but not limited to, letters, email

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or other correspondence, messages, memoranda, interoffice communications,

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notes, reports, summaries, manuals, magnetic tapes or discs, tabulations,

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books, records, checks, invoices, work papers, journals, ledgers, statements,

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returns, reports, schedules, or files; and

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2.

The original or a true copy of any written, typed, printed, electronically

Any electronically stored information stored on any Blackberrys, flash

drives, personal digital assistants (“PDAs”), desktop personal computer and
workstations, laptops, notebooks, and other portable computers, or other
electronic storage media, whether assigned to individuals or in pools of

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computers available for shared use, or personally owned but used for work-

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related purposes; backup disks and tapes, archive disks and tapes, and other

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forms of offline storage, whether stored onsite with the computer used to

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generate them, stored offsite in another company facility, or stored, hosted, or

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otherwise maintained offsite by a third-party; and computers and related

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offline storage used by Defendants or Defendants’ participating associates,

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which may include persons who are not employees of the company or who do
not work on company premises.
D.

“Electronic Data Host” means any person or entity that stores, hosts, or

otherwise maintains electronically stored information.
E.

“Financial Institution” means any bank, savings and loan institution,

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credit union, or any financial depository of any kind, including, but not limited to,

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any brokerage house, trustee, broker-dealer, escrow agent, title company, commodity

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trading company, or precious metal dealer.

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F.

“Material fact” means any fact that is likely to affect a person’s choice

of, or conduct regarding, goods or services.
G.

“Mortgage assistance relief product or service” means any product,

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service, plan, or program, offered or provided to the consumer in exchange for

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consideration, that is represented, expressly or by implication, to assist or attempt to

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assist the consumer with any of the following:

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stopping, preventing, or postponing any mortgage or deed of trust

foreclosure sale for the consumer’s dwelling, any repossession of the
consumer’s dwelling, or otherwise saving the consumer’s dwelling from
foreclosure or repossession;
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negotiating, obtaining, or arranging a modification of any term of a

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dwelling loan, including a reduction in the amount of interest, principal

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balance, monthly payments, or fees;

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3.

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from any dwelling loan holder or servicer on any dwelling loan;

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4.

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within which the consumer may (i) cure his or her default on a dwelling loan,

obtaining any forbearance or modification in the timing of payments
negotiating, obtaining, or arranging any extension of the period of time

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(ii) reinstate his or her dwelling loan, (iii) redeem a dwelling, or (iv) exercise
any right to reinstate a dwelling loan or redeem a dwelling;
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obtaining any waiver of an acceleration clause or balloon payment

contained in any promissory note or contract secured by any dwelling; or

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negotiating, obtaining, or arranging (i) a short sale of a dwelling, (ii) a

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deed in lieu of foreclosure, (iii) or any other disposition of a dwelling loan

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other than a sale to a third party that is not the dwelling loan holder.

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The foregoing shall include any manner of claimed assistance, including, but not

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limited to, auditing or examining a consumer’s mortgage or home loan application

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and offering to provide or providing legal services.

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H.

“Person” means any individual, group, unincorporated association,

limited or general partnership, corporation, or other business entity.
I.

“Receivership Assets” means and includes any legal or equitable

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interest in, right to, or claim to, any real, personal, or intellectual property of any

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Receivership Defendant, or held for the benefit of, or in constructive trust for, any

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Receivership Defendant, wherever located, whether in the United States or abroad,
including, but not limited to, chattel, goods, instruments, equipment, fixtures, general
intangibles, effects, leaseholds, contracts, mail or other deliveries, shares of stock,
commodities, futures, inventory, checks, notes, accounts, credits, receivables (as

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those terms are defined in the Uniform Commercial Code), cash, and trusts, and shall

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include both existing assets and assets acquired after the date of entry of this Order.

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“Receivership Assets” also expressly means and includes any asset of the

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Receivership Defendants, as defined above, held by a third party, whether a party to

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the above-referenced action or not.

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J.

“Receivership Estate” means and includes the estate of the Receivership

Defendants created by this Order, and as may be modified or expanded by
subsequent orders of this Court, including, but not limited to, all Receivership Assets
as defined herein, regardless of whether such Receivership Assets are held by any

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Defendant or Individual Defendant, or third party not presently a party to the above-

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referenced action.

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K.

“Receivership Defendants” means Consumer Advocates Group Experts,

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LLC, Paramount Asset Management Corp., and Advocates for Consumer Affairs

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Expert, LLC, and their successors, assigns, affiliates, or subsidiaries, and each of

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them by whatever names each might be known, provided that the Temporary

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Receiver has reason to believe they are owned or controlled in whole or in part by

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any of the Defendants.

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L.

The words “and” and “or” shall be understood to have both conjunctive

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and disjunctive meanings as necessary to make the applicable phrase or sentence

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inclusive rather than exclusive.

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I.
PROHIBITED REPRESENTATIONS
IT IS THEREFORE ORDERED that Defendants and their officers, agents,
servants, employees, and attorneys, and those persons or entities in active concert or

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participation with any of them who receive actual notice of this Order by personal

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service, facsimile transmission, email, or otherwise, whether acting directly or

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through any corporation, subsidiary, division, or other device, in connection with the

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advertising, marketing, promotion, offering for sale, sale, or performance of any

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mortgage assistance relief product or service, are hereby restrained and enjoined

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from falsely representing, or from assisting others who are falsely representing,
expressly or by implication, any of the following:
A.

that any Defendant or any other person:
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generally will obtain for consumers mortgage loan modifications

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that will make consumers’ payments substantially more

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affordable,
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mortgage loan modifications that will make consumers’ payments

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substantially more affordable;

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3.

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B.

The degree of success that any Defendant or any other person has had in
performing any mortgage assistance relief service;

C.

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The nature of any Defendant’s or any other person’s relationship with
any mortgage loan holder or servicer, or other secured or unsecured

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will give refunds to consumers if the Defendant fails to obtain a
mortgage loan modification;

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as a result of a loan audit, generally will obtain for consumers

lender;
D.

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The amount of time it will take or is likely to take to obtain or arrange a
renegotiation, settlement, modification, or other alteration of the terms

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of any secured or unsecured debt, including but not limited to the

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modification of any term of a consumer's home loan, deed of trust, or

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mortgage, including any recapitalization or reinstatement agreement;

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E.

other payments pursuant to the terms of the consumer’s dwelling loan;

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The consumer’s obligation to make scheduled periodic payments or any

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The amount of money or percentage of the debt amount that a consumer
may save by using the mortgage assistance relief service; and

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G.

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The refund policy of any Defendant or any other person, including but
not limited to the likelihood of a consumer obtaining a full or partial

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refund, or the circumstances in which a full or partial refund will be

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granted to the consumer.

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II.

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REPRESENTATIONS PROHIBITED AND DISCLOSURES REQUIRED BY
MARS RULE

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IT IS FURTHER ORDERED that Defendants and their officers, agents,

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servants, employees, and attorneys, and those persons or entities in active concert or
participation with any of them who receive actual notice of this Order by personal
service, facsimile transmission, email, or otherwise, whether acting directly or
through any corporation, subsidiary, division, or other device, in connection with the

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advertising, marketing, promotion, offering for sale, sale, or performance of any

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good or service, are hereby restrained and enjoined from engaging in, or assisting

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others in engaging in, the following conduct:

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A.

Representing, expressly or by implication, that a consumer cannot or

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should not contact or communicate with his or her lender or servicer, in

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violation of 12 C.F.R. § 1015.3(a);

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B.

Making any representation, expressly or by implication, about the

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benefits, performance, or efficacy of any mortgage assistance relief

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service unless, at the time such representation is made, the Defendants

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possess and/or rely upon competent and reliable evidence that

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substantiates that the representation is true, including, but not limited to,

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representations regarding:

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1.

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The amount of time it will take the mortgage assistance relief
service provider to accomplish any represented service or result;

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and

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2.

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The amount of money or the percentage of the debt amount that a

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consumer may save by using the mortgage assistance relief

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service, in violation of 12 C.F.R. § 1015.3(c);

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C.

Failing to make the following disclosure in all general and consumerspecific commercial communications: “[Name of Company] is not

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associated with the government, and our service is not approved by the

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government or your lender,” in violation of 12 C.F.R. § 1015.4(a)(1) &

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1015.4(b)(2);

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D.

Failing to make the following disclosure in all general and consumer-

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specific commercial communications: “Even if you accept this offer and

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use our service, your lender may not agree to change your loan,” in

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violation of 12 C.F.R. § 1015.4(a)(2) & 1015.4(b)(3);

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E.

Failing to make the following disclosure in all consumer-specific
commercial communications: “You may stop doing business with us at
any time. You may accept or reject the offer of mortgage assistance we
obtain from your lender [or servicer]. If you reject the offer, you do not

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have to pay us. If you accept the offer, you will have to pay us [insert

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amount or method for calculating the amount] for our services.” For the

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purposes of this section, the amount “you will have to pay” shall consist

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of the total amount the consumer must pay to purchase, receive, and use

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all of the mortgage assistance relief services that are the subject of the

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sales offer, including but not limited to, all fees and charges, in violation

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of 12 C.F.R. § 1015.4(b)(1);
F.

Failing, in all general commercial communications, consumer-specific
commercial communications, and other communications in cases where

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any Defendant or person has represented, expressly or by implication, in

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connection with the advertising, marketing, promotion, offering for sale,

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sale, or performance of any mortgage assistance relief service, that the

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consumer should temporarily or permanently discontinue payments, in

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whole or in part, on a dwelling loan, to place clearly and prominently,

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and in close proximity to any such representation the following

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disclosure: “If you stop paying your mortgage, you could lose your

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home and damage your credit rating,” in violation of 12 C.F.R.

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§ 1015.4(c).

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III.
PROHIBITION ON COLLECTION OF ADVANCE FEES
IT IS FURTHER ORDERED that Defendants and their officers, agents,
servants, employees, and attorneys, and those persons or entities in active concert or
participation with any of them who receive actual notice of this Order by personal
service, facsimile transmission, email, or otherwise, whether acting directly or

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through any corporation, subsidiary, division, or other device, in connection with the

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advertising, marketing, promotion, offering for sale, sale, or performance of any

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mortgage assistance relief service, are hereby restrained and enjoined from asking for

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or receiving payment before consumers have executed a written agreement between

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the consumer and the loan holder or servicer that incorporates the offer obtained by

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Defendants.

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IV.

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PRESERVATION OF RECORDS AND TANGIBLE THINGS
IT IS FURTHER ORDERED that Defendants and their officers, agents,
servants, employees, and attorneys, and those persons or entities in active concert or

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participation with any of them who receive actual notice of this Order by personal

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service, facsimile transmission, email, or otherwise, whether acting directly or

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through any corporation, subsidiary, division, or other device, are hereby enjoined

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from destroying, erasing, mutilating, concealing, altering, transferring, or otherwise

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disposing of, in any manner, directly or indirectly, any documents or records that

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relate to the business practices, or business or personal finances, of Defendants or

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other entity directly or indirectly under the control of Defendants.

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V.

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DISABLEMENT OF WEBSITES

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IT IS FURTHER ORDERED that, immediately upon service of the Order
upon them, (1) any person hosting any Internet website for, or on behalf of, any
Defendant, and (2) Defendants and their officers, agents, servants, employees, and
attorneys, and those persons or entities in active concert or participation with any of
them who receive actual notice of this Order by personal service, facsimile
transmission, email, or otherwise, whether acting directly or through any
corporation, subsidiary, division, or other device, shall:
A.

Immediately do whatever is necessary to ensure that any Internet

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website used by Defendants for the advertising, marketing, promotion,

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offering for sale, sale, or performance of any mortgage assistance relief

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service, including but not limited to www.consumer-advocates-

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group.com and www.aca-portal.com, and containing statements or

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representations prohibited by Sections I and II of this Order cannot be

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accessed by the public;
B.

Prevent the destruction or erasure of any Internet website used by
Defendants for the advertising, marketing, promotion, offering for sale,

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sale, or performance of any mortgage assistance relief service, by

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preserving such website in the format in which it is maintained

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currently; and

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C.

Immediately notify in writing counsel for the FTC of any other Internet

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website operated or controlled by any Defendant not listed in

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Subsections V.A or B above.

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VI.

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SUSPENSION OF INTERNET DOMAIN NAME REGISTRATIONS

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IT IS FURTHER ORDERED that any domain name registrar shall suspend

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the registration of any Internet website used by Defendants for the advertising,

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marketing, promotion, offering for sale, sale, or performance of any mortgage

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assistance relief service, and containing statements or representations prohibited by
Sections I and II of this Order, including, but not limited to www.consumeradvocates-group.com and www.aca-portal.com, and provide immediate notice to
counsel for the FTC, the Temporary Receiver, and the Temporary Receiver’s

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attorneys of any other Internet domain names registered or controlled by any

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Defendants.

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VII.

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ASSET FREEZE

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IT IS FURTHER ORDERED that Defendants, and their officers, agents,
servants, employees, and attorneys, and all persons or entities directly or indirectly

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under the control of any of them, including any financial institution, and all other
persons or entities in active concert or participation with any of them who receive
actual notice of this Order by personal service, facsimile, email, or otherwise, are
hereby restrained and enjoined from directly or indirectly:
A.

Selling, liquidating, assigning, transferring, converting, loaning,

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hypothecating, disbursing, gifting, conveying, encumbering, pledging,

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concealing, dissipating, spending, withdrawing, or otherwise disposing

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of any funds, real or personal property, or other assets or any interest

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therein, wherever located, including any assets outside the territorial

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United States, that are:

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1.

in the actual or constructive possession of any Defendant;

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2.

owned or controlled by, or held, in whole or in part for the benefit

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of, or subject to access by, or belonging to, any Defendant; or in

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the actual or constructive possession of, or owned or controlled

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by, or subject to access by, or belong to, any corporation,

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partnership, trust or other entity directly or indirectly owned,

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managed or under the control of any Defendant;
B.

name of any Defendant, or subject to access by any Defendant;

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Opening, or causing to be opened, any safe deposit boxes titled in the

C.

Incurring charges on any credit card, stored value card, debit card or

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charge card issued in the name, singly or jointly, of any Defendant or

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any other entity directly or indirectly owned, managed or controlled by

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any Defendant;

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D.

Obtaining a personal or secured loan; or

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E.

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Cashing any checks from consumers, clients, or customers of any
Defendant.

F.

The funds, property, and assets affected by this Section shall include:
(a) all assets of each Defendant as of the time this Order is entered, and

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(b) those assets obtained or received after entry of this Order that are

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derived from the actions alleged in Plaintiff’s Complaint. This Section

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does not prohibit transfers to the Temporary Receiver, as specifically

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required in Section XVII (Delivery of Receivership Property), nor does

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it prohibit the Repatriation of Foreign Assets, as specifically required in

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Section XI of this Order.

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VIII.

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RETENTION OF ASSETS AND DOCUMENTS BY THIRD PARTIES

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IT IS FURTHER ORDERED that any financial or brokerage institution,

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business entity, electronic data host, or person served with a copy of this Order that

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holds, controls, or maintains custody of any account, document, electronically stored

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information, or asset of, on behalf of, in the name of, for the benefit of, subject to
withdrawal by, subject to access or use by, or under the signatory power of any
Defendant or other party subject to Section VII above, or has held, controlled, or
maintained any such account, document, electronically stored information, or asset at
any time since January 1, 2009, shall:
A.

Hold, preserve, and retain within such entity’s or person’s control, and

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prohibit the withdrawal, removal, alteration, assignment, transfer,

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pledge, hypothecation, encumbrance, disbursement, dissipation,

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conversion, sale, liquidation, or other disposal of such account,

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document, electronically stored information, or asset held by or under

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such entity’s or person’s control, except as directed by further order of

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the Court or as directed in writing by the Temporary Receiver regarding

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accounts, documents, or assets held in the name of or for the benefit of

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any Receivership Defendant;

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B.

Provide the Temporary Receiver, the Temporary Receiver’s agents, the

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FTC, and the FTC’s agents immediate access to any data stored, hosted,

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or otherwise maintained by an electronic data host on behalf of

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Defendants for forensic imaging;

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C.

Deny access to any safe deposit boxes that are either titled in the name

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of, individually or jointly, or subject to access by, any Defendant or

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other party subject to Section VII above;

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D.

Provide to counsel for the FTC and the Temporary Receiver, within one

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(1) business day, a sworn statement setting forth:

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1.

16

the identification of each account or asset titled in the name of,
individually or jointly, or held on behalf of or for the benefit of,

17

subject to withdrawal by, subject to access or use by, or under the

18

signatory power of any Defendant or other party subject to

19

Section VII above, whether in whole or in part; the balance of

20

each such account, or a description of the nature and value of

21
22

such asset, as of the close of business on the day on which this

23

Order is served;

24

2.

the identification of any safe deposit box that is either titled in the

25

name of, individually or jointly, or is otherwise subject to access

26

or control by, any Defendant or other party subject to Section VII

27

above, whether in whole or in part; and

28
Page 17 of 45

1

3.

2

removed, the date closed or removed, the balance on said date,

3

and the name or the person or entity to whom such account or

4

other asset was remitted;

5
6

if the account, safe deposit box, or other asset has been closed or

E.

Provide to counsel for the FTC and the Temporary Receiver, within

7

three (3) business days after being served with a request, copies of all

8

documents pertaining to such account or asset, including but not limited

9

to originals or copies of account applications, account statements,

10

signature cards, checks, drafts, deposit tickets, transfers to and from the

11

accounts, all other debit and credit instruments or slips, currency

12

transaction reports, 1099 forms, and safe deposit box logs; provided that

13

such institution or custodian may charge a reasonable fee; and

14

F.

Cooperate with all reasonable requests of the Temporary Receiver

15

relating to this Order’s implementation, without further order of the

16

Court.

17

G.

18

The accounts subject to this provision include: (a) all assets of each
Defendant deposited as of the time this Order is entered, and (b) those

19

assets deposited after entry of this Order that are derived from the

20

actions alleged in Plaintiff’s Complaint. This Section does not prohibit

21
22

transfers to the Temporary Receiver, as specifically required in Section

23

XVII (Delivery of Receivership Property), nor does it prohibit the

24

Repatriation of Foreign Assets, as specifically required in Section XI of

25

this Order.

26
27

H.

The FTC is granted leave, pursuant to Fed. R. Civ. P. 45, to subpoena
documents immediately from any financial or brokerage institution,

28
Page 18 of 45

1

business entity, electronic data host, or person served with a copy of this

2

Order that holds, controls, or maintains custody of any account,

3

document, electronically stored information, or asset of, on behalf of, in

4

the name of, for the benefit of, subject to withdrawal by, subject to

5
6

access or use by, or under the signatory power of any Defendant or

7

other party subject to Section VII above, or has held, controlled, or

8

maintained any such account, document, electronically stored

9

information, or asset at any time since January 1, 2009, and such

10

financial or brokerage institution, business entity, electronic data host or

11

person shall respond to such subpoena within three (3) business days

12

after service.

13

IX.

14

FINANCIAL STATEMENTS AND ACCOUNTING

15
16
17
18

IT IS FURTHER ORDERED that each Defendant, within three (3) business
days of service of this Order, shall prepare and deliver to counsel for the FTC and the
Temporary Receiver:
A.

19

as of the date of service of this Order upon such Defendant on the form

20

of Attachment A to this Order captioned “Financial Statement of

21

Individual Defendant.”

22
23

For the Individual Defendant, a completed financial statement accurate

B.

For each Corporate Defendant, a completed financial statement accurate

24

as of the date of service of this Order upon such Defendant (unless

25

otherwise agreed upon with FTC counsel) in the form of Attachment B

26

to this Order captioned “Financial Statement of Corporate Defendant.”

27
28
Page 19 of 45

1

C.

2

Defendants shall provide a list of all officers and directors of each
Corporate Defendant and all other individuals or entities with authority

3

to direct the operations of each Corporate Defendant or withdraw

4

money from the account of each Corporate Defendant.

5
6

X.

7

CONSUMER CREDIT REPORTS

8
9
10

IT IS FURTHER ORDERED that pursuant to Section 604(1) of the Fair
Credit Reporting Act, 15 U.S.C. § 1681b(1), any consumer reporting agency may
furnish to the FTC a consumer report concerning any Defendant.

11

XI.

12

REPATRIATION OF FOREIGN ASSETS

13
14
15

IT IS FURTHER ORDERED that, within five (5) business days following
the service of this Order, each Defendant shall:
A.

16

accounting of all assets, accounts, funds, and documents outside of the

17

territory of the United States that are held either: (1) by Defendants;

18

(2) for their benefit; (3) in trust by or for them, individually or jointly;

19

or (4) under their direct or indirect control, individually or jointly;

20
21

Provide counsel for the FTC and the Temporary Receiver with a full

B.

Transfer to the territory of the United States all assets, accounts, funds,

22

and documents in foreign countries held either: (1) by Defendants;

23

(2) for their benefit; (3) in trust by or for them, individually or jointly;

24

or (4) under their direct or indirect control, individually or jointly;

25
26

C.

All repatriated assets, accounts, funds, and documents are subject to
Section VII of this Order; and

27
28
Page 20 of 45

1

D.

2

Provide the FTC, the Temporary Receiver, and the Temporary
Receiver’s attorneys access to all records of accounts or assets of the

3

Corporate Defendants and Individual Defendants held by financial

4

institutions located outside the territorial United States by signing the

5
6

Consent to Release of Financial Records attached to this Order as

7

Attachment C.

8

XII.

9

NONINTERFERENCE WITH REPATRIATION

10

IT IS FURTHER ORDERED that Defendants are hereby restrained and

11

enjoined from taking any action, directly or indirectly, that may result in the

12

encumbrance or dissipation of foreign assets, or in the hindrance of the repatriation

13

required by the preceding Section XI of this Order, including, but not limited to:

14

A.

Sending any statement, letter, fax, email or wire transmission, or

15

telephoning or engaging in any other act, directly or indirectly, that

16

results in a determination by a foreign trustee or other entity that a

17

“duress” event has occurred under the terms of a foreign trust agreement

18

until such time that all assets have been fully repatriated pursuant to

19

Section XI of this Order; or

20
21

B.

Notifying any trustee, protector, or other agent of any foreign trust or

22

other related entities of either the existence of this Order, or of the fact

23

that repatriation is required pursuant to a court order, until such time

24

that all assets have been fully repatriated pursuant to Section XI of this

25

Order.

26
27
28
Page 21 of 45

1
2
3
4
5

XIII.
CONTINUATION OF APPOINTMENT OF TEMPORARY RECEIVER
IT IS FURTHER ORDERED that Michael A. Grassmueck is appointed to
continue as Temporary Receiver for the business activities of Receivership

6

Defendants with the full power of an equity receiver. The Temporary Receiver shall

7

be an agent of this Court and solely an agent of this Court in acting as Temporary

8

Receiver under this Order. The Temporary Receiver shall be accountable directly to

9

this Court. The Temporary Receiver shall comply with all laws and Local Rules of

10

this Court governing receivers, including but not limited to Local Rules 66-1 through

11

66-5.1 and Local Rule 66-8.

12

XIV.

13

DUTIES AND AUTHORITY OF TEMPORARY RECEIVER

14
15
16

IT IS FURTHER ORDERED that the Temporary Receiver is directed and
authorized to accomplish the following:
A.

17

Temporary Receiver deems necessary or advisable, any director, officer,

18

independent contractor, employee, or agent of any of the Receivership

19

Defendants, including any named Defendant, from control of,

20

management of, or participation in, the affairs of the Receivership

21

Defendants;

22
23

Assume full control of the Receivership Defendants by removing, as the

B.

Take exclusive custody, control, and possession of all Receivership

24

Assets, documents, and electronically stored information of, or in the

25

possession, custody, or under the control of, the Receivership

26

Defendants, wherever situated. The Temporary Receiver shall have full

27

power to divert mail and to sue for, collect, receive, take into

28
Page 22 of 45

1

possession, hold, and manage all Receivership Assets and documents of

2

the Receivership Defendants and other persons or entities whose

3

interests are now held by or under the direction, possession, custody, or

4

control of the Receivership Defendants. Provided, however, that the

5
6

Temporary Receiver shall not attempt to collect or receive any amount

7

from a consumer if the Temporary Receiver believes the consumer was

8

a victim of the unlawful conduct alleged in the complaint in this matter;

9

C.

Take all steps necessary to secure the business premises of the

10

Receivership Defendants. Such steps may include, but are not limited

11

to, the following, as the Temporary Receiver deems necessary or

12

advisable:

13

1.

serving and filing this Order;

14

2.

completing a written inventory of all Receivership Assets;

15

3.

obtaining pertinent information from all employees and other

16

agents of the Receivership Defendants, including, but not limited

17

to, the name, home address, Social Security number, job

18

description, method of compensation, and all accrued and unpaid

19

commissions and compensation of each such employee or agent,

20

and all computer hardware and software passwords;

21
22

4.

videotaping and/or photographing all portions of the location;

23

5.

securing the location by changing the locks and disconnecting

24

any computer modems or other means of access to the computer

25

or other records maintained at that location;

26
27
28
Page 23 of 45

1

6.

2

requiring all employees, independent contractors, and consultants
of the Receivership Defendants to complete a Questionnaire

3

submitted by the Temporary Receiver; and

4

7.

5

requiring any persons present on the premises at the time this

6

Order is served to leave the premises, to provide the Temporary

7

Receiver with proof of identification, or to demonstrate to the

8

satisfaction of the Temporary Receiver that such persons are not

9

removing from the premises documents or assets of the
Receivership Defendants.

10
11

D.

Conserve, hold, and manage all Receivership Assets, and perform all

12

acts necessary or advisable to preserve the value of those assets, in order

13

to prevent any irreparable loss, damage, or injury to consumers or to

14

creditors of the Receivership Defendants, including, but not limited to,

15

obtaining an accounting of the assets and preventing transfer,

16

withdrawal, or misapplication of assets;

17

E.

18

benefit of the Receivership Defendants as the Temporary Receiver

19

deems to be advisable or necessary;

20
21

F.

Enter into contracts and purchase insurance as the Temporary Receiver
deems to be advisable or necessary;

22
23

Liquidate any and all securities or commodities owned by or for the

G.

Prevent the inequitable distribution of assets and determine, adjust, and

24

protect the interests of consumers and creditors who have transacted

25

business with the Receivership Defendants;

26
27

H.

Manage and administer the business of the Receivership Defendants
until further order of this Court by performing all incidental acts that the

28
Page 24 of 45

1

Temporary Receiver deems to be advisable or necessary, which includes

2

retaining, hiring, or dismissing any employees, independent contractors,

3

or agents;

4
5

I.

Choose, engage, and employ attorneys, accountants, appraisers, and

6

other independent contractors and technical specialists, as the

7

Temporary Receiver deems advisable or necessary in the performance

8

of duties and responsibilities under the authority granted by this Order;

9

J.

Make payments and disbursements from the Receivership Estate that are

10

necessary or advisable for carrying out the directions of, or exercising

11

the authority granted by, this Order. The Temporary Receiver shall

12

apply to the Court for prior approval of any payment of any debt or

13

obligation incurred by the Receivership Defendants prior to the date of

14

entry of this Order, except payments that the Temporary Receiver

15

deems necessary or advisable to secure assets of the Receivership

16

Defendants, such as rental payments;

17

K.

18

Defendants comply with, and prevent violations of, this Order and all

19

other applicable laws, including, but not limited to, revising sales

20

materials and implementing monitoring procedures;

21
22

Determine and implement measures to ensure that the Receivership

L.

Institute, compromise, adjust, appear in, intervene in, or become party to

23

such actions or proceedings in state, federal, or foreign courts that the

24

Temporary Receiver deems necessary and advisable to preserve or

25

recover the assets of the Receivership Defendants, or that the

26

Temporary Receiver deems necessary and advisable to carry out the

27

Receiver’s mandate under this Order;

28
Page 25 of 45

1

M.

2

Defend, compromise, adjust, or otherwise dispose of any or all actions
or proceedings instituted in the past or in the future against the

3

Temporary Receiver in his role as Temporary Receiver, or against the

4

Receivership Defendants, that the Temporary Receiver deems necessary

5
6

and advisable to preserve the assets of the Receivership Defendants or

7

that the Temporary Receiver deems necessary and advisable to carry out

8

the Temporary Receiver’s mandate under this Order;

9

N.

Continue and conduct the business of the Receivership Defendants in

10

such manner, to such extent, and for such duration as the Temporary

11

Receiver may in good faith deem to be necessary or appropriate to

12

operate the business profitably and lawfully, if at all; provided,

13

however, that the continuation and conduct of the business shall be

14

conditioned upon the Temporary Receiver’s good faith determination

15

that the businesses can be lawfully operated at a profit using the assets

16

of the receivership estate;

17

O.

18

pertaining to the Receivership Estate and compliance with this Order.

19

Subpoenas may be served by agents or attorneys of the Temporary

20

Receiver and by agents of any process server retained by the Temporary

21

Receiver;

22
23

Take depositions and issue subpoenas to obtain documents and records

P.

Open one or more bank accounts in the Central District of California as

24

designated depositories for funds of the Receivership Defendants. The

25

Temporary Receiver shall be the sole signatory on such accounts, shall

26

deposit all funds of the Receivership Defendants in such designated

27
28
Page 26 of 45

1

accounts, and shall make all payments and disbursements from the

2
3
4

receivership estate from such account(s);
Q.

as Temporary Receiver;

5
6

R.
S.

approval of the FTC.

10

12

Maintain the chain of custody of all of Defendants’ records in his
possession, pursuant to procedures to be established in writing with the

9

11

Cooperate with reasonable requests for information or assistance from
any state or federal law enforcement agency; and

7
8

Maintain accurate records of all receipts and expenditures that he makes

XV.
TEMPORARY RECEIVER AND FTC IMMEDIATE ACCESS TO
BUSINESS PREMISES AND RECORDS

13
14

IT IS FURTHER ORDERED that Defendants and their officers, directors,

15

agents, servants, employees, attorneys, and all other persons or entities directly or

16

indirectly, in whole or in part, under their control, and all other persons in active

17

concert or participation with them who receive actual notice of this Order by

18

personal service, facsimile, email, or otherwise, whether acting directly or through

19

any corporation, subsidiary, division, or other entity, shall:

20
21
22
23
24

A.

Immediately identify to FTC’s counsel, Temporary Receiver, and the
Temporary Receiver’s attorneys:
1.

All of Defendants’ business premises;

2.

Any non-residence premises where any Defendant conducts
business, sales operations, or customer service operations;

25
26

3.

Any non-residence premises where documents or electronically

27

stored information related to the business, sales operations, or

28

customer service operations of any Defendant are hosted, stored,
Page 27 of 45

1

or otherwise maintained, including but not limited to the name

2

and location of any electronic data hosts; and

3

4.

4

Defendant are stored or maintained;

5
6

Any non-residence premises where assets belonging to any

B.

Allow the FTC and the Temporary Receiver, and their respective

7

representatives, agents, attorneys, investigators, paralegals, contractors,

8

or assistants immediate access to:

9

1.

All of the Defendants’ business premises, including but not

10

limited to:

11

a.

100 West Broadway, Suite 100, Glendale, CA 91210;

12

b.

11901 Santa Monica Blvd., Suite 574, West Los Angeles,

13

CA 90025;

14

c.

3699 Wilshire Blvd., Suite 220, Los Angeles, CA 90010;

15

d.

11870 Santa Monica Blvd., Suite 540, West Los Angeles,

16

CA 90025;

17

and such other business locations that are wholly or partially

18

owned, rented, leased, or under the temporary or permanent

19

control of any Defendant;

20
21

2.

operations or customer service operations;

22
23

3.

26

Any premises where documents related to the Defendants’
businesses are stored or maintained;

24
25

Any other premises where the Defendants conduct business, sales

4.

Any premises where assets belonging to any Defendant are stored
or maintained; and

27
28
Page 28 of 45

1

5.

2

Section, and such other locations as may become known to the

3

Temporary Receiver; and

4
5

Any documents located at any of the locations described in this

C.

Provide the FTC and the Temporary Receiver, and their respective

6

representatives, agents, attorneys, investigators, paralegals, contractors,

7

or assistants with any necessary means of access to, copying of, and

8

forensic imaging of documents or electronically stored information,

9

including, without limitation, the locations of Receivership Defendants’

10

business premises, keys and combinations to business premises locks,

11

computer access codes of all computers used to conduct Receivership

12

Defendants’ business, access to (including but not limited to execution

13

of any documents necessary for access to and forensic imaging of) any

14

data stored, hosted or otherwise maintained by an electronic data host,

15

and storage area access information.

16
17
18
19
20
21

D.

The FTC and the Temporary Receiver are authorized to employ the
assistance of law enforcement officers, including, but not limited to, the
United States Postal Inspection Service, Internal Revenue Service,
Federal Bureau of Investigation, and local police and County Sheriff’s
Department Officers to effect service, to implement peacefully the

22

provisions of this Order, and to keep the peace. The Temporary

23

Receiver shall allow the FTC and its representatives, agents,

24

contractors, or assistants into the premises and facilities described in

25

this Section to inspect, inventory, image, and copy documents or

26

electronically stored information relevant to any matter contained in this

27

Order. Counsel for the FTC and the Temporary Receiver may exclude

28
Page 29 of 45

1

Defendants and their agents and employees from the business premises

2

and facilities during the immediate access. No one shall interfere with

3

the FTC’s or Temporary Receiver’s inspection of the Defendants’

4

premises or documents.

5
6

E.

The Temporary Receiver and the FTC shall have the right to remove

7

any documents related to Defendants’ business practices from the

8

premises in order that they may be inspected, inventoried, and copied.

9

The materials so removed shall be returned within ten (10) business

10

days of completing said inventory and copying. If any property,

11

records, documents, or computer files relating to the Receivership

12

Defendants’ finances or business practices are located in the residence

13

of any Defendant or are otherwise in the custody or control of any

14

Defendant, then such Defendant shall produce them to the Temporary

15

Receiver within twenty-four (24) hours of service of this Order. In

16

order to prevent the destruction of computer data, upon service of this

17

Order upon Defendants, any such computers shall be powered down

18

(turned off) in the normal course for the operating systems used on such

19

computers and shall not be powered up or used again until produced for

20

copying and inspection, along with any codes needed for access. The

21
22

FTC’s and the Temporary Receiver’s representatives may also

23

photograph and videotape the inside and outside of all premises to

24

which they are permitted access by this Order, and all documents and

25

other items found on such premises.

26
27

F.

The FTC’s access to the Defendants’ documents pursuant to this
provision shall not provide grounds for any Defendant to object to any

28
Page 30 of 45

1

subsequent request for documents served by the FTC or the Temporary

2
3
4

Receiver.
G.

The Temporary Receiver shall have the discretion to determine the time,
manner, and reasonable conditions of such access.

5
6

XVI.

7

COOPERATION WITH TEMPORARY RECEIVER

8

IT IS FURTHER ORDERED that:

9

A.

Defendants, and their officers, agents, directors, servants, employees,

10

salespersons, independent contractors, attorneys, and corporations, and

11

all other persons or entities in active concert or participation with them,

12

who receive actual notice of this Order by personal service, facsimile

13

transmission, email, or otherwise, whether acting directly or through

14

any trust, corporation, subsidiary, division, or other device, or any of

15

them, shall fully cooperate with and assist the Temporary Receiver.

16

Defendants’ cooperation and assistance shall include, but not be limited

17
18

to:
1.

19

Providing any information to the Temporary Receiver that the
Temporary Receiver deems necessary to exercising the authority

20

and discharging the responsibilities of the Temporary Receiver

21
22

under this Order, including but not limited to allowing the

23

Temporary Receiver to inspect documents and assets and to

24

partition office space;

25
26

2.

Providing any username or password and executing any
documents required to access any computer or electronic files in

27
28
Page 31 of 45

1

any medium, including, but not limited to, any data stored, hosted

2

or otherwise maintained by an electronic data host; and

3

3.

4

Defendants that all debts should be paid directly to the Temporary

5

Receiver.

6
7

Advising all persons who owe money to the Receivership

B.

Defendants and their officers, directors, agents, servants, employees,

8

attorneys, and all other persons or entities directly or indirectly, in

9

whole or in part, under their control, and all other persons in active

10

concert or participation with them who receive actual notice of this

11

Order by personal service, facsimile transmission, email, or otherwise,

12

are hereby restrained and enjoined from directly or indirectly:

13

1.

Transacting any of the business of the Receivership Defendants;

14

2.

Destroying, secreting, erasing, mutilating, defacing, concealing,

15

altering, transferring or otherwise disposing of, in any manner,

16

directly or indirectly, any documents, electronically stored

17
18
19
20
21

information, or equipment of the Receivership Defendants,
including, but not limited to, contracts, agreements, consumer
files, consumer lists, consumer addresses and telephone numbers,
correspondence, advertisements, brochures, sales material, sales

22

presentations, documents evidencing or referring to Defendants’

23

services, training materials, scripts, data, computer tapes, disks, or

24

other computerized records, books, written or printed records,

25

handwritten notes, telephone logs, “verification” or “compliance”

26

tapes or other audio or video tape recordings, receipt books,

27

invoices, postal receipts, ledgers, personal and business canceled

28
Page 32 of 45

1

checks and check registers, bank statements, appointment books,

2

copies of federal, state or local business or personal income or

3

property tax returns, photographs, mobile devices, electronic

4

storage media, accessories, and any other documents, records or

5
6

equipment of any kind that relate to the business practices or

7

business or personal finances of the Receivership Defendants or

8

any other entity directly or indirectly under the control of the

9

Receivership Defendants;

10

3.

Transferring, receiving, altering, selling, encumbering, pledging,

11

assigning, liquidating, or otherwise disposing of any assets

12

owned, controlled, or in the possession or custody of, or in which

13

an interest is held or claimed by, the Receivership Defendants, or

14

the Temporary Receiver;

15

4.

Excusing debts owed to the Receivership Defendants;

16

5.

Failing to notify the Temporary Receiver of any asset, including

17

accounts, of a Receivership Defendant held in any name other

18

than the name of the Receivership Defendant, or by any person or

19

entity other than the Receivership Defendant, or failing to provide

20

any assistance or information requested by the Temporary

21
22

Receiver in connection with obtaining possession, custody, or

23

control of such assets;

24

6.

Failing to create and maintain books, records, and accounts

25

which, in reasonable detail, accurately, fairly, and completely

26

reflect the incomes, assets, disbursements, transactions and use of

27
28
Page 33 of 45

1

monies by the Defendants or any other entity directly or

2

indirectly under the control of the Defendants;

3

7.

4

Doing any act or refraining from any act whatsoever to interfere
with the Temporary Receiver’s taking custody, control,

5
6

possession, and managing of the assets or documents subject to

7

this Receivership; or to harass or to interfere with the Temporary

8

Receiver in any way; or to interfere in any manner with the

9

exclusive jurisdiction of this Court over the assets or documents

10

of the Receivership Defendants; or to refuse to cooperate with the

11

Temporary Receiver or the Temporary Receiver’s duly authorized

12

agents in the exercise of their duties or authority under any Order

13

of this Court; and

14

8.

Filing, or causing to be filed, any petition on behalf of the

15

Receivership Defendants for relief under the United States

16

Bankruptcy Code, 11 U.S.C. § 101 et seq., without prior

17

permission from this Court.

18

XVII.

19

DELIVERY OF RECEIVERSHIP PROPERTY

20
21

IT IS FURTHER ORDERED that immediately upon service of this Order

22

upon them or upon their otherwise obtaining actual knowledge of this Order, or

23

within a period permitted by the Temporary Receiver, Defendants and any other

24

person or entity, including but not limited to financial institutions and electronic data

25

hosts, shall transfer or deliver access to, possession, custody, and control of the

26

following to the Temporary Receiver:

27

A.

All Receivership Assets;

28
Page 34 of 45

1

B.

2

All documents and electronically stored information of the Receivership
Defendants, including, but not limited to, books and records of

3

accounts, all financial and accounting records, balance sheets, income

4

statements, bank records (including monthly statements, canceled

5
6

checks, records of wire transfers, records of ACH transactions, and

7

check registers), client or customer lists, title documents and other

8

papers;

9

C.

Receivership Defendants;

10
11

All assets belonging to members of the public now held by the

D.

All keys, computer and other passwords, user names, entry codes,

12

combinations to locks required to open or gain or secure access to any

13

assets or documents of the Receivership Defendants, wherever located,

14

including, but not limited to, access to their business premises, means of

15

communication, accounts, computer systems, or other property; and

16

E.

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Information identifying the accounts, employees, properties, or other
assets or obligations of the Receivership Defendants.

F.

In the event any person or entity fails to deliver or transfer immediately
any asset or otherwise fails to comply with any provision of this Section
XVII, the Temporary Receiver may file ex parte with the Court an

22

Affidavit of Non-Compliance regarding the failure. Upon filing of the

23

affidavit, the Court may authorize, without additional process or

24

demand, Writs of Possession or Sequestration or other equitable writs

25

requested by the Temporary Receiver. The writs shall authorize and

26

direct the United States Marshal or any sheriff or deputy sheriff of any

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2
3

county to seize the asset, document, or other thing and to deliver it to
the Temporary Receiver.
XVIII.

4
5
6

COMPENSATION FOR TEMPORARY RECEIVER
IT IS FURTHER ORDERED that the Temporary Receiver and all personnel

7 hired by the Temporary Receiver as herein authorized, including counsel to the
8 Temporary Receiver and accountants, are entitled to reasonable compensation for the
9 performance of duties pursuant to this Order, and for the cost of actual out-of-pocket
10 expenses incurred by them, from the assets now held by or in the possession or
11 control of, or which may be received by, the Receivership Defendants. The
12 Temporary Receiver shall file with the Court and serve on the parties periodic
13 requests for the payment of such reasonable compensation, with the first such request
14 filed no more than ninety (90) days after the date of this Order. The Temporary
15 Receiver shall not increase the hourly rates used as the bases for such fee applications
16
17
18
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without prior approval of the Court.
XIX.
TEMPORARY RECEIVER’S REPORTS
IT IS FURTHER ORDERED that the Temporary Receiver shall report to
this Court within ninety (90) days from the date of entry of this Order, regarding:

22

(1) the steps taken by the Temporary Receiver to implement the terms of this Order;

23

(2) the value of all liquidated and unliquidated Receivership Assets; (3) the sum of

24

all liabilities of the Receivership Defendants; (4) the steps the Temporary Receiver

25

intends to take in the future to: (a) prevent any diminution in the value of

26

Receivership Assets, (b) pursue Receivership Assets from third parties, and (c) adjust

27

the liabilities of the Receivership Defendants, if appropriate; (5) the Temporary

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2
3
4
5

Receiver’s assessment of whether the business can be operated in compliance with
this Order; and (6) any other matters which the Temporary Receiver believes should
be brought to the Court’s attention. Provided, however, if any of the required
information would hinder the Temporary Receiver’s ability to pursue Receivership

6

Assets, the portions of the Temporary Receiver’s report containing such information

7

may be filed under seal and not served on the parties.

8
9
10

XX.
WITHDRAWAL OF TEMPORARY RECEIVER
IT IS FURTHER ORDERED that the Temporary Receiver and any

11

Professional retained by the Temporary Receiver, including, but not limited to, his or

12

her attorneys and accountants, be and are hereby authorized to withdraw from his or

13

her respective appointments or representations and apply for payment of their

14

professional fees and costs at any time after the date of this Order, for any reason in

15

their sole and absolute discretion, by sending written notice seven (7) days prior to

16

the date of the intended withdrawal to the Court and to the parties along with a

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18
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20
21

written report reflecting the Temporary Receiver’s work, findings, and
recommendations, as well as an accounting for all funds and assets in possession or
control of the Temporary Receiver. The Temporary Receiver and Professionals shall
be relieved of all liabilities and responsibilities, and the Temporary Receiver shall be

22

exonerated and the receivership deemed closed seven (7) days from the date of the

23

mailing of such notice of withdrawal. The Court will retain jurisdiction to consider

24

the fee applications, report, and accounting submitted by the Temporary Receiver

25

and the Professionals. The written notice shall include an interim report indicating

26

the Temporary Receiver’s actions and reflect the knowledge gained along with the

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2
3

fee applications of the Temporary Receiver and his or her Professionals. The report
shall also contain the Temporary Receiver’s recommendations, if any.
XXI.

4
5
6

TEMPORARY RECEIVER’S BOND/LIABILITY
IT IS FURTHER ORDERED that no bond shall be required in connection

7

with the appointment of the Temporary Receiver. Except for an act of gross

8

negligence, the Temporary Receiver and the Professionals shall not be liable for any

9

loss or damage incurred by any of the Defendants, their officers, agents, servants,

10

employees, and attorneys or any other person, by reason of any act performed or

11

omitted to be performed by the Temporary Receiver and the Professionals in

12

connection with the discharge of his or her duties and responsibilities, including but

13

not limited to their withdrawal from the case under Section XX.

14

XXII.

15

PROHIBITION ON RELEASE OF CONSUMER INFORMATION

16

IT IS FURTHER ORDERED that, except as required by a law enforcement

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19
20
21

agency, law, regulation or court order, Defendants, and their officers, agents,
servants, employees, and attorneys, and all other persons in active concert or
participation with any of them who receive actual notice of this Order by personal
service, facsimile transmission, email, or otherwise, are restrained and enjoined from

22

disclosing, using, or benefitting from consumer information, including the name,

23

address, telephone number, email address, Social Security number, other identifying

24

information, or any data that enables access to a consumer’s account (including a

25

credit card, bank account, or other financial account), of any person which any

26

Defendant obtained prior to entry of this Order in connection with any mortgage

27

assistance relief product or service.

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1

XXIII.

2
3
4
5

STAY OF ACTIONS
IT IS FURTHER ORDERED that:
A.

Except by leave of this Court, during pendency of the Receivership

6

ordered herein, Defendants and all other persons and entities be and

7

hereby are stayed from taking any action to establish or enforce any

8

claim, right, or interest for, against, on behalf of, in, or in the name of,

9

the Receivership Defendants, any of their subsidiaries, affiliates,

10

partnerships, assets, documents, or the Temporary Receiver or the

11

Temporary Receiver’s duly authorized agents acting in their capacities

12

as such, including, but not limited to, the following actions:

13

1.

Commencing, prosecuting, continuing, entering, or enforcing any

14

suit or proceeding, except that such actions may be filed to toll

15

any applicable statute of limitations;

16

2.

17

filing or enforcing any lien; taking or attempting to take

18

possession, custody, or control of any asset; attempting to

19

foreclose, forfeit, alter, or terminate any interest in any asset,

20

whether such acts are part of a judicial proceeding, are acts of

21

self-help, or otherwise;

22
23

Accelerating the due date of any obligation or claimed obligation;

3.

Executing, issuing, serving, or causing the execution, issuance or

24

service of, any legal process, including, but not limited to,

25

attachments, garnishments, subpoenas, writs of replevin, writs of

26

execution, or any other form of process whether specified in this

27

Order or not; or

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1

4.

2

Doing any act or thing whatsoever to interfere with the
Temporary Receiver taking custody, control, possession, or

3

management of the assets or documents subject to this

4

Receivership, or to harass or interfere with the Temporary

5
6

Receiver in any way, or to interfere in any manner with the

7

exclusive jurisdiction of this Court over the assets or documents

8

of the Receivership Defendants;

9

B.

This Section XXIII does not stay:
1.

10

The commencement or continuation of a criminal action or
proceeding;

11
12

2.

The commencement or continuation of an action or proceeding by

13

the State Bar of California to enforce its police or regulatory

14

power;

15

3.

16

a governmental unit to enforce such governmental unit’s police or

17

regulatory power;

18

4.

19

The enforcement of a judgment, other than a money judgment,
obtained in an action or proceeding by a governmental unit to

20

enforce such governmental unit’s police or regulatory power; or

21

5.

22

The issuance to a Receivership Defendant of a notice of tax
deficiency; and

23
24

The commencement or continuation of an action or proceeding by

C.

Except as otherwise provided in this Order, all persons and entities in

25

need of documentation from the Temporary Receiver shall in all

26

instances first attempt to secure such information by submitting a formal

27

written request to the Temporary Receiver, and, if such request has not

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1

been responded to within thirty (30) days of receipt by the Temporary

2

Receiver, any such person or entity may thereafter seek an Order of this

3

Court with regard to the relief requested.

4

XXIV.

5
6

LIMITED EXPEDITED DISCOVERY

7

IT IS FURTHER ORDERED that the FTC is granted leave to conduct

8

certain expedited discovery, and that, commencing with the time and date of this

9

Order, in lieu of the time periods, notice provisions, and other requirements of Rules

10

26, 30, 34, and 45 of the Federal Rules of Civil Procedure, and applicable Local

11

Rules, the FTC is granted leave to:

12

A.

Take the deposition, on three (3) days’ notice, of any person or entity,

13

whether or not a party, for the purpose of discovering: (1) the nature,

14

location, status, and extent of assets of Defendants or their affiliates or

15

subsidiaries; (2) the nature and location of documents and business

16

records of Defendants or their affiliates or subsidiaries; and (3)

17
18
19
20
21

compliance with this Order. The limitations and conditions set forth in
Fed. R. Civ. P. 30(a)(2)(B) and 31(a)(2)(B) regarding subsequent
depositions shall not apply to depositions taken pursuant to this Section.
In addition, any such depositions taken pursuant to this Section shall not

22

be counted toward the ten deposition limit set forth in Fed. R. Civ. P.

23

30(a)(2)(A)(i) and 31(a)(2)(A)(i) and shall not preclude the FTC from

24

subsequently deposing the same person or entity in accordance with the

25

Federal Rules of Civil Procedure. Service of discovery upon a party,

26

taken pursuant to this Section, shall be sufficient if made by facsimile,

27

email or by overnight delivery. Any deposition taken pursuant to this

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sub-section that has not been reviewed and signed by the deponent may

2
3
4

be used by any party for purposes of the preliminary injunction hearing;
B.

Serve upon parties requests for production of documents or inspection
that require production or inspection within three (3) calendar days of

5
6

service, and may serve subpoenas upon non-parties that direct

7

production or inspection within five (5) calendar days of service, for the

8

purpose of discovering: (1) the nature, location, status, and extent of

9

assets of Defendants or their affiliates or subsidiaries; (2) the nature and

10

location of documents and business records of Defendants or their

11

affiliates or subsidiaries; and (3) compliance with this Order, provided

12

that twenty-four (24) hours’ notice shall be deemed sufficient for the

13

production of any such documents that are maintained or stored only as

14

electronic data;

15

C.

16

to this action by facsimile or overnight courier, and take depositions by

17
18
19
20
21

Serve deposition notices and other discovery requests upon the parties
telephone or other remote electronic means; and

D.

If a Defendant fails to appear for a properly noticed deposition or fails
to comply with a request for production or inspection, seek to prohibit
that Defendant from introducing evidence at any subsequent hearing.

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25
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XXV.

2
3
4
5

MONITORING
IT IS FURTHER ORDERED that agents or representatives of the FTC may
contact Defendants directly or anonymously for the purpose of monitoring

6

compliance with this Order, and may tape record any oral communications that occur

7

in the course of such contacts.

8

XXVI.

9

DEFENDANTS’ DUTY TO DISTRIBUTE ORDER

10

IT IS FURTHER ORDERED that Defendants shall immediately provide a

11

copy of this Order to each affiliate, subsidiary, division, sales entity, successor,

12

assign, officer, director, employee, independent contractor, client company,

13

electronic data host, agent, attorney, spouse, and representative of Defendants and

14

shall, within three (3) calendar days from the date of entry of this Order, provide

15

counsel for the FTC with a sworn statement that: (a) confirms that Defendants have

16

provided copies of the Order as required by this Section and (b) lists the names and

17
18
19
20
21

addresses of each entity or person to whom Defendants provided a copy of the Order.
Furthermore, Defendants shall not take any action that would encourage officers,
agents, directors, employees, salespersons, independent contractors, attorneys,
subsidiaries, affiliates, successors, assigns, or other persons or entities in active

22

concert or participation with Defendants to disregard this Order or believe that they

23

are not bound by its provisions.

24

XXVII.

25

CORRESPONDENCE WITH PLAINTIFF

26
27

IT IS FURTHER ORDERED that, for the purposes of this Order, because mail
addressed to the FTC is subject to delay due to heightened security screening, all

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3

correspondence and service of pleadings on Plaintiff shall be sent either via
electronic submission or via Federal Express to:

4

Miry Kim
Federal Trade Commission
6
915 Second Ave., Suite 2896
7 Seattle, WA 98174
8 [e-mail]
5

9
10

with a copy to:

11
12

Raymond E. McKown
13 Federal Trade Commission
14 10877 Wilshire Blvd., Suite 700
Los Angeles, CA 90024
15
[e-mail]
16
17

XXVIII.

18
19
20
21
22

SERVICE OF THIS ORDER
IT IS FURTHER ORDERED that copies of this Order may be served by
facsimile transmission, email, personal or overnight delivery, or U.S. Mail, by agents
and employees of the FTC or any state or federal law enforcement agency or by

23

private process server, upon any financial institution or other entity or person that

24

may have possession, custody, or control of any documents or assets of any

25

Defendant, or that may otherwise be subject to any provision of this Order. Service

26

upon any branch or office of any financial institution shall effect service upon the

27

entire financial institution.

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1

XXIX.

2
3
4
5

RETENTION OF JURISDICTION
IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this
matter for all purposes of construction, modification, and enforcement of this Order.

6
7

XXX.

8

IMMEDIATE RETURN OF FUNDS TO RECEIVER

9

IT IS ALSO ORDERED that Defendant Zimmerman shall turn over to the

10

Receiver any and all funds withdrawn after Defendant received notice of the

11

Temporary Restraining Order issued in this action. Defendant shall turn over any

12

such funds within twenty-four (24) hours of service of this Order.

13

Defendant is advised that willful violation of a court order may constitute

14

contempt of court, the penalties for which may include imprisonment among other

15

consequences.

16
17
18

IT IS SO ORDERED, this 7th day of June, 2012, at 11:45 a.m., Pacific
Standard Time.

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20
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22
23

Dated: June 7, 2012
Dean D. Pregerson
UNITED STATES DISTRICT JUDGE

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