Federal Trade Commission v. Denny Lake et al

Filing 68

PRELIMINARY INJUNCTION ORDER WITH ASSET FREEZE AND OTHER EQUITABLE RELIEF AS TO DEFENDANT DENNY LAKE by Judge Cormac J. Carney (mt)

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1 2 3 4 5 6 7 8 9 10 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA 11 12 13 14 FEDERAL TRADE COMMISSION, Plaintiff, 15 16 17 v. 18 19 20 21 22 23 DENNY LAKE, et al. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. SACV 15-00585-CJC(JPRx) PRELIMINARY INJUNCTION ORDER WITH ASSET FREEZE AND OTHER EQUITABLE RELIEF AS TO DEFENDANT DENNY LAKE Judge: Hon. Cormac J. Carney Courtroom 9B 24 25 26 27 28 Page 1 of 25 1 2 Plaintiff Federal Trade Commission (“FTC”) filed this action on April 13, 3 2015, pursuant to Sections 13(b) and 19 of the Federal Trade Commission Act 4 (“FTC Act”), 15 U.S.C. §§ 53(b) and 57b, the Telemarketing and Consumer Fraud 5 and Abuse Prevention Act (“Telemarketing Act”), 15 U.S.C. §§ 6101-6108, and 6 the 2009 Omnibus Appropriations Act, Public Law 111-8, Section 626, 123 Stat. 7 524, 678 (Mar. 11, 2009) (“Omnibus Act”), as clarified by the Credit Card 8 Accountability Responsibility and Disclosure Act of 2009, Public Law 111-24, 9 Section 511, 123 Stat. 1734, 1763-64 (May 22, 2009) (“Credit Card Act”), and 10 amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act, 11 Public Law 111-203, Section 1097, 124 Stat. 1376, 2102-03 (July 21, 2010) 12 (“Dodd-Frank Act”), 12 U.S.C. § 5538. 13 On April 16, 2015, upon motion by the FTC, this Court issued an ex parte 14 temporary restraining order (“TRO”) with asset freeze, appointment of a Receiver, 15 and other equitable relief. On April 29, 2015, the Court granted a consent motion 16 to extend the TRO with respect to Defendant Denny Lake. On May 8, 2015, 17 Defendant Denny Lake, having been represented by counsel and through such 18 counsel, filed a brief opposing the FTC’s application for a Preliminary Injunction. 19 The FTC responded on May 11, 2015. On May 13, 2015, the Court heard 20 argument from both parties. FINDINGS OF FACT 21 22 This Court having considered the FTC’s Complaint, ex parte application, 23 declarations, exhibits, and memoranda filed in support of the FTC’s application, 24 and the supplemental briefing and evidence presented by both the FTC and 25 Defendant Denny Lake, finds that: 26 27 1. This Court has jurisdiction over the subject matter of this case, and there is good cause to believe it will have jurisdiction over all parties hereto; 28 Page 2 of 25 2. 2 As an agency of the United States, the FTC need not post a security Court; 3 4 There is good cause to believe that venue lies properly with this 3. 1 for the issuance of a preliminary injunction. Fed. R. Civ. P. 65(c). 4. 5 There is good cause to believe that Defendant Denny Lake, both 6 individually and d/b/a JD United, U.S. Crush, Advocacy Division, Advocacy 7 Department, Advocacy Agency, and Advocacy Program, has engaged and is likely 8 to continue to engage in acts or practices that violate the MARS Rule, 12 C.F.R. 9 Part 1015, including but not limited to: a. 10 Providing substantial assistance or support to sellers and 11 telemarketers in connection with contacting and communicating with consumer 12 clients on behalf of Chad Caldaronello, C.C. Enterprises, Inc., Derek Nelson, D.N. 13 Marketing, Inc., Brian Pacios, and Justin Moreira, when Defendant Lake knew that 14 these Defendants were engaged in acts or practices that violated the MARS Rule; 15 and b. 16 Providing substantial assistance or support to Chad 17 Caldaronello, C.C. Enterprises, Inc., Derek Nelson, D.N. Marketing, Inc., Brian 18 Pacios, and Justin Moreira, who were in the course of providing, offering to 19 provide, or arranging for others to provide mortgage assistance relief services, 20 when Defendant Lake knew that these Defendants were engaged in acts or 21 practices that violated the MARS Rule. 22 5. There is good cause to believe that immediate and irreparable harm 23 will result from Defendant’s ongoing violations of the MARS Rule, unless 24 Defendant is restrained and enjoined by Order of this Court. 25 6. Good cause exists for permitting the FTC to take limited expedited 26 discovery from third parties as to the existence and location of assets and 27 Documents; 28 Page 3 of 25 7. 1 Good cause exists for (a) the appointment of a Permanent Receiver for 2 the Receivership Defendant, (b) the freezing of Defendant’s assets, and (c) 3 ancillary equitable relief; 8. 4 There is good cause to believe that an Order is necessary to prohibit 5 immediate and irreparable damage to the Court’s ability to grant effective final 6 relief for consumers in the form of monetary restitution and disgorgement of ill- 7 gotten gains that could occur if Defendant transferred, dissipated, or concealed 8 assets or business records; and 9. 9 10 ultimate success, this Order is in the public interest. DEFINITIONS 11 For the purposes of this Preliminary Injunction, the following definitions 12 13 14 Weighing the equities and considering the FTC’s likelihood of apply: A. “Assets” means any legal or equitable interest in, right to, or claim to, 15 any and all real and personal property of Defendant, or held for the benefit of 16 Defendant, wherever located, whether in the United States or abroad, including but 17 not limited to chattel, goods, instruments, equipment, fixtures, general intangibles, 18 effects, leaseholds, contracts, mail or other deliveries, inventory, checks, notes, 19 accounts, credits, receivables (as those terms are defined in the Uniform 20 Commercial Code), shares of stock, futures, all cash or currency, and trusts, 21 including but not limited to a trust held for the benefit of Defendant, any of 22 Defendant’s minor children, or Defendant’s spouse, and shall include both existing 23 assets and assets acquired after the date of entry of this order, or any interest 24 therein. 25 B. “Assisting others” includes but is not limited to: (1) performing 26 customer service functions, including, but not limited to, receiving or responding 27 to consumer complaints; (2) formulating or providing, or arranging for the 28 Page 4 of 25 1 formulation or provision of, any advertising or marketing material, including but 2 not limited to, any telephone sales script, direct mail solicitation, or the design, 3 text, or use of images of any Internet website, email, or other electronic 4 communications; (3) formulating or providing, or arranging for the formulation or 5 provision of, any marketing support material or service, including but not limited 6 to, web or Internet Protocol addresses or domain name registration for any Internet 7 websites, affiliate marketing services, or media placement services; (4) providing 8 names of, or assisting in the generation of, potential customers; (5) performing or 9 providing marketing, billing, or payment services of any kind; (6) acting or serving 10 as an owner, officer, director, manager, or principal of any entity; or (7) providing 11 telemarketing services. 12 C. “Corporate Defendants” means C.C. Enterprises, Inc. (also d/b/a 13 HOPE Services, Trust Payment Center, and Retention Divisions), and D.N. 14 Marketing, Inc. (also d/b/a HAMP Services and Trial Payment Processing), and 15 their successors, assigns, affiliates, or subsidiaries, and each of them by whatever 16 names each might be known. 17 D. “Defendant” means Denny Lake (d/b/a JD United, U.S. Crush, 18 Advocacy Division, Advocacy Department, Advocacy Division, Advocacy 19 Agency, Advocacy Program, or any other entity providing Mortgage Assistance 20 Relief Products or Services from an office located at 2280 University Drive, Suite 21 101, Newport Beach, California 92660) and their successors, assigns, affiliates, 22 subsidiaries, or agents, individually, collectively, or in any combination, and each 23 of them by whatever names each might be known. 24 E. “Document” is synonymous in meaning and equal in scope to the 25 terms “document” and “electronically stored information,” as described and used 26 in Federal Rule of Civil Procedure 34(a)(1)(A). 27 28 Page 5 of 25 1 2 3 F. “Electronic Data Host” means any person or entity in the business of storing, hosting, or otherwise maintaining electronically stored information. G. “Financial Institution” means any bank, savings and loan institution, 4 credit union, or any financial depository of any kind, including but not limited to, 5 any brokerage house, trustee, broker-dealer, escrow agent, title company, 6 commodity trading company, or precious metal dealer. 7 H. “Mortgage assistance relief product or service” means any product, 8 service, plan, or program, offered or provided to the consumer in exchange for 9 consideration, that is represented, expressly or by implication, to assist or attempt 10 to assist the consumer with any of the following: 11 1. stopping, preventing, or postponing any mortgage or deed of 12 trust foreclosure sale for the consumer’s dwelling, any repossession of the 13 consumer’s dwelling, or otherwise saving the consumer’s dwelling from 14 foreclosure or repossession; 15 2. negotiating, obtaining, or arranging a modification of any term 16 of a dwelling loan, including a reduction in the amount of interest, principal 17 balance, monthly payments, or fees; 18 19 20 3. obtaining any forbearance or modification in the timing of payments from any dwelling loan holder or servicer on any dwelling loan; 4. negotiating, obtaining, or arranging any extension of the period 21 of time within which the consumer may (i) cure his or her default on a dwelling 22 loan, (ii) reinstate his or her dwelling loan, (iii) redeem a dwelling, or (iv) exercise 23 any right to reinstate a dwelling loan or redeem a dwelling; 24 25 26 27 5. obtaining any waiver of an acceleration clause or balloon payment contained in any promissory note or contract secured by any dwelling; or 6. negotiating, obtaining, or arranging (i) a short sale of a dwelling, (ii) a deed-in-lieu of foreclosure, (iii) or any other disposition of a 28 Page 6 of 25 1 dwelling loan other than a sale to a third party that is not the dwelling loan holder. 2 The foregoing shall include any manner of claimed assistance, including, but not 3 limited to, auditing or examining a consumer’s mortgage or home loan application 4 and offering to provide or providing legal services, or offering to sell a consumer a 5 plan or subscription to a service that provides such assistance. 6 7 I. “Person” means any individual, group, unincorporated association, limited or general partnership, corporation or other business entity. 8 J. 9 “FTC”). 10 K. “Plaintiff” means the Federal Trade Commission (“Commission” or “Receiver” means Thomas McNamara of McNamara Benjamin LLP, 11 the receiver appointed by the Court in Section X of the TRO issued on April 16, 12 2015, as well as any subsequent receiver the Court appoints in this action. The 13 term “Receiver” also includes any deputy receivers or agents as may be named by 14 the Receiver. 15 L. “Receivership Defendant” means: Denny Lake d/b/a JD United, 16 U.S. Crush, Advocacy Division, Advocacy Department, Advocacy Division, 17 Advocacy Agency, Advocacy Program, or any other entity providing Mortgage 18 Assistance Relief Products or Services from an office located at 2280 University 19 Drive, Suite 101, Newport Beach, California 92660 and the businesses’ successors, 20 assigns, affiliates, subsidiaries, or agents, individually, collectively, or in any 21 combination, and each of them by whatever names each might be known. 22 “Receivership Defendant” includes businesses that lack formal legal structure 23 (such as businesses operating under fictitious business names), but that otherwise 24 satisfy the definition of “Receivership Defendant.” 25 M. “Telemarketer” means any person who, in connection with 26 telemarketing, initiates or receives telephone calls to or from a customer or donor. 27 16 C.F.R. § 310.2(cc). 28 Page 7 of 25 N. 1 “Telemarketing” means a plan, program, or campaign (whether or 2 not covered by the Telemarketing Sales Rule, 16 C.F.R. Part 310) that is conducted 3 to induce the purchase of goods or services or a charitable contribution by use of 4 one or more telephones. 5 I. PROHIBITED REPRESENTATIONS IT IS THEREFORE ORDERED that Defendant, Defendant’s officers, 6 7 agents, servants, employees, and attorneys, and all other persons in active concert 8 or participation with any of them, who receive actual notice of this Order, whether 9 acting directly or indirectly, in connection with the advertising, marketing, 10 promotion, offering for sale, sale, or performance of any mortgage assistance relief 11 service or debt relief service, are restrained and enjoined from misrepresenting or 12 assisting others in misrepresenting, expressly or by implication: A. 13 That any Defendant or any other person typically will obtain for 14 consumers mortgage loan modifications that will make consumers’ payments 15 substantially more affordable, will substantially lower their interest rates, and/or 16 will help them avoid foreclosure; B. 17 That money from the consumer, including but not limited to trial 18 payments and/or reinstatement fee payments, will be held in his or her lender’s 19 trust account and either be paid to his or her lender at the end of the trial period to 20 finalize his or her modification, or be refunded; C. 21 That any Defendant is affiliated with, endorsed or approved by, or 22 otherwise associated with the United States government, the MHA program, HUD, 23 or NACA; D. 24 That any Defendant communicates with specialized departments, 25 divisions or “higher ups” at the maker, holder, or servicer of a consumer’s dwelling 26 loan; 27 28 Page 8 of 25 E. 1 That the consumer’s lender can no longer foreclose on the consumer’s 2 house after any Defendant has received signed documents and a consumer’s first 3 payment; and F. 4 5 That any Defendant can deliver a loan modification within any specific or general timeframe. IT IS FURTHER ORDERED that Defendant, Defendant’s officers, agents, 6 7 servants, employees, and attorneys, and all other persons in active concert or 8 participation with any of them, who receive actual notice of this Order, whether 9 acting directly or indirectly, in connection with the advertising, marketing, 10 promotion, offering for sale, sale, or provision of any mortgage assistance relief 11 service or debt relief service, are hereby restrained and enjoined from assisting or 12 facilitating the conduct this section prohibits. 13 II. DISCLOSURES REQUIRED BY AND REPRESENTATIONS 14 PROHIBITED BY THE MARS RULE 15 IT IS FURTHER ORDERED that Defendant, Defendant’s officers, agents, 16 servants, employees, and attorneys, and all other persons in active concert or 17 participation with any of them, who receive actual notice of this Order, whether 18 acting directly or indirectly, in connection with the advertising, marketing, 19 promotion, offering for sale, sale, or provision of any mortgage assistance relief 20 service or debt relief service, are hereby restrained and enjoined from engaging in, 21 or assisting others in engaging in, the following conduct: 22 23 24 A. Misrepresenting, expressly or by implication, any material aspect of any mortgage assistance relief service, in violation of 12 C.F.R. § 1015.3(b); B. Representing, expressly or by implication, in connection with the 25 advertising, marketing, promotion, offering for sale, sale or performance of any 26 mortgage assistance relief service, that a consumer cannot or should not contact or 27 communicate with his lender or servicer, in violation of 12 C.F.R. § 1015.3(a); 28 Page 9 of 25 1 C. Failing to make the following disclosure in all general and consumer- 2 specific commercial communications: “[Name of Company] is not associated with 3 the government, and our service is not approved by the government or your 4 lender,” in violation of 12 C.F.R. §§ 1015.4(a)(1) & 1015.4(b)(2); 5 D. Failing to make the following disclosure in all general and consumer- 6 specific commercial communications: “Even if you accept this offer and use our 7 service, your lender may not agree to change your loan,” in violation of 12 C.F.R. 8 §§ 1015.4(a)(2) & 1015.4(b)(3); 9 E. Failing to make the following disclosure in all consumer-specific 10 commercial communications: “You may stop doing business with us at any time. 11 You may accept or reject the offer of mortgage assistance we obtain from your 12 lender [or servicer]. If you reject the offer, you do not have to pay us. If you 13 accept the offer, you will have to pay us [insert amount or method for calculating 14 the amount] for our services,” in violation of 12 C.F.R. § 1015.4(b)(1). For the 15 purposes of this subsection, the amount “you will have to pay” shall consist of the 16 total amount the consumer must pay to purchase, receive, and use all of the 17 mortgage assistance relief services that are the subject of the sales offer, including 18 but not limited to, all fees and charges; and 19 F. Failing, in all general commercial communications, consumer-specific 20 commercial communications, and other communications in cases where any 21 Defendant or person has represented, expressly or by implication, in connection 22 with the advertising, marketing, promotion, offering for sale, or performance of 23 any mortgage assistance relief service, that the consumer should temporarily or 24 permanently discontinue payments, in whole or in part, on a dwelling loan, to place 25 clearly and prominently, and in close proximity to any such representation the 26 following disclosure: “If you stop paying your mortgage, you could lose your 27 home and damage your credit rating,” in violation of 12 C.F.R. § 1015.4(c). 28 Page 10 of 25 IT IS FURTHER ORDERED that Defendant, Defendant’s officers, agents, 1 2 servants, employees, and attorneys, and all other persons in active concert or 3 participation with any of them, who receive actual notice of this Order, whether 4 acting directly or indirectly, in connection with the advertising, marketing, 5 promotion, offering for sale, sale, or provision of any mortgage assistance relief 6 service or debt relief service, are hereby restrained and enjoined from assisting or 7 facilitating the conduct this section prohibits. 8 III. 9 ADVANCE FEE PROHIBITION IT IS FURTHER ORDERED that Defendant, Defendant’s officers, agents, 10 servants, employees, and attorneys, and all other persons in active concert or 11 participation with any of them, who receive actual notice of this Order, whether 12 acting directly or indirectly, in connection with the advertising, marketing, 13 promotion, offering for sale, sale, or provision of any mortgage assistance relief 14 service or debt relief service, or in connection with telemarketing, are hereby 15 restrained and enjoined from asking for, or receiving payment of, any fee or other 16 consideration until a consumer has executed a written agreement between the 17 consumer and the consumer’s loan holder or servicer incorporating the offer of 18 mortgage assistance relief the Defendant obtained on the consumer’s behalf. 19 IT IS FURTHER ORDERED that Defendant, Defendant’s officers, agents, 20 servants, employees, and attorneys, and all other persons in active concert or 21 participation with any of them, who receive actual notice of this Order, whether 22 acting directly or indirectly, in connection with the advertising, marketing, 23 promotion, offering for sale, sale, or provision of any mortgage assistance relief 24 service or debt relief service, are hereby restrained and enjoined from assisting or 25 facilitating the conduct this section prohibits. 26 27 28 Page 11 of 25 1 IV. PRESERVATION OF RECORDS AND TANGIBLE THINGS IT IS FURTHER ORDERED that Defendant, and each of Defendant’s 2 3 successors, officers, agents, servants, employees, and attorneys, and those persons 4 in active concert or participation with any of them, who receive actual notice of 5 this Order by personal service or otherwise, whether acting directly or indirectly, in 6 connection with the advertising, marketing, promotion, offering for sale, sale, or 7 provision of any mortgage assistance relief service or debt relief service, are 8 hereby restrained and enjoined from destroying, erasing, mutilating, concealing, 9 altering, transferring, or otherwise disposing of, in any manner, directly or 10 indirectly, any documents or records that relate to the business practices, or 11 business and personal finances, of Defendant, or an entity directly or indirectly 12 under the control of Defendant. 13 V. DISABLEMENT OF WEBSITES AND PRESERVATION OF 14 ELECTRONICALLY STORED INFORMATION 15 IT IS FURTHER ORDERED that, immediately upon service of the Order 16 upon them, (1) any person hosting any Internet website, server, or “cloud-based” 17 electronic storage for, or on behalf of, Defendant, and (2) Defendant, Defendant’s 18 officers, agents, servants, employees, and attorneys, and all other persons in active 19 concert or participation with any of them, who receive actual notice of this Order, 20 whether acting directly or indirectly, shall: 21 A. Immediately take all necessary steps to ensure that any Internet 22 website used by Defendant for the advertising, marketing, promotion, offering for 23 sale, sale, or provision of any mortgage assistance relief service, and containing 24 statements or representations prohibited by Sections I and II of this Order cannot 25 be accessed by the public; and 26 27 B. Prevent the alteration, destruction or erasure of any (1) Internet website used by Defendant for the advertising, marketing, promotion, offering for 28 Page 12 of 25 1 sale, sale, or provision of any mortgage assistance relief service, by preserving 2 such websites in the format in which they are maintained currently and (2) any 3 electronically stored information stored on behalf of Corporate Defendants, or 4 entities in active concert or participation with any of them. 5 VI. 6 SUSPENSION OF INTERNET DOMAIN NAME REGISTRATIONS IT IS FURTHER ORDERED that any domain name registrar shall 7 suspend the registration of any Internet website used by Defendant for the 8 advertising, marketing, promotion, offering for sale, sale, or provision of any 9 mortgage assistance relief service, and containing statements or representations 10 prohibited by Sections I and II of this Order and provide immediate notice to 11 counsel for the FTC and the Receiver of any other Internet domain names 12 registered by Defendant, Defendant’s officers, agents, servants, employees, and 13 attorneys, and all other persons in active concert or participation with any of them 14 who receive actual notice of this Order by personal service or otherwise. 15 VII. PROHIBITION ON USE OF CUSTOMER INFORMATION 16 IT IS FURTHER ORDERED that Defendant, and Defendant’s officers, 17 agents, directors, servants, employees, salespersons, and attorneys, as well as all 18 other persons or entities in active concert or participation with them, who receive 19 actual notice of this Order by personal service or otherwise, whether acting directly 20 or through any trust, corporation, subsidiary, division, or other device, are hereby 21 restrained and enjoined from using, benefitting from, selling, renting, leasing, 22 transferring, or otherwise disclosing the name, address, telephone number, email 23 address, Social Security number, credit card number, debit card number, bank 24 account number, any financial account number, or any data that enables access to a 25 customer’s account, or other identifying information of any person which 26 Defendant obtained prior to entry of this Order in connection with the marketing or 27 sale of any good or service, including those who were contacted or are on a list to 28 Page 13 of 25 1 be contacted by any Defendant; provided that Defendant may disclose such 2 identifying information to a law enforcement agency or as required by any law, 3 regulation, or court order. 4 VIII. ASSET FREEZE 5 IT IS FURTHER ORDERED that Defendant, and Defendant’s officers, 6 agents, servants, employees, and attorneys, and all other persons or entities directly 7 or indirectly under the control of any of them, including any Financial Institution, 8 and all other persons or entities in active concert or participation with any of them 9 who receive actual notice of this Order are hereby restrained and enjoined from 10 directly or indirectly: 11 A. Transferring, liquidating, converting, encumbering, pledging, loaning, 12 selling, concealing, dissipating, disbursing, assigning, spending, withdrawing, 13 granting a lien or security interest or other interest in, or otherwise disposing of any 14 Assets, or any interest therein, wherever located, including outside the United 15 States, that are: 16 1. 17 owned or controlled, directly or indirectly, by Defendant, in whole or in part, or held, in whole or in part, for the benefit of Defendant; 18 2. in the actual or constructive possession of Defendant; or 19 3. owned, controlled by, or in the actual or constructive possession 20 of any corporation, partnership, or other entity directly or indirectly owned, 21 managed, or controlled by, or under common control with Defendant, including 22 any entity acting under a fictitious name owned by or controlled by Defendant, and 23 any Assets held by, for, or under the name of any Defendant at any bank or savings 24 and loan institution, or with any broker-dealer, escrow agent, title company, 25 commodity trading company, payment processing company, precious metal dealer, 26 or other Financial Institution or depository of any kind; 27 28 Page 14 of 25 1 2 3 4 5 B. Opening or causing to be opened any safe deposit boxes titled in the name of Defendant; C. Incurring charges or cash advances on any credit card, debit card, or checking card issued in the name, singly or jointly, of Defendant; D. Obtaining a personal or secured loan, except that Defendant may 6 obtain a personal, unsecured loan from an unrelated third party, for the sole 7 purpose of funding reasonable costs and attorney’s fees related to the defense of 8 this matter that Lake’s counsel, Borchard & Callahan, will provide. The loan 9 proceeds must be funds that Defendant does not control, they must be transmitted 10 directly from the third party lender to Lake’s attorney, and they may only be used 11 for the reasonable attorney’s fees and costs incurred in the defense of this matter 12 on behalf of Defendant. Further, in connection with the transmittal of the loan 13 proceeds to Defendant’s attorney, the third party shall sign a letter to Borchard & 14 Callahan that confirms the following: (1) the identity of the third party lender, (2) 15 the source of the loan is not funds Defendant controls, (3) the amount of the loan 16 and any other terms including any non-privileged terms of the engagement, (4) 17 acknowledgment that the FTC may request the letter, at any time (without 18 subpoena) and may investigate the source of the funds by subpoena in accordance 19 with Fed. R. Civ. P. 45. Defendant’s attorney shall provide a copy of this 20 Preliminary Injunction Order to the third party, inclusive of these conditions. Both 21 the third party lender and Defendant’s attorney are required to comply with this 22 Preliminary Injunction Order, and only the Court may determine whether particular 23 conduct complies with the Order; 24 25 26 27 E. Incurring liens or encumbrances on real property, personal property or other Assets in the name, singly or jointly, of Defendant; and F. Cashing any checks or depositing any money orders or cash received from consumers, clients, or customers of Defendant. 28 Page 15 of 25 IT IS FURTHER ORDERED that the Assets affected by this Section shall 1 2 include: (1) all Assets of Defendant as of the time the TRO was entered; and (2) 3 for Assets obtained after the entry of the TRO, those Assets of Defendant that are 4 derived, directly or indirectly, from Defendant’s activities as described in the 5 Commission’s Complaint, filed on April 13, 2015. 6 IX. 7 RETENTION OF ASSETS AND DOCUMENTS BY THIRD PARTIES IT IS FURTHER ORDERED that any financial or brokerage institution, 8 business entity, electronic data host, or person served with a copy of this Order that 9 holds, controls, or maintains custody of any account, document, electronically 10 stored information, or asset of, on behalf of, in the name of, for the benefit of, 11 subject to withdrawal by, subject to access or use by, or under the signatory power 12 of Defendant, or other party subject to Section VIII above, or has held, controlled, 13 or maintained any such account, document, electronically stored information, or 14 asset, shall: 15 A. Hold, preserve, and retain within such entity’s or person’s control, and 16 prohibit the withdrawal, removal, alteration, assignment, transfer, pledge, 17 hypothecation, encumbrance, disbursement, dissipation, conversion, sale, 18 liquidation, or other disposal of such account, document, electronically stored 19 information, or asset held by or under such entity’s or person’s control, except as 20 directed by further order of the Court; 21 B. Provide the FTC and the FTC’s agents immediate access to 22 electronically stored information stored, hosted, or otherwise maintained on behalf 23 of Defendant for forensic imaging; 24 C. Deny access to any safe deposit boxes that are either titled in the 25 name, individually or jointly, or subject to access by, Defendant, or other party 26 subject to Section VIII above; 27 28 Page 16 of 25 D. 1 2 Provide to counsel for the FTC, within five (5) business days after being served with a copy of this Order, a sworn statement setting forth: 1. 3 the identification of each account or asset titled in the name, 4 individually or jointly, or held on behalf of or for the benefit of, subject to 5 withdrawal by, subject to access or use by, or under the signatory power of 6 Defendant, or other party subject to Section VIII above, whether in whole or in 7 part; 2. 8 the balance of each such account, or a description of the nature 9 and value of such asset, as of the close of business on the day on which this Order 10 is served; 3. 11 the identification of any safe deposit box that is either titled in 12 the name of, individually or jointly, or is otherwise subject to access or control by, 13 Defendant, or other party subject to Section VIII above, whether in whole or in 14 part; and 4. 15 if the account, safe deposit box, or other asset has been closed 16 or removed, the date closed or removed, the balance on said date, and the name or 17 the person or entity to whom such account or other asset was remitted; E. 18 Provide counsel for the FTC, within five (5) business days after being 19 served with a request, copies of all documents pertaining to such account or asset, 20 including but not limited to: account statements, account applications, signature 21 cards, checks, deposit tickets, transfers to and from the accounts, wire transfers, all 22 other debit and credit instruments or slips, 1099 forms, and safe deposit box logs; 23 and 24 25 26 27 F. Cooperate with all reasonable requests of the FTC relating to this Order’s implementation. IT IS FURTHER ORDERED that the accounts subject to this provision include (a) all Assets of Defendant deposited as of the time the TRO was entered 28 Page 17 of 25 1 on April 16, 2015, at 10:30 a.m. Pacific Standard Time, and (b) those Assets 2 deposited after entry of the TRO that are derived from the actions alleged in 3 Plaintiff’s Complaint. 4 IT IS FURTHER ORDERED that, in addition to the information and 5 documents required to be produced pursuant to other provisions herein, the FTC is 6 granted leave, pursuant to Fed. R. Civ. P. 45, to subpoena documents immediately 7 from any financial or brokerage institution, business entity, electronic data host, or 8 person served with a copy of this Order that holds, controls, or maintains custody 9 of any account, document, electronically stored information, or asset of, on behalf 10 of, in the name of, for the benefit of, subject to withdrawal by, subject to access or 11 use by, or under the signatory power of Defendant, or other party subject to 12 Section VIII above, or has held, controlled, or maintained any such account, 13 document, electronically stored information, or asset, and such financial or 14 brokerage institution, business entity, electronic data host or person shall respond 15 to such subpoena within three (3) business days after service. The FTC may effect 16 service by electronic mail. 17 X. APPOINTMENT OF RECEIVER IT IS FURTHER ORDERED that Thomas McNamara of McNamara 18 19 Benjamin LLP, the Temporary Receiver named in Section X of the TRO, is 20 appointed Receiver for the Receivership Defendant, with the full power of an 21 equity receiver. The Receiver shall be the agent of this Court and solely the agent 22 of this Court in acting as Receiver under this Order. The Receiver shall be 23 accountable directly to this Court. The Receiver shall comply with all local rules 24 and laws governing federal equity receivers. 25 XI. 26 27 COOPERATION WITH THE RECEIVER IT IS FURTHER ORDERED that Defendant shall fully cooperate with and assist the Receiver. Defendant’s cooperation and assistance shall include, but 28 Page 18 of 25 1 not be limited to, providing any information to the Receiver that the Receiver 2 deems necessary to exercise the authority and discharge the responsibilities of the 3 Receiver under this Order; providing any login, password, or biometric identifier 4 required to access any computer or electronic files or information in or on any 5 medium; and advising all persons who owe money to the Receivership Defendant 6 that all debts should be paid directly to the Receiver. Defendant is hereby 7 restrained and enjoined from directly or indirectly: 8 A. Transacting any of the business of the Receivership Defendant; 9 B. Excusing debts owed to the Receivership Defendant; 10 C. Destroying, secreting, defacing, transferring, or otherwise altering or 11 12 disposing of any documents of the Receivership Defendant; D. Transferring, receiving, altering, selling, encumbering, pledging, 13 assigning, liquidating, or otherwise disposing of any Assets owned, controlled, or 14 in the possession or custody of, or in which an interest is held or claimed by, the 15 Receivership Defendant, or the Receiver; 16 E. Failing to provide any assistance or information requested by the 17 Receiver in connection with obtaining possession, custody, or control of any 18 Assets within the receivership estate that the Receiver or the FTC has identified; or 19 F. Doing any act or thing whatsoever to interfere with the Receiver’s 20 taking and keeping custody, control, possession, or managing of the Assets or 21 documents subject to this receivership; or to harass or interfere with the Receiver 22 in any way; or to interfere in any manner with the exclusive jurisdiction of this 23 Court over the Assets or documents of the Receivership Defendant; or to refuse to 24 cooperate with the Receiver or the Receiver’s duly authorized agents in the 25 exercise of their duties or authority under any Order of this Court. 26 27 28 Page 19 of 25 1 XII. TRANSFER OF FUNDS TO THE RECEIVER BY FINANCIAL 2 INSTITUTIONS AND OTHER THIRD PARTIES 3 IT IS FURTHER ORDERED that, upon service of a copy of this Order, 4 any financial or brokerage institution or depository, escrow agent, title company, 5 commodity trading company, payment processing company, or trust shall 6 cooperate with all reasonable requests of counsel for the FTC and the Receiver 7 relating to implementation of this Order, including transferring funds at the 8 Receiver’s direction. 9 XIII. RECEIVER’S REPORTS 10 IT IS FURTHER ORDERED that the Receiver shall report to this Court 11 on or before July 13, 2015 regarding: (1) the steps taken by the Receiver to 12 implement the terms of this Order; (2) the value of all liquidated and unliquidated 13 Assets of the Receivership Defendant; (3) the sum of all liabilities of the 14 Receivership Defendant; (4) the steps the Receiver intends to take in the future to: 15 (a) prevent any diminution in the value of Assets of the Receivership Defendant; 16 (b) pursue receivership Assets from third parties; and (c) adjust the liabilities of the 17 Receivership Defendant, if appropriate; and (5) any other matters which the 18 Receiver believes should be brought to the Court’s attention. Provided, however, 19 if any of the required information would hinder the Receiver’s ability to pursue 20 receivership Assets, the portions of the Receiver’s report containing such 21 information may be filed under seal and not served on the parties. 22 XIV. BANKRUPTCY PETITIONS 23 IT IS FURTHER ORDERED that, in light of the appointment of the 24 Receiver, the Receivership Defendant is hereby prohibited from filing petitions for 25 relief under the United States Bankruptcy Code, 11 U.S.C. § 101 et seq., without 26 prior permission from this Court. 27 28 Page 20 of 25 1 XV. MISCELLANEOUS PROVISIONS 2 IT IS FURTHER ORDERED that: 3 A. Nothing herein modifies any existing Order in any way, including the 4 Orders governing Defendant Pacios and nonparty Assurity Law Group. See FTC 5 v. Lakhany, No. SACV 12-00337. The FTC may take discovery and pursue other 6 measures any existing Order permits. 7 B. The FTC may obtain credit reports concerning Defendant pursuant to 8 Section 604(a)(1) of the Fair Credit Reporting Act, 15 U.S.C. § 1681b(a)(1), and 9 that, upon written request, any credit reporting agency from which such reports are 10 requested shall provide them to the FTC. 11 XVI. STAY OF ACTIONS 12 IT IS FURTHER ORDERED that: 13 A. Except by leave of this Court, during the pendency of the 14 Receivership ordered herein, the Receivership Defendant and all customers, 15 principals, investors, creditors, stockholders, lessors, and other persons seeking to 16 establish or enforce any claim, right, or interest against or on behalf of the 17 Receivership Defendant, and all others acting for or on behalf of such persons, 18 including attorneys, trustees, agents, sheriffs, constables, marshals, and other 19 officers and their deputies, and their respective attorneys, servants, agents, and 20 employees be and are hereby stayed from: 21 1. Commencing, prosecuting, continuing, entering, or enforcing 22 any suit or proceeding, except that such actions may be filed to toll any applicable 23 statute of limitations; 24 2. Accelerating the due date of any obligation or claimed 25 obligation; filing or enforcing any lien; taking or attempting to take possession, 26 custody, or control of any Asset; attempting to foreclose, forfeit, alter, or terminate 27 28 Page 21 of 25 1 any interest in any Asset, whether such acts are part of a judicial proceeding, are 2 acts of self-help, or otherwise; 3. 3 Executing, issuing, serving, or causing the execution, issuance 4 or service of, any legal process, including, but not limited to, attachments, 5 garnishments, subpoenas, writs of replevin, writs of execution, or any other form 6 of process, whether specified in this Order or not; or 4. 7 Doing any act or thing whatsoever to interfere with the 8 Receiver’s taking custody, control, possession, or management of the Assets or 9 Documents subject to this receivership; or to harass or interfere with the Receiver 10 in any way; or to interfere in any manner with the exclusive jurisdiction of this 11 Court over the Assets or Documents of the Receivership Defendant. 12 B. 1. The commencement or continuation of a criminal action or 2. 13 14 This Section does not stay: The commencement or continuation of an action or proceeding proceeding; 15 16 by a governmental unit to enforce such governmental unit’s police or regulatory 17 power; 3. 18 The enforcement of a judgment, other than a money judgment, 19 obtained in an action or proceeding by a governmental unit to enforce such 20 governmental unit’s police or regulatory power, including but not limited to any 21 actions (including discovery) taken by the FTC in enforcing the Orders in the 22 related matter, FTC v. Lakhany, et al., No. SACV 12-00337; or 4. 23 24 The issuance to the Receivership Defendant of a notice of tax deficiency. 25 26 27 28 Page 22 of 25 1 XVII. ACKNOWLEDGMENT OF RECEIPT OF ORDER BY DEFENDANT 2 IT IS FURTHER ORDERED that Defendant, within five (5) business days 3 4 of receipt of this Order, must submit to counsel for the FTC a truthful sworn 5 statement acknowledging receipt of this Order. 6 XVIII. CORRESPONDENCE WITH PLAINTIFF 7 IT IS FURTHER ORDERED that, for the purposes of this Order, because 8 mail addressed to the FTC is subject to delay due to heightened security screening, 9 all correspondence and service of pleadings on Plaintiff shall be sent via electronic 10 submission or Federal Express to: 11 Jonathan Cohen Miriam Lederer Federal Trade Commission 600 Pennsylvania Ave., NW, Mail Drop CC-9528 Washington, DC 20580 Telephone: (202) 326-2551, -2975 Fax: (202) 326-3197 Jcohen2@ftc.gov, mlederer@ftc.gov 12 13 14 15 16 17 18 19 XIX. SERVICE OF THIS ORDER IT IS FURTHER ORDERED that copies of this Order may be served by 20 facsimile, email, personal or overnight delivery, U.S. Mail, or hand-delivery, by 21 agents and employees of the FTC or the Receiver, any state or federal law 22 enforcement agency, or by private process server, upon Defendant, any Financial 23 Institution or other entity or person that may have possession, custody, or control 24 of any documents or assets of Defendant, or that may otherwise be subject to any 25 provision of this Order. Service upon any branch or office of any Financial 26 Institution shall effect service upon the entire Financial Institution. 27 28 Page 23 of 25 1 2 XX. EXPEDITED DISCOVERY IT IS FURTHER ORDERED that the FTC is granted leave to conduct 3 certain expedited discovery, and that, commencing with the time and date of this 4 Order, in lieu of the time periods, notice provisions, and other requirements of 5 Rules 26, 30, 31, 33, and 34 of the Federal Rules of Civil Procedure, expedited 6 discovery as to parties and non-parties shall proceed as follows: 7 A. The FTC may, upon ten (10) calendar days’ notice, take the 8 deposition, including by telephone, of any person or entity, whether or not a 9 Defendant, in any judicial district, for the purpose of discovering the nature, 10 location, status, and extent of the Assets of Defendant, and Defendant’s affiliates 11 and subsidiaries; the nature and location of Documents reflecting the business 12 transactions of Defendant, and Defendant’s affiliates and subsidiaries; the location 13 of any premises where Defendant, directly or through any third party, conducts 14 business operations; and the Defendant’s identities and whereabouts. 15 B. The FTC may serve interrogatories for the purpose of discovering the 16 nature, location, status, and extent of the Assets of Defendant, and Defendant’s 17 affiliates and subsidiaries; the nature and location of Documents reflecting the 18 business transactions of Defendant, and Defendant’s affiliates and subsidiaries; the 19 location of any premises where Defendant, directly or through any third party, 20 conducts business operations; and the Defendant’s whereabouts. Defendant shall 21 respond within ten (10) calendar days after the FTC serves such interrogatories. 22 C. The FTC may issue requests for the production of Documents from 23 Defendant relating to the nature, location, status, and extent of the Assets of 24 Defendant, and Defendant’s affiliates and subsidiaries; the nature and location of 25 Documents reflecting the business transactions of Defendant, and Defendant’s 26 affiliates and subsidiaries; the location of any premises where Defendant, directly 27 or through any third party, conducts business operations; the Defendant’s identities 28 Page 24 of 25 1 and whereabouts; and/or the applicability of any evidentiary privileges to this 2 action. Defendant shall respond within ten (10) calendar days after the FTC serves 3 requests for production. 4 D. The FTC may, including through the use of a Rule 45 subpoena, 5 demand the production of documents from any person or entity, whether or not a 6 Defendant, relating to the nature, location, status, and extent of the Assets of 7 Defendant’s affiliates and subsidiaries; the nature and location of Documents 8 reflecting the business transactions of Defendant, and Defendant’s affiliates and 9 subsidiaries; the location of any premises where Defendant, directly or through any 10 third party, conducts business operations; the Defendant’s identities and 11 whereabouts; and/or the applicability of any evidentiary privileges to this action. 12 The subpoena recipient shall respond within ten (10) calendar days after the FTC 13 serves the subpoena. 14 For purposes of discovery pursuant to this Section, service shall be sufficient 15 if made by facsimile, electronic mail, or by overnight courier. 16 XXI. RETENTION OF JURISDICTION 17 IT IS FURTHER ORDERED that this Court shall retain jurisdiction of 18 this matter for all purposes of construction, modification, and enforcement of this 19 Order. 20 21 IT IS SO ORDERED, this 13th day of May, 2015. 22 23 24 Dated: May 13, 2015 25 CORMAC J. CARNEY 26 UNITED STATES DISTRICT JUDGE 27 28 Page 25 of 25

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