Securities and Exchange Commission v. Secure Investement Services, Inc., et al

Filing 936

STIPULATION and ORDER AUTHORIZING RECEIVER TO INCREASE BANK FINANCING FACILITY signed by Judge Garland E. Burrell, Jr. on 3/1/2013 ORDERING the Receiver to increase the bank financing facility to $4.5 million in order to meet upcoming premium obligations. (Zignago, K.)

1
2
3

BOUTIN JONES INC.
Chris Gibson, SBN 073353
Maralee Eriksen, SBN 208699
555 Capitol Mall, Suite 1500
Sacramento, California 95814-4603
Tel. [phone]

4
5
6
7
8
9
10

QUILLING, SELANDER, LOWNDS, WINSLETT & MOSER, P.C.
Michael J. Quilling (Tex. Bar No. 16432300) – Admitted Pro Hac Vice
Brent J. Rodine (Tex. Bar No. 24048770) – Admitted Pro Hac Vice
2001 Bryan Street, Suite 1800
Dallas, Texas 75201
Telephone: [phone]
Facsimile: [phone]
Attorneys for Michael J. Quilling
Receiver of Defendants Secure Investment Services, Inc.,
American Financial Services, Inc., and Lyndon Group, Inc.

11

UNITED STATES DISTRICT COURT

12

EASTERN DISTRICT OF CALIFORNIA, SACRAMENTO DIVISION

13
14

SECURITIES AND EXCHANGE
COMMISSION,

15

Case No. 2:07-cv-01724 GEB CMK

Plaintiff,

STIPULATION AND ORDER
AUTHORIZING RECEIVER TO
INCREASE BANK FINANCING
FACILITY

16
17
18
19

v.
SECURE INVESTMENT SERVICES, INC.,
AMERICAN FINANCIAL SERVICES, INC.,
LYNDON GROUP, INC., DONALD F.
NEUHAUS, and KIMBERLY A. SNOWDEN,

20
Defendants.

21
22
23

THE HONORABLE GARLAND E. BURRELL, JR., UNITED STATES DISTRICT
JUDGE:

24

Michael J. Quilling, the Receiver appointed in these proceedings (“Receiver”), files this

25

Stipulation and Order Authorizing Receiver to Increase Bank Financing Facility and in support

26

TO:

of such would show the following:

27
28
-1Receiver’s Motion to Compel Payment of Premium Share from «Investor» [«Viator»]
516100.1

1.

1

By order of October 30, 2007, the Court appointed Michael J. Quilling as

2

Receiver for Secure Investment Services, Inc. and other related entities (“SIS”) and authorized

3

him to take complete and exclusive control, possession, and custody of all receivership assets.

4

2.

The receivership estate’s largest single asset is a portfolio currently comprised of

5
33 life insurance policies with a combined death benefit exceeding $30 million. Those policies
6
7
8

currently carry premium obligations of roughly $1.6 million a year.

Failure to pay those

premiums will cause some of the life insurance policies to lapse.
3.

9

Since the Receiver’s appointment, by Court Order four policies with face value

10

totaling $11,250,000.00 have been abandoned or sold because the cost of premiums did not make

11

it economically feasible to continue to maintain the policies. (See Dkt. Nos. 254, 767, and 817.)

12

In addition, 11 policies have matured with a total of $7,614,074.35 in death benefits paid to the

13
14

receivership estate. The Receiver has used those funds to pay down the amount borrowed that is

15

described below, and to continue to pay monthly premiums due on the current portfolio of life

16

insurance policies.

17
18
19

4.

The Receiver intends to continue paying premiums on the 33 remaining life

insurance policies since those policies and their death benefits are the most promising source of
recovery to pay over 800 investors and creditors with claims in this case.

20
5.

In order to pay premiums, the Receiver approached Sovereign Bank in Dallas,

21
22

Texas, to discuss establishing a $3 million line of credit secured by some of the receivership

23

estate’s insurance policies. The Receiver chose Sovereign Bank because it has experience in

24

making loans secured by a portfolio of insurance policies. After negotiation and as described

25

below, Sovereign Bank agreed to establish a $3 million line of credit, which was increased to $4

26

million in 2009.

27
28
-2Receiver’s Motion to Compel Payment of Premium Share from «Investor» [«Viator»]
516100.1

6.

1

On August 29, 2007, the Receiver filed a Stipulated Motion to Obtain Interim

2

Bank Financing (Dkt. No. 38). The Court entered its Order (Dkt. No. 57) authorizing the

3

Receiver to borrow $200,000 from Sovereign Bank.

4

7.

On February 21, 2008, the Receiver filed an Unopposed Motion to Approve Bank

5
Financing (Dkt. No. 116), which proposed an increase in the available line of credit to $3
6
7

million. That increase was intended to ensure that premium obligations could be met through the

8

2008 calendar year. The Court entered its Order (Dkt. No. 131) authorizing that increase on

9

March 14, 2008.

10

8.

11
12

On February 20, 2009, the Receiver filed a Stipulation and Order to Increase

Bank Financing Facility (Dkt. No. 469), which proposed an increase in the available line of
credit to $4 million. That increase was intended to ensure that premium obligations could be met

13
14
15

through the 2009 calendar year. The Court entered its Order (Dkt. No. 470) authorizing that
increase on February 26, 2009.
9.

16

The Receiver constantly monitors the health status of the viators named on the

17

current portfolio of insurance policies. The Receiver has been advised several insureds, with

18

death benefits in excess of $4 million, are in ill health. Therefore, the Receiver anticipates

19

policies to mature in the next several months.

20
10.

To date, the Receiver has borrowed $3,767,204.00 against that $4 million line of

21
22

credit. Since the Receiver is close to exhausting his current line of credit, he recently negotiated

23

an increase in the financing facility to a total of $4.5 million. It is hoped that maturities from

24

policies will allow the Receiver to repay most, if not all, of the line of credit before it is

25

exhausted.

26
27
28
-3Receiver’s Motion to Compel Payment of Premium Share from «Investor» [«Viator»]
516100.1

11.

1

Clearly, it is in the best interest of the receivership estate and the investors to keep

2

the remaining life insurance policies in force. An increase in the bank financing facility will

3

ensure that enough funds are available to meet premium obligations for the immediate future.

4

WHEREFORE, PREMISES CONSIDERED, the parties stipulate to authorization of

5
Receiver to increase the bank financing facility to $4.5 million in order to meet upcoming
6
7

premium obligations.
QUILLING, SELANDER, LOWNDS,
WINSLETT & MOSER, P.C.

8
9
10

Dated: February 14, 2013

By:

11
12
13

/s/ Michael J. Quilling
Michael J. Quilling
Brent J. Rodine
Attorneys for Receiver

U.S. SECURITIES AND EXCHANGE
COMMISSION

14
15
16

Dated: February 18, 2013

By:

17
18
19

/s/ Thomas J. Eme (authorized on 2/18/13)
Thomas J. Eme
John S. Yun
Attorneys for Plaintiff Securities and Exchange
Commission

MUNSCH HARDT KOPF & HARR, P.C.

20
21

Dated: February 14, 2013

22

By:

/s/ Steven A. Harr (authorized on 2/14/13)
Steven A. Harr
Dennis L. Roossien, Jr.
Attorneys for Examiner

23
24
25

ORDER

26
27
28

IT IS SO ORDERED.

_________________________

March 1, 2013

Senior United States District Judge

GARLAND E. BURRELL, JR.

-4Receiver’s Motion to Compel Payment of Premium Share from «Investor» [«Viator»]
516100.1