Securities And Exchange Commission v. JSW Financial Inc. et al

Filing 62

ORDER GRANTING 60 MOTION TO LIFT STAY.(whalc2, COURT STAFF) (Filed on 1/28/2016)

1 JINA L. CHOI (N.Y. Bar No. 2699718)
ROBERT L. TASHJIAN (Cal. Bar No. 191007)
[e-mail]
2
STEVEN D. BUCHHOLZ (Cal. Bar No. 202638)
[e-mail]
3
4 Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
5 44 Montgomery Street, Suite 2800
San Francisco, California 94104
6 Telephone: [phone]
Facsimile: 415-705-2501
7
8
9

UNITED STATES DISTRICT COURT

10

NORTHERN DISTRICT OF CALIFORNIA

11

SAN FRANCISCO DIVISION

12
13 SECURITIES AND EXCHANGE COMMISSION,
14
15

Case No. 3:11-cv-01356 WHA

Plaintiff,
MOTION TO LIFT STAY AND
[PROPOSED] ORDER

vs.

16 JSW FINANCIAL INC., JAMES S. WARD,
DAVID S. LEE, EDWARD G. LOCKER,
17 RICHARD F. TIPTON, and DAVID C. LIN,
18
19

Defendants,
and

20 BLUE CHIP REALTY FUND LLC and
SHORELINE INVESTMENT FUND, LLC,
21
Relief Defendants.
22
23
24
25
26
27
28
CERTIFICATE OF SERVICE

CASE NO. 3:11-CV-01356 WHA

1
2

MOTION TO LIFT STAY
Pursuant to the Court’s Order dated July 22, 2011, plaintiff Securities and Exchange

3 Commission (the “Commission”) hereby moves to lift the stay of proceedings. By way of
4 background, the Commission filed this action on March 22, 2011, alleging six defendants, JSW
5 Financial Inc. (“JSW Financial”), James S. Ward, David S. Lee, Edward G. Locker, Richard F.
6 Tipton, and David C. Lin, violated the federal securities laws, and naming two relief defendants, Blue
7 Chip Realty Fund LLC (“Blue Chip”) and Shoreline Investment Fund, LLC (“Shoreline”).
8

Three months later, the United States Government filed an indictment charging four of the

9 same defendants, Lin, Locker, Tipton, and Ward, with 18 counts of mail fraud, wire fraud, and
10 conspiracy. See United States v. Tipton, et al., Case No. 11-CR-0393 TEH (N.D. Cal. filed June 22,
11 2011). The Court declined to relate this civil action with the criminal matter. See Dkt. 32.
12

Defendant Ward filed an Answer in this action on June 11, 2011. See Dkt. 25. On July 6,

13 2011, the Trustee acting on behalf of defendant JSW Financial informed the Court that it had filed for
14 bankruptcy. See Dkt. 28 (citing Case No. 09-57648 SLJ (N.D. Cal.)). The Court, at the Trustee’s
15 request, entered a stay of proceedings. See Dkt. 29 (imposing stay against all defendants). The Court
16 ordered the Commission to file a request to lift the stay within 30 days of “final resolution of the
17 bankruptcy action.” See id.
18

In the parallel criminal matter, three of the four defendants—Locker, Tipton, and Ward—

19 subsequently pleaded guilty. See Tipton, supra, Case No. 11-CR-0393 TEH, Dkts. 35-37 (plea
20 agreements). The remaining defendant, Lin, was found guilty after trial. See id. Dkt. 108 (verdict).
21 The Court entered final judgments against the four defendants in February 2013, sentencing them to
22 time in prison and ordering them to pay restitution. See id. Dkt. 181 (ordering all defendants jointly
23 and severally liable to pay more than $8.6 million in restitution); Dkt. 190 (sentencing Ward to 60
24 months in custody); Dkt. 191 (sentencing Locker to 30 months); Dkt. 192 (sentencing Tipton to 18
25 months); Dkt. 193 (sentencing Lin to 28 months).
26

The JSW Financial bankruptcy action continued during the pendency of the criminal matter.

27 Ward filed for bankruptcy in January 2012. See Dkt. 33 (referring to Case No. 12-50020 JEH (S.D.
28
SEC V. JSW FINANCIAL, INC.

1

CASE NO. 3:11-CV-01356 WHA

1 Ohio)). In July 2013, Lee filed his own bankruptcy petition. See Case No. 13-54056 AJ (N.D. Cal.).
2 JSW Financial was discharged from bankruptcy on September 28, 2015. See Case No. 09-57648
3 SLJ, Dkt. 445 (final decree). Ward’s bankruptcy proceedings have also been terminated. See Case
4 No. 12-50020 JEH (minute entry dated June 12, 2014). Defendant Lee’s bankruptcy petition is still
5 pending.
6

In this action, the Commission reached resolutions with four of the six defendants and the two

7 relief defendants. See Dkts. 40-51. The Court entered final judgments against the settling defendants
8 on January 20, 2016. See Dkts. 53-58 (entering judgments against defendants Lee, Lin, Locker, and
9 Tipton, and relief defendants Blue Chip and Shoreline). The same day, the Commission filed a notice
10 of voluntary dismissal of the claims against defendant JSW Financial. See Dkt. 59.
11

Only defendant Ward, who is serving his sentence in custody, now remains as a defendant in

12 this matter. Commission Staff has spoken with his attorney of record, David M. McKim, who has
13 not been in contact with Ward for several years. See Buchholz Decl. ¶ 2 (filed concurrently). With
14 counsel’s permission, the Commission has been serving Ward with the filings in this matter by mail.
15 See, e.g., Dkt. 52 (certificate of service); Buchholz Decl. ¶ 2. Commission Staff has not received any
16 communications from Ward, who defaulted in an administrative proceeding instituted by the
17 Commission after his criminal conviction to determine whether Ward should be barred from the
18 securities industry. See SEC Rel. No. IA-3551, 2013 WL 653015 (Feb. 7, 2013) (order making
19 findings and barring Ward by default); Buchholz Decl. ¶ 3 & Exh. A (attaching copy of order).
20

In light of Ward’s guilty plea, the sworn testimony and evidence introduced at his co-

21 defendant Lin’s criminal trial, and the evidence gathered in the Commission Staff’s pre-filing
22 investigation, the Commission intends to move for summary judgment against Ward. The
23 Commission would be prepared to file its motion within 30 days after the current stay of proceedings
24 is lifted. Entry of judgment against Ward would resolve all remaining claims in this action.
25
26
27
28
SEC V. JSW FINANCIAL, INC.

1

CASE NO. 3:11-CV-01356 WHA

1

Based on the foregoing, the Commission respectfully requests that the Court lift the stay of

2 proceedings so that it may file its proposed motion for summary judgment.
3

Respectfully submitted,

4
5 Dated: January 25, 2016
6

/s/ Robert L. Tashjian
Robert L. Tashjian
Attorney for Plaintiff
SECURITIES AND EXCHANGE
COMMISSION

7
8
9
10

***

11

[PROPOSED] ORDER

12

Pursuant to its Order dated July 7, 2011, the Court hereby lifts the previously-imposed stay of

13 proceedings.
14
15

DATED: January 28, 2016.
_______________________________
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

16
17
18
19
20
21
22
23
24
25
26
27
28
SEC V. JSW FINANCIAL, INC.

1

CASE NO. 3:11-CV-01356 WHA