Securities And Exchange Commission v. Obioha et al
Filing
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ORDER GRANTING SEC'S APPLICATION FOR ORDER COMPELLING COMPLIANCE WITH ADMINISTRATIVE SUBPOENAS by Judge William Alsup [granting 1 Motion to Compel]. (whasec, COURT STAFF) (Filed on 10/12/2012)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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No. C 12-80109 WHA
Plaintiff,
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For the Northern District of California
United States District Court
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SECURITIES AND EXCHANGE
COMMISSION,
v.
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MACK OBIOHA; QFF SECURITIES
FUND LTD.; and QFF HOLDINGS LLC,
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ORDER GRANTING SEC’S
APPLICATION FOR ORDER
COMPELLING COMPLIANCE
WITH ADMINISTRATIVE
SUBPOENAS
Defendants.
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INTRODUCTION
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This action involves the Securities and Exchange Commission’s application for an order
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compelling defendants — Mack Obioha, QFF Holdings LLC, and QFF Securities Fund Ltd. —
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to comply with administrative subpoenas for documents and testimony. For the foregoing
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reasons, the Commission’s application is GRANTED.
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STATEMENT
The investigation by the Commission involves a possible Ponzi scheme by Yusaf Jawed,
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who, through various entities, raised more than $30 million through the management of private
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investment funds (Br. 2). In the course of the investigation, the Commission served subpoenas
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on (1) Mr. Obioha, who is believed to have relevant information about alleged transactions
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involving funds managed by Mr. Jawed; (2) QFF Securities Fund Ltd., an entity that is allegedly
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managed by Mr. Obioha (Leach Exh. J); and (3) QFF Holdings LLC, an entity that was allegedly
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incorporated by QFF Securities’ former counsel and director, Jacques B. Nichols (ibid.).
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Prior orders in this action required the Commission to effectuate proper service on each
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defendant (Dkt. Nos. 9, 16, 19). Pursuant to an order dated August 24, any defendant who
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was properly served was required to submit an opposition or statement of non-opposition to the
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motion to compel by September 19 (Dkt. No. 19). Because no oppositions were filed, the motion
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was deemed submitted.
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ANALYSIS
“The scope of the judicial inquiry in an . . . agency subpoena enforcement proceeding
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is quite narrow. The critical questions are: (1) whether Congress has granted the authority
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to investigate; (2) whether procedural requirements have been followed; and (3) whether the
evidence is relevant and material to the investigation.” EEOC v. Federal Exp. Corp., 558 F.3d
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For the Northern District of California
United States District Court
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842, 848 (9th Cir. 2009) (quoting EEOC v. Karuk Tribe Hous. Auth., 260 F.3d 1071, 1076
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(9th Cir. 2001)).
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The Commission is expressly authorized by three statutes — the Securities Act, the
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Exchange Act, and the Advisers Act — to conduct investigations regarding whether any person
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has violated any provisions of those federal securities laws. See 15 U.S.C. 77t(a); 15 U.S.C.
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78u(a); 15 U.S.C. 80b-9(a). For purposes of subpoena enforcement, relevance of the evidence is
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established when the information sought is not “plainly incompetent or irrelevant for any lawful
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purpose.” Endicott Johnson Corp. v. Perkins, 317 U.S. 501, 509 (1943). Here, the information
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sought by the Commission is relevant to the ongoing investigation of whether Mr. Jawed devised
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a sham buyout by the entities associated with Mr. Obioha. Through the subpoenaed testimony
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and documents, the Commission seeks to learn, for example, the basis for statements made to
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fund investors. The information sought is directly relevant to those issues.
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In as much as the Commission’s motion has gone unopposed by all three defendants,
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the only issue before the Court is whether or not all three defendants were properly served.
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Due process requires “notice reasonably calculated, under all circumstances, to apprise interested
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parties of the pendency of the action and afford them an opportunity to present their objections.”
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Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950) (citations omitted).
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“Rule 4 is a flexible rule that should be liberally construed so long as a party receives sufficient
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notice of the complaint.” United Food & Commercial Workers Union v. Alpha Beta Co.,
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736 F.2d 1371, 1382 (9th Cir. 1984).
MR. MACK OBIOHA.
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1.
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On June 11, 2012, Mr. Obioha appeared for his testimony with the Commission and
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accompanied by his attorney, James A. Trodden. Mr. Obioha was served with the Commission’s
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motion and the declaration of Robert S. Leach (Dkt. No. 18 ¶¶ 2, 3). After Mr. Obioha’s
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testimony, the Commission was unable to locate him, and therefore, could not serve him the
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Court’s subsequent orders in person. Consequently, the Commission served the Court’s orders
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by UPS overnight to the addre§ identified by Mr. Obioha as his own, despite the fact that the
address was actually Attorney Trodden’s. In determining whether Mr. Obioha was sufficiently
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For the Northern District of California
United States District Court
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served, consideration was given to Mr. Obioha’s acknowledgment that he had prior notice of
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the motion from the service of summons mailed to Attorney Trodden on his behalf (Dkt. No. 18;
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Exh. A). Finding substantial compliance with California Code of Civil Procedure
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Section 415.30, this Court’s August 23 order found that service upon Mr. Obioha was sufficient
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(Dkt. No. 19).
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2.
QFF SECURITIES FUND LTD.
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QFF Securities is an entity incorporated and domiciled in the British Virgin Islands.
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The Commission stated that it was unable to locate a domestic agent for service. Additionally,
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according to the Commission, QFF Securities was removed from the British Virgin Islands
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public register of companies in May 2010 for non-payment of its annual license fees.
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Without these conventional means of service, the Commission served Attorney Trodden
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via UPS next day delivery, on behalf of QFF Securities, on March 23, 2012 and May 23, 2012
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(Dkt. No. 20 ¶ 4, Exh. 3).
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As with defendant Obioha, Attorney Trodden also claimed to represent QFF Securities
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Fund Ltd. in email correspondence with the Commission (Dkt. No. 20; Exhs. 2, 3) and by letter
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to the Court (Dkt. No. 15). The Commission’s argument that service upon Attorney Trodden
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was sufficient, however, is not premised solely on the attorney-client relationship. Rather, the
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Commission relied upon an e-mail in which Attorney Trodden declared, “Please be advised that
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I am authorized to accept legal service in [sic] behalf of [][] and QFF Securities and Funds [sic],
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LTD. (British Virgin Islands)” (Dkt. 20; Exh. 2). Service on a client’s attorney is sufficient if
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the attorney has been explicitly authorized to accept service on the client’s behalf. See Pochiro
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v. Prudential Ins. Co. of Am., 827 F.2d 1246, 1248–49 (9th Cir. 1987); FRCP 4(h) (providing
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that service on a foreign corporation may be made on any agent authorized by appointment).
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Accordingly, this order finds that QFF Securities was sufficiently served through its authorized
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agent, Attorney Trodden.
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3.
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QFF Holdings LLC is a Delaware corporation (Br. 8). The Commission arranged
QFF HOLDINGS LLC.
for a process server to serve QFF Holdings’ registered agent, Delaware Corporations LLC.
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For the Northern District of California
United States District Court
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After attempting to serve Delaware Corporations, the process server stated that the agent would
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not accept service because QFF Holdings had not paid its fees in three years. According to
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Delaware Corporations, it no longer had a contractual obligation to accept service on behalf
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of QFF Holdings (Dkt. No. 20; Exh. 4). The next day, the process server served the Delaware
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Corporation; however, an individual followed the process server out of the office and threw
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the served papers on the ground (id. at Exh. 5). In order to ensure service, a process server also
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served the Delaware Secretary of State on behalf of QFF Holdings (id. at Exhs. 6, 7). See Del.
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Code Ann. tit. 8, § 321 (2010) (providing that “it shall be lawful to serve the process against the
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[Delaware] corporation upon the Secretary of State . . .”). Accordingly, QFF Holdings has been
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sufficiently served.
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CONCLUSION
For the reasons set forth above, the Commission’s application for an order compelling
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compliance with administrative subpoenas is GRANTED. In as much as no defendant appeared
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in this action, the Commission is obligated, in order to provide for the contempt power of the
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Court, to properly serve this order on defendants. By OCTOBER 17, 2012, defendants Mack
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Obioha, QFF Holdings LLC, and QFF Securities Ltd. shall produce all documents requested
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under the administrative subpoenas issued on March 6, 2012 and March 16, 2012, respectively.
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On OCTOBER 17, 2012, at 9:30 a.m., defendant Obioha shall appear for sworn testimony at the
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Commission’s San Francisco Regional Office, 44 Montgomery Street, Suite 2800,
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San Francisco, California.
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IT IS SO ORDERED.
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Dated: October 12, 2012.
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE
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For the Northern District of California
United States District Court
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