Securities and Exchange Commission v. Bivona et al

Filing 68

STIPULATION AND ORDER re 67 Preliminary Injunction filed by Saddle River Advisors, LLC, John V. Bivona, Anne Bivona. Signed by Judge Edward M. Chen on 5/3/16. (bpfS, COURT STAFF) (Filed on 5/3/2016)

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SHARTSIS FRIESE LLP
JAHAN P. RAISSI (Bar #168599)
[e-mail]
One Maritime Plaza, Eighteenth Floor
San Francisco, CA 94111-3598
Telephone:
[phone]
Facsimile:
[phone]
[e-mail]

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Attorneys for Defendants JOHN V. BIVONA,
SADDLE RIVER ADVISORS LLC and
ANNE BIVONA

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN FRANCISCO DIVISION

ONE MARITIME PLAZA
EIGHTEENTH FLOOR
SAN FRANCISCO, CA 94111-3598

SHARTSIS FRIESE LLP

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SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

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v.

Case No. 3:16-cv-01386-EMC
STIPULATED ORDER RE
PRELIMINARY INJUNCTION
Docket Nos. 59, 67

JOHN V. BIVONA, SADDLE RIVER
ADVISORS LLC; SRA MANAGEMENT
LLC; FRANK GREGORY MAZZOLA,
Defendants, and
SRA I LLC; SRA II LLC; SRA III LLC;
FELIX INVESTMENTS, LLC; MICHELE J.
MAZZOLA; ANNE BIVONA; CLEAR
SAILING GROUP IV LLC; CLEAR
SAILING GROUP V LLC,
Relief Defendants.

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Pursuant to the Stipulation of Plaintiff Securities and Exchange Commission, Defendants

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John V. Bivona, Saddle River Advisors LLC (“Saddle River”), and SRA Management LLC

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(“SRA Management”), and Relief Defendants SRA I LLC, SRA II LLC, SRA III LLC, Felix

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Investments, LLC, Anne Bivona, Clear Sailing Group IV LLC, and Clear Sailing Group V LLC

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(the two Clear Sailing entities, collectively, “Clear Sailing”), IT IS ORDERED that the SEC’s

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Motion for a Preliminary Injunction as to the above stipulating parties is GRANTED as follows:
Case No.
3:16-cv-01386-EMC

-1STIPULATED ORDER RE PRELIMINARY INJUNCTION

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I.

Obey-the-Law Injunction

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IT IS FURTHER ORDERED that defendants John Bivona, Saddle River, and SRA

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Management, hereby are preliminarily restrained and enjoined from, directly or indirectly,

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violating the anti-fraud provisions of the federal securities laws alleged against them, namely

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Section 17(a) of the Securities Act (15 U.S.C. § 77q(a)); Section 10(b) of the Exchange Act of

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1934 (15 U.S.C. § 78j(b)) and Rule 10b-5 thereunder (17 C.F.R. § 240.10b-5); and Sections

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206(1), (2), and (4) of the Advisers Act (15 U.S.C. §§80b–6(1), 80b–6(2) and 80b–6 (4)) and

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Rule 206(4)–8 thereunder (17 C.F.R. §275.206 (4)–8).

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II.

Injunction Against Soliciting to Purchase Any Interest in any Fund

ONE MARITIME PLAZA
EIGHTEENTH FLOOR
SAN FRANCISCO, CA 94111-3598

IT IS FURTHER ORDERED that defendants John Bivona, Saddle River, and SRA

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SHARTSIS FRIESE LLP

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Management, and their agents, servants, employees, attorneys, and those persons in active

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concert or participation with any of them, until further order of this Court are preliminarily

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restrained and enjoined from directly or indirectly soliciting any person or entity to purchase any

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membership interest in any fund unless approved by the Independent Monitor as set forth herein.
Order Not to Dissipate Certain Assets – Anne Bivona

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III.

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IT IS FURTHER ORDERED that relief defendant Anne Bivona must preserve and not

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dissipate $999,667, unless and until there is a further order of this Court.
IV.

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Expedited Discovery-The Status of the Entities and Related Shares/Economic
Interests

IT IS FURTHER ORDERED that, commencing with the time and date of this Order, the

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SEC may proceed with expedited discovery on the following subject matters: (1) the current

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condition of Saddle River, SRA Management, and the SRA Funds, including any assets owned

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and that have been transferred; and (2) Clear Sailing, and the assets they are holding on behalf of

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any funds that are associated or affiliated with John Bivona or Saddle River, including but not

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limited to, the SRA Funds.

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V.

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IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, each of the

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Evidence Preservation

defendants, John Bivona, Saddle River, and SRA Management, and the relief defendants, the
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3:16-cv-01386-EMC

-2STIPULATED ORDER RE PRELIMINARY INJUNCTION

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SRA Funds, Felix Investments, Anne Bivona, and Clear Sailing, and their officers, agents,

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servants, employees, attorneys, subsidiaries, and affiliates, and those persons in active concert or

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

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otherwise, and each of them, be and hereby are restrained and enjoined from, directly or

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indirectly: destroying, mutilating, concealing, transferring, altering, or otherwise disposing of, in

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any manner, any documents, which includes all books, records, computer programs, computer

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files, computer printouts, contracts, emails, correspondence, memoranda, brochures, or any other

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documents of any kind in their possession, custody or control, however created, produced, or

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stored (manually, mechanically, electronically, or otherwise), pertaining in any manner to any of

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the defendants or relief defendants.

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EIGHTEENTH FLOOR
SAN FRANCISCO, CA 94111-3598

SHARTSIS FRIESE LLP

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VI.

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IT IS FURTHER ORDERED that Michael A. Maidy of Sherwood Partners, 1100 La

Appointment of An Independent Monitor

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Avenida Street, Building A, Mountain View, CA 94043, Telephone: [phone] is hereby

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appointed to act as an Independent Monitor for Saddle River, SRA Management, the SRA

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Funds, Clear Sailing, and Felix Investments as follows:

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Independent Monitor – Responsibilities and Duties

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The Independent Monitor shall be empowered to:

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1. Have full and complete access to Saddle River, SRA Management, the SRA
Funds’, Clear Sailing book and records;

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2. Have full and complete access to Saddle River’s, SRA Management’s, the

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SRA Funds’, and Clear Sailing’s principals, officers, employees, agents,

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consultants, or anyone else who is otherwise associated with those entities to

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carry out the Independent Monitor’s assignment.

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3. Review and monitor all proposed purchases and sales of securities or interests

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in securities by Saddle River, SRA Management, the SRA Funds, Clear

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Sailing and to object to any purchase or sale that the Independent Monitor

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determines is not in the best interests of the SRA Funds and its investors.

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4. Enter into the offices and premises of Saddle River, SRA Management, the

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SRA Funds, or Clear Sailing.
5. Review and monitor all proposed transfers of money or assets by Saddle

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River, SRA Management, the SRA Funds, or Clear Sailing and to object to

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any transfer of money or assets that the Independent Monitor determines is not

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in the best interests of the SRA Funds and its investors.

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6. Identify and locate all money, assets, securities and interests in securities held

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by, or for the benefit of, Saddle River, SRA Management, the SRA Funds or

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Clear Sailing.

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7. Identify all investors in the SRA Funds and determine whether those investors

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EIGHTEENTH FLOOR
SAN FRANCISCO, CA 94111-3598

SHARTSIS FRIESE LLP

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have received the securities or economic interests in securities that the

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investors have paid for.

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8. Identify all debts, accounts payable, liabilities and unpaid obligations of the

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SRA Funds.
9. Review and monitor all bills or invoices sent to Saddle River, SRA

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Management, the SRA Funds, or Clear Sailing and expenditures that Saddle

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River, SRA Management, the SRA Funds, or Clear Sailing intends to make

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and to object to any expenditure that the Independent Monitor determines is

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not in the best interests of the SRA Funds and its investors.

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10. Apply to the Court for an order compelling compliance with this Order or

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seeking a modification of this Order.

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Independent Monitor – Payment

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Saddle River and SRA Management shall pay, upon approval of this Court as set forth

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below, the reasonable costs, fees and expenses of the Independent Monitor incurred in

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connection with the performance of the respective powers and duties described herein, including,

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but not limited to, the reasonable costs, fees, and expenses of all persons retained by the

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Independent Monitor with the Court’s approval to assist in carrying out the Independent

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Monitor’s powers and duties. All applications for costs, fees and expenses of the Independent
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Monitor and those employed by the Independent Monitor, including but not limited to any

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attorney or accountant retained by the Independent Monitor, shall be made by application to the

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Court, with notice to all parties and an opportunity to be heard, setting forth in reasonable detail

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the nature of such costs, fees, and expenses. The Monitor is directed to be as economical as is

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reasonably possible in performing the duties set for herein, including by assigning staff located

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in the New York region, if possible and practical, to minimize the costs and expenses incurred.

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Independent Monitor – Limitation on Liability

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The Independent Monitor shall not be responsible for the operation of Saddle River, SRA

Independent Monitor shall have all of the immunities afforded to a court-appointed receiver in a

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ONE MARITIME PLAZA
EIGHTEENTH FLOOR
SAN FRANCISCO, CA 94111-3598

Management, the SRA Funds or Clear Sailing or for the preservation or sale of any assets. The

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SHARTSIS FRIESE LLP

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federal action. The Independent Monitor and all persons who may be engaged or employed by

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the Independent Monitor to assist him in carrying out his duties or obligations hereunder shall

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not be liable for any act or omission of the Independent Monitor or such person, respectively, or

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any of their partners, employees, agents or attorneys, unless it shall be proven that the

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Independent Monitor or such other person acted recklessly or in bad faith. In particular, the

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Independent Monitor shall not, under any circumstances, be liable for any losses in connection

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with any of the Saddle River’s or SRA Management’s investment funds, including but not

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limited to the SRA Funds and Clear Sailing, arising out of or related to the Independent

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Monitor’s work hereunder, including, but not limited to, losses from either the sale or failure to

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sell securities or delays in the sale of securities during the course of the Independent Monitor’s

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term. No claim may be filed against the Independent Monitor without first obtaining Court

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approval to file such an action. This provision shall apply to claims based on conduct during the

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term of any agreement that may be entered into between the Independent Monitor and any other

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person who may be engaged or employed by the Independent Monitor hereunder, even if such

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claims are filed after the termination of such agreement.

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Independent Monitor – Indemnification

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Saddle River and SRA Management shall indemnify, defend and hold harmless the

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Independent Monitor and his/her/its agents, employees, consultants, successors, and assigns,
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from and against all actions (pending or threatened and whether at law or in equity in any

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forum), liabilities, damages, losses, costs, and expenses, including but not limited to reasonable

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attorneys’ and other professionals’ fees, arising from the conduct or omission of the Independent

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Monitor or his/her/its agents, employees and consultants under the terms of this Order, except for

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any such conduct or omission adjudged by the Court to be the result of gross negligence or

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willful misconduct.

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Independent Monitor – Access

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John V. Bivona, Saddle River, SRA Management, the SRA Funds and Clear Sailing and

attorneys, shall provide to the Independent Monitor and any other person engaged or employed

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ONE MARITIME PLAZA
EIGHTEENTH FLOOR
SAN FRANCISCO, CA 94111-3598

their respective principals, officers, directors, equity holders, agents, servants, employees, and

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SHARTSIS FRIESE LLP

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by the Independent Monitor hereunder with the access to their premises, persons, and

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information as reasonably requested by the Independent Monitor in connection with his/her/its

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powers and duties under this Order; shall provide all reasonable cooperation to the Independent

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Monitor and any other person engaged or employed by the Independent Monitor in carrying out

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the powers and duties herein; and shall take no action, directly or indirectly, to hinder, obstruct,

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delay or otherwise interfere in any manner with the actions of the Independent Monitor or any

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other person engaged or employed by the Independent Monitor to assist in carrying out the

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powers and duties herein. The Independent Monitor may authorize any party or party

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representative to accompany and assist the Independent Monitor in carrying out the Independent

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Monitor’s duties.

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Independent Monitor – Approval of All Contemplated Transfers

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So that the Independent Monitor can review and monitor all contemplated transfers of

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money or assets, purchases, sales, or expenditures by Saddle River, SRA Management, the SRA

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Funds, Clear Sailing, and Felix Investments, the Court hereby directs Saddle River, SRA

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Management, the SRA Funds, Clear Sailing, and Felix Investments to provide the Independent

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Monitor with three-business-days’ notice of such contemplated transfers of money or assets,

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purchases, sales, or expenditures. Until such time as the Independent Monitor has had the

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opportunity to review the books and records of Saddle River, SRA Management, the SRA Funds,
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Clear Sailing, and Felix Investments and to review contemplated transfers of money or assets,

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purchases, sales, or expenditures by those entities, the Court hereby prohibits Saddle River, SRA

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Management, the SRA Funds, Clear Sailing, and Felix Investments from engaging in any

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transfers of money or assets, purchases, sales, or expenditures. If the Independent Monitor

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objects to any transfer, purchase, sale, or expenditure, Saddle River, SRA Management, the SRA

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Funds, Clear Sailing, and Felix Investments may move the Court on shortened time for

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administrative relief pursuant to Civil Local Rule 7-11 of the Northern District of California.

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Independent Monitor – Report to Court

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The Independent Monitor shall provide the Court and the SEC written reports at least bi-

ONE MARITIME PLAZA
EIGHTEENTH FLOOR
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weekly regarding his review of the records, assets, liabilities, expenditures and operations of

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SHARTSIS FRIESE LLP

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Saddle River, SRA Management, the SRA Funds and Clear Sailing. By no later than the date of

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the hearing on the motion for preliminary injunction (whether such hearing is held or not), the

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Independent Monitor shall submit a written report to the Court, the SEC, and counsel for Mr.

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Bivona containing (1) a preliminary accounting for Saddle River, SRA Management, the SRA

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Funds, and Clear Sailing for the limited purpose of determining what assets the SRA Funds own

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and whether the SRA Funds own the shares of pre-IPO companies to which investors are entitled

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and (2) a recommendation for how to wind down the SRA Funds that minimizes investor harm.

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Independent Monitor – Prohibition Against Bankruptcy Filing

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Saddle River, SRA Management, the SRA Funds and Clear Sailing are hereby enjoined

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from filing a voluntary petition in bankruptcy without at least five (5) court days’ notice to the

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Independent Monitor and Commission (by notice to the attorneys appearing on the

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Commission’s behalf in this matter). Upon receiving such notice, the Independent Monitor or

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the Commission may seek appropriate expedited relief from this Court.

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Independent Monitor – Compliance

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The Independent Monitor and any party may apply to the Court for an order compelling

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compliance with this Order. The Commission or the Independent Monitor may, in their

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discretion, petition the Court to modify this Order. The Commission shall have the right to

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petition the Court for immediate relief if the Commission deems that any defendant’s or relief
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defendant’s ongoing activities are contrary to the best interests of the SRA Funds’ investors.

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In accordance with Rule 65(d)(2) of the Federal Rules of Civil Procedure, this Order

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Appointing Independent Monitor shall be binding upon all persons who receive actual notice of

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it through personal service or otherwise.

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VII.

No Prejudice to Seek Modification of Preliminary Injunction

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Nothing herein shall prejudice any Party or Relief Defendant’s right to petition the Court

VIII. Hearing on Plaintiff’s Motion Regarding Mazzolas

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This Order does not include Defendant Frank G. Mazzola or Relief Defendant Michelle

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Mazzola. As to the Mazzolas, the terms of the Temporary Restraining Order entered on March

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25, 2016, remain in effect and the hearing on Plaintiff’s Motion for a Preliminary Injunction as to

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them, set for May 12, 2016, remains on the Court’s calendar. This Order resolves the Plaintiff’s

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Motion for a Preliminary Injunction as to the parties set forth on page 1.

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IT IS SO ORDERED.

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Dated: May 3, 2016

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H

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Judge E

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UNIT
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ONE MARITIME PLAZA
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SAN FRANCISCO, CA 94111-3598

for an Order modifying any provision of this Preliminary Injunction.

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SHARTSIS FRIESE LLP

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C

N
F
________________________________
D IS T IC T O
R
EDWARD M. CHEN
United States District Judge

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Case No.
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-8STIPULATED ORDER RE PRELIMINARY INJUNCTION