Securities and Exchange Commission v. Schooler et al

Filing 1423

ORDER Approving and Adopting Receiver's Report and Recommendations Regarding Xpera Report and Recommendations #1405 . Signed by Judge Gonzalo P. Curiel on 12/12/16.(dlg)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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SECURITIES AND EXCHANGE
COMMISSION,

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v.

Defendant.

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[ECF No. 1405]

Before the Court is Receiver Thomas C. Hebrank’s (the “Receiver”) Report and

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APPROVING AND ADOPTING
RECEIVER’S REPORT AND
RECOMMENDATIONS
REGARDING XPERA REPORT
RECOMMENDATIONS

LOUIS V. SCHOOLER and FIRST
FINANCIAL PLANNING
CORPORATION, dba Western Financial
Planning Corporation,

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ORDER:

Plaintiff,

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Case No.: 3:12-cv-2164-GPC-JMA

Recommendations Regarding Xpera Report Recommendations. ECF No. 1405.
I.

BACKGROUND
On May 25, 2016 this Court entered an order approving in part, and denying in

part, the Receiver’s motion for an order: (a) authorizing the receiver to conduct an
orderly sale of general partnerships; (b) approving the plan of distributing receivership
assets; and (c) approving procedures for the administration of investor claims. ECF No.
1181. One of the salient disputes that the Court addressed in that order was the question
of whether and when to sell the General Partnership properties. See id. at 9. The
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3:12-cv-2164-GPC-JMA

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Receiver had argued that it was in the best interest of the receivership estate to conduct an

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orderly sale of all GP properties as is. Id. By contrast, a group of investors (referred to

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as the “Dillon Investors”) sought to follow an orderly sale that comported with the

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recommendations of a consulting group, the Xpera Group (“Xpera”), which the investors

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had independently commissioned to weigh in on the dispute. Id. at 10.

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Despite the substantial level of agreement between the Receiver’s orderly sale

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proposal and the Xpera proposal, the Court noted that the Xpera report disagreed with the

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Receiver in a few instances and, more specifically, cautioned against selling a handful of

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the properties in the near-term. Id. at 16. In light of this disagreement, the Court

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accepted the Receiver’s invitation to evaluate the pros and cons of the Xpera proposal

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before proceeding forward. See id. at 19. As such, the Court directed the Receiver to file

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“a report and recommendation evaluating the pros and cons of the Xpera Report

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recommendations, and identifying those recommendations that would feasibly maximize

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the value of the receivership estate.” Id.

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II.

REPORT AND RECOMMENDATIONS

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In order to evaluate the Xpera proposal, the Receiver requested, and was granted,

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authority to hire CBRE, a real estate brokerage and consulting firm, to assess the Xpera

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recommendations. ECF No. 1181 at 3. The Receiver limited the scope of CBRE’s

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engagement to evaluating Xpera’s recommendations that (1) eight properties undergo

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zoning changes or other entitlement work before being sold; (2) four properties be held

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for 5-10 years before being sold; and (3) two be held for 12 months before sale. Id. at 3.

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The Receiver’s report summarizes CBRE’s recommendations as to each of the

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fourteen properties that CBRE analyzed, notes where — and how — CBRE’s suggested

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course of conduct differs from Xpera’s suggested approach, and includes his conclusive

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recommendation. Id., Exhibit A. In all but one instance, the Receiver recommends

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adopting CBRE’s suggestions because, in his estimation, “adopting CBRE’s

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recommendations will maximize the net recovery from the applicable GP properties for

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the receivership estate.” Id. at 7. The Receiver, however, does not support adopting
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CBRE’s recommendation that the receivership enter into a joint venture proposal in order

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to sell the Fernley I property. Id. Instead, the Receiver recommends “directly retaining

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an engineering firm to obtain a new subdivision map for the property” because such an

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action will better “preserve the value in the property for the receivership estate” as such

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action avoids having to “spend[ ] time and money on negotiation and then having to share

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such value with a joint venture partner.” Id. Lastly, the Receiver also recommends, and

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requests, permission to list the Tecate property on the same terms as the other six Tecate

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properties and to do so with the same broker that the Court already approved to list such

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properties. Id. “The Receiver believes having all of the Tecate properties listed with the

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same broker is the best course of action in terms of attracting buyers who may be

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interested in purchasing more than one (or possibly all) of the properties.” Id.

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Having reviewed the Receiver’s report evaluating the Xpera and CBRE

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recommendations, his analysis, and subsequent recommendations, the Court ADOPTS

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the Receiver’s Report and Recommendations Regarding Xpera Report

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Recommendations. ECF No. 1405. The Receiver is, therefore, DIRECTED to take all

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the steps he outlined in the document.

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IT IS SO ORDERED.

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Dated: December 12, 2016

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3:12-cv-2164-GPC-JMA