USA v. First New England Capital 2, L.P.

Filing 1

Consent ORDER by Charles S. Haight, Jr., United States District Judge, District of Connecticut on 09/26/2014. (Attachments: # 1 Exhibit, # 2 Civil Cover Sheet) (dbera, )

Case 3:14-cv-01033-CSH Document 10 Filed 09/26/14 Page 1 of 6

IN TIIE I]NITED STATES DISTRICT COURT
FOR TIIE DISTRICT OF CONNECTICUT
)
)
)
)
)

IJNITED STATES OF AMERICA,

Plaintiff

)

v.

FIRST NEW ENGLAND

CAPITAL2,L.P.

)
)

)
)
)

Defendant

Civ. Action No. 3:14-CV-1033 (CSH)

SEPTEMBER 26, 2014

CONSENT ORDER
Before this Court is the Complaint by the United States of America, on behalf of the

United States Small Business Administration ("SBA"), for a permanent injunction and the
appointment of the SBA as Permanent Receiver for First New England Capital z,L.P. ("FNEC

2"). The Court, being fully advised as to the merits,

and based upon the consent of the parties,

believes this relief should be granted:

IT IS IIEREBY ORDERED, ADJUDGED AI\D DECREED THAT:

1.

Pursuant to the provisions

of

15 U.S.C. $ 687c, this Court shall take exclusive

jurisdiction of FNEC 2 and all of its assets, wherever located, and the United States Small
Business Administration ("SBA"), is hereby appointed receiver ("the Receiver") of FNEC 2 to
serve without bond until further order of this Court. The Receiver is appointed for the purpose

administering, marshaling and, if necessary, liquidating all of FNEC

2's

assets to satisfy the

claims of creditors therefrom in the order of priority as determined by this Court.

2.

The Receiver shall have all powers, authorities, rights and privileges heretofore

possessed by the general partners, managers, officers, and directors of FNEC 2 under applicable

of

Case 3:14-cv-01033-CSH Document 10 Filed 09/26/14 Page 2 of 6
state and federal law and by the Certificate of Limited Pannership and Partnership Agreement

of

said partnership, in addition to all powers and authority conferred upon the Receiver by the

provisions of 15 U.S.C. $ 687c and 28 U.S.C. $ 754. The general partners, managers, directors,
officers, employees and agents of FNEC 2 are hereby dismissed. Such persons shall have no
authority with respect to FNEC 2's operations or assets, except as may hereafter be expressly
granted by the Receiver. The Receiver shall assume and control the operation of FNEC 2 and shall
pursue and preserve all of its claims.

3.

The past and/or present officers, directors, agents, managers, general partners,

accountants, attomeys and employees of FNEC2, as well as all those acting in their place, are
hereby ordered and directed to tum over to the Receiver forthwith all books, records, documents,
accounts and all other instruments and papers of said partnership and all other assets and property

of the partnership, whether real or personal. FNEC 2 shall fumish a written statement within five
(5) days after the entry of this Order, listing the identity, location and estimated value of all assets

of FNEC 2 as well
FNEC

2.

as the names, addresses and amounts

of claims of all known creditors of

All persons having control, custody or possession of any assets or property of FNEC 2,

including its former General Partners, are hereby directed to turn such property over to the
Receiver.

4.

The Receiver shall promptly give notice of its appointment to all known officers,

directors, agents, managers, general partners, employees, limited partners, creditors, debtors and
agents of FNEC

2.

All persons and entities owing any obligations or debts to FNEC 2 shall, until

further order of this Court, pay all such obligations in accordance with the terms thereof to the
Receiver, and its receipt for such payments shall have the same force and effect as if FNEC Zhad
received such payments.

Case 3:14-cv-01033-CSH Document 10 Filed 09/26/14 Page 3 of 6

5.

The Receiver is hereby authorized to open such Receiver's bank accounts, at

banking or other financial institutions, to extend credit on behalf of FNEC 2, to utilize SBA
personnel, and to employ such other personnel as necessary to effectuate the operation of the

receivership including, but not limited to, attomeys and accountants, and is further authorized to
expend receivership funds to compensate such personnel in such amounts and upon such terms as
the Receiver shall deem reasonable in light of the usual fees and billing practices and procedures

of

such personnel. The Receiver is not required to obtain Court approval prior to the disbursement

of

receivership funds for payments to personnel employed by the Receiver or payments for expenses
incidental to administration of the Receivership. In addition, the Receiver is authorized to
reimburse the SBA or its employees for travel expenses incurred by SBA personnel in the
establishment and administration of the receivership. The Receiver may, without further order

of

this Court, transfer, compromise, or otherwise dispose of any claim or asset, other than real estate,

which would result in net proceeds to the Receiver and the receivership estate.

6.

FNEC 2's past and/or present officers, directors, agents, managers, general partners,

limited partners, employees, and other appropriate persons (including, without limitation, the
defendant's portfolio of small business concerns and banks or other financial institutions doing
business with defendant and/or defendant's portfolio of small business concerns) shall answer
under oath, pursuant to a Receiver's Notice or Subpoena, to the Receiver, all questions which

it

may put to them regarding the business of said partnership, or any other matter relevant to the

operation or administration of the receivership or the collection of funds due to FNEC 2. In
the
event that the Receiver deems it necessary to require the appearance of the aforementioned
persons' the production of documents, information, or any other form of discovery
conceming the
assets, property or business assets

of FNEC 2 or any other matter relevant to the operation or

3

L

Case 3:14-cv-01033-CSH Document 10 Filed 09/26/14 Page 4 of 6
administration of the Receivership or the collection of funds due to FNEC 2, the Receiver shall
direct notice for any such appearance by certified mail, and said persons shall appear and give
answer to the Receiver, produce documents or submit to any other form of discovery in accordance

with the Federal Rules of Civil Procedure.

7.

The parties or prospective parties to any and all

civil legal proceedings wherever

located, including, but not limited to arbitration proceedings, bankruptcy or foreclosure actions,

default proceedings, or any other proceedings involving (i) FNEC 2, (ii) any assets of FNEC 2,

(iii) the Receiver for FNEC 2 or (iv) FNEC 2's present or past officers, directors, managers, or
general partners (including the managers or members of such general partner) to the extent said

civil legal proceedings involve any action taken by them while acting in their official capacity with
FNEC 2, are enjoined from taking any action, including discovery, commencing or continuing any
legal proceeding of any nature without further order of this Court.

8.

All civil legal proceedings wherever located, including arbitration

proceedings,

foreclosure activities, bankruptcy actions, or default proceedings, but excluding the instant
proceeding, involving (i) FNEC 2, (ii) any of assets of FNEC 2, (iii) the Receiver for FNEC 2, or

(iv) FNEC 2's present or past officers, directors, managers, or general partners (including the
managers or members of such general partner) to the extent said civil legal proceedings involve
any action taken in their official capacity for FNEC 2 are stayed in their entirety, and all courts

having any jurisdiction thereof are enjoined from taking or permitting any action in such
proceedings until further Order of this Court.

9.

Further, as to a cause of action accrued or accruing in favor of FNEC 2 against a

third person or party, any applicable statute of limitation is tolled to the extent allowed by
applicable law during the period in which this injunction against commencement of legal

4

Case 3:14-cv-01033-CSH Document 10 Filed 09/26/14 Page 5 of 6
proceedings is in effect as to that cause of action.

10.

FNEC 2 and its past and/or present directors, officers, managers, general partners,

agents, employees and other persons acting in concert or participation therewith be, and they

hereby are, enjoined from either directly or indirectly taking any actions or causing any such action
to be taken which would dissipate the assets and property of FNEC 2 to the detriment of the

Receiver appointed in this cause, including but not limited to destruction of partnership records, or

which would violate the Small Business Investment Act of 1958, as amended, (the "SB[A"), 15
U.S.C. Section 661 et seq., or the regulations promulgated thereunder, (the "Regulations"), 13
C.F.R. $ 107.1 et!eg.

11.

The Receiver is authorizedto borrow on behalf of FNEC 2, from the SBA, up to

$1,000,000, and is authorized to cause FNEC 2 to issue Receiver's Certificates of Indebtedness in
the principal amounts of the sums borrowed, which certificates
percent per annum and

will have a maturity

will bear interest

at or about 10

date no later than 18 months after the date of issue.

Said Receiver's Certificates of Indebtedness shall have priority over all other debts and obligations

of FNEC 2, excluding administrative expenses of the Receivership, whether presently existing or
hereinafter incurred, including without limitation any claims of partners of FNEC 2.

12.

This Court determines and adjudicates that FNEC 2 has violated 13 C.F.R. $

107.1830(b) of the Regulations as alleged in the Complaint filed in this matter. After completing

its activities in accordance with this Order, the Receiver may recommend that FNEC 2's license as
an SBIC be revoked.

5

Case 3:14-cv-01033-CSH Document 10 Filed 09/26/14 Page 6 of 6
FIRST NEW ENGLAND CAPITAL z,L,P.
a Connecticut limited partnership

By: F

tl$6[ tor?,

its

By:
Name:
Its:

T]NITED STATES SMALL BUSII\ESS ADMINISTRATION

Thomas G.

IT IS SO ORDERED.
Dated this

26th
_

day of

Sept.

4

-,20I_.
/s/Charles S. Haight, Jr.
CHARLES S. HAIGHT, JR.
SENIOR T'NITED STATES DISTRICT JUDGE

6