USA v. Red Rock Ventures - SBIC III, L.P.

Filing 1

Stipulation for Consent ORDER of Receivership by Magistrate Judge Nathanael M. Cousins, Northern District of California on 1/25/2016. (Attachments: # 1 Complaint For Receivership and Injunctive Relief, # 2 Civil Cover Sheet) (dbera, )

Case 5:15-cv-05349-NC Document 10 Filed 01/25/16 Page 1 of 12

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BENJAMIN MIZER
PRINCIPAL DEPUTY ASSISTANT ATTORNEY GENERAL

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BRIAN STRETCH, CA No. 163973
Acting United States Attorney
ALEX G. TSE, CA No. 152348
Chief, Civil Division
ERIC J. ADAMS, CA No. 135893
Special Assistant U.S. Attorney

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U.S. Small Business Administration
455 Market Street, Suite 600
San Francisco, CA 94105
Telephone: [phone]
Facsimile: [phone]
[e-mail]
CHRISTOPHER J. MCCLINTOCK, VA Bar No. 68417
ARLENE M. EMBREY, FL Bar No. 0125539
Trial Attorney
Office of General Counsel
U.S. Small Business Administration
409 Third St., S.W.
Washington, D.C. 20416
Telephone: [phone]
Facsimile: [phone]
[e-mail]

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Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
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v.
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RED ROCK VENTURES - SBIC III, L.P. )
Defendant.
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UNITED STATES OF AMERICA,
Plaintiff,

Civil Action No. 15-cv-05349-NC
STIPULATION FOR
CONSENT ORDER
OF RECEIVERSHIP
(Cover Page)

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STIPULATION FOR CONSENT ORDER OF RECEIVERSHIP

No. 15-cv-05349-NC

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Case 5:15-cv-05349-NC Document 10 Filed 01/25/16 Page 2 of 12

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BENJAMIN MIZER
PRINCIPAL DEPUTY ASSISTANT ATTORNEY GENERAL
BRIAN STRETCH, CA No. 163973
Acting United States Attorney
ALEX G. TSE, CA No. 152348
Chief, Civil Division
ERIC J. ADAMS, CA No. 135893
Special Assistant U.S . Attorney
U.S. Small Business Administration
455 Market Street, Suite 600
San Francisco, CA 941 05
Telephone: [phone]
Facsimile: [phone]
[e-mail]

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CHRISTOPHER J. MCCLINTOCK, VA Bar No. 68417
ARLENE M . EMBREY, FL Bar No. 0125539
Trial Attorney
Office of General Counsel
U.S . Small Business Administration
409 Third St., S.W.
Washington, D.C. 20416
Telephone: [phone]
Facsimile: [phone]
christopher.mcclintock@sba. gov

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Attorneys for Plaintiff

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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION

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UNITED STATES OF AMERICA,

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Plaintiff,

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v.

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Civil Action No.

CONSENT RECEIVERSHIP
ORDER

RED ROCK VENTURES- SBIC III, L.P.)
DefundanL

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

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CONSENT RECEIVERSHIP ORDER, United States of America v. Red Rock Ventures- SBIC III, L.P.

Case 5:15-cv-05349-NC Document 10 Filed 01/25/16 Page 3 of 12

United States Small Business Administration ("SBA"), for a permanent injunction, and the
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appointment of the SBA as Permanent Receiver for Red Rock Ventures - SBIC III, L.P. pursuan

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to 15 U.S.C. § 687c. The Court, pursuant to a stipulation for a consent order presented by the

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parties, finds that this relief should be granted:

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IT IS HEREBY O RDERED, ADJUDGED AND DECREED THAT:

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1.

Pursuant to the provisions of 15 U.S. C.§ 687c, this Court shall take exclusive

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jurisdiction of Red Rock Ventures- SBIC III, L.P. (hereinafter "Red Rock III") and all of its

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assets, wherever located, and the United States Small Business Administration ("SBA"), is

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hereby appointed receiver ("the Receiver") of Red Rock III to serve without bond until further

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order of this Court. The Receiver is appointed for the purpose of administering, marshaling and

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liquidating all of Red Rock III's assets to satisfy the claims of creditors therefrom in the order of

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priority to be determined by this Court.

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2.

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

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possessed by the general partners, limited partners, managers, officers, directors and agents of

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Red Rock III under applicable state and federal law and by the Agreement of Limited

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Partnership of said limited partnership, in addition to all powers and authority conferred upon the

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Receiver by the provisions of 15 U.S.C. § 687c and 28 U.S.C. § 754. The general partners,

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managers, directors, officers, employees and agents of Red Rock III are hereby dismissed. Such

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persons shall have no authority with respect to Red Rock III's operations or assets, except as may

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hereafter be expressly granted by the Receiver. The Receiver shall assume and control the

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operation of Red Rock III and shall pursue and preserve all of its claims.

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3.

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

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accountants, attorneys and employees of Red Rock III, as well as all those acting in their place,

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are hereby ordered and directed to tum over to the Receiver forthwith all books, records,

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documents, accounts and all other instruments and papers of said partnership and all other assets

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and property of the partnership, whether real or personal. Red Rock III's general partrter, RRV

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Partners IliA, LLC, shall furnish a written statement within five (5) days after the entry of this

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Order, listing the identity, location and estimated value of all assets of Red Rock III as well as

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CONSENT RECEIVERSH IP O RD ER, United States of America v. Red Rock Ventu res- S BIC Ill, L.P.

Case 5:15-cv-05349-NC Document 10 Filed 01/25/16 Page 4 of 12

the names, addresses and amounts of claims of all known creditors of Red Rock III. All persons
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having control, custody or possession of any assets or property of Red Rock III, including its

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General Partner, are hereby directed to turn such property over to the Receiver.

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4.

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

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

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agents of Red Rock III. All persons and entities owing any obligations or debts to Red Rock III

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shall, until further order of this Court, pay all such obligations in accordance with the terms

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thereof to the Receiver, and its receipt for such payments shall have the same force and effect as

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if Red Rock III had received such payments.

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5.

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

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banking or other financial institutions, to extend credit on behalf of Red Rock III, to utilize SBA

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personnel, and to employ such other personnel as necessary to effectuate the operation of the

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receivership including, but not limited to, attorneys and accountants, and is further authorized to

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expend receivership funds to compensate such personnel in such amounts and upon such terms

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as the Receiver shall deem reasonable in light of the usual fees and billing practices and

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

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disbursement of receivership funds for payments to personnel employed by the Receiver or

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payments for expenses incidental to administration ofthe Receivership. In addition, the

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Receiver is authorized to reimburse the SBA or its employees for travel expenses incurred by

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SBA personnel in the establishment and administration of the receivership. The Receiver may,

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without further order of this Court, transfer, compromise, or otherwise dispose of any claim or

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asset, other than real estate.

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6.

Red Rock III's past and/or present officers, directors, agents, managers, general

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partners, limited partners, employees, and other appropriate persons (including, without

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limitation, the defendant's portfolio of small business concerns and banks or other financial

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institutions doing business with defendant and/or defendant's portfolio of small business

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concerns) shall answer under oath, pursuant to a Receiver's Notice or Subpoena, to the Receiver,

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all questions which it may put to them regarding the business of said partnership, or any other

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CONSENT RECEIVERSHIP ORDER, United States of America v. Red Rock Ventures - SBIC Ill, L.P.

Case 5:15-cv-05349-NC Document 10 Filed 01/25/16 Page 5 of 12

matter relevant to the operation or administration of the receivership or the collection of funds
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due to Red Rock III. In the event that the Receiver deems it necessary to require the appearance

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of the aforementioned persons, the production of documents, information, or any other form of

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discovery concerning the assets, property or business assets ofRed Rock III, or any other matter

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relevant to the operation or administration ofthe Receivership or the collection of funds due to

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Red Rock III, the Receiver shall direct notice for any such appearance by certified mail, and said

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persons shall appear and give answer to the Receiver, produce documents or submit to any other

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form of discovery in accordance with the Federal Rules of Civil Procedure.

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7.

The parties or prospective parties to any and all civil legal proceedings wherever

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

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default proceedings, or any other proceedings involving (i) Red Rock III, (ii) any assets of Red

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Rock III, (iii) the Receiver for Red Rock III, or (iv) Red Rock III' s present or past officers,

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directors, managers, or general partners (including the managers, partners or members of such

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general partner) to the extent said civil legal proceedings involve any action taken by them while

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acting in their official capacity with Red Rock III, are enjoined from taking any action, including

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discovery, commencing or continuing any legal proceeding of any nature without further order o

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this Court.

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All civil legal proceedings wherever located, including arbitration proceedings,

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foreclosure activities, bankruptcy actions, or default proceedings, but excluding the instant

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proceeding, involving (i) Red Rock III, (ii) any of assets of Red Rock III, (iii) the Receiver for

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Red Rock III or (iv) Red Rock III's present or past officers, directors, managers, or general

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partners (including the managers or members of such general partner) to the extent said civil

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legal proceedings involve any action taken in their official capacity for Red Rock III are stayed

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in their entirety, and all Courts having any jurisdiction thereof are enjoined from taking or

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permitting any action in such proceedings until further Order of this Court.

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9.

As to a cause of action accrued or accruing in favor of Red Rock III against a

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third person or party, any applicable statute oflimitation is tolled to the extent allowed by

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CONSENT RECEIVERSHIP ORDER, United States of America v. Red Rock Ventures- SBIC Ill, L.P.

Case 5:15-cv-05349-NC Document 10 Filed 01/25/16 Page 6 of 12

applicable law during the period in which this injunction against commencement of legal
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proceedings is in effect as to that cause of action.

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10.

Red Rock III and its past and/or present directors, officers, managers, general

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

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they hereby are, enjoined from either directly or indirectly taking any actions or causing any sue

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action to be taken which would dissipate the assets and property ofRed Rock III to the detriment

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

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records, or which would violate the Small Business Investment Act of 1958, as amended, (the

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"Act"), 15 U.S.C. § 661 , et seq. , or the regulations promulgated thereunder, (the "Regulations"),

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13 C.F.R. § 107.20, et seq.

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The Receiver is authorized to borrow on behalf of Red Rock III, from the SBA,

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up to $1 ,000,000, and is authorized to cause Red Rock III to issue Receiver's Certificates of

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Indebtedness in the principal amounts of the sums borrowed, which certificates will bear interest

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at or about 10 percent per annum and will have a maturity date no later than 18 months after the

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date of issue. Said Receiver's Certificates of Indebtedness shall have priority over all other debts

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and obligations of Red Rock III, excluding administrative expenses ofthe Receivership, whether

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presently existing or hereinafter incurred, including without limitation any claims of partners of

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Red Rock III.

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This Court determines and adjudicates that Red Rock III is capitally impaired

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above its allowed maximum, which constitutes a violation of 13 C.F .R. § 107 .1830(b) (capital

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impairment) and 13 C.F.R. § 107.507(a) (non-performance due to capital impairment) ofthe

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Regulations as alleged in the Complaint filed in this matter. After completing its activities in

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accordance with this Order, the Receiver may recommend that Red Rock III's license as an SBIC

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be revoked and may recommend that control of the limited partnership be returned to Red Rock

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III's general partner.

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CONSENT RECEIVERSHIP ORDER, United States of America v. Red Rock Ventures- SBIC Ill, L.P.

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Dated: __________________

By:
ERIC J. ADAMS
Special Assistant United States Attorney
U.S. Small Business Administration
455 Market Street, Suite 600
San Francisco, CA 94105
Telephone: [phone]
Facsimile: [phone]
[e-mail]

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IT IS SO ORDERED
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thanael
Judge Na

ER

M. Cousin

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NO

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THE HONORABLE NATHANAEL M. COUSINS
UNITED STATES MAGISTRATE JUDGE

UNIT
ED

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RT
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S DISTRICT
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_________________________________________
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, 2016.

R NIA

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this 25th day of January

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N

D IS T IC T
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OF

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CONSENT RECEIVERSHIP ORDER, United States of America v. Red Rock Ventures – SBIC III, L.P.

Case 5:15-cv-05349-NC Document 10 Filed 01/25/16 Page 10 of 12

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BENJAMIN MIZER
PRINCIPAL DEPUTY ASSISTANT ATTORNEY GENERAL

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BRIAN J. STRETCH, CA No. 163973
Acting United States Attorney
ALEX G. TSE, CA No. 152348
Chief, Civil Division
ERIC J. ADAMS, CA No. 135893
Special Assistant U.S. Attorney

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U.S. Small Business Administration
455 Market Street, Suite 600
San Francisco, CA 94105
Telephone: [phone]
Facsimile: [phone]
[e-mail]
CHRISTOPHER J. MCCLINTOCK, VA Bar No. 68417
ARLENE M. EMBREY, FL Bar No. 0125539
Trial Attorney
Office of General Counsel
U.S. Small Business Administration
409 Third St., S.W.
Washington, D.C. 20416
Telephone: [phone]
Facsimile: [phone]
[e-mail]

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Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
)
)
)
)
v.
)
)
RED ROCK VENTURES - SBIC III, L.P. )
Defendant.
)
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UNITED STATES OF AMERICA,
Plaintiff,

Civil Action No.
STIPULATION AND
[PROPOSED] ORDER FOR
ENTRY OF CONSENT ORDER
OF RECEIVERSHIP

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WHEREAS, upon the filing of this Stipulation the Plaintiff, United States of America, on

STIP AND ORDER FOR ENTRY OF CONSENT ORDER OF RECEIVERSHIP, United States of America
Page 1
v. Red Rock Ventures – SBIC III, L.P.

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Case 5:15-cv-05349-NC Document 10 Filed 01/25/16 Page 12 of 12