Securities and Exchange Commission v. Nadel et al

Filing 1380

Unopposed MOTION for Settlement Approval by Burton W. Wiand. (Attachments: # 1 Exhibit A - Settlement Agreement Fully Executed)(Perez, Jared)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.

Case No. 8:09-cv-87-T-26TBM

ARTHUR NADEL,
SCOOP CAPITAL, LLC,
SCOOP MANAGEMENT, INC.
Defendants,
SCOOP REAL ESTATE, L.P.
VALHALLA INVESTMENT PARTNERS, L.P.,
VALHALLA MANAGEMENT, INC.
VICTORY IRA FUND, LTD,
VICTORY FUND, LTD,
VIKING IRA FUND, LLC,
VIKING FUND, LLC, AND
VIKING MANAGEMENT,
Relief Defendants.
/
RECEIVER’S UNOPPOSED MOTION TO APPROVE SETTLEMENT
Burton W. Wiand, as receiver (the “Receiver”), moves the Court for an order
approving the settlement of all litigation between the Receiver and Manon Sommers-Lee and
Vernon M. Lee, individually and as trustee of his eponymous trust (“Lee,” and collectively
with Manon Sommers-Lee, the “Lees”), including:
•

The Receiver’s $6,477.30 judgment against Lee, obtained in this action on July
21, 2014 (Doc. 1132);

•

Burton W. Wiand, as Receiver v. Vernon Lee, Case No. 8:10-cv-210-T-17MAP
(M.D. Fla) (the “Clawback Action”) and the Receiver’s associated $935,631.51
judgment (Clawback Doc. 170);

•

In re Vernon M. Lee, Case No. 8:15-bk-01038-KRM (Bankr. M.D. Fla.) (the
“Bankruptcy Action”) and the Receiver’s objection to Lee’s discharge;

•

Wiand, as Receiver v. Vernon M. Lee et al., Adv. Pro. No. 8:15-ap-00464-KRM
(Bankr. M.D. Fla.) (the “Adversary Proceeding”) and the equitable lien and
constructive trust the Receiver obtained on the Lee’s real property, located at
4018 Via Mirada, Sarasota, Florida 34238 (the “Property”), in the principal
amount of $227,126.78 plus pre-judgment interest (Adv. Doc. 29); and

•

Vernon Lee et al. v. Burton Wiand, Case No. 18-13156 (11th Cir.) (the “Property
Appeal”), which is currently pending before the Eleventh Circuit.

The terms of the settlement are set forth in Exhibit A to this motion (the “Settlement
Agreement”). The Securities and Exchange Commission (the “Commission” or “SEC”) has
no objection to the requested relief.
MEMORANDUM IN SUPPORT
The Commission instituted this action to “halt [an] ongoing fraud, maintain the status
quo, and preserve investor assets….” (Doc. 1, Compl. ¶ 7.) Burton W. Wiand was appointed
by this Court as the Receiver for Defendants other than Arthur Nadel and for Relief
Defendants. (See Order Reappointing Receiver (Doc. 140).) Additionally, the Receivership
was expanded to include Venice Jet Center, LLC and Tradewind, LLC (Doc. 17); Laurel
Mountain Preserve, LLC, Laurel Preserve, LLC, the Marguerite J. Nadel Revocable Trust
UAD 8/2/07, and the Laurel Mountain Preserve Homeowners Association, Inc. (Doc. 44);
The Guy-Nadel Foundation, Inc. (Doc. 68); Lime Avenue Enterprises, LLC, and A Victorian
Garden Florist, LLC (Doc. 81); Viking Oil & Gas, LLC (Doc. 153); Home Front Homes,
LLC (Doc. 172); Traders Investment Club (Doc. 454); Summer Place Development Corp.

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(Doc. 911); Respiro, Inc. (Doc. 916); and Quest Energy Management Group, Inc. (Doc.
1024).

All of the entities in receivership are collectively identified herein as the

“Receivership Entities.”
Pursuant to the Orders Reappointing Receiver (see, e.g., Doc. 984), the Receiver has
the duty and authority to:
2.
Investigate the manner in which the affairs of the Receivership Entities
were conducted and institute such actions and legal proceedings, for the
benefit and on behalf of the Receivership Entities and their investors and other
creditors as the Receiver deems necessary . . . against any transfers of money
or other proceeds directly or indirectly traceable from investors in the
Receivership Entities; provided such actions may include, but not be limited
to, seeking imposition of constructive trusts, disgorgement or profits, recovery
and/or avoidance of fraudulent transfers under Florida Statute § 726.101, et.
seq. or otherwise, rescission and restitution, the collection of debts, and such
orders from this Court as may be necessary to enforce this Order.
Further, the Orders Reappointing Receiver (at paragraph 6) authorize the Receiver to
“[d]efend, compromise or settle legal actions . . . in which the Receivership Entities or the
Receiver is a party . . . with authorization of this Court . . . .”
Pursuant to this mandate, the Receiver identified every investor who received more
money from Nadel’s Ponzi scheme than he or she invested – i.e., “false profits.” This
included Lee and his trust. 1 The Receiver then offered each such investor the opportunity to
settle the Receiver’s pre-suit clawback claims for 90% of the investor’s false profits. This
procedure resulted in numerous settlements, but Lee did not accept the Receiver’s offer. As
a result, the Receiver filed the Clawback Action against Lee in 2010 (along with more than

1

Lee was one of Nadel’s earliest investors and a close associate. At least one of Lee’s
children received compensation from the scheme. Lee refused to concede Nadel operated a
Ponzi scheme even after Nadel died in prison, which at least in part, resulted in the $6,477.30
sanction/judgment referenced above (Doc. 1132).

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100 similar lawsuits against other profiteers). The court overseeing those actions ordered
early mediation, which also resulted in numerous settlements, but Lee and the Receiver were
once again unable to reach an agreement. The Clawback Action involved extensive litigation
over many years, but the Receiver ultimately obtained summary judgment against Lee and
his trust in the principal amount of $935,631.51. 2 The court denied the Receiver’s request
for prejudgment interest.
Lee appealed the court’s decision to the Eleventh Circuit, and the Receiver crossappealed the denial of prejudgment interest. The Receiver ultimately prevailed on both
issues. See Wiand v. Lee, 753 F.3d 1194 (11th Cir. 2014) (affirming grant of summary
judgment but finding District Court abused its discretion with respect to prejudgment
interest). 3 Meanwhile, the Receiver engaged in post-judgment discovery and collection
efforts, including the issuance of writs of garnishment, the institution of proceedings
supplementary pursuant to Fla. Stats. § 52.69, and the impleader of Lee’s wife as a relief

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The Receiver initially sought the recovery of $1,268,073.33 in false profits, but shortly
after the Receiver filed the Clawback Action, Lee transferred a large portion of his liquid
assets to his adult children. The Receiver then filed actions against them as subsequent
transferees. Lee’s son resolved the Receiver’s claims by paying $133,371.09. Lee’s other
children transferred the money they received back to Lee. See Wiand v. Kelvin Lee &
Barbara Lee, Case No. 8:10-cv-251-T-17MAP (M.D. Fla.) (Docs 1 (complaint), 19 (motion
to dismiss due to settlement), 20 (order granting motion)); Wiand v. Kelvin Lee, as Trustee of
the Nancy E. Lee Trust, Case No. 8:10-cv-211-T-17MAP (M.D. Fla.) (Docs. 1 (complaint),
17 (motion to dismiss due to settlement), 18 (order granting motion)); Wiand v. Lee, 753 F.3d
1194, 1198 n.2 (11th Cir. 2014) (recognizing $133,371.09 deduction from total amount
sought by Receiver due to settlements with Kelvin Lee); but cf. Wiand, as Receiver v. Dianne
Pezick, Case No. 8:10-cv-237-T-17MAP (M.D. Fla.) (Docs. 1 (complaint), 10 (notice of
voluntary dismissal due to Ms. Pezick’s transfer of funds back to Lee).
3

The parties engaged in additional litigation over prejudgment interest (which was a
substantial amount because Lee invested in Nadel’s scheme at its inception), including an
additional appeal to the Eleventh Circuit, in which the Receiver again prevailed.

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defendant. Documents obtained by the Receiver indicated that Lee had liquid assets worth
hundreds of thousands of dollars when the Receiver filed the Clawback Action, but during a
post-judgment deposition, Lee claimed to have dissipated them through, among other things,
gambling losses at casinos in Atlantic City, New Jersey; Biloxi, Mississippi; and Las Vegas,
Nevada. Cf. In re Lee, Case No. 8:13-bk-01055-KRM, Summary of Schedules (Bankr. M.D.
Fla.) (Doc. 17 at 21) (listing “casino gambling” losses in bankruptcy schedule).
The Receiver was skeptical of Lee’s testimony and continued to engage in postjudgment discovery and collection efforts. 4 The Receiver ultimately determined that Lee
used a substantial portion of his false profits to purchase and improve the Property, where he
and his wife live today, but on February 2, 2015, Lee filed the Bankruptcy Action before the
Receiver could recover against the Property. 5 In the Bankruptcy Action, Lee asserted a
Florida “homestead exemption” from collection by creditors.

He also transferred the

Property into a “tenancy by the entireties” with his wife to capture another protection from
4

The Receiver’s skepticism was bolstered by Lee’s testimony that he withdrew cash through
structuring transactions designed to evade IRS and other money laundering detection
protocols. See Lee Dep. Tr. 58:20-59:6 (available upon request):
Q. Now, there’s three transactions in -- two in this month and one last month for
$9,800, which is kind of a specific and unusual dollar amount. Do you remember
why you were taking things out in that amount?
A. It’s probably less than $10,000 I guess.
Q. Why were you trying to keep it under $10,000?
A. I didn’t want any whatever they call it, stuff going to the IRS. I don’t know.
Somebody told me you should probably take out less than $10,000 in cash or it gets
reported to somebody. So I used that number. The best of my recall.
5

Lee filed bankruptcy twice, but his first petition was dismissed because it was not filed in
good faith. Specifically, Lee initiated a Chapter 13 proceeding (Case No. 8:13-bk-01055KRM (Bankr. M.D. Fla.)) on January 29, 2013, despite knowing he was ineligible for
Chapter 13 because of the nature of the judgment against him. The proceeding was
dismissed on April 18, 2013.

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creditors recognized in Florida. The Receiver (1) filed a proof of claim in the amount of
$1,391,269.41, which included both pre-judgment interest (as approved by the Eleventh
Circuit) and post-judgment interest; (2) objected to Lee’s discharge from bankruptcy due,
among other reasons, to his purported gambling losses; and (3) instituted the Adversary
Proceeding to obtain an equitable lien and constructive trust on the Property.
After several hearings, the Bankruptcy Court ruled that the funds that Lee contributed
from his false profits were not entitled to homestead or any other protection. The Bankruptcy
Court thus granted the Receiver’s motion for summary judgment and imposed an equitable
lien and constructive trust on the Property in the principal amount of $227,126.78. After
additional briefing, the Bankruptcy Court also determined the Receiver was entitled to
prejudgment interest. Lee appealed that ruling to the District Court, which affirmed the
Bankruptcy Court. Lee then appealed to the Eleventh Circuit, and that matter – the Property
Appeal – is partially briefed and currently pending.
As shown by the attached Settlement Agreement, the Receiver and the Lees, subject
to the approval of this Court (and the Bankruptcy Court), have agreed to settle all litigation
between them. The Receiver has agreed to accept a total of $132,500 in full settlement of the
Settled Claims (as defined in Exhibit A), to be paid in one lump sum within 60 days of the
requisite approvals. The Receiver believes that the settlement provides a practical solution
that benefits the Receivership Entities.

In reaching that conclusion, the Receiver has

considered the following factors and risks:
•

The Receiver has proposed similar settlements in the past, and this is the first the
Lees have formally accepted.

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•

Despite the size of the judgment in the Clawback Action, the Receiver is
reasonably satisfied that the Lees have no material assets other than the Property.
As such, a majority of the judgment is uncollectable.

•

Even if the judgment was collectable, Lee is seeking to discharge it in the
Bankruptcy Action, and the Receiver might not prevail on his objection to
discharge, which in any event, would require the expenditure of additional fees
and costs.

•

The Lees intend to pay the settlement amount by obtaining a mortgage on the
Property, and the Receiver will obtain the full mortgage amount.

•

The Lees are elderly, and this settlement will allow them to remain in the
Property.

•

The Receiver might not prevail on the Property Appeal.

•

Even if the Receiver prevails on the Property Appeal, additional litigation would
be necessary to obtain turnover or foreclosure of the equitable lien and
constructive trust on the Property.

•

The Receiver would then have to sell the Property, which would expose the
Receivership Entities to additional costs and market risks.

•

The parties’ disputes have been mediated unsuccessfully numerous times,
including before a federal magistrate judge.

•

The parties reached the present settlement with the assistance of the Eleventh
Circuit’s Kinnard Mediation Center after no less than three telephonic sessions
spanning several months.

•

The Clawback Action is the last of approximately 150 similar cases filed by the
Receiver, and (aside from Quest Energy Management Group, Inc.) it is one of the
final matters in this Receivership subject to active litigation.

•

Settlement of these matters will thus facilitate the closure of this Receivership and
a final distribution to claimants.

As such, the settlement reflected by the Settlement Agreement is in the best interests of the
Receivership, the investors in the Receivership Entities, and the Lees because resolution of
the claims avoids protracted litigation and conserves Receivership assets and judicial
resources.

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WHEREFORE, the Receiver moves the Court to approve the settlement reflected by
the attached Settlement Agreement.
LOCAL RULE 3.01(g) CERTIFICATE OF COUNSEL
The undersigned counsel for the Receiver is authorized to represent to the Court that
the SEC has no objection to the Court’s granting this motion.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 7th day of February 2019, I electronically filed
the foregoing with the Clerk of the Court by using the CM/ECF system.

s/Jared J. Perez
Jared J. Perez, FBN 0085192
Email: [e-mail]
WIAND GUERRA KING PA
5505 West Gray Street
Tampa, FL 33609
Tel: [phone]
Fax: [phone]
Attorney for the Receiver, Burton W. Wiand

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