Securities and Exchange Commission v. Nadel et al

Filing 1426

DECLARATION of Burton W. Wiand re 1425 Reply to Response to Motion by Burton W. Wiand. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E)(Perez, Jared)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
v.

CASE NO.: 8:09-cv-0087-T-33CPT

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.

/

DECLARATION OF BURTON W. WIAND IN SUPPORT OF THE
RECEIVER’S REPLY IN SUPPORT OF (DOC. 1419) HIS MOTION TO
AUTHORIZE THE RETENTION OF $100,000 EARNEST MONEY DEPOSIT AND
IN RESPONSE TO (DOC. 1423) ARCHER’S RESPONSE IN OPPOSITION
Burton W. Wiand declares as follows:
1.

I am the Court-appointed Receiver in the above-captioned matter and over the

assets of Quest Energy Management Group, Inc. (“Quest”).

2.

I make this declaration in support of the Receiver’s Reply in Support of (Doc.

1419) His Motion to Authorize the Retention of $100,000 Earnest Money Deposit and in
Response to (Doc. 1423) Archer’s Response in Opposition.
3.

I make this declaration based on information personally known to me or

gathered and investigated by others at my request and under my direction.
4.

In my verified motion (Doc. 1419) to retain the $100,000 earnest money deposit

(the “Deposit”), I stated that I believed Archer’s reasons for attempting to cancel the Asset
Purchase Agreement (“APA”) were pretextual and that the APA does not provide for
cancellation under these circumstances, which appear to involve Archer’s issues with its
investors. Archer’s response to my motion demonstrates that my belief was correct.
5.

First, Drew Hudson claims that he “was not aware that preparing the assets for

sale with clean title would require such additional significant negotiations with the tax
authorities and with significant additional creditors with complex claims as to delay [my]
timely filing of the Motion to approve the transaction.” Doc. 1423-6 (the “Hudson Aff.”) ¶ 8.
Archer’s purported ignorance does not excuse his failure to perform under the APA because
all documents relevant to the claims process were publicly-filed in the Court’s docket and
many were available on my website: www.nadelreceivership.com/quest-claims-process.html.
6.

For example, on June 15, 2016, I filed an Unopposed Motion to (1) Approve

Procedure to Administer Claims and Proof of Claim Form, (2) Establish Deadline for Filing
Proofs of Claim, and (3) Permit Notice by Mail and Publication. See Doc. 1240 (the “Quest
Claims Motion”). The Court granted the motion on June 17, 2016, thus establishing the

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“Quest Claims Process.” Doc. 1241. Investors and other creditors then submitted 93 claims,
which my professionals and I reviewed and evaluated.
7.

On March 7, 2019, I filed a Motion to (1) Approve Determination and Priority

of Claims, (2) Pool Receivership Assets and Liabilities, (3) Approve Plan of Distribution, and
(4) Establish Objection Procedure. See Doc. 1383 (the “Quest Determination Motion”). The
motion disclosed and extensively discussed claims against Quest’s assets, including from
several Texas-based taxing authorities and the Bank of Albany. See Doc. 1383 at 12-21.
8.

Hudson asserts that he “was told prior to executing the APA that the legal issues

with the Albany bank were related to a residential property, which was not relevant to my
proposed acquisition” (Hudson Aff. ¶ 9), but the Claims Determination Motion (which was
filed two months before Hudson and Archer executed the APA) clearly disclosed that the
“Bank of Albany loaned Quest $700,000 … which was secured by certain oil and gas leases,
personal property, and equipment” (Doc. 1383 at 16). Approximately, $150,000 of the bank’s
$198,000 claim related to this secured loan. Id. at 17. I recommended denial of this portion
of the bank’s claim, which resulted in brief litigation that the parties ultimately resolved. Id.
at 17-18; see also Docs. 1387 (motion filed by Bank of Albany on March 26, 2019 – i.e., more
than a month before Hudson’s and Archer’s execution of the APA); 1388-90 (orders directing
me to respond and scheduling a hearing); 1391 (my response); 1395 (notice of objections to
claim determinations); 1397 (the Court’s post-hearing order); 1402 (my motion to approve a
settlement with the bank, which was filed the same day my counsel received an executed
settlement agreement); 1406 (the Court’s order approving the settlement). Again, all of these
documents were available to Hudson and other members of the public from the Court’s docket

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and/or from my website. I never mislead him (or anyone else) about the complexities of the
transaction. Hudson’s claimed ignorance of the complicated issues surrounding Quest and the
APA is pretextual and not credible. It is also belied by the repeated conversations I had with
him explaining the process of resolving claims so that we could complete the transaction.
Emails with him make this clear. While resolution of the bank’s claim involved a house, the
bank agreed to waive its asserted secured claim against the oil and gas leases that Archer sought
to purchase because I agreed to transfer the house to the bank in full satisfaction of its claim
against both the house and the leases. Archer ignores this fact.
9.

Second, Hudson claims my professionals and I were too busy to file the APA

because this Court appointed me as Receiver in another matter – C.F.T.C. v. Oasis
International Group, Limited et al., Case No. 8:19-cv-00886-VMC-SPF (M.D. Fla.) (the
“Oasis Receivership”). That appointment occurred on April 15, 2019 (id. Doc. 7) – i.e.,
several weeks before Archer even executed the APA. That appointment had nothing to do
with the timing of the motion and did not prevent me or my professionals from addressing any
of the matters discussed in the preceding paragraphs.
10.

Hudson’s reference to the Oasis Receivership is noteworthy because it relates

to a discussion that I had with him regarding the closing of the Quest transaction. I recall this
discussion specifically because I was traveling to Sarasota to inspect several properties at issue
in the Oasis Receivership when I spoke to Mr. Hudson on the telephone. He informed me that
his investors were in Scotland, and he thus wanted to delay closing until August or September
2019 so that the investors could attend in person. In his affidavit, Hudson ignores this crucial
request, which is contrary to his arguments to the Court.

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11.

My counsel and counsel for the secured creditors exchanged at least 50 emails

and engaged in several phone calls to resolve the creditors’ objections between approximately
the date Archer executed the APA and the date I filed my motion to approve the claim
settlements. As previously noted, I filed that motion and the motion to approve the sale of
Quest’s assets to Archer on the exact day my counsel received an executed settlement
agreement from the Bank of Albany – July 24, 2019. See Doc. 1403. As such, Hudson’s
suggestion that the Oasis Receivership delayed the filing of the motion is false.
12.

Third, on July 23, 2019, Jeffrey Rizzo informed Hudson about the ongoing

negotiations with the Bank of Albany, the status of the motion, and the statutory publication
requirements. Instead of raising any concerns, Hudson only responded: “Thank you for the
update.” A true and correct copy of the pertinent correspondence is attached as Exhibit A.
13.

As noted above, my counsel received the bank’s executed settlement agreement

the next day – July 24, 2019 – and filed the motion to approve the sale of Quest’s assets that
afternoon. Mr. Rizzo promptly informed Hudson of that fact. A true and correct copy of the
pertinent correspondence is attached as Exhibit B. Given this, Archer’s attempt to cancel the
transaction for failing to file the motion approximately two weeks after the motion had already
been filed is nonsensical, inequitable, and clear evidence of pretext.
14.

Fourth, Hudson discusses a decline in production during June 2019 (Hudson

Aff. ¶ 10), but he does not link that issue to his decision to attempt to cancel the APA
(presumably because he cannot truthfully do so). Production did decline in June 2019, but the
decline was temporary and due to a clerical error by the Texas Railroad Commission, which
caused the severance of several wells (during a severance, no production can occur). The issue

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was promptly resolved, and normal production resumed in July 2019. True and correct copies
of relevant documents are attached as Composite Exhibit C. Because Archer was not buying
the cash in Quest’s bank accounts, this one-month decline in production had no effect on the
APA’s terms or the economic implications of those terms. Indeed, as late as August 6, 2019,
Hudson was still requesting information about Quest with no indication he intended to cancel
the transaction. A true and correct copy of the pertinent correspondence is attached as
Exhibit D. Ironically, if Archer had owned Quest’s assets in June 2019, he would have had to
resolve these issues; instead, I had to resolve them, which is further evidence that Hudson’s
testimony is entirely pretextual.
15.

Put simply, my professionals and I worked hard to obtain Court approval and

close this transaction. In contrast, Hudson and Archer offer no equitable or legal justification
for their cancellation or articulate any form of prejudice. Archer’s agreement to purchase
Quest’s assets was a lynchpin to the closing of this Receivership. The claims process and the
negotiations with secured creditors were conducted, in large part, for Archer’s benefit.
Archer’s conduct has caused and will continue to cause the Receivership to incur expenses in
the tens of thousands of dollars as well as delaying payment to secured creditors. Archer’s
conduct has clearly damaged the Receivership and is inexcusable. As the Court is aware, Quest
has limited assets, and the entire point of the Deposit was to establish Archer’s “good faith”
(in Hudson’s own words) and to avoid exactly this type of costly litigation. A true and correct
copy of the pertinent correspondence is attached as Exhibit E.

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I DECLARE under penalty of perjury that the foregoing is true and correct to the best
of my knowledge.
DATED: November 4, 2019

s/ Burton W. Wiand
Burton W. Wiand, as Receiver
[e-mail]
WIAND GUERRA KING P.A.
5505 W. Gray Street
Tampa, FL 33609
Tel.: [phone]
Fax: [phone]

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