SEC v. First Choice Mgt Svc, et al
Filing
988
OPINION AND ORDER GRANTING 984 Emergency MOTION to Compel Production of Documents by Receiver Joseph D Bradley; ORDERING that Nona K. Roach and Agape & Associates, as the representative, accountant and regulatory liaison of John W. Hannah and C RM Energy Partners, Inc., shall within fourteen (14) days of the issuance of this Order deliver to counsel for the Receiver, Shawn F. Sullivan, certain documents as outlined in Order. IT IS FURTHER ORDERED that the Receiver shall serve this Order on Nona K. Roach and Agape & Associates, Inc., 441 2nd Street, Avant, Oklahoma 74001, as outlined in Order and file notice of service with the Clerk of this Court. Signed by Judge Robert L Miller, Jr on 11/19/2015. (lhc)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
SECURITIES & EXCHANGE
COMMISSION,
PLAINTIFF,
VS.
FIRST CHOICE MANAGEMENT
SERVICES AND GARY VAN
WAEYENBERGHE,
DEFENDANTS.
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CAUSE NO. 3:00-CV-446-RLM-CAN
OPINION AND ORDER
This matter is before the court on the Receiver’s Emergency Motion to
Compel Production of Documents (Doc. No. 984) filed October 28, 2015. The
motion concerns the refusal of Nona K. Roach and Agape & Associates, Inc. to
comply with this court’s orders obligating them to produce to the Receiver
documents in their possession relating to oil leases knows as the Branson Energy
Leases. The Receiver served a copy of the motion on Nona K. Roach and Agape
& Associates, Inc. via commercial carrier on November 2, 2015. (Doc. No. 985).
Neither Ms. Roach nor Agape has responded.
The Receiver’s motion represents the latest of many attempts to recover
information and documents related to the operations of the Branson Energy
Leases. On January 7, 2014, this court issued an Order Approving [the
Receiver’s] Revised Budget and Liquidation Plan (Doc. No. 891). In it, the court
ordered that the Branson Energy Leases be liquidated to satisfy the debt owned
by the Wilson Operating Company to the receivership. In a separate order issued
that same day, the court denied the request of John W. Hannah and CRM Energy
Partners, Inc., to intervene in these proceedings, (Doc. No. 892), and on March
18, 2014 denied their Motion for Reconsideration. (Doc. No. 912). On May 22,
2014, the court issued a Confirmation of Sale Order which ordered the following
with regard to documentation related to the operation of the Leases:
Documentation Related to Operations of Branson Energy leases: Any
entity or person in possession or control of information pertaining to the
operatorship or ownership of the Branson Energy leases, Branson Energy,
or any of the equipment, chattels, fixtures, structures, and other related
property, including all documentation regarding production from the
Branson Energy leases, shall turn such information over to Wilson (or its
agent or designee) within three (3) business days. If such information
rightly belongs to Branson Energy, the originals of such information shall
be turned over to Wilson or its designee or agent. Such request for
information can be made orally or in writing, and, if this case is not yet
closed, such a request may occur…via subpoena. The receiver has
authority to enforce implementation of this provision on behalf of the
parties to the transaction governed by this sale order. Enforcement of
these provisions shall be at the cost (attorney fees and expenses) of the
person(s) or entities interfering with the protections afforded in this
paragraph.
(Doc. No. 922).
When Mr. Hannah and CRM failed to comply with their obligations under
the Confirmation of Sale Order, the court issued a Writ of Assistance to enforce
the order. (Doc. No. 947). When Nona Roach of Agape & Associates (Mr. Hannah
and CRM’s accountant and regulatory liaison) was personally served with the
court’s orders on November 4, 2014, both the Chief Deputy U.S. Marshal for the
Northern District of Oklahoma and counsel for the Receiver explained to Ms.
Roach her obligation to turn over to the Receiver all business records in her
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possession. (See Affidavit of Carroll Allbery, Doc. No. 984-1, at ¶¶ 4-12; Affidavit
of Rick Coody, Doc. No. 984-2 at ¶¶ 12-13). Ms. Roach refused to turn over any
records at that time and indicated that she wanted to discuss the matter with
her attorney first. (See Process Receipt and Return, Doc. No. 961). On November
10, 2014, the court issued another order enforcing the earlier sale order, making
clear that “the terms of this order and the SALE ORDER are obligatory for any
person with knowledge of the existence of the terms of the orders” and that “[i]t
is imperative that all non-parties with notice comply with the provisions of these
orders.” (Doc. No. 957, at 5). On April 8, 2015, the court rejected the final
arguments from Mr. Hannah and CRM as to why they should not have to produce
the documents. The court noted that Mr. Hannah and CRM had “retained what
they consider to be ‘original documents that they are required by the [Bureau of
Indian Affairs] to maintain while they are owners of record’” and ordered that
they give at least copies of such records to the Receiver. (Doc. No. 975, at 16).
The court then reiterated that:
CRM Energy and Mr. Hannah must produce copies of any document in
their possession or control that has information from 2002 to 2014 and is
related to the following:
●
the production of the leases, including the production records
maintained by the third-party vendor;
●
the expenses of the leases;
●
the financials related to the leases;
●
the use of the proceeds of the lease production;
●
the employees that worked on the leases;
●
the corporate business of the leases; and
●
the government regulation of the leases.
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As already stated, CRM Energy and Mr. Hannah must also turn over copies
of the documents the BIA requires them to maintain and documents
related to their operatorship of the leases.
(Doc. No. 975, at 18-19).
Mr. Hannah and CRM then filed a notice relinquishing any right or title to
the leases in question. (Doc. No. 978).
The Receiver still hasn’t received the documentation that was the subject
of the court’s many prior orders. The representations by Mr. Hannah and CRM
and the interactions between Ms. Roach and the Marshal and representatives of
the Receiver on November 4, 2014 make clear that Ms. Roach and Agape &
Associates, Inc. act as the regulator liaison, accountant and representative for
Mr. Hannah and CRM in matters related to the ownership and operatorship of
the Branson Energy Leases. As the court’s prior orders make clear, any
documentation in Ms. Roach or Agape’s possession belongs to the Receiver.
Among the documentation Mr. Hannah and CRM have withheld from the
Receiver are BIA-required certified monthly oil and gas production reports as set
forth in ¶¶ 35-37 of the Affidavit of Rick Coody, (Doc. No. 984-2), and other
operating, tax and financial documentation in the possession and control of Mr.
Hannah and CRM’s third-party vendors, Ms. Roach and Agape. The Receiver
needs these documents to be promptly produced, as the Bureau of Indian Affairs
has afforded the Receiver’s successor only until February 15, 2016 to complete
remediation of the leases. The documents in the possession of Ms. Roach and
Agape are necessary to pursue such remediation. It is crucial that the production
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of documentation by Ms. Roach and Agape be inclusive of all federal and state
tax returns with supporting documentation, be they personal, corporate,
partnership or otherwise, which in any manner reflect income received from or
otherwise attributable to the Branson Energy leases.
For the foregoing reasons the Receiver’s Emergency Motion to Compel
(Doc. No. 984) is GRANTED.
IT IS THEREFORE ORDERED that Nona K. Roach and Agape & Associates,
Inc., 441 2nd Street, Avant, Oklahoma 74001, as the representative, accountant
and regulatory liaison of John W. Hannah and CRM Energy Partners, Inc., shall
within fourteen (14) days of the issuance of this Order deliver to counsel for the
Receiver, Shawn F. Sullivan, at his offices located at 1717 Wayne Street, South
Bend, Indiana 46615, at a time to be coordinated with attorney Sullivan, certain
documents and/or electronically stored information which is inventoried.1 and
produced in an organized, Bates numbered, indexed, labeled, chronological,
categorized manner and in a readily referenced and usable format,2 the following:
I.
All records and/or documents of John W. Hannah and CRM Energy
Partners, Inc., in their possession and/or control encompassing the period
from January 1, 2002, to the current date pertaining to the operatorship
1 There shall be a master inventory and index which facilitates the location of documents by
category, Bates number, form number, date and other significant identifying characteristics.
The protocol for production established herein applies to both documents and/or electronically
stored information. All electronically stored information must be produced in a .pdf format and
each electronic file must be produced with a concise, coherent and descriptive label
2
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or ownership of the Branson Energy leases, Branson Energy, or any of the
equipment, chattels, fixtures, structures and other related property,
including all documentation regarding oil and gas production from the
Branson Energy Leases.
II.
Any and all records and/or documents of John W. Hannah or CRM
Energy Partners, Inc., in their possession and/or control encompassing
the period from January 1, 2002, to the current date which are related to
the following:
1.
The ownership and operatorship of the Branson Energy
Leases;
2.
Oil and gas production of the Branson Energy Leases;
3.
All income derived from and associated with the production
and sale of oil and gas from the Branson Energy Leases.
4.
All expenses incurred and otherwise associated with the
production and sale of oil and gas from the Branson Energy
Leases, including, but not limited to, production and payroll;
5.
All documentation which in any way reflects any interests, oil
and gas or otherwise, acquired with proceeds from the sale of
Branson Energy Lease assets (i.e., equipment, oil and gas
production, etc.);
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6.
All financial and banking records, including, but not limited
to, check registers and account statements, related to the
Branson Energy Leases;
7.
The use of all proceeds from production of the Branson Energy
Leases;
8.
All work assignment, personnel and payroll records of
employees or independent contractors who worked at or on
the Branson Energy Leases;
9.
The corporate business records of the Branson Energy Leases;
10.
All gatherers reports, payment received reports and other
records created, generated or furnished by gatherers who
worked at or on the Branson Energy Leases;
11.
All records of governmental regulation, inclusive of BIA and
EPA records, related to the Branson Energy Leases; and
12.
All documentation required to be submitted, filed, recorded
and/or maintained by the BIA and the EPA.
III.
All federal and state tax returns of John W. Hannah, CRM Energy
Partners, Inc., or any other business entity, from January 1, 2002, to the
current date with supporting documentation and schedules, be they
individual, corporate, partnership or otherwise, which in any manner
reflect income received, derived from or otherwise attributable to the
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Branson Energy Leases. This is inclusive of, but not limited to, the
individual returns of John W. Hannah which reflect schedules of business
activity related to the Branson Energy Leases, income derived from such
Leases and expenditures, including purchases of all property, both real
and personal.
Any costs associated with the production, reproduction and delivery of the
documentation which is the subject of this Order shall be solely that of Nona K.
Roach and Agape & Associates, Inc.
IT IS FURTHER ORDERED that the Receiver shall serve this Order on
Nona K. Roach and Agape & Associates, Inc., 441 2nd Street, Avant, Oklahoma
74001, via U.S. Mail, facsimile transmission, electronic mail or otherwise and
file notice of service with the Clerk of this Court.
SO ORDERED.
ENTERED: November 19, 2015
/s/ Robert L. Miller, Jr.
Judge
United States District Court
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