United States of America v. Merchants Capital Partners

Filing 2

COPY OF ORDER from USDC-Southern District of New York appointing United states Small business Administration as receiver for Merchants Capital Partners, L.P. (MKR)

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LORElTA E. T.YNCH UNITED STATES AITORNEY WILLIAM YOUNG (WY9160) Special Assistant United States Attorney 271 Cadman Plaza East, 7mFloor Brooklyn, NY 11201 Telephone: (718)254-6057 ARLENE M. EMBREY (AME97t8) Trial Attorney U.S. Small Business Administration 409 Third Street, S.W. Seventh Floor Washington, D.C. 20416 Tel~:(202)205-6976 , i J .. 0'9 i\ii C;A ", ~:, \ 1r)L~l. II -----.. ", , ' w ,-' -v,:, :. ;:.:. .' ~,.l t__ II \ ... ;.> .r;:- (../') . Facsimile: (202)481-0324 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRlCf OF NEW"\'~- ::-:= .. ... ) ====-==::-, UNInD STATES OF AMERICA, PlaiDtiff' ) ) ; . '.' v. MERCHANTS CAPITAL PARTNERS, L.P., Defendant ) ) ) ) Ii }' . . ' I' ...,1 \ < . ) Clv. Adiok::Na.-::...::.... ) ) ) CONSENT ORDER OF RECEIVERSHIP IT IS HEREBY ORDERED. ADJUDGED AND DECREED: 1. Pursuant to the provisions of 15 U.s.C. 687c, this Court takes exclusive jurisdiction of Merchants Capital Partners, L.P. ("Merchants") and all of its assets and property, of whatever kind and wherever located, and the United States Smal1Susiness Administration ("SBA") is hereby appointed Receiver ("the Receiver") of Merchants to serve without bond until further order of this Court. The Receiver is appointed for the Case 1:11-cv-01769-SAS Document 2 Filed 03/18/11 Page 2 of 7 purpose of marshalling and liquidating in an orderly manner all of Merchants's assets and satisfying the claims of creditors thereof 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 partner, managers, officers. directors. investment advisors and other agents of Merchants under applicable state and federal law. by the Certificate of Limited Partnership and Agreement of Limited Partnership of said limited partnership. in addition to all powers and authority of a receiver at equity. and all powers and authority conferred upon the Receiver by the provisions of 15 U.S.C. 687c and 28 U.S.C. 754. The, managers, officers, directors. investment advisors and agents of Merchants are hereby dismissed and the powers of the general partner are hereby suspended. Such persons shall have no authority with respect to Merchants's operations or assets. except to the extent as may hereafter be expressly granted by the Receiver. The Receiver shall assume and control the operation of Merchants and shall pursue and preserve all of its claims. 3. The past and/or present general partners, managers, officers, directors, investment advisors. agents. trustees, attorneys, accountants, and employees of Merchants, as well as aU those acting in their place, are hereby ordered and directed to tum over to the Receiver forthwith all books, record~ documen~ accounts and all other instruments and papers of and relating to Merchants and its assets and all other assets and property of the corporation. whether real or personal. The former General Partner and/or other agent of Merchants. shall furnish a written statement within ten (10) days after the entry of this Order, listing the identity, location and estimated value of all assets of Case 1:11-cv-01769-SAS Document 2 Filed 03/18/11 Page 3 of 7 Merchants as well as the names, addresses and amounts of claims of all known creditors of Merchants. Within thirty (30) days following the entry of this Order, such person shall also furnish a written report describing all assets. All persons having control, custody or possession of any assets or property of Merchants are hereby directed to tum such assets and property over to the Receiver. 4. The Receiver shall promptly give notice of its appointment to all known partners, officers, directors, agents, employees, shareholders, creditors and debtors of Merchants, as the Receiver deems necessary or advisable to effectuate the operation of the receivership. All persons and entities owing any obligation or debt to Merchants, until further ordered by this Court, pay all such obligations in accordance with the tenDs thereof to the Receiver and its receipt for such payments shall have the same force and effect as if Merchants had received such payments. 5. The Receiver is hereby authorized to open such Receiver's accounts at banking or other financial institutions to extend credit on behalf of Merchants, to utilize SBA personnel, and to employ such other personnel as it may deem necessary to effectuate the operation of the receivership including, but not limited to, attorneys, accountants, and appraisers, 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 ~uired to obtain Court approval prior to the disbursement of receivership funds for payments to personnel employed by the Receiver or for expenses that the Receiver deems advantageous to the orderJy administration and operation of the receivership. In addition, the Receiver is authorized to reimburse the '1 .' Case 1:11-cv-01769-SAS Document 2 Filed 03/18/11 Page 4 of 7 SBA 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 asset (including without limitation any claim), other than real estate. 6. Merchants's past and/or present partners, officers, directors, agents, accountants, managers, shareholders, employees, debtors and creditors of Merchants and other appropriate persons (including without limitation, the defendant's portfolio of small business concerns and financial institutions doing business with defendant and/or defendant's portfolio of small business concerns) shaU, upon reasonable notice, answer under oath to the Receiver all questions which the Receiver may put to tbem in compliance with the Federal Rules of Civil Procedure, and pursuant thereto shall produce any documents as required by the Receiver regarding the business of said corporation, or any other matter relevant to the operation or administration of the receivership or the collection of funds due to Merchants. In the event that the Receiver deems it necessary to require the appearance of the aforementioned persons, the production of documents, infonnation, or any other discovery concerning the assets, property or business operations of Merchants, or any other matter relevant to the operation or administration of the Receivership or the collection of funds due to Merchants, the Receiver shall make its discovery request(s) in compliance with the notice, subpoena and other 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 arbittation proceedings, bankruptcy or foreclosure actions, default proceedings, or any other proceedings involving (i) Merchants, Case 1:11-cv-01769-SAS Document 2 Filed 03/18/11 Page 5 of 7 (ii) any assets of Merchants, (iii) the Receiver for Merchants or (iv) Merchants'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 Merchants, are enjoined from taking any action. including discovery, conunencing or continuing any legal proceeding of any natw"e without fw1her 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) Merchants, (ii) any of assets ofMerc~ (iii) the Receiver for Merchants or (iv) Merchants'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 Merchants 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 thisCoun. 9. Further. as to a cause of action accrued or accruing in favor of Merchants 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 proceedings is in effect as to that cause of action. 10. Merchants and its past and/or present managers, general partner or limited partners, officers. directors, agents, investment advisors, employees and other persons acting in concert or participating therewith be, and they hereby are, enjoined from either directly or indirectly taking any actions or causing any such action to be taken which Case 1:11-cv-01769-SAS Document 2 Filed 03/18/11 Page 6 of 7 would dissipate the assets and/or property of Merchants to the detriment of the Receiver appointed in this cause, including but not limited to destruction of coIpOrate records, or which would violate the Small Business Investment Act of 1958, as amended, 15 U.S.C. 661 et.~, or the regulations promulgated thereunder ("Regulations"), 13 C.F.R. Part 107. 11. The Receiver is authorized to borrow on behalf of Merchants, from the SEA, up to $1,000.000, and is authorized to cause Merchants to issue Recei ver's Certificates of Indebtedness in the principal amounts of the sums borrowed. which certificates will bear interest at or about 10 percent per annum and will have a maturity date no later than 18 months after the date of issue. Said Receiver's Certificates of Indebtednes.~ shall have priority over all other debts and obligations of Merchants, excluding administrative expenses of the Receivership, whether presently existing or hereinafter incurred, including without limitation any claims of partners of Merchants. 12. This Court determines and adjudicates that Merchants has violated the Small Business Investment Act, 15 U.S.C. 661 et. seq, and the Regulations promulgated thereunder at 13 C.F.R. 107.1 et. seq, as alleged in the Complaint filed in this matter. 13. After completing its activities in accordance with this Order, the Receiver may recommend that Merchants's license as an SBIC be revoked and that control of the limited partnership be returned to Merchants's general partner and/or its designee or successor in interest. Case 1:11-cv-01769-SAS Document 2 Filed 03/18/11 Page 7 of 7 so ORDERED this I {.; day of Jl/tt. ., t 2011. UNITED SEEN STIPULATED AND AGREED TO BY: MERCHANTS CAPITAL PARTNERS, L.P. Through its general partner, Merchants Capital Managers. LLC By: Gordon G. Cohen, Managing Member U.S. SMALL BUSINESS ADMINISTRATION By: ~/1~~ Thomas G. Morris or Office of SalC Liquidation Dated: <3'3 -O~-/(

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