United States of America v. East Gate Private Equity Fund III, L.P.

Filing 2

Copy of ORDER from USDC-Northern District of California-San Jose, Case Number 5:15CV3315, appointing United States Small Business Administration as receiver of East Gate Private Equity Fund III. (LAC)

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,i Case 5:15-cv-03315-PSG Document 12 Filed 10/14/15 Page 1 of 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 BENJAMIN MIZER PRINCIPALDEPUTY ASSISTANTATORNEYGENERAL 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 United States Attorney 455 Market Street, Suite 600 San Francisco, CA 94105 Telephone: (415) 744-8440 Facsimile: (415)744-6812 Eric.Adams@SBA.Gov , . FILED , U.S. DISTRICT COURT ·DISTRICT Of NEBRASKA zo1soc1 21 P!i/: 26 OFFICE OF THE CLER!'\ ARLENE M. EMBREY, FL NO. 125539 Trial Attorney U.S. Small Business Administration 409 3rd Street, S.W., 7th Floor Washington, D.C. 20416 Telephone: (202) 205-6976 Fax: (202) 481-0324 Arlene.Embrey@SBA. Gov 15 16 Attorneys for Plaintiff United States of America 17 18 19 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION B: /5 MC II L1 ) 20 UNITED STATES OF AMERICA, 21 22 23 24 25 26 Plaintiff, v. EAST GATE PRIVATE EQUITY FUND III, L.P. Defendant. 27 ) ) ) ) ) ) ) ) ) ) ) No. 15-cv-03315-PSG Stipulation for Consent Order of Receivership (Cover Page) RECENED OCT 21 ·Z015 28 STIPULATION FOR CONSENT ORDER OF RECEIVERSHIP No. 15 age 1 Case 5:15-cv-03315-PSG Document 12 Filed 10/14/15 Page 2 of 12 IN THE UNITED STATES DISTRICT COURT 2 3 FOR THE NORTHERN DISTRICT OF CALIFORNIA 4 SAN JOSE DIVISION 5 6 ) 7 8 UNITED STATES OF AMERICA, Plaintiff, 9 10 11 v. No. 15-cv-03315-PSG ORDER APPOINTING RECEIVER ) EAST GATE PRIVATE EQUITY FUND III, L.P. 12 13 ) ) ) ) ) Defendant. ) ) ) ) ) 14 15 16 CONSENT ORDER OF RECEIVERSHIP 17 18 19 20 21 22 23 24 25 26 27 28 ORDER APPOINTING RECEIVER No. 15-cv-03315-PSG Pagel Case 5:15-cv-03315-PSG Document 12 Filed 10/14/15 Page 3 of 12 1. 2 Pursuant to the provisions 15 u.S.C. §687c. this Court hereby takes exclusive jurisdiction of East Gate Private Equity Fund III, L.P. ("East Gate"), and all of 3 its assets and property. of whatever kind and wherever located, and the United States 5 Small Business Administration ("SBA") is hereby appointed Receiver ("the Receiver") of 6 East Gate to serve without bond until further order of this Court. The Receiver is 7 appointed for the purpose of marshaling and liquidating all of East Gate· s assets and 8 satisfying the claims of creditors therefrom in the order of priority as determined by this 9 Court. 10 2. II The Receiver shall have all powers, authorities, rights and privileges 12 heretofore possessed by the directors, managers and general and limited partners of East l.l Gate under applicable state and federal law. by the Articles of Limited Partnership, and 14 By-Laws of said limited partnership. in addition to all powers and authority of a receiver 15 16 at equity. and all powers and authority conferred upon the Receiver by the provisions of 17 15 U.S.C. § 687c and 28 U.S.C. § 754. The trustees. directors. managers, employees, 18 investment advisors. accountants, attorneys and other agents of East Gate are hereby I~ dismissed and the powers of any general partners arc hereby suspended. Such persons and entities shall have no authority with respect to East Gate's operations or assets. ~I 22 except to the extent as may hereafter be expressly granted by the Receiver. The Receiver shall assume and control the operation of East Gate and shall pursue and preserve all of its claims. 25 3. The Receiver is entitled to take immediate possession of all assets, bank 26 accounts or other financial accounts, books and records and all other documents or 27 28 instruments relating to East Gate. The past and!or present officers, directors. agents, - ORDER APPOINTING RECEIVER Page Z Case 5:15-cv-03315-PSG Document 12 Filed 10/14/15 Page 4 of 12 > managers, general and limited partners, trustees, a!lomeys. accountants, and employees 2 of East Gate, as well as all those acting in their place, arc hereby ordered and directed to 3 turn over to the Receiver forthwith all books, records. documents, accounts and all other 4 5 instruments and papers of and relating to East Gate and all of East Gate's assets and all 6 other assets and property of the limited partnership, whether real or personal. The 7 general partm:r of East Gate shall furnish a written statement within ten (I 0) days after 8 the entry of this Order. listing the identity, location and estimated value of all assets of 9 East Gate. a list of all employees (and job titles thereof), other personnel, attorneys, 10 II accountants and any other agents or contractors of East Gate. as well as the names, 12 addresses and amounts of claims of all known creditors of East Gate. Within thirty (30) 13 days following the entry of this Order, the general partner of East Gate shall also furnish 14 a written report describing all assets. All persons and entities having control, custody or 15 16 17 18 I~ possession of any assets or property of East Gate are hereby directed to turn such assets and property over to the Receiver. 4. The Receiver shall promptly give notice of its appointment to all known officers. directors, agents, employees. shareholders, creditors, debtors, managers and 20 gcnernl and limited partners of East Gate. as the Receiver deems necessary or advisable 21 22 to effectuate the operation of the receivership. All persons and entities owing any obligation, debt. or distribution with respect to a partnership interest lo East Gate shall. until further ordered by this Court, pay all such obligations in accordance with the tern1s thereof to the Rccei ver and its receipt for such payments shall have the same force and 26 effect as if East Gate had received such payments. 27 ORDER APPOINTING RECEIVER PageJ case 5:15-cv-03315-PSG Document 12 Filed 10/14/15 Page 5 of 12 5. 2 The Receiver is hereby authorized to open such Receiver's accounts at banking or other financial institutions to extend credit on behalf of East Gate. to utilize 3 SBA personnel. and to employ such other personnel as it may deem necessary to 4 5 effectuate the operation of the receivership including, but not limited to. attorneys. 6 accountants. consultants and appraisers. and is further authorized to expend receivership 7 funds lo compensate such personnel in such amounts and upon such terms as the 8 Receiver shall deem reasonable in light of the usual fees and billing practices and 9 procedures of such personnel. The Receiver is not required to obtain Court approval 10 II prior to the disbursement of receivership funds for payments to personnel employed by 12 the Receiver or for expenses that the Receiver deems advantageous to the orderly 1.1 administration and operation of the receivership. In addition, the Receiver is authorized 14 to reimburse the SBA for travel expenses incurred by SBA personnel in the establishment 15 16 and administration of the recei\"ership. The Receiver may. without further order of this 17 Court, transfer, compromise, or otherwise dispose of any claim or asset in the ordinary 18 course of business. other than real estate. 19 6. East Gate's past and/or present officers, directors. agents, attorneys. 20 managers. shareholders, employees. accountants. debtors, creditors, managers and 21 general and limited partners of East Gate. and other appropriate persons or entities 23 (including without limitation, the defendant's portfolio of small business concerns and 24 financial institutions doing business with defendant and/or defendant's portfolio of small 25 business concerns) shall answer under oath to the Receiver all questions which the 26 27 28 Receiver may put to them and produce any documents as required by the Receiver regarding the business of said limited partnership, or any other matter relevant to the ORDER APPOINTING RECEIVER Page4 Case 5:15-cv-03315-PSG Document 12 Filed 10/14/15 Page 6 of 12 ' operation or administration of the receivership or the collection of funds due to East Gate. 2 In the ewnt that the Receiver deems it necessary to require the appearance of the .1 aforementioned persons or entities, the Receiver shall make its discovery request(s) in 4 5 6 7 8 accordance with the 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 arbitration proceedings. bankruptcy or foreclosure actions. default proceedings, or any other proceedings involving (i) East Gate 9 (ii) any assets of East Gate. (iii) the Receiver for East Gate. and (iv) East Gate's present or JO II past directors, general partners or managers. to the extent said civil legal proceedings 12 involve any action taken by them while acting in their official capacity for East Gate, are 13 enjoined from taking any action. including discovery. commencing or continuing any legal I" proceeding of any nature without further order of this Court. 15 16 8. All civil legal proceedings wherever located. including arbitration 17 proceedings. foreclosure activities, bankruptcy actions. or default proceedings. but 18 excluding the instant proceeding, invohing (i) East Gate. (ii) any of assets of East Gate. 19 (iii) the Receiver for East Gate or (iv) East Gate's present or past general partners, directors, ~o or managers to the extent said civil legal proceedings involve any action taken in their 21 official capacity for East Gate. 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 this Court. 25 27 9. Further. as to a cause of action accrued or accruing in favor of East Gate against a third person or party, any applicable statute oflimitation is tolled during the 28 ORDER APPOINTING RECEIVER Pages Case 5:15-cv-03315-PSG Document 12 Filed 10/14/15 Page>? of 12 period in which this injunction against conunencement of legal proceedings is in effect as 2 to that cause of action. 3 I 0. East Gate and its past and/or present directors, ollicers, managers, general 4 or limited partners. agents. employees and other persons or entities acting in concert or 6 participating therewith be. and they hereby are. enjoined from either directly or indirectly 7 taking any actions or causing any such action to be taken which would dissipate the 8 assets and/or property of East Gate to the detriment of East Gate or of the Receiver 9 appointed in this cause, including but not limited to destruction of corporate records, or IO II which would violate the Small Business Investment Act of 1958, as amended. 15 U .S.C. 12 661 ct. seq., or the regulations promulgated thereunder. ("Regulations"). 13 C.F.R. 1.1 §107.I et.~. 14 11. The Receiver is authorized to borrow on behalf of East Gate. from the 15 16 SBA, up to $500.000 and is authorized to cause East Gate to issue Receiver's Certificates 17 oflndebtcdness in the principal amounts of the sums borrowed, which certificates will 18 bear interest at or about l 0 percent per annum and will have a maturity date no later than 19 18 months after the date of issue. Said Receiver's Certificates of Indebtedness shall have 20 priority over all other debts and obligations of East Gate. excluding administrative 21 expenses of the Receivership. whether currently existing or hereinafter incurred, 23 24 25 including without limitation any claims of general or limited partners of East Gate. 12. This Court determines and adjudicates that SBA has made a sufficient showing that East Gate has violated the Act and the Regulations, as alleged in the 26 Complaint filed against East Gate in the instant action. to obtain the relief so requested. 27 28 ORDER APPOINTING RECEIVER Page6 Case 5:15-cv-03315-PSG Document 12 Filed 10/14/15 Page 8 of 12 ., I U. Alier completing i1s acli\'iti.:s in accordance with this Order. !he Receiver ma) recommend that East tiaie·s license as an SBIC be rernked and tha1 control ufthc -' / limitrd panncr,hip ht! returned 4 IO Las! gale°> general partnerand·or its.dcsigncc or successor in interest. ,, SO ORDERED DA TED thi> 14tJ:! day of_ Oct. 111115 ' ,, ~H~ra~~Ss~ ~-- 10 United States Dimi~t C'om1 J1o1dge Magistrate Judge 11 12 SEEN AND AGREED BY EAST GATE PRl\'ATE EQUITY Fl:l\D Ill, L.P. AND THE t:.S. S'\1ALL BUSINESS ADMINISTRATIO:"i, THROl:GH TH~IR Dt:LY AL'THORIZED REPRESENTATIVES: •• I; EAST GATE PRIVATE EQUITY FUl'\D III. L.P. I .. I Dated: j By: -~---~~ Name: Ken Choi. Title: Managing. l\kmbcr. i' East Gate Pri\ate Equity Partners LLC General Panncr of East Gate Pri\'ate Equity Fund Ill. L.P'. I " I 2 ' IDated: U.S. SMALL BUSINESS ADMINISTRATION I 2I "'' 1/hi u!/J/ Name: GaiiJ:GTcen. Chief Title: Accounts Resolution Branch SBA lnwstmcnt Dh·ision Ollicc ofSBIC Liquidation ,. ORllER APPOINTING RECEJ\'ER Pag~ 7

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