United States Securities and Exchange Commission v. The Heartland Group Ventures, LLC et al
Filing
2
COPY OF ORDER from USDC - Northern District of Texas appointing Deborah D. Williamson as receiver of all assets of The Heartland Group Ventures, LLC; Heartland Production and Recovery LLC; Heartland Production and Recovery Fund LLC; Heartland Prod uction and Recovery Fund II LLC; The Heartland Group Fund III, LLC; Heartland Drilling Fund I, LP; Carson Oil Field Development Fund II, LP; Alternative Office Solutions, LLC; Arcooil Corp.; Barron Petroleum LLC; Dodson Prairie Oil & Gas LLC; Panther City Energy LLC; Encypher Bastion, LLC; Barron Energy Corporation; Dallas Resources Inc.; Leading Edge Energy, LLC; Sahota Capital LLC; and 1178137 B.C. LTD. (LRM)
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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DMSION
UNITED STATES SECURITIES
AND EXCHANGE COMMISSION,
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Plaintiff,
v.
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THE HEARTLAND GROUP VENTURES, LLC;
HEARTLAND PRODUCTION AND RECOVERY
LLC; HEARTLAND PRODUCTION AND
RECOVERY
FUND
LLC;
HEARTLAND
PRODUCTION AND RECOVERY FUND II LLC;
THE HEARTLAND GROUP FUND Ill, LLC;
HEARTLAND DRILLING FUND I, LP; CARSON
OIL FIELD DEVELOPMENT FUND. II, LP;
ALTERNATIVE OFFICE SOLUTIONS, LLC;
ARCOOIL CORP.; BARRON PETROLEUM
LLC; JAMES IKEY; JOHN MURATORE;
THOMAS BRAD PEARSEY; MANJIT SINGH
(AKA ROGER) SAHOTA; and RUSTIN
BRUNSON,
Defendants,
and
DODSON PRAIRIE OIL & GAS LLC, et al.
Relief Defendants.
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Civil No. 4:21-cv-01310-O
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FILED UNDER SEAL
ORDER APPOINTING RECEIVER
WHEREAS this matter has come before this Court upon motion of the Plaintiff U.S.
Securities and Exchange Commission ("SEC", "Commission" or "Plaintiff') to appoint a receiver
in the above-captioned action; and,
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WHEREAS the Court finds that, based on the record in these proceedings, the appointment
of a receiver in this action is necessary and appropriate for the purposes of marshaling and
preserving all assets of the Defendants (the "Receivership Assets") and those assets of the Relief
Defendants that: (a) are attributable to funds derived from investors or clients of the Defendants;
(b) are held in constructive trust for the Defendants; (c) were fraudulently transferred by the
Defendants; and/or (d) may otherwise be includable as assets of the estates of the Defendants
(collectively, the "Recoverable Assets"); and,
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WHEREAS this Court has subject matter jurisdiction over this action and personal
jurisdiction over the Defendants, and venue properly lies in this district.
NOW THEREFORE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED
THAT:
1.
This Court hereby takes exclusive jurisdiction and possession of the assets, of
whatever kind and wherever situated, of the Defendants The Heartland Group Ventures, LLC;
Heartland Production and Recovery LLC; Heartland Production and Recovery Fund LLC;
Heartland Production and Recovery Fund II LLC; The Heartland Group Fund III, LLC; Heartland
Drilling Fund I, LP; Carson Oil Field Development Fund II, LP; Alternative Office Solutions,
LLC; Arcooil Corp.; and Barron Petroleum LLC; and Relief Defendants Dodson Prairie Oil & Gas
LLC; Panther City Energy LLC; Encyphei Bastion, LLC; Barron Energy Corporation; Dallas
Resources Inc.; Leading Edge Energy, LLC; Sahota Capital LLC; and 1178137 B.C. LTD.
(collectively, the "Receivership Parties").
2.
Until further Order of this Court, Deborah Williamson ("Williamson"), Dykema
Gossett PLLC is hereby appointed to serve without bond as receiver (the "Receiver") for the estates
of the Receivership Parties. Because Williamson is located in San Antonio, Texas, outside the Fort
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Worth Division of the Northern District of Texas, she shall retain as local counsel, and otherwise
utilize, Rose L. Romero ("Romero"), of the Law Offices of Romero/Kozub. Romero is familiar
with the processes involved in this case and more importantly is familiar with this division and is
available to appear on short notice.
I. Asset Freeze
3.
Except as otherwise specified herein, all Receivership Assets and Recoverable
Assets are frozen until further order of this Court. Accordingly, all persons and entities with direct
-,
or indirect control over any Receivership Assets and/or any Recoverable Assets, other than the
Receiver, are hereby restrained and enjoined from directly or indirectly transferring, setting off,
receiving, changing, concealing, selling, destroying, commingling, pledging, offsetting, assigning,
liquidating or otherwise disposing of or withdrawing such assets. This freeze shall include, but not
be limited to, Receivership Assets and/or Recoverable Assets that are on deposit with any entity
or person, including financial institutions such as banks, brokerage firms and mutual funds.
4.
Receivership Parties and each of their past and/or present officers, directors, agents,
managers, general and limited partners, trustees, attorneys, accountants, vendors and third parties
(including, but not limited to, all entities hosting servers, databases, any proprietary information,
any electronic or digital format information, backup or storage files and/or computers, and all
entities with possession of any aircraft), consultants and employees of the entity Receivership
Parties, as well as all other entities and individuals, are hereby prohibited from selling,
encumbering, transferring, gifting or otherwise disposing of any Receivership Assets and
Recoverable Assets. The Receiver shall file a motion and obtain authority of this Court to dispose
of, or abandon, any Receivership Assets and/or Recoverable Assets.
II. General Powers and Duties of Receiver
5.
The Receiver shall have all powers, authorities, rights and privileges heretofore
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possessed by the officers, directors, managers and general and limited partners of the entity
Receivership Parties under applicable state and federal law, by the governing charters, bylaws,
articles and/or agreements in addition to all powers and authority of a receiver at equity, and all
powers conferred upon a receiver by the provisions of28 U.S.C. §§ 754,959 and 1692, and Fed.
R. Civ. P. 66.
6.
The trustees, directors, officers, managers, employees, investment advisors,
accountants, attorneys and other agents of the Receivership Parties are hereby dismissed and the
powers of any general partners, officers, directors and/or managers are hereby suspended. Such
persons and entities shall have no authority with respect to the Receivership Parties' 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 the Receivership Parties and shall pursue and preserve
all of their claims.
7.
No person holding or claiming any position of any sort with any of the Receivership
Parties shall possess any authority to act by or on behalf of any of the Receivership Parties.
8.
Subject to the specific provisions in Sections III through XIV, below, the Receiver
shall have the following general powers and duties:
A.
To use reasonable efforts to determine the nature, location and value of all
property interests of the Receivership Parties, including, but not limited to, monies,
funds, securities, credits, effects, goods, electronic devices, including phones and
computers, chattels, lands, aircraft, vehicles, premises, leases, claims, rights and
other assets, together with all rents, profits, dividends, interest or other income
attributable thereto, of whatever kind, which the Receivership Parties own, possess,
lease, have a beneficial interest in, or control directly or indirectly ("Receivership
Property" or, collectively, the "Receivership Estates");
B.
To take custody, control and possession of all Receivership Property and
records relevant thereto from the Receivership Parties; to sue for and collect,
recover, receive and take into possession from third parties all Receivership
Property and records relevant thereto;
C.
To manage, control, operate and maintain the Receivership Estates and hold
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in the Receiver's possession, custody and control all Receivership Property,
pending further Order of this Court;
D.
To terminate, continue and/or modify any business operations;
E.
To abandon any asset that, in the exercise of the Receiver's reasonable
business judgment, will not provide benefit or value to the Receivership Estates;
F.
To use Receivership Property for the benefit of the Receivership Estates,
making payments and disbursements and incurring expenses as may be necessary
or advisable in the ordinary course of business in discharging all duties as Receiver;
G.
To take any action which, prior to the entry of this Order, could have been
taken by the officers, directors, partners, managers, trustees and agents of the
Receivership Parties;
H.
To engage and employ persons in the Receiver's discretion to assist the
Receiver in carrying out the Receiver's duties and responsibilities hereunder,
including, but not limited to, accountants, attorneys, field and contract operators,
appraisers, securities traders, registered representatives, financial or business
advisers, liquidating agents, real estate agents, forensic experts, brokers, traders or
auctioneers;
I.
To take such action as necessary and appropriate for the preservation of
Receivership Property or to prevent the dissipation or concealment of Receivership
Property;
J.
The Receiver is authorized to issue subpoenas for documents and testimony
consistent with the Federal Rules of Civil Procedure;
K.
To bring such legal actions based on law or equity in any state, federal, or
foreign court as the Receiver deems necessary or appropriate in discharging the
Receiver's duties;
To pursue, resist and defend all suits, actions, claims and demands which
L.
may now be pending or which may be brought by or asserted against the
Receivership Estates; and
M.
To enforce the rights of any Receivership Parties for policies
N.
To take such other action as may be approved by this Court.
III. Access to Information
9.
The Receivership Parties and their past and/or present officers, employees,
consultants, directors, agents, managers, general and limited partners, shareholders, trustees,
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attorneys, accountants, vendors and other third parties (including, but not limited to, all entities
hosting servers, databases, any proprietary information, well files, and all other information related
to the facilities, operation, drilling, or production of hydrocarbons, any electronic or digital format
information, backup or storage files and/or computers), as well as those acting in their place, are
hereby ordered and directed to preserve and tum over to the Receiver or designee forthwith all
paper and electronic information of, and/or relating to, the Receivership Parties and/or all
Receivership Property, including, but not limited to, all storage lockers, well equipment, leased
property, well sites, pumping equipment, offices, control and communication equipment and
facilities; such information shall include but not be limited to computers, laptops, servers, ipads,
tablets, cellphones, other communication devices, backup data devices, electronic files and
databases, books, records, documents, accounts and all other instruments and papers, whether in
digital format, or otherwise. All such parties are directed to immediately tum over to the Receiver
all passwords, pass cards, combinations to safes, keys to any locked cabinets or facilities, fobs or
key cards, pass codes, user IDs, secondary user ID information such as recovery questions and
answers, and any other device or information required to access any information of any
Receivership Party.
10.
Manjit "Roger" Singh Sahota, Monrose Sahota, Sunny Sahota, Harprit Sahota,
James Ikey, John Muratore, Thomas Brad Pearsey, Bridy Ikey, Rustin Brunson, and the
Receivership Parties and their past and/or present officers, directors, agents, managers, general and
limited partners, shareholders, employees, consultants, trustees, attorneys, accountants, vendors
and other third parties (including, but not limited to, all entities hosting servers, databases, any
proprietary information, any electronic or digital format information, backup or storage files and/or
computers), are hereby ordered and directed to (a) preserve and not delete or encrypt any and all
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data, numbers, email, texts, electronic communications, recordings, and pictures, and (b) preserve
and not destroy, alter or make unusable any devices, including, but not limited to, telephones, cell
phones, cellular devices, computers, servers, laptops, iPads, tablets, cameras, and all other
electronic and cellular devices.
11.
Within twenty (20) days of the entry of this Order, the Receivership Parties shall
file with the Court and serve upon the Receiver and the Commission a sworn statement, listing:
(a) the identity, location and estimated value of all Receivership Property; (b) all employees (and
job titles thereof), other personnel, attorneys, accountants and any other agents or contractors of
the Receivership Parties; and, (c) the names, addresses and amounts of claims of all known
creditors of the Receivership Parties.
12.
Within thirty (30) days of the entry of this Order, the Receivership Parties shall file
with the Court and serve upon the Receiver and the Commission a sworn statement and accounting,
with complete documentation, covering the period from January 1, 2018 to the present:
A.
Of all Receivership Property, wherever located, held by or in the name of
the Receivership Parties, or in which any of them, directly or indirectly, has or had
any beneficial interest, or over which any of them maintained or maintains and/or
exercised or exercises control, including, but not limited to: (a) all securities,
investments, funds, real estate, automobiles, aircraft, jewelry, coins, guns, gold
silver, platinum, palladium, jade, diamonds, sapphires, emeralds, rubies,
alexandrites, tanzanites, pearls, all electronic or crypto currency and any relevant
access data, keys, passwords, and passcodes, and other assets, stating the location
of each; and (b) any and all accounts, including all funds held in such accounts,
with any bank, brokerage or other financial institution held by, in the name of, or
for the benefit of any of them, directly or indirectly, or over which any of them
maintained or maintains and/or exercised or exercises any direct or indirect control,
or in which any of them had or has a direct or indirect beneficial interest, including
the account statements from each bank, brokerage or other :financial institution;
B.
Identifying every account at every bank, brokerage or other :financial
institution: (a) over which Receivership Parties have signatory authority; and (b)
opened by, in the name of, or for the benefit of, or used by, the Receivership Parties;
C.
Identifying all credit, bank, charge, debit or other deferred payment card
issued to or used by each Receivership Defendant, including but not limited to the
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issuing institution, the card or account number(s), all persons or entities to which a r
card was issued and/or with authority to use a card, the balance of each account
and/or card as of the most recent billing statement, and all statements for the last 36
months;
D.
Of all assets received by any of them from any person or entity, including
the value, location, and disposition of any assets so received;
E.
Of all funds received by the Receivership Parties, and each of them, in any
way related, directly or indirectly, to the conduct alleged in the Commission's
Complaint. The submission must clearly identify, among other things, all investors,
the securities they purchased, the date and amount of their investments, and the
current location of such funds;
F.
Of all expenditures exceeding $1,000 made by any of them, including those
made on their behalf by any person or entity; and
G.
13.
Of all transfers of assets made by any of them.
Within thirty (30) days of the entry of this Order, the Receivership Parties shall
provide to the Receiver and the Commission copies of each of the Receivership Parties' complete
federal income tax returns with all schedules for 2018 through the present with all relevant and
necessary underlying documentation.
14.
The Receivership Parties' past and/or present officers, directors, agents, attorneys,
managers, shareholders, employees, accountants, debtors, creditors, managers and general and
limited partners, and other appropriate persons or entities shall answer under oath to the Receiver
all questions which the Receiver may put to them and produce all documents as required by the
Receiver regarding the business of the Receivership Parties, or any other matter relevant to the
operation or administration of the receivership or the collection of funds due to the Receivership
Parties. In the event that the Receiver deems it necessary to require the appearance of the
aforementioned persons or entities, the Receiver shall make its discovery requests in accordance
with the Federal Rules of Civil Procedure.
15.
To issue subpoenas to compel testimony of persons or production of records,
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consistent with the Federal Rules of Civil Procedure and applicable Local Rules, except for the
provisions of Fed. R. Civ. P. 26(d)(l), concerning any subject matter within the powers and duties
granted by this Order.
16.
The Receivership Parties are required to assist the Receiver in fulfilling the
Receiver's duties and obligations. As such, they must respond promptly and truthfully to all
requests for information and documents from the Receiver.
IV. Access to Books, Records and Accounts
17.
The Receiver is authorized to take immediate possession of all assets, bank
accounts or other financial accounts, books and records, registration certificates for all aircraft, and
all other documents or instruments relating to the Receivership Parties. All persons and entities
having control, custody or possession of any Receivership Property are hereby directed to
immediately tum such property over to the Receiver.
18.
The Receivership Parties, as well as their agents, servants, employees, attorneys,
any persons acting for or on behalf of the Receivership Parties, and any persons receiving notice
of this Order by personal service, facsimile transmission, electronic mail, text, or otherwise, having
possession of the property, business, books, records, accounts, or assets of the Receivership Parties
are hereby directed to deliver the same to the Receiver, the Receiver's agents and/or employees.
19.
All banks, brokerage firms, financial institutions, and other persons or entities
which have possession, custody or control of any assets or funds held by, in the name of, or for the
benefit of, directly or indirectly, any of the Receivership Parties that receive actual notice of this
Order by personal service, facsimile transmission or otherwise shall:
A.
Not liquidate, transfer, sell, convey or otherwise transfer any assets,
securities, funds, or accounts in the name of or for the benefit of the Receivership
Parties except upon instructions from the Receiver;
B.
Not exercise any form of set-off, alleged set-off, lien, or any form of self
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help whatsoever, or refuse to transfer any funds or assets to the Receiver's control
without the permission of this Court;
C.
Within five (5) business days of receipt of that notice, file with the Court
and serve on the Receiver and counsel for the Commission a certified statement
setting forth, with respect to each such account or other asset, the balance in the
account or description of the assets as of the close of business on the date ofreceipt
of the notice; and,
D.
Cooperate expeditiously in providing information and transferring funds,
assets and accounts to the Receiver or at the direction of the Receiver.
V. Access to Real and Personal Property
20.
The Receiver is authorized to take immediate possession of all personal property of
the Receivership Parties, wherever located, including but not limited to electronically stored
information, computers, laptops, hard drives, external storage drives, and any other such memory,
media or electronic storage devices, books, papers, data processing records, evidence of
indebtedness, bank records and accounts, savings records and accounts, brokerage records and
accounts, certificates of deposit, stocks, bonds, debentures, and other securities and investments,
contracts, mortgages, furniture, office supplies, equipment, automobile titles, and registration
certificates for all aircraft.
21.
The Receiver is authorized to take immediate possession of all real property of the
Receivership Parties, wherever located, including but not limited to all ownership and leasehold
interests and fixtures. Upon receiving actual notice of this Order by personal service, facsimile
transmission, electronic mail, text, or otherwise, all persons other than law enforcement officials
acting within the course and scope of their official duties, are (without the express written
permission of the Receiver) prohibited from: (a) entering such premises; (b) removing anything
from such premises; or (c) destroying, concealing or erasing anything on such premises.
22.
In order to execute the express and implied terms of this Order, the Receiver is
authorized to change all locks, security codes, and other access to the premises described above.
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The Receiver shall have exclusive control of the keys and any security codes. The Receivership
Parties, or any other person acting or purporting to act on their behalf, are ordered not to change
the locks in any manner, nor to have duplicate keys made, nor shall they have keys in their
possession during the term of the receivership. In order to execute the express and implied terms
of this Order, the Receiver is authorized to change all user IDs and passwords and access for any
electronic files or information of the Receivership Parties and/or all Receivership Property
described above. The Receiver shall have exclusive control of all such access, user IDs and
passwords.
23.
The Receiver is authorized to open all mail directed to or received by or at the
offices or post office boxes of the Receivership Parties, and to inspect all mail opened prior to the
entry of this Order, to determine whether items or information therein fall within the mandates of
this Order.
24.
Upon the request of the Receiver, the United States Marshal Service, in any judicial
district, is hereby ordered to assist the Receiver in carrying out the Receiver's duties to take
possession, custody and control of, or identify the location of, any assets, records or other materials
belonging to the Receivership Estate, including, without limitation, taking control of, sequestering
and securing following:
A.
premises at 471 State Highway 67, Graham, Texas 76450;
B.
real estate and premises in or near Eldorado, Texas with the coordinates:
30.847820, -100.934100, owned by Dallas Resources Inc.;
C.
real estate and premises in or near San Angelo, Texas, with the description
of Lot 8, Section 1, STONEWALL FIELDS SUBDIVISION, Tom Green County,
Texas; Property ID R000103065 in Tom Green County, Texas; and/or 12642
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Raspberry Lane, San Angelo, Texas;
D.
model CL-600-2B16 fixed wing multi-engine aircraft manufactured by
Canadair Ltd., with N-Number 486BG, serial number 5133, and registered owner
Dallas Resources Inc., wherever it may be located.
E.
model Al 09S rotorcraft aircraft manufactured by Agusta Spa, with N-
Number 709DM, serial number 22043, and registered owner Dallas Resources Inc.,
wherever it may be located; and
F.
Certain oil and gas assets located in Val Verde County, Texas, which shall
be identified by the Receiver.
VI. Notice to Third Parties
25.
The Receiver shall promptly give notice of this appointment to all known officers,
directors, agents, employees, shareholders, creditors, debtors, managers and general and limited
partners of the Receivership Parties, as the Receiver deems necessary or advisable to effectuate
the operation of the receivership.
26.
All persons and entities owing any obligation, debt, or distribution with respect to
an ownership interest to any Receivership Defendant shall, until further ordered by this Court, pay
all such obligations in accordance with the terms thereof to the Receiver and its receipt for such
payments shall have the same force and effect as if the Receivership Defendant had received such
payment.
27.
In furtherance of the Receiver's responsibilities in this matter, the Receiver is
authorized to communicate with, and/or serve this Order upon, any person, entity or government
office that he deems appropriate to inform them of the status of this matter and/or the financial
condition of the Receivership Estates. All government offices which maintain public files of
security interests in real and personal property shall, consistent with such office's applicable
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procedures, record this Order upon the request of the Receiver or the SEC.
28.
The Receiver is authorized to instruct the United States Postmaster to hold and/or
reroute mail which is related, directly or indirectly, to the business, operations or activities of any
of the Receivership Parties (the "Receiver's Mail"), including all mail addressed to, or for the
benefit of, the Receivership Parties. The Postmaster shall not comply with, and shall immediately
report to the Receiver, any change of address or other instruction given by anyone other than the
Receiver concerning the Receiver's Mail. The Receivership Parties shall not open any of the
Receiver's Mail and shall immediately turn over such mail, regardless of when received, to the
Receiver. All personal mail and/or any mail appearing to contain privileged information, and/or
any mail not falling within the mandate of the Receiver, shall be released to the named addressee
by the Receiver. The foregoing instructions shall apply to any proprietor, whether individual or
entity, of any private mail box, depository, business or service, or mail courier or delivery service,
hired, rented or used by the Receivership Parties. The Receivership Parties shall not open a new
mailbox, or take any steps or make any arrangements to receive mail in contravention of this Order,
whether through the U.S. mail, a private mail depository or courier service. The Receiver is
authorized to receive, review and respond to all email, electronic communications, and electronic
messages of the Receivership Parties. The Receiver shall be given all passwords and other
identifying information necessary to take control of all Receivership Parties' electronic mail and
messaging, and the Receiver shall have exclusive control of all such email, messages and related
data.
29.
Subject to payment for services provided after the appointment of the Receiver, any
entity furnishing internet, broadband, pumping, transportation, drilling, water, electric, telephone,
sewage, garbage or trash removal services to the Receivership Parties shall maintain such service
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and transfer any such accounts to the Receiver unless instructed to the contrary by the Receiver.
30.
The Receiver is authorized to assert, prosecute and/or negotiate any claim under
any insurance policy held by or issued on behalf of the Receivership Parties, or their officers,
directors, agents, employees or trustees, and to take any and all appropriate steps in connection
with such policies.
VII. Injunction Against Interference with Receiver
31.
The Receivership Parties and all persons receiving notice of this Order by personal
service, facsimile, electronic mail, or otherwise, are hereby restrained and enjoined from directly
or indirectly taking any action or causing any action to be taken, without the express written
agreement of the Receiver, which would:
A.
Interfere with the Receiver's efforts to take control, possession, or
management of any Receivership Property; such prohibited actions include but are
not limited to, using self-help or executing or issuing or causing the execution or
issuance of any court attachment, subpoena, replevin, execution, or other process
for the purpose of impounding or taking possession of or interfering with or creating
or enforcing a lien upon any Receivership Property, or moving any aircraft bearing
N-numbers 486BG or 709DM from their current location;
B.
Hinder, obstruct or otherwise interfere with the Receiver in the performance
of the Receiver's duties; such prohibited actions include but are not limited to,
concealing, destroying or altering records or information;
C.
Dissipate or otherwise diminish the value of any Receivership Property;
such prohibited actions include but are not limited to, releasing claims or disposing,
transferring, exchanging, assigning or in any way conveying any Receivership
Property, enforcing judgments, assessments or claims against any Receivership
Property or any Receivership Defendant, attempting to modify, cancel, terminate,
call, extinguish, revoke or accelerate (the due date), of any lease, loan, mortgage,
indebtedness, security agreement or other agreement executed by any Receivership
Defendant or which otherwise affects any Receivership Property; or
D.
Interfere with or harass the Receiver, or interfere in any manner with the
exclusive jurisdiction of this Court over the Receivership Estates.
32.
The Receivership Parties shall cooperate with and assist the Receiver in the
performance of the Receiver's duties.
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33.
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Creditors and all officers and directors of the Receivership Parties are hereby
prohibited and restrained from filing, commencing, talcing, or enforcing any action, including the
filing of any lawsuit in any federal or state court as well as any voluntary or involuntary bankruptcy
case pursuant to the United States Bankruptcy Code, against any Receivership Property or any of
the Receivership Parties.
34.
Landlords and lessors are prohibited and restrained from prohibiting or restricting
C
access to any Receivership Property or commencing, talcing, or enforcing any action against
Receivership Property or the Receivership Parties.
35.
Lessors and owners of surface rights are prohibited and restrained from prohibiting
or restricting access to any Receivership Property or commencing, talcing, or enforcing any action
against Receivership Property or any of the Receivership Parties.
36.
The Receiver shall promptly notify the Court and SEC counsel of any failure or
apparent failure of any person or entity to comply in any way with the terms of this Order.
VID. Stay of Litigation
37.
As set forth in detail below, the following proceedings, excluding the instant
proceeding and all police or regulatory actions and actions of the Commission related to the abovecaptioned enforcement action, are stayed until further Order of this Court:
All civil legal proceedings of any nature, including, but not limited to, bankruptcy
proceedings and voluntary or involuntary bankruptcy cases or petitions, arbitration
proceedings, foreclosure actions, Texas Railroad Commission proceedings, default
proceedings, or other actions of any nature involving: (a) the Receiver, in the
Receiver's capacity as Receiver; (b) any Receivership Property, wherever located;
(c) any of the Receivership Parties, including subsidiaries and partnerships; or, (d)
any of the Receivership Parties' past or present officers, directors, managers,
agents, or general or limited partners sued for, or in connection with, any action
talcen by them while acting in such capacity of any nature, whether as plaintiff,
defendant, third-party plaintiff, third-party defendant, or otherwise (such
proceedings are hereinafter referred to as "Ancillary Proceedings").
38.
The parties to any and all Ancillary Proceedings are enjoined from commencing or
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continuing any such legal proceeding, or from taking any action, in connection with any such
proceeding, including, but not limited to, the issuance or employment of process.
39.
All Ancillary Proceedings are stayed in their entirety, and all Courts having any
jurisdiction thereof are enjoined from taking or permitting any action until further Order of this
Court. Further, as to a cause of action accrued or accruing in favor of one or more of the
Receivership Parties against a third person or party, any applicable statute of limitation is tolled
during the period in which this injunction against commencement of legal proceedings is in effect
as to that cause of action.
IX. Managing Assets
40.
The Receiver shall establish one or more custodial accounts at a federally insured
bank to receive and hold all cash equivalent Receivership Property (the "Receivership Funds").
41.
The Receiver may, without further Order of this Court, transfer, compromise, or
otherwise dispose of any Receivership Property, other than real estate, in the ordinary course of
business, on terms and in the manner the Receiver deems most beneficial to the Receivership
Estate, and with due regard to the realization of the true and proper value of such Re~eivership
Property.
42.
Subject to Paragraph 43, immediately below, the Receiver is authorized to locate,
list for sale or lease, engage a broker for sale or lease, cause the sale or lease, and take all necessary
and reasonable actions to cause the sale or lease of all personal and real property in the
Receivership Estates, either at public or private sale, on terms and in the manner the Receiver
deems most beneficial to the Receivership Estate, and with due regard to the realization of the true
and proper value of such real property.
43.
Upon further Order of this Court, pursuant to such procedures as may be required
by this Court and additional authority such as 28 U.S.C. §§ 2001 and 2004, the Receiver will be
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authorized to sell, and transfer clear title to, all real property in the Receivership Estates.
44.
The Receiver is authorized to take all actions to manage, maintain, and/or
winddown business operations of the Receivership Estates, including making legally required
payments to creditors, employees, and agents ofthe Receivership Estates and communicating with
vendors, investors, governmental and regulatory authorities, and others, as appropriate.
X. Investigate and Prosecute Claims
45.
Subject to the requirement, in Section VIII above, that leave of this Court is
required to resume or commence certain litigation, the Receiver is authorized, empowered and
directed to investigate, prosecute, defend, intervene in or otherwise participate in, compromise,
and/or adjust actions in any state, federal or foreign court or proceeding of any kind as may in the
Receiver's discretion, and in consultation with SEC counsel, be advisable or proper to recover
and/or conserve Receivership Property.
46.
Subject to the Receiver's obligation to expend receivership funds in a reasonable
and cost-effective manner, the Receiver is authorized, empowered and directed to investigate the
manner in which the financial and business affairs of the Receivership Parties were conducted and
(after obtaining leave of this Court) to institute such actions and legal proceedings, for the benefit
and on behalf of the Receivership Estate, as the Receiver deems necessary and appropriate; the
Receiver may seek, among other legal and equitable relief, the imposition of constructive trusts,
disgorgement of profits, asset turnover, avoidance of fraudulent transfers, rescission and
restitution, collection of debts, and such other relief from this Court as may be necessary to enforce
this Order. Where appropriate, the Receiver should provide prior notice to Counsel for the
Commission before commencing investigations and/or actions.
47.
The Receiver hereby holds, and is therefore empowered to waive, all privileges,
including the attorney-client privilege, held by all entity Receivership Parties. All files of any
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attorney representing any Receivership Parties shall be immediately turned over to the Receiver
upon written request.
48.
The receiver has a continuing duty to ensure that there are no conflicts of interest
between the Receiver, the Receiver's Retained Personnel (as that term is defined below), and the
Receivership Estate.
XI. Bankruptcy Filing
49.
The Receiver may seek authorization of this Court to file voluntary petitions for
relief under Title 11 of the United States Code (the "Bankruptcy Code") for any of the Receivership
Parties. If a Receivership Defendant is placed in bankruptcy proceedings, the Receiver may
become, and may be empowered to operate each of the Receivership Estates as a debtor in
possession. In such a situation, the Receiver shall have all of the powers and duties as provided a
debtor in possession under the Bankruptcy Code to the exclusion of any other person or entity.
Pursuant to Paragraph 5 above, the Receiver is vested with management authority for all entity
Receivership Parties and may therefore file a chapter 11 petition and manage a chapter 11 case
and estate.
50.
The provisions of Section VIII above bar any person or entity, other than the
Receiver, from placing any of the Receivership Parties in bankruptcy proceedings.
XII. Liability of Receiver
51.
Until further Order of this Court, the Receiver shall not be required to post bond or
give an undertaking of any type in connection with the Receiver's fiduciary obligations in this
matter.
52.
The Receiver, the Receiver's attorneys and other agents, acting within scope of
such agency ("Retained Personnel") are entitled to rely on all outstanding rules of law and Orders
of this Court and shall not be liable to anyone for their own good faith compliance with any order,
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rule, law, judgment, or decree. In no event shall the Receiver or Retained Personnel be liable to
anyone for their good faith compliance with their duties and responsibilities as Receiver or
Retained Personnel, nor shall the Receiver or Retained Personnel be liable to anyone for any
actions taken or omitted by them except upon a finding by this Court that they acted or failed to
act as a result of malfeasance, bad faith, gross negligence, or in reckless disregard of their duties.
53.
This Court shall retain exclusive jurisdiction over any action or proceeding filed
against the Receiver or Retained Personnel based upon acts or omissions committed in their
representative capacities.
54.
In the event the Receiver decides to resign, the Receiver shall first give written
notice to the Commission's counsel of record and the Court of its intention, and the resignation
shall not be effective until the Court appoints a successor. The Receiver shall then follow such
instructions as the Court may provide.
XIII. Recommendations and Reports
55.
The Receiver is authorized, empowered and directed to develop a plan for the fair,
reasonable, and efficient recovery and liquidation of all remaining, recovered, and recoverable
Receivership Property (the "Liquidation Plan").
56.
Within thirty (30) days after the end of each calendar quarter, the Receiver shall
file and serve a full report and accounting of each Receivership Estate (the "Quarterly Status
Report"), reflecting (to the best of the Receiver's knowledge as of the period covered by the report)
the existence, value, and location of all Receivership Property, and of the extent ofliabilities, both
those claimed to exist by others and those the Receiver believes to be legal obligations of the
Receivership Estates.
57.
The Quarterly Status Report shall contain the following;
A.
A summary of the operations of the Receiver;
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B.
The amount of cash on hand, the amount and nature of accrued
administrative expenses, and the amount of unencumbered funds in the estate;
C.
A schedule of all the Receiver's receipts and disbursements (attached as
Exhibit A to the Quarterly Status Report), with one column for the quarterly period
covered and a second column for the entire duration of the receivership;
D.
A description of all known Receivership Property, including approximate
or actual valuations, anticipated or proposed dispositions, and reasons for retaining
assets where no disposition is intended;
E.
A description of liquidated and unliquidated claims held by the
Receivership Estate, including the need for forensic and/or investigatory resources;
approximate valuations of claims; and anticipated or proposed methods of
enforcing such claims (including likelihood of success in: (i) reducing the claims
to judgment; and, (ii) collecting such judgments);
F.
A list of all known creditors with their addresses and the amounts of their
claims;
G.
The status of Creditor Claims Proceedings, after such proceedings have
been commenced; and,
H.
The Receiver's recommendations for a continuation or discontinuation of
the receivership and the reasons for the recommendations.
58.
On the request of the Commission, the Receiver shall provide the Commission with
any documentation that the Commission deems necessary to meet its reporting requirements, that
is mandated by statute or Congress, or that is otherwise necessary to further the Commission's
m1ss10n.
XIV. Fees, Expenses and Accountings
59.
Subject to Paragraphs 61 - 66 immediately below, the Receiver need not obtain
Court approval prior to the disbursement of Receivership Funds for expenses in the ordinary course
of the administration and operation of the receivership. Further, prior Court approval is not
required for payments of applicable federal, state, or local taxes.
60.
Subject to the paragraphs that follow, the Receiver is authorized to solicit persons
and entities ("Retained Personnel") to assist him in carrying out the duties and responsibilities
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described in this Order. The Receiver shall not engage any Retained Personnel without first
obtaining an Order of the Court authorizing such engagement.
61.
The Receiver and Retained Personnel are entitled to reasonable compensation and
expense reimbursement from the Receivership Estates as described in the "Billing Instructions for
Receivers in Civil Actions Commenced by the U.S. Securities and Exchange Commission" (the
"Billing Instructions") agreed to by the Receiver. Such compensation shall require the prior
approval of the Court.
62.
Within forty-five (45) days after the end of each calendar quarter, the Receiver and
Retained Personnel shall apply to the Court for compensation and expense reimbursement from
the Receivership Estates (the "Quarterly Fee Applications"). At least thirty (30) days prior to filing
each Quarterly Fee Application with the Court, the Receiver will serve upon counsel for the SEC
a complete copy of the proposed Application, together with all exhibits and relevant billing
information in a format to be provided by SEC staff.
63.
All Quarterly Fee Applications will be interim and will be subject to cost benefit
and final reviews at the close of the receivership. At the close of the receivership, the Receiver will
file a final fee application, describing in detail the costs and benefits associated with all litigation
and other actions pursued by the Receiver during the course of the receivership.
64.
Quarterly Fee Applications may be subject to a holdback in the amount of20% of
the amount of fees and expenses for each application filed with the Court. The total amounts held
back during the course of the receivership will be paid out at the discretion of the Court as part of
the final fee application submitted at the close of the receivership.
65.
Each Quarterly Fee Application shall:
A.
and,
Comply with the terms of the Billing Instructions agreed to by the Receiver;
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B.
Contain representations (in addition to the Certification required by the
Billing Instructions) that: (i) the fees and expenses included therein were incurred
in the best interests of the Receivership Estate; and, (ii) with the exception of the
Billing Instructions, the Receiver has not entered into any agreement, written or
oral, express or implied, with any person or entity concerning the amount of
compensation paid or to be paid from the Receivership Estate, or any sharing
thereof.
66.
At the close of the Receivership, the Receiver shall submit a Final Accounting, in
a format to be provided by SEC staff, as well as the Receiver's final application for compensation
and expense reimbursement.
IT IS SO ORDERED, this 2nd day of December, 2021.
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UNITED STATES DISTRICT JUDGE
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