Securities and Exchange Commission v. Martin et al

Filing 30

ORDER APPOINTING RECEIVER WITH LIMITED POWERS. Signed by District Judge Richard Voorhees on 8/30/2011. (cbb)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
STATESVILLE DIVISION
CIVIL ACTION NO.: 5:09-CV-22

SECURITIES AND EXCHANGE
COMMISSION,

)
)
)
Plaintiff,
)
)
vs.
)
)
SHELBY DEAN MARTIN, D. MARTIN )
ENTERPRISES, INC. and DM
)
VENTURES, LLC,
)
)
Defendants.
)
___________________________________ )

ORDER APPOINTING RECEIVER WITH LIMITED POWERS
THIS CAUSE, coming on to be heard and being heard before Richard L. Voorhees,
United States District Court Judge for the Western District of North Carolina, upon the Plaintiff's
Motion Seeking Order Directing Assets of Shelby Dean Martin to be Paid to the Federal
Treasury, Defendant Shelby Dean Martin's Response and Plaintiff's Reply.
Based upon the record herein, the Court makes the following FINDINGS OF FACT:

PROCEDURAL HISTORY
Plaintiff filed this case on March 6, 2009 against Defendants Shelby Dean Martin
(hereinafter "Defendant Martin"), D. Martin Enterprises, Inc. and DM Ventures, LLC
(hereinafter collectively referred to as "Defendants"), seeking relief for violations of Section
17(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77q(a)], Section 10b(b) of the
Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and Rule 10b-5

thereunder [17 C.F.R. § 240.10b-5] and Sections 206(1) and 206(2) of the Investment Advisers
Act of 1940 ("Adviser Act") [15 U.S.C. § 80b-6(1) and (2)]. The Plaintiff sought and obtained
emergency relief at that time, which among other things, froze the assets of the Defendants.
Subsequently, as a result of certain asset sales, Defendant Martin's criminal defense attorney
holds in his escrow account the sum of $151,314.00 as proceeds of the sale of Defendant
Martin's frozen assets. The purpose of this Order is to facilitate the distribution of those funds to
the Defendants' victims.
On December 21, 2009, the Court entered an Order of Permanent Injunction and Other
Relief as to the Defendants (hereinafter "Order of Permanent Injunction"). The Order of
Permanent Injunction, to which the Defendants consented, permanently enjoins the Defendants
from future violations of the anti-fraud provisions identified herein above and permits the Court
to impose disgorgement, pre-judgment interest and civil penalties upon motion of the
Commission without regard to the standards for summary judgment.
On November 18, 2010, the Court entered an Order Setting Disgorgement and Civil
Penalties against Defendants Shelby Dean Martin, D. Martin Enterprises, Inc. and DM Ventures,
LLC (hereinafter the "Order"). As set forth in the Order, Defendants were disgorged of the sum
of $428,000.00, plus post-judgment interest, as well as $42,382.78 in pre-judgment interest, and
ordered to pay a civil penalty, jointly and severally, in the sum of $130,000.00. Additionally, the
Court ordered the distribution of the frozen assets to the Defendants' victims.

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DISTRIBUTION
Plaintiff has provided the Court with a list of victims of Defendant Martin's scheme that
was generated from questionnaires sent to a list of victims prepared by the North Carolina
Secretary of State's Securities Division. That list, containing the names and addresses of the
victims, as well as the figures each reported as the amount they invested and received back from
the Defendants, shows that 199 investors had losses totaling $16,606,288.00. Since the total
available for distribution is $151,314.00, the pro rata share for each investor is 0.911% of their
net investment (total invested-total returned), less the cost of distribution (e.g., the cost of the
Receiver, its attorneys and accountants).
Based on the foregoing, IT IS HEREBY ORDERED that:
1.

That William Walt Pettit be and he herewith is appointed as Receiver in this matter for

Defendants with the limited powers set forth herein without bond. Defendants Martin, Martin
Enterprises, Inc., and DM Ventures, LLC and their assets are collectively referred herein as "The
Receiver Estate." No person holding or claiming any position of any sort with the Receiver
Estate shall possess any authority to act by or on behalf of any of the Receiver Estate, except as
authorized by the Receiver. All persons, including but not limited to, the Defendants and their
officers, agents, servants, employees, attorneys, and all persons in active concert or participation
with them, who receive actual notice of this Order by personal service or otherwise, are enjoined
from in any way interfering with the operation of the Receivership or in any way disturbing the
assets of Receivership Estate and from filing or prosecuting any actions or proceedings which
involve the Receiver or which affect the Receivership Estate, specifically including any
proceeding initiated pursuant to the United States Bankruptcy Code, except with the prior
permission of this Court.
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2.

The Receiver shall possess all the powers and rights to administer and manage the

Receivership Estate, including but not limited to, the power and authority to:
a.

take custody, control and possession of all records, assets, funds, property

premises and other materials of any kind in the possession of or under the direct or
indirect control of the Receiver Estate and, until further order of this Court;
b.

conduct business operations of Defendants Martin, D. Martin Enterprises, Inc.

and DM Ventures, LLC and the entities they control, including the collection of rents or
continuation and termination or any employment arrangement and all other aspects of
any active business operation;
c.

make such ordinary and necessary payments, distributions, and disbursements as

he deems advisable or proper for the marshaling, maintenance or preservation of the
Receiver Estate;
d.

receive and collect any and all sums of money due or owing to Defendants

Martin, D. Martin Enterprises, Inc. and DM Ventures, LLC whether the same are now
due or shall hereafter become due and payable, and is authorized to incur such expenses
and make such disbursements as are necessary and proper for the collection,
preservation, maintenance, administration and operation of the Receiver Estate;
e.

open bank accounts or other depository accounts, in the name of the Receiver on

behalf of the Receiver Estate;
f.

prepare any and all tax returns and related documents regarding the assets and

operation of the Receiver Estate; and
g.

take such other actions as may be approved by this Court.
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3.

That Defendants and their officers, agents, servants, employees, attorneys, and all

persons who have had any type of business or personal relationship with any of them, who
receive actual notice of this Consent Order, shall cooperate with the Receiver and the other
professionals working with him in the administration of the Receiver Estate, including, but not
limited to, the immediate delivery and turn-over to the Receiver of the following:
a.

all assets and other materials of the Receiver Estate in the possession or under

their control, as well as the name and contact information of any person who has
knowledge of the nature or location of assets or other materials belonging to the Receiver
Estate;
b.

business records of any kind, whether in hard copy or electronic format, including

e-mail files and accounts, customer files, accounting and financial records, bank records
and brokerage or other depository records;
c.

such other information related to the Receiver Estate as the Receiver and those

working with him reasonably request.

4.

That any bank, brokerage firm, mutual fund or other financial institution or any other

person, partnership, corporation or other entity maintaining or having custody or control of: (a)
any brokerage or depository accounts or other assets of the Receiver Estate; or, (b) accounts into
which proceeds of the subject investment offering(s) have been deposited; (c) accounts or assets
under the direct or indirect control of any Defendant, or (d) other tangible or intangible assets
under the direct or indirect control of any Defendant, who receives actual notice of this Consent
Order, shall:
i.

freeze such accounts, funds or assets;
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ii.

within five (5) business days of receipt of such notice, file with the Court and

serve on the Receiver and counsel for the Commission and for the Defendants a certified
statement setting forth, with respect to each such account or other assets, the balance in
the account or the description of the assets as of the close of business on the date of the
receipt of the notice;
iii.

promptly cooperate with the Receiver to determine whether and to what extent

any accounts, funds or other assets are actually assets or proceeds of assets of the
Receiver Estate; and
iv.

provide to the Receiver records of such funds, accounts and assets and tender said

funds and/or the assets about which a determination of ownership cannot be made, they
shall be turned over to the Receiver to be held in escrow pending a determination of the
ownership of such assets.

5.

That the Receiver is authorized to communicate with all such persons as he deems

appropriate to inform them of the status of this matter and the financial condition of the Receiver
Estate. The Receiver is also hereby authorized to employ such employees, accountants,
consultants, attorneys and other professionals, including employees of his own professional firm,
as are necessary and proper for the administration of the Receiver Estate and the performance of
his duties as set forth herein. The Receiver shall seek and obtain the approval of the Court prior
to disbursement of professional fees and expenses to himself, his firm or his counsel, by
presentation of a written application therefore, and after consultation with the Commission and
counsel for the Defendants. All costs incurred by the Receiver shall be paid from the Receiver
Estate. Upon notice to all parties in this case, the Receiver may submit a proposed order
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regarding an administrative process for the approval and payment of professional fees and
expenses consistent with this provision.

6.

That except for an act of gross negligence or intentional misconduct, the Receiver and all

persons engaged or employed by him shall not be liable for any loss or damage incurred by any
person or entity by reason of any act performed or omitted to be performed by the Receiver or
those engaged or employed by him in connection with the discharge of their duties and
responsibilities in connection with the receivership.

7.

That this Court shall retain jurisdiction of this action for all purposes. The Receiver is

hereby authorized, empowered and directed to apply to this Court, with notice to the
Commission and Defendants, named in the first paragraph of this Consent Order, above, for
issuance of such other orders as may be necessary and appropriate in order to carry out the
mandate of this Court.

8.

That this Consent Order will remain in effect until modified by further order of this

Court.
9.

That this Court shall retain jurisdiction of this matter for all purposes.

SO ORDERED.
Signed: August 30, 2011

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