Securities and Exchange Commission v. Martin et al

Filing 44

ORDER granting Receiver's 40 Motion for Attorney Fees; granting in part and denying in part Receiver's 41 Supplemental Motion. Receiver shall begin distributing proceeds to victims on a pro rata basis after py mt of attys' fees and expenses, without recovering the VAE shares at this time. Receiver shall further submit w/i 3 mos of date on which this Order is filed a brief proposal regarding what should be done with these VAE shares. Signed by District Judge Richard Voorhees on 4/1/2013. (cbb)

IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
STATESVILLE DIVISION
CASE NO. 5:09-cv-00022-RLV-DSC
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.
SHELBY DEAN MARTIN, D.
MARTIN ENTERPRISES, INC.,
and DM VENTURES, LLC,
Defendants.

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ORDER

THIS MATTER is before the Court upon Receiver Pettit’s Motion for Attorneys’ Fees
(Doc. 40) and Supplemental Report (Doc. 41).
On March 30, 2012, the Court directed that funds presently held in escrow be paid to the
U.S. Securities and Exchange Commission, and thereafter deposited with the Crime Victims
Fund in the U.S. Treasury, partly in light of Plaintiff’s belief at the time that Martin and his wife
had no additional assets. (Doc. 31.) Receiver Pettit thereafter brought to the Court’s attention a
number of equity interests in both publicly traded and privately held entities owned by Martin,
which Receiver represented as having potentially significant value. (Doc. 32.) In response, the
Court, in an Order filed April 26, 2012, stayed its March 30 Order and directed Receiver to file a
status report on or before June 5, 2012. (Doc. 33.) On June 12, 2012, and in response to
Receiver’s June 5 Status Report (Doc. 34), the Court stayed its March 30 Order an additional
forty-five days, authorized Receiver to liquidate the publicly traded shares identified in the
Report, and directed Receiver to file a second status report on or before July 20, 2012 (Doc. 35).

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Receiver subsequently submitted his second Status Report and moved for authority to liquidate
Defendants’ shares in Virginia Uranium, Ltd., valued at $4,662.25, and in GlowBal, Inc., of
undetermined value. (Doc. 36.) The Court granted Receiver’s motion in part, directing Receiver
to liquidate the remaining equity interests and to file an application for fees, and the March 30
Order was again stayed. (Doc. 37.) Receiver then discovered that an order of a Canadian court
may be required before the Virginia Uranium shares (since converted by merger into shares of
Virginia Energy Resources, Inc. (“VAE”), a publicly traded Canadian corporation) could be
liquidated and requested that the March 30 Order be further stayed so as to permit an evaluation
of the cost-effectiveness of efforts to liquidate such shares. (Doc. 38.) This request was granted
via Text Order, entered August 24, 2012. Receiver has been instructed by the Court “not[ to]
distribute any assets pending further direction from the Court.” (Doc. 37 at 2.)
Counsel for Receiver has submitted its application for fees and reimbursement of
expenses. (Doc. 40.) The time for filing objections to this motion has passed, and no party in
interest has so filed. However, counsel has subsequently clarified that “the time set forth in the
Application was intended to include the time to distribute all funds to the victims on a pro-rata
basis and to close the case as set forth in the prior Report of Receiver.” (Doc. 43 at 2.) Counsel
for the SEC had previously notified the Court that there is “no reason to deviate from the plan in
the March 30 Order,” which directed that funds be deposited with the Crime Victims Fund. It
appearing to the Court that the fees and expenses requested are fair and reasonable in light of the
valuable services rendered and to be rendered, including the time required “to distribute all funds
to the victims on a pro-rata basis,” the Court hereby authorizes payment of attorneys’ fees in the
amount of $9,668.00 and expenses in the amount of $122.80. Consistent with this authorization,
the Court here amends its March 30 Order and directs Receiver to distribute the funds to the
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victims in this case on a pro rata basis, rather than to the Crime Victims Fund.
Additionally, Receiver reports his belief that the expenses to be incurred by the
receivership estate to identify and retain legal counsel in Canada for the purpose of obtaining a
Canadian court order compelling the Canadian transfer agent to transfer the VAE shares, having
a current value of $5,112.17, to Receiver, combined with the commissions resulting from the
liquidation of the shares as well as the currency exchange, will “at most result in nominal net
gain” to the receivership estate. (Doc. 41 at 2.) The Court is inclined to agree given (1) VAE’s
accumulated deficit and cash-flow issues, see Va. Energy Res. Inc., Interim Financial Report, at
2–6 (Nov. 29, 2012), available at http://www.sedar.com, and (2) the withdrawal of legislative
efforts this year to reconsider the matter of uranium mining in Virginia, see Cameron McWhirter,
Virginia Keeps Ban on Uranium Mining, Wall St. J., Jan. 31, 2013. However, if the Virginia
General Assembly were to lift the longstanding moratorium on uranium mining, such shares
could have substantial value, and it would be inequitable to permit Defendant Martin such a
windfall. Therefore, while Receiver is temporarily relieved of his obligation to liquidate the VAE
shares because doing so may not be in the best interests of the receivership, the Court shall
revisit the matter of these shares in three months’ time.
IT IS, THEREFORE, ORDERED that Receiver’s Motion for Fees be GRANTED.
(Doc. 40.)

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IT IS FURTHER ORDERED Receiver’s Supplemental Motion be GRANTED in part
and DENIED in part. (Doc. 41.) Receiver shall begin distributing the proceeds to the victims on
a pro rata basis after payment of attorneys’ fees and expenses, without recovering the VAE
shares at this time. Receiver shall further submit within three months of the date on which this
Order is filed a brief proposal regarding what should be done with these VAE shares.
Signed: April 1, 2013

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