Klein v. Newman

Filing 24

MEMORANDUM DECISION AND ORDER granting in part 16 Motion for Summary Judgment. Signed by Judge David Nuffer on 4/27/21 (alt)

THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH
R. WAYNE KLEIN, as Receiver,
v.

Plaintiff,

KIRK B. NEWMAN, an individual,
Defendant.

MEMORANDUM DECISION AND
ORDER GRANTING IN PART
RECEIVER’S MOTION FOR
SUMMARY JUDGMENT
Case No. 2:19-cv-00694-DN-PK
District Judge David Nuffer
Magistrate Judge Paul Kohler

This is an ancillary action to United States v. RaPower-3, LLC et al.,
2:15-cv-00828-DN-DAO (D. Utah) (“Civil Enforcement Case”), brought by Plaintiff R. Wayne
Klein, the Court-Appointed Receiver (“Receiver”) of RaPower-3, LLC (“RaPower”),
International Automated Systems Inc. (“IAS”), LTB1, LLC (“LTB1”), their subsidiaries and
affiliates, 1 and the assets of Neldon Johnson (“Johnson”) and R. Gregory Shepard (“Shepard”). 2
In the Civil Enforcement Case, the Receivership Entities were found to be operated as an abusive
tax fraud to enable funding for Johnson and his family. The Receiver’s Complaint in this case
asserts seven causes of action against Defendant Kirk B. Newman to recover commission
payments made to him by the Receivership Entities for the sale of solar lenses to customers,
which perpetuated and expanded the Receivership Defendant’s fraudulent scheme. 3

Collectively, unless stated otherwise, RaPower, IAS, LTB1, and all subsidiaries and affiliated entities are referred
to herein as “Receivership Entities.” The subsidiaries and affiliated entities are: Solco I, LLC (“Solco”); XSun
Energy, LLC (“XSun”); Cobblestone Centre, LC (“Cobblestone”); LTB O&M, LLC; U-Check, Inc.; DCL16BLT,
Inc.; DCL-16A, Inc.; N.P. Johnson Family Limited Partnership; Solstice Enterprises, Inc.; Black Night Enterprises,
Inc.; Starlite Holdings, Inc.; Shepard Energy; and Shepard Global, Inc.

1

2

Collectively, RaPower, IAS, LTB1, Shepard, and Johnson are referred to herein as the “Receivership Defendants.”

3

Complaint, docket no. 2, filed Sept. 25, 2019.

The Receiver seeks summary judgment on his First, Second, and Third causes of action
arguing the transfers to Kirk B. Newman are voidable because they were made with actual or
constructive fraud. 4 The Receiver also seeks summary judgment on his Sixth and Seventh causes
of action seeking disgorgement of the commissions paid to Kirk B. Newman for the sale of
unregistered securities by Kirk B. Newman, who was not properly licensed to sell securities.
Summary judgment in favor of the Receiver and against Kirk B. Newman is appropriate
on the Receiver’s First, Sixth, and Seventh causes of action. The Receiver’s Second, Third,
Fourth, and Fifth causes of action are moot. Therefore, the Receiver’s Motion for Summary
Judgment 5 is GRANTED in part. 6

4

Receiver’s Motion for Summary Judgment, docket no. 16, filed Nov. 25, 2020.

5

Id.

The Receiver was directed to prepare and file a proposed memorandum decision and order granting in part the
Receiver’s Motion for Summary Judgment in compliance with DUCivR 54-1(b). Docket Text Order, docket no. 21,
filed Feb. 25, 2021. Kirk B. Newman was served with the Receiver’s proposed memorandum decision and order on
March 9, 2021. Proposed Memorandum Decision and Order Granting Receiver’s Motion for Summary Judgment at
29, docket no. 22-1, filed Mar. 16, 2021. Under DUCivR 54-1(b), Kirk B. Newman had seven days to file an
objection to the form of the proposed memorandum decision and order. No objection was filed. Therefore, any
objection is waived. DUCivR 54-1(b).
6

2

TABLE OF CONTENTS
UNDISPUTED MATERIAL FACTS ............................................................................................ 4
The Receivership Defendants’ fraudulent scheme ...................................................................... 4
The Civil Enforcement Case against the Receivership Defendants ............................................ 8
Kirk B. Newman’s involvement with the Receivership Defendants ......................................... 10
Financial condition of certain Receivership Entities ................................................................. 11
DISCUSSION ............................................................................................................................... 13
Judicial notice of the findings in the Civil Enforcement Case is allowed and those findings may
be used in this ancillary proceeding .......................................................................................... 14
The Receiver is entitled to summary judgment on his voidable transfer claim because the
transfers were made with actual intent to hinder, delay, or defraud .......................................... 16
The Receiver has standing to assert claims to avoid transfers ............................................... 17
The transfers are avoidable because they were made with actual intent to hinder, delay, or
defraud creditors ..................................................................................................................... 18
The Receivership Defendants did not receive reasonably equivalent value in return for the
transfers to Kirk B. Newman.................................................................................................. 21
The Receiver is entitled to summary judgment on his securities claims ................................... 23
The solar lens purchase program constitutes a security because it is an investment contract 24
Kirk B. Newman violated securities laws by selling unregistered securities without being
licensed ................................................................................................................................... 27
The Receiver is entitled to disgorgement of the commissions paid to Kirk B. Newman ...... 28
The Receiver’s Fourth cause of action for unjust enrichment is moot ...................................... 28
The Receiver is entitled to prejudgment interest ....................................................................... 29
ORDER ......................................................................................................................................... 29

3

UNDISPUTED MATERIAL FACTS 7
The Receivership Defendants’ fraudulent scheme
1.

Johnson claimed to have invented solar energy technology, which involves solar

lenses placed in arrays on towers. 8
2.

To make money from this purported technology, Johnson sold a component of the

technology: the solar lenses. 9
3.

Through a multi-level marketing model (using affiliated entity RaPower), lenses

were sold to hundreds of investors across the nation. 10
4.

IAS or RaPower agreed to build solar towers and install the customers’ lenses at a

site determined by IAS or RaPower. 11
5.

When customers purchased lenses, the customers also signed an operations and

maintenance agreement with LTB1, with LTB1 agreeing to operate and maintain the customers’
lenses to produce revenue. 12
6.

LTB1 was to make quarterly payments to the lens purchasers, representing a

portion of the revenues earned from the operation of the solar lenses. 13

Those facts, or portions thereof, identified in the parties’ briefing that do not appear in these Undisputed Material
Facts are either disputed; not supported by cited evidence; not material; or are not facts, but rather, are
characterization of facts or legal argument. Additionally, self-serving and conclusory assertions within an affidavit
or declaration are not accepted for purposes raising a genuine dispute of a material fact. Hall v. Bellmon, 935 F.2d
1106, 1111 (10th Cir. 1991).

7

Findings of Fact and Conclusions of Law (“FFCL”) ¶¶ 2-3 at 2, ECF no. 467 in Civil Enforcement Case, filed Oct.
4, 2018, docket no. 16-1, filed Nov. 25, 2020.
8

9

Id. ¶ 27 at 6.

10

Id. ¶¶ 44 at 8, 49 at 9.

11

Id. ¶¶ 124 at 23, 126 at 23, 133 at 24, 144-145 at 26.

12

Id. ¶¶ 16 at 4, 150-152 at 27.

13

Id. ¶ 153 at 27.

4

7.

No customer ever decided to buy a lens and then lease it to an entity other than

LTB1. 14
8.

Customers never took direct physical possession of their lenses. Because the

Receivership Defendants did not track which lens belonged to which customer, there was no way
for a customer to know which specific lens they owned. No customer has provided testimony
that the owned lenses could be identified. 15
9.

A bonus incentive program paid commissions or referral fees to persons who

persuaded others to purchase solar lenses. 16 This program was offered to lens owners who were
early participants with RaPower and promised to provide large bonuses when energy production
became profitable. The program is different from the RaPower commission structure. 17
10.

14

Johnson illustrated his idea as follows: 18

Id. ¶ 336 at 64.

Id. ¶¶ 337-338 at 64. This fact is not disputed by Kirk B. Newman’s subjective belief that a serial numbering
system was used to associate lenses with owners. Declaration of Kirk B. Newman in Opposition to Wayne Klein’s
Motion for Summary Judgment (“Newman’s Declaration”) ¶ 3 at 2, docket no. 19-2, filed Jan. 22, 2021. Rather, his
belief relates to the disputed issue of good faith, resolution of which is not necessary for determination on the
Receiver’s Motion for Summary Judgment.
15

16

FFCL ¶¶ 28-30 at 6.

17

Newman’s Declaration ¶ 4 at 2.

18

FFCL ¶ 292 at 57.

5

11.

Johnson’s entities retained the lenses and controlled what happened to them (if

anything). 19
12.

The Receivership Defendants emphasized how little any customer would have to

do with respect to “leasing out” their lenses: “[s]ince LTB[1] installs, operates and maintains
your lenses for you, having your own solar business couldn’t be simpler or easier.” 20
13.

The Receivership Defendants knew that they sold solar lenses to individuals who

generally work full-time jobs, like teachers, school administrators, coaches, and others. They
knew, or had reason to know, that their customers do not have special expertise in the solar
energy industry. 21

19

Id. ¶ 339 at 64.

20

Id. ¶ 340 at 64.

21

Id. ¶¶ 350-351 at 67.

6

14.

The Receivership Defendants advertised substantial returns and tax benefits in

exchange for only a down payment on the solar lenses: 22

15.

The lens purchase program that Kirk B. Newman solicited others to purchase was

not registered as a security with the United States Securities and Exchange Commission or the
Utah Division of Securities. 23

22

Plaintiff’s Trial Exhibits 496, 497, and 777 in Civil Enforcement Case, docket no. 16-2, filed Nov. 25, 2020.

23
Receiver’s Declaration in Support of Motion for Summary Judgment (“Receiver’s Declaration”) ¶¶ 4-5 at 3-4,
docket no. 16-3, filed Nov. 25, 2020.

7

The Civil Enforcement Case against the Receivership Defendants
16.

On November 23, 2015, the United States filed the Civil Enforcement Case

against the Receivership Defendants alleging that they were operating a fraudulent solar energy
scheme. 24
17.

In the Civil Enforcement Case, the court found: “For more than ten years, the

Receivership Defendants promoted an abusive tax scheme centered on purported solar energy
technology featuring ‘solar lenses’ to customers across the United States. But the solar lenses
were only the cover story for what the Receivership Defendants were really selling: unlawful tax
deductions and credits.” 25
18.

The Receivership Defendants sold solar lenses emphasizing their purported tax

benefits. Customers were told that they could “zero out” their federal income tax liability by
buying enough solar lenses and claiming both a depreciation deduction and solar energy tax
credit for the lenses. 26
19.

The purported solar energy technology and solar lenses, however, did not work

and could not generate marketable energy. Specifically, the court found that the “purported solar
energy technology is not now, has never been, and never will be a commercial-grade solar
energy system that converts sunlight into electrical power or other useful energy” and “[t]he

Complaint for Permanent Injunction and Other Equitable Relief, ECF no. 2 in Civil Enforcement Case, filed Nov.
23, 2015.
24

Memorandum Decision and Order on Receiver’s Motion to Include Affiliates and Subsidiaries in Receivership
(“Affiliates Order”) ¶ 1 at 4, ECF no. 636 in Civil Enforcement Case, filed May 3, 2019; docket no. 16-4, filed Nov.
25, 2020.
25

26

FFCL ¶ 203 at 35.

8

solar lenses do not, either on their own or in conjunction with other components, use solar energy
to generate [marketable electricity].” 27
20.

None of these solar lenses ever met the necessary elements to qualify for

depreciation deductions or the solar energy tax credit. Indeed, “[h]undreds, if not thousands” of
customer lenses were not even removed from the shipping pallets. 28
21.

Notwithstanding the fact the solar lenses and technology never worked, the

Receivership Defendants continued to sell solar lenses to customers emphasizing that customers
would qualify for depreciation deductions and/or the solar energy tax credit. Between 45,205 and
49,415 solar lenses were sold to customers. 29
22.

The Receivership Defendants’ own transaction documents and testimony at trial

in the Civil Enforcement Case showed that the gross receipts received by the Receivership
Defendants were at least $32,796,196 and possibly much more. 30
23.

Based on these facts and others, the court enjoined the Receivership Defendants

in the Civil Enforcement Case from promoting their abusive solar energy scheme; ordered them
to disgorge their gross receipts; and required them to turn over their assets and business
operations to the Receiver. 31
24.

The court found that the “whole purpose of RaPower, IAS, and LBT1 . . . was to

perpetuate a fraud to enable funding for Neldon Johnson. The same is true for other entities
27
Id. ¶¶ 261-264 at 49. This fact is not disputed by Kirk B. Newman’s assertion that he has seen the technology
work. Newman’s Declaration ¶ 5 at 2. Kirk B. Newman also asserted that he knew that RaPower and IAS had not
sold electricity on the energy market and believed they were making progress through research and development and
were on the verge of creating electricity on a marketable scale. Id. ¶ 2 at 1-2.
28

FFCL ¶¶ 288 at 55, 407-413 at 81-83.

29

Id. ¶¶ 79 at 14, 261-264 at 49.

30

Id. ¶¶ 80-86 at 15.

31
Affiliates Order ¶ at 4; Memorandum Decision and Order Freezing Assets and to Appoint a Receiver (“Freeze
Order”), ECF no. 444 in Civil Enforcement Case, filed Aug. 22, 2018, docket no. 16-5, filed Nov. 25, 2020.

9

Johnson created, controls, and owns . . . . Johnson has commingled funds between these entities,
used their accounts to pay personal expenses, and transferred Receivership Property to and
through them in an attempt to avoid creditors.” 32
25.

“Here, the whole purpose of RaPower[] was to perpetrate a fraud to enable

funding of the unsubstantiated, irrational dream of Nel[d]on Johnson. The same is true for the
other entities Johnson established and used including IAS, SOLCO I, XSun Energy,
Cobblestone, and the LTB entities.” 33
26.

“[The Receivership] Defendants have no legitimate business, [the Receivership]

Defendants’ solar energy scheme is an abusive tax scheme and not a legitimate business.” 34
27.

“[The Receivership] Defendants do not have any revenue or income aside from

the sale of solar lenses.” 35
Kirk B. Newman’s involvement with the Receivership Defendants
28.

Kirk B. Newman acted as a salesperson for the Receivership Entities and sold

solar lenses for depreciation deductions or solar energy tax credits. 36

32
Affiliates Order ¶ 2 at 4-5; FFCL at 128; Receiver’s Report and Recommendation on Inclusion of Affiliates and
Subsidiaries in Receivership Estate (“Receiver’s Report and Recommendation”) §§ B.4-5, B.7, B.10-13, F.4-5, F.7,
F.10-13, ECF 581 in Civil Enforcement Case, filed Feb. 25, 2019. “Receivership Property” means “all property
interests of each of the Receivership Defendants . . . . These property interests include, but are not limited to:
monies, accounts, trusts, funds, digital currencies, securities, credits, stocks, bonds, effects, goods, chattels,
intangible property (including patents and other intellectual property), real property, lands, premises, leases, claims,
rights, ownership interests in domestic or foreign entities, and other assets, together with rents, profits, dividends,
receivables, interest, or other income attributable thereto, of whatever kind, that the Receivership Defendants own,
possess, have a beneficial interest in, or control directly or indirectly.” Corrected Receivership Order ¶ 13.a at 7,
ECF no. 491 in Civil Enforcement Case, filed Nov. 1, 2018.
33

FFCL at 128 (footnote omitted).

34

Freeze Order at 18.

35

Id. at 19.

Receiver’s Declaration ¶¶ 6-7 at 4. This fact is not disputed by Kirk B. Newman’s subjective beliefs regarding the
purported solar technology or his motivation for earning money. Newman’s Declaration ¶ 7 at 2. Rather, his beliefs
and motivations relate to the disputed issue of good faith, resolution of which is not necessary for determination on
the Receiver’s Motion for Summary Judgment.
36

10

29.

Kirk B. Newman received commissions from the Receivership Entities for these

sales from 2011 to 2016 in the amount of $12,828.90. 37
30.

Kirk B. Newman was not licensed under state or federal securities law to sell

securities. 38
Financial condition of certain Receivership Entities
IAS
31.

IAS was a public company and filed annual reports that included audited financial

statements. The most recent annual report filed by IAS was for 2016. In that report, IAS
indicated that it had $0.00 of revenue for the most recent fiscal year. 39
32.

IAS indicated that as the date of its annual report for 2016, it had “not marketed

any commercially acceptable products” and “will continue to need additional operating capital
either from borrowing or from the sale of additional equities.” 40
33.

IAS also indicated that “[s]ince inception, we have incurred operating losses each

year of our operations and we expect to continue to incur operating losses for the next several
years. We may never become profitable.” 41
34.

As of June 30, 2016, IAS indicated that it had accumulated deficits of

$40,156,398 with only $3,997,445 in total assets. 42

Receiver’s Declaration ¶¶ 6-7 at 4; Defendant Kirk B. Newman’s Responses to R. Wayne Klein’s First Set of
Discovery Requests (“Discovery Responses”) at 2 (Response to Request for Admission No. 1), docket no. 19-1,
filed Jan. 22, 2021.
37

38

Discovery Responses at 6 (Response to Request for Admission No. 13).

39

IAS Annual Report for Fiscal Year Ended June 30, 2016 at 2, docket no. 16-7, filed Nov. 25, 2020.

40

Id. at 12.

41

Id. at 15.

42

Id. at 21-22.

11

35.

IAS’s annual report for 2016 also states that “[t]he accompanying financial

statements have been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the Company has suffered recurring losses from
operations that raises a substantial doubt about its ability to continue as a going concern.” 43
RaPower
36.

RaPower’s revenue came from the sale of solar lenses. 44

37.

Johnson’s technology never generated marketable electricity or revenue from the

sale of power. 45
38.

The obligation of investors to make payments from the purchase of the solar

lenses (beyond the initial down payment) was conditioned on receiving income from the use of
the lenses in producing solar power. 46
39.

RaPower was liable to lens purchasers to refund the purchase price for lenses if

customers wanted their money back. 47

43

Id. at 37.

44
FFCL at 87, ¶¶ 50 at 9, 79 at 14. This fact is not disputed by Kirk B. Newman’s subjective belief that RaPower’s
revenues included investments made by Johnson and other individuals. Newman’s Declaration ¶ 8 at 3. Rather, his
beliefs relate to the disputed issue of good faith, resolution of which is not necessary for determination on the
Receiver’s Motion for Summary Judgment.
45
FFCL at ¶¶ 292-315 at 57-60. This fact is not disputed by Kirk B. Newman’s assertion that he has seen the
technology generate heat and was aware of the solar lenses generating measurable electricity. Newman’s
Declaration ¶ 9 at 3. Kirk B. Newman also asserted that he knew that RaPower and IAS had not sold electricity on
the energy market and believed they were making progress through research and development and were on the verge
of creating electricity on a marketable scale. Id. ¶ 2 at 1-2. That he was told the technology was used to lower
electrical costs at the facilities used by RaPower and at a grocery store for U-Check, Id. ¶ 9 at 3, relates to the
disputed issue of good faith, resolution of which is not necessary for determination on the Receiver’s Motion for
Summary Judgment.
46

FFCL at 99, 101, 115-116, ¶ 20 at 5, ¶¶ 143-171 at 26-29, ¶¶ 329-334 at 63.

47

Id. at 102, 114-116, ¶ 135 at 24, ¶ 171 at 29, ¶¶ 330-334 at 63, ¶ 360 at 69-70.

12

XSun
40.

XSun received the vast majority of its funds from a transfer from RaPower’s

account in June 2012. On June 27, 2012, Glenda Johnson withdrew $1,498,150.85 from
RaPower’s Zions Bank account, which she later deposited into XSun’s account at Wells Fargo. 48
41.

XSun’s account had a $700.15 balance before the transfer from RaPower’s

account. 49
42.

The money used by XSun to pay commission payments came from the money it

received from RaPower, which in turn came solely from the sale of solar lenses. 50
43.

XSun had no source of income from any legitimate business operations. 51
DISCUSSION

Summary judgment is appropriate if “there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” 52 A factual dispute is genuine when
“there is sufficient evidence on each side so that a rational trier of fact could resolve the issue
either way” 53 or “if a reasonable jury could return a verdict for the nonmoving party.” 54 A fact is
material if “it is essential to the proper disposition of [a] claim.” 55 And in ruling on a motion for

Declaration of Glenda Johnson, filing no. 7-1 in Johnson v. United States, 2:15-cv-00742-JNP (D. Utah), filed
Jan. 6, 2016, docket no. 16-8, filed Nov. 25, 2020; Zions Bank Cashier’s Check, filing no. 1-1 in Johnson v. United
States, 2:15-cv-00742-JNP (D. Utah), filed Oct. 19, 2015, docket no. 16-9, filed Nov. 25, 2020; Deposition of
Glenda Johnson at 109:2-113:2, Deposition Exhibit 2006, docket no. 16-10, filed Nov. 25, 2020.
48

49

Deposition of Glenda Johnson at 112:14-113:2, Deposition Exhibit 2006.

50

Receiver’s Declaration ¶¶ 9-10 at 5.

51

Id.

52

Fed. R. Civ. P. 56(a).

53

Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998).

Universal Money Ctrs., Inc. v. Am. Tel. & Tel. Co., 22 F.3d 1527, 1529 (10th Cir. 1994) (internal quotations
omitted).

54

55

Adler, 144 F.3d at 670.

13

summary judgment, the factual record and all reasonable inferences drawn therefrom are viewed
in a light most favorably to the nonmoving party. 56
The moving party “bears the initial burden of making a prima facie demonstration of the
absence of a genuine issue of material fact and entitlement to judgment as a matter of law.” 57 If
the moving party carries this initial burden, the nonmoving party “may not rest upon mere
allegations or denials of [the] pleading[s], but must set forth specific facts showing that there is a
genuine issue for trial as to those dispositive matters for which it carries the burden of proof.” 58
“The mere existence of a scintilla of evidence in support of the [nonmovant’s] position will be
insufficient to defeat a properly supported motion for summary judgment.” 59
Judicial notice of the findings in the Civil Enforcement Case is allowed
and those findings may be used in this ancillary proceeding
Kirk B. Newman challenges the Receiver’s use of findings of fact from the Civil
Enforcement Case, arguing that he “was not a party to the lawsuit between the IRS and the
Receivership Defendants and what was decided in that case cannot be binding on Defendant.” 60
While the facts from the Civil Enforcement Case are not binding on Kirk B. Newman, they can
be used by the Receiver as evidence to form a basis for his summary judgment motion for two
reasons.
First, this action—along with other actions brought by the Receiver—arose directly from
the Civil Enforcement Case. 61 The orders in the Civil Enforcement Case and their findings

56

Id.

57

Id. at 670-71.

58

Universal Money Ctrs., Inc., 22 F.3d at 1529 (internal quotations and citations omitted; emphasis in original).

59

Id. (internal quotations omitted).

Defendant Kirk Newman’s Opposition to Wayne Klein’s Motion for Summary Judgment (“Response”) at 5, 7-11,
docket no. 19, filed Jan. 22, 2021.

60

61

General Order No. 19-003, Oct. 18, 2019 (D. Utah).

14

provide the basis for the existence of the receivership, including findings that Receivership
Defendants promoted and operated an abusive tax scheme centered on purported solar energy
technology; that the solar energy technology did not work; and that the Receivership Defendants
had no legitimate business. These findings were made against the Receivership Defendants after
a 12-day bench trial and have been affirmed by the Tenth Circuit Court of Appeals. 62
In the receivership context, courts routinely use findings made as to receivership entities
in proceedings against third parties. 63 The ability of district courts to use such findings is an
important tool in receiverships because the findings reduce the time necessary to settle disputes,
decrease litigation costs, avoid duplication of work, and avoid inconsistent decisions. 64 The use
of appropriate findings from the underlying action avoids the expense, distraction, and
complexity of relitigating undisputed—and appeal-affirmed—findings. This is one of the reasons
district courts have broad discretion in their supervisory role over equity receiverships involving
numerous parties and complex transactions. 65
Second, judicial notice of factual findings in the Civil Enforcement Case under Federal
Rule of Evidence 201 is appropriate. In the summary judgment context, federal courts may “take
judicial notice, whether requested or not, of its own records and files, and facts which are part of

62

FFCL at 1; United States v. RaPower-3, LLC, 960 F.3d 1240, 1243 (10th Cir. 2020).

This is usually done through summary proceedings in the underlying actions. In these types of cases, prior
findings are used in proceedings involving third parties who were not defendants in the underlying action. SEC v.
Elliott, 953 F.2d 1560 (11th Cir. 1992) (non-parties presented evidence as to whether certain transfers were
fraudulent but previous findings of securities violations and Ponzi-type scheme in underlying case were accepted in
summary proceedings); United States v. RaPower-3, LLC, No. 2:15-CV-00828-DN, 2020 WL 5531563, at *1 (D.
Utah Sept. 15, 2020) (citing prior findings in underlying action in order for turnover against a third-party).
63

Elliott, 953 F.2d at 1566 (citing SEC v. Wencke, 783 F.2d 829, 837 (9th Cir. 1986)). These reasons are also why
all actions arising from the Civil Enforcement Case were ordered to be heard by the District Judge that presided over
the Civil Enforcement Case. General Order, No. 19-003.
64

SEC v. Vescor Capital Corp., 599 F.3d 1189, 1194 (10th Cir. 2010) (district courts have “broad powers and wide
discretion to determine relief in an equity receivership.”); SEC v. Capital Consultants, LLC, 397 F.3d 733, 738 (9th
Cir. 2005); Fed. Trade Comm'n v. Noland, No. CV-20-00047-PHX-DWL, 2020 WL 4530459, at *7 (D. Ariz. Aug.
6, 2020) (discussing the need to avoid distracting satellite litigation in a receivership).
65

15

its public records.” 66 “Judicial notice is particularly applicable to the court’s own records of prior
litigation closely related to the case before it.” 67 The Tenth Circuit has affirmed the use of
judicial notice for a district court’s prior factual findings in a closely related matter. 68 In
Amphibious Partners, LLC v Redman, the Tenth Circuit held that the district court’s judicial
notice of its prior memorandum of order and judgment from a previous, related case was
permitted and provided “no cause to disturb the district court’s evaluation of the evidence.” 69
Kirk B. Newman has not presented facts or evidence to dispute the findings in the Civil
Enforcement Case or to question their accuracy, beyond his unsupported subjective beliefs.
Therefore, judicial notice of the facts from the Civil Enforcement Case is appropriate and is
taken.
The Receiver is entitled to summary judgment on his voidable transfer claim
because the transfers were made with actual intent to hinder, delay, or defraud
The Receiver seeks summary judgment on his First, Second, and Third causes of action
under the Uniform Voidable Transactions Act (“UVTA”). 70 The Receiver seeks summary
judgment on his First cause of action because the transactions were made with “actual intent to
hinder, delay, or defraud any creditor of the debtor.” 71 The Receiver seeks summary judgment on
St. Louis Baptist Temple v. Fed. Deposit Ins. Corp., 605 F.2d 1169, 1172 (10th Cir. 1979) (“a district court may
utilize the doctrines underlying judicial notice in hearing a motion for summary judgment substantially as they
would be utilized at trial.”); Anderson v. Cramlet, 789 F.2d 840, 845 (10th Cir. 1986); Van Woudenberg v. Gibson,
211 F.3d 560, 568 (10th Cir. 2000), abrogated on other grounds by McGregor v. Gibson, 248 F.3d 946 (10th Cir.
2001); United States v. Ahidley, 486 F.3d 1184, 1192 (10th Cir. 2007).
66

67
St. Louis Baptist Temple, 605 F.2d at 1172 (“federal courts, in appropriate circumstances, may take notice of
proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct
relation to matters at issue.”).
68

Amphibious Partners, LLC v. Redman, 534 F.3d 1357, 1361-62 (10th Cir. 2008).

69

Id.

The UVTA became effective on May 9, 2017. The governing law prior to the UVTA was the Uniform Fraudulent
Transfer Act. The statutes are substantially similar; any differences do not affect the disposition of the Receiver’s
Motion for Summary Judgment. The statutes are referred to collectively herein as the UVTA, but citations to both
statutes are given.

70

71

Utah Code Ann. § 25-6-202(1)(a); Utah Code Ann. § 25-6-5(1)(a) (2016).

16

his Second and Third causes of action based on constructive fraud. 72 Summary judgment in favor
of the Receiver and against Kirk B. Newman on the Receiver’s First cause of action—finding the
transfers were made with “actual intent to hinder, delay, or defraud”—is appropriate. The
Receiver’s Second and Third causes of action are moot.
The Receiver has standing to assert claims to avoid transfers
Kirk B. Newman challenges the Receiver’s ability to bring claims under the UVTA,
arguing the Receiver has not identified a creditor of the Receivership Defendants. 73 The UVTA
allows a creditor remedies to avoid a transaction. 74 The Receiver, who is the receiver of the
assets of Receivership Defendants, has standing to bring the claims of the Receivership
Defendants as a creditor.
The Tenth Circuit has recognized that a business entity abused by a fraudulent scheme
qualifies as a defrauded creditor. 75 In doing so, the Tenth Circuit adopted the reasoning of
Scholes v. Lehmann 76 that the transferor corporations were creditors “because the corporations
had been ‘evil zombies’ under the defendant’s ‘spell,’ they had been injured.” 77 This analysis has
also been recognized in the District of Utah. 78
Here, the Receiver stands in the shoes of the defrauded Receivership Entities. These
entities were “evil zombies” under the control of Johnson, who used the entities for his own
purposes. Indeed, the “whole purpose of RaPower, IAS, and LBT1 . . . was to perpetuate a fraud

72

Utah Code Ann. §§ 25-6-202(1)(b), 25-6-203(1); Utah Code Ann. §§ 25-6-5(1)(b), 25-6-8 (2016).

73

Response at 18-19.

74

Utah Code Ann. § 25-6-202(3).

75

Klein v. Cornelius, 786 F.3d 1310, 1316 (10th Cir. 2015).

76

56 F.3d 750 (7th Cir. 1995).

77

Cornelius, 786 F.3d at 1317 (quoting Scholes, 56 F.3d at 754).

78
Klein v. Michelle Turpin & Assocs., P.C., No. 2:14-cv-00302-RJS-PMW, 2016 WL 3661226, at *5 (D. Utah July
5, 2016).

17

to enable funding for Neldon Johnson. The same is true for other entities Johnson created,
controls, and owns . . . . Johnson has commingled funds between these entities, used their
accounts to pay personal expenses, and transferred Receivership Property to and through them in
an attempt to avoid creditors.” 79 “[T]he whole purpose of RaPower[] was to perpetrate a fraud to
enable funding of the unsubstantiated, irrational dream of Nel[d]on Johnson. The same is true for
the other entities Johnson established and used including IAS, SOLCO I, XSun[], Cobblestone,
and the LTB entities.” 80
Because the Receiver stands in the position of the defrauded Receivership Entities, the
Receiver has standing and the ability to assert fraudulent transfer claims on behalf of the
Receivership Entities.
The transfers are avoidable because they were made with actual intent to hinder, delay, or
defraud creditors
Pursuant to the UVTA, a transfer is voidable if the debtor (here, the Receivership
Entities) made the transfer with “actual intent to hinder, delay, or defraud any creditor of the
debtor.” 81 To determine if a transfer is made with actual intent to hinder, delay, or defraud,
courts look at a variety of factors, including the badges of fraud set forth in § 202 of the
UVTA. 82 Courts also examine the knowledge of the transferors and the purpose of the transfer. 83
In In re Independent Clearing House Co., the district court examined transfers made by a
fraudulent business entity, operating as a Ponzi scheme. 84 The district court held that the debtor

Affiliates Order ¶ 2 at 4-5; FFCL at 128; Receiver’s Report and Recommendation §§ B.4-5, B.7, B.10-13, F.4-5,
F.7, F.10-13.
79

80

FFCL at 128 (footnote omitted).

81

Utah Code Ann. § 25-6-202(1)(a) (emphasis added); Utah Code Ann. § 25-6-5(1)(a) (2016).

82

Utah Code Ann. § 25-6-202(2).

83

In re Independent Clearing House Co., 77 B.R. 843 (D. Utah 1987).

84

Id.

18

knew “from the very nature of his activities” that creditors would lose money and that the
business was not legitimate. 85 As a result of this knowledge, the only inference possible was that
the transfers were made with actual intent to hinder, delay, or defraud creditors. 86
A similar finding is appropriate in this case based on the Undisputed Material Facts. Each
transfer made to Kirk B. Newman was payment for his bringing in additional purchasers of solar
lenses. 87 The purchase of solar lenses was the primary component of the Receivership
Defendants’ fraudulent tax scheme. The “whole purpose of . . . the Receivership Entities . . . was
to perpetuate a fraud to enable funding for Neldon Johnson. The same is true for other entities
Johnson created, controls, and owns . . . . Johnson has commingled funds between these entities,
used their accounts to pay personal expenses, and transferred Receivership Property to and
through them in an attempt to avoid creditors.” 88
At this time, insolvency and a Ponzi Scheme has not been found in this case. However,
the Receivership Defendants did not conduct a legitimate business. The Undisputed Material
Facts demonstrate that the selling of solar lenses perpetuated and expanded the Receivership
Defendants’ fraudulent scheme. Kirk B. Newman was paid commissions by the Receivership
Defendants for selling the solar lenses. Therefore, Kirk B. Newman’s conduct and the payments
made to her perpetuated and expanded the Receivership Defendant’s fraudulent scheme. The
only reasonable inference from the Undisputed Material Facts and record evidence is that the
transfers to Kirk B. Newman were made with actual intent to hinder, delay, and defraud creditors

85

Id. at 860.

86

Id.

87

Discovery Responses at 2 (Response to Request for Admission No. 1).

88

Id. (citing FFCL; Receiver’s Report and Recommendation).

19

of the Receivership Defendants. “[T]he question of intent to defraud is not debatable” where the
Receivership Entities were operated as a fraudulent scheme. 89
Additionally, actual intent to defraud may be inferred based upon the consideration of
badges of fraud, including those set forth in Utah Code Ann. § 25-6-202(2). 90 Several factors
exist that compel a finding of actual intent to hinder, delay, or defraud in this case, including:
•

The Receivership Defendants had been sued or threatened with suit as the Internal
Revenue System began a criminal investigation of the Receivership Defendants in
June 2012, and the Department of Justice commenced the Criminal Enforcement
Action in November 2015; 91

•

The Receivership Defendants had no legitimate business, and had not received any
revenue or income aside from the sale of solar lenses; 92

•

The Receivership Defendants have removed or concealed assets and records; 93

•

The Receivership Defendants falsified documents to cover up their fraud; 94

•

The Receivership Entities did not receive reasonably equivalent value in return for the
transfers. 95

The Receiver has produced sufficient evidence of the badges of fraud. Kirk B. Newman
has failed to adequately dispute those badges of fraud, instead asserting only his own purported
good faith. Therefore, based on the Undisputed Material Facts and record evidence, the transfers
to Kirk B. Newman were fraudulent as a matter of law.

89

In re Independent Clearing House, 77 B.R. at 861 (quoting Conroy v. Shott, 363 F.2d 90, 91-91 (6th Cir. 1966)).

90

RES-NV CHLV, LLC v. Rosenberg, No. 2:13-cv-00115-DK, 2015 WL 423284 (D. Utah Feb. 2, 2015).

91

Utah Code Ann. § 25-6-202(2)(d); Freeze Order at 16 (footnotes omitted).

92

Freeze Order at 18-19.

Affiliates Order at 55; Memorandum Decision and Order Granting Turnover Motion; Denying Motion to Strike;
Overruling Objection to Authentication of Exhibits; and Overruling Objection to Rejection of Reputed Contract
(“Turnover Order”) at 45-47, ECF no. 1007 in Civil Enforcement Case, filed Sept. 15, 2020; Civil Contempt Order
Re: Neldon Johnson, Glenda Johnson, LaGrand Johnson, and Randale Johnson at 5-9, 11-19, ECF no. 947 in Civil
Enforcement Case, filed July 6, 2020.
93

94

Id. at 8-9; Turnover Order at 41-42.

95

Infra at 21-23.

20

The Receivership Defendants did not receive reasonably equivalent value in return for the
transfers to Kirk B. Newman
Because the transfers were made to Kirk B. Newman with actual intent to hinder, delay,
or defraud, the burden shifts to Kirk B. Newman to show that the good faith defense applies
because (1) he took the transfers in good faith, and (2) for reasonably equivalent value. 96 The
Receiver does not allege Kirk B. Newman did not act in good faith in receiving the transfers. 97
Therefore, for purposes of the Receiver’s Motion for Summary Judgment, this requirement is
presumed to be met. The issue is whether the Receivership Defendants received reasonably
equivalent value.
“[I]n determining whether reasonably equivalent value was given, the focus is on whether
the debtor received reasonably equivalent value from the transfer.” 98 “In other words, the
question is not whether [the transferee] ‘gave reasonably equivalent value; it is whether [the
debtor] received reasonably equivalent value.’” 99 Kirk B. Newman does not attempt to identify
what benefit the Receivership Defendants received in exchange for the payments of commissions
to him. Rather, he focuses only on what labor and services he performed in exchange for the
transfers. This is immaterial. Because Kirk B. Newman does not identify any value received by
the Receivership Defendants, his good faith defense fails as a matter of law.
Additionally, Kirk B. Newman could not have provided reasonably equivalent value in
exchange for the commission payments as a matter of law. All of the transfers to Kirk B.
Newman were payments of commissions for selling solar lenses to other investors. In Wing v.

96

Utah Code Ann. § 25-6-304; Utah Code Ann. § 25-6-6(1) (2016).

97

Receiver’s Motion for Summary Judgment at 19 n.77.

98

Miller v. Wulf, 84 F. Supp. 3d 1266, 1276 (D. Utah 2015) (emphasis in original).

99
Michelle Turpin & Assocs., P.C., 2016 WL 3661226, at *7 (quoting Klein v. Cornelius, No. 2:11-cv-01159-DAK,
2013 WL 6008304, at *3 (D. Utah Nov. 13, 2013)).

21

Holder, the receiver sought the return of referral fees paid to the defendant for bringing new
investors into the fraudulent business. 100 The defendant argued that he provided reasonably
equivalent value through his efforts of bringing in additional money from investors and
answering questions from investors. The district court concluded that these efforts did not
provide reasonably equivalent value to the fraudulent business. Rather, the defendant “essentially
received money for prolonging the fraud of and on the [business entities].” 101 “It takes cheek to
contend that in exchange for the payments he received the [fraudulent] scheme benefited from
his efforts to extend the fraud by securing new investments.” 102
Commission payments paid to parties that promote a fraudulent scheme constitute
fraudulent transfers and the recipients of the commission payments do not give reasonably
equivalent value. Kirk B. Newman’s sale of solar lenses further perpetuated the fraudulent tax
scheme operated by the Receivership Defendants. Therefore, the Receivership Entities did not
receive reasonably equivalent value as a matter of law.
Likewise, reasonably equivalent value was not provided because the payments to Kirk B.
Newman were illegal since he was not licensed to sell securities. 103 Kirk B. Newman cannot

Wing v. Holder, No. 2:09-cv-00118-DB, 2010 WL 5021087 (D. Utah Dec. 3, 2010); Miller v. Taber,
No. 1:12-cv-0074-DN, 2014 WL 317938 (D. Utah Jan. 28, 2014) (stating defendant must return commissions
because he obtained them illegally); Wing v. Buchanan, No. 2:08-cv-00803-DB, 2014 WL 1516001 (D. Utah Apr.
18, 2014) (stating the investors have consistently been required to return commissions they received for finding new
investors); Klein v. Andres, No. 2:11-cv-00656-TS, 2013 WL 4809260 (D. Utah Sep. 10, 2013) (“this and other
courts have rejected similar claims that payments made as compensation for drawing in new investors to a Ponzi
scheme constitute an exchange of reasonably equivalent value.”).
100

101

Holder, 2010 WL 5021087, at *2.

102

Id.

103

Infra at 23-28.

22

assert any right to payment founded upon an illegal contract and for this reason reasonably
equivalent value was not provided. 104
The Receiver is entitled to avoid the transfers to Kirk B. Newman in the amount of
$12,828.90. Judgment will be entered in the Receiver’s favor and against Kirk B. Newman on
the Receiver’s First cause of action for this amount. The Receiver’s Second and Third causes of
action under the UVTA are moot.
The Receiver is entitled to summary judgment on his securities claims
In addition to his claims under the UVTA, the Receiver also moves for summary
judgment on his claims for violations of securities law because the securities sold by Kirk B.
Newman were not registered and he was not licensed to sell securities. Utah and Federal law
require that securities be properly registered and prohibit the sale of unregistered securities. 105
Utah and Federal law also prohibit an unlicensed person from selling securities. 106 It is
undisputed that the lens purchase program that Kirk B. Newman solicited others to purchase was
not registered as a security with the United States Securities and Exchange Commission or the
Utah Division of Securities 107 and that Kirk B. Newman was not licensed to sell securities. 108
Therefore, if the lens purchase program is a security, Kirk B. Newman sold the lens purchase
program to others in violation of Utah and Federal law.

104
Wing v. Dockstader, No. 2:08-cv-00776-DB, 2010 WL 5020959, *6 (D. Utah Dec. 3, 2010) (finding reasonably
equivalent value was not given because defendant was not licensed to sell securities).

Utah Code Ann. § 61-1-7 (“It is unlawful for any person to offer or sell any security in this state unless it is
registered under this chapter, the security or transaction is exempted under Section 61-1-14, or the security is a
federal covered security for which a notice filing has been made pursuant to the provisions of Section
61-1-15.5.”);15 U.S.C. § 77e(a), (e).
105

Utah Code Ann. § 61-1-3 (“It is unlawful for a person to transact business in this state as a broker-dealer or agent
unless the person is licensed under this chapter.”); 15 U.S.C. § 78o(a).
106

107

Receiver’s Declaration ¶¶ 4-5 at 3-4.

108

Discovery Responses at 6 (Response to Request for Admission No. 13).

23

The solar lens purchase program constitutes a security because it is an investment contract
The Receiver argues that the lens purchase program constitutes a security because it is an
investment contract. 109 Kirk B. Newman argues that it is not a security because he was merely
selling a commodity—the solar lenses. 110 To determine whether the lens purchase program
constitutes a security, it is analyzed under the three-part test set forth in S.E.C. v. Howey Co. 111
In Howey, the Supreme Court defined an investment contract as an agreement that involves
(1) an investment of money; (2) in a common enterprise; (3) with profits derived solely from the
efforts of others. 112 Applying this definition to the Undisputed Material Facts, the lens purchase
program constitutes a security.
Howey involved the sales to investors of tracts of orange groves in Florida, combined
with contracts to manage the orange groves for individual investors. 113 The Supreme Court held
that the sale of the real property, combined with the management contracts, constituted an
investment contract and was a security. 114 In so holding, the Supreme Court stated that the
company offered more than fee simple interests in land, instead it offered “an opportunity to
contribute money and to share in the profits of a large citrus fruit enterprise managed and partly
owned by respondents.” 115 The Supreme Court noted that the common enterprise was a
necessary part of the deal because the individual plots of land would not be economically

109

Receiver’s Motion for Summary Judgment at 21-23.

110

Response at 23-24.

111

328 U.S. 293 (1946).

112
Id. at 298-99; Utah Code Ann. § 61-1-13 (defining “investment contract” as “an investment in a common
enterprise with the expectation of profit to be derived through the essential managerial efforts of someone other than
the investor”).
113

Howey, 328 U.S. at 295.

114

Id. at 299.

115

Id.

24

feasible due to their small size, and only gain attractiveness when they are component parts of a
larger operation managed by the respondent companies. 116 The orange groves in Howey were
managed by an affiliated service company, which performed the labor of tending to the trees and
harvesting and selling the oranges. 117 The investors also had no right to specific fruit; rather it
was pooled by the company and the profits were to be provided to the investors. 118
Each of the three elements of the Howey test is present here. Indeed, the structure of the
lens purchase program and the structure of the orange grove program in Howey are substantially
similar. It is undisputed that the first element—an investment of money—is met. Kirk B.
Newman argues the purchasers were merely purchasing a commodity—the solar lenses—and
were not making an investment. 119 The same argument was made in Howey—that the purchasers
were merely purchasing a fee simple interest in real property. The Supreme Court rejected this
contention, finding they were purchasing “an opportunity to contribute money and to share in the
profits of a large citrus fruit enterprise managed and partly owned by respondents.” 120
Like in Howey, the investors were purchasing more than solar lenses. They were
purchasing the right to receive tax credits and deductions and to share in profits of a solar lens
operation managed by the Receivership Defendants. Indeed, the solar lens customers never took
direct physical possession of their lenses. 121 Instead, as Kirk B. Newman concedes, the “the

116

Id. at 300.

117

Id.

118

Id. at 296.

119

Response at 23-24.

120

Howey, 328 U.S. at 296.

121

FFCL ¶¶ 337-338 at 64

25

purchaser would lease the lenses to one of the Receiver Defendants who would then pay lease
payments back to the owner of the lens.” 122
The second element—a common enterprise—is also present. To determine whether a
common enterprise exists, courts examine the “economic reality of the transaction that
occurred.” 123 The “determining factor of a common enterprise and the economic reality of the
transaction is whether or not the investment was for profit.” 124 The Receivership Defendants
advertised substantial profits for only a down payment on the solar lenses. 125 Kirk B. Newman
also concedes the purchasers of solar lenses expected to profit from the purchase of lenses. 126
The lenses would not be economically feasible on their own; the fortunes of the investors were
tied to the fortunes of the promoter in a common enterprise.
The presence of the third element—profits derived solely from the efforts of others—is
also indisputably present. The purchasers of solar lenses would sign an operations and
maintenance agreement with LTB1, with LTB1 agreeing to operate and maintain the customers’
leases to produce revenue. 127 The Receivership Defendants emphasized how little any customer
would have to do with respect to “leasing out” their lenses: “[s]ince LTB[1] installs, operates and
maintains your lenses for you, having your own solar business couldn’t be simpler or easier.” 128
The Receivership Defendants knew that they sold solar lenses to individuals who generally work
full-time jobs, like teachers, school administrators, coaches, and others. They knew, or had

122

Response at 23.

123

McGill v. American Land & Exploration Co., 776 F.2d 923, 925 (10th Cir. 1985).

124

Berrios-Bones v. Nexidis, LLC, No. 2:07-cv-00193-CW, 2007 WL 3231549, *5 (D. Utah Oct. 30, 2007).

125

Plaintiff’s Trial Exhibits 496, 497, and 777 in Civil Enforcement Case.

126

Discovery Responses at 4 (Response to Request for Admission No. 9).

127

FFCL ¶¶ 16 at 4, 150-152 at 27.

128

Id. ¶ 340 at 64.

26

reason to know, that their customers do not have special expertise in the solar energy industry. 129
The profits were to be derived solely from the efforts of LTB1. Therefore, the third element is
met.
Because each element of the Howey test is met, the lens purchase program constitutes an
investment contract and is a security.
Kirk B. Newman violated securities laws by selling unregistered securities without being
licensed
Because the lens purchase program constitutes a security, Kirk B. Newman was required
to be licensed to sell the security and the lens purchase program needed to be properly registered
as a security. It is undisputed that Kirk B. Newman was not licensed and that the lens purchase
program was not registered. And it is immaterial whether Kirk B. Newman knew that the lens
purchase program constituted a security. 130
Because Kirk B. Newman sold securities without being licensed under Utah or Federal
securities laws, he violated Utah and Federal securities laws. And because the lens purchase
program that Kirk B. Newman solicited others to purchase was not registered as a security with
the United States Securities and Exchange Commission or the Utah Division of Securities, Kirk
B. Newman violated Utah and Federal securities laws.

129

Id. ¶¶ 350-351 at 67.

Cf. State v. Bushman, 231 P.3d 833, 837 (Utah Ct. App. 2010) (“[A]dministrative sanctions under the Act do not
require a finding of scienter or other mental state. Utah Code section 61-1-20 allows for the imposition of
administrative sanctions . . . without regard to the violator’s mental state. By contrast, Utah Code section 61-1-21
allows for criminal penalties for securities violations only for actions that are willful or knowing.”); State v.
Wallace, 124 P.3d 259, 262-263 (Utah Ct. App. 2005) (“Quite simply, knowledge by Defendant that the items sold
were securities was not required to convict [Defendant] of willfully violating Utah Code section 61-1-3(1) and (2)
and Utah Code section 61-1-7.”).
130

27

The Receiver is entitled to disgorgement of the commissions paid to Kirk B. Newman
Finally, the Receiver has standing and the ability to disgorge the commissions Kirk B.
Newman received as a result of violating Utah and Federal securities laws. A receiver can
recover commissions the defendant obtained illegally as a result of violations of securities
laws. 131 “[Where t]he [d]efendants participated in a violation of law by selling [] securities
without being properly licensed[, t]hey should not be allowed to benefit from the
transactions.” 132
Additionally, the Receiver has standing because it stands in the place of the Receivership
Entities that were defrauded. The Receivership Entities were “evil zombies” under the control of
Johnson, who used the entities for his own purposes. Now that the Receiver has been appointed,
he can seek disgorgement of the illegal commissions paid to Kirk B. Newman.
Therefore, the Receiver is entitled to disgorge the commission payments to Kirk B.
Newman in the amount of $12,828.90. Judgment will be entered in favor of the Receiver and
against Kirk B. Newman on the Receiver’s Sixth and Seventh causes of action for this amount.
The Receiver’s Fifth cause of action for fraud in the offer and sale of securities is moot.
The Receiver’s Fourth cause of action for unjust enrichment is moot
Because judgment will be entered in favor of the Receiver and against Kirk B. Newman
on the Receiver’s First, Sixth, and Seventh causes of action in the amount of $12,828.90, the
Receiver’s Fourth cause of action for unjust enrichment is moot.

Taber, 2014 WL 317938 (stating defendant must return commissions because he obtained them illegally);
Dockstader, 2010 WL 5020959 (because defendant was not licensed to sell securities, he cannot assert any right
founded on an illegal contract).
131

132

Taber, 2014 WL 317938, *3.

28

The Receiver is entitled to prejudgment interest
The Receiver is entitled to an award of prejudgment interest. 133 Kirk B. Newman does
not dispute the Receiver is entitled to prejudgment interest. For simplicity of calculation,
prejudgment interest is awarded at the rate of 5% per annum 134 on the entire amount of
$12,828.90 from the date the last transfer was received by Kirk B. Newman, which was February
17, 2016. The prejudgment interest that has accrued from February 17, 2016, through March 16,
2021, is $3,259.19.
ORDER
IT IS HEREBY ORDERED that the Receiver’s Motion for Summary Judgment 135 is
GRANTED in part. Judgment will be entered in favor of the Receiver and against Kirk B.
Newman on the Receiver’s First, Sixth, and Seventh causes of action. The Receiver’s Second,
Third, Fourth, and Fifth causes of actions will be dismissed as moot.
The judgment entered in favor of the Receiver and against Kirk B. Newman will be for
the $12,828.90 received in commissions by Kirk B. Newman, plus prejudgment interest in the
amount of $3,259.19, and post judgment interest from the date of the entry of the judgment, at a
rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the

Wing v. Gillis, 525 Fed. App’x 795, 801 (10th Cir. 2013) (upholding award of prejudgment interest to receiver
because prejudgment interest “compensates for the loss of use of the money” and “[u]nder fairness and equity
principles, prejudgment interest was proper”); Miller v. Kelley, No. 1:12-cv-00056-DN, 2014 WL 5437023 (D. Utah
Oct. 27, 2014) (awarding prejudgment interest to receiver who obtained judgment under Utah’s voidable transfers
act); Klein v. Widmark, No. 2:11-cv-01097-CW, 2016 WL 845317 (D. Utah Mar. 2, 2016) (same).
133

Gillis, 525 Fed. App’x at 801 (finding court did not abuse discretion in awarding prejudgment interest at the rate
of 5%).
134

135

Docket no. 16, filed Nov. 25, 2020.
29

Board of Governors of the Federal Reserve System, for the calendar week preceding the date of
the judgment.
The Clerk is directed to close the case.
Signed April 27, 2021.
BY THE COURT:

David Nuffer
United States District Judge

30