case 8:09-cv-00800-doc-an document 114 filed 08/13/10 page ... · 5 marion anthony (a.k.a....

Case 8:09-cv-00800-DOC-AN Document 114 Filed 08/13/10 of 55 Page ID #:1991

GARY OWEN CARIS (SBN 088918)E-mail: gcaris @mckennalong.comLESLEYANNE HAWES (SBN 117101)E-mail: ihawes @mckennalon.comMcKENNA LONG & ALDR1DGE LLP300 South Grand Avenue, 14th FloorLos Angeles, CA 90071-3 124Telephone: (213) 688-1000Facsimile: (213) 243-6330ANGELA E. FONES (SBN 245204)E-mail: [email protected] LONG & ALDPJDGE LLP101 California Street, 41st FloorSan Francisco, CA 94111Telephone: (415) 267-4000Facsimile: (415) 267-4198Attorneys for ROBB EVANS & ASSOCIATESLLC as Receiver

FEDERAL TRADECOMMISSION,

V.

LOSS MITIGATION SERVICES,INC.; SYNERGY HNANCIALMANAGEMENTCORPORATION, also dlb/aDIRECT LENDER and DIRECTLENDER.COM; DEAN SHAFER;BERNADETTE PERRY (a.k.a.BERNADETTE CARR andBERNADETTE CARR-PERRY);MARION ANTHONY (a.k.a.“TONY”) PERRY,

CASE NO. SACV09- 800 DOC (ANx)

DECLARATION OF BRICK KANE INSUPPORT OF MOTION FOR ORDER(1) APPROVING FINAL REPORT ANDACCOUNTING (2) APPROVINGFINAL DISTRTñUTION OFRECEIVERSHIP ASSETS(3) APPROVING RECEIVER’S AM)PROFESSIONALS’ FEES ANDEXPENSES FROM AUGUST 18, 2009THROUGH CLOSING(4) DISCHARGING RFCEIVER;(5) RELIEVING RECEIVER OF ALLDUTIES AND LIABILITIES(6) EXONERATING RECEI$ER’SBOND (7) AUTHORIZINGABANhONMENT AND DESTRUCTIONOF RECORDS AND DEEMINGABANDONED ANYUNADMINISTERED ASSETS(8) GRANTING ANY OTHER RELWFRELATED TO TIlE WINI) 1JP OF THEESTATE; AND (9) GRANTING RELIEFFROM LOCAL RULE 66-7PERTAINING TO NOTICE TOCREDITORS

UNITED STATES DISTRICT COURTCENTRAL DISTRICT OF CALIFORNIA

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28MCKENNA LONG &

ALDRIDGE LLPATTORNEYS AT LAW

LOS ANGELES

Plaintiff,

Defendants.

Date: September 13, 2010Time: 8:30a.m.

______________________________

Place: 9D

DECLARATION OF BRICK KANE ISO MOTION FOR ORDER APPROVING RECEIVER’S FINAL REPORT AND ACCOUNTINGAND RELATED RELIEF

LA: 17767333.1

Case 8:09-cv-00800-DOC-AN Document 114-2 Filed 08/13/10 Page 1 of 10 Page ID #:2050

1 I, Brick Kane, declare:

2 1. I am the Chief Operating Officer and a member of Robb Evans &

3 Associates LLC, appointed as Receiver (“Receiver”) over Loss Mitigation Services,

4 Inc. and Synergy Financial Management Corporation, also dlb/a Direct Lender and

5 Direct Lender.com as well as any successors, assigns, affiliates, and subsidiaries

6 (“Receivership Defendants”). I have personal knowledge of the facts set forth in

7 this declaration or I have gained knowledge of such facts based on my role as the

8 member of the Receiver primarily responsible for the supervision of this

9 receivership estate, the investigation of the status of assets of the estate and the

10 activities of the Receiver’s members and staff in this case. If called upon to testify

11 as to the facts set forth, I would and could testify competently.

12 2. This action was commenced by the Federal Trade Commission (the

13 “FTC”) against the Receivership Defendants, Dean Shafer, Bernadette Perry (a.k.a.

14 Bernadette Carr and Bernadette Carr-Perry) and Marion Anthony (a.k.a. “Tony”)

15 Perry (collectively “Defendants”), on or about July 13, 2009.

16 3. The Receiver was appointed as the receiver, with the full powers of an

17 equity receiver, pursuant to the Preliminary Injunction Order With Receiver, Asset

18 Freeze and Other Equitable Relief (“Preliminary Injunction”) entered on August 18,

19 2009.

20 4. Default Judgment and Order for Permanent Injunction and Monetary

21 Relief as to Corporate Defendants Loss Mitigation Services Inc. and Synergy

22 Financial Management Corporation was entered on April 19, 2010. On July 12,

23 2010, the following stipulations were filed with the Court: 1) Stipulation by

24 Defendant Marion Anthony (A.K.A. “Tony”) Perry for Entry of Final Order for

25 Permanent Injunction and Settlement of Claims as to Defendant Marion Anthony

26 (A.K.A. “Tony”) Perry; 2) Stipulation by Defendant Dean Shafer for Entry of Final

27 Order for Permanent Injunction and Settlement of Claims as to Defendant Dean

28 Shafer; and 3) Stipulation by Defendant Bernadette Perry (A.K.A. Bernadette CarrMCKSNNALONG& 2ATTORNEYS AT LAW DECLARATION OF BRICK KANE ISO MOTION FOR ORDER APPROVING RECEIVER’S FINAL REPORT AND ACCOUNTING

LOS ANGELES AND RELATED RELIEFLA17767333.1


I and Bernadette Carr-Perry) for Entry of Final Order for Permanent Injunction and

2 Settlement of Claims as to Defendant Bernadette Perry (A,K.A. Bernadette Carr

3 and Bernadette Carr-Perry). Thereafter, on July 14, 2010, the Court entered the

4 Final Orders for Permanent Injunction and Settlement Claims against Defendants

5 Marion Anthony (A.K.A. “Tony”) Perry, Dean Shafer and Bernadette Perry

6 (A.K,A, Bernadette Carr and Bernadette Carr-Perry).

7 5. Attached hereto as Exhibit 1 is a true and correct copy of the

8 Receiver’s Final Report and Accounting (collectively “Final Report”) for this

9 receivership. Attached to the Final Report under Tab 1 is the summary entitled

10 “Receivership Fees & Expenses by Month and Fund Balance” (the “Final

11 Accounting”). The Final Accounting sets forth the funds received and expenses

12 incurred during the period from August 18, 2009 through June 30, 2010, including

13 the Receiver’s fees and expenses and counsel’s fees and expenses. In addition, the

14 Final Accounting sets forth the estimated funds that may be received and estimated

15 expenses that may be incurred, including Receiver’s fees and expenses and legal

16 fees, from July 1, 2010 through the closing of the estate and indicates that at

17 closing, after paying all expenses incurred from July 1, 2010 through the closing of

18 the estate (the “Expense Period”), including all estimated fees and expenses, the

19 Receiver anticipates having the sum of approximately $96,600 available to

20 distribute pursuant to the Court’s prior orders, as explained hereafter.

21 6. As reflected in the “Final Accounting attached as Tab 1 to the Final

22 Report, the Receiver recovered funds totaling $7,358.20 from various bank

23 accounts of the Receivership Defendants and made these funds part of the

24 receivership estate. In addition, the Receiver completed a successful auction of

25 personal property of the Receivership Defendants. The net proceeds from the

26 auction totaled $13,474.46. A large portion of the funds the Receiver will use to

27 wind up the receivership estate are being held in a bank account ending in the four

28 digits 7028 at the Monterey County Bank (the “Reserve Account”), as discussedMcKENNALONG& 3ATTORWEYSATLAW DECLARATION OF BRICK KANE ISO MOTION FOR ORDER APPROVING RECEIVER’S FINAL REPORT AND ACCOUNTING

LOS ANGELES AND RELATED RELIEFLA: 17767333. 1


1 below. The $175,212.16 held in the Reserve Account was frozen and is being held

2 until the approval of this motion. The funds held in the Reserve Account will be

3 used to pay the receivership estate’s fees and expenses.

4 7. On October 12, 2009, TK Global Partners, LP, d.b.a. Meritus Payment

5 Solutions (“TK Global”), filed a Motion for Declaratory Relief, Leave to Intervene,

6 Leave to Sue Defendant Loss Mitigation Services, Inc., and Leave to Sue

7 Defendant Dean Shafer (hereinafter “Motion for Declaratory Relief’). TK Global’s

8 Motion for Declaratory Relief alleged that the Receiver had improperly taken

9 control of a bank account ending in the four digits 7028 located at Monterey

10 County Bank. The Motion for Declaratory Relief alleged the Reserve Account

11 belonged to TK Global and/or Monterey County Bank and that Monterey County

12 Bank had assigned any rights of collection it had to TK Global.

13 8. On December 7, 2009, the Court partially granted the Motion for

14 Declaratory Relief. On December 14, 2009, TK Global filed a Complaint in

15 Intervention for Declaratory Relief seeking a judicial declaration regarding TK

16 Global’s rights in the Reserve Account. On February 18, 2010, the FTC and TK

17 Global entered into a stipulation resolving their disputes and differences over the

18 Reserve Account. The stipulation provided that the Reserve Account was part of

19 the receivership estate and shall be distributed according to the following three

20 priorities: (1) first, to pay the costs and expenses of the Receiver and Receiver’s

21 counsel; (2) second, the funds shall be distributed on a pro-rata basis as redress to

22 consumers who fell victim to the Defendants’ activities to the extent that the FTC

23 determined that a redress program was practical; and (3) third, to TK Global in its

24 capacity as an assignee of collection rights in the Reserve Account. On February

25 19, 2010, the Court approved the parties’ stipulation by Court Order.

26 9. As reflected in the Final Accounting attached as Tab 1 to the Final

27 Report, after payment of the fees and expenses of the Receiver and its counsel

28 incurred during the Expense Period and the estimated fees and expenses of theMcKENNAL0NG& 4ATTORNEYS AT LAW DECLARATION OF BRICK KANE ISO MOTION FOR ORDER APPROVING RECEIVER’S FINAL REPORT AND ACCOUNTING

LOS ANGELES AND RELATED RELIEFLA: 17767333. 1


1 Receiver and its counsel through closing, including fees and expenses for the

2 preparation and filing of the Receiver’s Final Report and Accounting and this

3 Motion, the Receiver estimates that there will be approximately $96,600 available

4 for distribution by the estate. Under the circumstances, the FTC has determined

5 that no consumer redress program is practical to address consumer claims as there

6 are limited assets of the receivership estate available to pay such claims.

7 10. Pursuant to the stipulation entered into by the parties and approved by

8 this Court on February 19, 2010, the Receiver seeks approval to turn over to TK

9 Global, in its capacity as an assignee of collection rights in the Reserve Account,

10 the net amount remaining in the Reserve Account after payment of all of the

11 Receiver’s and its counsel’s fees, costs and expenses. After these payments, the

12 Receiver estimates that the net remaining amount in the Reserve Account will be

13 approximately $74,800.

14 11. In addition, the Receiver seeks approval to turn over to the FTC the

15 remaining assets of the receivership estate. The Receiver estimates that the

16 remaining amount in the receivership estate available for turn over to the FTC will

17 be approximately $21,800.

18 12. The Receiver also seeks approval and authorization for payment of

19 fees and expenses of the Receiver, its staff and its attorneys for legal fees and

20 expenses incurred by the estate from August 18, 2009 through the closing of the

21 estate (“Expense Period”). As set forth in pages 1 through 4 of Tab 1 of the Final

22 Report, during the period from August 18, 2009 through June 30, 2010, the

23 Receiver incurred fees for the Receiver, its members and staff of $37,979.14 and

24 costs of $3,719.52 for total Receiver’s fees and expenses of $41,698.66 during that

25 time frame. The Receiver’s counsel incurred legal fees of $29,568.15 and costs of

26 $345.84 for the services of its counsel, for total legal fees and costs of $29,913.99

27 for the ten-month period from August 18, 2009 through June 30, 2010.

28MCKENNALONG& 5ATTORNEYS AT LAW DECLARATION OF BRICK KANE ISO MOTION FOR ORDER APPROVING RECEIVER’S FINAL REPORT AND ACCOUNTING

Los ANGELES AND RELATED RELIEFLA: 17767333. 1


1 13. The Receiver’s final accounting includes an estimate of the

2 receivership expenses that will be incurred from July 1, 2010 through the closing of

3 the estate. As set forth in the Final Accounting, the Receiver estimates total closing

4 expenses to be $26,489.70, including Receiver’s fees and expenses of $11,489.70

5 and the Receiver’s counsel’s fees and expenses of $15,000. The Receiver’s

6 estimate of fees and expenses includes the cost of storing the Receivership

7 Defendants’ documents and records for a period of 120 days, the cost for

8 destruction of such records after the 120 day period, completing any activities

9 necessary or appropriate to wind up the estate, and counsel’s attendance at the

10 hearing on the wind up motion and advice in connection with the Receiver’s wind

11 up of the estate. The Receiver seeks an order authorizing the Receiver to pay from

12 the Reserve Account all actual fees and expenses incurred by the Receiver in

13 winding up the estate through closing, including all actual fees and costs of the

14 Receiver, the Receiver’s members and staff and the Receiver’s counsel, prior to

15 distribution of the net remaining Reserve Account assets to TK Global.

16 14. Consistent with prior motions, the Receiver also seeks an order

17 granting relief from Local Rule 66-7 pertaining to the giving of notice to all

18 creditors of the receivership estate and approving the procedure for limited notice

19 of this Motion by (a) service of this Motion on all parties to this action and creditors

20 of the receivership estate who have served upon the Receiver a written request for

21 notice as provided herein, (b) posting the Motion on the Receiver’s website,

22 allowing all interested parties an opportunity to review the Motion, (c) service of a

23 notice of hearing on the 104 non-consumer creditors, and (d) providing copies of

24 the Motion to any interested party upon written request. Because there are several

25 thousand customers of the Receivership Defendants who are potential creditors, the

26 Receiver requests that it be relieved of the obligation to notice all of those

27 customers to save the estate from substantial photocopying and mailing expenses.

28MCKENNALONG& 6ATTORNEYS AT LAW DECLARA11ON OF BRICK KANE ISO MOTION FOR ORDER APPROVING RECEIVER’S FINAL REPORT AND ACCOUNTING

LOS ANGELES AND REIJJED RELIEFLA: 17767333.1


1 15. The fees and costs of the Receiver are described in detail in the

2 Receiver’s billing records attached hereto, including Receiver’s fees, senior staff

3 fees, information technology staff fees and support staff fee claims. True and

4 correct copies of the fees and costs of the Receiver for August 2009 through June

5 2010 are attached hereto as Exhibits 2 through 12. The fees and expenses of the

6 Receiver’s outside counsel, McKenna Long & Aidridge LLP, are attached to the

7 supporting Declaration of Gary Owen Cat-is as Exhibit 1.

8 16. During the Expense Period, the primary activities of the Receiver and

9 its counsel have focused on the Receiver gaining possession and control of the

10 business and records of the Receivership Defendants, evaluating those records and

11 the Receivership Defendants’ business activities, analyzing the Receivership

12 Defendants’ financial situation, and reconstructing of the financial transactions of

13 the entities. In addition, the Receiver liquidated personal property assets of the

14 Receivership Defendants with the approval of the Court.

15 17. Pursuant to the Preliminary Injunction, the Receiver took custody,

16 control and possession of the Receivership Defendants’ premises at 1700 Carnegie

17 Avenue, Suite 250, Santa Ma, California; 2501 Pullman Street, Suites 200 and

18 250, Santa Ana, California; and 7525 Irvine Center Driver, Suite 200, Irvine,

19 California, along with all paper documents and electronic data. After recovering

20 these records, the Receiver took measures to ensure that the records were secured.

21 In an effort to conserve receivership estate assets, the Receiver removed the

22 personal property of the Receivership Defenthnts to the auctioneer’s warehouse

23 and removed the records of the Receivership Defendants to the Receiver’s facility

24 in Sun Valley, California.

25 18. After taking possession of the business premises and records, the

26 Receiver conducted an investigation to determine the ownership and management

27 structure of the Receivership Defendants. The Receiver interviewed Dean Shafer,

28 an onsite manager, and other employees of the Receivership Defendants in an effort

MCKNNA LONG & 7ATTORNEYS AT LAW DECLARATION OF RRICK KANE ISO MOTION FOR ORDER APPROVING RECEIVER’S FINAL REPORT AND ACCOUNTING

LOS ANGELESAND RELATED RELIEF

LA: 17767333. 1


1 to ascertain details concerning the Receivership Defendants’ assets, amounts owed

2 to consumers and other relevant infonnation. The Receiver reviewed and analyzed

3 business and financial records, electronic and physical accounting records, bank

4 account information and records, income and expense records and receipts,

5 transfers of funds to and from the Receivership Defendants, emails, mail, and other

6 documents.

7 19. Based on the Receiver’s investigation, the Receiver determined that

8 the only assets of the Receivership Defendants were numerous bank accounts and

9 personal property consisting of computer equipment (computers, displays and

10 printers), copiers, desks and chairs. The Receiver assisted its counsel in preparation

11 of an ex parte application seeking Court approval to sell the personal property items

12 at an auction. The Court approved the Receiver’s request to sell the personal

13 property by auction on November 10, 2009. The Receiver coordinated and oversaw

14 the auction of the Receivership Defendants’ personal property and collected net

15 proceeds for the receivership estate of $13,474.46 from the auction.

16 20. Tn addition, a significant amount of the Receiver’s time during the

17 Expense Period was focused on the electronic records of the Receivership

18 Defendants. The initial stages of analyzing the consumer information contained in

19 the Receivership Defendants’ databases required extensive technological expertise.

20 Because of the volume of data involved, substantial time was required to preserve

21 the electronic records and information.

22 21. During the Expense Period, the Receiver has performed other

23 administrative services in connection with the administration of the receivership

24 estate. The Receiver has notified fmancial institutions of the receivership and

25 served copies of the Preliminary Injunction on the financial institutions where

26 receivership assets may be located. The Receiver also continued to address

27 administrative issues regarding the receivership estate, including responding to

28 consumers’ written and telephone inquiries regarding their files and the

MCKENNALONG& 8ATTORNEYS AT LAW DECLARATION OF BRICK KANE ISO MOTION FOR ORDER APPROVING RECEIVER’S FINAL REPORT AND ACCOUNTING

LOS ANGELESAND RELATED RELIEF

LA: 17767333.1


1 receivership estate, communicating with the FTC, performing bank reconciliations

2 and maintaining accounting records. The Receiver also analyzed and addressed

3 issues concerning credit card chargebacks.

4 22. Copies of this Motion will be posted on the Receiver’s website at

5 www.robbevans.com/htrnlJlossms.html, where it may be reviewed in its entirety,

6 except for the voluminous time records attached hereto and to the Declaration of

7 Gary Owen Cans, Copies of the Motion will be provided to any interested party

8 upon receipt of a written request which may be sent to: Robb Evans & Associates

9 LLC, Attn: Cherrie Eustaquio, 11450 Sheldon Street, Sun Valley, CA 91352-1121;

10 Telephone (818) 768-8100; Facsimile: (818) 768-8802.

11 23. As a member of Robb Evans & Associates LLC, I am familiar with the

12 methods and procedures used by the Receiver and its staff and employees to record

13 the time spent rendering services to receivership estates over which the Receiver

14 has been appointed. The records attached hereto as Exhibits 2 through 12 are

15 regularly prepared by the members, staff and employees of the Receiver at or about

16 the time of the services rendered and each of whom has a business duty to

17 accurately record the information regarding their services set forth in these records.

18 The records are reviewed by the Receiver’s accounting staff and summarized in the

19 Final Accounting, attached hereto as Tab 1 to Exhibit 1. As explained in the

20 accompanying declaration of Gary Owen Cans, the Receiver’s time records have

21 been redacted where appropriate to preserve descriptions containing confidential,

22 tactical, strategic, attorney-client privileged and/or attorney work-product

23 information. Based upon my experience with Robb Evans & Associates LLC, I

24 believe the Receiver’s methods and procedures for recording and accounting for

25 time and services for the receivership estates over which it has been appointed are

26 reliable and accurate.

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28MCKENNALONG& 9ATTORNEYS AT LAW DECLARATION OF BRICK KANE ISO MOTION FOR ORDER APPROVING RECEIVER’S ANAL REPORT AND ACCOUNTING

Los ANGELES AND RELATED RELIEFLA:17767333,1


1 1 declare under penalty of perjury that the foregoing is true and correct and

2 that this declaration was executed on August 3, 2010, at Sun Valley, California.

5 BRICK KANE

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28MCKIENNALONC& 10‘-U,ATTOkNYS AT LAW DECLARATION OF BRICK KANE ISO MOTION FOR ORDER APPROVING RECEIVERS FINAL REPORT AND ACCOUNTING

Los AOELES AND RELATED RELIEFLA: 17 7673 33. I


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