Opinion
David J. Van Havermaat, Cal. Bar No. 175761, Alka N. Patel, Cal. Bar No. 175505, Janet Rich Weissman, Cal. Bar No. 137023, Katharine E. Zoladz, Cal. Bar No. 254867, Attorneys for Plaintiff.
Securities and Exchange Commission, Rosalind R. Tyson, Regional Director, Michele Wein Layne, Associate Regional Director
[PROPOSED] PRELIMINARY INJUNCTION AND ORDERS: (1) FREEZING ASSETS, (2) REQUIRING ACCOUNTINGS; (3) PROHIBITING THE DESTRUCTION OF DOCUMENTS, AND (4) GRANTING EXPEDITED DISCOVERY
MARGARET M. MORROW District Judge.
This matter came to be heard upon Plaintiff Securities and Exchange Commission's ("Commission") Ex Parte Application For A Temporary Restraining Order and Orders: (1) Freezing Assets; (2) Requiring Accountings; (3) Prohibiting The Destruction Of Documents; And (4) Granting Expedited Discovery; And Order To Show Cause Re Preliminary Injunction (the "Application"). On May 4, 2011, the Court granted the Commission's Application and issued a Temporary Restraining Order and Orders: (1) Freezing Assets; (2) Requiring Accountings; (3) Prohibiting The Destruction Of Documents; And (4) Granting Expedited Discovery; And Order To Show Cause Re Preliminary Injunction, which ordered Butler to show cause, if there be any, why a preliminary injunction should not be granted in accordance with the complaint filed by the Commission. On May 11, 2011, the Court extended the Temporary Restraining Order until June 6, 2011.
The Court, having considered the Commission's Complaint, the Application, the supporting Memorandum of Points and Authorities, the Notice of Non-Receipt of Opposition to Order to Show Cause Re Preliminary Injunction, the Declarations and Exhibits, and all other evidence and argument presented, finds that:
A. This Court has jurisdiction over the parties to, and the subject matter of, this action.
B. Good cause exists to believe that Defendant Robert C. Butler ("Defendant" or "Butler") has engaged in, is engaging in, and is about to engage in transactions, acts, practices and courses of business that constitute violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77q(a), Section 10(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), (2) and (4) of the Investment Advisers Act of 1940 ("Advisers Act"), 15 U.S.C. §§ 80b-6(1), (2) and (4), and Rule 206(4)-8 thereunder, 17 C.F.R. § 275.206(4)-8.
C. The Commission has demonstrated a probability of success on the merits and the possibility of dissipation of assets.
D. Good cause exists to believe that defendant Butler will continue to engage in such violations to the immediate and irreparable loss and damage to investors and to the general public unless he is restrained and enjoined.
I.
IT IS HEREBY ORDERED that the Commission's Application for a Preliminary Injunction and Orders: (1) Freezing Assets, (2) Requiring Accountings, (3) Prohibiting The Destruction Of Documents, and (4) Granting Expedited Discovery is GRANTED.
II.
IT IS FURTHER ORDERED that defendant Butler, and his agents, servants, employees, attorneys, and affiliates, and those persons in active concert or participation with any of them, who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are preliminarily restrained and enjoined from, directly or indirectly, in the offer or sale of any securities, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails:
A. employing any device, scheme or artifice to defraud;
B. obtaining money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or
C. engaging in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser;
in violation of Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a).
III.
IT IS FURTHER ORDERED that defendant Butler, and his agents, servants, employees, attorneys, and affiliates, and those persons in active concert or participation with any of them, who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are preliminarily restrained and enjoined from, directly or indirectly, in connection with the purchase or sale of any security, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange:
A. employing any device, scheme or artifice to defraud;
B. making any untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
C. engaging in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person;
in violation of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
IV.
IT IS FURTHER ORDERED that, defendant Butler, and his agents, servants, employees, attorneys, and affiliates, and those persons in active concert or participation with any of them, who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are preliminarily restrained and enjoined from, directly or indirectly, by the use of mails or means or instrumentalities of interstate commerce:
A. employing devices, schemes and artifices to defraud clients or prospective clients; or
B. engaging in transactions, practices, and courses of business which operate as a fraud or deceit upon clients or prospective clients;
in violation of Sections 206(1) and (2) of the Advisers Act, 15 U.S.C. §§ 80b-6(1) and (2).
V.
IT IS FURTHER ORDERED that defendant Butler, and his agents, servants, employees, attorneys, and affiliates, and those persons in active concert or participation with any of them, who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are preliminarily restrained and enjoined from, directly or indirectly, by the use of the mails or any means or instrumentality of interstate commerce, while acting as an investment adviser to a pooled investment vehicle:
A. making any untrue statement of a material fact or omitting to state a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading, to any investor or prospective investor in a pooled investment vehicle;
B. engaging in any act, practice, or course of business that is fraudulent, deceptive, or manipulative with respect to any investor or prospective investor in a pooled investment vehicle;
in violation of Section 206(4) of the Advisers Act, 15 U.S.C. § 80b-6(4), and Rule 206(4)-8 thereunder, 17 C.F.R. § 275.206(4)-8.
VI.
IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, defendant Butler, and his agents, servants, employees, attorneys, and affiliates, and those persons in active concert or participation with any of them, who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are preliminarily restrained and enjoined from, directly or indirectly:
A. transferring, assigning, selling, hypothecating, changing, wasting, dissipating, converting, concealing, encumbering, or otherwise disposing of, in any manner, any funds, assets, securities, claims, or oher real or personal property, wherever located, of defendant Butler, whether owned by, controlled by, managed by or in his possession or custody;
B. transferring, encumbering, dissipating, incurring charges or cash advances on any debit or credit card or credit arrangement of defendant Butler.
VII.
IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, an immediate freeze shall be placed on all monies and assets in all accounts at any bank, financial institution or brokerage firm, all certificates of deposit, and other funds or assets, held in the name of, for the benefit of, or over which account authority is held by defendant Robert C. Butler, or any trust, partnership, joint venture, person or entity affiliated with any of them (including subsidiaries), including, but not limited to, the accounts set forth below:
________________________________________________________________________ Company Account Name Account Number ________________________________________________________________________ Bank of America Robert C. Butler xxxxxx6699 ________________________________________________________________________ Rabobank Robert C. Butler xxxxxxx3677 ________________________________________________________________________ TD Ameritrade Robert C. Butler xxx-xx8834 Scottsdale Capital Bob Butler xxxx1880 Advisors ________________________________________________________________________ Union Bank Robert C. Butler xxxxxx7535 Wells Fargo Bank Robert C. Butler xxxxxx6328 ________________________________________________________________________ xxxxxx4212
Notwithstanding the asset freeze provisions of this Section, defendant may, upon compliance with the financial reporting requirements herein, utilize assets otherwise subject to the freeze to pay for reasonable attorney's fees, subject to prior written agreement with the Commission.
Notwithstanding the asset freeze provisions of this Section, defendant may, upon compliance with the financial reporting requirements herein, pay from his individual personal funds reasonable, usual, ordinary and necessary living expenses subject to prior written agreement with the Commission.
VIII.
IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, defendant Butler, and his agents, servants, employees, attorneys, and affiliates, and those persons in active concert or participation with any of them, who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are preliminarily restrained and enjoined from, directly or indirectly: destroying, mutilating, concealing, transferring, altering, or otherwise disposing of, in any manner, any documents, which includes all books, records, computer programs, computer files, computer printouts, contracts, correspondence, memoranda, brochures, or any other documents of any kind in their possession, custody or control, however created, produced, or stored (manually, mechanically, electronically, or otherwise), pertaining in any manner to defendant Butler.
IX.
IT IS FURTHER ORDERED that the Commission's application for expedited discovery is granted and that the Commission may take depositions upon oral examination and obtain document production from parties and non-parties subject to two business days notice; and may serve interrogatories and requests for admissions, subject to response within five calendar days of service. Service of all expedited discovery requests shall be proper if made upon the parties by facsimile, electronic mail, or overnight courier.
X.
IT IS FURTHER ORDERED that defendant Butler shall, immediately upon the issuance of this Order, prepare and deliver to the Commission a detailed and complete schedule of all of his assets, including all real and personal property exceeding $5,000 in value, and all bank, securities, futures and other accounts identified by institution, branch address and account number. The accountings shall include a description of the source(s) of all such assets. Such accountings shall be filed with the Court and copies shall be delivered to the attention of David Van Havermaat at the Commission's Los Angeles Regional Office, located at 5670 Wilshire Blvd., Los Angeles, CA 90036. After completion of the accountings, defendant Butler shall produce to the Commission's Los Angeles Regional Office, at a time agreeable to the Commission, all books, records and other documents supporting or underlying his accountings.
XI.
IT IS FURTHER ORDERED that this Court shall retain jurisdiction over this action for the purpose of implementing and carrying out the terms of all orders and decrees which may be entered herein and to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.
IT IS SO ORDERED.