Opinion
Civil Action No. 3:04-CV0351-N
February 19, 2004
ORDER FREEZING ASSETS AND GRANTING OTHER RELIEF
This matter came before the Court this 19 day of February, 2004, on ex parte motion of the Securities and Exchange Commission (Commission"), for the issuance of: (1) an order freezing assets, (2) an order requiring Defendants and Relief Defendant to provide accountings of the receipts of trading profits and proceeds of the sale of stock, including account identification; (3) an order requiring repatriation of offshore funds, (4) an order preventing document alteration or destruction, (5) an order for expedited discovery, and (6) an order authorizing alternative means for service of process. Having considered the Commission's Complaint, supporting memorandum, declarations and exhibits thereto and the argument of counsel, the Court finds:
1. This Court has jurisdiction over the subject matter of this action and over all parties hereto, and the Commission is a proper party to bring this action seeking the relief sought in its Complaint.
2. There is good cause to believe that Defendants have engaged in acts and practices that violate Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and that the Relief Defendant has received proceeds of the Defendants' unlawful activity under circumstances in which in would be inequitable for it to retain the property.
3. The Commission has made a sufficient showing that neither written nor oral prior notice need be given to the Defendants or Relief Defendant because it is likely that assets may be dissipated if such notice were given.
3. There is good cause to believe that proceeds of the unlawful activities described in the Commission's Complaint may be outside the jurisdiction of this Court, and that Defendants have assets and business activities outside the jurisdiction of this Court.
IT IS THEREFORE ORDERED:
I.
Defendants and Relief Defendant, their officers, agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise are restrained and enjoined from, directly or indirectly, making any payment or expenditure of funds, incurring any additional liability (including, specifically, by advances on any line of credit and any charges on any credit card), or effecting any sale, gift, hypothecation or other disposition of any asset, pending provision of sufficient proof to the Court of sufficient funds or assets to satisfy all claims alleged in the Commission's Complaint, or the posting of a bond or surety sufficient to assure payment of any such claim. Further, any bank, trust company, broker-dealer or other depository institution holding accounts for or on behalf of any of the Defendants shall make no transactions in securities (excepting liquidating necessary as to wasting assets) and no disbursement of funds or securities (including extensions of credit, or advances on existing lines of credit), including the honor of any negotiable instrument (including, specifically, any check, draft, or cashier's check) purchased by or for the Defendants, pending further order of this Court.
II.
To effectuate the provisions of Paragraph I, the Commission may cause a copy of this Order to be served on any bank, savings and loan, broker-dealer or other financial or depository institution either by United States mail or by facsimile as if such service were personal service, to restrain and enjoin any such institution from disbursing funds, directly or indirectly, to or on behalf of Defendants, or any companies or persons or entities under their control.
III.
Defendants and Relief Defendant shall make an interim accounting under oath, within ten days of the issuance of this Order or three days prior to the hearing on the Commission's application for preliminary injunction and other relief, whichever is sooner, detailing by amount, date, method and location of transfer, payee and payor, purpose of payment or transfer: (a) all monies and other benefits they received, directly and indirectly, from or as a result of the activities alleged in the Complaint or thereafter transferred; (b) all receipts of trading profits and the proceeds of any sale of iDial Networks, Inc. ("iDial") stock from August 1, 2003 to the present; (c) account identifying information, including name of bank, trust company, brokerage firm or other depository institution holding iDial stock or proceeds of the sale of iDial stock; account numbers; names, dates of birth, addresses and social security numbers of signatories on any such account. The accounting shall be sufficient to permit a full understanding of the flow of funds relating to the activities alleged in the Complaint to the extent known by Defendants or Relief Defendant, or within their power to learn. The accounting and all documents reviewed in the course of the preparation thereof or otherwise pertaining thereto shall be delivered by facsimile or overnight courier to Toby M. Galloway, Securities and Exchange Commission, 801 Cherry Street, 19th Floor, Fort Worth, Texas 7'6102 by the deadline set forth above.
IV.
Defendants and Relief Defendant shall immediately repatriate all funds and assets that were obtained, directly or indirectly, from the activities described in the Commission's Complaint and that are now located outside the jurisdiction of this Court. Such funds shall be immediately transferred or paid into the Registry of this Court. Securities, or other personal property that can be readily moved or transferred, and titled or other documents reflecting ownership as to real property, shall be delivered into the Registry of this Court as soon as possible.
V.
Defendants and Relief Defendant, and their agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, are restrained an enjoined from destroying, removing, mutilating, altering, concealing or disposing of, in any manner, any of their books and records or any documents relating in any manner to the matters set forth in the Commission's Complaint, or the books and records of any entities under their control, until further order of this Court.
VI.
A. All parties may take depositions upon oral examination, and demand production of documents or other things, of parties and persons who are not parties prior to the expiration of 30 days after service of the Commission's Complaint upon Defendants.
B. All parties shall comply with the provisions of Rule 45 of the Federal Rules of Civil Procedure, regarding issuance and service of subpoenas, unless the provision of testimony or productions of documents is agreed to by the person(s) subpoenaed.
C. Pursuant to Rule 30(a) of the Federal Rules of Civil Procedure, all parties may take depositions upon oral examination, subject to 72 hours' notice.
D. All depositions in this action, unless properly noticed to take place elsewhere, shall be taken within the United States.
E. Pursuant to Rule 34(b) of the Federal Rules of Civil Procedure, the parties shall produce all documents requested within 72 hours of such request.
F. All written responses to any parties' requests for discovery under the Federal Rules of Civil Procedure shall be delivered by facsimile or overnight courier to Toby M. Galloway, Securities and Exchange Commission, 801 Cherry Street, 19th Floor, Fort Worth, Texas 76102, or such other place as counsel may direct.
VII.
A. Pursuant to Rule 4 of the Federal Rules of Civil Procedure, service of all pleadings and other papers, including the Summons, the Complaint, this Order and all documents filed in support thereof, and all other documents to be served in this action, may be made by serving such documents on the domestic brokerage firms through with Defendants effected their trades of iDial stock or on the Defendants' and Relief Defendant's foreign agents.
B. Pursuant to Rule 4 of the Federal Rules of Civil Procedure, service of all pleadings and other papers, including the Summons, the Complaint, and court orders may be made personally, by facsimile, by overnight courier, or by mail upon Defendants, Relief Defendant or their attorneys by representatives of the Plaintiff Commission, or by an alternative provision for service permitted by Rule 4 of the Federal Rules of Civil Procedure, including the issuance of letters rogatory, or as this Court may direct by further order.
C. Upon submission by the SEC of appropriate forms of letters rogatory, the Court shall sign, and the Clerk of this Court shall promptly execute and return to counsel for the SEC for transmission to the appropriate foreign judicial authorities copies of the summons, complaint, and this Order for service upon Defendants and Relief Defendant pursuant to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents or the Inter-American Service Convention.
VIII.
The hearing on the Commission's motion for a preliminary injunction shall take place at 900 o'clock A.m. on Februay 28, 2004, in Courtroom 1358 w at such other time or place as counsel may be heard, and that the Defendants, and each of them, shall serve any papers in opposition to the Commission's motion so as to be received no later than five days before the time established in this Order for a hearing on the application. Service shall be made by telecopy to Toby M. Galloway, Trial Counsel, at telecopy number (817) 978-4927, and by overnight delivery of the papers to the Commission, 801 Cherry Street, Suite 1900, Fort Worth, Texas, 76102, to the attention of Toby M. Galloway, Trial Counsel, or such other place and person as counsel for the Commission may direct in writing.