Stettin V. Rothstein, Emergency Injunction Motion

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 1 of 30

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA (FORT LAUDERDALE DIVISION) In re

CASE NO. 09-34791-BKC-RBR CHAPTER 11

ROTHSTEIN ROSENFELDT ADLER, P.A., Debtor. / HERBERT STETTIN, not individually but as Chapter 11 Trustee of the estate of the Debtor, Rothstein Rosenfeldt Adler, P.A., Plaintiff, v. SCOTT WALTER ROTHSTEIN; 29 BAHIA, LLC; 235 GC, LLC; 350 LOP # 2840, LLC; 353BR, LLC; 708 SPANGLER, LLC; 1012 BROWARD, LLC; 1198 DIXIE, LLC; 1299 FEDERAL, LLC; 2133 IP, LLC; 10630 # 110, LLC; 15158, LLC; AAMG, LLC; AAMG1, LLC; AAMM HOLDINGS, LLC; ABT INVESTMENTS, LLC; ADVANCED SOLUTIONS, LLC; BAHIA PROPERTY MANAGEMENT, LLC; BOAT ANAGEMENT, LLC; BOSM HOLDINGS, LLC; BOVA PRIME, LLC; BOVA RESTAURANT GROUP, LLC; THE BOVA GROUP, LLC; BOVA SMOKE, LLC; BOVCU, LLC; BOVRI, LLC; CI 07, LLC; CI 08, LLC; CI 16, LLC; CI 27, LLC; CSU, LLC; D & D MANAGEMENT & INVESTMENT, LLC; D & S MANAGEMENT AND INVESTMENT, LLC; DJB FINANCIAL HOLDINGS, LLC; DYMMU, LLC; FIFTH COURT FINANCIAL, LLC; FULL CIRCLE FT. LAUDERDALE, LLC; GHW1, LLC; IDNLGEAH, LLC; ILK3, LLC; IS MANAGEMENT, LLC; JUDAH, LLC; NF SERVICING, LLC; NRI 11, LLC; NRI 15, LLC; NS HOLDINGS, LLC; BFHI, LLC; PK ADVENTURES, LLC; PK’S WILD RIDE, LTD; ROTHSTEIN FAMILY FOUNDATION, INC.; RRA CONSULTING, INC.; RRA GOAL LINE MANAGEMENT, LLC; RRA SPORTS & ENTERTAINMENT, LLC; RSA 11TH ST, LLC; RW

ADV. NO. 09-02478-BKC-RBR-A

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 2 of 30

COLLECTIONS, LLC; S&KEA, LLC; SCORH, LLC; TIPP, LLC; VGS, LLC; THE WALTER FAMILY, LLC; WALTER INDUSTRIES, LLC; WPBRS, LLC; REN GROUP, LLC; CCCN, LLC; TB22N, LLC; TLBN, LLC; UG, LLC; SPAC INVESTMENTS, LLC; GBPT, LLC; RET GROUP, LLC; REP GROUP, LLC; REC GROUP, LLC; REV GROUP, LLC; VGSI, LLC; QT, LLC; WAWW, LLC; WAWW 2, LLC; WAWW 3, LLC; WAWW 4, LLC; WAWW 5, LLC; WAWW 6, LLC; WAWW 7, LLC; WAWW 8, LLC; WAWW 9, LLC; WAWW 10, LLC; WAWW 11, LLC; WAWW 12, LLC; WAWW 13, LLC; WAWW 14, LLC; WAWW 15, LLC; WAWW 16, LLC; WAWW 17, LLC; WAWW 18, LLC; WAWW 19, LLC; WAWW 20, LLC; WAWW 21, LLC; WAWW 22, LLC; MRISC, LLC; RES GROUP, LLC; JJ FINANCE HOLDINGS, LLC; MLC 350, LLC; and JB BOCA M HOLDINGS, LLC, Defendants. / EMERGENCY MOTION AND SUPPORTING MEMORANDUM OF LAW OF THE PLAINTIFF, CHAPTER 11 TRUSTEE HERBERT STETTIN, FOR ENTRY OF PRELIMINARY INJUNCTION AND FOR OTHER RELIEF AND REQUEST FOR JUDUCIAL NOTICE [EMERGENCY HEARING REQUESTED ON OR BEFORE DECEMBER 4, 2009] Herbert Stettin, not individually but as Chapter 11 Trustee for the estate of Rothstein Rosenfeldt Adler P.A. (“RRA” or the “Debtor”), files this Emergency Motion For Entry of a Preliminary Injunction and for Other Relief and Request for Judicial Notice, pursuant to Rule 65 of the Federal Rules of Civil Procedure, as incorporated into Rule 7065 of the Federal Rules of Bankruptcy Procedure, Section 105(a) of Title 11 of the United States Code (hereinafter the “Bankruptcy Code”) and Fed. R. Evid. 201, and says

2

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 3 of 30

I. PRELIMINARY STATEMENT AND LOCAL RULE 9075-1 CERTIFICATION OF BASIS FOR EMERGENCY HEARING By this Motion, the Trustee seeks the entry of a preliminary injunction with notice to be established at a hearing to be scheduled by the Court. In his nine-count Verified Adversary Complaint for Damages and Other Relief (the “Rothstein Complaint”) filed December 1, 2009, the Trustee is asserting claims against Scott W. Rothstein (“Rothstein”) and his affiliated alter ego business entities (collectively referred to herein as the “Rothstein Entities”) seeking, among other relief, substantive consolidation of Rothstein and the Rothstein Entities with and into the estate of the Debtor, an alter ego liability determination, for turnover of property of the estate, to avoid and recover fraudulent transfers from RRA to Rothstein and the Rothstein Entities (the “Avoidable Transfers” and for the entry of an order granting preliminary and permanent injunctive relief. [DE # 1]. Specifically, the Adversary Complaint seeks the following relief against Rothstein and the Rothstein Entities: ●

Count I - Action Seeking to Substantively Consolidate Non-Debtor Rothstein and the Non-Debtor Rothstein Entities with and into the Bankruptcy Estate of the Debtor.

●

Count II – Action to Impose Alter Ego Liability upon Rothstein and the Rothstein Entities for the Debts and Liabilities of the Debtor, and to Pierce the Corporate Veil of the Rothstein Entities for the Benefit of the Debtor.

●

Count III - Action Requesting the Entry of a Preliminary and Permanent Injunction against Rothstein and the Rothstein Entities as Alter Egos of the Debtor.

3

Case 09-02478-RBR

●

Doc 2

Filed 12/02/09

Page 4 of 30

Count IV - To the Extent the Court Grants the Relief Demanded in Counts I and/or II Above, Action Seeking Turnover of Property of the Debtor’s Bankruptcy Estate Pursuant to Section 542 of the Bankruptcy Code, as Well as an Accounting in Connection therewith.

●

Count V - Action to Avoid and Recover Fraudulent Transfers from RRA to Rothstein and the Rothstein Entities (Defined Herein as the Avoidable Transfers).

●

Count VI - Action for Conversion against Rothstein and the Rothstein Entities

●

Count VII - Action for Unjust Enrichment against Rothstein and the Rothstein Entities.

●

Count VIII - Action for an Accounting against Rothstein and the Rothstein Entities.

●

Count IX - Action for Breach of Fiduciary Duty against Rothstein.

Rothstein, a disbarred attorney who was arrested by the U.S. government yesterday and charged with a federal criminal information, caused significant funds to be transferred out of the Debtor’s financial institution accounts and utilized those funds to acquire contractual rights and property interests for Rothstein and the Rothstein Entities. After the revelation of Rothstein’s fraud, Rothstein has failed to protect and preserve his assets and the assets of the Rothstein Entities or even respond to correspondence from creditors stating their intent to declare a forfeiture of the contractual rights and property interests of Rothstein and/or the Rothstein Entities. An emergency hearing is requested because there is a significant likelihood that the Debtor’s estate will suffer irreparable harm if the assets of Rothstein and Rothstein Entities are not protected and preserved by the entry of preliminary injunction. Specifically, an emergency

4

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 5 of 30

hearing is necessary and appropriate based upon, among other things: (i) the magnitude of Rothstein’s fraud in terms of the significant number of creditors, substantial dollar amounts, international scope, and the significant number of yet to be identified individuals who likely acted in concert with him and who likely continue to have possession, custody or control of assets belonging to Rothstein and/or the Rothstein Entities; and (ii) the assertion and/or exercise of rights by creditors who continue to declare forfeitures of contractual rights and property interests belonging to Rothstein and the Rothstein Entities without a defense being interposed thereto. A preliminary injunction would serve to maintain the status quo and preserve this Court’s ability to award equitable relief and provide for a fair distribution to the Debtor’s creditors. The Trustee likewise satisfies all of the necessary elements to obtain injunctive relief: (1) given the substantial, undisputed proof establishing the fraudulent nature of Rothstein’s Ponzi scheme activities and the use of RRA bank accounts and or the alter ego Rothstein Entities in perpetrating the scheme, the Trustee has a substantial likelihood of the success on the merits; (2) because the assets of Rothstein and the Rothstein Entities are comprised of funds transferred to them from RRA, the bankruptcy estate will suffer substantial harm if an injunction is not imposed because cash and other assets will continue to be further transferred and/or dissipated; (3) the harm, if any, to be suffered by Rothstein or the Rothstein Entities will be outweighed by the substantial harm that will befall the estate if an injunction is not imposed; and (4) the public interest will best be served if an injunction is imposed to protect, among other things, the estate, creditors and other parties in interest to the recovery of funds that are the subject of Rothstein’s fraudulent scheme. The entry of a preliminary injunction is necessary and appropriate to assist the Trustee in the recovery of property of the estate totaling in excess of $500 million that was

5

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 6 of 30

wrongfully diverted to Rothstein and Rothstein Entities as part of a fraudulent scheme to hinder, delay or defraud creditors. II. FACTS SUPPORTING RELIEF REQUESTED1 A.

The Parties, Jurisdiction & Venue 1.

RRA was a law firm that was incorporated in the State of Florida on February 7,

2002. RRA maintained a principal office at 401 East Las Olas Boulevard, Suite 1650, Fort Lauderdale, Florida, with satellite offices in Miami, Boca Raton, West Palm Beach and New York City. 2.

Rothstein is an individual who resides in Broward County, Florida.

3.

Until he was permanently disbarred by Order of the Florida Supreme Court dated

November 25, 2009, Rothstein had been a member of the Florida Bar since 1988 and, prior to November 2, 2009, was RRA’s Chief Executive Officer and fifty percent shareholder. 4.

The Rothstein Entities are limited liability companies, limited partnerships, and/or

corporations organized and existing under the laws of the States of Florida, Delaware and New York and/or other domestic or foreign jurisdictions. The Rothstein Entities were not separate and distinct legal entities from RRA because their existence was directly attributable to, and entirely dependent upon, the operations of RRA. At all times material hereto, the Rothstein Entities, among other things, conducted business from RRA’s offices, were funded with monies provided by RRA, and utilized RRA’s personnel and office equipment to conduct business. 5.

At all times material hereto, Rothstein caused RRA to transfer funds to, between

and/or among RRA, Rothstein and the Rothstein Entities, while RRA, through Rothstein, 1

The facts supporting this Motion are numbered herein as Paragraph Nos. 1-30 in Paragraphs A and B below with the same paragraph numbers as referenced in the Rothstein Complaint, and are quoted in their entirety herein.

6

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 7 of 30

continued to exercise dominion and control of and over such funds, which were thereafter used to acquire real and personal property of substantial value for Rothstein and the Rothstein Entities. The precise nature, extent and whereabouts of all of the assets of Rothstein and the Rothstein Entities are not yet fully known, except that certain valuable assets of Rothstein and the Rothstein Entities were seized by the U.S. government during November, 2009. 6.

On November 2, 2009, Stettin was appointed as RRA’s Receiver. On November

11, 2009, Stettin was appointed as RRA’s Chief Restructuring Officer, and thereafter by Order dated November 20, 2009, was appointed Chapter 11 Trustee of RRA. 7.

The Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. §§

157(a), 1334(b), 2201 and 2202. 8.

This is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A), (B), (C), (E),

(H) and (O), and the Trustee consents to the entry of final orders and judgment by the Bankruptcy Court. 9. B.

Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409.

The Common Factual Allegations for Each Count 10.

On November 10, 2009 (the “Petition Date”), a group of petitioning creditors filed

an involuntary petition for reorganization under Chapter 11 of Title 11 of the United States Code ... against RRA in the wake of allegations, which have proven to be true, that Rothstein had perpetrated a massive Ponzi scheme. 11.

The involuntary petition was filed after RRA learned that Rothstein utilized

RRA’s business to fraudulently secure investments in fictitious structured settlements and that Rothstein funneled those investments funds through accounts labeled as “trust accounts” titled in

7

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 8 of 30

the name of RRA, as well as RRA’s other financial institution accounts, to Rothstein personally and to the Rothstein Entities. 12.

Rothstein represented to prospective investors that certain clients of RRA had

claims which were settled and that the defendants were obligated to pay settlement proceeds to RRA for the benefit of the clients over an extended period of time. 13.

Rothstein further represented that certain clients of RRA were willing to assign

their interests in the periodic payments in exchange for an immediate discounted lump sum payment. 14.

As part of his scheme, Rothstein offered prospective investors the opportunity to

pay discounted lump sum payments to RRA for the purported benefit of its clients in exchange for assignments by the clients of their interest in the full periodic payments. 15.

To accomplish this scheme, Rothstein provided prospective investors with a copy

of a redacted contingency fee agreement between RRA and its client, a copy of a redacted settlement agreement between RRA’s client and the purported defendant, a sale and transfer agreement, an acknowledgement of assignment/purchase of settlement proceeds agreement, a guaranty executed by Rothstein both personally and on behalf of RRA, a defense agreement, a copy of a redacted wire transfer confirmation purporting to evidence the payment of the settlement proceeds into RRA’s trust account, and correspondence detailing the transaction on RRA’s letterhead. 16.

Rothstein falsified the existence of the client, falsified the existence of the

settlement, falsified the existence of the settlement proceeds, falsified the documents, and misappropriated the investor funds to himself and to the Rothstein Entities.

8

Case 09-02478-RBR

17.

Doc 2

Filed 12/02/09

Page 9 of 30

As part of his scheme, Rothstein utilized his position as an attorney and as an

owner and officer of RRA, his relationship with existing clients of RRA and RRA’s financial institution accounts in order to effectuate the fraudulent sale of fictitious structured settlements. 18.

In sum, Rothstein utilized the RRA law firm to perpetrate a fraudulent scheme by

engaging in the sale of non-existent structured settlements. 19.

Rothstein used the staff and premises of the RRA law firm as his command center

for his fraudulent scheme to benefit himself and the Rothstein Entities. 20.

Indeed, while the scheme was ongoing, RRA rapidly grew from a 7 attorney [law

firm] in 2002, to 70 attorneys and 80 support staff in 2009. Prior to 2005, Rothstein was a virtual unknown in legal, political, and charitable circles. Subsequent to 2005, Rothstein and RRA gained the reputation of being a premier law firm with significant political and charitable connections. Rothstein’s Ponzi scheme provided the monies necessary for RRA’s operations and growth.

Moreover, substantially all funds flowed to and through RRA’s bank accounts to

Rothstein and the Rothstein Entities. 21.

Upon information and belief, Rothstein bilked investors out of more than five

hundred million dollars. A recently published article quoted an F.B.I. source as saying the actual figure could be as high as $1 Billion. 22.

RRA filed a Complaint against Rothstein in Broward County Circuit Court on

November 2, 2009, and Stettin was appointed as RRA’s Receiver on November 4, 2009. 23.

The Order Appointing Receiver found that Rothstein had relinquished his

authority with respect to the firm’s management by virtue of, inter alia, his failure to appear at the duly noticed hearings.

9

Case 09-02478-RBR

24.

Doc 2

Filed 12/02/09

Page 10 of 30

On or about November 4, 2009, federal authorities executed a search warrant and

seized various records from RRA’s offices. 25.

On November 9, 2009, the United States filed a Verified Complaint for Forfeiture

In Rem against eight real properties purchased by, with, or on behalf of Rothstein or through the Rothstein Entities (the “Forfeiture Complaint”), followed by an Amended Verified Complaint for Forfeiture In Rem filed on November 23, 2009, against various other real properties, vehicles, and vessels, tangibles, bank accounts, business interests, and contributions (the “Amended Forfeiture Complaint”). 26.

On or about November 9, 2009, federal authorities seized other assets, including

motor vehicles, yachts, watches, jewelry and other personal property titled in the name of Rothstein and the Rothstein Entities. 27.

The Amended Forfeiture Complaint alleges that: (a)

Rothstein operated a Ponzi scheme since approximately 2005 and acquired the subject properties in connection with such Ponzi scheme;

(b)

investor monies generated through the Ponzi scheme were deposited into RRA’s trust account;

(c)

these types of fraudulent investments had been offered by Rothstein to a variety of persons and entities throughout the United States for at least four years in a scheme involving hundreds of millions of dollars; and

(d)

Rothstein purchased many properties in the names of nominee corporations including “C1 07 LLC,” “C1 08 LLC,” “C1 16 LLC,” “29 Bahia LLC,” “MLC 350 LLC,” “350 LOP # 2840 LLC,” and “JB Boca M Holdings LLC,” each of which are named Defendants in this action.

10

Case 09-02478-RBR

28.

Doc 2

Filed 12/02/09

Page 11 of 30

At all times material hereto, Rothstein formed, operated or otherwise treated RRA

and the Rothstein Entities as his alter egos and as his mere instrumentality in committing the fraud described hereinabove. 29.

For all purposes, Rothstein, the Rothstein Entities, and RRA were single

economic entities and RRA and the Rothstein Entities simply functioned as a façade for Rothstein as their dominant shareholder. 30.

By notice filed November 25, 2009, RRA, by and through the Trustee, consented

to the entry of an Order for Relief under Chapter 11 of the Bankruptcy Code. As such, the Trustee is the duly authorized fiduciary on behalf of the Debtor. C.

Other Facts Supporting the Relief Requested (the Co-Conspirators) The recent events surrounding Rothstein and the Debtor have been widely publicized in

local and national media account. As set forth in the Rothstein Complaint, Rothstein utilized the Debtor and the Debtor’s financial institution accounts to fraudulently secure investments in fictitious structured settlements. The funds obtained through Rothstein’s Ponzi scheme were initially deposited into the Debtor’s financial institution accounts, and subsequently transferred to Rothstein and the Rothstein Entities. Rothstein then utilized those funds to obtain contractual rights and property interests of substantial value for himself and the Rothstein Entities. It has been reported that Rothstein allegedly bilked creditors out of more than $1 billion. It is believed that Rothstein acted in concert with other individuals in perpetrating the fraud and that such other individuals held contractual rights or property interests as nominees for Rothstein (hereinafter the “co-conspirators”). The identities of the co-conspirators have not yet been determined. The coconspirators continue to maintain possession, custody, and/or control over contractual rights

11

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 12 of 30

and/or property interests of Rothstein and the Rothstein Entities including, but not limited to, the ability to transfer, conceal, dissipate, and/or destroy such assets. Rothstein and the co-conspirators have also failed to take the necessary actions to protect and preserve the contractual rights and property interests of Rothstein and the Rothstein Entities. By way of example, on November 2, 2009 Iron Street Management, LLC (hereinafter “Iron Street”) forwarded a correspondence to WAWW9, LLC (hereinafter “WAWW9”), (a Rothstein entity and named Defendant in the Rothstein Complaint), notifying WAWW9 of its failure to make payments owed under a separation agreement and consequent default under an operating agreement (hereinafter the “Default Notice”).

The Default Notice states that WAWW9

membership interests in Iron Street would be forfeited within thirty days if the default is not cured within such time period. Upon information and belief, Iron Street owns an interest in a highly valuable health benefits consulting company known as Edify. A copy of the notice will be presented to the Court at the hearing on this Motion. Upon information and belief, Rothstein and the co-conspirators have failed to respond to Iron Street’s correspondence or to otherwise protect and preserve WAWW9’s contractual rights in Iron Street. Moreover, the Trustee has asserted claims that Rothstein and the Rothstein Entities are the alter egos of the Debtor, that the corporate veil of the Rothstein Entities should be pierced, and that the assets and liabilities of Rothstein and the Rothstein Entities should be consolidated with and into the Debtor’s estate. D.

The Trustee’s Request for Judicial Notice The Trustee requests the Court take judicial notice pursuant to Rule 201 of the Federal

Rules of Evidence of the dockets, pleadings and all papers filed in two related cases pending in the United States District Court for the Southern District of Florida. See Universal Foam v. Kohr

12

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 13 of 30

(In re Kohr), 399 B.R. 284, 287 (Bankr. M.D. Fla. 2008) (Court may take judicial notice of documents filed in a state court litigation related to the debtor) citing Fed. R. Evid. 201(b) (“A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot be reasonably questioned.”) Accordingly, the Trustee requests that the Court take judicial notice of the following documents: ●

The Verified Complaint for Forfeiture In Rem, Amended Verified Complaint for Forfeiture In Rem, case docket and all pleadings and papers filed in the case styled, United States of America v. Various Real Properties Purchased by or with or on behalf of Scott W. Rothstein, et al. (Case No. 09-CV-61780ZLOCH/ROSENBAUM) in the United States District Court for the Southern District of Florida (the “Forfeiture Case”). A copy of the case docket in the Forfeiture Case is attached hereto as Exhibit “A,” and a copy of the Amended Verified Complaint for Forfeiture In Rem is attached hereto as Exhibit “B.”

●

The Information, case docket and all pleadings and papers filed in the case styled United States of America v. Scott W. Rothstein (Case No. 09-CR-60331-JIC-1), in the United States District Court for the Southern District of Florida (the “Rothstein Criminal Case”). A copy of the case docket in the Rothstein Criminal Case is attached hereto as Exhibit “C,” and a copy of the Information filed against Scott W. Rothstein is attached hereto as Exhibit “D.” Legal Argument and Citation to Authority

A.

Legal Standard for Obtaining a Preliminary Injunction

13

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 14 of 30

A plaintiff is entitled to preliminary injunctive relief upon showing (1) there is a substantial likelihood that the moving party will prevail on the merits; (2) the moving party will suffer irreparable injury if the injunction is not granted; (3) the threatened injury to the moving party outweighs the threatened harm the proposed injunction may cause the opposing party; and, (4) the injunction, if issued, would not be adverse to the public interest.

Johnson v U.S.

Department of Agriculture, 734 F.2d 774, 781 (11th Cir. 1984); McDonald’s Corp. v. Robertson, 147 F. 3d 1301 (11th Cir. 1998). Moreover, pursuant to Fla. Stat. § 726.108 referenced as “Remedies of creditors” in regard to the avoidance of a fraudulent transfer, “subject to applicable principles of equity and in accordance with applicable rules of civil procedure ... [the court may issue] [a]n injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property...” (emphasis added). Further, where, such as here, a particular fund or piece of property is at issue (i.e., the funds of the Debtor that were fraudulently transferred and diverted to Rothstein and the Rothstein Entities), and where the final equitable relief sought is of the same character as the preliminary injunction (i.e., to establish an equitable lien/constructive trust against the funds and assets that are the subject of the Avoidable Transfers to Rothstein and the Rothstein Entities), the entry of a pre-judgment asset freeze is appropriate to preserve the status quo order in order to provide security for performance of a future order which may be entered by the court. Indeed, in cases such as this, even when money damages are sought in conjunction with equitable relief, it has been held that the entry of a freeze order is appropriate. See S.E.C. v. ETS Payphones, Inc., ___ F.3d ___, 2005 WL 1039650 (11th Cir. May 5, 2005) citing United States v. Oncology Assoc's, P.C., 198 F.3d 489, 498 (4th Cir. 1999) (holding that where equitable relief (disgorgement) and money damages are sought in the same action, an asset freeze is justified as a

14

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 15 of 30

means of preserving funds for the equitable remedy of disgorgement; inclusion of a claim for civil penalty damages does not make the remedies sought wholly legal and not equitable); Rosen v. Cascade Intern., Inc., 21 F.3d 1520 (11th Cir. 1994) (where money damages and the funds encumbered by the preliminary injunction are worth no more than the amount reasonably in controversy, the injunction does involve "a fund or property which could [be] the subject of the provisions of [a] final decree in the cause," rather than "a matter wholly outside the issues in the suit."); De Beers Consolidated Mines v. United States, 325 U.S. 212, 65 S.Ct. 1130, 89 L.Ed. 1566 (1945) (reversing entry of injunction as to property which in “no circumstances [could] be dealt with in any final injunction that [might] be entered.”). B.

The Entry of a Preliminary Injunction is Necessary and Appropriate

Applying the above factors and legal authorities to the instant case, the Trustee is entitled to the entry of an order granting preliminary injunctive relief against Rothstein and the Rothstein Entities. (1) The Trustee has a substantial likelihood he will prevail on the merits In the Rothstein Complaint, the Trustee seeks to substantively consolidate Rothstein and the Rothstein Entities with and into the estate of the Debtor as the alter egos of the Debtor, thereby warranting a piercing of the corporate veil of such entities. (See Complaint at Counts I & II). The Rothstein Complaint also seeks turnover or property of the estate and recovery of the Avoidable Transfers as fraudulent transfers in accordance with Section 544 of the Bankruptcy Code and Sections 726.105(1)(a), 726.105(1)(b) and/or 726.106(1) of the Florida Statutes and/or other applicable law. (See Complaint at Counts IV & V). a.

The Substantive Consolidation and Alter Ego Claims

15

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 16 of 30

Although the Bankruptcy Code does not specifically authorize bankruptcy courts to substantive consolidate entities and individuals, the broad equitable power detailed in Section 105(a) of the Bankruptcy Code has been recognized as the basis. See In re Munford, Inc., 115 B.R. 390, 397 (Bankr. N.D. Ga. 1990); In re Tureaud, 45 B.R. 658, 662 (Bankr. N.D. Okla. 1985); In re New Center Hosp., 179 B.R. 848, 853 (Bankr. E.D. Mich. 1994). Substantive consolidation may be limited to certain classes of claims, specific property, or may be appropriately conditioned. See In re Continental Vending Machine Corp., 517 F.2d 997, 1001 (2d Cir. 1975); In re Cooper, 147 B.R. 678, 682 (Bankr. D.N.J. 1992); In re Steury, 94 B.R. 553, 557 (Bankr. N.D. Ind. 1988). Courts have also authorized substantive consolidation of debtors and non-debtors. See Sampsell v. Imperial Paper Corp., 313 U.S. 215 (1941); In re United Stairs Corp., 176 B.R. 359 (Bankr. D. N.J. 1995); In re Crabtree, 39 B.R. 718 (Bankr. E.D. Tenn. 1984); In re 1438 Meridian Place N.W., Inc., 15 B.R. 89 (Bankr. D. D.C. 1981). Practically, substantive consolidation is similar to the state law remedy of piercing the corporate veil based on a finding that the entities are alter egos. See Cooper, 147 B.R. at 683-84. Piercing the corporate veil, however, is not a prerequisite to the utilization of the bankruptcy law remedy of substantive consolidation. Munford, 115 B.R. at 394 citing Tureaud, 59 B.R. at 97576; In re Snider, Inc., 18 B.R. 230, 234 (Bankr. D. Mass 1982). The bankruptcy remedy of substantive consolidation ensures the equitable distribution of property to all creditors, while on the other hand, piercing the corporate veil is a limited merger for the benefit of a particular creditor. Cooper, 147 B.R. at 683-84. Indeed, substantive consolidation of a non-debtor with a debtor has been deemed appropriate where a non-debtor is an alter ego of the debtor. See Sampsell, 313 U.S. at 218-19. An entity which is the alter ego of a debtor is not entitled to the safeguards to which a true

16

Case 09-02478-RBR

Doc 2

independent non-debtor would be entitled.

Filed 12/02/09

Page 17 of 30

See United Stairs, 176 B.R. at 369-70; 1438

Meridian Place, 15 B.R. at 97. Where non-debtor entities are alter egos of the debtor, the creditors have the right to move for extension and consolidation independent from the right to force those entities into bankruptcy pursuant to 11 U.S.C. § 303. See United Stairs, 176 B.R. at 370 (“[i]n a case involving alter egos where the non-debtor entities are not entitled to procedural safeguards and creditors will not be harmed by the lack of these protections, the court need not address the requirements of Section 303(b) to order substantive consolidation”); see also Crabtree, 39 B.R. at 721-22; Munford, 115 B.R. at 397. The court in Munford recognized that the substantive consolidation of a non-debtor’s assets with those of a debtor is substantially different from the involuntary petition remedy of Section 303 of the Bankruptcy Code and therefore does not circumvent the requirements of that provision. See id. The entire purpose of substantive consolidation is to recover assets from a financially sound affiliated entity in order to facilitate the debtor’s own reorganization or maximize value of the estate. The non-debtor is not an insolvent entity whose financial affairs need to be managed by the court. Therefore, substantive consolidation is a remedy separate and distinct from Section 303 of the Bankruptcy Code. See id. at 397-98. Under its general equitable powers, a bankruptcy court may substantively consolidate affiliate corporations within a pending case when the assets and liabilities of different entities are dealt with as if the assets were held by, and the liabilities were incurred by a single entity. Tureaud, 45 B.R. at 661 (“[i]t is clear, based on the inability of the Court and the creditors to reconcile and separate the financial affairs of the debtor and affiliate corporations, that consolidation will not work an injustice on the secured or unsecured creditors”); In re Creditors Svc. Corp., 195 B.R. 680, 691 (Bankr. S.D. Ohio 1987) (‘[i]n view of the state of the financial

17

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 18 of 30

records and the complex relationships, the cost of recovery proceedings in bankruptcy would substantially reduce or eliminate any possible return to creditors”); In re Baker & Getty Fin. Svcs., Inc., 78 B.R. 139, 142 (Bankr. N.D. Ohio 1987) (“[t]he extensive and unrestricted commingling of corporate and personal assets, combined with the inadequate substantiation of certain transfers, would compromise the accuracy of any segregation of the assets”); New Center Hosp., 179 B.R. at 855 (equities of the case required substantive consolidation of debtor with non-debtor entities as a “sufficient indicia of unity and entanglement are present, making the affairs is either impossible or so costly as to consume the assets of the estate”). In the Eleventh Circuit, substantive consolidation of non-debtor affiliates is a remedy permitted under Section 105 of the Bankruptcy Code. See Eastgroup Props. v. Southern Motel Assoc., Ltd., 935 F.2d 245 (11th Cir. 1991) (adopting the substantive consolidation test articulated by the District of Columbia Circuit in In re Auto-Train Corp., Inc., 810 F.2d 270 (D.C. Cir. 1997)). Applying a three party analysis, a movant seeking substantive consolidation must establish the following: (i)

The proponent must show a substantial identity between the entities to be consolidated;

(ii)

The proponent must show that consolidation is necessary to avoid some harm or to realize some benefit; and

(iii)

If a creditor objects and demonstrates that it relied upon the separate credit of one of the entities and that it will be prejudiced by the consolidation, then the court may order consolidation only if it determines that the demonstrated benefits of consolidation “heavily” outweigh the harm.

18

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 19 of 30

The first component of the test is similar to a state court alter ego analysis and the second and third components require a balancing of equities or benefits and harms of the substantive consolidation. New Center Hosp., 179 B.R. at 854. The Second Circuit also adopted a two-part test for substantive consolidation in Union Sav. Bank v. Augie/Restivo Baking Co., Ltd., (In re Augie/Restivo Banking Co., Ltd.) 860 F.2d 515, 518 (2d Cir. 1988) to determine: (i)

Whether creditors dealt with the entities as a single economic unit and did not rely on their separate identity in extending credit; or

(ii)

Whether the affairs of the debtors are so entangled that consolidation will benefit all creditors.

Treatment of the entities by creditors, or alternatively, the

complexity of the interrelationship of the entities. Both the Eleventh and the Second Circuits have adopted a seven-part objective inquiry into the inter-relationship of the debtor and non-debtor entities set forth in In re Vecco Constr., 4 B.R. 407 (Bankr. E.D. Va. 1980). The seven factors are: (i)

presence of absence of consolidated business or financial records;

(ii)

unity of interest and ownership between the debtors;

(iii)

the existence of parent and intercorporate guarantees on loans;

(iv)

degree of difficulty in segregating and ascertaining separate assets and liabilities;

(v)

existence of transfers of assets without observance of corporate or other legal formalities;

(vi)

commingling of assets and business functions; and

(vii)

the profitability of consolidation at a single physical location.

19

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 20 of 30

When applying the above authorities to the allegations contained in the Complaint, it is clear that the Complaint sufficiently pleads the elements of the claim for substantive consolidation. b.

The Fraudulent Transfer and Turnover Claims

Pursuant to 11 U.S.C. § 544(b), the Trustee may avoid any transfer of an interest of the Debtor in property to Rothstein and the Rothstein Entities or any obligation incurred by the Debtor that is voidable under applicable law by a creditor holding an unsecured claim. Pursuant to 11 U.S.C. § 550, to the extent that a transfer is avoided under Section 544(b) of the Bankruptcy Code, then the Trustee may recover the property transferred or the value of the property from the initial transferee or any immediate or mediate transferee. In addition, pursuant to Section 542 of the Bankruptcy Code, the Trustee has the ability to obtain turnover of property of the estate as broadly defined under Section 541 of the Bankruptcy Code. The Trustee alleges that the funds that are the subject of Avoidable Transfers to Rothstein and the Rothstein Entities constituted transfers of an interest in property of the Debtor within four (4) years prior to the Petition Date (the time limitation as permitted under Chapter 726 of the Florida Statutes), and that the Debtor made the Avoidable Transfers to the Rothstein and the Rothstein Entities with the actual intent to hinder, delay or defraud creditors of the Debtor in violation of Chapter 726 and Section 548 of the Bankruptcy Code. The Eleventh Circuit has recognized that direct proof of actual fraud is often very difficult to establish. See, e.g., Dionne v. Keating (In re XYZ Options, Inc.), 154 F.3d 1262, 1271 (11th Cir. 1998). Recognizing that direct evidence of fraud does not always exist, courts also allow fraudulent intent to be proven through circumstantial evidence and the surrounding

20

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 21 of 30

circumstances of the transactions, including the “badges of fraud.” Id. at 1271-72. These badges include: (1)

The transfer was to an insider;

(2)

The debtor retained possession or control of the property transferred after the transfer;

(3)

The transfer was disclosed or concealed;

(4)

Before the transfer was made the debtor had been sued or threatened with suit;

(5)

The transfer was of substantially all of the debtor’s assets;

(6)

The debtor absconded;

(7)

The debtor removed or concealed assets;

(8)

The value of the consideration received by the debtor was not reasonably equivalent to the value of the asset transferred;

(9)

The debtor was insolvent or became insolvent shortly after the transfer was made;

(10)

The transfer occurred shortly before or shortly after a substantial debt was incurred; and

(11)

The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

Id. In addition, the first indication that a debtor is experiencing financial difficulties is a delay in paying its normal creditors and vendors as their debts come due. A dishonest debtor, seeing financial trouble on the horizon as reflected in its inability to pay normal and ordinary debts as they come due, may begin to make fraudulent conveyances. Thus, a twelfth badge of fraud to be considered in determining the intent of a debtor is whether the debtor is paying its normal and ordinary debts as they come due when the alleged fraudulent conveyances occur. In re Model Imperial, Inc., 250 B.R. 776 (Bankr. S.D. Fla. 2000) (Judge Hyman).

21

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 22 of 30

The Eleventh Circuit found that when using the badges of fraud to determine the existence of actual fraudulent intent, courts should consider the totality of the circumstances. Citing In re Sherman, 67 F.3d 1348 (8th Cir. 1995), the court in XYZ Options stated that “[a]lthough the presence of one specific ‘badge’ will not be sufficient to establish fraudulent intent, the ‘confluence of several can constitute conclusive evidence of an actual intent to defraud.’” XYZ Options, 154 F.3d at 1271 n.17; see also General Trading Inc. v. Yale Materials Handling Corp., 119 F.3d 1485, 1498 (11th Cir. 1997); Harman v. First American Bank of Maryland (In re Jeffrey Bigelow Design Group, Inc.), 956 F.2d 479, 483-84 (4th Cir. 1992) (“While each fact does not have to demonstrate actual fraud, the facts taken together must lead to the conclusion that actual fraud existed”); In re Young, 235 B.R. 666, 669 (Bankr. M.D. Fla. 1999) (“While a single badge of fraud may create a suspicion but not the requisite fraud to set aside a conveyance, several considered together may afford a basis to infer fraud”). According to the Fourth Circuit, a determination of actual fraudulent intent must include a “subjective evaluation of the debtor’s motive.” Harman, 956 F.2d at 484 (discussing also that “an objective determination has bearing on whether constructive fraudulent intent exists, but is not conclusive for actual fraudulent intent”); see also Thompson v. Jonovich (In re Food & Fibre Protection, Ltd.), 168 B.R. 408, 418 (Bankr. D. Ariz. 1994) (stating that § 548(a)(1) sets out a subjective test for actual fraudulent intent). In the instant case, several badges of fraud exist in connection with the Avoidable Transfers to Rothstein and the Rothstein Entities, (i) the Avoidable Transfers were to an insider of the Debtor and his affiliated owned and/or controlled alter ego business entities, the Rothstein Entities; (ii) the Debtor did not receive reasonably equivalent value from Rothstein or the Rothstein Entities in exchange for the Avoidable Transfers; (iii) the Debtor was insolvent at the

22

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 23 of 30

time of the Avoidable Transfers or became insolvent as a result thereof; (iv) the Debtor knew or should have known that it was going to incur debts beyond its ability to pay at the time of the Avoidable Transfers; (viii) by and through Rothstein, the Debtor was part of a massive Ponzi scheme at the time of the Avoidable Transfers; and (ix) the Debtor, by and through Rothstein, concealed the Avoidable Transfers by informing scammed investors that the investments were subject to purported confidentiality agreements. Moreover, the Defendants bear the burden of proving good faith defense to avoid the Avoidable Transfers under 11 U.S.C. § 550(b)(1) which, based upon the facts of record, they cannot do based upon their involvement in the Ponzi scheme at issue. See, e.g., In re M & L Business Machine Co., 84 F.3d 1330, 1338 (10th Cir. 1996); In re Agricultural Research & Tech. Group, 916 F.2d 528, 535 (9th Cir. 1990); In re Nordic Village, Inc., 915 F.2d 1049, 1055 (6th Cir. 1990), rev'd on other grounds, 503 U.S. 30, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992). Good faith is not defined in the Bankruptcy Code. Accordingly, courts generally evaluate good faith defenses on a case-by-case basis. See, e.g., In re Sherman, 67 F.3d 1348, 1355 (8th Cir. 1995).

To determine whether a transferee acts in good faith for purposes of § 548(c), courts

look to what the transferee objectively "knew or should have known," such that a transferee does not act in good faith when it has sufficient knowledge to place it on inquiry notice of the voidability of the transfer. Id.; see also M & L Business Machine, 84 F.3d at 1335-36 (quoting Collier on Bankruptcy and stating that "the presence of any circumstance placing the transferee on inquiry as to the financial condition of the transferor may be a contributing factor in depriving the former of any claim to good faith unless investigation actually disclosed no reason to suspect financial embarrassment"); Agricultural Research, 916 F.2d at 535-36 (stating that "courts look

23

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 24 of 30

to what the transferee objectively 'knew or should have known' in questions of good faith, rather than examining what the transferee actually knew from a subjective standpoint"). Courts also look at whether the transaction "carries the earmarks of an arms-length bargain." Sherman, 67 F.3d at 1355; see also In re Colonial Realty Co., 210 B.R. 921, 923 (Bankr. D. Conn. 1997) (finding that good faith requires an arm's length transaction as well as: (i) an honest belief in the propriety of the activities in question; (ii) no intent to take unconscionable advantage of others; and (iii) no intent to or knowledge of the fact that the activities will hinder, delay or defraud others). Fundamental to the concept of good faith is that a transferee may not remain willfully ignorant of facts which would cause it be on notice of a debtor's fraudulent purpose: Good faith is to be measured objectively, rather than subjectively. Consequently, a transferee may not put on "blinders" prior to entering into transactions with the debtor and claim the benefit of § 548(c), where circumstances would place the transferee on inquiry notice of the debtor's fraudulent purpose or insolvency. In re Cannon, 230 B.R. 546, 592 (Bankr. W.D. Tenn. 1999). A similar analysis of both the nature of the transaction and the transferee's lack of knowledge of facts which would cause a reasonable person to make further investigation is applied in the context of § 550(b)(1) defenses. See, e.g., In re Southmark Corp., 217 B.R. 499, 507 (Bankr. N.D. Tex. 1997), rev'd in part on other grounds, 242 B.R. 330 (N.D. Tex. 1999); In re Consolidated Capital Equities Corp., 175 B.R. 629, 637-38 (Bankr. N.D. Tex. 1994); In re Richmond Produce Co., 151 B.R. 1012, 1021-22 (Bankr. N.D. Cal. 1993). The mere failure to make inquiry in the face of unusual circumstances also is sufficient to preclude a good faith defense. See Cannon, 230 B.R. at 592 (stating further that "[c]ourts have generally held that it is not necessary to show that the transferee had actual fraudulent, though fraudulent intent on the

24

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 25 of 30

part of the transferee would clearly establish lack of good faith"); see also In re M & L Business Machine Co., 84 F.3d 1330, 1335-36 (10th Cir. 1996). Finally, as held in Model Imperial by Judge Hyman, supra, the providing of reasonably equivalent value does not standing alone negate a finding of actual intent. In re Model Imperial, Inc., 250 B.R. at 793-94. Thus, even if the Defendants were able to offer material and undisputed proof that reasonably equivalent value was given for the Avoidable Transfers, if the Court finds that the Debtor acted with actual intent to hinder, delay or defraud, such transfers must still be avoided. When the above law is applied to the undisputed material facts of the instant case, given the relationship between the Defendants and the Debtor described above and the other facts and circumstances surrounding the Avoidable Transfers, the Defendants will not be able to establish at trial or on summary judgment that they were “good faith” recipients of the Avoidable Transfers. (2) The Trustee will suffer irreparable injury if the injunction is not granted Given the nature of the property of estate at issue under Section 541 of the Bankruptcy Code – funds fraudulently transferred to Rothstein and the Rothstein Entities – it is imperative that the Trustee undertake immediate efforts to prevent the further transfer or disposition of such assets. The failure of the status quo to be maintained pending the conclusion of this proceeding will result in irreparable injury to the estate if an injunction is not entered. Only through the imposition of a freeze order can the Trustee ensure that the estate’s property interest in the diverted funds will be protected. Moreover, given the pending U.S. criminal and civil actions, unless immediate action is undertaken to protect the status quo, the estate runs the risk of further transfers or dissipation of the funds. (3) The threatened injury to bankruptcy estate outweighs the threatened harm the proposed injunction may cause Rothstein and the Rothstein Entities

25

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 26 of 30

Given, among other things, the substantial sums of cash that are the subject of the Avoidable Transfers, the threatened injury to the Trustee outweighs any threatened harm the injunction may do to Rothstein and the Rothstein Entities. Rothstein and the Rothstein Entities have little if any legitimate business operations and, as admitted in testimony, are no more than transferees of substantial sums received from RRA as part of the Ponzi scheme. Given the legitimate interests of creditors and other parties in interest that the Trustee is duty-bound to protect, the harm to the estate far outweighs any purported harm, to Rothstein and the Rothstein Entities. (4) The injunction, if issued, would not be adverse to the public interest Finally, the granting of the preliminary injunction will not be adverse to the public interest. Indeed, the interests of creditors and other parties in interest to this case will be protected, as will the integrity of the bankruptcy system itself, if an injunction is granted. To rule otherwise will permit wrongdoers to benefit from their inequitable conduct thereby thwarting the legitimate interests of the estate, its creditors and other parties in interest. C.

To the Extent an Injunction is Not Issue or as Otherwise May be Necessary or Appropriated, the Trustee Should be Appointed Monitor

To the extent an injunction is not issued or as otherwise may be necessary or appropriate, the Trustee requests that he be appointed monitor of the business and financial affairs of Rothstein and the Rothstein Entities. Under 11 U.S.C. § 105, a court may authorize a bankruptcy trustee to periodically monitor the business affairs of a defendant accused of wrongfully withholding estate property while an adversary case is pending seeking turnover of such property. In re Raymark Industries, Inc., 228 B.R. 524 (Bankr. D. Conn. 1999) (holding that in adversary proceeding brought by Chapter 11 trustee for recovery of damages and turnover of

26

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 27 of 30

assets, trustee was temporarily authorized to monitor corporate defendants' operations by inspecting their books and records and reviewing their actual and projected cash disbursements). The standards that should be applied in determining whether the monitoring of the Non-Debtor Affiliates is appropriate should be the same as those that govern the appointment of receivers under Florida law. Under Florida law, receivers will be appointed when the appointment is necessary to prevent fraud or to save the property from injury or threatened loss or destruction. Apalachicola Northern R. Co. v. Sommers, 85 So. 361 (Fla. 1920). It has also been held that the appointment of a receiver is appropriate where a party is guilty of waste, misuse of assets, or misconduct in the management of an entity. Allen v. Allen, 150 So. 237 (Fla. 1933). Receivers may also be appointed where the property involved is susceptible to deterioration and a receiver is necessary for preservation of the property. Electro Mechanical Products, Inc. v. Borona, 324 So.2d 638 (Fla. 3d DCA 1976). Each of these factors should be equally applied in authorizing the Trustee to monitor the business and financial affairs of Rothstein and the Rothstein Entities. IV. CONCLUSION For the reasons set forth above, the Trustee requests the entry of a preliminary injunction against Rothstein and the Rothstein Entities: (i) imposing a preliminary and a permanent injunction against Rothstein, the Rothstein Entities, and Rothstein Entities’ members, managers, partners, joint venturers, officers, directors, agents, attorneys, employees, shareholders, and affiliates, past or present, and all others in custody, possession or control of funds, documents, or other property of the Debtor, Rothstein, and the Rothstein Entities and the proceeds or products thereof (the “Enjoined Parties”), from, among other things, (a) taking any action, directly or indirectly, to transfer, conceal, dissipate, destroy, encumber, hypothecate, abandon or otherwise dispose of any and all income, revenue, funds, contracts, licenses, contract rights, real property,

27

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 28 of 30

tangible and intangible personal property and any other legal or equitable asset or property right (the “Assets”) of, or received, directly or indirectly, from the Debtor, Rothstein, and/or the Rothstein Entities without the written consent of the Trustee; (b) restraining and enjoining the Enjoined Parties from authorizing, causing, effectuating or acquiescing in such acts which might have the effect of impairing the value of the assets of the Debtor, Rothstein, and/or the Rothstein Entities; (c) transferring or withdrawing balances on deposit in financial institution accounts of the Debtor, Rothstein, the Rothstein Entities, and/or any of their affiliates; and (d) enjoining any and all actions seeking a receivership or commencing an involuntary bankruptcy proceeding against Rothstein and the Rothstein Entities; and (ii) for such other relief the Court may deem appropriate. In addition, and to the extent necessary or appropriate, the Trustee requests that he be appointed monitor of the business and financial affairs of Rothstein and the Rothstein Entities. WHEREFORE, the Trustee requests the relief herein and for any other relief the Court deems appropriate.

28

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 29 of 30

Dated this 2nd day of December, 2009. WE HEREBY CERTIFY that we are admitted to the Bar of the U.S. District Court for the Southern District of Florida and that we are in compliance with the additional qualifications to practice in this Court set forth in Local Rule 2090-1(A).

GENOVESE JOBLOVE & BATTISTA, P.A. Special Counsel to the Trustee Bank of America Tower at International Place 100 S.E. 2nd Street, Suite 4400 Miami, Florida 33131 Telephone: (305) 349-2300 Telecopier: (305) 349-2310 By:

/s/ David C. Cimo David C. Cimo, Esq. Florida Bar No. 775400 John H. Genovese, Esq. Florida Bar No. 280852 Paul J. Battista, Esq. Florida Bar. No. 884162 Theresa Van Vliet, Esq. Florida Bar No. 374040 Robert F. Elgidely, Esq. Florida Bar No. 111856

29

Case 09-02478-RBR

Doc 2

Filed 12/02/09

Page 30 of 30

CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing was served via email and hand delivery (where denoted with an asterisk) to the below listed parties this 2nd day of December, 2009. By: Marc S. Nurik, Esq.* Law Offices of Marc S. Nurik 1 East Broward Boulevard, Suite 700 Fort Lauderdale, Florida 33301 Email: [email protected] Michael D. Seese, Esq.* Hinshaw & Culbertson LLP 1 East Broward Boulevard, Suite 1010 Fort Lauderdale, Florida 33301 Email: [email protected] Steven Schneiderman, Esq. Office of the U.S. Trustee 51 Southwest First Avenue, Room 1204 Miami, Florida 33130 Email: [email protected]

30

/s/ David C. Cimo. David C. Cimo, Esq.

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 1 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 2 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 3 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 4 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 5 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 6 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 7 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 8 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 9 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 10 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 11 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 12 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 13 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 14 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 15 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 16 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 17 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 18 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 19 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 20 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 21 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 22 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 23 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 24 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 25 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 26 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 27 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 28 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 29 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 30 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 31 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 32 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 33 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 34 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 35 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 36 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 37 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 38 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 39 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 40 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 41 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 42 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 43 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 44 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 45 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 46 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 47 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 48 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 49 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 50 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 51 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 52 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 53 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 54 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 55 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 56 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 57 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 58 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 59 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 60 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 61 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 62 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 63 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 64 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 65 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 66 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 67 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 68 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 69 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 70 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 71 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 72 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 73 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 74 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 75 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 76 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 77 of 78

Case 09-02478-RBR

Doc 2-1

Filed 12/02/09

Page 78 of 78