SUSAN I. MONTGOMERY (Bar No. 120667)
PETER J. MASTAN (Bar No. 190250)
GUMPORT, REITMAN & MONTGOMERY
550 South Hope St., Suite 825
Los Angeles, California 90071-2627
Telephone: (213) 452-4900
Facsimile: (213) 623-3302
Attorneys for Nathan J. Hochman, Receiver
UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION
FEDERAL TRADE COMMISSION, Plaintiff,
vs.
NIA CANO, a/k/a Nghia F. Cano, Nina DeCano, Nia S. Cano, Individually and Doing Business as Credit Development International and Drivers Seat Network; CHARLES JOHNSON; JAIME MARTINEZ; Defendants, and LEADERS ALLIANCE, INC., a Nevada Corporation; Relief Defendant.
Dist.Ct.No.CV 97-7947-CAS(AJWx)
[Proposed] ORDER:
(1) APPROVING PLAN OF REDRESS;
(2) CONFIRMING THE RECEIVER'S RETENTION OF POORMAN-DOUGLAS CORPORATION;
(3) ESTABLISHING PROCEDURE FOR APPROVAL AND PAYMENT OF COMPENSATION TO THE RECEIVER AND HIS PROFESSIONALS AND FOR APPROVAL OF THE RECEIVER'S FINAL REPORT; AND
(4) APPROVING NOTICE OF THIS MOTION
DATE: March 15, 1999
TIME: 10:00 a.m.
PLACE: Courtroom 5
[Judge Christina Snyder]
On March 15, 1999, on the 10:00 a.m. calendar in Courtroom 5 of the United States Courthouse, 312 North Spring Street, Los Angeles, California 90012, the Honorable Christina A. Snyder, United States District Judge, conducted a hearing on the "Motion For Order:
(1) Approving Plan of Redress; (2) Confirming the Receiver's Retention of Poorman-Douglas Corporation; (3) Establishing Procedure For Approval and Payment of Compensation to the Receiver and His Professionals and for Approval of the Receiver's Final Report; and (4) Approving Notice of This Motion; Memorandum of Points and Authorities; Declarations of Nathan J. Hochman, Lujennie Perkins, Susan I. Montgomery and Larry Peterson; Exhibits" (the "Motion"), filed by Nathan J. Hochman, the court-appointed receiver (the "Receiver") over the assets of Credit Development International, Drivers Seat Network, and Leaders Alliance, Inc. (collectively the "Receivership Defendants"). Susan I. Montgomery of Gumport, Reitman & Montgomery appeared on behalf of the Receiver, who was also present. Betsy Broder appeared on behalf of the Federal Trade Commission ("FTC"). Any other appearances were stated on the record.
The Court, having considered the Motion, no objection having been filed, and good cause appearing, hereby finds and directs as follows:
1. The Motion is approved in all respects.
Payment to Post-Receivership Victims
2. Within 30 days of entry of this Order, the Receiver is authorized to and shall pay to the "Post-Receivership Victims"(1) the amount paid by each such Victim less a $15 administrative fee (the "Administrative Fee"), which the Court finds to be a reasonable estimate of the actual and necessary costs and expenses incurred by the receivership in maintaining and preserving the "Post-Receivership Funds" and identifying the Post-Receivership Victims.
3. The Receiver shall retain the Administrative Fee and shall reallocate the Administrative Fee to, and may commingle the Administrative Fee with, the "Pre-Receivership Funds."
4. All checks paid to Post-Receivership Victims shall become stale dated 90 days after issuance. If checks are returned to the Receiver as undeliverable, the Receiver shall instruct Poorman-Douglas to make reasonable inquiry to locate a correct address for such person. If the Receiver is unable to identify or locate a new address for any such person or if a resent check is not cashed within 60 days after its issuance, the Receiver shall pay all unclaimed funds to the FTC on behalf of the United States.
Procedure for Determination and Payment of
Pre-Receivership Claims Determination of Pre-Receivership Victim Claims
5. The claim amount due to each "Pre-Receivership Victim" shall be the $130 actually paid by each Pre-Receivership Victim for joining the Receivership Defendants, less any commissions or refunds received. No amounts paid for attending events or purchasing supplies, including telephones, regardless of whether such supplies were received by the respective Pre-Receivership Victim, shall be included in the claim amount.
6. Within 30 days of entry of this Order, the Receiver shall send each Pre-Receivership Victim a "Pre-Receivership Victim Claim Form," in the form of Exhibit 7 to the Motion, setting forth the amount of the Pre-Receivership Victim's claim.
7. Each Pre-Receivership Victim shall complete and sign the Pre-Receivership Victim Claim Form and return it to the Receiver, in care of Poorman-Douglas, post-marked within 30 days after the date of mailing by the Receiver.
8. If a Pre-Receivership Victim signs the Claim Form agreeing to the amount of his/her claim, and timely returns it to the Receiver as set forth in paragraph 7 above, the Pre-Receivership Victim shall have an allowed claim in said amount.
9. If a Pre-Receivership Victim signs the Claim Form disagreeing with the Receiver's calculation of her/her claim, and submits documentation satisfactory to the Receiver reflecting the corrected claim amount, the Receiver may allow such claim in the amended amount without further order from the Court, or further notification to the Pre-Receivership Victim.
10. If the Receiver disagrees with the amended amount claimed by the Pre-Receivership Victim, the Receiver shall file and serve an objection to the claim upon at least 30 days notice to the Pre-Receivership Victim, and the claim shall be determined by the Court. The Pre-Receivership Victim shall be notified that he/she must respond to the objection at least 14 days before the scheduled hearing or the Receiver's objection may be sustained.
11. If the Receiver presents evidence in his objection that the claim should not be allowed, the Pre-Receivership Victim shall have the burden to present evidence in support of his/her claim.
12. Any Pre-Receivership Victim who fails to return the signed claim form to the Receiver post-marked within 30 days after the mailing of said form, even if such claim is undisputed, shall be barred from having a claim against and shall not receive any funds from the receivership.
Determination of Trade Creditor Claims
13. Within 30 days after entry of this Order, the Receiver shall send the "Trade Creditor Notice" and "Proof of Claim" form, in the form of Exhibit 6 to the Motion, to all known trade creditors of the Receivership Defendants, including former employees, as determined by the books and records of the receivership. Claim forms shall not be sent to trade creditors who previously filed a claim with the Receiver on the approved Proof of Claim form.
14. Any person who was named as a defendant in this proceeding, or any person or entity that participated in the management or control of the Receivership Defendants, or a family member or insider of a defendant in this action or a person or entity that participated in the management or control of the Receivership Defendants, shall not be entitled to a Pre-Receivership or Trade Creditor claim and shall not receive any funds from the receivership.
15. Trade Creditors shall only be allowed claims for the agreed upon and unpaid price of goods or services (including for services rendered by non-insider/non-defendant employees) actually requested and received by a Receivership Defendant. The Receiver shall not allow claims for goods or services that were not actually requested and received by a Receivership Defendant, or for any other costs, including interest, late payment penalties, attorneys' fees, court costs, and the like.
16. The Receiver shall allow Trade Creditor claims if post-marked within 30 days after the date on which the Claim Form is mailed to the Trade Creditor, and if the completed Claim Form is supported by documentation or information sufficient to confirm the validity and amount of the claim. If the Receiver disagrees with the validity and/or amount of a particular claim, the Receiver shall file with the Court and serve on the Trade Creditor an objection to said claim to be heard by the Court on not less than 30 days notice. The Trade Creditor shall be notified that he/she/it must respond to the objection at least 14 days before the scheduled hearing or the Receiver's objection may be sustained.
17. If the Receiver presents evidence in his objection that the claim should not be allowed, the Trade Creditor shall have the burden to present evidence in support of its claim.
18. Any Trade Creditor who fails to return a signed claim form to the Receiver post-marked within 30 days after the mailing of said form, even if such claim is undisputed, shall be barred from having a claim against and shall not receive any funds from the receivership.
Payment of Claims Pre-Receivership Victims and Trade Creditors
19. The allowed claims of Pre-Receivership Victims and Trade Creditors (whether allowed by the Receiver or by the Court after hearing on the Receiver's Objection) shall be treated equally as general unsecured claims against the receivership estate.
20. After payment of all allowed administrative claims by the Receiver and his professionals and reservation of all estimated amounts necessary to complete the administration and closing of the receivership, the balance of the Pre-Receivership Funds shall be paid pro rata to Pre-Receivership Victims and Trade Creditors based on the amount of their allowed claims.
21. All checks paid to Pre-Receivership Victims and Trade Creditors shall become stale dated 90 days after issuance. If checks are returned to the Receiver as undeliverable, the Receiver shall instruct Poorman-Douglas to make reasonable inquiry to locate a correct address for such person. If Poorman-Douglas cannot identify a new address for any such person or if a resent check is not cashed within 60 days after its issuance, the Receiver shall pay all unclaimed funds to the FTC on behalf of the United States.
Confirmation of Employment of the Receiver's
Professionals And Allowance of Administrative Claims
Poorman-Douglas Corporation
22. The Receiver's agreement (the "Agreement") with Poorman-Douglas Corporation ("Poorman-Douglas") (attached as Exhibit 4 to the Motion) to assist the Receiver in the administration and payment of the receivership claims is hereby approved.
23. Upon presentation of an invoice by Poorman-Douglas, and without further order of this Court, the Receiver is authorized to pay Poorman-Douglas' invoice, and any future invoices, in full from the Pre-Receivership Funds (which shall include the Administrative Fee collected from Post-Receivership Victims).
Employment of Receiver's Attorneys and Accountants
24. The Receiver's employment of Gumport, Reitman & Montgomery ("GR&M") as his attorneys beginning October 31, 1997 is hereby approved and confirmed.
25. The Receiver's employment of Neilson Elggren Durkin & Co. ("NED") as his accountants for the period October 31, 1997 through March 15, 1998 is hereby approved and confirmed.
26. The Receiver's employment of Neilson Elggren Durkin & Co., a Unit of Arthur Andersen, LLP ("NEDAA") beginning March 16, 1998 is hereby approved and confirmed.
27. The fees and expenses incurred by the Receiver, GR&M, NED, and NEDAA, as approved by the Court, shall be treated as administrative claims against the receivership estate and shall be paid in full from the Pre-Receivership Funds prior to any distribution of funds to general unsecured creditors.
28. The Receiver may, from time to time, apply to the Court for approval and payment of his fees and expenses, and for those of GR&M, NED, and NEDAA, from the assets of the receivership estate upon a showing of the reasonableness of such fees and expenses. Such fees and expenses shall be subject to review by the Court.
Receiver's Filing of His Final Report and Account
29. Within 30 days after completing the steps outlined above, the Receiver shall file a final report and account with the Court, which shall include a list of all distributions paid to Victims and Trade Creditors, and shall request that the Court discharge the Receiver and his professional and exonerate the Receivers's bond. Concurrently with the filing of the final report and account, the Receiver and his professionals shall file an application for approval and payment of final compensation.
30. Any funds remaining in the receivership after payment of the fees and expenses of the Receiver and his professionals, and after all checks to Pre- and Post-Receivership Victims and Trade Creditors have become stale dated, shall be paid to the FTC on behalf of the United States.
Adequate Notice of the Receiver's Application
31. In light of the cost of giving notice of the Receivers' Motion to the more than 30,000 victims and creditors, the Court hereby finds that notice of the Receiver's Motion to the FTC was reasonable and adequate.
IT IS SO ORDERED.
DATED: March __, 1999
_________________________________
THE HONORABLE CHRISTINA A. SNYDER
UNITED STATES DISTRICT JUDGE
Proposed by:
GUMPORT, REITMAN & MONTGOMERY
By________________________________
Susan I. Montgomery
Attorneys for Nathan J. Hochman,
Receiver of the Assets of Credit
Development International, Drivers Seat
Network, and Leaders Alliance, Inc.
1. Unless otherwise defined, the Capitalized terms shall have the same meaning as set forth in the Receiver's Motion.