1. RECEIVERSHIP OVERVIEW Presented By Michael I. Goldberg Akerman Senterfitt Fort Lauderdale, Florida

2. Florida – Ground Zero for Fraud Florida is first in: Medicare Fraud Insurance Fraud Mortgage Fraud Ponzi Schemes

3. Why is Florida prone to Fraud? Large population of retirees with their life savings creates a pool of easy targets Fast paced culture – "keep up with the Joneses" attitude Liberal exemption laws Nice weather – if you are going to commit a fraud, you might as well do it in a place with nice weather, good golf courses and beaches

4. Equitable Emergency Remedies  Temporary restraining orders  Temporary removal of company officers  Asset freezes  Appointment of receivers

5. Actions Warranting a Receiver Partnership Disputes, Business Operations Disputes, Liquidation Dissolution, Partition, Divorce, Enforcement of Judgments Collections Process Regulatory Actions – ie… Fraud, Securities law violations

6. Justification for Seeking a Receiver  On-going fraud  Existing/significant assets  Danger of immediate dissipation  Protection of innocent investors and public

7. What is a Receiver? Receiver is an Officer of the Court Receiver is a Fiduciary Receiver is a Neutral Independent Third Party Receiver does not work for the Regulators Receiver Assumes the Decisions, Duties, Risks and Responsibilities of a Prudent Owner Receiver is Completely Transparent Receiver Reports Directly to the Court

8. Who Are Receivers  Lawyers o Bankruptcy experience o Asset protection/collection o Not all SEC/DOJ alumni  Accountants o Forensic experience  Bankruptcy trustees  Property, probate and other specializations depending on the circumstance

9. Receivership Basics  Court appoints at regulator's request  Receiver is agent/fiduciary of the Court, not the regulatory agency  General charge in receivership cases is to marshal assets for benefit of investors  Orders give receiver broad authority over all aspects of business

10. Receivership Procedural Issues Complaint if prepared and filed with the Court alleging the elements of fraud and violations of the applicable regulatory scheme Motion for Preliminary Injunction, Asset Freeze and the Appointment of a Receiver filed along with Complaint Affidavits filed in Support of Motion Appointment by Ex-Parte Emergency Application Appointment by Noticed Motion - rare for a regulator to give notice Court Order Describes the Receivership Scope of Duties of Receiver

11. Order Appointing Receiver The Receiver derives his authority from the Court’s Order Appointing the Receiver Important for the Regulator to take time drafting it. Must look ahead to see what type of receivership it is and what Receiver’s duties will be Regulator should speak with the Receiver prior to submitting the order and allow the Receiver to comment on the Order In the end, the scope of the Receiver’s duties will be up to the Court The Receiver can petition the Court to expand powers

12. Order Appointing Receiver  Take physical custody/control o Employees o Computers o Locks o Security  Access to/control of all financial/other records o Banks o Brokerage accounts o All other financial records  Physical assets o Buildings o Equipment o Property o Vehicles

13. Order Appointing Receiver Operate/shut down business o Typical fraud case does not involve ongoing, legitimate business o Occasional exceptions – (Worldwide Entertainment)  Leases/property disposal  Liabilities/creditors – typically creditor actions will be enjoined  Mail  Taxes  Change bank accounts  Permission to send official communications to parties in interest by email or web posting

14. Order Appointing Receiver  Undertake new litigation to recover assets – “clawbacks”  Employees/principals required to cooperate  Communicate with investors, creditors, suppliers, vendors, etc.  Retain professionals – lawyers, accountants, others  Resolve/continue existing litigation

15. General Receivership Guidelines Regular Financial Reports Filed with Court Receiver’s Fees and Expenses Must be Approved by Court Distribution of Funds According to the Court Order Only “Ordinary” versus “Out of Ordinary” course of business Transparency is the key – when it doubt, err on the side of caution

16. First Days of a Typical Receivership File Surety Bond with the Court if required SEC Actions - Record a copy of the Order Appointing Receiver and Complaint in all jurisdictions where you believe property or defendants are located within first 10 days Serve Freeze Order on Financial Institutions Subpoena Financial Institutions Secure Computers and back-up all files—”ghost image” – shut down remote access Demand Turnover of Books, Records, Reports, Mail, etc…

17. First Days of Typical Receivership Interview Management and Employees and replace as necessary Secure Real Estate and Physical Assets File Suggestions of Receivership in pending actions Communicate with creditors by letter Set up Website and toll free numbers to communicate with investors Hire Professionals

18. First Days of a Receivership Set Up New Receivership Bank Accounts Take Inventory of All Property Start Forensic Analysis of Income Create Master “Ins and Outs” Database. This Database will serve as the cornerstone of all dealings with creditors – claim amount, “clawbacks”, etc…

19. Regulator vs. Receiver Role Regulator prosecutes underlying lawsuit. Typically seeks an injunction preventing further violations of the law and a judgment against the Defendant Receiver marshals assets, investigates claims and deals with creditors. Even though independent, the Receiver may assist regulator. Receiver brings fraudulent transfer (ie… “clawback”) actions, third party claims, malpractice claims, etc…

20. Claims Process Net Winner vs. Net Loser Approach Rising Tide Formula

21. Terminating the Receivership File Final Tax Returns – if you don't there is potential personal liability Final Distribution Final Report Motion to Terminate Receivership, Discharge Receiver Motion to Destroy All Documents