and his professionals is subjected to review. A hearing is essential because the Receiver

Transcription

1 Case 9:03-cv KAM Document 2998 Entered on FLSD Docket 10/06/2015 Page 1 of 5 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT ()F FL()RIl)A Case N o C iv-m A R ItA ht ym 'P' $u.% SECURITIES AND EXCHANGE COMMISSION, Plaintiff9 M ICHAEL LAUER, Defendant. NOTICE OF OBJECTION BY JOHN W. BENDALL. JR.. RICHARD GEIST. MICHAEL LAUER. AND MARTIN GARVEY REGARDING AMOUNT OF TOTAL FEES AND EXPENSES COLLECTED BY RECEIVER AND HIS PROFESSIONALS, INCLUDING KAPILA & COMPANY John W. Bendall, Jr., Dr. ltichard G eist, M ichael Lauer, and M artin Garvey hereby inform the Court that they intend to t5le their objections when the Court schedules a hearing at the conclusion of the receivership and the propriety of the total fee awards to the Receiver and his professionals is subjected to review. A hearing is essential because the Receiver sends copies ofhis filings, which paint a very different picture than the filings by those filing this notice, w hich he denies them. By studiously w ithholding from them inform ation that discredits the Receiver, he violates his liduciary duty to investors. lnvestors do not know the facts on which to base objections.moreover, investors who might otherwise wish to file objections to fees cannot file inteligent objections without knowing, inter alia, the total am ounts awarded and w ithheld and the services allegedly perform ed by the Receiver and his professionals, know ledge w hich to date have been denied to everyone by virtue ofthe refusal by the Receiver and the Court to provide unredacted billing rccords and other records, including correspondence w ith the (?tlurt, the SEC. and the 1)0.1. N o intelligent decisions

2 Case 9:03-cv KAM Document 2998 Entered on FLSD Docket 10/06/2015 Page 2 of 5 can be m ade On the propriety of the past paym ents to the Receiver and his profkssionals and future claim ed paym ent to the R eceiver and his professionals. The rapacious Receiver is now atem pting to m ake offw ith his unexam ined fees by stealth, w ith this applicant one of the major beneficiaries. DE The amounts involved are staggering, in the neighborhood of $80 m ilion paid to or claimed by the Receiver and his professionals in tkes and expenses in contrast to under $50 milion paid to or to be paid to the investors. 'l-his is a m onum ental scandal of historic proportions. One point m ust be em phasized. Lauer has a m otion pending in this Coul't to vacate the judgment against him, principaly on the ground ofviolation of separation ofpowers. DE lfthat m otion is granted either by this Coul't, the Eleventh Circuit, or the U nited States Suprem e Coul't, there w ill have been no legal basis w hatsoever for the receivership unless and until the SEC secures a new judgment against Lauer. There are other potential complexities, including that there is and cannot be ajudgment against Lancer M anagement Group LlwC and Lancer Management Group 11 LLC. The hedge funds were never the proper subject of receivership since they were totally innocent entities with innocent directors and were never defendants in any case. In other w ords- the final fees of the Receiver and his professionals- as wel as others, cannot be ascertained until at the very least the challenges to the judgment against Lauer are resolved.l A pplicant Kapila & Com pany is headed by Soneet R. Kapila, w ho had the distinction of being the SEC'S only w itness at M ichael Lauer's disgorgem ent hearing. Kapila w as em ployed by the Receiver, so w as pal4 of the Judicial Branch, w hich the Receiver does not ' Lauer h as prev iously stated his belief-that vacating the judgment wil not affect any settlem ents, but legal and other fees are an entirely dift-erent m a ter. For exam ple, it m ay be that fees w ould have to be determ ined on the basis of quantum m eruit, w hich would involve ascertaining the value of services perform ed to the investors. 2

3 Case 9:03-cv KAM Document 2998 Entered on FLSD Docket 10/06/2015 Page 3 of 5 dispute. T() the best ol- the know ledge 01- those lsling this Notice. the SIï(? did ntlt pay the Receiver tbr the use of Kapila. 'I-hus, the applicant is at the heart ofthe violation of separation ofpowers- which is basis for Lauer's motion to vacate the judgment. Kapila readily discloses that he has received to date nearly $ l.5 milion in fees and expenses. lt should also be noted that the only reason that the Receiver utilized K apila's services in the past period is that he unethica ly refused to dism iss the Receivership Case w ithout a personal release for him and his professionals. That was one of the grounds on w hich Lauer and G arvey m oved to dism iss the Receivership case on the grounds of the Receiver's misconduct. (-l'he Court has been requested to take judicial notice of that motion, which has not been opposed, so it is pal't of the record in this case.) W ithout the Receiver's and the other applicants' records, it is im possible to evaluate any particular application, including for duplication of services or paym ent for unlaw ful actions, including engaging in the w ork ofthe SEC and D OJ, both part of the Executive Branch, in violation of separation of pow ers.the vague and redacted tim e descriptions provided by this applicant for fees is w oefu ly inadequate, although, it should be noted, applicant has no difficulty providing total receipts to date. Som e ofthe entries are bizarre for a firm ofcertifsed public aecountants, including study of case law. M oreover, since this applicant's affidavits and reports have not been filed, they m ust have been delicient. This applicant also seeks com pensation for tim e spent preparing the fee application without providing authority. The record confirm s that no diligent examination of billing practices and the bils them selves has been conducted to date. lt is inconceivable that the Court wil not insist that the Receiver disclose to his fiduciaries, the innocent investors, the am ounts that the Receiver and his professionals have received to date and the precise services they perform ed so the various 3

4 Case 9:03-cv KAM Document 2998 Entered on FLSD Docket 10/06/2015 Page 4 of 5 tke applications can be reconciled, tbr exam ple. to try to resolve why two sets ofaccountants w ere used. The Court should insure that the bils that have been stlbm ited are proper by, fbr example, appointing an impartial representative of the investors to scrutinize the fees paid and sought in view of the Receiver's flagrant concealm ent of m aterial facts as w ell as his conflicts of interest. <%ee, e.g., A leghany Corp. v. Kirby, 333 F.2d 327 (2d Cir. 1964) (Friendly, J., dissenting), qfd by equally divided cfp/r/ en /7l?7c, 340 F.2d 31 (2d Cir. 1965), cerl. J/h'z?7j,ts'tyl sub n()m.s /#?/ v, Alleghany (.kyrp., 384 U.S. 28 ( 1966)., Roseljèld v. Black, 445 P'.2d 1337 (2d Cir. l 971) (Friendly, J.). To prevent further exploitation ofthe innocent investors, it would be fkasible to appoint a representative to serve on a contingent basis, w ith his or her fee based on the am ount recovered from the Receiver and his professionals. Res ectfully sub ' ed, Dated: October l, 2015 David M. Dorsen Suite 500, 2900 K Street, N.W. W ashington, D C Telephone: E -M ail: Dorsen3s@ aol.com A torney for John W. Bendal, Jr., Dr. Richard G eist, M ichael Lauer, and M artin G arvey 4

5 Case 9:03-cv KAM Document 2998 Entered on FLSD Docket 10/06/2015 Page 5 of 5 CERTIFICATE OF SERVICE l H EREBY CERTIFY that on this 1 st day of O ctober, 201 5, a true and correct copy of the foregoing has been sent by USPC, tirst-class m ail, to: Christopher M artin, Esq. Securities & Exchange C om m ission 80l Brickell A venue Suite l 800 Miami, FL and Juan C. Enjamio, Esq. David Bane, Esq. Hunton & W illiams Brickell Avenue Suite 2500 M iam i. Fl and Berkow itz Pollack Brant 200 South Biscayne Blvd., Sixth Floor Miami, FL A ttn: Scott M. Bouchner N David M. Dorsen 5