IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA CHARLOTTE DIVISION CASE NO. 3:16-CV-285

Transcription

1 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA CHARLOTTE DIVISION CASE NO. 3:16-CV-285 SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. RICHARD W. DAVIS, JR., MOTION TO APPROVE SETTLEMENT RESOLVING MINING EQUIPMENT LITIGATION and Defendant, DCG REAL ASSETS, LLC, et al., Relief Defendants. A. Cotten Wright, the duly-appointed receiver for the assets of DCG Real Assets, LLC; DCG Commercial Fund I, LLC; H20, LLC; DCG PMG, LLC; DCG PMF, LLC; Finely Limited, LLC; DCG Funds Underwriting, LLC; DCG ABF Management, LLC; DCG Funds Management, LLC; Davis Capital Group, Inc.; Davis Financial, Inc.; DCG Partners, LLC; DCG Real Estate Development, LLC; Huntersville Plaza Phase One, LLC; Huntersville Plaza Phase Two, LLC; North Lake Business Park, LLC; and Richard Davis Enterprises, LLC (each a Receivership Entity, and, collectively, the Receivership Entities ) in the above-referenced case (the Receiver ), through counsel, hereby presents this Motion to Approve Settlement Resolving Mining Equipment Litigation (this Motion ) and respectfully shows the Court the following: PROCEDURAL BACKGROUND 1. On June 2, 2016, the U.S. Securities and Exchange Commission (the SEC ) filed a civil complaint (the SEC Complaint ) against Richard Wyatt Davis, Jr. ( Davis ) as defendant and the Receivership Entities as relief defendants, initiating the above-captioned civil Case 3:16-cv GCM Document 145 Filed 10/26/17 Page 1 of 7

2 enforcement action (this Action ) before the Court. In the SEC Complaint, Davis is alleged to have violated the registration and antifraud provisions of the federal securities laws by conducting unregistered sales of securities through the Receivership Entities and failing to disclose to investors (a) various conflicts of interest between the Receivership Entities and (b) unauthorized transfers of assets for Davis s personal benefit. 2. About one month prior to the initiation of this Action, Davis signed a document consenting to the entry of a judgment against Davis that permanently enjoins Davis from engaging in the sale of certain securities and that requires Davis to disgorge any ill-gotten gains from his dealings with the Receivership Entities (the Consent ). Davis also agreed to the appointment of a receiver for the Receivership Entities in the Consent. On June 3, 2016, a partial judgment against Davis was entered in this Action. 3. On June 8, 2016, a Temporary Receivership Order was entered in this Action, appointing the Receiver as the receiver for any and all assets of the Receivership Entities. By default judgments entered against the Receivership Entities on August 5, 2016 and September 22, 2016, the Court extended the temporary receivership into a permanent receivership (collectively, the Receivership Order ). On June 13, 2016, the Receiver filed the SEC Complaint and Receivership Order in the U.S. District Court for the District of Nevada. FACTUAL BACKGROUND Nevada Mining Equipment 4. Upon information and belief, sometime during 2010, Davis learned about a mining operation in Pershing County, Nevada (the Willow Creek Mine ) that Davis could potentially participate in, through raising capital or otherwise. Upon information and belief, in the fall of 2010, Davis, through one or more of the Receivership Entities, performed due 2 Case 3:16-cv GCM Document 145 Filed 10/26/17 Page 2 of 7

3 diligence on the Willow Creek Mine and contracted with various geologists, engineers, and/or other mining professionals to examine and report on the Willow Creek Mine. 5. Between 2011 and 2013, certain of the Receivership Entities purchased various equipment for use at the Willow Creek Mine, including, without limitation: a sluicing machine and other components of a gold mining or processing plant; a FiatAllis 20-B Bulldozer; a 2000 New Holland 655E Back Hoe; a Caterpillar mounted generator; a Big Tex equipment trailer; a second equipment trailer; and a Ford dump truck (collectively, the Mining Equipment ). 6. Davis informed the Receiver a few months after this Action was filed that, prior to this Action, Davis had left the Mining Equipment on certain land between the Willow Creek Mine and the main highway (I-80), said real property titled to Pershing County, Nevada (the Pershing County Parcel ), except for the Bulldozer, which Davis left on a parcel directly adjacent to the Willow Creek Mine. Davis also informed the Receiver at that time that the Mining Equipment had apparently been moved from the Pershing County Parcel to an unknown location. On November 7, 2016, a private investigator found all, or most, of the Mining Equipment at the Willow Creek Mine. 7. On November 10, 2016, the Receiver filed in this Action her Emergency Motion to Aid in the Retrieval of the Receivership Property (Doc. No. 71), seeking a Court order authorizing Plaintiff to enter the Willow Creek Mine to retrieve the Mining Equipment and directing the U.S. Marshal Service and any willing local law enforcement to accompany the Receiver s agents during that task (the Emergency Equipment Retrieval Motion ). On November 10, 2016, the Court entered an Order granting the Emergency Equipment Retrieval Motion (Doc. No. 73) (the Emergency Equipment Retrieval Order ). 8. However, given the logistical complexity of coordinating the schedules of the 3 Case 3:16-cv GCM Document 145 Filed 10/26/17 Page 3 of 7

4 U.S. Marshal Service, local law enforcement, private investigators, heavy equipment haulers, and auctioneers, the Receiver was unable to recover possession of the Mining Equipment before mid-november, when the winter weather at the Willow Creek Mine made it temporarily impossible to retrieve the Mining Equipment. 9. By early May 2017, the snow had melted, and, on May 11, 2017, the Receiver s private investigators, heavy equipment haulers, and local law enforcement officers found a suitable time to travel to the Willow Creek Mine in order to retrieve the Mining Equipment. Upon entering the Willow Creek Mine on May 11, 2017, the Receiver s agents discovered that certain parties alleged that they acquired rights in the Mining Equipment superior to that of the Receiver. 10. On June 2, 2017, the Receiver filed a Complaint against James D. Wellmon, David C. Colvin, Jr., Karen Colvin, Christopher J. Taylor, Barry E. Taylor and CT Exploration, LLC (collectively, the Mining Equipment Defendants ), initiating case number 3:17-cv-292, currently pending before the Court ( the Mining Equipment Lawsuit ). 11. On June 16, 2017, the Court entered a preliminary injunction in the Mining Equipment Lawsuit directing the Mining Equipment Defendants to surrender the Mining Equipment to the Receiver, and the Mining Equipment Defendants obliged. The Receiver has since seized the Mining Equipment. The Proposed Settlement 12. After engaging in negotiations with counsel for the Mining Equipment Defendants, the Receiver has reached a tentative settlement with the Mining Equipment Defendants resolving any and all outstanding issues relating to the Mining Equipment Lawsuit, which settlement provides that: 4 Case 3:16-cv GCM Document 145 Filed 10/26/17 Page 4 of 7

5 (a) the Mining Equipment Defendants shall cooperate with the Receiver and pay the Receiver $7, over the course of six months (secured by a Confession of Judgment in favor of the Receiver); (b) the Receiver shall dismiss the Mining Equipment Lawsuit with prejudice; and (c) the Mining Equipment Defendants and the Receiver shall provide mutual releases limited to the claims relating specifically to the Mining Equipment. The terms of the settlement are set forth in the more detail in the settlement agreement attached hereto as Exhibit A and incorporated herein by reference (the Settlement Agreement ). RELIEF REQUESTED 13. Through this Motion, the Receiver respectfully requests that the Court approve the Receiver s settlement with the Mining Equipment Defendants and authorize the Receiver and the Mining Equipment Defendants to consummate the Settlement Agreement. ARGUMENT 14. The Settlement Agreement avoids the costs, delays, and uncertainty associated with litigation. In addition, the collectability of any monetary judgment entered in the Mining Equipment Lawsuit is dubious with respect to most, if not all, of the Mining Equipment Defendants. 15. Based in part on the foregoing, in the opinion of the Receiver, the Settlement Agreement reflects a fair, reasonable, and adequate resolution of the issues remaining in the Mining Equipment Lawsuit and is otherwise in the best interests of the receivership estate. NOTICE 16. If you do not want the Court to approve this Motion, or if you want the Court to consider your views, then on or before November 9, 2017, you or your attorney must file with the Court a written response explaining your position. The response must be filed electronically 5 Case 3:16-cv GCM Document 145 Filed 10/26/17 Page 5 of 7

6 with the United States District Court for the Western District of North Carolina, Under certain circumstances, if you are an individual who is not represented by an attorney, you may hand deliver your response to the Clerk of the United States District Court, 401 West Trade Street, Charlotte, NC On or before the date stated above for filing your written response, you must also mail, fax or a copy of your written response to: A. Cotten Wright, Grier Furr & Crisp, PA, 101 N. Tryon St., Ste. 1240, Charlotte, NC 28246; 704/ ; dcgreceivership@grierlaw.com. If the Court schedules a hearing, you or your attorney should attend the hearing, which will be held at a time and date which will be noticed only to any party who files a response, at the United States District Court, 401 West Trade Street, Charlotte, NC If you or your attorney do not to take these steps, then the Court may decide that you do not oppose the relief the Receiver requests herein and may enter an order approving this Motion. WHEREFORE, the Receiver respectfully prays that this Court will enter an Order: 1) Granting this Motion; 2) Approving the settlement reflected in the Settlement Agreement and authorizing the Receiver to enter into, and perform under, the Settlement Agreement; and 3) Granting such further relief as is just and proper. Respectfully submitted, this 26th day of October, /s/ Michael L. Martinez A. Cotten Wright (N.C. Bar No ) Michael L. Martinez (N.C. Bar No ) Grier Furr & Crisp, PA 101 North Tryon Street, Suite 1240 Charlotte, NC Phone: 704/ ; Fax: 704/ mmartinez@grierlaw.com Attorneys for the Receiver 6 Case 3:16-cv GCM Document 145 Filed 10/26/17 Page 6 of 7

7 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA CHARLOTTE DIVISION CASE NO. 3:16-CV-285 SECURITIES AND EXCHANGE COMMISSION, v. Plaintiff, RICHARD W. DAVIS, JR., CERTIFICATE OF SERVICE and Defendant, DCG REAL ASSETS, LLC, et al., Relief Defendants. The undersigned hereby certifies that copies of the foregoing Motion to Approve Settlement Resolving Mining Equipment Litigation were served by electronic notification on those parties registered with the U.S. District Court, W.D.N.C. electronic case filing system to receive notices for this case, as well as on other parties, as noted below. Patrick R. Costello Securities and Exchange Commission Brian S. Cromwell Sarah F. Hutchins Parker Poe Adams & Bernstein LLP Attorneys for DCG Commercial, LLC and DCG Commercial Holdings, LLC Richard W. Davis, Jr. Via J.P. Davis Federal Defenders of Western NC, Inc. Attorneys for Defendant in a related action Investors in Receivership Defendants Via , U.S. Mail, and online publication Marshall Walker (mwalker@gastonlegal.com) Gray Layton Kersh Solomon Furr & Smith, P.A. Attorneys for Mining Equipment Defendants This is the 26th day of October, /s/ Michael L. Martinez Michael L. Martinez Grier Furr & Crisp, PA 101 North Tryon Street, Suite 1240 Charlotte, NC Case 3:16-cv GCM Document 145 Filed 10/26/17 Page 7 of 7