Case :-cv-00-rs Document Filed // Page of Elizabeth Berke-Dreyfuss (Bar No. ) WENDEL, ROSEN, BLACK & DEAN LLP Telephone: () -00 Fax: () - Email: edreyfuss@wendel.com Attorneys for Susan L. Uecker, Receiver UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION SECURITIES AND EXCHANGE COMMISSION, vs. Plaintiff, SAN FRANCISCO REGIONAL CENTER, LLC; THOMAS M. HENDERSON; CALIFORNIA GOLD MEDAL, L.P.; CALLSOCKET, L.P.; CALLSOCKET II, L.P.; CALLSOCKET III, L.P.; COMPREHENSIVE CARE OF OAKLAND, L.P.; NAPL, L.P.; WEST OAKLAND PLAZA, L.P.; CALLSOCKET, LLC; CALLSOCKET II, LLC; CALLSOCKET III, LLC; COMPREHENSIVE CARE OF CALIFORNIA, LLC; IMMEDIA, LLC; and NORTH AMERICA PL, LLC, Defendants, -and- CALLSOCKET HOLDING COMPANY, LLC; CALLSOCKET III HOLDING COMPANY, LLC; BERKELEY HEALTHCARE DYNAMICS, LLC; CENTRAL CALIFORNIA FARMS, LLC; and JL GATEWAY, LLC, Relief Defendants. Case No. :-CV-00-RS RECEIVER S THIRD QUARTER REPORT (July, -September 0, ) RECEIVER S THIRD QUARTER REPORT :-CV-00-RS
Case :-cv-00-rs Document Filed // Page of I. CASE BACKGROUND This matter was initially brought before the Court pursuant to a Complaint filed on January,, by the Securities and Exchange Commission (the SEC ), alleging that the named Defendants had exploited a federal EB- visa program by defrauding investors seeking to invest in the job creation program, earn a return on their investments and obtain a permanent U.S. visa as a way toward United States residency. (Docket No. ) On January,, the SEC filed a motion seeking an order appointing a receiver over the entity Defendants and Relief Defendants. (Docket No. ) On March,, the Court entered the Order Granting Motion for Preliminary Injunction and to Appoint a Receiver, pursuant to which the Court, among other things, appointed Susan L. Uecker as a receiver over the Receivership Entities and monitor over the Monitor Entities (Docket No. ). Pursuant to the terms of the Order Granting Motion for Preliminary Injunction and Motion to Appoint a Receiver, on March,, the Court entered the Order Appointing Receiver and Monitor ( Appointment Order ). (Docket No. 0). On June,, the Court entered the Order Extending Scope of Receivership. (Docket No. ). The Receiver s Quarterly Reports for First Quarter and the Second Quarter were filed on April, and July,, respectively. (Docket No. and Docket No. 0). The Receiver engaged and the Court approved the retention of professionals. (Docket No. and Docket No. ). All professionals and the Receiver filed the First Interim Fee Applications (Docket Nos.,,, 0,, ) and an Order Granting Certain Pending Motions, including approval of interim fees and costs for professionals, was entered on October,. (Docket No. ). II. ACTIVITIES DURING SECOND QUARTER A. Sale of Runway Assets The order approving the sale of assets to Runway Global Innovation Corporation was entered on June,. (Docket No. ). However Runway Global Innovation was unable to perform and the Receiver proceeded with the sale of assets to the approved backup bidder, Vanke Holdings USA LLC at $,0,000. (Docket No. ). The closing date was extended to July, RECEIVER S THIRD QUARTER REPORT :-CV-00-RS
Case :-cv-00-rs Document Filed // Page of and once again to July,. The sale of Runway assets was closed on July,. The Receiver retained the Runway Global Innovation deposit as damages for its failure to close escrow pursuant to the terms of the Asset Purchase Agreement. The Receiver wrapped up the Runway closing of accounts along with the transfer of some accounts and true up with the buyer during third quarter. B. Turnover Requests for Information and Compliance During the Third Quarter, the Receiver continued to request turnover of documents from individuals as follows:. Marvin Tate, CPA for Defendants, Relief Defendants and other affiliates. James Yang, Pegasus Law Group, PC, immigration counsel for investors. Leeds Disston, Casalina & Disston, corporate counsel for SFRC, and numerous entities Additional turnover requests have been issued to numerous banks, individuals and Central Escrow Company regarding banking and investor information. C. Funds to Pay Expenses and Authorize Continued Operation of CallSocket II, LP, California Gold Medal, LLC and Central California Farms, LLC The Receiver required funding and requested to use funds to continue business operations for the third quarter of the case covering July through September and the months of October and November. The Order Granting Receiver s Second Administrative Motion for Order Authorizing Receiver to Use funds from Receivership Estate was granted. (Docket No. ). The Order Granting Receiver s Fifth Administrative Motion for Order Authorizing Receiver to Use Funds from Receivership Estate was also granted. (Docket No. ). D. Receivership Forensic Work The Receiver filed a Third Administrative Motion for Order Authorizing Receiver to Expend Funds for Forensic Accounting, which was granted. (Docket No. ). The Order expanded the scope of the Bachecki Crom & Co. LLP, CPA engagement and authorized the expenditure of funds of $0,000-$0,000. RECEIVER S THIRD QUARTER REPORT :-CV-00-RS
Case :-cv-00-rs Document Filed // Page of E. Receiver s Standardized Fund Accounting Report (SFAR) The Standardized Fund Accounting Report for Consolidated SEC vs SFRC Receivership Entities for Reporting Period: April, to June 0,, was filed on July,. (Docket No. ). F. Acknowledgement Agreement The Receiver s Fourth Administrative Motion for Order Approving Acknowledgement Agreement between Receiver and 0 th Street Property Owner, LLC was approved. (Docket No. ). Pursuant to the terms of the Agreement, the Receiver abandoned personal property that SFRC had abandoned at the th floor conference room space of the Tribune Tower, because the cost of removal of the personal property exceeded the value of the property. The Acknowledgement Agreement has been executed pursuant to the Order. G. Receiver s Motion to ) Sell Personal Property; ) Approve Agreement with Mid-Valley Services, Inc.; and ) Authorize Retention of Broker and Listing of Property for Sale The Receiver filed the Receiver s Motion for Order ) Authorizing Sale of Personal Property of Central California Farms, LLC; ) Approving Agreement with Mid-Valley Services, Inc.; and ) Authorizing Retention of Broker and Listing of JL Gateway, LLC Property for Sale. (Docket No. ).. California Gold Medal The Receiver obtained a broker s opinion as to value indicating that the value of the real property owned by relief defendant Central California Farms, LLC is worth less than the debt. The Receiver had a motion filed for authority to sell the remaining equipment and approve an agreement with the lender to accept a deed in lieu of foreclosure. The Order Granting Certain Pending Motions (Docket ) approved the sale of the personal property at Tipton. Several issues have arisen and the deed in lieu motion for the Tipton property has been continued to October,.. JL Gateway/West Oakland Plaza The Receiver filed a motion for authority to retain a broker to market and sell the real estate owned by relief defendant JL Gateway, LLC. (Docket No. ). RECEIVER S THIRD QUARTER REPORT :-CV-00-RS
Case :-cv-00-rs Document Filed // Page of The Order Granting Certain Pending Motions (Docket ) approved retention of broker and listing of the JL Gateway property. H. Receiver s Motion to Close CallSocket II, LP The Receiver s Motion for Order Authorizing Closing of CallSocket, LP Call Center was filed in September and the hearing date is set for October,. (Docket No. ). After operating the CSII call center for over one year, the Receiver determined in her business judgment, that the CSII call center should be closed for the following reasons: () the call center has lost over $ million for the eight months of ; () due to the extensive commingling of funds, it would be inequitable to use the receivership funds to continue to operate the call center; () it is currently impossible to determine if the proceeds of the sale of real estate previously owned by CSII actually belong to CSII investors; () the Receiver offered to sell the call center to the CSII investors, and/or suggested investors recapitalize with an additional investment which was declined; and () the call center can be closed without harming the CSII investors. Counsel for a group of investors indicated that they hope to redeploy distribution funds from the receivership into a new construction based EB- project in the future. I. Tax Returns The Receiver continued to work with the CPA firms to obtain, compile, complete and file the tax returns for the estate entities as follows: CS Holding Co, LLC, CallSocket, LLC, CallSocket, LP CallSocket II, LLC, CallSocket II, LP, CallSocket III, LLC, CallSocket III, LP, California Gold Medal, LP, California Central Farms, LLC Comprehensive Care of Oakland, Comprehensive Care of California, LLC, Immedia, LLC, JL Gateway, LLC, West Oakland Plaza, LP, North America PL, LP, Tesh, LLC, SFRC Bay Area Trading, LLC, Berkeley Healthcare Dynamics, LLC Berkeley Healthcare Dynamics, LP CA Export Group, LLC, Magic Ear, LLC, NAPL, LLC RECEIVER S THIRD QUARTER REPORT :-CV-00-RS
Case :-cv-00-rs Document Filed // Page of The Receiver and CPA firm worked with investors to obtain K- s and update investor addresses for filings and remittance. III. ASSET REVIEW A. Cash The Standardized Fund Accounting Report, for the period July, September 0, (Docket No. ), includes the consolidated report on a cash basis for the Receivership Entities. Attached to the consolidated report are the individual entity reports with balance sheet and income statement. The individual reports are as follows:. CallSocket, LP. CallSocket II, LP. CallSocket III, LP. CallSocket Holding Company, LLC. JL Gateway, LLC. West Oakland Plaza, LP. California Gold Medal, LP (escrow funds). Crystal Golden LLC. NAPL (escrow funds). North America PL, LLC. Berkeley Healthcare Dynamics, LLC. CCOO. SFRC The current cash at September 0, is $,,0., of which $,,. is held in reserve from Central Escrow Funds. B. Real Estate There are three remaining real estate assets held by the estate as follows:. JLGateway, LLC which holds title to the retail shopping center complex located at 00-00 Market Street, Oakland, CA. The shopping center contains approx.,00 sq. feet of leasable area. The site area is. acres or, square feet, which includes. acres RECEIVER S THIRD QUARTER REPORT :-CV-00-RS
Case :-cv-00-rs Document Filed // Page of or, sq. feet of land comprising a common area condominium site that was approved for development of an additional,000 sq. feet of retail space within a larger adjacent senior apartment complex. This property has been valued at $,00,000 by Colliers. The title report shows a loan of approximately $ million in debt indicating potential net sale proceeds to the estate. The property is being managed by a professional management company previously retained by the state court receiver. This property went on the market for sale upon receipt of the Order approving issued in October.. Central California Farms, LLC holds title to a former dairy processing plant located at N Burnett Road in Tipton, CA. The property has been valued at $. million by Newark Grubb Knight & Frank. The title report shows a loan of approximately $. million and delinquent taxes of approximately $0,000. There appears to be no equity in this property and the Receiver is working on an agreement to abandon the property pursuant to a deed in lieu of foreclosure.. Berkeley Healthcare Dynamics, LLC holds title to the warehouse property located at 00 th Street in Oakland, CA. This property has been valued at $,0,000 by Colliers. The title report shows a loan of approximately $. million in debt indicating potential net sale proceeds to the estate. The Receiver has done a walk-through of the property with the real estate broker and is reviewing a potential sale of real estate. C. Businesses The operating businesses are as follows:. CallSocket II, LP The call center business continues to operate at the Dufwin building in Oakland, CA. After the Receiver could not obtain a funding source of new capital from the investors to continue operations because they had decided to redeploy funds to another construction based EB- project at some point in the future, a motion was filed seeking authority to shut down the operation.. North America PL, LLC The Receiver has been working with the existing tenant, Customs and Border Patrol, regarding future operations. RECEIVER S THIRD QUARTER REPORT :-CV-00-RS
Case :-cv-00-rs Document Filed // Page of. CCOO/CCOC The Receiver has engaged consultants to prepare a valuation of the business and the real estate. The Receiver, along with the CPA firm, has been working with management on a clean-up of the books and records so that the tax return could be filed and the financials would reflect the correct information. Additionally a cash balance review has been instituted for the th and end of the month in order to track the profitability of the businesses. D. SFRC and Other Interests This Is There Restaurant Group, LLC is a restaurant (Tribune Tavern) located in the Tribune Tower of which SFRC owns a % interest. The other members have proposed a buy-out of the SFRC interest and negotiations continued in third quarter. The Receiver believes there may be additional SFRC interests available to the estate and is investigating. IV. INVESTOR UPDATE The Receiver has responded to investor inquiries and has established a website at SFRC- EB.com. The website has the court filings and reports available to the investors and is updated as information becomes available. Additionally the Receiver and counsel have met with and had conference calls with counsel for various investors. The Receiver along with her immigration counsel continue to work on reconciliation of the investor lists with escrow receipts in order to determine the final investor lists for each entity. V. ASSET RECOVERY The Receiver is investigating and reviewing numerous causes of action and claims against third parties and when appropriate, will seek Court authority to pursue those claims pursuant to Paragraphs and 0 of the Order Appointing Receiver and Monitor. VI. ACCRUED PROFESSIONAL FEES The accrued professional fees and costs at 0% are as follows: Uecker & Associates $,0.0 Wendel Rosen Black & Dean $,0. Bachecki, Crom and Co $,. RECEIVER S THIRD QUARTER REPORT :-CV-00-RS
Case :-cv-00-rs Document Filed // Page of Akawie & LaPietra $,.00 Baker, Donelson $,.0 Denton s $,00.0 The fee applications have been completed and are being submitted to the SEC. They will be filed with the Court in November. DATED: October, By: /s/ Susan L. Uecker Susan L. Uecker, Receiver RECEIVER S THIRD QUARTER REPORT :-CV-00-RS