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FEDERAL EQUITY RECEIVERSHIPS 2022_Federal Equity Receiverships- The Order Controls

There are no in-depth statutory guidelines for federal equity receivers, as there are for bankruptcy trustees. Accordingly, the appointment order is the primary source from which a federal equity receiver’s powers are derived. This webinar discusses the importance of the appointment order, the timing of the entry of the appointment order, why and when the appointment order should be amended and what can happen when a receiver acts outside the scope of the appointment order.

Part of the webinar series: FEDERAL EQUITY RECEIVERSHIPS 2022

See more at https://www.financialpoise.com/webinars/

There are no in-depth statutory guidelines for federal equity receivers, as there are for bankruptcy trustees. Accordingly, the appointment order is the primary source from which a federal equity receiver’s powers are derived. This webinar discusses the importance of the appointment order, the timing of the entry of the appointment order, why and when the appointment order should be amended and what can happen when a receiver acts outside the scope of the appointment order.

Part of the webinar series: FEDERAL EQUITY RECEIVERSHIPS 2022

See more at https://www.financialpoise.com/webinars/

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FEDERAL EQUITY RECEIVERSHIPS 2022_Federal Equity Receiverships- The Order Controls

  1. 1. 1
  2. 2. 2 Practical and entertaining education for attorneys, accountants, business owners and executives, and investors.
  3. 3. 3 Thank You To Our Sponsors:
  4. 4. Disclaimer The material in this webinar is for informational purposes only. It should not be considered legal, financial or other professional advice. You should consult with an attorney or other appropriate professional to determine what may be best for your individual needs. While Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate, Financial Poise™ makes no guaranty in this regard. 4
  5. 5. Meet the Faculty MODERATOR: Joel Cohen – Managing Director, Stout PANELISTS: Melanie Damian, Co-Founder/Partner – Damian & Valore LLP Kevin Duff, Partner – Rachlis Duff & Peel LLC S. Gregory Hays, Founder/Managing Partner - Hays Financial Consulting Kathy Bazoian Phelps, Partner - Raines Feldman LLP 5
  6. 6. About This Webinar - Federal Equity Receiverships: The Order Controls There are no in-depth statutory guidelines for federal equity receivers, as there are for bankruptcy trustees. Accordingly, the appointment order is the primary source from which a federal equity receiver’s powers are derived. This webinar discusses the importance of the appointment order, the timing of the entry of the appointment order, why and when the appointment order should be amended and what can happen when a receiver acts outside the scope of the appointment order. 6
  7. 7. About This Series - Federal Equity Receiverships Federal equity receiverships are a powerful and increasingly utilized remedy. Yet, it is still not well understood by most bankruptcy professionals or creditors. This series explores the origins of the federal equity receivership, the wide array of situations in which it can be used, and the way it functions in practice. Each episode is delivered in Plain English understandable to business owners and executives without much background in these areas. Yet, each episode is proven to be valuable to seasoned professionals. As with all Financial Poise Webinars, each episode in the series brings you into engaging, sometimes humorous, conversations designed to entertain as it teaches. And, as with all Financial Poise Webinars, each episode in the series is designed to be viewed independently of the other episodes, so that participants will enhance their knowledge of this area whether they attend one, some, or all of the episodes. Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and executives without much background in these areas, yet is of primary value to attorneys, accountants, and other seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that participants will enhance their knowledge of this area whether they attend one, some, or all episodes. 7
  8. 8. Episodes in this Series #1: Federal Equity Receiverships: The Basics Premiere date: 5/10/22 #2: Federal Equity Receiverships: The Order Controls Premiere date: 6/7/22 #3: The Federal Equity Receiverships: Recent Trends and Evolving Case Law Premiere date: 7/12/22 8
  9. 9. Episode #2 Federal Equity Receiverships: The Order Controls 9
  10. 10. Preliminary and Initial Planning for the Order Overview… • Preparation and Timing • Filing and Procedural Considerations • Drafting, Revising, Finalizing • Content and Scope • Resources 10
  11. 11. Contents of the Order • Asset Freeze • General Powers and Duties • Defendants’ Duties to the Receiver • Access to Books, Records, and Accounts • Access to Real and Personal Property • Notice to Third Parties • Injunction Against Interference with Receiver • Stay of Litigation 11
  12. 12. Contents of the Order (cont’d) • Managing Assets • Investigate and Prosecute Claims • Repatriation of Foreign Assets and Documents • Interference with Repatriation • Bankruptcy Filing • Liability of Receiver • Insurance • Recommendations and Reports • Fees, Expenses, and Accounting 12
  13. 13. Model Order NAFER’S Model Appointment Order 13 Looking for a Model Appointment Order? Login to www.NAFER.org ➢ Membership ➢ Members Only ➢ Best Practices
  14. 14. Asset Freeze Who is bound? ➢ Defendants, Relief Defendants, and all persons acting with them ➢ All persons, institutions and entities with direct or indirect control over any Receivership Assets ➢ Everyone other than the Receiver Injunctive Effect ➢ Enjoins any action to control, dispose of, or affect the value of any asset ➢ Receiver has sole right to control and dispose of assets 14
  15. 15. Asset Freeze (cont’d) Specify the assets to be frozen – be clear and inclusive ➢ “all assets” ➢ categories of assets o Include deposits bank accounts, brokerage accounts, mutual funds, IRAs, 401(k) plans, etc. ➢ certain assets Define whose assets ➢ Defendants ➢ Relief defendants Duration – “until further order of this Court” 15
  16. 16. General Powers and Duties Receiver has all powers, authorities, rights and privileges of Receivership Defendants ➢ under applicable law, including by 28 U.S.C. §§ 754, 959 and 1692, Fed. R. Civ. P. 66, and the Order ➢ by governing charters, by-laws, articles and/or agreements 16
  17. 17. General Power and Duties (cont’d) ➢ Steps into the shoes of the Receivership Defendants ➢ Suspends powers of general partners, directors, and/or managers ➢ Such persons and entities have no authority with respect to the Receivership Defendants’ operations or assets, except as granted in writing by the Receiver ➢ Receiver may control operation of Receivership Defendants and may pursue and preserve their claims or interests ➢ Receiver may continue business operations as necessary or appropriate 17
  18. 18. General Power and Duties (cont’d) Specific Receiver powers and duties: ➢ Determine the nature, location, and value of all property interests of the Receivership Defendants ➢ Take exclusive custody, control, and possession of Receivership Assets and records ➢ Sue for and collect, recover, receive and take into possession from third parties all Receivership Assets and records ➢ Manage, control, operate, and maintain the Receivership Estates and take possession, custody, and control of all Receivership Assets ➢ Possession and control of all bank and investment accounts or securities accounts of Receivership Defendants or their subsidiaries or affiliates, wherever located ➢ Add or delete signers on the account(s) ➢ Open and maintain new bank accounts in Receiver’s name 18
  19. 19. General Power and Duties (cont’d) Specific Receiver powers and duties (cont.): ➢ Control, conserve, and liquidate any and all securities or commodities ➢ Use Receivership Assets to make payments and incur expenses in discharging duties ➢ Take any action which could have been taken by persons in control ➢ Engage and employ persons to assist in carrying out duties and responsibilities including accountants, attorneys, advisers, real estate agents, forensic experts, brokers, auctioneers, etc. 19
  20. 20. General Power and Duties (cont’d) Specific Receiver powers and duties (cont.): ➢ Take such action to preserve or prevent the dissipation or concealment of Assets ➢ Issue subpoenas to compel testimony of persons or production of records ➢ Bring legal actions in any state, federal, or foreign court ➢ Pursue, resist, and defend all suits, actions, claims and demands ➢ Prepare a full accounting ➢ Take all actions approved by the Court 20
  21. 21. Defendants’ Duties to the Receiver The individual Receivership Defendants and anyone acting for the entity Receivership Defendants must forthwith: ✓ preserve, ✓ provide immediate access, and ✓ turn over to the Receiver ➢ all paper and electronic information of, and/or relating to, the Receivership Defendants and/or all Receivership Assets ➢ all books, records, documents, accounts, access codes, security codes, passwords, safe deposit keys, combinations, and all other instruments, papers, and electronic data 21
  22. 22. Defendants’ Duties to the Receiver (cont’d) Soon after entry of the Appointing Order (e.g., 10 days), require the Receivership Defendants to file with the Court and serve upon the Receiver a sworn statement, listing: ✓ the identity, location and estimated value of all Receivership Property; ✓ all employees (and job titles thereof), other personnel, attorneys, accountants and any other agents or contractors of the Receivership Defendants; and ✓ names, addresses, and amounts of claims of all known creditors of the Receivership Defendants 22
  23. 23. Defendants’ Duties to the Receiver (cont’d) Receivership Defendants must produce sworn statement and accounting, with complete documentation, of: A. All Receivership Property including: (a) all securities, investments, funds, real estate, automobiles, jewelry and other assets (and location of each); and (b) any and all accounts, including all funds held in such accounts, with any bank, brokerage or other financial institution including the account statements B. every account at every bank, brokerage or other financial institution C. credit, bank, charge, debit or other deferred payment card issued to or used by each Receivership Defendant, including the issuing institution, the card or account number(s), the balance of each, and all statements for the last twelve months (or other appropriate time frame) 23
  24. 24. Defendants’ Duties to the Receiver (cont’d) D. All assets received by any of them from anyone, including the value, location, and disposition of any assets E. Funds received, including all investors, the securities they purchased, the date and amount of their investments, and the current location of such funds F. Expenditures exceeding $1,000 for the last twelve months (or other appropriate time frame) G. Transfers of assets for the last twelve months (or other appropriate time frame) 24
  25. 25. Defendants’ Duties to the Receiver (cont’d) Receivership Defendants and their past and/or present officers, directors, agents, attorneys, managers, members, shareholders, employees, accountants, debtors, creditors, managers and general and limited partners, and other appropriate persons or entities must ✓ answer under oath to the Receiver all questions which the Receiver may put to them, and ✓ Produce federal income tax returns with underlying documentation ✓ produce all other documents as required by the Receiver ✓ fully cooperate with and assist the Receiver 25
  26. 26. Access to Books, Records, and Accounts ❖ Receiver may take immediate possession of all assets, bank accounts, or other financial accounts, books and records and all other documents or instruments relating to the Receivership Defendants ❖ Anyone receiving notice of the Order must give the Receiver all assets, property, records, and information 26
  27. 27. Access to Books, Records, and Accounts (cont’d) All banks, brokerage and securities firms, financial institutions, and other persons or entities which have possession, custody or control of any Receivership assets or funds must: ✓ Not liquidate, transfer, sell, convey or otherwise transfer any Receivership assets, securities, funds, or accounts, except upon the Receiver’s instructions ✓ Not exercise any form of set-off, alleged set-off, lien, or any form of self-help whatsoever, or refuse to transfer any funds or assets to the Receiver without the Receiver’s permission or a Court order 27
  28. 28. Access to Books, Records, and Accounts (cont’d) ✓ Within a short amount of time after notice of the Appointing Order (e.g., 5 days), file with the Court and serve on the Receiver a certified statement setting forth, with respect to each such account or other asset, the balance in the account or description of the assets as of the close of business on the date of receipt of the notice ✓ Cooperate expeditiously in providing access to accounts, assets, and funds, as well as information as well as transferring funds, assets and accounts to the Receiver or at the direction of the Receiver 28
  29. 29. Access to Real and Personal Property Receiver may take immediate possession of all personal property of the Receivership Defendants Receiver may take immediate possession of all real property of the Receivership Defendants Upon receiving actual notice of the Appointing Order, all persons other than law enforcement officials acting within the course and scope of their official duties, are prohibited from: ✓ entering such premises ✓ removing anything from such premises ✓ destroying, concealing, or erasing anything on such premises 29
  30. 30. Access to Real and Personal Property (cont’d) ❖ Receiver may change door locks ❖ Receiver has exclusive control of the keys ❖ Receiver may open all mail or email directed to or received by or at the offices or post office boxes of the Receivership Defendants, and to inspect all mail and email opened prior to the entry of the Order, to determine whether items or information therein fall within the mandates of the Order ❖ Receiver may request assistance of the U.S. Marshals Service, in any judicial district, to assist the Receiver in carrying out his duties to take possession, custody and control of, or identify the location of, any assets, records, or other materials belonging to the Receivership Estates 30
  31. 31. Notice to Third Parties ❖ Receiver must give prompt notice of the Appointing Order to all known officers, directors, agents, employees, shareholders, creditors, debtors, managers, members, and general and limited partners of the Receivership Defendants ❖ All persons and entities owing any obligation, debt, or distribution to any Receivership Defendant must pay all such obligations to the Receiver 31
  32. 32. Notice to Third Parties (cont’d) ❖ Subject to payment for services provided, any entity or utility furnishing water, electric, telephone, sewage, garbage, or trash removal services to the Receivership Defendants must maintain such service and transfer any such accounts to the Receiver unless Receiver instructs otherwise ❖ Receiver may assert, prosecute and/or negotiate any claim under any insurance policy held by or issued on behalf of the Receivership Defendants, or their officers, directors, agents, employees, or trustees, and to take any and all appropriate steps in connection with such policies 32
  33. 33. Notice to Third Parties (cont’d) Receiver may communicate with or serve the Order upon, any person, entity, or government office to inform them of the status of the Receivership and/or the financial condition of the Receivership Estates All government offices which maintain public files of security interests in real and personal property must, consistent with such office’s applicable procedures, record the Order upon the request of the Receiver Receiver may instruct the Postmaster to hold and/or reroute mail related to the Receivership 33
  34. 34. Notice to Third Parties (cont’d) Receivership Defendants may not open any of the Receiver’s Mail and must immediately turn over such mail, regardless of when received, to the Receiver All personal mail of any individual Receivership Defendants, and/or any mail appearing to contain privileged information, must be released to the named addressee or addressee’s attorney by the Receiver Receivership Defendants may not open a new mailbox or take any steps or make any arrangements to receive mail in contravention of the Order, whether through the U.S. mail, email, or otherwise 34
  35. 35. Injunction Against Interference with Receiver Receivership Defendants and all persons receiving notice of the Order by personal service, email, facsimile transmission, or otherwise, are hereby restrained and enjoined from any action that would: ✓ Interfere with Receiver’s efforts to take control, possession, or management of any Receivership Assets, including by self-help or any lien, court attachment, subpoena, replevin, execution, or other process ✓ Hinder, obstruct or otherwise interfere with Receiver, including concealing, destroying, or altering records 35
  36. 36. Injunction Against Interference with Receiver (cont’d) ✓ Dissipate or otherwise diminish the value of any Receivership Assets ✓ Interfere with or harass Receiver, or interfere in any manner with the exclusive jurisdiction of the Court ✓ Receivership Defendants must cooperate with and assist the Receiver in the performance of his duties ✓ Receiver must promptly notify the Court of any failure to comply with the Appointing Order 36
  37. 37. Stay of Litigation Excluding the proceeding issuing the Appointing Order and all related police or regulatory actions, all other actions are stayed pending further order once notice of Receivership is served (similar to the automatic stay in bankruptcy) This covers all civil legal proceedings of any nature, bankruptcy proceedings, arbitration proceedings, foreclosure actions, default proceedings, or other actions, filed against or seeking relief from: ➢ Receiver or Receivership Assets ➢ Receivership Defendants, including subsidiaries and partnerships, or ➢ Receivership Defendants’ past or present controlling actors in connection with any action taken by them while acting in such capacity of any nature 37
  38. 38. Stay of Litigation (cont’d) The parties to and the Courts with jurisdiction over any such action are enjoined from commencing, continuing, or taking any action in connection with any such proceeding, including service of process Any applicable statute of limitation is tolled until the earlier of two years following entry of the Order or such time as the Receiver has filed an accounting with the Appointing Court 38
  39. 39. Managing Assets ❖ Receiver must establish account(s) at a federally insured bank to receive and hold all cash and cash equivalents ❖ Receiver’s deposit account must be entitled “Receiver's Account, Estate of [Name of Receivership Defendant]” together with the name of the action, or a title to that effect ❖ Receiver must determine whether use existing or new Employer Identification Number. See, e.g., IRS Pub. 1635. ❖ Receiver may transfer, compromise, or otherwise dispose of any Receivership Assets, other than real estate, in the ordinary course of business, on terms most beneficial to the Receivership with due regard to proper value 39
  40. 40. Managing Assets (cont’d) ❖ Receiver may sell, and transfer clear title to, all real property with Court authorization ❖ Receiver may manage, maintain, and/or wind-down business operations of the Receivership Estates ❖ Receiver is not responsible for payment or performance of any obligations of the Receivership Defendants incurred prior to the date of the Order 40
  41. 41. Investigate and Prosecute Claims ➢ Receiver may investigate, prosecute, defend, intervene in, or otherwise participate in, compromise, and/or adjust actions in any court or proceeding to recover and/or conserve Receivership Assets ➢ Receiver may investigate the financial and business affairs of the Receivership Defendants and (with leave of Court) institute actions and legal proceedings, for the benefit and on behalf of the Receivership Estates ➢ Receiver may conduct a full accounting with regard to the activities of the Receivership Defendants 41
  42. 42. Investigate and Prosecute Claims (cont’d) ➢ Receiver also may seek to impose constructive trusts, disgorgement of profits, asset turnover, avoidance of fraudulent transfers, rescission and restitution, collection of debts, and such other relief ➢ Receiver holds and may waive privileges, including attorney-client privilege, for entity Receivership Defendants ➢ Receiver has a continuing duty to ensure that there are no conflicts of interest between the Receiver, his Retained Personnel, and the Receivership Estate 42
  43. 43. Resource for Privilege Issues NAFER’S Best Practices 43 Login to www.NAFER.org ➢ Membership ➢ Members Only ➢ Best Practices
  44. 44. Repatriation of Foreign Assets and Documents Receiver may repatriate Receivership Assets outside the U.S. held by or for Receivership Defendants or under their control Shortly after entry of the Order (e.g., 3 business days), the individual Defendants must provide the Receiver with a full accounting of all assets that are located outside the U.S., including the addresses and names of any financial institution or other entity holding the assets, along with the account numbers and balances Defendant must take all steps to prevent any transfer, disposition, or dissipation whatsoever of any assets, including Receivership Assets, located outside the U.S. Within three (3) business days following entry of the Order, Receivership Defendants must provide the Receiver access to records and documents held by financial institutions or other entities outside the U.S., by signing and delivering to the Receiver a Consent to Release of Financial Records 44
  45. 45. Repatriation of Foreign Assets and Documents (cont’d) Receiver repatriation and international discovery tools and laws: ❖ Mareva Compania Naviera SA v. Int’l Bulk Carriers SA (The Mareva), [1980] 1 All E.R. 213 (Eng. C.A. Civ. Div.) -- freezing injunction ❖ Anton-Piller KG v. Mfg. Processes Ltd., [1976] Ch. 55, [1976 1 All ER 770, [1976 2 WLR 162, [1976] RPC 719, [1976] FSR 129 -- search order ❖ Norwich Pharmacal Co. v. Customs & Excise Comm’rs , [1974] AC 133 -- requiring third party to produce evidence 45
  46. 46. Repatriation of Foreign Assets and Documents (cont’d) Receiver repatriation and international discovery tools and laws (cont’d): ❖ Hague Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil and Commercial Matters (entered into force Oct. 7, 1972), U.N.T.S. 37/1976 -- international discovery ❖ See also Societe Nationale Industrielle Aerospatiale v. U.S. District Court, 482 U.S. 522 (1987) ❖ See Ch. 15, Bankruptcy Code, 11 U.S.C. § 1501, et seq. 46
  47. 47. Interference with Repatriation Defendants are temporarily restrained and enjoined from taking any action that may result in the encumbrance or dissipation of foreign assets, including Receivership Assets, or in the hindrance of the repatriation, including but not limited to: ✓ Sending any communication that results in a determination by a foreign trustee or other entity that a “duress” event has occurred under the terms of a foreign trust agreement, until the assets have been fully repatriated, and ✓ Notifying any trustee, protector, or other agent of any foreign trust or other related entities of either the existence of the Order or the fact that repatriation is required pursuant to a Court Order, until the assets, including Receivership Assets, have been fully repatriated 47
  48. 48. Bankruptcy Filing ➢ Receiver may seek authorization of this Court to file voluntary petitions for relief under the Bankruptcy Code for the Receivership Defendants ➢ If a Receivership Defendant is placed in Chapter 11 bankruptcy proceedings, the Receiver may become and operate each of the Receivership Estates as a debtor-in-possession and have all of the powers and duties as provided a debtor-in-possession to the exclusion all others ➢ No person or entity, other than the Receiver, may file voluntary bankruptcy petitions for, or involuntary bankruptcy petitions against any of the Receivership Defendants unless, upon a showing of good cause, the third party obtains an order from the Court 48
  49. 49. Liability of Receiver ❖ No bond required unless required by Order ❖ No liability for good faith compliance with any order, rule, law, judgment, or decree ❖ No liability for actions or omissions except upon an express finding of malfeasance, bad faith, gross negligence, or reckless disregard of duties ❖ No responsibility or liability for environmental or hazardous condition of any Receivership Property 49
  50. 50. Liability of Receiver (cont’d) ❖ No action may be filed against the Receiver or the Receiver’s professionals arising out the Receivership or their duties or work performed in connection with the receivership without obtaining an order from the appointing Court based upon a showing of good cause – the “Barton Doctrine” – see Barton v. Barbour, 104 U.S. 126, 128 (1881) ❖ The Court retains jurisdiction over any action filed against the Receiver or his/her professionals based upon acts or omissions committed in their representative capacities 50
  51. 51. Insurance Receiver must make it a priority to verify or obtain insurance coverage immediately Receivership Defendants must immediately: ✓ provide the Receiver with all available insurance information, including all applications, policies, riders, correspondence, endorsements, claims and other information ✓ advise the insurance agent(s) of the Order in writing ✓ designate all authority over the policies to the Receiver, and ✓ take no action with regard to terminating or modifying existing insurance policies 51
  52. 52. Insurance (cont’d) The Parties and Court acknowledge there may be a gap of time before such insurance may be in place Given the urgency to appoint a Receiver, the Receiver has no responsibility or liability due to lack or insufficiency of insurance until he/she can confirm appropriate insurance is in place and notify the Court 52
  53. 53. Insurance (cont’d) Any insurance broker, agent, carrier, or underwriter must timely provide the Receiver : ✓ copies of all insurance policies including any riders, endorsements and applications with respect to policies related to the Receivership Estates ✓ loss history for five consecutive years or for as long as insurance has been in force if less than five years ✓ premium payment history including current status, and ✓ any correspondence with insurance agents, brokers and companies 53
  54. 54. Insurance (cont’d) Receivership Defendants must endorse policies naming the Receiver as Named Insured and Loss Payee effective the date of the Order, and evidence of this policy endorsement must be promptly supplied to the Receiver Receiver may engage insurance brokers and consultants to insure the Receivership Assets 54
  55. 55. Case Specific Provisions (examples) ❖ Ongoing operations ❖ Environmental issues ❖ Licensing ❖ Intellectual property ❖ Inventory ❖ Unique assets ❖ Unusual circumstances 55
  56. 56. Recommendations and Reports ❖ Receiver may develop a plan for recovery and liquidation of all Receivership Assets ➢ Liquidation plan is typically filed within ninety (90) days of entry of the Order ❖ Receiver typically files a quarterly status report and accounting of the existence, value, and location of all Receivership Assets, and of the extent of liabilities, both those claimed to exist by others and those the Receiver believes to be legal obligations of the Receivership Estates 56
  57. 57. Recommendations and Reports (cont’d) The Quarterly Status Report must contain the following: ✓ Summary of Receivership operations ✓ Cash on hand, accrued administrative expenses, and unencumbered funds ✓ Schedule of receipts and disbursements ✓ Description of all known Receivership Assets, including valuations, dispositions, and reasons to retain assets ✓ Description of liquidated and unliquidated claims, including valuations methods of enforcing such claims (including likelihood of success) 57
  58. 58. Recommendations and Reports (cont’d) The Quarterly Status Report must contain the following (cont’d): ✓ List of known creditors and amounts of their claims ✓ Status of objections to claims ✓ Receiver's recommendations for a continuation or discontinuation of the receivership 58
  59. 59. Fees, Expenses, and Accounting ➢ No prior approval needed from Court for ordinary course disbursement of Receivership Funds for expenses in the of the administration and operation of the receivership or for payments of taxes ➢ Receiver may engage professionals to assist carrying out duties and responsibilities in the Order ➢ Receiver and retained professionals are entitled to reasonable compensation and expense reimbursement upon approval of the Court ➢ Subject to availability of funds, Receiver typically files a Quarterly fee application 59
  60. 60. Fees, Expenses, and Accounting (cont’d) Fee applications are typically interim and subject to cost benefit and final reviews, may be subject to a holdback amount, and must: ✓ Comply with the terms of the billing instructions agreed to by the Receiver; and ✓ Contain representations that: (i) fees and expenses were incurred in the best interests of the Receivership Estates; and (ii) with the exception of professional fees, the Receiver has not entered into any agreement, written or oral, express or implied, with any person or entity concerning the amount of compensation paid or to be paid from the Receivership Estates, or any sharing thereof At the close of the Receivership, Receiver must submit a final accounting and final fee application, describing costs and benefits of litigation and other actions by the Receiver during the receivership 60
  61. 61. Serving the Order ➢ Identify who to hand serve – e.g., landlords, postmaster, banks ➢ Mail/email/fax to all investors, banks, creditors, credit card issuers, asset holders, and anyone who may attempt to exercise self-help ➢ Email liberally ➢ Post to Receiver’s web site ➢ Phone calls to key recipients – e.g., banks, landlord, holders of large assets ➢ Be aware of who may act badly upon service/notice ➢ File in District Court of all jurisdictions that may have assets – see 28 U.S.C. § 754 61
  62. 62. Subsequent Procedural Actions ❖ Amending the Order ✓ Add additional defendants ✓ Gain control over additional Receivership assets ✓ Specify particular authority ✓ Otherwise address scope of Receivership ❖ Seeking Reappointment ✓ Including for 28 U.S.C. § 754 purposes 62
  63. 63. Terminating the Order ❖ If Receiver decides to resign, Receiver must give written notice to counsel of record and the Court, and the resignation is not effective until the Court appoints a successor receiver ❖ Receiver must then follow the Court’s instructions 63
  64. 64. Terminating the Order (cont’d) NAFER’S Model Wind-Up Order 64 Model Termination Order Login to www.NAFER.org ➢ Membership ➢ Members Only ➢ Best Practices
  65. 65. About the Faculty 65
  66. 66. About The Faculty Joel E. Cohen – jcohen@stout.com Joel Cohen is a Managing Director in the Disputes, Compliance, & Investigations group in Stout’s New York Office. Joel has over 19 years of experience in the dispute, forensic, and insolvency practice areas, most specifically focused in the financial services and asset management industries. His experience encompasses a number of significant cross-border insolvency and litigation matters, where he has served as financial advisor and consulting expert to fiduciaries, offshore liquidators, bankruptcy, and litigation trustees. He has assisted these clients in a variety of litigation consulting services, including asset tracing, fraud, Ponzi schemes, industry custom and practice for investment managers, and forensic analysis. Joel has also led several internal investigations within the context of family office, investment advisors, and various corporate structures. Joel has expertise in managing the expectations of various stakeholders involved in insolvency proceedings, liquidations, litigation settlements, and receiverships, namely in his capacity of assisting a board, trustee, receiver, or official liquidator with their duties, including U.S. and cross border considerations. He has extensive experience within the offshore world, regularly handling cases out of the Caribbean. 66
  67. 67. About The Faculty Melanie Damian – mdamian@dvllp.com Melanie Damian, Co-Founder and Partner of Damian & Valori, LLP | Culmo Trial Attorneys, represents public and private companies and individuals in a variety of complex business and securities litigation. Ms. Damian has been appointed as an equity receiver in 19 federal court cases and 21 state court cases and regularly serves as court-appointed Federal Equity Receiver, Special Monitor, and distribution Agent. Ms. Damian represents officers and directors in corporate and securities litigation matters, and various partners or members in closely held “business divorce” matters. She also represents national law firms in a variety of legal malpractice matters, including those involving allegations of malpractice in connection with failed advocacy, failed transactions, and the failure of financial institutions. She counsels companies on corporate governance matters and serves as counsel to special litigation committees performing internal investigations in response to shareholder derivative demands. Ms. Damian also has substantial experience advising executives on contractual and compensation matters and litigating executive and general employment matters, including representation and counseling on behalf of national and local companies in discrimination and harassment claims. She also has experience in counseling clients and litigating issues concerning various employment-related issues including, non-competition agreements, and theft of trade secrets. Ms. Damian is a Past Chair of the Business Law Section of The Florida Bar, President of the International Women’s Forum (IWF) Florida Chapter and served as Co-Chair of the IWF 2018 World Leadership Conference. 67
  68. 68. About The Faculty Kevin Duff– kduff@rdaplaw.net Kevin Duff is a member/partner in the firm of Rachlis Duff & Peel, LLC. Mr. Duff regularly serves as a federal equity receiver and represents receivers as counsel. He is the Immediate Past President of the National Association of Federal Equity Receivers (“NAFER”). Mr. Duff also focuses on complex commercial litigation in addition to receivership matters. Mr. Duff represents corporations and executives in multi-million dollar fraud, securities, breach of fiduciary duty, and contract disputes. He has significant experience in professional malpractice actions involving lawyers and international accounting firms, including claims for fraud, illegal tax shelters, and breaches of duty. Mr. Duff also represents high net worth individuals and trusts in trust and estate disputes with banks and among adverse family members. 68
  69. 69. About The Faculty Greg Hays – ghays@haysconsulting.net Mr. Hays is a court appointed fiduciary and forensic accountant that specializes in recovering funds from insolvent companies and investment offerings. He is routinely appointed by federal and state courts as a receiver or bankruptcy trustee to manage businesses in order to maximize recovery for creditors. He has been appointed as a fiduciary by courts in seven states. Mr. Hays is a recognized expert in Ponzi schemes and receiverships and has been quoted in many articles in national publications. The TV show American Greed featured a story on the Al Parish Ponzi scheme where he served as receiver. Other cases in which he has served as a fiduciary have been the subject of TV broadcasts including CNN's Anderson Cooper, CBS Evening News, and local news programs. He has spoken on bankruptcy, receiver and fraud issues at conferences sponsored by the ABI, ACFE, AIRA, IAAR, INSOL, NABT, NACM, NAFER, NCBJ, TMA and other professional organizations. Mr. Hays has thirty-five years of financial experience including twenty-five years managing bankruptcy and receivership cases and investigating fraudulent activity. He manages a firm of corporate financial consultants that specializes in turnarounds, workouts, asset recovery, forensic accounting, litigation support, and interim management. 69
  70. 70. About The Faculty Kathy Bazoian Phelps – kphelps@raineslaw.com Kathy Bazoian Phelps is a partner at the law firm of Raines Feldman LLP in Los Angeles California. She has been practicing law in the areas of bankruptcy and fraud litigation since 1991, and is a certified mediator. Kathy represents bankruptcy trustees, receivers, and investors, and has been lead counsel in large-scale litigation involving the recovery of assets in Ponzi scheme cases. She also has extensive litigation experience in bankruptcy and commercial litigation. Kathy has lectured widely and written on bankruptcy and receivership matters, with a focus on Ponzi schemes. She co-authored The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes (www.theponzibook.com), which has garnered national and international attention as the authoritative work on Ponzi scheme law. Kathy has also recently published Ponzi-Proof Your Investments: An Investor’s Guide to Avoiding Ponzi Schemes and Other Fraudulent Scams (www.ponzi-proof.com), and she is the author of The Ponzi Scheme Blog at www.theponzischemeblog.com. 70
  71. 71. Questions or Comments? If you have any questions about this webinar that you did not get to ask during the live premiere, or if you are watching this webinar On Demand, please do not hesitate to email us at info@financialpoise.com with any questions or comments you may have. Please include the name of the webinar in your email and we will do our best to provide a timely response. IMPORTANT NOTE: The material in this presentation is for general educational purposes only. It has been prepared primarily for attorneys and accountants for use in the pursuit of their continuing legal education and continuing professional education. 71
  72. 72. Commercial Bankruptcy Litigation is a must-have resource for any non-bankruptcy attorney who is involved in a chapter 11 bankruptcy case. It is also a handy “take on the road” treatise for the experienced chapter 11 professional. This 2,000- plus page treatise, updated yearly, and with contributions from some of the country's most respected practitioners from top firms across the U.S., covers topics from general bankruptcy and procedure to appeals. Commercial Bankruptcy Litigation, 2d, 2022 ed. eBook available through Thomson and Reuters and Amazon
  73. 73. Strategic Alternatives For And Against Distressed Businesses, 2022 ed. Strategic Alternatives for And Against Distressed Businesses is one of a kind. It is the only resource that provides comprehensive state-by-state comparisons of assignments for the benefit of creditors and receiverships. This alone makes the book a must-have for every insolvency professional. “If you can only own one book about corporate restructuring and insolvency, there is a compelling case that this should be the one.” eBook available through Thomson and Reuters and Amazon
  74. 74. ABOUT DailyDAC DailyDAC.com is the leading source of information about assignments, article 9, bankruptcy, receiverships, out-of-court workouts and vulture investing, designed for business owners and vulture investors. Visit us at www.dailydac.com. Premium Public Notice Service DailyDAC’s Premium Public Notice Service helps market asset sales on behalf of fiduciaries (e.g., Chapter 11 debtors- in-possession and committees, trustees, receivers, assignees), secured lenders selling collateral under UCC Article 9, and auctioneers to a very large and self-selected group of potential bidders and their advisors. The Service also assists with noticing other events, deadlines, and milestones – including tombstones and other press releases. Our free weekly newsletter, DailyDAC contains our latest bankruptcy article, current Public Notices and all opportunistic deals added to our proprietary database that week. Sign up at: https://www.dailydac.com/dacyak-weekly-newsletter-signup/
  75. 75. About Financial Poise 76 DailyDAC LLC, d/b/a Financial Poise™ provides continuing education to attorneys, accountants, business owners and executives, and investors. It’s websites, webinars, and books provide Plain English, entertaining, explanations about legal, financial, and other subjects of interest to these audiences. Visit us at www.financialpoise.com Our free weekly newsletter, Financial Poise Weekly, updates you on new articles published on our website and Upcoming Webinars you may be interested in. To join our email list, please visit: https://www.financialpoise.com/subscribe/

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