UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
UNITED STATES SECURITIES AND EXCHANGE COMMISSION, |
Judge: John Daniel Tinder CIVIL ACTION NO.: 1:05-CV-1102-JDT-TAB Magistrate Judge: Tim A. Baker |
MOTION FOR APPROVAL OF UNPAID MONITOR’S FEES AND FIRST MOTION FOR INTERIM COMPENSATION OF BRADLEY W. SKOLNIK AS RECEIVER
Bradley W. Skolnik, the appointed and acting Receiver herein, moves the Court for an Order authorizing the payment of his fees for services rendered as the Independent Monitor, and since December 20, 2006, as the Receiver in these proceedings. In support thereof, Bradley W. Skolnik shows the Court as follows:
Unpaid Monitor’s Fees and Expenses
1. On July 26, 2005, the Court entered an Order of Permanent Injunction and Other Relief in which it appointed Bradley W. Skolnik as the Independent Monitor in this proceeding.
2. Section IX of the Order of Permanent Injunction and Other Relief directed that the Independent Monitor shall take such action as allowed by law to protect the interests of the Bondholders and Bond Fund Investors.
3. Section IX(H)(2) of the Order of Permanent Injunction and Other Relief provided that the Independent Monitor shall be compensated and reimbursed for expenses as follows:
The Reeves shall pay the Monitor reasonable compensation and expense reimbursement in amounts commensurate with services performed by the Monitor. Within ten (10) days after the entry of the Order of Permanent Injunction and Other Relief, the Reeves shall establish an escrow account, and fund that account with $75,000 (the “Initial Amount”), to be used to pay the fees and expenses of the Monitor and of the advisers and experts hired or retained by the Monitor. The Monitor may apply to the Court for such compensation and expense reimbursement monthly and such amounts shall be drawn from the escrow account. The Reeves shall continue to provide additional funds to the escrow account as necessary to maintain at all times a balance equal to or greater than the Initial Amount.
4. Pursuant to the Court’s Order, the Reeves established and funded an Escrow Account with Union Federal Bank of Indianapolis in Indianapolis, Indiana to be used to pay the fees and expenses of the Independent Monitor and the advisers and experts hired or retained by the Independent Monitor.
5. The Reeves failed to replenish the Escrow Account in compliance with the terms and procedures set forth in Section IX(H)(2) of the Order of Permanent Injunction and Other Relief.
6. Following this Court’s Order entered on November 21, 2005 approving and authorizing the payment of the Independent Monitor’s fees and expenses covering the period from October 1, 2005 through October 31, 2005, there was a shortfall of $3,699.21 between the amount of the Independent Monitor’s fees and expenses and the amount then on deposit in the Escrow Account. Therefore, the balance due and owing by the Reeves to the Independent Monitor, Bradley W. Skolnik, for services rendered through October 31, 2005 as the Independent Monitor is $3,699.21.
7. During the period from November 1, 2005 through December 20, 2005, the date on which this matter was converted to a Receivership, Bradley W. Skolnik, in his capacity as Independent Monitor, devoted 110.9 hours to this matter at the rate of $225 per hour for a total of $24,952.50 in fees. When coupled with the sum of $3,699.21 which remains unpaid from the Independent Monitor’s statement of services for services rendered through October 31, 2005, there is a total amount due to Bradley W. Skolnik for services rendered as the Independent Monitor in the amount of $28,621.71.
8. The undersigned respectfully requests that the Court approve and authorize the payment of the Independent Monitor’s aforementioned fees in the amount of 28,621.71. Because the Reeves have failed to take the necessary steps to make any effort whatsoever to provide additional funds to the Escrow Account in compliance with Section IX(H)(2) of the Order of Permanent Injunction and Other Relief entered by this Court as ordered on November 21, 2005 the Receiver further requests that the Receiver pay such Independent Monitor’s fees and expenses from the estate of the Receivership and that the Receiver be authorized to recoup such funds from the Reeves through any and all appropriate legal action.
First Request for Interim Compensation of Receiver
9. On December 20, 2005, this Court entered its Order Granting Plaintiff Securities and Exchange Commission’s Motion to Convert Monitorship to Receivership. Pursuant to this Order, the Independent Monitor Bradley W. Skolnik was appointed as the Receiver in this action and was authorized to employ the law firm of Stewart & Irwin, P.C. and the accounting firm of BGBC Partners, P.C.
10. Since December 20, 2005, the date of his appointment as Receiver, the undersigned has performed the duties of his office and accordingly requests this Court to authorize payment of Interim Compensation for his services.
11. This motion seeks an approval of compensation for services, including fees and costs, of the receiver from December 21, 2005 through and including March 15, 2006, and the Receiver believes that all such work performed and expenses incurred were proper and necessary in order to administer the Receivership estate.
12. The Receiver was granted the authority to take possession of the assets of the Receiver Defendants, all of which are specifically identified in this Court’s December 20, 2005 Order, as amended.
13. The services to be rendered by the Receiver, his counsel and the forensic accountants retained by him are extensive as Alanar and the related entities that comprise the Receiver Defendant can best be described as a financial services conglomerate that consists of:
14. The Receiver has performed various services, many of which are described in detail in the statement of services rendered attached hereto and incorporated by reference herein as Exhibit B. The services performed by the Receiver for and on behalf of the Receivership include, but are not limited to, the following:
a. Participated in numerous telephone calls and conferences with investors and their counsel. Because of the large volume of investor inquiries, the Receiver has utilized the services of one of his law firm’s paralegals, Kim Spears, to help respond to calls and inquiries from investors.
b. Participated in numerous telephone calls and conferences with issuers and their counsel.
c. Established a webpage on his law firm’s website to provide updates and information regarding the status of the case.
d. Worked closely with the staff in Sullivan, Indiana in connection with the administration and operation of the Receiver Defendants. In particular, the Receiver has devoted an extensive amount of time to the oversight and administration of the day to day operations of the paying agents -- Guardian Services, LLC, First Financial Services of Sullivan County, and The Liberty Group, Inc., -- that serve as bond servicing agents and in some cases, as trustees, for approximately 380 open bond issues, as well as paying agent for the Bond Funds. Inasmuch as these paying agents are still operating in some respects, the Receiver continues to devote a significant amount of time to such activities.
e. Worked with and attended several in-depth meetings and conferences with BGBC Partners, P.C., the accountants who are serving as the forensic accountants and prepared the inventory of assets and liabilities and preliminary report to the Court regarding the activities of the Receiver Defendants.
f. Participated in telephone conferences and communicated with attorneys representing the Receiver Defendants in litigation or settlement negotiations pending in various states. The Receiver, working with the staff of the paying agents, continues to be actively involved with these matters. One example of a pending legal matter that has required the Receiver’s attention is the condemnation proceeding filed in the Dallas, Texas County Court by the Dallas Independent School District against Guardian, LLC, and others in a matter encaptioned, Dallas Independent School District v. Apostolic Community Church, Inc. n/k/a Christian Temple of Dallas, Inc., et al. Cause No. 04-06678. On March 13, 2006, the Receiver filed a Petition for Authority to Enter Into Settlement Agreement on Behalf of Defendants Guardian Services, LLC in this Court, which motion was approved by this Court on April 3, 2006.
status of the case and proposals for resolution of case.
g. Participated in negotiations regarding the terms of a proposed sale (that never materialized) of real estate in Florida held in the name of the Reeves Family Limited Partnership, which is a debtor of the Receiver Defendant, Churchmen’s Capital Group.
h. The Receiver has been required to devote a significant amount of time to pending or threatened litigation involving the Receiver or Receiver Defendants, including the petition for intervention filed in this action by an ad hoc committee of investors and the action filed by the Southern Michigan Bank & Trust, a trustee on several open bond issues, in the United States District Court for the Southern District of Indiana in a matter encaptioned, Southern Michigan Bank & trust v. Guardian Services, LLC, Cause No. 1:05-cv-1880-JDT-TAB.
i. Participated in conferences with counsel for the Receiver regarding various pending legal matters and issues, including, but not limited to, matters involving the Southern Michigan Bank & Trust, the petition for intervention filed by an ad hoc committee of investors and the inventory of assets and liabilities and report to the Court and preparation for plan for the resolution of the case.
j. The Receiver and his counsel have spent a considerable amount of time responding to communications from and working with issuers that are interested in refinancing, paying off or working out their indebtedness on the bonds. Because of the Receiver Defendants’ wide-spread instances of misapplication and/or inappropriate co-mingling of funds in bond proceed and repayment accounts, the misuse and misapplication of monies in the bond funds, the failure to comply with accepted accounting standards and confusion occasioned by the myriad number of transactions that must be scrutinized, this has proven to be a challenging task for the Receiver, the accountants and the staff of Guardian Services, LLC who are assisting the Receiver and the accountants.
k. Following the entry of the Order converting this matter to a Receivership, the Receiver worked closely with the staff of the Receiver Defendants to ensure that the over 430 bank accounts and brokerage accounts are now maintained in accordance with this Court’s December 20, 2005 Order Granting Plaintiff Securities and Exchange Commission’s Motion to Convert Monitorship to Receivership, as amended.
l. Because some of the Receiver Defendants hold mortgages or liens on real estate owned by issuers located throughout the country, the Receiver, immediately following his appointment, filed copies of the Complaint and Order Granting Plaintiff Securities and Exchange Commission’s Motion to Convert Monitorship to Receivership in virtually every U.S. District Court in the country in accordance with 28 U.S.C. § 754. This action was taken to better ensure that the Receiver could assert jurisdiction over property located in the several states in which issuers are located.
m. The Receiver’s First Inventory and Appraisal and the Accountants’ Preliminary Report were filed in this Court on February 21, 2006, the Receiver’s Report of Expenditures and Receipts was filed on March 23, 2006 and the Accountants’ Second Report was filed on April 3, 2006.
15. Exhibit B provides a detail of the time expended by the Receiver from the date of his appointment on December 21, 2005 through March 15, 2006.
16. The Receiver requests compensation for his services totaling 188.60 hours at an hourly rate of $225 per hour, or the sum of $42,435.00, and for the services of his paralegal Kim Spears totaling 19.9 hours at an hourly rate of $95 per hour or the sum of $1,890.50, and expenses in the amount of $7,991.19, for a total amount due of $52,316.69.
17. No agreement or understanding exists between the Receiver and any other person for the sharing of compensation to be received for services rendered and expenses in connection with this case.
WHEREFORE, Bradley W. Skolnik, the Receiver herein, respectfully prays that:
a. The Court approve and authorize Bradley W. Skolnik’s unpaid fees and expenses in the amount of $28,621.71 for services rendered and expenses incurred in his capacity as the Independent Monitor in this matter through December 20, 2005, and
b. The Court further authorize that such unpaid Independent Monitor’s fees and expenses in the amount of $28,621.71 be paid from the Receivership Estate and that the Receiver be authorized to recoup such funds from the Reeves though any and all appropriate legal action, and
c. The Court award Bradley W. Skolnik an interim allowance in the amount of $52,316.69 for services rendered and expenses incurred in his capacity as Receiver in this matter from December 21, 2005 through March 15, 2006.
EXHIBIT A
EXHIBIT B
Respectfully submitted,
s/Bradley W. Skolnik
Bradley W. Skolnik (1770-49)
Receiver
CERTIFICATE OF SERVICE
Service of the foregoing was accomplished via the United States District Court’s Electronic Notification and/or via U.S. Mail, first class postage pre-paid, this 26th day of April 2006, addressed to:
John Joseph Sikora, Jr.
UNITED STATES SECURITIES & EXCHANGE COMMISION
sikoraj@sec.gov
Cassandra Becker
UNITED STATES SECURITIES & EXCHANGE COMMISION
beckerc@sec.gov
Michael J. Rusnak, Jr.
STEWART & IRWIN, P.C.
mrusnak@silegal.com
David I. Rubin
STEWART & IRWIN, P.C.
drubin@silegal.com
H. James Maxwell
hjmesq@kc.rr.com
Mark J. R. Merkle
KRIEG DEVAULT, LLP
mmerkle@kdlegal.com
Joshua D. Hague
KRIEG DEVAULT, LLP
jdh@kdlegal.com
Vaughn A. Reeves, Sr.
2122 Lakeview Drive
Sullivan, IN 47882
Vaughn A. Reeves, Jr.
900 Hillside Drive
Sullivan, IN 47882
Jonathan Christopher Reeves
302 West Washington Street
Sullivan, IN 47882
Joshua Craig Reeves
330 West Washington Street
Sullivan, IN 47882
s/Bradley W. Skolnik
Bradley W. Skolnik
Bradley W. Skolnik
STEWART & IRWIN, P.C.
251 E. Ohio Street, Suite 1100
Indianapolis, Indiana 46204-2147
(317) 639-5454/Fax: (317) 632-1319
bskolnik@silegal.com