New Bankruptcy Opinion: Securities and Exchange Commission v. JSW FINANCIAL INC. – Dist. Court, ND California, 2016





SECURITIES AND EXCHANGE COMMISSION, Plaintiff,

v.

JSW FINANCIAL INC., JAMES S. WARD, DAVID S. LEE, EDWARD G. LOCKER, RICHARD F. TIPTON, and DAVID C. LIN, Defendants, and

BLUE CHIP REALTY FUND LLC and SHORELINE INVESTMENT FUND, LLC, Defendants.

Case No. 3:11-cv-01356 WHA.

United States District Court, N.D. California, San Francisco Division.

January 28, 2016.

MOTION TO LIFT STAY AND [PROPOSED] ORDER

WILLIAM ALSUP, District Judge.

MOTION TO LIFT STAY

Pursuant to the Court’s Order dated July 22, 2011, plaintiff Securities and Exchange Commission (the “Commission”) hereby moves to lift the stay of proceedings. By way of background, the Commission filed this action on March 22, 2011, alleging six defendants, JSW Financial Inc. (“JSW Financial”), James S. Ward, David S. Lee, Edward G. Locker, Richard F. Tipton, and David C. Lin, violated the federal securities laws, and naming two relief defendants, Blue Chip Realty Fund LLC (“Blue Chip”) and Shoreline Investment Fund, LLC (“Shoreline”).

Three months later, the United States Government filed an indictment charging four of the same defendants, Lin, Locker, Tipton, and Ward, with 18 counts of mail fraud, wire fraud, and conspiracy. See United States v. Tipton, et al., Case No. 11-CR-0393 TEH (N.D. Cal. filed June 22, 2011). The Court declined to relate this civil action with the criminal matter. See Dkt. 32.

Defendant Ward filed an Answer in this action on June 11, 2011. See Dkt. 25. On July 6, 2011, the Trustee acting on behalf of defendant JSW Financial informed the Court that it had filed for bankruptcy. See Dkt. 28 (citing Case No. 09-57648 SLJ (N.D. Cal.)). The Court, at the Trustee’s request, entered a stay of proceedings. See Dkt. 29 (imposing stay against all defendants). The Court ordered the Commission to file a request to lift the stay within 30 days of “final resolution of the bankruptcy action.” See id.

In the parallel criminal matter, three of the four defendants—Locker, Tipton, and Ward— subsequently pleaded guilty. See Tipton, supra, Case No. 11-CR-0393 TEH, Dkts. 35-37 (plea agreements). The remaining defendant, Lin, was found guilty after trial. See id. Dkt. 108 (verdict). The Court entered final judgments against the four defendants in February 2013, sentencing them to time in prison and ordering them to pay restitution. See id. Dkt. 181 (ordering all defendants jointly and severally liable to pay more than $8.6 million in restitution); Dkt. 190 (sentencing Ward to 60 months in custody); Dkt. 191 (sentencing Locker to 30 months); Dkt. 192 (sentencing Tipton to 18 months); Dkt. 193 (sentencing Lin to 28 months).

The JSW Financial bankruptcy action continued during the pendency of the criminal matter. Ward filed for bankruptcy in January 2012. See Dkt. 33 (referring to Case No. 12-50020 JEH (S.D. Ohio)). In July 2013, Lee filed his own bankruptcy petition. See Case No. 13-54056 AJ (N.D. Cal.). JSW Financial was discharged from bankruptcy on September 28, 2015. See Case No. 09-57648 SLJ, Dkt. 445 (final decree). Ward’s bankruptcy proceedings have also been terminated. See Case No. 12-50020 JEH (minute entry dated June 12, 2014). Defendant Lee’s bankruptcy petition is still pending.

In this action, the Commission reached resolutions with four of the six defendants and the two relief defendants. See Dkts. 40-51. The Court entered final judgments against the settling defendants on January 20, 2016. See Dkts. 53-58 (entering judgments against defendants Lee, Lin, Locker, and Tipton, and relief defendants Blue Chip and Shoreline). The same day, the Commission filed a notice of voluntary dismissal of the claims against defendant JSW Financial. See Dkt. 59.

Only defendant Ward, who is serving his sentence in custody, now remains as a defendant in this matter. Commission Staff has spoken with his attorney of record, David M. McKim, who has not been in contact with Ward for several years. See Buchholz Decl. ¶ 2 (filed concurrently). With counsel’s permission, the Commission has been serving Ward with the filings in this matter by mail. See, e.g., Dkt. 52 (certificate of service); Buchholz Decl. ¶ 2. Commission Staff has not received any communications from Ward, who defaulted in an administrative proceeding instituted by the Commission after his criminal conviction to determine whether Ward should be barred from the securities industry. See SEC Rel. No. IA-3551, 2013 WL 653015 (Feb. 7, 2013) (order making findings and barring Ward by default); Buchholz Decl. ¶ 3 & Exh. A (attaching copy of order).

In light of Ward’s guilty plea, the sworn testimony and evidence introduced at his co-defendant Lin’s criminal trial, and the evidence gathered in the Commission Staff’s pre-filing investigation, the Commission intends to move for summary judgment against Ward. The Commission would be prepared to file its motion within 30 days after the current stay of proceedings is lifted. Entry of judgment against Ward would resolve all remaining claims in this action.

Based on the foregoing, the Commission respectfully requests that the Court lift the stay of proceedings so that it may file its proposed motion for summary judgment.

[PROPOSED] ORDER

Pursuant to its Order dated July 7, 2011, the Court hereby lifts the previously-imposed stay of proceedings.

Save trees – read court opinions online on Google Scholar.

300x600

Leave a Reply