UNITED STATESOF AMERICA

Before the

SECURITIESANDEXCHANGECOMMISSION

ADMINISTRATIVE PROCEEDING 

File No. 3-16829

In the Matter of

WILLIAM B. FRETZ, JR., JOHN P. 

FREEMAN, COVENANT CAPITAL 

MANAGEMENT PARTNERS, L.P., 

AND COVENANT PARTNERS, L.P., 

Respondents.

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PROPOSED PLAN OF 

DISTRIBUTION

I. OVERVIEW

1. The Division of Enforcement (“Division”) has developed this proposed Plan of 

Distribution (the “Plan”) pursuant to Rule 1101 of the Commission’s Rules on Fair Fund and 

Disgorgement Plans (“Rules”), 17 C.F.R. § 201.1101. The Plan is intended to distribute the 

funds collected and any future funds collected directly or indirectly from William B. Fretz, Jr. 

(“Fretz”), John P. Freeman (“Freeman”), Covenant Capital Management Partners, L.P. 

(“CCMP”), and Covenant Partners, L.P. (“Covenant”) (collectively, the “Respondents”) to 

compensate investors who bought partnership interests in Covenant and were harmed by the 

Respondents’ offering and investment advisory fraud. The method of calculation for distribution 

of the funds described in the Plan is intended to fairly and reasonably achieve this purpose. The

Plan is subject to approval by the Commission, and the Commission retains jurisdiction over the 

implementation of the Plan. 

II. THE ADMINISTRATIVE PROCEEDING

2. On September 23, 2015, the Commission issued an Order Instituting 

Administrative and Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act 

of 1933, Sections 15(b) and 21C of the Securities Exchange Act of 1934, Sections 203(e), 203(f), 

and 203(k) of the Investment Advisers Act of 1940, and Section 9(b) of the Investment Company 

Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order 

(the “Administrative Order”)1against the Respondents. The Respondents consented to the 

Administrative Order without admitting or denying the findings except as to jurisdiction. 

 

1

Securities Act Rel. No. 9925 (Sept. 23, 2015).
2

3. In the Administrative Order, the Commission found that Fretz and Freeman 

orchestrated an offering fraud and investment advisory fraud through sales of partnership 

interests in Covenant and the operation of its adviser, CCMP, which Fretz and Freeman 

controlled. The Commission found that, from 1999 through 2014, Fretz and Freeman raised 

approximately $7.3 million through the sale of Covenant partnership interests (the “Fund”) to 

more than 50 limited partners by misrepresenting that Covenant would primarily invest in direct 

marketing companies, only pay the adviser performance fees if certain conditions were met, and 

that Fretz and Freeman would act as fiduciaries in the best interests of the Fund. The 

Commission found that, instead, Fretz and Freeman, through CCMP, used the majority of 

Covenant investors’ funds for their own purposes and benefit, in breach of their fiduciary duties. 

4. As a result of this conduct, the Commission found that Fretz, Freeman, and 

CCMP willfully violated, and Covenant violated Section 17(a) of the Securities Act of 1933 and 

Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and, Fretz, 

Freeman, and CCMP willfully violated Sections 206(1), 206(2), and 206(4) of the Investment 

Advisers Act of 1940 and Rule 206(4)-8 thereunder. The Commission ordered the Respondents, 

jointly and severally, to disgorge $5,476,928 and pay prejudgment interest of $353,582, and 

Fretz and Freeman to each pay civil penalties of $500,000.

5. As part of their consent to the Administrative Order, Fretz, Freeman, and CCMP 

waived their rights to any and all equity interest in Covenant and any claims against Covenant. 

Upon quantification of the waived equity interests and claims in the bankruptcy proceeding 

described below, these respondents will receive dollar-for-dollar offsets of the aggregate value of 

the interests and claims against the ordered disgorgement, prejudgment interest, and civil

penalties. 

III. THE BANKRUPTCY PROCEEDING

6. On September 19, 2014, Covenant filed for protection under Chapter 7 of the 

United States Bankruptcy Code (the “Bankruptcy Proceeding”).

2

 On September 22, 2014, the 

United States Trustee appointed Gary F. Seitz as the Chapter 7 Trustee (the “Trustee”). 

7. On October 2, 2014, the Commission filed a protective Proof of Claim in the 

Bankruptcy Proceeding for an undetermined amount of penalties, disgorgement, and 

prejudgment interest arising from possible violations of the federal securities laws.3 

8. By Order entered on December 2, 2015, the Bankruptcy Court granted the 

Commission an allowed general unsecured claim of $5,830,510, representing disgorgement of 

$5,476,928 and prejudgment interest of $353,582 (the “Allowed Claim”).

4

9. On October 10, 2016, the Trustee filed a motion for approval of an interim 

distribution seeking, among other things, to distribute $2,391,807.89 to the Commission on the

 

2 Covenant Partners, L.P., Case No. 14-17568-SR (Bankr. E.D. Pa.).

3 Bankruptcy Proceeding, Claim No. 1-1.

4 Bankruptcy Proceeding, Dkt. No. 109.
3

Allowed Claim.5 By Order dated November 16, 2016, the Bankruptcy Court approved the 

interim distribution and the Trustee distributed $2,391,807.89 to the Commission on the Allowed 

Claim (the “Interim Bankruptcy Distribution”).6

10. At this time, the Commission staff anticipates that there will be one or more 

additional distributions to the Commission on the Allowed Claim before the termination of the 

Bankruptcy Proceeding. 

IV. THE DISTRIBUTION FUND

11. A distribution fund has been created for any payments of disgorgement and 

prejudgment interest received from the Bankruptcy Proceeding or otherwise received from the 

Respondents, plus any interest earned on those funds (the “Distribution Fund”). The Distribution 

Fund is subject to the continuing jurisdiction and control of the Commission and is currently on 

deposit in a Commission designated interest bearing account at the United States Department of 

Treasury (“U.S. Treasury”). 

12. At this time, the Commission staff anticipates collection of additional 

distributions from the Bankruptcy Proceeding and funds obtained through post-judgment 

collection activities. If the Commission staff collects any amounts in satisfaction of the civil 

penalties, it will, if appropriate, seek the creation of a Fair Fund, combining the civil penalty 

collections with any amounts remaining in the Distribution Fund for distribution in accordance 

with the Plan.

13. On December 8, 2016, the Interim Bankruptcy Distribution was deposited into the 

Distribution Fund. 

V. DEFINITIONS

As used herein, the following definitions shall apply:

14. “Administrative Costs”: fees, obligations, and expenses related to the 

administration of the Plan and the distribution of the Distribution Fund, including without 

limitation tax payments, tax administrator fees and costs, and any investment fees and costs. All 

Administrative Costs will be paid by the Distribution Fund.

15. “Aggregate Payments In”: During the period January 1, 1999 through December 

31, 2014 (the “Relevant Period”), the sum of all monetary contributions of all Investors on the 

Preliminary List into their limited partner accounts at Covenant, including transfers from other 

limited partner(s) account. 

 

5 Bankruptcy Proceeding, Dkt. No. 163.

6 Bankruptcy Proceeding, Dkt. No. 185.
4

16. “Aggregate Payments Out”: During the Relevant Period, the sum of all monetary 

withdrawals or transfers from the Covenant limited partner accounts of all Investors on the 

Preliminary List.

17. “Distribution Payment”: the payment made to an Eligible Investor in accordance 

with the Plan. No Distribution Payment shall be made under the Plan for less than $20.00 (“De 

Minimis Amount”). The Plan anticipates there may be more than one distribution to Eligible 

Investors, if and when additional funds are paid into the Distribution Fund and the Fund 

Administrator determines subsequent distribution(s) are feasible. The first Distribution Payment 

is referenced herein as the “Initial Distribution Payment.”

18. “Eligible Investor”: any Investor whose Payments In exceed their Payments Out; 

who is not (a) an Unresponsive Investor, (b) a Respondent, or (c) an entity controlled by a 

Respondent; whose Initial Distribution Payment or any subsequent Distribution Payment under 

the Plan equals or exceeds the De Minimis Amount; and who is determined eligible for a 

payment under the methodology described below, ¶ 33. An Investor who is an Eligible Investor 

with respect to one distribution under the Plan may not be an Eligible Investor with respect to 

another distribution under the Plan (and vice versa). 

19. “Investor”: any person or entity identified by the Fund Administrator from the 

records of the Trustee, records provided to the Commission staff by Covenant, or records 

obtained through the Plan Notice process, who/which held equity in Covenant as a limited 

partner during the Relevant Period.

20. “Net Distribution Fund”: the Distribution Fund less Administrative Costs.

21. “Payments In”: calculated by the Fund Administrator from the records of the 

Trustee, records provided to the Commission staff by Covenant, or records obtained through the 

Plan Notice process, refers to the sum of monetary payments made by an Investor into their 

limited partner accounts at Covenant, including transfers from another limited partner account

during the Relevant Period. Payments In do not include dividends, interest, or any funds that did 

not originate with an Investor.

22. “Payments Out”: calculated by the Fund Administrator from the records of the 

Trustee, records provided to the Commission staff by Covenant, or records obtained through the 

Plan Notice process, refers to the sum of monetary withdrawals or transfers from the Covenant 

limited partner accounts of an Investor during the Relevant Period.

23. “Preliminary List”: the list of Investors whose Payments In exceed their 

Payments Out and who are not (a) Unresponsive Investors, (b) Respondents, or (c) entities 

controlled by a Respondent. The Fund Administrator will apply the methodology set forth below, 

¶ 33, to the limited partner accounts of the Investors on the Preliminary List to determine 

whether they qualify as Eligible Investors.

24. “Recovery Ratio”: a calculation of Investors’ payments received, in the form of 

Aggregate Payments Out and aggregate Distribution Payments, as a fraction of Aggregate
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Payments In. Interim calculations of the Recovery Ratio will change until the Fund 

Administrator has identified all Eligible Investors and their Payments In and Payments Out. 

25. “Tentative Distribution”: an interim calculated distribution amount under ¶ 33 of 

the Plan below.

26. “Unresponsive Investor”: an Investor whose address the Fund Administrator has 

not been able to verify and/or who does not timely respond to the Fund Administrator’s attempts 

to obtain information, including any information sought in the Plan Notice (see ¶¶ 35 and 37). 

Unresponsive Investors will be excluded from the Preliminary List and will not be eligible for a 

distribution under the Plan. 

VI. TAX ISSUES AND ADMINISTRATION OF THE PLAN

27. Tax Administrator. On December 8, 2016, the Commission appointed Damasco 

& Associates LLP7as the tax administrator of the Distribution Fund (the “Tax Administrator”).8 

The Tax Administrator will be compensated for reasonable costs and expenses from the 

Distribution Fund in accordance with its 2016-2018 Engagement Letter Agreement with the 

Commission, and tax obligations will be paid out of the Distribution Fund.

28. Qualified Settlement Fund. The Distribution Fund constitutes a Qualified 

Settlement Fund (“QSF”) under Section 468B(g) of the Internal Revenue Code, 26 U.S.C. 

§ 468B(g), and related regulations, 26 C.F.R. §§ 1.468B-1 through 1.468B-5.

29. Fund Administrator. Catherine E. Pappas, Senior Adviser in the Commission’s 

Division of Enforcement, is proposed to act as the administrator of the Distribution Fund (the 

“Fund Administrator”). As a Commission employee, the Fund Administrator shall receive no 

compensation from the Distribution Fund for her services in administering the Distribution Fund. 

In accordance with Rule 1105(c) of the Rules, 17 C.F.R. § 201.1105(c), no bond is required 

because the Fund Administrator is a Commission employee. In carrying out her duties, the Fund 

Administrator may be assisted by other Commission staff acting under her supervision. 

The Fund Administrator will, among other things: oversee the administration of the 

Distribution Fund, distribute money from the assets of the Distribution Fund in accordance with 

the Plan, resolve disputes, prepare a final accounting with assistance from the Tax Administrator, 

and take the steps necessary to provide to the Tax Administrator funds to ensure the payment of

tax liabilities and tax compliance fees and costs, pursuant to the Omnibus Order Directing the 

Appointment of Tax Administrator in Administrative Proceedings that Establish Distribution 

Funds.

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 The Fund Administrator and the Tax Administrator will work together to accomplish 

their respective obligations under the Plan. 

 

7

 Damasco & Associates LLP is now part of Miller Kaplan Arase LLP.

8 Order Appointing Tax Administrator, Exchange Act Rel. No. 79511 (Dec. 8, 2016).

9 Exchange Act Rel. No. 77016 (Feb. 2, 2016).
6

30. Fund Administrator Contact Information. Unless directed otherwise by the Plan 

Notice or other correspondence or notices sent pursuant to the Plan, the Fund Administrator can 

be contacted by receipted mail directed to the following address:

Fund Administrator

Covenant Partners Distribution Plan

c/o Melissa Mitchell

United States Securities and Exchange Commission

Office of Distributions

100 F. Street, NE

Washington, DC 20549

VII. THE DISTRIBUTION

31. No claims-made process. The Distribution Fund is not being distributed 

according to a claims-made process, so the procedures for providing notice and for making and 

approving claims are not applicable.

32. Locating Investors. Subject to ¶ 37 below regarding each Investor’s obligation to 

communicate changes in contact information to the Fund Administrator, the Fund Administrator 

will use her best efforts to ensure that communications are properly directed to Investors. 

Review of the information provided by the Trustee, Covenant, and Investors to the Fund 

Administrator, and use of commercial computer databases regularly available to the Division of 

Enforcement shall constitute best efforts to locate and communicate with Investors. 

33. Methodology for Determining Eligible Investors and Distribution Payments. The 

objective of the methodology described below is to distribute the Net Distribution Fund so that 

the payments received, in the form of Payments Out and Distribution Payment, as a fraction of 

Payments In, is the same for all Eligible Investors. The Fund Administrator will identify Eligible 

Investors, and the amount to be distributed to each Eligible Investor, in the following manner:

(a) The Fund Administrator will create the Preliminary List as defined above, ¶ 23;

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(b) Using the Preliminary List, the Fund Administrator will calculate the Recovery 

Ratio as defined above, ¶ 24;

(c) For each Investor on the Preliminary List, the Fund Administrator will calculate 

the Investor’s Tentative Distribution by multiplying the Recovery Ratio by the 

Investor’s Payments In, and subtract from that product the Investor’s Payments 

Out;

 

10 For the purposes of calculations described in in this paragraph and paragraph 23, where an Investor fully 

transferred all assets in the Investor’s account to the account of another Investor, the Payments In and Payments Out 

of the account of the transferring Investor will be combined with the Payments In and Payments Out of the account 

of the receiving Investor. 
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(d) If for any Investor, the Tentative Distribution is less than the De Minimis Amount, 

the Investor will be removed from the Preliminary List, and steps (b) through (d) 

will be repeated until each remaining Investor’s Tentative Distribution is equal to 

or greater than the De Minimis Amount. Such amount will be the Investor’s 

Distribution Payment and each remaining Investor on the Preliminary List will be 

deemed an Eligible Investor.

In the view of Fund Administrator, this methodology constitutes a fair and reasonable 

allocation of the Net Distribution Fund. 

34. Plan Notice and Investor Obligations with Respect to the Plan Notice. Within 

thirty (30) days of Commission approval of the Plan, the Fund Administrator will send to each 

Investor at the Investor’s last known address a notice (the “Plan Notice”) by United States Postal 

Service regarding the Commission’s approval of the Plan, including:

(a) A link to the approved Plan posted on the Commission’s website and a copy of 

the Plan; 

(b) Specification of any information needed from the Investor; 

(c) Objection procedures; 

(d) Contact information for the Fund Administrator; 

(e) A unique Investor number by which the Investor will be referenced in any public 

filings or notices and on schedules sent to multiple Investors (the “Investor 

Number”); 

(f) The Fund Administrator’s preliminary classification of the Investor’s status as a 

Respondent or entity controlled by a Respondent, by which the Investor will be 

excluded from the Preliminary List; 

(g) The Investor’s Payments In and Payments Out, as calculated by the Fund 

Administrator, which will be the basis for excluding an Investor from the 

Preliminary List if the Investor’s Payments Out exceed their Payments In, and 

which otherwise will be the basis for the calculation of the Investor’s Distribution 

Payment, if any; and

(h) An interim Recovery Ratio, calculated by the Fund Administrator (see ¶ 33(b)) 

under the assumptions that the Fund Administrator’s preliminary classification of 

Investors as Respondents or entities controlled by a Respondent is correct and that 

no Investors are Unresponsive Investors. 

The Fund Administrator will coordinate with the Tax Administrator to request in the Plan 

Notice information from each Eligible Investor that is needed to accomplish the distribution in 

accordance with applicable tax requirements relating to the Distribution Fund. Investors must 
8

timely provide to the Fund Administrator the information requested in the Plan Notice in order to 

be considered for classification, or to retain their existing status, as an Eligible Investor.

35. Identification of Unresponsive Investors. If an Investor has been requested to 

provide information in the Plan Notice and the Investor fails to provide the Fund Administrator 

such information by correspondence postmarked within sixty (60) days of approval of the Plan, 

the Fund Administrator shall make two (2) attempts to contact the Investor telephonically or by 

electronic mail. If a last known telephone number or electronic mail address is not located, the 

Fund Administrator will attempt to make contact by first class mail. If an Investor fails to 

respond to the Fund Administrator’s contact attempts as described in this paragraph within 

fourteen (14) days of the last contact attempt that Investor will be deemed an Unresponsive 

Investor, will be excluded from the Preliminary List, and will not be eligible for a distribution 

under the Plan. 

36. Objections to Classification and the Preliminary Calculation. Any and all

objection(s) to information specific to the Investor provided in the Plan Notice, and in particular, 

to the information that follows, must be set forth with specificity, in writing, pursuant to the 

instructions provided in the Plan Notice: 

(a) The Fund Administrator’s classification of an Investor as a “Respondent or entity 

controlled by a Respondent,” which will be the basis for excluding an Investor 

from the Preliminary List; and/or

(b) The Fund Administrator’s calculation of the Investor’s Payments In and Payments 

Out, which will be the basis for excluding an Investor from the Preliminary List if 

the Investor’s Payments Out exceed their Payments In, and which otherwise will 

be the basis for the calculation of Distribution Payments for Investors so not 

excluded. 

The objection must demonstrate, under penalty of perjury, the grounds for the objection,

and be accompanied by documentation sufficient to prove the claimed inaccuracy or omission. 

This can be done by setting forth in detail the basis for the objection and including at the end of 

the statement (if true) the phrase: “I declare under penalty of perjury that the foregoing is true 

and correct,” and signing and dating the document. All objections submitted pursuant to this 

paragraph must be postmarked within sixty (60) days of approval of the Plan and be in 

accordance with the instructions set forth in the Plan Notice, and must include current contact 

information, including a telephone number and, if applicable, an electronic mail address, for the 

objecting person or entity. Any objections not timely submitted in accordance with the 

Instructions in the Plan Notice will be deemed waived. 

The Fund Administrator will review all objections and supporting documentation and 

will notify the Investor in writing of the resolution of the objection within ninety (90) days of 

approval of the Plan. Any such resolution shall be final. 

37. Investor Change of Address or Contact Information after Receipt of Plan Notice. 

Any Investor who relocates or otherwise changes contact information after receipt of the Plan 
9

Notice must promptly communicate any change in address or contact information to the Fund 

Administrator (see ¶ 31). Any Investor who fails to comply with this paragraph will be deemed 

an Unresponsive Investor, will be excluded from the Preliminary List, and will not be eligible for 

a distribution under the Plan. 

38. Validation and Approval of Disbursement of the Distribution Fund. The Fund 

Administrator will compile the payee information and prepare a payment file in a Commissionapproved format for submission to United States Treasury’s Bureau of the Fiscal Service 

(“BFS”). Pursuant to Rule 1101(b)(6) of the Rules,11 the Fund Administrator will obtain an 

order from the Commission to disburse the Distribution Fund. BFS will disburse the

Distribution Fund to Eligible Investors by mailing checks or electronically transferring funds to 

each Eligible Investor as instructed by the Fund Administrator. The Fund Administrator will use 

her best efforts to start the Commission disbursement approval process for the Initial Distribution 

Payments within one hundred and fifty (150) days of the Plan’s approval.

The Fund Administrator will work with BFS to obtain information about uncashed 

checks, any returned items due to non-delivery, insufficient addresses and/or other deficiencies. 

The Fund Administrator will make additional outreach efforts to Eligible Investors for whom the 

Fund Administrator has contact information and who have not negotiated their payment, 

including at least one (1) telephone call to the Eligible Investor’s last known telephone number 

and one (1) outreach mailing. The Fund Administrator is responsible for researching and 

reconciling errors and reissuing payments when possible. The Fund Administrator also is 

responsible for accounting for all payments. 

Checks issued by BFS will state on their face that they are valid for one (1) year. The 

amount of all uncashed checks will be credited to the Distribution Fund and may be distributed 

to other Eligible Investors in a subsequent distribution or sent to the U.S. Treasury as residual in 

accordance with ¶ 43. 

39. Accountings. When all funds have been disbursed except for the residual 

described in ¶ 43, the Fund Administrator will submit a final accounting for approval of the 

Commission prior to termination of the Distribution Fund and discharge of the Fund 

Administrator. Because the funds are being held in a Commission designated interest bearing 

account at the U.S. Treasury, and an SEC employee will be appointed as Fund Administrator, no 

interim accountings will be submitted.

40. Expenses of Administration. Administrative Costs shall be paid from the 

Distribution Fund. 

41. Amendments and Procedural Deadline Extensions. The Fund Administrator will 

take reasonable and appropriate steps to distribute the Distribution Fund according to the Plan. If 

a change to the Plan is determined material, Commission approval is required prior to 

implementation by amending the Plan, which may be done upon the motion of any party, the 

Fund Administrator, or upon the Commission’s own motion. Immaterial changes may be made 

 

11

 17 C.F.R. § 201.1101(b)(6).
10

by the Fund Administrator and for good cause the Fund Administrator may extend any of the 

procedural dates set forth in the Plan.

42. Procedures for the Receipt of Additional Funds. It is anticipated that the 

Distribution Fund may receive additional funds from the Bankruptcy Proceeding and through 

post-judgment collection activities. At any time after the issuance of Initial Distribution 

Payments and before the termination of the Distribution Fund, if the Fund Administrator, in 

consultation with the Tax Administrator, determines the amount in the Net Distribution Fund is

sufficient for one or more subsequent distributions, the Fund Administrator will take the steps

necessary to make such subsequent distribution(s) in accordance with the Plan.

43. Residual Account. A residual account within the Distribution Fund is established 

for any amounts remaining after the completion of all distributions to Eligible Investors under 

the Plan. The residual account may include funds reserved for Administrative Costs, funds from 

checks that have not been cashed or from funds returned to the Commission, tax refunds for 

overpayment or for waiver of IRS or other penalties, and any interest accrued after the final 

distribution. All funds remaining in the residual account will be transferred to the U.S. Treasury 

after the final accounting is approved by the Commission.

44. Termination of the Distribution Fund. Upon final distribution of the Net 

Distribution Fund to Eligible Investors, the Fund Administrator shall make arrangement for the 

final payment of taxes and Tax Administrator fees and shall submit a final accounting to the 

Commission. The Distribution Fund shall be eligible for termination after all of the following 

have occurred: (a) a final accounting, in the Commission’s standard accounting format, has been 

submitted by the Fund Administrator, and has been approved by the Commission; and, (b) all 

Administrative Costs have been paid. When the Commission has approved the final accounting, 

the Commission staff shall seek an order from the Commission to approve the: (a) transfer of the 

residual and any funds returned to the Distribution Fund in the future to the U.S. Treasury; (b) 

termination of the Distribution Fund; and (c) discharge of the Fund Administrator.

VIII. NOTICE AND COMMENT PERIOD

45. Notice of the Proposed Plan of Distribution and Opportunity for Comment 

(“Notice”) will be published in the SEC Docket and on the Commission website at 

http://www.sec.gov/litigation/fairfundlist.htm. Any person wishing to comment on the Plan must 

do so in writing by submitting their comments to the Commission within thirty (30) days of the 

date of the Notice: (a) to the Office of the Secretary, United States Securities and Exchange 

Commission, 100 F Street, NE, Washington, DC 20549-1090; (b) by using the Commission’s 

Internet comment form (http://www.sec.gov/litigation/admin.shtml); or (c) by sending an e-mail 

to rule-comments@sec.gov. Comments submitted by email or via the Commission’s website 

should include “Administrative Proceeding File No. 3-16829” in the subject line. Comments 

received will be publicly available. Persons should only submit comments that they wish to make 

publicly available.