1 

UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF FLORIDA 

CASE NO.: 9:20-CV-81205-RAR 

SECURITIES AND EXCHANGE COMMISSION, 

Plaintiff, 

vs. 

COMPLETE BUSINESS SOLUTIONS GROUP, 

INC. d/b/a/ PAR FUNDING, et al., 

Defendants. 

_________________________________________/ 

DEFENDANTS’ AMENDED OPPOSITION TO PLAINTIFF’S 

EXPEDITED MOTION TO AMEND RECEIVERSHIP ORDER 

Relief Defendant The LME 2017 Family Trust, as the owner of all issued and outstanding 

shares of Complete Business Solutions Group, Inc. d/b/a/ Par Funding, and Lisa McElhone, as the 

owner of Full Spectrum Processing, Inc., submit this Joint Amended1 Response to Plaintiff’s 

Expedited Motion to Amend Receivership Order, ECF 105, (“Motion to Amend Receivership 

Order”) and state as follows:2

1

 The only amendments made to the Defendants’ Opposition to Plaintiff’s Expedited Motion to 

Amend Receivership Order, ECF 130, are revisions to the former footnote 1 (now, footnote 2) and 

the deletion of the former footnote 6. 

2

 This afternoon, counsel for Defendants Lisa McElhone, Joseph Laforte and Relief Defendant The 

LME 2017 Family Trust (the “Trust”) conferred during a lengthy call with counsel for the SEC 

and the Receiver (collectively, “the Parties”) to resolve and narrow several issues pending before 

the Court. Included in those discussions were issues relating to privileged communications and the 

Receiver’s interviews of Complete Business Solutions Group, Inc. d/b/a/ Par Funding (“CBSG”) 

employees, which is consistent with Defendants’ desire for the Receiver to rehire CBSG 

employees immediately. 

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On July 24, 2020, the SEC commenced this action with the filing of its Complaint, ECF 1, 

accompanied by its ex parte motions for the appointment of a Receiver, ECF 4, and for a temporary 

restraining order, ECF 6. The SEC submitted a proposed Receivership Order, ECF 4-2, that it now 

refers to as its “Model Order.” ECF 105, at p. 2. However, there is nothing “model” about an 

action that, on a preliminary basis, deprives the lawful owners of a legitimate business from 

maintaining their rights of ownership—and, correspondingly, the investors in that business from 

realizing their promised returns—while the parties litigate whether the SEC can prove the 

allegations in its Complaint, particularly one it just amended on August 10, 2020. 

The owners of Par Funding and Full Spectrum (the “Companies”) recognize that the Court 

might impose temporary relief to address the concerns raised by the SEC and to protect the investor 

interests. But, as Defendants submitted in their first substantive response to the SEC’s request for 

temporary relief, the Receivership Order needed to be carefully calibrated to protect the legitimate 

concerns raised by the SEC without unduly harming the legitimate interests of the owner and 

managers of the Companies, as well as investors and client merchants. Defendants cited authority 

from this District, and from other Federal Courts, in which monitorships, or limited receivers, were 

appointed under appropriate circumstances, instead of full-blown receiverships. ECF 43. 

There is no “one size fits all” receivership that Federal Courts impose at the preliminary 

stage of a proceeding brought by federal regulators. The fact is that a full-blown receivership is 

often a prelude to liquidation, whereas other procedural mechanisms, such as monitorships, limited 

receiverships, or conservators, are used to protect the interests of Companies, the people and 

businesses that rely on them, and their investors, by making sure that they remain “going 

concerns.” See e.g. Hennessy v. FDIC, 58 F.3d 908, 916 (3d Cir. 1995)(“A receiver, unlike a 

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conservator, does not have as its purpose the preservation of an institution as a going 

concern...Receivers have the power to liquidate and wind up the affairs of an institution.”) 

The Court rightly rejected the SEC’s proposed receivership order and entered a narrower 

Receivership Order, appropriately tailored to the circumstances presented in this case. ECF 36. 

The Court, at the August 4, 2020 status conference, reaffirmed its narrower view of the Receiver’s 

authority and its decision to enter the Receivership Order that presently governs this case. The 

SEC nevertheless insists, in its Expedited Motion, that the substance of the proposed order that 

was rejected by the Court should now be imposed. The SEC does not claim that the Court 

committed a legal error in imposing the narrower Receivership Order, nor does the SEC even 

suggest any materially changed circumstances that should lead the Court to reconsider the scope 

of the Receivership Order. If anything, the facts as disclosed in recent defense filings show that 

the SEC and the Receiver misapprehended significant, material facts about the finances and the 

business and how it was run. These facts confirm this Court’s sound decision to issue a 

Receivership order carefully tailored to the circumstances of this case. 

The SEC’s first basis for imposing the rejected proposed order is simply because three 

other Judges in this District in cases with vastly different facts imposed the SEC’s preferred Model 

Order. ECF 105 at p. 2. 3 The SEC prefers its Model Order, not because it is appropriate for this 

case, but because it gives them total control over their adversaries before the Defendants have even 

had an opportunity to respond to the allegations. This Court did not wish to take such a drastic step 

3

 In SEC v Natural Diamonds Investment Co., Case No. 19-Civ-80633, the SEC alleged in its 

complaint that the Defendants were operating an illegitimate Ponzi scheme. ECF 1 at ¶6. SEC v 

Lottonet Operating Corp., Case No. 17-Civ-21033 involved an illegal “boiler room” operation. 

ECF 1. Further, the Defendant who owned that boiler room did not even respond to the complaint 

and defaulted. ECF 54. In SEC v TCA Fund Management Group Corp., Case No 20-Civ-21964, 

the Defendants agreed to the entry of that receivership order. ECF 5. 

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in this case and chose a more measured course. There is simply no reason to change course now 

and grant the receivership authority it previously rejected—certainly not before the Defendants 

have had a full opportunity to respond to the SEC’s motion for preliminary injunction scheduled 

for hearing on August 18. 

The SEC’s second basis for the requested expansion of the Receivership Order is that it 

wants the Receiver to hand over to the SEC protected client communications of the Receivership 

entities. ECF 105 at pp. 3-5. But the owners of the Companies do not wish to have their counsel 

terminated and have asserted their rights regarding extensive privileged communications that have 

occurred with all of its counsel over a number of years. The SEC’s request would strip the 

Defendants of these protected communications.4

For example, Defendants retained counsel for the Companies to handle nationwide 

litigation regarding the enforcement of the Merchant Cash Advance (“MCA”) funding agreements 

that support the legitimate revenues that are used to pay investors. Exhibit “A” to this Joint 

Response is the Declaration of Norman Valz, who describes the MCA agreements and the 

nationwide litigation that had successfully enforced those agreements prior to the commencement 

of this proceeding. 

One of the crucial issues that this Court must decide is how to allow this litigation to move 

forward so that the revenues owed to the Companies, which ultimately is used to pay the investors 

4

 As the SEC had to recognize, pursuant to binding Fifth Circuit precedent, the Receiver’s control 

over the property of the Companies, pursuant to the Receivership Order, does not lead to the right 

to terminate counsel, or to take control of privileges. See NCL Corp. v. Lone Star Bldg. Centers, 

144 B.R. 170 (S.D.Fla. 1992), citing In re Yarn Processing Patent Validity Litig., 530 F.2d 83 (5th

Cir. 1976); see also FDIC v. McAtee, 124 F.R.D. 662 (D. Kan. 1988)(rejecting government’s claim 

that it controlled privilege, citing In re Yarn Processing). As shown below, the SEC’s proposed 

solution, to enter an Amended Order that institutes the change in legal control, under the General 

Powers and Duties of Receiver, that the Court already rejected, is a seriously flawed proposal. 

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on their promissory notes, can be effectively collected. See ECF 115, setting forth the Defendants’ 

Proposed Action Plan. These cases are filed in federal and state courts across the nation where 

local judges, knowledgeable of their state’s applicable laws, read the merchant agreements and 

hear the arguments of counsel and make decisions. These judges are fully familiar with the MCA 

business and the agreements at issue,5 and the vast majority have resulted in favorable rulings or 

settlements. The SEC’s insistence on the immediate termination of counsel who have had lengthy 

and positive experience in handling these litigation matters will only lead to more losses for the 

Companies and their investors. See Defendants Joint Reply, ECF 115, at p. 5. There is, for all 

practical purposes, no way a new law firm can step into hundreds of state and federal cases and 

recommence the litigation process without weeks or months of work. By then, millions of dollars 

in revenue – revenue that would have continued to be collected but for the TRO, will be lost. 

Defendants’ Proposed Action Plan requests the recommencement of litigation. By seeking its 

Expedited Motion to terminate counsel, the SEC is asking this Court to issue an order that will 

cause millions of dollars in receivables that will be used to repay investors, and fund businesses 

that rely on these funds, to be lost. The SEC’s request should be denied. 

The SEC’s actions to date have already caused and are continuing to cause significant 

economic damage to the Companies. Based on the unproven allegations of the SEC’s Complaint 

and its (and the Receiver’s) fundamental misunderstanding of how the Companies operate, several 

MCA vendors are refusing to repay debts owed to the Companies, seeking to renegotiate their 

debts to the Companies, or filing law suits against the Companies. Counsel for the Companies has 

5

 Multiple efforts by one law firm to claim that the MCA business is improper or violates state or 

federal laws have been uniformly unsuccessful and turned away by judges. See Exhibit A, ¶¶ 12-

22. 

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reached out to counsel for the Receiver to stem this tide and repair the damage. There is simply no 

way new counsel could be brought up to speed in time to handle these issues. 

Moreover, the owners and senior management of the Companies, who properly engaged in 

privileged and confidential communications with counsel to protect the interests of the Companies 

have the right to protect those communications from an adversary in the SEC who is required to 

prove its allegations with proper evidence. 6 The SEC’s demand that the privileged 

communications related to this ongoing legal representation be handed over to the Receiver, ECF 

105 at p. 4, n. 6, raises fundamental and complex legal issues that will have to be resolved by this 

Court if the Parties cannot reach a practical accommodation that protects the interests of the 

Defendants as well as the Receiver. Consistent with this Court’s directive, Defendants have 

reached out to the Receiver, and the SEC, to propose a mechanism to resolve this important issue 

without the need for further contested litigation. Those conversations are ongoing. 

The first fundamental legal principle is that the legitimate owners of these Companies have 

a right to the continued representation by their chosen counsel in these litigation matters. It is a 

fundamental and long-standing rule that “property is more than economic value.” Possession, 

control and disposition are valuable rights that inhere in the property. Phillips v Washington Legal 

Foundation, 525 U.S. 156, 163 (1998); Henneford v. Silas Mason Co., 300 U.S. 577, 582 

(1937)(“The privilege of use is only one attribute, among many, of the bundle of privileges that 

make up property or ownership.”); Almeida v. Holder, 588 F.3d 778, 788 (2d Cir. 2009)(discussing 

attributes of ownership, including the right to exclude others from possessing the property). Even 

in regulatory actions commenced by the SEC, the fundamental rule applies that: “[t]he Court’s 

6

 On August 6, 2020, counsel for the owner of Par Funding wrote to the Receiver’s counsel, 

asserting Defendants’ intention to protect these privileged attorney-client communications. A 

Copy of that letter is attached as Exhibit “B” to this Joint Response. 

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equitable authority, however, does not extend to abrogating property rights created by state law 

and protected by due process; equity follows the law.” SEC v Haligiannis, 608 F.Supp.2d 444, 449 

(S.D.N.Y. 2009), citing Hedges v Dixon County, 150 U.S. 182, 192 (1893). 

The SEC ignores the fundamental difference between companies steeped in unlawful 

activity such as Ponzi schemes or boiler rooms; cases where companies are insolvent or have filed 

for bankruptcy protection; and a case involving an ongoing legitimate and solvent company with 

over 100 employees. Defendants, through their submissions to this Court, and as will be further 

presented to the Court at the preliminary injunction hearing and through the discovery process, are 

conducting a lawful business that was absolutely solvent before the SEC commenced this action. 

The Receivership Order that the Court entered in this case, which protects the interests of the 

investors and enables the Receiver to perform his legitimate functions, while preserving the 

owner’s rights in this property, is the type of Order that follows the adage, reflected by the Court 

on August 4, 2020, of “First Do No Harm.” By sharp contrast, the rejected receivership order the 

SEC now seeks to resuscitate in its Expedited Motion violates Defendants’ fundamental rights.7

The second fundamental principle that governs the SEC’s Expedited Motion is that 

Defendants’ privileged communications cannot be forcibly transferred to the Receiver without 

adequate Court-ordered protections. As this Court recognized in Brown v NCL (Bahamas) Ltd., 

7

 The Due Process rights afforded are not merely procedural. The owner has a Fifth Amendment 

right not to have property taken by the Government without just compensation. Unlike cases where 

the Courts have upheld a taking of an insolvent institution, see e.g. Branch v Bank of New England 

Corporation, 69 F.3d 1571, 1575 (Fed.Cir. 1995), the SEC has not established that Par Funding 

and Full Spectrum were insolvent when they commenced this action. The SEC cannot use this 

Court to drive the Companies into insolvency, so that the SEC can then turn back to the Defendants 

and seek to have them fill the massive financial hole that the SEC will create. Not only would 

such an action violate the owner’s Fifth Amendment Due Process Takings rights, such an action 

would violate the equitable principles that govern this proceeding. See Liu v. SEC, _ U.S. _, 104 

S.Ct. 1936 (2020). 

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155 F.Supp.3d 1335, 1339 (S.D.Fla. 2015), courts are willing to maintain the privilege where “a 

disclosure is essentially compelled,” citing Stern v. O’Quinn, 253 F.R.D. 663, 682 (S.D.Fla. 

2008)8; SEC v Roberts, 254 F.R.D. 371, 378 (N.D.Cal. 2008)(addressing, but not resolving, the 

question of whether the privilege is maintained when it is disclosed due to coercive government 

action), citing Regents of the Univdersity of Calif. Superior Court, 165 Cal. App.4th 672, 684 81 

Cal.Rptr.3d 186, 195 (2008); Pension Committee of the University of Montreal Pension Plan v 

Banc of America Securities LLC, Case No. 05 Civ 9016, 2009 WL 2921302, at *1, and n. 1, citing 

Chubb Integrated Systems Ltd. v National Bank of Washington, 103 F.R.D. 52, 63 and n. 2 (D.D.C. 

1984)(“Voluntary disclosure means the documents were not judicially compelled”).9

The SEC and the Receiver have two fundamentally different roles in this litigation. The 

SEC is the adversary to the Defendants, who has alleged—and must prove—that they violated the 

securities laws. The Receiver acts under the Court’s direction and instructions, ECF 105, at p. 2, 

n. 1, and therefore should not act as an adversary to the Defendants and as an ally to the SEC trying 

to prove the SEC’s case. From the very commencement of this case, Defendants have expressed 

a willingness – and a desire – to work with the Receiver to protect not just the assets of this lawful 

and solvent business, but the revenue stream that is needed to pay investors. To those ends, 

8

 The SEC seems to believe that if a legal issue has not been directly addressed in an SEC 

enforcement proceeding, the legal rules are different. ECF 105, at p. 4 and n. 6. The SEC is not 

such a “special” litigant that it can avoid the legal rules that otherwise apply. Nevertheless, the 

legal authority relied upon by this Court in Brown was also cited in See United States SEC v. 

Herrara, 324 F.R.D. 258 (S.D.Fla. 2017)(upholding certain privileges and finding waiver of other 

privileges). 

9

 The Nationwide litigation handled by various counsel for the Companies also involved the 

representation of individual defendants in certain actions. Thus, the privileged communications 

are not simply between counsel and the Companies. They also include communications with 

individuals, protected by a common interest privilege. See generally In re: International Oil 

Trading Company, LLC, 548 B.R. 825, 832-34 (Bkr. Ct. S.D.Fla. 2016). 

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Defendants have offered to instruct counsel for the Companies to work with the Receiver to 

manage the nationwide litigation and collect the monies owed to the Companies. This Court has 

the authority to fashion appropriate relief through which the Defendants, with their shared common 

interest, can allow the Receiver to have access to the limited/necessary privileged communications 

to successfully manage the litigation, while preventing the SEC, or any other law enforcement 

agency, or third party, from having any access to those communications. See Fed.R.Civ.P. 26(c); 

Farnsworth v Proctor & Gamble Co., 758 F.2d 1545, 1547 (11th Cir. 1985)(upholding protective 

order to protect work product in nationwide litigation).10 The Defendants should not be asked to 

waive their privileges and simply hand them over to an adversary. This does not have to happen. 

By continuing to tailor its orders to the circumstances of this case, this Court can protect 

the lawful interests of the Defendants in their privileged communications, ensure that a legitimate 

business is not needlessly upended, protect a revenue stream on which investors depend, and allow 

the Receiver to maintain the status quo while the parties litigate the claims in this case. 

10 On August 8, 2020, the Receiver’s Reply Memorandum in support of his Motion to hire 

professionals, expressed a need to “pause and consider” the legality of the underlying MCA 

business of the Companies, ECF 113, at p. 2, n.2, a position many judges have been asked to 

consider around this nation, and have rejected, finding the MCA business lawful and the 

agreements enforceable. (See page 4, infra) Thus, the Receiver appears to be taking the side of 

the businesses who owe the Companies money pursuant to the MCAs; rather than supporting the 

numerous court decisions and settlements upholding the enforceability of these agreements under 

state laws; and collecting monies that inures to the benefit of investors and the benefit of many 

business that routinely utilize these funding agreements. On August 10, 2010, the Receiver 

demanded that all counsel for the Companies, present and former, immediately divulge privileged 

communications related, in part, to the SEC’s burden to prove that Defendants were engaged in 

the sale of “securities,” the very jurisdictional foundation of the SEC’s Complaint, without which 

this proceeding cannot continue. If the Receiver has chosen to support the SEC in trying to prove 

Plaintiff’s case against the Defendants, such an improper adversarial position would prevent the 

Defendants from being able to share privileged communications with the Receiver that are needed 

to recommence the litigation, to collect the money owed pursuant to the MCAs. 

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The SEC’s third basis for expanding the Receivership Order is a claim that the employees 

and officers of the Companies have been uncooperative with the Receiver. ECF 105, at pp. 5-6. 

That issue was separately addressed in the Receiver’s Expedited Motion to Approve Retained 

Professional, ECF 101, and the Defendants’ Cross-Motion, ECF 106, which was resolved on 

August 9, 2020, with the Court’s Order, ECF 116. As that Order requires the Receiver to examine 

the feasibility of Defendants’ Proposed Action Plan and to Report the Court at the August 17 status 

conference, there is no justification for the SEC to seek the drastic relief they are requesting on an 

expedited basis. The Court’s most recent Order reflects, again, the Court’s reasoned approach to 

require the Receiver and the Defendants to work towards a solution that will protect the interests 

of all constituents, while the SEC and the Defendants gear up for the August 18 preliminary 

injunction hearing.11

Conclusion

The SEC commenced this proceeding on an emergency, ex parte basis, and has continued 

to press the Court to make decisions affecting the Defendants’ rights on an expedited basis. 

Defendants, in this Joint Response, have shown that the SEC’s request, to effectively deny 

11 Defendant Dean Vagnozzi is not a part of CBSG and never has been, so he lacks firsthand 

knowledge of the CBSG business operations and what attorney/client privilege issues it may have. 

Therefore, he takes no position on those matters. Vagnozzi does agree with the other defendants 

that this Court should not precipitously expand the scope of the Receivership order and should 

defer any decision on that issue until after the August 18 preliminary injunction hearing. Vagnozzi 

remains extremely concerned that, especially because his businesses appear to be one of CBSG's 

largest creditors, this Court should allow CBSG to resume its normal business operations as soon 

as possible with appropriate monitoring by the Receiver. Every day that goes by costs Vagnozzi 

and the investors more and more money. Every day that goes by jeopardizes the SEC and 

Receiver's goal – as they both stated on the record – that they are not looking to liquidate CBSG. 

Finally, Vagnozzi does not oppose the SEC's request to add the ABFP Income "parallel" funds 

(ABFP Income Fund 1 Parallel, ABFP Income Fund 3 Parallel, ABFP Income Fund 4 Parallel, 

and ABFP Income Fund 6 Parallel) into the existing Receivership, while reserving all of his general 

objections to receivership.

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Defendants’ fundamental due process rights, is unnecessary and detrimental to the fundamental 

adage that the SEC “should do no harm.” As the Court has Ordered, the Defendants are seeking 

to reach an accommodation with the Receiver on an extremely tight schedule that also requires 

Defendants to prepare their substantive written response in advance of the preliminary injunction 

hearing. Defendants respectfully request that the Court to defer a ruling on the SEC’s Expedited 

Motion until the Court receives additional information from both the Receiver and the Defendants 

with respect to Defendants’ Proposed Action Plan and, certainly, until after Defendants have had 

the opportunity to present their case in connection with the SEC’s motion for a preliminary 

injunction at the August 18 hearing. 

Respectfully submitted, 

Law Offices of Alan S. Futerfas 

Attorneys for Lisa McElhone 

565 Fifth Avenue, 7th Floor 

New York, New York 10017 

(212) 684-8400 

asfuterfas@futerfaslaw.com

By: /s/Alan S. Futerfas 

ALAN S. FUTERFAS 

Admitted Pro Hac Vice

GRAYROBINSON, P.A. 

Attorneys for The LME 2017 Family Trust

333 S.E. 2d Avenue, Suite 3200 

Miami, Florida 33131 

Telephone #: (305) 416-6880 

Facsimile #: (305) 416-6887 

joel.hirschhorn@gray-robinson.com

By: /s/Joel Hirschhorn 

JOEL HIRSCHHORN 

Florida Bar #104573 

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CERTIFICATE OF SERVICE 

I HEREBY CERTIFY that, on August 12, 2020, I electronically filed the foregoing with 

the Clerk of the Court by using the CM/ECF system which will send a notice of electronic filing 

to all counsel of record. 

/s/Joel Hirschhorn 

JOEL HIRSCHHORN 

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