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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF

FLORIDA

Case No. 20-CIV-81205-RAR

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

v.

COMPLETE BUSINESS SOLUTIONS GROUP,

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

Defendants.

/

DEFENDANT JOSEPH W. LAFORTE’S OBJECTION TO RECEIVER RYAN K. 

STUMPHAUZER'S SIXTH APPLICATION FOR ALLOWANCE AND PAYMENT 

OF PROFESSIONALS' FEES AND REIMBURSEMENT OF EXPENSES FOR 

OCTOBER 1, 2021-DECEMBER 31, 2021 (DE# 1153)

AND RESPONSE TO QUARTERLY STATUS REPORT (DE# 1140)

Defendant, Joseph W. LaForte, respectfully submits this memorandum in support of his objections 

to the Receiver’s Sixth Application for Allowance and Payment of Professionals’ Fees and 

Reimbursement of Expenses for October 1, 2021 – December 31, 2021. (DE# 1153), and Response to 

Quarterly Status Report (DE# 1140). As discussed below, the billing statements request reimbursement 

for expenses that are a blatant waste of the receivership estate’s assets. The Quarterly Status Report, filed 

on January 31, 2022, shows just how inefficient of a job the Receiver is doing on his own. For this 

lackluster performance, the Receiver is requesting that this Court award $1,528,064.31 in fees and costs 

for the fourth quarter of 2021.

The Applicable Law

There is no dispute that a District Court's power over a receiver is a matter for the District Court's 

discretion. Indeed, a receiver “is a creature of equity” whose powers “are limited by the district judge's 

concept of equity." In re Wiand, No. 8:10-cv-71-T-17MAP, et al., 2012 U.S. Dist. LEXIS 22667, 2012 WL 

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611896, at *5 (M.D. Fla. Jan. 4, 2012). A receiver “receives h[er] power and authority directly from the 

court and therefore is subject to the court’s directions and orders in the discharge of h[er] official duties.”

SEC v. Elfindepan, S.A., 169 F. Supp. 2d 420, 424 (M.D.N.C. 2001). It is particularly relevant to the instant 

motion that once appointed, a receiver is a “neutral officer of the Court.” Sterling v. Stewart, 158 F.3d 1199, 

1201 n.2 (11th Cir 1998). Put another way, the receiver must be impartial between parties, although that 

impartiality “does not extend to h[er] relationship with the receivership estate” as receivers owe a 

“‘fiduciary duty to the owners of the property under h[er] care’ and thus must ‘protect and preserve’ the 

receivership’s assets ‘for the benefit of the persons ultimately entitled to it.’” SEC v. Schooler, No. 3:12-cv2164-GPC-JMA, 2015 U.S. Dist. LEXIS 46870, 2015 WL 1510949, at *3 (S.D. Cal. March 4, 2015) 

(quoting Sovereign Bank v. Schwab, 414 F.3d 450, 454 (3d Cir. 2005). As neutral officers of the court, 

however, receivers must avoid the appearance of impropriety or partiality in their actions. Schooler, 2015 

U.S. Dist. LEXIS 46870, 2015 WL 1510949, at *3. See also FTC v. On Point Global LLC, 2020 U.S. Dist. 

LEXIS 180255, at *11 (S.D. Florida September 30, 2020).

Here, the Receiver’s billing records show that some of his conduct is wasteful of the estate’s assets.

The Receiver is Wasting Receivership Assets

The Receiver’s billing records show that the Receiver is continuing to saddle the Receivership 

Estate account with huge fees while collecting a minimal amount. Since the inception of the receivership, 

he has collected an abysmal $32 million for CBSG over 18 months. To put this into context, in July of 

2020, in the height of the COVID-19 Pandemic, when businesses had huge cash flow problems, the 

CBSG collected over $30 million in a single month. After 18 months of using attorneys skilled in white 

collar investigations, and focusing primarily on investigating and going after LaForte rather than 

collections, the Receiver has now hired a professional collections firm, Altus Receivables Management, 

Inc. (“Altus”), a national collection company that the Receiver recently engaged on a contingency fee 

recovery basis. (DE# 1140 at 5). However, in doing so, the Receiver has failed to comply with the 

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Amended Receivership Order, which allows the Receiver “to solicit persons and entities (“Retained 

Personnel”) to assist him in carrying out the duties and responsibilities described in this Order.” (DE# 

141 at ¶57). However, the same paragraph also states that “The Receiver shall not engage any Retained 

Personnel without first obtaining an Order of the Court authorizing such engagement.” Id. This follows 

the Receiver’s pattern of lack of transparency.

For example, the Receiver states “[t]o date, the Receiver has resolved, either through full payoffs 

of the amount owed or settlements, the account balances of 15 counterparties to agreements with Eagle 

Six Consultants, Inc. (“ESC”) and Heritage Business Consulting, Inc. (“HBC”)”. (DE# 1140 at 5).

Consistent with his pattern of refusing to disclose potential settlements or parties against whom he seeks 

to lift the litigation injunction in order to have a meaningful meet and confer, the Receiver is being 

completely opaque about the settlement terms merchants are receiving. Why? The Court, investors, and 

the defendants are entitled to that information and there is no good reason why it is not being provided. 

To support his billing, the Receiver shows the large amount of cash and assets in the Receivership 

Estate in his Quarterly Status Reports. However, these reports show cash and assets that belong to 

defendants which were hidden in plain sight and already frozen by the Court. The Receiver was given 

these assets by simply filing successive motions to expand, but yet he touts his worth by counting these 

“frozen” assets that he simply takes from the Defendant’s accounts and moves into his accounts. This is 

not progress or successful collections and is orders of magnitude less successful than Par Funding was 

prior to the Receivership. The Receiver was originally appointed to manage Par Fundings portfolio. Since 

that time, he has only managed to collect $32 million from a portfolio with a value of $420 million with 

over 2,500 merchants. 

The Receiver is a high stakes white collar lawyer, not a collections lawyer, not a businessperson. 

He fails to understand, or chooses not to because he is making tens of millions of dollars, that he is a 

liability to Par’s portfolio. He took over 18 months to outsourced collections to Altus on a contingency 

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basis after collecting one month’s worth of receivables in 18 months as the Receiver. The Receiver has 

clearly thrown his hands up on collection efforts, he should not be rewarded handsomely for doing so. 

Clearly it is not good business to have DSI charging $1 million a quarter to conduct collections and then 

outsource collections on a contingency basis to yet another company. While Mr. LaForte is heartened 

that the Receiver has finally hired a professional collections operation—albeit without seeking permission 

from the Court—it is clear that the Receiver and DSI have been so ineffective at collections that the fees 

they have been paid, including a raise for DSI has only hurt the Receivership Estate. Further, the lack of 

transparency as to the marching orders and percentage of contingency to be paid to Altus is concerning. 

Receiver Failures- Property Portfolio

The Receiver’s failure extends beyond the poor collections to the property portfolio which is the 

easiest and most clear and clean-cut entities to manage. Early in this action, the Court had reservations 

about the Receiver acting as a “property manager,” rightfully so. Prior to the expanded receivership in 

December 2020 defendants collected $230,392.68 in rent per month. Now looking at the receiver’s 

quarterly status report he is only collecting $159,806.59 in rent per month, which is 30% less than the 

defendants collected. 

The Receiver told the court that him taking over the rental properties would be “plug and play” 

and that his counsel “knew” the property manager/property management company personally so it would 

be a simple transition (should we include Dec 2020 transcripts?) This was not exactly accurate and the 

proof is in the numbers. The truth is that the Receiver immediately fired 5 of the LM Property 

Management employees who maintained the value of the portfolio through maintenance, cleaning, 

upkeep, and thorough turnover methods. The termination of this key component of the business is the 

causation of significant lost profits, apparent vacancies, and potential devaluation of the portfolio. The 

Defendants were able to collect $70,586.09 more (30% more) per month than the Receiver even through 

the pandemic. The loss of revenue in one of the most conservative businesses on the planet (rental 

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payments) extends to Par Funding’s portfolio which has been downright abysmal. 

The Receiver and his Retained Personnel are charging millions of dollars to the estate yet are 

collecting significantly less rent from Class A buildings. “The building portfolio is a bright spot in the 

receivership” If it is such a bright spot why is he failing the estate? The proof of his failures overall lies in 

the performance of the property management. If the Receiver is unable to simply collect rents, how could 

he ever be expected to effectively collect the hundreds of millions of dollars owed by merchants, which 

is of course more complex than a tenant paying for his apartment once a month? The firing and removal 

of the defendant’s property management company and the unjust expansion of the Receivership which 

was built on falsities told by Bradley Sharp through his Non-GAAP, Non-CPA, report is the causation 

of the losses to the property portfolio and other assets which were much better off prior to the 

Receivership.

The numbers do not lie. Installing the Receiver over Par Funding and the Defendants’ assets has 

been a disaster. The assets could have been held for potential disgorgement by lis pendens and a monitor. 

Instead, the Receiver has been in liquidation mode of Par’s valuable profitable portfolio (as the defense 

warned would happen) from day 1, while making it appear that he is working for the Receivership Estate. 

The collateral damage done by expanding the Receivership over the defendants’ assets have proved to be 

a failure.

Billing

Additionally, the Receiver’s billing is also concerning. The Receiver has had at least one of his 

attorneys at every single deposition even depositions that do not support the Receiver’s mission of 

marshalling assets for the Receivership Estate. For example, the Receiver had an attorney appear at the 

SEC’s 30(b)(6) depositions. Why the Receiver needed to bill to hear the SEC object and refuse to answer 

questions is a mystery. Furthermore, the Receiver bills for things that do not add value to the case, and 

not only bills, but double and triple bills for reviewing documents that do not support his mission. For 

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example: 

On October 3, 2021, two attorneys from the Stumphauzer firm billed to review SEC’s response to 

motion to dismiss and motion for sanctions in connection with 30(b)(6) deposition of SEC, one attorney 

billing a .2 for it and one billing .5 for the same task. (DE#1153-8 at 6-7). On top of that Mr. Alfano 

from the Pietragallo firm billed .7 for review of the same response. (DE#1153-9 at 8). The Receiver had

no interest in this motion and these billings added no value to the case since the Receiver is a neutral party 

in this action. On October 4th and 5th, attorneys from both the Stumphauzer firm and the Pietragallo firm

billed to review the Defendants’ Daubert motion to exclude the SEC’s proposed expert witness. Again, 

there is no reason why any attorney, let alone multiple attorneys for the Receiver needed to review this 

substantive motion and these billings added no value to the case. These examples, among others, of the 

Receiver and his counsel billing and multiple billing the Receivership Estate with no value added to the 

case should not be billed to the Receivership Estate. 

In addition to the double billing, the Receiver and his attorneys are not maximizing efficiency and 

loading up on partner time rather than using associates for relatively simple tasks. In the Fee Application 

the Receiver states:

The Pietragallo firm — with its sixty (60) attorneys, including nineteen (19) professionals 

in the Philadelphia office, as well as approximately ten (10) paralegals, a forensic 

accountant and two Certified Fraud Examiners — is uniquely suited to serve as counsel 

to the Receiver because, in addition to defending high-profile government investigations 

and litigating complex commercial disputes in federal and state courts . . . 

DE# 1153 at 13. While the Fee Application highlight’s the Pietragallo firm giving discounted hourly rates 

(DE#1153 at 14), it fails to mention that 8 of 10 attorneys from the Pietragallo firm who billed on this 

matter during the relevant time period were partners. (DE#1153-4 at 2). Furthermore, of the two 

associates who billed on the file, one of them only billed three tenths (.3) of an hour. Id. Clearly the 

Pietragallo firm is not reasonably allocating work to associates to preserve assets for the Receivership 

Estate. While the Pietragallo firm certainly has the credentials for a case of this magnitude, lawyers of this 

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caliber do not need to be billing for collections or to be managing rental properties. Simply put, the 

Receiver should have moved the Court to retain a contingency collections firm a year and a half ago, 

rather than bilk the Receivership Estate for all he could before he threw his hands up to hire a collections 

firm on a contingency basis. 

Conclusion

It is inconceivable that this type of profligate spending is consistent with the Receiver’s fiduciary 

obligation to “protect and preserve” the estate’s assets. For all of these reasons, the Defendants object 

to the bill as proposed.

Dated: March 1, 2022

KOPELOWITZ OSTROW 

FERGUSON WEISELBERG GILBERT

One W. Las Olas Blvd., Suite 500 

Fort Lauderdale, Florida 33301

Attorneys for Joseph W. LaForte

By: /s/ Joshua R. Levine

DAVID L. FERGUSON

Florida Bar Number: 0981737

Ferguson@kolawyers.com 

JOSHUA R. LEVINE

Florida Bar Number: 91807

Levine@kolawyers.com

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on March 1, 2022, I electronically filed the forgoing document with 

the clerk of the Court using CM/ECF. I also certify that the foregoing document is being served this day 

on counsel of record via transmissions of Notices of Electronic Filing generated by CM/ECF.

By: /s/ Joshua R. Levine

JOSHUA R. LEVINE

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