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UNITED STATES DISTRICT COURT 

DISTRICT OF MARYLAND 

SOUTHERN DIVISION

In re SANCTUARY BELIZE LITIGATION No: 18-cv-3309-PJM

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION

FOR ORDER APPROVING SETTLEMENT AGREEMENT AND RELEASE BETWEEN 

RECEIVER AND LEE NOBMANN

I. INTRODUCTION AND STATEMENT OF FACTS

This lawsuit was commenced on October 31, 2018 by the Federal Trade Commission 

(“FTC”) with its filing of a Complaint for Permanent Injunction and Other Equitable Relief 

(Doc. 1) (“Complaint”). The lawsuit named 17 entity defendants and seven individual 

defendants, in addition to five relief defendants. On November 5, 2018, the Court issued an Ex 

Parte Temporary Restraining Order With Asset Freeze, Writs Ne Exeat, Appointment of a 

Temporary Receiver, and Other Equitable Relief, and Order to Show Cause Why a Preliminary 

Injunction Should Not Issue (“TRO”). Under the TRO, the Receiver became temporary receiver 

over all entity defendants except for Atlantic International Bank, Ltd. (“AIBL”) and over the 

assets of Andris Pukke (“Pukke”) and Peter Baker (“Baker”) valued at $1,000 or more. The 

Court extended the duration of the TRO pursuant to the Interim Preliminary Injunction on 

November 20, 2018.

The FTC filed a motion to amend the Complaint and a proposed Amended Complaint for 

Permanent Injunction and Other Equitable Relief (“Amended Complaint”) on December 28, 

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2018 (Doc. 87) adding Michael Santos and Newport Land Group, LLC (“NLG”) as defendants. 

The Court granted the motion to amend on January 11, 2019 (Doc. 107) and extended the asset 

freeze to Michael Santos on that date. On February 13, 2019 the Court entered a Stipulated 

Preliminary Injunction as to Defendants Rod Kazazi, Foundation Partners, Brandi Greenfield, 

BG Marketing LLC, Frank Costanzo, Deborah Connelly, Ecological Fox LLC, Michael Santos, 

Angela Chittenden, and Beach Bunny Holdings LLC (Doc. 195) (“Stipulated Preliminary 

Injunction”). Under the Stipulated Preliminary Injunction, the Receiver remained as receiver 

over the stipulating Receivership Entities BG Marketing, LLC, Ecological Fox, LLC, and 

Foundation Partners, and NLG was expressly added as a named Receivership Entity.

On October 3, 2019, the Court issued the Preliminary Injunction as to Defendants Andris 

Pukke, Peter Baker, Luke Chadwick, John Usher, Certain Corporate Defendants, and the Estate 

of John Pukke (Doc. 615) (“Pukke Preliminary Injunction”). Under the Pukke Preliminary 

Injunction, the Receiver was named as permanent receiver over at least 16 Receivership Entities 

and over Pukke, Baker and Luke Chadwick’s (“Chadwick”) assets valued at $1,000 or more. 

On January 14, 2020, the Court entered the Stipulated Order for Permanent Injunction 

and Monetary Judgment Against Defendant Michael Santos (Doc. 820) (“Santos Judgment”). 

Under the Santos Judgment, Michael Santos permanently transferred, assigned and relinquished 

to the Receiver, for liquidation and ultimate payment to the FTC, all rights Michael Santos may 

have to the real properties commonly described as: (a) 17085 Birch Hill Road, Riverside, 

California (“Riverside Property”); (b) 1807 Coastal Way, Costa Mesa, California (“Costa Mesa 

Property”); (c) 460 Lindberg Circle, Petaluma, California (“Petaluma Property”); (d) 14070 

Falling Leaf Road, Apple Valley, California (“Apple Valley Property”); and (e) 7862 Chase 

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Avenue, Hesperia, California (“Hesperia Property”). (The real properties described are hereafter 

collectively referred to as the “Santos Properties.”) 

Legal title to the Riverside Property is held by Michael Santos and Carole Santos, 

husband and wife as community property. Legal title to the Costa Mesa Property is held by 

Michael Santos and Carole Santos, husband and wife as joint tenants. Legal title to the Petaluma 

Property is held by Carole Santos and Michael Santos, wife and husband as joint tenants. Legal 

title to the Apple Valley Property is held by Michael Santos and Carole Santos, husband and 

wife as joint tenants. Legal title to the Hesperia Property is held by Michael Santos and Carole 

Santos, husband and wife as joint tenants. Carole Santos’s interests in the Santos Properties are 

not expressly addressed or assigned to the Receiver in the Santos Judgment. 

In January 2019, Michael Santos and Carole Santos purportedly made, executed and 

delivered a $1,000,000 promissory note (“Nobmann Promissory Note”) to Lee Nobmann 

(Nobmann) for value received. Nobmann contends that on or about May 3, 2017, Nobmann 

authorized Michael Santos and Carole Santos to apply the proceeds of a prior $250,000 loan 

from Nobmann to Michael Santos and Carole Santos to be used in the purchase of the Riverside 

Property and that Nobmann caused a wire transfer of $754,250 to be paid directly to Stewart 

Title of California, Inc., as the escrow officer handling the purchase of the Riverside Property by 

Michael Santos and Carole Santos. The promissory note is purportedly secured by a deed of 

trust on the Riverside Property which was recorded in Riverside County, California on January 

11, 2019 (“Nobmann Deed of Trust”), the day that the Court extended the asset freeze in the 

FTC Action to Michael Santos.

Michael Santos and Carole Santos purportedly made, executed and delivered a $240,000 

promissory note to Geoff Richstone (“Richstone”) for value received in January 2019. The 

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promissory note is purportedly secured by a deed of trust on the Costa Mesa Property which was 

recorded in Orange County, California on January 11, 2019. 

Michael Santos and Carole Santos purportedly made, executed and delivered a $375,000 

promissory note to Richstone for value received in January 2019. The promissory note is 

purportedly secured by a deed of trust on the Petaluma Property which was recorded in Sonoma 

County, California on January 14, 2019. 

Michael Santos and Carole Santos purportedly made, executed and delivered a $125,000 

promissory note to Richstone for value received in January 2019. The promissory note is 

purportedly secured by a deed of trust on the Apple Valley Property which was recorded in San 

Bernardino County, California on January 11, 2019.

Michael Santos and Carole Santos purportedly made, executed and delivered a $135,000 

promissory note to Richstone for value received in January 2019. The promissory note is 

purportedly secured by a deed of trust on the Hesperia Property which was recorded in San 

Bernardino County, California on January 11, 2019. (The four promissory notes in favor of 

Richstone are hereafter collectively referred to as the “Richstone Promissory Notes” and the 

deeds of trust which purportedly collateralize the Richstone Promissory Notes are hereafter 

collectively referred to as the “Richstone Deeds of Trust.”)

As set forth above, the Nobmann Deed of Trust and the Richstone Deeds of Trust all 

were recorded at or about the time that the Court issued an asset freeze on Michael Santos. For 

this and other reasons, the Receiver: (a) disputes the validity of the Nobmann Promissory Note 

and Nobmann Deed of Trust; (b) disputes the validity of the Richstone Promissory Notes and 

Richstone Deeds of Trust; (c) contends that the Nobmann Deed of Trust and the Richstone 

Deeds of Trust may be avoided as fraudulent transfers; and (d) contends that the Receiver’s 

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interest in the Santos Properties are superior to the Nobmann Deed of Trust and Richstone Deeds 

of Trust. 

The Receiver has preliminarily evaluated the market value of the Santos Properties and 

the extent to which the Santos Properties are encumbered by deeds of trust. Each of the Santos 

Properties is encumbered by a bona fide first lien in favor of an institutional lender and, in the 

Receiver’s judgment, not subject to challenge. If the Nobmann Deed of Trust and Richstone 

Deeds of Trust, each of which is in second lien position against the respective properties, are 

valid and enforceable, then the Santos Properties would have no equity for the receivership 

estate. Under California law, Carole Santos appears to have a one-half interest in each of the 

Santos Properties taken as joint tenancy property and an undivided 100% interest in the 

Riverside Property, which was taken as community property. Michael Santos cannot unilaterally 

assign his community property interest in the Riverside Property without Carole Santos’s 

consent (see California Family Code section 1102), rendering the assignment to the Receiver 

problematic unless the Receiver can successfully challenge her interest, obtain her consent or 

argue that the assignment operates in effect as a judgment creditor’s execution levy. Therefore, 

Carole Santos’s interest in the Santos Properties do not appear resolved by the Santos Judgment. 

Unless her interest can be successfully challenged, the Receiver would have to seek and obtain 

an order compelling the sale of the properties, and the Receiver would realize only 50% of the 

net equity upon sale. While the Riverside Property has the largest potential equity, in addition to 

the fact that it is held as community property, it also is subject to a long-term lease/purchase 

option through 2033, which further hinders the Receiver’s ability to promptly monetize this 

asset. Several of the other Santos Properties are or will soon be vacant, further impeding the 

Receiver’s ability to service debt and preserve equity in the properties. 

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Based on the Receiver’s preliminary valuations, assuming that: (a) the second priority 

Nobmann Deed of Trust and Richstone Deeds of Trust can be set aside, which will require a 

successful legal challenge; (b) Carole Santos preserves a 50% interest in the Santos Properties; 

and (c) the Receiver can force a prompt sale of the Santos Properties, including the Riverside 

Property, despite it being held in community property and the long term lease/purchase option on 

that property, the Receiver estimates that gross equity in the real estate for the receivership 

estate, not including the costs of sale and legal expenses, would be approximately $500,000.

II. TERMS OF THE SETTLEMENT AGREEMENT

The Receiver and Nobmann have negotiated and executed a comprehensive Settlement 

Agreement, a copy of which is attached as Exhibit 1 to the accompanying declaration of Brick 

Kane in support of this Motion. The key provisions of the Settlement Agreement are:

1. In full satisfaction of all rights, claims, interests and demands the Receiver and 

Nobmann may have against one another, and in consideration for the Receiver’s assignment to 

Nobmann or his assignee of all rights the Receiver may have in the Santos Properties, Nobmann 

shall pay to the Receiver the sum of $350,000. This amount has already been paid to and is 

being held by the Receiver, subject to the Court’s approval of the Settlement Agreement.

2. As between the Receiver and Nobmann, the Receiver is entitled to the rents, 

issues and profits from the Santos Properties prior to the Court’s approval of the settlement and 

Nobmann is entitled to the rents, issues and profits from the Santos Properties thereafter. 

3. The Receiver makes no representations and warranties of any kind with respect to 

the Santos Properties.

4. General and mutual releases are entered into between Nobmann and the Receiver. 

5. The Settlement Agreement becomes effective upon Court approval and provided 

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that the FTC does not file written opposition to this Motion. The Receiver understands that the 

FTC supports the Settlement Agreement. 

III. THE SETTLEMENT IS FAIR AND REASONABLE AND SHOULD BE 

APPROVED

The leading treatise on receivership law states:

The only justification for the compromise of claims is that it is done for 

the best interests of the receivership and the estate under the control and 

possession of the court.

3 Clark on Receivers § 655 (3d ed. 1992).

The court appointing a receiver must use its discretion in determining 

whether it is for the best interests of the estate that the receiver be 

authorized to compromise a claim, and when the appointing court has 

not abused its discretion in giving instructions to the receiver, its orders 

will not be disturbed or reviewed in the appellate court.

Id. at § 770.

Under Rule 9019 of the Federal Rules of Bankruptcy Procedure, the court in a 

bankruptcy case may approve a proposed compromise of controversies after notice and an 

opportunity for hearing. In the Fourth Circuit, courts have adopted a four-part test in evaluating 

compromises in bankruptcy:

In order to approve a settlement . . ., a court must consider the 

following factors: (1) the probability of success in litigation; (2) the

likely difficulties in collection; (3) the complexity of the litigation 

involved, and the expense, inconvenience and delay necessarily 

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attending it; and (4) the paramount interest of the creditors. Will v. 

Northwestern Univ. (In re Nutraquest, Inc.), 434 F.3d 639, 644 (3d Cir.

2006) (citation omitted); see also In re Bowman, 181 B.R. 836, 843 

(Bankr.D.Md.1995).

In Re Final Analysis, Inc., 417 B.R. 332, 341 (Bankr. D. Md. 2009); see also In re 

Bowman, 181 B.R. 836 (Bankr. D. Md. 1995), adopting this four-part standard and citing other 

Circuit Courts of Appeal, including the Seventh Circuit in In re American Reserve Corp., 841 

F.2d 159, 161 (7th Cir. 1987) and the Ninth Circuit in In re Woodson, 839 F.2d 610, 620 (9th 

Cir. 1988). 

The foregoing factors have been examined by courts in receiverships in approving 

settlements, but the court in a federal equity receivership has even broader authority to approve 

proposed settlements by a receiver and to look to other factors in determining that the settlement 

should be approved. See Gordon v. Dadante, 336 Fed. Appx. 540 (6th Cir. 2009) (settlement by 

receiver in a federal equity receivership within the receiver’s discretion and should be approved 

if it is fair); Securities and Exchange Commission v. Credit Bancorp, Ltd.. No. 99 Civ. 11395, 

2002 WL 1792053 at *4-5 (S.D.N.Y. Aug. 2, 2002); Securities and Exchange Commission v. 

Princeton Economic International, Inc., No. 99 Civ. 9667, 2002 WL 206990 at *1 (S.D.N.Y.

Feb. 8, 2002). “[R]eceivers benefit from the general presumption that district courts favor 

settlements.” Sterling v. Stewart, 158 F.3d 1199, 1202 (11th Cir. 1998). The District Court's 

determination of the fairness of a settlement by the Receiver is subject to the sound discretion of 

the Court and will only be overturned based on a clear showing of abuse of discretion. Gordon 

v. Dadante, 336 Fed. Appx. at 545 (holding that district court did not abuse its discretion in 

approving settlement agreement entered into by a receiver); Securities and Exchange 

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Commission v. Arkansas Loan and Thrift Corp., 427 F.2d 1171, 1172 (8th Cir. 1970) (court finds 

no abuse of discretion in trial court’s approval of receiver’s settlement on fidelity bond claim); 

see also Sterling v. Stewart, 158 F.3d at 1204 (affirming the district court’s approval of a 

settlement because “the court did not abuse its discretion in concluding that the settlement 

decision was fair.”)

Courts in the Fourth Circuit have held that there is a strong presumption in favor of 

finding a settlement fair. See, e.g., Lomascolo v. Parsons Brinckerhoff, Inc., 2009 WL 3094955, 

at *10 (E.D.Va. Sept. 28, 2009) (noting the “strong presumption in favor of finding a settlement 

fair” in the context of a class action settlement) (internal quotation omitted). Because a 

settlement hearing is not a trial, the court's role is more “balancing of likelihoods rather than an 

actual determination of the facts and law in passing upon ... the proposed settlement.” Decohen v. 

Abbasi, LLC, 299 F.R.D. 469, 479 (D. Md. 2014) (quoting Flynn v. FMC Corp., 528 F.2d 1169, 

1173 (4th Cir. 1975) (internal quotations omitted).)

The settlement of the dispute between the Receiver and Nobmann is a very favorable 

resolution for the estate and should be approved under the foregoing authorities. While the 

Receiver believes that it has a legitimate argument that the Nobmann Deed of Trust and the 

Richstone Deeds of Trust may constitute voidable fraudulent transfers pursuant to the California 

Uniform Voidable Transactions Act, this position is not without doubt in light of Nobmann’s 

contention and Richstone’s contention that value was provided by them to Michael Santos and 

Carole Santos in exchange for the subject deeds of trust. As set out above, if the Nobmann Deed 

of Trust and Richstone Deeds of Trust are valid and enforceable, then the Santos Properties 

would have no equity for the receivership estate. Even assuming that the Nobmann Deed of 

Trust and Richstone Deeds of Trust can be successfully avoided as fraudulent transfers or under 

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some other theory, Carole Santos appears to have a one-half interest in each of the Santos 

Properties held in joint tenancy and an undivided community property interest in the Riverside 

Property under applicable California law and her interest is not resolved by the Santos Judgment. 

Unless her interest can be successfully challenged, the Receiver would have to seek and obtain 

an order compelling the sale of the properties, and the Receiver would realize only 50% of the 

net equity upon sale. In addition to its problematic status as community property, the Riverside 

Property is subject to a long-term lease/purchase option through 2033, which further hinders the 

Receiver’s ability to monetize this asset, which has the largest amount of potential equity of all 

of the Santos Properties. Several of the other Santos Properties are or will soon be vacant, 

further impeding the Receiver’s ability to service debt and preserve equity in the properties. 

All of these factors dictate in favor of the Receiver promptly monetizing its interest in the 

Santos Properties for the benefit of the FTC for the purpose of providing consumer redress under 

Section VI.E of the Santos Judgment. The immediate recovery of $350,000 is an excellent result 

when considering the uncertainty, time and expense surrounding litigation of the various disputes 

with Nobmann, Richstone, Carole Santos and the tenant of the Riverside Property which may be 

required. As explained above, assuming a successful challenge could be mounted to the 

Nobmann Deed of Trust and Richstone Deeds of Trust, Carole Santos’s interest remained in 

effect, and all of the Santos Properties could be promptly liquidated, including the Riverside 

Property despite it being subject to a long term lease/purchase option through 2033, net equity 

for the receivership estate for ultimate disposition to the FTC likely would not generate more 

than this amount. 

///

///

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IV. CONCLUSION

Based on the Motion, this Memorandum of Points and Authorities, and the supporting 

declaration of Brick Kane, it is respectfully requested that the Court grant this Motion to approve 

the Settlement Agreement between the Receiver and Nobmann in its entirety, and enter the 

proposed order submitted concurrently herewith. 

Dated: March 24, 2020 Respectfully submitted,

/s/ Gary Owen Caris

Gary Owen Caris, Calif. Bar No. 088918

Admitted Pro Hac Vice 11/30/18

BARNES & THORNBURG LLP

2029 Century Park East, Suite 300

Los Angeles, CA 90067

Telephone: (310) 248-3880

Facsimile (310) 248-3894

Email: gcaris@btlaw.com

and

/s/ James E. Van Horn

James E. Van Horn (Bar No. 29210)

BARNES & THORNBURG LLP

1717 Pennsylvania Avenue, NW, Suite 500

Washington, DC 20006

Telephone: (202) 371-6351

Facsimile (202) 289-1330

Email: jvanhorn@btlaw.com

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