Page 1 - LIMITED OBJECTION TO AND REQUEST FOR CLARIFICATION OF 

PROPOSED ORDER APPOINTING RECEIVER (UNITED RECOVERY GROUP

FOR EQUALITY) MILLER NASH GRAHAM & DUNN LLP ATTORNEYS AT LAW

TELEPHONE: 503.224.5858

3400 U.S. BANCORP TOWER

111 S.W. FIFTH AVENUE

PORTLAND, OREGON 97204

Dennis P. Rawlinson, P.C., OSB No. 763028

dennis.rawlinson@millernash.com

Teresa H. Pearson, P.C., OSB No. 953750

teresa.pearson@millernash.com

Joshua M. Sasaki, P.C., OSB No. 964182

josh.sasaki@millernash.com

Justin C. Sawyer, P.C., OSB No. 014057

justin.sawyer@millernash.com

Jeanne Kallage Sinnott, OSB No. 075151

jeanne.sinnott@millernash.com

MILLER NASH GRAHAM & DUNN LLP

3400 U.S. Bancorp Tower

111 S.W. Fifth Avenue

Portland, Oregon 97204

Telephone: 503.224.5858

Facsimile: 503.224.0155

Attorneys for United Recovery Group for 

Equality

UNITED STATES DISTRICT COURT

DISTRICT OF OREGON

PORTLAND DIVISION

SECURITIES AND EXCHANGE 

COMMISSION,

Plaintiff,

v.

AEQUITAS MANAGEMENT, LLC; 

AEQUITAS HOLDINGS, LLC; AEQUITAS 

CV No. 3:16-cv-00438-PK

UNITED RECOVERY GROUP FOR 

EQUALITY'S LIMITED OBJECTION 

TO AND REQUEST FOR 

CLARIFICATION OF PROPOSED 

ORDER APPOINTING RECEIVER

Case 3:16-cv-00438-PK Document 50 Filed 03/18/16 Page 1 of 9
Page 2 - LIMITED OBJECTION TO AND REQUEST FOR CLARIFICATION OF 

PROPOSED ORDER APPOINTING RECEIVER (UNITED RECOVERY GROUP

FOR EQUALITY)

MILLER NASH GRAHAM & DUNN LLP ATTORNEYS AT LAW

TELEPHONE: 503.224.5858

3400 U.S. BANCORP TOWER

111 S.W. FIFTH AVENUE

PORTLAND, OREGON 97204

COMMERCIAL FINANCE, LLC; AEQUITAS

CAPITAL MANAGEMENT, INC.; AEQUITAS 

INVESTMENT MANAGEMENT, LLC; 

ROBERT J. JESENIK; BRIAN A. OLIVER; and 

N. SCOTT GILLIS,

Defendants.

KEITH L. BARNES; BLACKNER STONE AND 

ASSOCIATES DEFINED BENEFIT PLAN; 

PAUL GULICK; TOM MULFLUR; STEVE 

SHARP; PAUL E. SYLVAN; AMAR GUPTA, 

as trustee of the Starbright Trust dated 

January 30, 1997; and ZHONG JIU GUO,

Proposed Intervenors.

I. INTRODUCTION

As victims of the financial scandal that gave rise to this proceeding, United 

Recovery Group for Equality ("URGE")

1 supports the appointment of a receiver to preserve and 

distribute the assets of the defendant Aequitas companies. The stay of litigation and injunction 

in the proposed Stipulated Order Appointing Receiver (Dkt. No. 2) (the "Proposed Order"), 

however, are overly broad and severely prejudicial to the rights of investors, including URGE, 

because the provisions could: (1) restrict or enjoin the pursuit of claims and damages 

independent of the receivership; (2) limit investors' ability to pursue discovery in pursuit of such

claims; and (3) result in investors' claims becoming time-barred while the stay and injunction are 

 1 As of the date of this limited objection, URGE consists of the following members, who 

collectively invested at least than $12 million in various Aequitas investment vehicles: Keith L. 

Barnes, Blackner Stone and Associates Defined Benefit Plan, Paul Gulick, Tom Mulflur, Steve 

Sharp, Paul E. Sylvan, Amar Gupta, as trustee of the Starbright Trust dated January 30, 1997, 

and Zhong Jiu Guo. URGE anticipates that its membership (and aggregate investments at risk) 

will grow in the future.

Case 3:16-cv-00438-PK Document 50 Filed 03/18/16 Page 2 of 9
Page 3 - LIMITED OBJECTION TO AND REQUEST FOR CLARIFICATION OF 

PROPOSED ORDER APPOINTING RECEIVER (UNITED RECOVERY GROUP

FOR EQUALITY)

MILLER NASH GRAHAM & DUNN LLP ATTORNEYS AT LAW

TELEPHONE: 503.224.5858

3400 U.S. BANCORP TOWER

111 S.W. FIFTH AVENUE

PORTLAND, OREGON 97204

in place. Accordingly, URGE respectfully requests that the final order be revised to address 

these concerns and protect the Aequitas investors.2 

In addition, the final order should be clarified to provide that the receiver may not 

simply conduct a fire sale of all assets, but rather must determine the best ways to maximize 

recovery. Some entities, for example, may be more valuable if operated for a period of time 

before being sold. Such issues should be addressed at the telephonic hearing on March 29 and 

throughout the pendency of this case. Furthermore, the final order should provide that URGE 

may seek discovery from the receiver to allow URGE to confirm that the estate is being 

administered properly as well as to gain information necessary to evaluate or propose any

liquidation plan. Finally, the Interim Order implies that Schwabe, Williamson & Wyatt

("SWW") will be compensated for professional fees from the assets of the receivership. Interim 

Order ¶ 1. SWW has appeared on behalf of the entity defendants. The parties seeking the 

receivership order should clarify the basis for why the entity defendants' attorneys should be 

compensated from estate assets, which should be preserved to pay victimized investors. 

II. POTENTIAL CLAIMS AGAINST THIRD PARTIES 

URGE members may have claims against third parties who are not part of the 

Receivership Entity.

3

 For example, URGE's members are analyzing potential claims against 

investment advisers, brokers, attorneys, and accountants in addition to directors and officers of 

the Receivership Entity, and others who could be liable for, among other things, fraud,

participating in or materially aiding violations of Oregon securities laws, and abuse of a 

vulnerable person. See, e.g., ORS 59.115; 59.135; 124.100. 

 2 On March 16, the court entered a Stipulated Interim Order Appointing Receiver (the "Interim 

Order") (Dkt. No. 30). The Interim Order contains an identical stay and injunction, except for a 

broader tolling provision as detailed below.

3 See Proposed Order ¶ 1, defining the "Receivership Entity" as the entity defendants along with 

44 other related entities. 

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Page 4 - LIMITED OBJECTION TO AND REQUEST FOR CLARIFICATION OF 

PROPOSED ORDER APPOINTING RECEIVER (UNITED RECOVERY GROUP

FOR EQUALITY)

MILLER NASH GRAHAM & DUNN LLP ATTORNEYS AT LAW

TELEPHONE: 503.224.5858

3400 U.S. BANCORP TOWER

111 S.W. FIFTH AVENUE

PORTLAND, OREGON 97204

URGE members hold these claims separate from the receiver, who would lack the 

necessary standing to assert such claims. See, e.g., Johnson v. Chilcott, 590 F Supp 204, 208-

209 (D Colo 1984) (citing Rochelle v. Marine Midland Grace Trust Co., 535 F2d 523, 527 (9th 

Cir 1976) and holding that federally-appointed receiver did not have standing to assert securities 

and state-law fraud claims based on misrepresentations similar to those existing in this case); 

Baker v. Heller, 571 F Supp 419, 420 (SD Fl 1983) (holding that a receiver did not have standing 

to assert securities claims on behalf of injured investors). 

Although the receiver may have claims on behalf of the Receivership Entity

stemming from a common set of facts, the receiver's claims would be different from the 

investors' claims. For example, a law firm could be liable to the Receivership Entity for 

malpractice, while also being liable to investors for materially aiding a violation of Oregon 

securities laws or for abuse of a vulnerable person. The burden of proof, defenses, statutes of 

limitation, and remedies for such claims are materially different. 

III. THE PROPOSED ORDER, AS WRITTEN, COULD PREJUDICE URGE 

MEMBERS

The Proposed Order contains the following overly broad stay, which could be 

applicable to legal proceedings against third parties outside of the Receivership Entity:

"[T]he following proceedings, excluding the instant proceeding and any action or 

proceeding by a governmental unit to enforce such governmental unit's police or 

regulatory power and actions of the Commission related to the above-captioned 

enforcement action, are stayed until further Order of this Court:

All civil legal proceedings of any nature, including, but not limited to, bankruptcy 

proceedings, arbitration proceedings, foreclosure actions, default proceedings, or 

other actions of any nature involving: (a) the Receiver, in his capacity as 

Receiver; (b) any Receivership Property, wherever located; (c) any of the 

Receivership Entity; or (d) any of the Receivership Entity' [sic] past or present 

officers, directors, managers, agents, or general or limited partners sued for, or 

in connection with, any action taken by them while acting in such capacity of any 

nature, whether as plaintiff, defendant, third-party plaintiff, third-party defendant, 

or otherwise[.]" (Proposed Order ¶ 20.) (Emphasis added.)

Case 3:16-cv-00438-PK Document 50 Filed 03/18/16 Page 4 of 9
Page 5 - LIMITED OBJECTION TO AND REQUEST FOR CLARIFICATION OF 

PROPOSED ORDER APPOINTING RECEIVER (UNITED RECOVERY GROUP

FOR EQUALITY)

MILLER NASH GRAHAM & DUNN LLP ATTORNEYS AT LAW

TELEPHONE: 503.224.5858

3400 U.S. BANCORP TOWER

111 S.W. FIFTH AVENUE

PORTLAND, OREGON 97204

The Proposed Order also contains an injunction as follows:

"The Receivership Entity and all persons receiving notice of this Order by 

personal service, email, facsimile or otherwise, are hereby restrained and enjoined 

from directly or indirectly taking any action or causing any action to be taken, 

without the express written agreement of the Receiver, which would

* * *

"Dissipate or otherwise diminish the value of any Receivership Property; such 

prohibited actions include but are not limited to, releasing claims or disposing, 

transferring, exchanging, assigning or in any way conveying any Receivership 

Property, enforcing judgments, assessments or claims against any Receivership 

Property or any Receivership Entity, attempting to modify, cancel, terminate, call, 

extinguish, revoke, foreclose upon, enforce default provisions or accelerate (the 

due date), of any lease, loan, mortgage, indebtedness, security agreement or other 

agreement executed by any Receivership Entity or which otherwise affects any 

Receivership Property[.]" (Proposed Order ¶ 17C.)

These sweeping provisions could cause substantial prejudice to URGE members

for several reasons. First, they could be interpreted to potentially limit recoveries for investors 

by precluding them from pursuing their own claims against third parties outside of the 

Receivership Estate. 

Second, investors could be at risk of losing their claims completely upon the 

expiration of the applicable statutes of limitation or other time-based defenses. Although the 

Proposed Order contains a tolling provision to benefit the Receivership Entity, there is no such 

protection available for the investors' independent claims. See Proposed Order ¶ 22. The Interim 

Order contains a broader tolling provision than the Proposed Order, but it is questionable 

whether that tolling provision could bind or apply to parties not before the court. It would be 

unfair for URGE members to have to potentially litigate this issue and bear the risk of losing 

their remedies on a legal technicality. 

Third, the Proposed Order provides no protection in the form of a bond or security

requirement. Under Fed R Civ P 65(c), "[t]he court may issue a preliminary injunction or a 

temporary restraining order only if the movant gives security in an amount that the court 

Case 3:16-cv-00438-PK Document 50 Filed 03/18/16 Page 5 of 9
Page 6 - LIMITED OBJECTION TO AND REQUEST FOR CLARIFICATION OF 

PROPOSED ORDER APPOINTING RECEIVER (UNITED RECOVERY GROUP

FOR EQUALITY)

MILLER NASH GRAHAM & DUNN LLP ATTORNEYS AT LAW

TELEPHONE: 503.224.5858

3400 U.S. BANCORP TOWER

111 S.W. FIFTH AVENUE

PORTLAND, OREGON 97204

considers proper to pay the costs and damages sustained by any party found to have been 

wrongfully enjoined or restrained."

4

 The final order should therefore require a bond if it could 

be interpreted to enjoin URGE members from pursuing their claims against third parties.

Finally, the Proposed Order provides that the stay extends to any legal 

proceedings "involving" a "Receivership Entity' [sic] past or present officers, directors, 

managers, agents, or general or limited partners," which could be interpreted to prevent 

discovery from the Receivership Entity and any parties that could fall under that broad list. 

(Proposed Order ¶ 20.) Accordingly, the Proposed Order should be revised to clarify that the 

stay does not limit the investors' ability to obtain such discovery, which is necessary and critical 

to their claims as well as URGE's ability to obtain discovery to evaluate the administration of the 

receivership and to evaluate or propose any liquidation plan. 

IV. CONCLUSION

For the reasons above, there is a substantial risk that if the Proposed Order is 

entered as a final order as drafted, URGE members could lose important avenues for recovery 

with limited (and speculative) benefit to the receivership estate. Accordingly, the Proposed 

Order should be revised as suggested above to protect the interests of the victims of the Aequitas 

scandal. The receiver should also be required to maximize recovery for the estate by thoroughly 

considering the best and highest use of each entity and its assets, and considering the input of 

URGE members in making that determination.

///

///

///

 4 Although Fed R Civ P 65(c) exempts the United States from providing a bond, in this case the 

defendants are joint-movants and are not exempt. Furthermore, Ninth Circuit authority exists 

supporting that a bond could be required under certain circumstances when the SEC has obtained 

a receivership order with a similar injunction. See, e.g., S.E.C. v. Wencke, 622 F2d 1363, 1374 

(9th Cir 1980). 

Case 3:16-cv-00438-PK Document 50 Filed 03/18/16 Page 6 of 9
Page 7 - LIMITED OBJECTION TO AND REQUEST FOR CLARIFICATION OF 

PROPOSED ORDER APPOINTING RECEIVER (UNITED RECOVERY GROUP

FOR EQUALITY)

MILLER NASH GRAHAM & DUNN LLP ATTORNEYS AT LAW

TELEPHONE: 503.224.5858

3400 U.S. BANCORP TOWER

111 S.W. FIFTH AVENUE

PORTLAND, OREGON 97204

URGE expressly reserves its right to amend or supplement this objection, to 

introduce evidence at any hearing regarding this objection, and file additional and supplemental 

objections and pleadings as allowed by the court. 

DATED this 18th day of March, 2016.

MILLER NASH GRAHAM & DUNN LLP

/s/ Dennis P. Rawlinson

Dennis P. Rawlinson, P.C., OSB No. 763028

dennis.rawlinson@millernash.com

Phone: 503.224.5858

Fax: 503.224.0155

Attorneys for United Recovery Group for Equality

Case 3:16-cv-00438-PK Document 50 Filed 03/18/16 Page 7 of 9
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Page 1 - CERTIFICATE OF SERVICE

MILLER NASH GRAHAM & DUNN LLP ATTORNEYS AT LAW

T: 503.224.5858 | F: 503.224.0155

3400 U.S. BANCORP TOWER

111 S.W. FIFTH AVENUE

PORTLAND, OREGON 97204

I hereby certify that I served the foregoing limited objection to and request for 

clarification of proposed order appointing receiver (United Recovery Group for Equality) on:

• Robert S. Banks , Jr

bbanks@samuelslaw.com,aclark@samuelslaw.com,

darlenep@samuelslaw.com 

• Daniel J. Colaizzi , IV

danielj.colaizzi@dechert.com 

• Sara C. Cotton 

scotton@schwabe.com,bankruptcynotices@schwabe.com,

docket@schwabe.com,dgibson@schwabe.com 

• Brad S. Daniels 

bsdaniels@stoel.com,dmholland@stoel.com,docketclerk@stoel.com 

• Jeffrey S. Eden 

jeden@schwabe.com,centraldocket@schwabe.com,scrawford@schwabe.com 

• Troy D. Greenfield 

tgreenfield@schwabe.com,bbratton@schwabe.com 

• Brian E. Greer 

brian.greer@dechert.com 

• Mary J Heston 

hestonm@lanepowell.com,campbelld@lanepowell.com,

docketing-sea@LanePowell.com 

• Ivan B. Knauer 

knaueri@pepperlaw.com 

• Brian M. Nichilo 

nichilob@pepperlaw.com 

• Sheila E. O'Callaghan 

ocallaghans@sec.gov,stearnsj@sec.gov,langitg@sec.gov,roeselerk@sec.gov 

• Joel A. Parker 

jparker@schwabe.com,ron.greenspan@fticonsulting.com,

lream@schwabe.com,gblaser@schwabe.com,brad.foster@fticonsulting.com,

larissa.gotguelf@fticonsulting.com,docket@schwabe.com,

dgibson@schwabe.com 

• Milo Petranovich 

petranovichm@lanepowell.com,pettingerk@lanepowell.com,

docketing-pdx@lanepowell.com 

• Jeff S. Pitzer 

jpitzer@pitzerlaw.net,spatel@pitzerlaw.net,psullivan@pitzerlaw.net 

• Wade M. Rhyne 

rhynew@sec.gov,smythb@sec.gov,ocallaghans@sec.gov,combst@sec.gov,

buchholzs@sec.gov,stearnsj@sec.gov,austinh@sec.gov 

• Brent D. Smyth 

smythb@sec.gov,combst@sec.gov,buchholzs@sec.gov,stearnsj@sec.gov,

Case 3:16-cv-00438-PK Document 50 Filed 03/18/16 Page 8 of 9
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Page 2 - CERTIFICATE OF SERVICE

MILLER NASH GRAHAM & DUNN LLP ATTORNEYS AT LAW

T: 503.224.5858 | F: 503.224.0155

3400 U.S. BANCORP TOWER

111 S.W. FIFTH AVENUE

PORTLAND, OREGON 97204

Ocallaghans@sec.gov,roeselerk@sec.gov,austinh@sec.gov,Rhynew@sec.gov

,lamarcas@sec.gov,langitg@sec.gov 

• John M. Timperio 

john.timperio@dechert.com 

• David A. Wender 

david.wender@alston.com

by the following indicated method or methods on the date set forth below:

 CM/ECF system transmission.

 E-mail. As required by Local Rule 5.2, any interrogatories, requests for 

production, or requests for admission were e-mailed in Word or WordPerfect 

format, not in PDF, unless otherwise agreed to by the parties.

 Facsimile communication device.

 First-class mail, postage prepaid.

 Hand-delivery.

 Overnight courier, delivery prepaid.

and on the following by first-class mail, postage prepaid: 

Mr. Ronald F. Greenspan

FTI Consulting

633 W. 5th Street

16th floor

Los Angeles, California 90071

DATED this 18th day of March, 2016.

/s/ Dennis P. Rawlinson

Dennis P. Rawlinson, P.C., OSB No. 763028

Attorneys for United Recovery Group for 

Equality

Case 3:16-cv-00438-PK Document 50 Filed 03/18/16 Page 9 of 9