Page 1 - MOTION TO AUTHORIZE RECEIVER TO ESTIMATE 

VALUE OF PROMISSORY NOTES FOR IRA ACCOUNT 

HOLDERS UPON REQUEST 

SCHWABE, WILLIAMSON & WYATT, P.C.

Attorneys at Law 

Pacwest Center 

1211 SW 5th Ave., Suite 1900 

Portland, OR 97204 

Telephone: 503.222.9981 

Fax: 503.796.2900

PDX\129912\215141\AJL\19336049.1

Troy D. Greenfield, OSB #892534 

Email: tgreenfield@schwabe.com 

Joel A. Parker, OSB #001633

Email: jparker@schwabe.com 

Jeffrey S. Eden, OSB #851903

Email: jeden@schwabe.com 

Alex I. Poust, OSB #925155 

Email: apoust@schwabe.com 

Lawrence R. Ream (Admitted Pro Hac Vice) 

Email: lream@schwabe.com 

Schwabe, Williamson & Wyatt, P.C. 

Pacwest Center 

1211 SW 5th Ave., Suite 1900 

Portland, OR 97204 

Telephone: 503.222.9981 

Facsimile: 503.796.2900 

Ivan B. Knauer (Admitted Pro Hac Vice)

Email: knaueri@pepperlaw.com 

Brian M. Nichilo (Admitted Pro Hac Vice)

Email: nichilob@pepperlaw.com 

Pepper Hamilton, LLP 

600 14th Street, NW, Suite 500 

Washington, DC 20005 

Telephone: 202. 220.1219 

Facsimile: 202. 220.1665 

Attorneys for the Receiver for Defendants 

AEQUITAS MANAGEMENT, LLC; AEQUITAS HOLDINGS, LLC; 

AEQUITAS COMMERCIAL FINANCE, LLC; AEQUITAS CAPITAL 

MANAGEMENT, INC.; AEQUITAS INVESTMENT MANAGEMENT, LLC 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF OREGON 

PORTLAND DIVISION 

SECURITIES AND EXCHANGE 

COMMISSION, 

Plaintiff, 

v. 

No. 3:16-cv-00438-PK

MOTION TO AUTHORIZE RECEIVER TO 

ESTIMATE VALUE OF PROMISSORY 

NOTES FOR IRA ACCOUNT HOLDERS 

UPON REQUEST 

Case 3:16-cv-00438-PK Document 293 Filed 11/09/16 Page 1 of 6
Page 2 - MOTION TO AUTHORIZE RECEIVER TO ESTIMATE 

VALUE OF PROMISSORY NOTES FOR IRA ACCOUNT 

HOLDERS UPON REQUEST 

SCHWABE, WILLIAMSON & WYATT, P.C.

Attorneys at Law 

Pacwest Center 

1211 SW 5th Ave., Suite 1900 

Portland, OR 97204 

Telephone: 503.222.9981 

Fax: 503.796.2900

PDX\129912\215141\AJL\19336049.1

AEQUITAS MANAGEMENT, LLC; 

AEQUITAS HOLDINGS, LLC; 

AEQUITAS COMMERCIAL FINANCE, 

LLC; AEQUITAS CAPITAL 

MANAGEMENT, INC.; AEQUITAS 

INVESTMENT MANAGEMENT, LLC; 

ROBERT J. JESENIK, BRIAN A. OLIVER; 

and N. SCOTT GILLIS, 

Defendants.

LOCAL RULE 7-1 CERTIFICATE 

On November 2, 2016, counsel for the Receiver circulated to counsel of record, via email, a copy of this motion that is substantially the same as this filed version. The conferral 

requested that counsel respond by 12:00 p.m. (PST) on November 3, 2016, as to whether their 

clients object or consent to the motion. As of the time of filing this motion, the undersigned had 

received no objections. 

MOTION 

The Receivership entities issued promissory notes, some of which are held by individuals 

through their Individual Retirement Accounts (“IRAs”). Some such individuals must take 

annual distributions from their IRAs in proportion to the account’s value, which depends on the 

value of those promissory notes. For the reasons further set forth below, this Court should 

expressly authorize the Receiver to estimate the value of promissory notes issued by a 

Receivership entity for any individual who makes a showing to the Receiver that he or she: (a) 

holds such promissory notes through an IRA; and (b) must take a distribution from that account. 

Case 3:16-cv-00438-PK Document 293 Filed 11/09/16 Page 2 of 6
Page 3 - MOTION TO AUTHORIZE RECEIVER TO ESTIMATE 

VALUE OF PROMISSORY NOTES FOR IRA ACCOUNT 

HOLDERS UPON REQUEST 

SCHWABE, WILLIAMSON & WYATT, P.C.

Attorneys at Law 

Pacwest Center 

1211 SW 5th Ave., Suite 1900 

Portland, OR 97204 

Telephone: 503.222.9981 

Fax: 503.796.2900

PDX\129912\215141\AJL\19336049.1

I. Individuals over age 701⁄2 are required to take annual distributions from IRA 

accounts in relation to the account’s value, which requires information about the 

value of promissory notes held in the account. 

An IRA trustee, custodian, or annuity issuer is required to file an annual report with the 

Internal Revenue Service for each person for whom it maintained an IRA in the prior tax year. 

Such an annual report includes, among other information, the value of the assets held in the IRA 

in the prior tax year. See LOREN WHITNEY, TAX DEFERRED–PROMISSORY NOTE SELF-DIRECTED IRA 

INVESTING, available at http://www.promissorynoteappraisers.com/tax-deferred-promissory-noteself-directed-ira-investing/ (last visited Oct. 26, 2016). Valuation issues can arise when active 

investors decide to invest their retirement plan in promissory notes using a funded self-directed 

IRA. Id. When investing in promissory notes, an IRA holder may be required to provide the 

custodian or administrator with valuation documentation. Id. 

When a loan fails to perform, the valuation of a promissory note may vary year-overyear—a significant issue for notes held in an IRA. An IRA beneficiary is required to receive a 

minimum distribution from his or her IRA once he or she reaches the age of 701⁄2 in an amount 

that is calculated on life expectancy tables and the value of the IRA. See INTERNAL REVENUE 

SERVICE, Publication 590-B (2015), Distributions from Individual Retirement Arrangements 

(IRAs), Ch. 1, available at https://www.irs.gov/publications/p590b/ch01.html (last visited Oct. 

26, 2016). If the value of the note is lower than the face, the required minimum distribution can 

potentially be overstated. In the event that a note has a reduced value, it is the obligation of the 

IRA holder to prove its reduced value, thus enabling the provider to adjust the IRA balance 

accordingly, as well as the IRA beneficiary’s required minimum distribution amount. See 

WHITNEY, TAX DEFERRED–PROMISSORY NOTE SELF-DIRECTED IRA INVESTING. 

Case 3:16-cv-00438-PK Document 293 Filed 11/09/16 Page 3 of 6
Page 4 - MOTION TO AUTHORIZE RECEIVER TO ESTIMATE 

VALUE OF PROMISSORY NOTES FOR IRA ACCOUNT 

HOLDERS UPON REQUEST 

SCHWABE, WILLIAMSON & WYATT, P.C.

Attorneys at Law 

Pacwest Center 

1211 SW 5th Ave., Suite 1900 

Portland, OR 97204 

Telephone: 503.222.9981 

Fax: 503.796.2900

PDX\129912\215141\AJL\19336049.1

An IRA account holder who wishes to prove the reduced value of a note has a variety of 

options, including obtaining a detailed letter signed by the manager of a borrowing entity 

explaining the determination of a reduced value. Id. 

II. Several individuals have requested that the Receiver estimate the value of 

promissory notes held by them through their IRAs. 

The Receiver has been asked by representatives for several IRA account holders to 

provide estimated values of notes issued by the Receivership entities. Such investors could 

theoretically obtain an estimate from other sources, including a note appraiser, CPA, or licensed 

attorney certifying and explaining the reduced value of the asset. Id. But such a third-party 

appraisal would likely require individual IRA account holders—who are already past the age of 

retirement and may be on fixed incomes—to incur additional costs. The Receiver is sympathetic 

to such investors, including one whose IRA holdings consist entirely of such a promissory note.1

 

In the absence of other assets, this investor, who is over age 701⁄2, must take a partial distribution 

of the promissory note, but cannot do so without first obtaining a fair-market valuation of her 

note. That investor will owe tax penalties unless such a partial distribution is made. 

III. This Court should expressly authorize the Receiver to estimate the value of 

promissory notes for a limited category of investors. 

The Receiver likely already possesses the authority to provide estimates to individuals 

over age 701⁄2 who hold promissory notes from Receivership entities through their IRAs. (See

Order Appointing Receiver [dkt # 156], ¶ 27 (“The Receiver is authorized to take all actions to 

manage, maintain, and/or wind-down business operations of the Receivership Entity, including 

 

1

 Out of respect for the investor’s privacy, the Receiver is not identifying the investor by 

name or attaching the communication. The Receiver will supply that information if requested by 

the Court. 

Case 3:16-cv-00438-PK Document 293 Filed 11/09/16 Page 4 of 6
Page 5 - MOTION TO AUTHORIZE RECEIVER TO ESTIMATE 

VALUE OF PROMISSORY NOTES FOR IRA ACCOUNT 

HOLDERS UPON REQUEST 

SCHWABE, WILLIAMSON & WYATT, P.C.

Attorneys at Law 

Pacwest Center 

1211 SW 5th Ave., Suite 1900 

Portland, OR 97204 

Telephone: 503.222.9981 

Fax: 503.796.2900

PDX\129912\215141\AJL\19336049.1

making ... communicating with ... investors ... as appropriate.”). However, out of an 

abundance of caution and to ensure that the Receiver is entitled to the liability limitations and 

protections afforded by the Court (see id. at ¶ 34-37), the Receiver seeks express authorization to 

estimate the value of notes for such individuals (see id. at ¶ 6 (“[T]he Receiver shall have the 

following general powers and duties ... [t]o take such other actions as may be approved by this 

Court.”). 

In order to provide such estimates, the Receiver anticipates relying upon the same 

valuation analysis previously provided to the Investors Advisory Committee—an estimated 

range of recovery—with the overlay of a hypothetical distribution plan based solely on the books 

and records as currently understood. Any such estimate would necessarily be accompanied by 

disclaimers, including that the hypothetical plan has no relevance or use beyond providing 

estimates to this limited class of investors and that the creation of, use of, reliance upon, or 

failure to object to such a hypothetical plan cannot be used in any way in this action against the 

Court, the Receiver, the investor receiving the estimate, or any other investor, creditor, or debtor. 

CONCLUSION 

For the reasons set forth above, this Court should grant the Receiver’s motion to 

expressly authorize the Receiver to estimate the value of the promissory notes issued by a 

Receivership entity for any individual who makes a showing to the Receiver that he or she: 

/ / / 

/ / / 

 

Case 3:16-cv-00438-PK Document 293 Filed 11/09/16 Page 5 of 6
Page 6 - MOTION TO AUTHORIZE RECEIVER TO ESTIMATE 

VALUE OF PROMISSORY NOTES FOR IRA ACCOUNT 

HOLDERS UPON REQUEST 

SCHWABE, WILLIAMSON & WYATT, P.C.

Attorneys at Law 

Pacwest Center 

1211 SW 5th Ave., Suite 1900 

Portland, OR 97204 

Telephone: 503.222.9981 

Fax: 503.796.2900

PDX\129912\215141\AJL\19336049.1

(a) holds such promissory notes through an IRA; and (b) must take a distribution from that 

account. 

Dated this 9th day of November, 2016. 

Respectfully submitted, 

SCHWABE, WILLIAMSON & WYATT, P.C. 

By: s/ Troy D. Greenfield 

 Troy D. Greenfield, OSB #892534 

 tgreenfield@schwabe.com 

Joel A. Parker, OSB #001633 

jparker@schwabe.com 

Jeffrey S. Eden, OSB #851903

jeden@schwabe.com 

Alex I. Poust, OSB #925155 

apoust@schwabe.com 

 Lawrence R. Ream (Admitted Pro Hac Vice) 

 lream@schwabe.com 

Telephone: 503.222.9981 

Facsimile: 503.796.2900 

 Ivan B. Knauer (Admitted Pro Hac Vice) 

 knaueri@pepperlaw.com 

Brian M. Nichilo (Admitted Pro Hac Vice)

nichilob@pepperlaw.com 

PEPPER HAMILTON LLP 

 600 Fourteenth Street, N.W. 

 Washington, DC 2005 

 Tel: (202) 220-1665 

 

Attorneys for the Receiver for Defendants 

Aequitas Management, LLC, Aequitas 

Holdings, LLC, Aequitas Commercial 

Finance, LLC, Aequitas Capital 

Management, Inc., and Aequitas Investment 

Management, LLC

Case 3:16-cv-00438-PK Document 293 Filed 11/09/16 Page 6 of 6