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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

U.S. SECURITIES AND EXCHANGE 

COMMISSION,

 

v. 

 Plaintiff,

JOHN J. BRAVATA, RICHARD J. 

TRABULSY, ANTONIO BRAVATA, 

BBC EQUITIES, LLC AND BRAVATA 

FINANCIAL GROUP, LLC 

 Defendants, 

and 

SHARI A. BRAVATA,

 Relief Defendant.

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CIVIL ACTION NO.: 2:09-cv-12950-

DML-VMM

RESPONSE TO ORDER TO SHOW CAUSE

ON BEHALF OF THE DEFENDANT, JOHN J. BRAVATA

I. Preliminary Statement

The Plaintiff, Securities and Exchange Commission (“Commission”) filed its Motion For 

an Order to Show Cause [Doc. No. 63] relating to the Commission’s assertions that Defendant. 

John J. Bravata (“Mr. Bravata”) violated the Court’s Asset Freeze (“Asset Freeze”). The Asset 

Freeze was initially obtained ex-parte by the Commission on July 27, 2009 at 5:17 p.m. [Doc. 

No. 22]. For purposes of responding to the Court’s Order to Show Cause, Mr. Bravata in 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 1 of 33
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summary believes that he has shown no contemptuous conduct to the Court, nor will the facts 

adduced at the hearing to show cause establish that: (i) Mr. Bravata disobeyed a valid Court 

order in the nature of the Asset Freeze; (ii) that he was able to comply with the Court’s Asset 

Freeze; or alternatively, (iii) that Mr. Bravata should be provided with a reasonable opportunity 

to purge himself of any contemptuous conduct the Court may find took place. Furthermore, Mr. 

Bravata does not intend to deny that on August 10, 2009 he processed a loan from two of his life 

insurance policies issued by New York Life that resulted in his receipt of approximately a 

$37,000 loan. 

The Asset Freeze included a notice of hearing scheduling the Commission’s Motion for 

Preliminary Injunction for August 4, 2009 at 10:00 a.m. At the hearing, all Defendants were then 

represented by counsel. The “Bravata Defendants” lodged a number of objections at the hearing 

to the propriety of the Commission’s actions in obtaining emergency, ex-parte relief on July 27, 

2009; the Commission was NOT prepared to move forward at that time on any evidentiary 

hearing; and while reserving all rights to further object to the initial entry of the emergency, exparte relief sought and obtained by the Commission, the Defendants collectively consented to 

continue the effect of the Asset Freeze until the Court conducted an evidentiary hearing now rescheduled for October 21-22, 2009. Although no transcript of the August 4, 2009 hearing has 

been obtained for purposes of the upcoming hearing, it is clear on the record from that 

proceeding that all rights with respect to the entry of emergency, ex-parte relief sought and 

obtained by the Commission were reserved by the Bravata Defendants.

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 2 of 33
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 Following the August 4, 2009 hearing, the Court entered an Order [Doc. No. 34]. The 

Order recites that the Commission was not prepared on that date to proceed with an injunction 

hearing, but after meeting and conferring, counsel for the parties did resolve some, but not all 

procedural issues at that time presented by this case. Notably, the Order allowed any party 

wishing to submit additional papers concerning requested relief from the Asset Freeze to file 

same on or before August 11, 2009. [Doc. No. 34, at 2]. The parties ultimately reported back to 

the Court that an evidentiary hearing would be necessary with respect to any further continuation 

of the injunctive relief contained in the emergency, ex-parte temporary restraining order.

 No “carve outs” or relief from the Asset Freeze was agreed to by the Commission on 

August 4, 2009. In furtherance of the Bravata Defendants dire needs following the freezing of 

any assets, bank accounts, credit facilities and borrowing capabilities, the Bravata Defendants 

filed a series of requests for relief from the Asset Freeze [Doc. Nos. 39—filed August 9, 2009; 

Doc. No. 42—filed August 11, 2009; Doc. No 43—filed August 12, 2009; Doc. No. 45—filed 

August 13, 2009; Doc. No. 56—filed September 4, 2009 (Motion for Reconsideration). 

 The Commission’s Motion for Order to Show Cause leads the Court to believe that the 

filing of the aforesaid carve out requests from the Asset Freeze were purposeful attempts to 

mislead the Court, nefarious in nature and reflect outright contemptuous conduct before the 

Court. Such is not the case. The carve out request by the Bravata Defendants filed on August 9, 

2009 dealt solely with the Comerica Bank account held in the name of Dylite Adams. The carve 

out request by the Bravata Defendants filed on August 11, 2009 was far more general in nature 

due to the contention that freezing the assets of all Bravata Defendants anywhere in the world 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 3 of 33
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was far too broad; requests were made to permit several vehicles to be released from the Asset 

Freeze; further requests were made to allow Mr. Bravata to borrow against some or all of his life 

insurance policies—especially the policy he purchased in 2003, far before the formation of BBC 

or BFG. There is no admission made by the Bravata Defendants that the life insurance loan value 

that pre-dated the BBC offering timeframe was expressly understood to fall within the purview 

of the Asset Freeze.1

The filing made on August 13, 2009 was a further supplement to the August 11, 2009 filing, 

relating primarily to the urgent need to pay a life insurance premium for Mr. Bravata’s 83 yearold mother, which was due on August 15, 2009.

 The filing made on August 12, 2009 was a supplement to the August 11, 

2009 filing, but related solely to Mr. Bravata’s Declaration and certain redacted bank statements. 

2

 Although the undersigned counsel had no knowledge of Mr. Bravata’s request to process 

the Life Insurance Loan against New York Life Policy numbers 6 xxx 373 or 4 xxx 171, there 

was no surreptitious scheme to mislead the Court or counsel for that matter. Mr. Bravata’s 

actions were driven by the information he received following the August 4, 2009 hearing relating 

to the Commission’s clear statements that assets unconnected to the BBC offering that pre-dated 

 Finally, the September 9, 2009 filing in the 

nature of a Motion for Reconsideration was driven by the uncertainty of whether or not the Court 

had considered the Declaration of Mr. Bravata filed on August 12, 2009. 

 

1 Actually, the August 11, 2009 carve out request asserts just the contrary, where it asserts that.... “It is 

the position of the Bravata Defendants that life insurance cash value that existed before the 

commencement of offering activity by BBC is Mr. Bravata’s sole and separate estate, should not be 

impacted by the current asset freeze and that the Court’s subsequent Orders should clarify the release of 

these life insurance assets for use by Mr. Bravata to meet his cash needs.....(See Doc. No. 42, at 22-23). 

2

 As will be shown at the hearing on the Order to Show Cause, $4,200 of the Life Insurance Loan was 

applied to the premium payment on this policy to avoid forfeiture. 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 4 of 33
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the offering timeframe, as memorialized by the Commission’s August 13, 2009 email verifying 

its position, were to be treated as his sole and separate property not subject to the Asset Freeze 

and finally, his helplessness in concurring with the position advocated by the Commission that 

his pre-dated life insurance policies were subject to the Asset Freeze.3

Orders issued by the Court are presumptively valid, unless a determination is made that 

an order was obtained under circumstances giving rise to improprieties, non-compliance with the 

Federal Rules of Civil Procedures, or otherwise deemed to have misled the Court. Based upon 

the Bravata Defendants’ reconstruction of the events and conduct of the Commission 

enforcement staff commencing with the filing of the Complaint and supporting papers, through 

and including formal service of the Complaint on Defendants’ then counsel, Butzel Long, it is 

likely that if the Commission had fully complied with Fed. R. Civ. Pro. 65(b)(1)(A) and (B), the 

Court would have deferred entry of an ex-parte temporary restraining order until counsel for the 

Defendants could be heard on the relief requested. It is also quite likely that if Butzel Long had 

an opportunity to be heard at that early, critical stage of this case, the Asset Freeze and other 

ancillary relief obtained on July 27, 2009 by the Commission would be materially different than 

it was and has been since inception. The Commission is fully aware of the monumental 

advantages in civil enforcement cases it brings which are commenced by successfully seeking 

emergency, ex-parte relief in the nature of asset freezes, appointment of receivers and expedited 

 

3

 It appears undisputed that the Commission did not notify New York Life of the existence of the Asset 

Freeze until Mr. Hanauer emailed the relevant orders to Amy Miller at New York Life on September 4, 

2009 at 1:53 p.m. (See Motion for Order to Show Cause, [Doc. No. 63, Exhibit 1]. The Commission was 

fully aware of the existence of all of Mr. Bravata’s life insurance policies.

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 5 of 33
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discovery. In partial response to the Court’s Order to Show Cause, Mr. Bravata requests the 

Court to re-examine the Commission’s conduct in securing the emergency, ex-parte relief—all in 

the context of whether the Order was validly and properly entered.4

I. Controlling Standards for Civil Contempt Proceedings

The Court has both an inherent and a statutory power to enforce compliance with its 

orders through the remedy of civil contempt. See Shillitani v. United States, 384 U.S. 364, 370, 

86 S.Ct. 1531, 16 L.Ed.2d 622 (1966); Petties v. District of Columbia, 897 F.Supp. 626, 629 

(D.D.C.1995); SEC v. Current Fin. Servs., Inc., 798 F.Supp. 802, 806 (D.D.C.1992); 18 U.S.C. § 

401. A civil contempt proceeding generally involves three stages: (1) the court issues an order; 

(2) after the party disobeys the order, the court issues a conditional order finding the recalcitrant 

party in contempt and threatening to impose a specified penalty unless the recalcitrant party 

purges itself of contempt by complying with prescribed purgation conditions; and (3) if the party 

does not fulfill the purgation conditions, the court exacts the threatened penalty. See NLRB v. 

 

4 Based upon a review of materials made available to the undersigned counsel, i.e. primarily email 

messages initiated by the Commission to the Court and to Butzel Long, the Commission transmitted a 

form of proposed ex-parte temporary restraining order to the Court on July 27, 2009 at 10:40 a.m. 

However, the Commission had only delivered the filed Complaint [Doc. No. 1] and Emergency Motion 

for a Temporary Restraining Order, Asset Freeze, and Other Ancillary Relief and Brief in Support [Doc. 

No. 4] at 9:41 a.m. on July 27, 2009 to Butzel Long. Based upon counsel’s review of the available email 

messages initiated by the Commission, James G. Lundy, branch chief of the Commission’s Chicago 

Regional Office represented to Mr. Donnini of Butzel Long at 9:41 a.m. on July 27, 2009 that “Jonathan 

and Ben will follow-up with you about the exhibits and contacting the Judge,” and then, with no further 

communication to Mr. Donnini, submitted a form of proposed ex-parte order to the Court at 10:40 a.m. on 

July 27, 2009 with a copy of same separately sent to Mr. Donnini five minutes later. It is clear that the 

Commission was dealing directly with Mr. Donnini as Defendants’ counsel (having thanked him for 

accepting service), yet wholly failed to inform the Court of Mr. Donnini’s representation of the 

Defendants at this crucial stage of the proceeding. Why? (See Exhibit “A” and Exhibit “B” attached 

hereto and incorporated by reference herein). A justifiable conclusion can be made that Mr. Polish’s email 

to the Court at 10:40 a.m. on July 27, 2009 intentionally omitted reference to Mr. Donnini acting as 

Defendants’ counsel and having agreed to accept service.

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 6 of 33
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Blevins Popcorn Co., 659 F.2d 1173, 1184 (D.C.Cir.1981); SEC v. Parkersburg Wireless, L.L.C.,

156 F.R.D. 529 (D.D.C.1994); Current Fin. Servs., 798 F.Supp. at 806. 

A party is in contempt of court when he "violates a definite and specific court order 

requiring him to perform or refrain from performing a particular act or acts with knowledge of 

that order." SEC v. Bankers Alliance Corp., 881 F.Supp. 673, 678 (D.D.C.1995) (quoting 

Whitfield v. Pennington, 832 F.2d 909, 913 (5th Cir.1987)). As the party seeking a finding of 

contempt, the SEC bears the initial burden of showing, by clear and convincing evidence, that (1) 

court orders were in effect, (2) the orders required certain conduct by Mr. Bravata, and (3) that 

Mr. Bravata failed to comply with the Court's orders. See Bankers Alliance Corp., 881 F.Supp. at 

678. 

Once the SEC has made a prima facie showing that Mr. Bravata did not comply with the 

Court's orders, the burden shifts to Mr. Bravata to produce evidence justifying or excusing his 

noncompliance. See Chairs v. Burgess, 143 F.3d 1432, 1436 (11th Cir.1998). It is well 

recognized that a respondent to a contempt proceeding may defend against a finding of contempt 

on the ground that he is unable to comply with the orders. See United States v. Rylander, 460 

U.S. 752, 757, 103 S.Ct. 1548, 75 L.Ed.2d 521 (1983); SEC v. Ormont Drug & Chem. Co., 739 

F.2d 654, 656 (D.C.Cir.1984); Bankers Alliance Corp., 881 F.Supp. at 678. Unquestionalby, Mr. 

Bravata bears the burden of production on such a defense. See Rylander, 460 U.S. at 757, 103 

S.Ct. 1548; Ormont Drug & Chem. Co., 739 F.2d at 657 n. 7; Bankers Alliance Corp., 881 

F.Supp. at 683. Mr. Bravata must substantiate his inability to comply with the Court's order 

"categorically and in detail." Current Fin. Servs., 798 F.Supp. at 808. See also 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 7 of 33
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Midland Bank, 51 F.3d 5, 10 (2d Cir.1995) (stating that it is the alleged contemnor's burden to 

establish his inability to comply "clearly, plainly, and unmistakably."). Further, a party seeking 

to establish an impossibility defense to a charge of contempt should "show[ ] that he has made in 

'good faith all reasonable efforts to comply." Chairs, 143 F.3d at 1436 (quoting United States v. 

Ryan, 402 U.S. 530, 534, 91 S.Ct. 1580, 29 L.Ed.2d 85 (1971)). Cf. Natural Resources Defense 

Council, Inc. v. Train, 510 F.2d 692, 713 (noting that a court may choose not to hold a party in 

contempt if "he has in good faith employed the utmost diligence in discharging his ... 

responsibilities.") 

The Commission no doubt will contend that, to the extent Mr. Bravata’s claimed inability

to comply with the Asset Freeze has been self-created, it is not a defense to a finding of 

contempt. See In re Power Recovery Sys., Inc., 950 F.2d 798, 803 (1st Cir.1991) (noting that a 

self-induced inability to comply does not establish an inability defense); Pesaplastic, C.A. v. 

Cincinnati Milacron Co., 799 F.2d 1510, 1521 (11th Cir.1986) ("[W]here the person charged 

with contempt is responsible for the inability to comply, impossibility is not a defense to the 

contempt proceedings.") See also Ormont Drug & Chem. Co., 739 F.2d at 657 (noting that the 

court must consider the defendant's inability to comply, but only to the extent it was without fault 

on the defendant's part). 

A party also may defend on the ground of good faith substantial compliance with the 

orders, see Food Lion, Inc. v. United Food & Commercial Workers Int'l Union, 103 F.3d 1007, 

1016 (D.C.Cir.1997); Cobell v. Babbitt, 37 F.Supp.2d 6, 9-10 (D.D.C.1999).

II. It is Unclear Whether the Order to Show Cause Contemplates Civil or Criminal 

Contempt Against Mr. Bravata 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 8 of 33
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As a threshold matter, Mr. Bravata is unclear on what precisely he is appearing for in 

terms of defending his actions, i.e. whether the Court issued the Show Cause Order 

contemplating civil contempt or criminal contempt proceedings. The confusion on this point 

eminates not from the SEC’s Motion for an Order to Show Cause [Doc. No. 63], as that filing 

does clearly move the Court for civil contempt. The confusion arises from the Court’s Order to 

Show Cause [Doc. No. 64], which compels Mr. Bravata to appear and show cause, “if any there 

be, why he should not be held in civil contempt of this Court’s order freezing assets and 

punished accordingly

Distinguishing Between Civil and Criminal Contempt

.” [Doc. No. 64, Page 1]. 

Contempt proceedings are classified as either civil or criminal. If the purpose of the 

contempt order is to punish the contemnor

Matter of Terrebonne Fuel and Lube, Inc.,

 or to vindicate the authority of court, the contempt 

order is viewed as “criminal.” If, on other hand, the purpose of the contempt order is to coerce 

compliance with the order or to compensate another party for contemnor's violation, the 

contempt order is considered to be “civil.” 108 F.3d 

609, 612 (5th Cir. 1997). The key determinant in distinguishing between criminal and civil 

contempt orders is whether the penalty imposed is absolute or conditional upon contemnor's 

conduct. Lamar Financial Corp. v. Adams, 918 F.2d 564, 566 (5th Cir. 1990). When the face of 

contempt order reflects both a punitive and coercive dimension, it is classified as a “criminal 

contempt” order. F.D.I.C. v. LeGrand, 43 F.3d 163, 168 (5th Cir. 1995). In the case before the 

Court, there is no “contempt order” that has been entered—only the Court’s Order to Show 

Cause that refers to both civil contempt and punishment. In that respect the Order to Show Cause 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 9 of 33
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reflects both “punitive and coercive dimensions.” At this stage of the proceeding therefore, Mr. 

Bravata is unsure of what the nature of the proceeding to be held on October 1, 2009 is. If the 

proceeding is solely a civil contempt proceeding, Mr. Bravata’s rights are material different than 

if the proceeding results in “punishment” to Mr. Bravata, notwithstanding the actual wording of 

the SEC’s motion or the wording of the Court’s Order to Show Cause. 

What remedy the Commission seeks if it establishes all necessary elements of contempt 

is also dispositive of whether the proceeding is civil or criminal in nature, even contrary to the 

wording of the Commission’s Motion for Order to Show Cause. If for example, the Commission 

was to seek to require incarceration of Mr. Bravata UNTIL compliance is had, two interesting 

observations and consequences arise.First, such a request does not allow the chance for Mr. 

Bravata to comply prior to incarceration (thereby murking the water as to whether the real 

sanction is civil or criminal in nature because said relief would be more punitive than coercive in 

character).Secondly, Mr. Bravata’s ability to comply is virtually nil if and while incarcerated. As 

an aside, if the contempt proceeding results in a criminal contempt action, the Commission 

would have to prove criminal intent. U.S. v. Ortlieb, 274 F.3d 871, 874 (5th Cir. 2001). Criminal 

intent, for contempt purposes, means it is sufficient if the defendant's actions in failing to comply 

with a decree or order were deliberate, voluntary, or intentional, as distinguished from 

accidental, inadvertent, or negligent. U.S. v. Fidanian, 465 F.2d 755, 760 (5th Cir. 1972). Suffice 

it to say, to the extent that the Commission may seek criminal contempt or punitive remedies 

against Mr. Bravata, he is not on sufficient notice, nor has the Commission made sufficient 

allegations or proof of Mr. Bravata’s intent to support any punitive remedies at the hearing on 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 10 of 33
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the Court’s Order to Show Cause. 

To the extent that the Commission actually seeks civil contempt, civil contempt has two 

different purposes. On the one hand, it is used to enforce an order of the Court, through 

coerciveness, while on the other hand, civil contempt can be used to compensate a party who has 

suffered unnecessary injury or costs because of contemptuous conduct. Petroleos Mexicanos v. 

Crawford Enterprises, Inc., 826 F.2d 392, 400 (5th Cir. 1987). The movant in a civil contempt 

proceeding bears the burden of establishing by clear and convincing evidence: (1) that a court 

order was in effect, (2) that the order required certain conduct by the respondent, and (3) that the 

respondent actually failed to comply with the court's order. Test Masters Educational Services, 

Inc. v. Singh, 428 F.3d 559, 481-82 (5th Cir. 2005), cert. denied, 547 U.S. 1055 (U.S. 2006); 

American Airlines, Inc. v. Allied Pilots Ass'n, 228 F.3d 574, 581 (5th Cir. 2000), cert. denied,

531 U.S. 1191 (U.S. 2001). “Clear and convincing evidence,” for purposes of contempt 

proceedings, is “that weight of proof which produces in the mind of the trier of fact, a firm belief 

or conviction as to the truth of allegations sought to be established, evidence so clear, direct and 

weighty and convincing as to enable the fact finder to come to clear conviction, without 

hesitancy, of the truth of the precise facts of the case.” Shafer v. Army & Air Force Exchange 

Service, 376 F.3d 386, 396 (5th Cir. 2004), op. clarified, 2004 WL 2107672 (5th Cir. 2004). It is 

also paramount to recognize that willfulness and/or intent are not elements of civil contempt, 

unlike criminal contempt. American Airlines, Inc. v. Allied Pilots Ass'n, 228 F.3d 574, 581 (5th 

Cir. 2000), cert. denied, 531 U.S. 1191 (U.S. 2001); Petroleos Mexicanos v. Crawford 

Enterprises, Inc., 826 F.2d 392, 401 (5th Cir. 1987). 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 11 of 33
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III. Inability to Comply with the Freeze Order is a Complete Defense to a Contempt 

Action.

Based upon the factual circumstances summarized below, and that will be established at 

the show cause hearing, Mr. Bravata was realistically unable to comply with the Asset Freeze. If 

a showing is made that the alleged contemnor, Mr. Bravata was then and there unable to comply 

with the Freeze Order, his inability to comply is a complete defense to a contempt action. U.S. v. 

Rylander, 460 U.S. 752, 757 (U.S. 1983) (citing: Maggio v. Zeitz, 333 U.S., at 75-76; Oriel v. 

Russell, 278 U.S. 358, 366 (1929); see also Petroleos Mexicanos v. Crawford Enterprises, Inc.,

826 F.2d 392, 401 (5th Cir. 1987). In Rylander, there was an order to produce documents in an 

IRS proceeding, and the party required to produce claimed that it was unable to produce the 

documents. The United States Supreme Court recognized that a party unable to produce 

documents pursuant to the order defeats the motion for contempt. Id. The United States Supreme 

Court said it best:

“While the court is bound by the enforcement order, it will not be blind to evidence that 

compliance is now factually impossible. Where compliance is impossible, neither the 

moving party nor the court has any reason to proceed with the civil contempt action. It is 

settled, however, that in raising this defense, the defendant has a burden of production. 

McPhaul v. United States, 364 U.S. 372, 379, 81 S.Ct. 138, 142, 5 L.Ed.2d 136 (1960); 

Maggio v. Zeitz, 333 U.S., at 75-76, 68 S.Ct., at 411-412; Oriel v. Russell, 278 U.S., at 

366, 49 S.Ct., at 175. See also United States v. Fleischman, 339 U.S., at 362-363, 70 

S.Ct., at 746. Thus while Rylander could not attack the enforcement order on the ground 

that he lacked possession or control of the records at the time the order was issued, he 

could defend the contempt charge on the ground that he was then unable to comply 

because he lacked possession or control.” Id.

 Here, the focus on ability to comply with the Asset Freeze must be as of the date that the 

motion brought by the Commission alleges non-compliance, i.e. August 10, 2009. There are no 

other allegations made of continuing or non-compliance with the Court’s Asset Freeze. The 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 12 of 33
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Commission’s motion asserts a one-time, isolated event where Mr. Bravata requested a $37,000 

loan against two of the life insurance policies maintained on his life with New York Life, his 

regular life insurance carrier. 

Mr. Bravata secured the Life Insurance Loan at a time, and under circumstances that were 

extremely dire in terms of the needs of his family. The ONLY possible source of any dollars for 

his family’s needs at that time was his ability to obtain an asset from his life insurance policies 

that relates so far back in time that he rightfully concluded that the loan value on the life policies 

had substantially accrued long before the commencement of any offering of securities by BBC—

resulting in the real likelihood that the $37,000 loan value he accessed following his August 10, 

2009 loan request was not and is not subject to the Court’s Asset Freeze. Attached hereto and 

incorporated by reference as Exhibit “C

Mr. Bravata’s actions on August 10, 2009 were driven by three critical facts that he 

contends are not subject to dispute. Those facts are: 

” is a compendium of receipts, credit card charges, 

evidence of cash expenditures and obligations that Mr. Bravata applied to in using the Life 

Insurance Loan proceeds. It is evident that the proceeds of the loan were used for the very fabric 

of his family’s subsistence and necessities, the relocation of his family household and 

maintenance of life insurance on his elderly mother. 

 That his family’s basic needs and daily necessities were not being met and could not be 

met absent obtaining the Life Insurance Loan;5

 

5

 It is well settled that this Court has authority to freeze personal assets temporarily and the corollary 

authority to release frozen personal assets, or lower the amount frozen. S.E.C. v. Unifund SAL, 917 F.2d 

98 (2d Cir.1990); S.E.C. v. American Bd. Of Trade, Inc., 830 F.2d 431, 438 (2d Cir.1987), S.E.C. v. 

Manor Nursing Centers, Inc., 458 F.2d 1082 (2d Cir.1972). While the primary purpose of freezing assets 

is to facilitate compensation of defrauded investors in the event a violation is established at trial, "the 

disadvantages and possible deleterious effect of a freeze must be weighed against the considerations 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 13 of 33
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 That the portion of the loan value of the oldest life insurance policies owned by Mr. 

Bravata that he accessed from New York Life could be withdrawn on a “FIFO” first-infirst out basis and did not impinge any accrued value of the life policies generated by 

premium payments during the time that BBC conducted its offering; and

 The admitted position stated by the Commission verbally on August 4, 2009 and in 

writing on August 13, 2009, to the effect that the Commission does not dispute that assets 

not causally connected to any BBC offering proceeds were not subject to the restrictions 

of the Asset Freeze. Exhibit “D” hereto represents a lengthy email received from the 

Commission by Mr. Bravata’s counsel that was distributed to Mr. Bravata. Although the 

email post-dates the Life Insurance Loan—the email only verifies the Commission’s 

position discussed with all counsel during a meet and confer session on August 4, 2009. 

Although Mr. Bravata acknowledges the existence of the Court’s Asset Freeze dated July 

27, 2009, and as subsequently continued on August 4, 2009, the realistic impact of the Asset 

Freeze on he and his family went so far beyond preservation of the status quo, that the Asset 

Freeze was and remains to be a de facto “taking” of his property that pre-dated the BBC offering 

period without adequate due process or consideration for the deleterious effects of the Asset 

Freeze order as inappropriately secured by the Commission in this case on July 27, 2009. 

Although “two wrongs don’t make a right” could be apropos with respect to the manner in which 

the Commission secured the Asset Freeze and Mr. Bravata’s need to obtain financing for his 

 

indicating the need for such relief." Manor Nursing Centers, 458 F.2d at 1105. S.E.C. v. Duclaud 

Gonzalez De Castilla, 170 F.Supp.2d 427 (S.D.N.Y., 2001). It has been the contention throughout this 

case thus far that the deleterious effects of the freeze order as inappropriately secured by the Commission 

in this case on July 27, 2009 has not been sufficiently weighed against the Commission’s primary purpose 

of requesting the ex-parte freeze order. For example, as will be shown at the evidentiary hearing 

scheduled in this case, the Commission was well aware of the fact that BBC had discontinued offering 

and selling any securities; that the MOFIR had issued a Cease and Desist Order months prior to the 

Commission filing suite in this case; and that any other activities being conducted by the Defendants 

after the date of the Cease and Desist Order, were being conducted solely on the advice of and with the 

explicit guidance of competent securities counsel then representing BBC and BFG. There simply was no 

emergency on July 26-27, 2009. 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 14 of 33
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family’s needs secondarily, the fact remains that Mr. Bravata placed his family over his own 

security, recognizing that he would likely be compelled to explain or show cause for his actions. 

Since July 27, 2009, Mr. Bravata has had no access to any source of ready income, liquid assets 

for food, utilities, school supplies and expenses for this two children, clothing, gasoline, no 

ability to keep insurance on his life, home, cars or any other property current and in effect. Mr. 

Bravata has had no means to maintain health care coverage for he and his family, no means to 

pay for any sort of health care needed for his wife and children, nor has Mr. Bravata had any 

ability to compensate his legal counsel since the inception of this case.6

In the face of the Commission’s actions clearly designed to destroy Mr. Bravata, as well 

as the remaining Defendants, by its clandestine maneuvers in obtaining a draconian, ex-parte

In the short time since 

the Asset Freeze was entered, the Bravata family home has gone to a “Sheriff Sale,” and the 

family has been forced to relocate out-of-state, primarily so Mr. Bravata can begin reconstructing 

his employment opportunities outside of the negative impact of weekly press accounts of the 

Commission’s allegations that he masterminded a $53.0 million dollar Ponzi scheme. Mr. 

Bravata has lost two vehicles for non-payment and will lose two more vehicles for non-payment 

shortly. A life insurance policy purchased on Mrs. Bravata’s father’s life has lapsed and cannot 

be reinstated, resulting in a total loss of any cash surrender or loan value in that policy. 

 

6

 Based upon the facts available to Mr. Bravata, it would appear that all other counsel involved in this 

case have been and will continue to be compensated for their representation and expertise needed by their 

respective clients, including the Commission’s counsel. The two exceptions appear to be counsel for the 

Bravata Defendants and counsel for BBC and BFG—five of the six defendants accused of wrongdoing in 

the Commission’s Complaint. Although the Bravata Defendants have requested “carve outs” from the 

Asset Freeze that include some basic living expenses and a reasonable sum to enable them to retain 

competent securities counsel, those requests have been vigorously contested by the Commission and 

denied by the Court. “Death by a thousand cuts is death nonetheless.” 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 15 of 33
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emergency Asset Freeze in this case, Mr. Bravata when faced with the prospect of his family’s 

basic needs going unmet—elected to access perhaps the only remaining pre-BBC offering asset 

not clearly subject to the Asset Freeze and, at the same time, based his actions in part upon the 

Commission’s own oral and written statements that his pre-offering assets would not come 

within the purview of the Asset Freeze since the Life Insurance Loan amount is not causally 

connected to the alleged unlawful BBC offering. 

IV. The Entry of the Ex-Parte Asset Freeze Constituted an Impermissible 

Deprivation of Mr. Bravata’s Fourth and Fourteenth Amendment Rights 

A. The Commission’s Actions in Obtaining the Asset Freeze Order Were Violative 

of Mr. Bravata’s Due Process Rights Ab Initio

In Thomas v. Cohen, 304 F.3d 563; 2002 U.S. App. LEXIS 17528; 2002 FED App. 

0287P (6th Cir.), rehearing, en banc, denied by Thomas v. Cohen, 2002 U.S. App. LEXIS 25522 

(6th Cir., Dec. 3, 2002), U.S. Supreme Court certiorari denied by Cohen v. Thomas, 538 U.S. 

1032, 123 S. Ct. 2075, 155 L. Ed. 2d 1061, 2003 U.S. LEXIS 3710 (2003), the Sixth Circuit 

Court of Appeals made it clear that, the impact of asset freezes implicate fundamental 

constitutional rights. As a general proposition, the court in Thomas stated:

“The Fourth Amendment, made applicable to the States by the Fourteenth Amendment, 

provides in pertinent part that the "right of the people to be secure in their persons, 

houses, papers, and effects, against unreasonable searches and seizures, shall not be 

violated . . . ." U.S. Const. amend. IV. This right applies with equal force in both the civil 

and criminal contexts. (emphasis added) Camara v. Mun. Court of San Francisco, 387 

U.S. 523, 539, 18 L. Ed. 2d 930, 87 S. Ct. 1727 (1967). [**14] In United States v. 

Jacobsen, 466 U.S. 109, 113, 80 L. Ed. 2d 85, 104 S. Ct. 1652 (1984), the Supreme Court 

explained that the first clause of the Fourth Amendment "protects two types of 

expectations, one involving searches, the other seizures." According to Jacobsen, a search 

occurs when an expectation of privacy that society is prepared to consider is infringed, 

whereas a seizure of property occurs when "there is some meaningful interference with 

an individual's possessory interests in that property." Id. In Jacobsen, the Court further 

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explained: "While the concept of a 'seizure' of property is not much discussed in our 

cases, this [*570] definition follows from our oft-repeated definition of the 'seizure' of a 

person within the meaning of the Fourth Amendment -- meaningful interference, however 

brief, with an individual's freedom of movement." Id. at 114 n 5. This expansive 

definition is necessary because a seizure threatens an individual's distinct interest in 

retaining possession of his or her property. See Texas v. Brown, 460 U.S. 730, 747-48, 75 

L. Ed. 2d 502, 103 S. Ct. 1535 (1983) (Stevens, J., concurring).” 

Salmo v. U.S., 2006 U.S. Dist. LEXIS 75195 (East. Dist. Mi.—S. Div.) was a case 

brought in this Court which in relevant part, addressed the interplay between the effect of asset 

freeze orders interwoven by fundamental constitutional rights afforded to any civil or criminal 

litigant. In Salmo, the court concurred with the over arching notion espoused in Soldal v. Cook 

County, 506 U.S. 56, 61 (1992) where the Supreme Court wrote: "A 'seizure' of property, we 

have explained, occurs when 'there is some meaningful interference with an individual's 

possessory interests in that property.'" (quoting United States v. Jacobsen, 466 U.S. 109, 113, 

104 S.Ct. 1652, 1656, 80 L.Ed.2d 85 (1984).) As the Sixth Circuit noted in Thomas v. Cohen, 

304 F.3d 563, 572 (6th Cir. 2002): "Simply put, Soldal does not require that the 'meaningful 

interference' by governmental agents actually involve the physical seizure of the property in 

question." In Salmo, id., the interference with Mr. Salmo's possessory interest in the contents of 

his frozen bank accounts was surely "meaningful," since those contents were, by virtue of the 

asset freeze, placed wholly beyond his reach. 

The Salmo, id., court examined the impact of an asset freeze arising in the context of an 

ex-parte order entered in Colello v. S.E.C., 908 F. Supp. 738, 753 (C. D. Cal. 1995), where a 

Swiss asset freeze initiated in aid of an SEC civil enforcement action was deemed to be a Fourth 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 17 of 33
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Amendment Seizure, citing Soldal, supra).7

That same day, the Commission applied ex parte for a “Temporary Restraining Order, 

Temporary Orders: (1) Prohibiting the Transfer of Assets and Destruction of Documents; (2) 

Freezing Assets; (3) Appointing a Receiver; and (4) For an Accounting, Order to Show Cause 

Why a Preliminary Injunction Should Not be Granted and the Temporary Orders Should Not Be 

Continued, and Request for Waiver of Notice Pursuant to Local Rule 7.18.2.” The Commission 

submitted three volumes of exhibits supporting its applications for ex-parte relief. 

The Colello case, although involving the court’s 

interpretation of an international treaty between the United States and Switzerland, is factually 

analogous to the proceedings that have occurred to date in this case. In Colello, the Commission 

filed its complaint for a temporary restraining order, preliminary and permanent injunctions, 

appointment of a receiver, and other equitable and legal relief against several defendants, 

including name defendant, Michael J. Colello. 

Judge Hatter, the District Judge assigned to the case, entered an order granting the SEC's 

Ex Parte TRO Application on June 23, 1994, appointing a temporary receiver. The court granted 

a preliminary injunction with respect to two of the defendants that same date. A preliminary 

injunction hearing was set for July 5, 1994. 

 

7 See Soldal v. Cook County, 506 U.S. 56, 69 (1992) (holding that the Fourth Amendment's standard of 

"reasonableness" applies to any seizure by the government in any context); cf. Colello v. SEC, 908 F. 

Supp. 738, 752-55 (C.D. Cal. 1995) (ruling that an asset freeze by Swiss authorities at the request of the 

Department of Justice and the SEC violated the Fourth Amendment in that a treaty allowed seizure based 

on reasonable suspicion rather than probable cause), aff'd, 139 F.3d 674 (9th Cir. 1998); OKC Corp. v. 

Williams, 461 F. Supp. 540, 551 (N.D. Tex. 1978) (stating that if the SEC "knew or should have known at 

the time of the seizure's occurrence" that the informant was conducting a private party search, then the 

SEC violated Fourth Amendment rights). 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 18 of 33
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The court in Colello ultimately ruled that the defendants in the case brought by the 

Commission had their Fifth Amendment rights to due process and their Fourth Amendment right 

to be protected from unreasonable seizures, violated by the asset freeze of their Swiss assets.8

In a line of Due Process cases, the U.S. Supreme Court has employed a similar test for 

whether property is "seized." In North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601 

(1975), the Court sustained a Due Process challenge to a Georgia garnishment statute under 

which the debtor's "sizable bank account was frozen" pursuant to the challenged writ. Id., at 607. 

The result, the court noted, was that "[u]pon service of the writ, the debtor is deprived of the use 

of the property in the hands of the garnishee." Relying on its earlier decision in Fuentes v. 

Shevin, 407 U.S. 67 (1972), the court held that the debtor's Due Process rights were violated by 

the procedure, and the court's discussion of that case, and its impact on the issue there, make it 

perfectly clear that it considered this kind of temporary sequestration a "seizure" for Due Process 

purposes: 

“There the Court held invalid the Florida and Pennsylvania replevin statutes which 

permitted a secured installment seller to repossess the goods sold, without notice or 

hearing and without judicial order or supervision, but with the help of the sheriff 

operating under a writ issued by the clerk of the court at the behest of the seller. That the 

debtor was deprived of only the use and possession of the property, and perhaps only 

temporarily, did not put the seizure beyond scrutiny under the Due Process Clause. "The 

Fourteenth Amendment draws no bright lines around three-day, 10-day, or 50-day 

 8 Colello and the other plaintiffs in the case argued that the Swiss asset freeze obtained by the 

Commission through a cooperative effort by the U.S. Department of Justice, constituted a “seizure” 

within the meaning of the Fourth Amendment, and that the Government’s failure to obtain a warrant 

renders the asset freeze “per se unreasonable.” Both the Commission and Justice agreed that the asset 

freeze was in fact a “seizure.” The Government argued, however, that the seizure was reasonable and 

therefore not a violation of the Fourth Amendment. 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 19 of 33
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deprivations of property. Any significant taking of property by the State is within the 

purview of the Due Process Clause." Id., at 86, 92 S.Ct., at 1997. 

Thus, from either a Fourth Amendment or Due Process perspective, the "freezing" of Mr. 

Bravata’s assets must be considered a "seizure" and therefore subject to the strictures of the 

Fourth and Fourteenth Amendments. For the reasons previously set forth, the Commission’s

failure to comply with those strictures requires careful scrutiny by this Court, including the 

scrutiny given at this stage of the proceeding wherein the Commission seeks to hold Mr. Bravata 

in contempt of this Court’s Asset Freeze. 

B. The Commission’s Actions in Obtaining the Asset Freeze Violated Fed. R. Civ. 

Pro. 65(b)(1)(B) and Michigan Rules of Professional Conduct 3.3(d)

In the process of obtaining emergency, ex-party orders that constitute a “seizure” of a 

person’s property, unreasonably maintaining the propriety of the seizure while at the same time 

badgering third-party witnesses in hopes of obtaining sworn affidavits or declarations to support 

the Commission’s allegations of unlawful conduct on a post-hoc basis, the Commission now 

seeks to punish Mr. Bravata for his conduct asserted to have violated the Asset Freeze. The 

validity of the initial entry of the Asset Freeze, the broad scope of the Asset Freeze and the 

Commission’s relentless efforts to bring Mr. Bravata to his financial knees—is occurring during 

a time when the Commission refuses to acknowledge that its investigation conducted prior to 

instituting suite in this case resulted in its actual awareness that: (i) the Defendants expressly 

disclosed in writing to BBC investors all material facts with respect to BBC such that the alleged 

“Ponzi” scheme could not be actionable as alleged in the Commission’s Complaint; (ii) that BBC 

at all relevant times followed the professional, legal securities advice and guidance of more than 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 20 of 33
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one recognized securities counsel in the conduct of the BBC offering; and (iii) the Commission 

had actual knowledge that BBC was NOT conducting further offerings of its securities since the 

date of entry of the MOFIR Cease and Desist Order (March 30, 2009). Yet, in the face of this 

information; having worked “hand-in-glove” with BBC’s outside counsel, Butzel Long, for 

months prior to filing its Complaint; and notwithstanding Butzel Long’s repeated requests to 

meet with the enforcement staff of the Commission assigned to the BBC inquiry, the 

Commission managed to create an emergency at the time its Complaint was filed and managed 

to secure dubious ex-parte relief in this case. Even more questionable is the undisputed fact that 

the Commission conducted substantive meetings on May 14, 2009 with lawyers from Butzel 

Long, in Chicago, Illinois (at Butzel Long’s request) for the purpose of understanding precisely 

what proactive or remedial measures were being undertaken by the Defendants in light of the 

MOFIR and Commission inquiries and to make sure the Commission understood that BBC was 

instituting curative measures with respect to the Commission’s concerns. 

At the May 14, 2009 meeting with the Commission, Butzel Long reviewed a 

comprehensive 60-page power point presentation with the Commission enforcement staff 

outlining these measures and representing to the enforcement staff the cessation of BBC’s 

offering programs. Attached hereto as Exhibit “E” is a redacted copy of the May 14, 2009 

presentation, which surely evidences that there in deed was no emergency or need for the 

Commission to represent in its July 26, 2009 filing that irreparable loss or damage would occur 

in the event that emergency, ex-parte relief was not entered as suggested by the Commission. 

These material defects in the Commission’s actions should be seriously examined and 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 21 of 33
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scrutinized by this Court in the context of Mr. Bravata’s response to the Court’s Order to Show 

Cause and certainly, at a minimum, at the coming evidentiary hearing in this case.9

It can hardly be disputed that the Commission enforcement staff violated two key 

procedural requirements at the time that it requested and obtained the Asset Freeze it now seeks 

to punish Mr. Bravata for violating. First, the Commission did not comply with Fed. R. Civ. Pro. 

65(b)(1)(B) and on that basis alone, the Asset Freeze was improvidently entered. Secondly, and 

no less relevant, the Commission enforcement staff failed to comply in any respect with 

Michigan Rules of Professional Conduct 3.3(d). Neither of these two requirements are “mere 

technicalities.” Both of these requirements are in place to offer some level of Due Process 

protection to defendants in civil actions that do not even yet know they are defendants; nor yet 

do they have any awareness that ALL of their assets and many of their rights as U.S. citizens are 

about to be frozen in time and taken away merely on the basis of the Commission’s allegations—

none of which have yet been tested by the adversarial process. 

 Following 

the May 14, 2009 meeting with the Commission enforcement staff, Butzel Long provided 

additional substantive responses to the Commission’s follow up questions in the form of a 

detailed 13-page letter dated May 29, 2009 (FOIA Confidential Treatment of this letter was 

requested).

 

9 The Commission makes it clear that it does not wish to have its investigation or its investigators 

scrutinized. A Motion for Protective Order to Preclude Bravata Defendants from Calling Plaintiff’s Trial 

Counsel as Witness at Preliminary Injunctive Hearing and For Other Relief was filed by the Commission 

on September 15, 2009 [Doc. No. 65] seeking two forms of specific relief. First, the Commission does not 

want to permit the Bravata Defendants to question one of its enforcement staff on the facts giving rise to 

the entry of the emergency, ex-parte relief granted in this case; nor does the Commission want to permit 

the Bravata Defendants to be able to present several affirmative defenses outlined in their Answer and 

Affirmative Defenses [Doc 52]. 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 22 of 33
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(i) Non-compliance with Fed. R. Civ. Pro. 65(b)(1)(B) 

The Rule authorizes the issuance of a temporary restraining order (“TRO”) without notice 

to the adverse party in certain limited circumstances. An ex parte TRO may only be granted 

under Rule 65(b)(1) if: 

(A) specific facts in an affidavit or a verified complaint clearly show that 

immediate and irreparable injury, loss, or damage will result to the movant before 

the adverse party can be heard in opposition; and

(B) the movant's attorney certifies in writing any efforts made to give notice and 

the reasons why it should not be required. 

 

The Commission’s Complaint [Doc. No. 1] is not verified, nor are the allegations in the 

Complaint supported by separate affidavit. The Commission’s Motion for Emergency Motion for 

a Temporary Restraining Order, Asset Freeze, and Other Ancillary Relief and Brief in Support 

[Doc. No. 4] (“Motion for TRO”) filed on July 26, 2009 is not verified. The only document filed 

by the Commission on July 26-27, 2009 in support of its Motion for TRO is the Declaration of 

Luz Aguilar [Doc. No. 9], attached to the Commission’s Motion for TRO as Exhibit “A.” There 

is no other form of compliance by the Commission with Rule 65(b)(1)(A) or (B). In fact, the 

Commission admits that there has been no compliance with Rule 65(b)(1)(B). To the best of Mr. 

Bravata’s knowledge, the Commission did not reveal or indicate to the Court prior to the entry of 

the TRO at 5:17 p.m., July 27, 2009 that any of the Defendants were represented by counsel even 

though the Commission’s enforcement staff had actual knowledge of such for several months. 

Under this circumstance alone, compliance with Rule 65(b)(1)(B) is even more relevant so the 

Court could have been aware of the existence of Defendants’ counsel at a very critical stage of 

the proceedings commenced the day before on Sunday, July 26, 2009. 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 23 of 33
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In United States v. Mercy Reg'l Health Sys., 2008 U.S. Dist. LEXIS 18520 (S.D. Ill., Mar. 

11, 2008), without reaching the Government's arguments as to whether an ex-parte TRO should 

be granted under Rule 65(b)(1)(A), the court noted that the movant's attorney had not certified in 

writing any efforts made to give notice or reasons why notice to the opposing party should not be 

required as is necessary under Rule 65(b)(1)(B). The court denied the Government’s request for 

an ex parte TRO, commenting that if and when the Rule 65(b)(1)(B) certification is filed, the 

court would consider the supplemental filing as a motion to reconsider. 

Similarly, in Conroy v. Avalos, et al., 2008 U.S. Dist. LEXIS 25277 the court ruled that 

“Petitioner has not certified "in writing any efforts made to give notice and the reasons why it 

should not be required." Fed. R. Civ. P. 65(b)(1)(B). Because the Motion for Temporary 

Restraining Order fails to comply with Rule 65(b)(1)(B), the Court, in its discretion, will deny 

the Motion.” See American Can Co. v. Mansukhani, 742 F.2d 314, 321 (7th Cir. 1984) (district 

court abused its discretion in granting ex parte temporary restraining order "when there was no 

valid reason for proceeding ex parte and by disregarding the strict procedural requirements of 

Fed. R. Civ. P. 65(b) for the issuance of such ex parte orders"); see also Adobe Systems, Inc. v. 

South Sun Products, Inc., 187 F.R.D. 636 (S.D. Cal. 1999). 

Not only did the Commission fail to comply with Rule 65(b)(1)(B), the Declaration of 

Luz Aguilar, an accountant with the Commission since 1991, is facially defective and fails to 

comply with the requirements for affidavits generally accepted by Federal courts under the 

Federal Rules of Civil Procedure, specifically Rule 56(e), which outlines the form and content of 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 24 of 33
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sworn affidavits or declarations in support or opposition to motions for summary judgment.10

 

10 Under Fed.R.Civ.P. 56(e), an affidavit submitted in support of or in opposition to a motion for 

summary judgment "shall set forth such facts as would be admissible in evidence." It is therefore wellestablished that a "hearsay affidavit is a nullity on a motion for summary judgment."

In 

fact, the evidentiary standards for consideration of affidavits or declarations in an ex-parte

proceeding should be held to a more exacting standard of admissibility compared to the 

adversarial environment of affidavits filed in support or opposition to motions for summary 

judgment. The Declaration of Luz Aguilar states nothing more than “Based upon my review of 

the information discussed in paragraph 3 above, I am informed and believe and, therefore, state 

the information set forth below” [Doc No. 9, ¶ 6]. Almost without exception, the following 78 

paragraphs of the Declaration of Luz Aguilar establish nothing more than the declarant’s review 

of a specific document and then the declarant asserts a statement of fact SHE believes to be true 

under penalty of perjury. The problem is that the only statement of fact contained in the 

paragraphs of the Declaration are that a given document was reviewed. The remainder of each 

paragraph of the Declaration recites Ms. Aguilar’s conclusion or interpretation of what the 

document she reviewed means, at least to her. None of these purported factual statements have 

been subject to cross-examination or scrutiny at any point in this proceeding. Instead, the 

Schwimmer v. Sony 

Corp. Of Am., 637 F.2d 41, 45 & n. 9 (2d Cir.1980); Amnesty America v. Town of West Hartford, 361 

F.3d 113, 131 & n. 12 (2d Cir.2004) (district court deciding summary judgment motion was required to 

disregard hearsay in affidavits because it would be inadmissible at trial). Dora Homes, Inc. v. Epperson, 

344 F.Supp.2d 875 (E.D.N.Y., 2004) Under Rule 56(e), supporting affidavits must "set forth facts as 

would be admissible in evidence," language that has been interpreted by the Sixth Circuit to require that 

hearsay evidence in affidavits must be stricken. Wiley v. U.S., 20 F.3d 222, 226 (6th Cir.1994) 

("[H]earsay evidence cannot be considered on a motion for summary judgment.") Hearsay is an out of 

court statement offered for the truth of the matter asserted. Fed.R.Evid. 801(c). An out of court statement 

offered to serve some other purpose is not hearsay and may be considered by the trier of fact. See Browne 

v. Signal Mountain Nursery, L.P., 286 F.Supp.2d 904, 924 (E.D.Tenn. 2003). 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 25 of 33
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Commission uses the Declaration of Luz Aguilar as its apparent compliance with Rule 

65(b)(1)(A). 

Focusing on only two of the 84 paragraphs of the Declaration of Luz Aguilar establishes 

the harm in the Commission’s presentment of the Declaration as its compliance with Rule 

65(b)(1)(A). Paragraph 16 of the Declaration recites that Ms. Aguilar received and reviewed 

BBC’s private placement memoranda dated February 6, 2007 and April 17, 2008 and that each 

of those documents is attached to the Declaration as Exhibits (A)16 and (A)17. Nowhere in the 

Commission’s Complaint, or its Motion for TRO or any papers offered in support of the Motion 

for TRO does the Commission or Ms. Aguilar notate that BBC vividly, and on multiple 

occasions, disclosed in the private placement memoranda that BBC reserved the right to apply 

proceeds of the offering of BBC membership units to pay distributions due to other investors that 

purchased BBC membership units. Since the first sentence of the Commission’s Complaint and 

its Motion for TRO boldly asserts that “Plaintiff, the U.S. Securities and Exchange Commission 

(“SEC”), respectfully files this emergency motion to shut down an ongoing offering fraud and 

Ponzi scheme involving $50 million and at least 440 investors,” it would seem that the 

Commission could have at least in passing pointed out to the Court that BBC’s private placement 

memoranda attached as Exhibits (A)16 and (A)17 to the Commission’s Motion for TRO 

(approximately 100 pages of nearly 1,000 pages of exhibits), made numerous disclosures to BBC 

investors of a variety of material facts negating the prospect that the Defendants were 

masterminds of a Ponzi scheme. For further emphasis, attached hereto as Exhibit “F” are select 

pages taken from both private placement memoranda attached to the Commission’s Motion for 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 26 of 33
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TRO as Exhibit A(16) and A(17). These pages vividly disclose how and under what 

circumstances BBC was able to use the proceeds of the BBC offerings—including the payment 

of distributions and/or redemptions to earlier investors in the event that sufficient revenue had 

not yet been generated by BBC in the early stages of its real estate portfolio. Knowing that these 

material disclosures were buried hundreds of pages deep in thousands of pages of exhibits filed 

in support of its request for ex-parte relief, the Commission still splashed and sprinkled 

throughout its Complaint and Motion for TRO that the Defendants masterminded a $50.0 million 

Ponzi scheme. For this reason alone, the Asset Freeze was entered based upon a lack of material 

disclosures to the Court by the Commission. 

The Commission asserts in one single paragraph of its Complaint [Doc. No. 1, ¶ 55], that 

emergency, ex-parte relief is necessary based on the Commission’s belief that Defendants 

contemplate an offering of securities by an affiliated company, Phoenix Venture Capital, LLC 

(“Phoenix”). The Commission’s Motion for TRO [Doc. No. 4 at 11-12] also mentions Phoenix in 

passing, but there are no allegations that Phoenix or Defendants’ actions with regard to Phoenix 

is any anyway violative of any Federal securities laws. At most, the Commission asserts in 

unsupported fashion that Messrs. Trabulsy and Bravata “hatched a scheme.” Perhaps in line with 

the entire history of this case, Butzel Long provided the Commission enforcement staff with all 

offering documents associated with Phoenix, which fully discloses the State of Michigan and 

Commission inquiries involving the Defendants. Moreover, these offering materials were 

developed with the advice and guidance of Butzel Long and on their face appear to be fully 

compliant with offering exemptions afforded by Rule 506 of Regulation D promulgated under 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 27 of 33
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the Securities Act of 1933. This is the contrived basis for the Commission’s emergency, but 

allegations of wrongdoing or securities law violations by Phoenix are conspicuously absent from 

the Commission’s emergency, ex-parte papers. Even the Declaration of Luz Aguilar refers to 

Phoenix only in passing and includes nothing but speculation on the part of the declarant as it 

relates to Phoenix (See Declaration of Luz Aguilar, ¶¶ 76-77). Even though Ms. Aguilar 

declares that she reviewed the Phoenix documentation, she fails to attach copies of the offering 

materials developed by Phoenix with the guidance of Butzel Long—ostensibly due to the fact 

that the offering materials are well prepared, on their face include all material representations 

ordinarily and customarily given to prospective accredited investors in a Regulation D, Rule 506 

offering and is further indicia of the Commission’s unwillingness to provide exculpatory 

materials to the Court during its solicitation of emergency, ex-parte relief.11

(ii) Non-compliance with MRPC 3.3(d)12

To compound the Commission’s non-compliance with explicit procedural rules contained 

in Rule 65(b)(1)(A) and (B), the Commission had no regard for the requirements of Michigan 

Rule of Professional Conduct, 3.3(d), which is fairly clear. 

 

11 So the Court can examine the Phoenix offering materials claimed by the Commission to give rise to the 

emergency of July 26-27, 2009, a complete copy of the Private Placement Memorandum (without 

attachments) is attached hereto as Exhibit “G.” 

12 The Commission’s Enforcement Manual (October 6, 2008) provides that: Attorney Responsibility 

(under the OGE Standards of Ethical Conduct for Employees of the Executive Branch, the Rules of 

Professional Responsibility of the state in which the attorney is licensed to practice law, and the Rules of 

Professional Responsibility of the state in which the attorney is appearing on behalf of the Commission 

before a tribunal or otherwise engaging in such other behavior as may be considered the practice of law 

under that state bar’s ethical and disciplinary rules. (See § 1.4.4 of Enforcement Manual). Local Rule 

83.20 also mandates that all attorneys practicing before this Court consent to be bound by the Rules of 

Professional Conduct adopted by the Michigan Supreme Court.

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 28 of 33
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Rule 3.3 Candor Toward the Tribunal.

(d) In an ex parte proceeding, a lawyer shall inform the tribunal of all material facts that 

are known to the lawyer and that will enable the tribunal to make an informed decision, 

whether or not the facts are adverse.

 The Comment following Rule 3.3(d) is even more clear: 

Ex Parte Proceedings

Ordinarily, an advocate has the limited responsibility of presenting one side of the matter 

that a tribunal should consider in reaching a decision; the conflicting position is expected 

to be presented by the opposing party. However, in an ex parte proceeding, such as an 

application for a temporary restraining order, there is no balance of presentation by 

opposing advocates. The object of an ex parte proceeding is nevertheless to yield a 

substantially just result. The judge has an affirmative responsibility to accord the absent 

party just consideration. The lawyer for the represented party has the correlative duty to 

make disclosures of material facts that are known to the lawyer and that the lawyer 

reasonably believes are necessary to an informed decision.

Shah v. City of Farmington Hills , 2005 Mich. App. LEXIS 1024 (Mich. Ct. App. Apr. 

26, 2005)—reversed on appeal on other grounds at 278 Mich. App. 95, 748 N.W.2d 592, 2008 

Mich. App. LEXIS 380 (2008) addressed the application of Rule 3.3(d) in the setting of 

obtaining ex-parte relief. Relying upon Matley v Matley (On Remand), 242 Mich. App. 100, 101; 

617 N.W.2d 718 (2000) in the context of whether or not a court can be misled by counsel failing 

to disclose certain material information in an adversary proceeding where both parties are 

represented by counsel, the court agreed that in an ex-parte proceedings, the professional 

responsibility of one party’s counsel is far different. In both Matley and Shah, supra, the 

Michigan Court of Appeals intimated rather strongly that:

“We find . . . support for this conclusion in the Michigan Rules of Professional Conduct. 

Michigan Rule of Professional Conduct 3.3(d) provides that "[i]n an ex parte proceeding, 

a lawyer shall inform the tribunal of all material facts that are known to the lawyer and 

that will enable the tribunal to make an informed decision, whether or not the facts are 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 29 of 33
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adverse." (Emphasis added.) The comment following MRPC 3.3 addresses the difference 

between an advocate's duty during an ex parte proceeding and during an adversary 

proceeding, explaining that an advocate normally "has the limited responsibility of 

presenting one side of the matters that a tribunal should consider in reaching a decision; 

the conflicting position is expected to be presented by the opposing party." It is only 

during an ex parte proceeding that the lawyer for the represented party has a duty "to 

make disclosures of material facts that are known to the lawyer and that the lawyer 

reasonably believes are necessary to an informed decision." See Comment following 

MRPC 3.3. If an advocate generally has the responsibility to present only one side of the 

matters at issue, then a party cannot commit fraud on the court by failing to disclose to 

the court facts that are adverse to his position where the facts are known by the opposing 

party.” 

V. Conclusory Remarks 

This case is just short of being eight weeks old and has consumed much of the Court’s 

time thus far. Mr. Bravata’s actions in obtaining the Life Insurance Loan were not purposely or 

cavalierly intended to be contemptuous of the Court’s Asset Freeze. Faced with no choices or no 

“good choices,” Mr. Bravata followed his best judgment by reaching back for his only liquid 

asset that he believed in good faith should be deemed to be outside of the scope of the Asset 

Freeze for the reasons enunciated above. Aside from explaining Mr. Bravata’s actions in 

obtaining the Life Insurance Loan, we also believe that the manner in which the Commission 

obtained the Asset Freeze initially was fundamentally unfair and violative of the Defendants’ 

Due Process and procedural rights in this case. This conclusion, should the Court concur, should 

be a factor to be taken into consideration in adjudicating the Commission’s Motion for Order to 

Show Cause. 

Dated this 24th day of September, 2009. 

Respectfully Submitted, 

 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 30 of 33
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 By: 

 Law Office of Gregory Bartko, LLC 

/s/ Gregory Bartko, Esq.

Gregory Bartko, Esq. 

Michigan Bar No. P30052 

Counsel for Bravata Defendants 

3475 Lenox Road, Suite 400 

Atlanta, GA 30326 

Telephone: (404) 238-0550 

Facsimile: (866) 342-4092 

gbartko@securitieslawcounsel.com

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 31 of 33
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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

U.S. SECURITIES AND EXCHANGE 

COMMISSION,

 

v. 

 Plaintiff,

JOHN J. BRAVATA, RICHARD J. 

TRABULSY, ANTONIO BRAVATA, 

BBC EQUITIES, LLC AND BRAVATA 

FINANCIAL GROUP, LLC 

 Defendants,

and 

SHARI A. BRAVATA,

 Relief Defendant.

)

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

CIVIL ACTION NO.: 2:09-cv-12950-

DML-VMM

 

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing RESPONSE TO 

ORDER TO SHOW CAUSE ON BEHALF OF THE DEFENDANT, JOHN J. BRAVATA

was filed electronically this 24th day of September, 2009 with the Clerk of the Court using 

CM/ECF. I also certify that the foregoing document is being served this day on all counsel of 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 32 of 33
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record and any pro se parties identified on the attached Service List via e-mail and U.S. mail, 

either via transmission of Notices of Electronic Filing generated by CM/ECF or via U.S. mail to 

those parties that have formally appeared of record but are who are not authorized to receive 

electronic Notices of Electronic Filing.

 Respectfully Submitted,

 

By: /s/ Gregory Bartko, Esq.

 Law Office of Gregory Bartko, LLC

Gregory Bartko, Esq. 

Counsel for Bravata Defendants 

3475 Lenox Road, Suite 400 

Atlanta, GA 30326 

Telephone: (404) 238-0550 

Case 2:09-cv-12950-DML-VMM Document 70 Filed 09/24/2009 Page 33 of 33