perkins v. haines - reply brief
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UNITED STATES COURT OF APPEALSFOR THE ELEVENTH CIRCUIT
_____________________________________________________________
NO. 10-10683-BB
_________________________________________
WILLIAM F. PERKINS, PLAN TRUSTEE FOR INTERNATIONALMANAGEMENT ASSOCIATES, LLC
Appellant,
v.
AENA Y. HAINES, ET AL
Appellees._________________________________________
ON DIRECT APPEAL FROM THE UNITED STATES BANKRUPTCY COURTFOR THE NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION___________________________________________________________
REPLY BRIEF OF APPELLANT WILLIAM F. PERKINS, PLAN TRUSTEE
FOR INTERNATIONAL MANAGEMENT ASSOCIATES, LLC
____________________________________________________________
Colin M. BernardinoGeorgia Bar No. 054879KILPATRICK STOCKTON, LLP1100 Peachtree Street, Suite 2800Atlanta, Georgia 30309Tel: (404) 815-6500Fax: (404) 815-6555
Mark S. KaufmanGeorgia Bar No. 409194Bryan E. BatesGeorgia Bar No. 140856MCKENNA LONG & ALDRIDGE LLP303 Peachtree Street, N.E., Suite 5300Atlanta, Georgia 30308Tel: (404) 527-4000
Fax: (404) 527-4198
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TABLE OF CONTENTS
Page
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TABLE OF CONTENTS...........................................................................................i
TABLE OF CITATIONS ....................................................................................... iii
ARGUMENT AND CITATIONS OF AUTHORITY .............................................1
I. This case is governed by operation of law, rather than notions
of fairness..........................................................................................1
A. Surprisingly, the SEC has weighed in on this case for the
first time, pronouncing what it has determined to be the
fair result.................................................................................3
B. This Court should reject the Investor Defendants
additional extraneous arguments as either whollyunavailing or not properly before the Court ..............................7
II. The Investor Defendants and the SEC fail to demonstrate why
historically decided Ponzi scheme case law should be extended
to afford redeeming equity holders the same treatment as
distributions to debt holders ...............................................................12
A. This Court should refuse to follow the Ninth Circuits
ruling inIn re AFI Holding, Inc. because that court relied
on inapposite precedent, wholly failing to analyze
fundamental legal considerations that bear on the
assertion of fraud claims by equity holders .............................16
III. Section 510(b) of the Bankruptcy Code mandates that fraud-
based rescission claims of equity holders be subordinated to the
claims or interests of similarly situated equity holders; thus, the
principles of Section 510(b), read together with Sections
1123(a)(4) and 1129(b)(1), prohibit defrauded equity holders
who assert fraud-based rescission claims from receiving better
treatment than similarly situated equity holders .................................... 19
A. The history of the enactment of Section 510(b) of the
Bankruptcy Code indicates that Congress clearly
mandated that equity holders cannot utilize fraud claims
to elevate their positions to be equal to general creditors
nor even ahead of similarly situated equity holders ................22
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B. The application of contemporary principles of Section
510(b) of the Bankruptcy Code to the facts at bar showsthat the Investor Defendants clearly are prohibited from
receiving better treatment than their similarly situated
equity holder peers, based on the assertion of fraud
claims .......................................................................................25
CONCLUSION.......................................................................................................28
CERTIFICATE OF COMPLIANCE......................................................................30
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TABLE OF CITATIONS
Page(s)CASES
Ashoff v. City of Ukiah,
130 F.3d 409 (9th Cir. 1997) ................................................................................7
Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc.,
467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).....................................6, 7
Eby v. Ashley,
1 F.2d 971 (4th Cir. 1924) ...............................................................14, 15, 16, 19
In re AFI Holding, Inc.,
525 F.3d 700 (9th Cir. 2008) ............................................................16, 17, 18, 19
In re Geneva Steel Co.,
281 F.3d 1173 (10th Cir. 2002) ..........................................................................22
In reGranite Partners,
208 B.R. 332 (Bankr. S.D.N.Y. 1997)................................................................18
In re Terry Mfg. Co., Inc.,2007 WL 274319 (Bankr. M.D. Ala. 2007) .................................................18, 19
In re United Energy Corp.,
944 F.2d 589 (9th Cir. 1991) ........................................................................16, 17
Jezarian v. Raichle
(In re Stirling Homex Corp.), 579 F.2d 206 (2d Cir. 1978) .........................23, 24
Newton National Bank v. Newbegin,
74 F. 135 (8th Cir. 1896) ....................................................................................21
Oppenheimer v. Harriman Nat'l Bank & Trust Co.,
301 U.S. 206, 57 S.Ct. 719, 81 L.Ed. 1042 (1937).............................................22
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Perkins v. Smith, Gambrell & Russell, LLP et al,
United States District Court for the Northern District of Georgia, CivilAction No. 1:08-CV-2673-JEC ............................................................................9
Scholes v. Lehmann,
56 F.3d 750 (7th Cir 1995) .................................................................................26
Skidmore v. Swift & Co.,
323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944).................................................7
STATUTES
11 U.S.C. 510(b) ............................................................................................passim
11 U.S.C. 1123(a)(4).......................................................................................19, 27
11 U.S.C. 1129(b)(1).......................................................................................19, 27
OTHER AUTHORITIES
H.R.Rep.No.95-595, 95th Cong., 1st Sess. (1977)............................................23, 24
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Appellant William F. Perkins, Plan Trustee (the Trustee) for the
substantively consolidated post-confirmation debtor (the Debtor or Debtors, or
generally IMA), with the advice of the Plan Committee (the Committee),1 by
and through undersigned counsel, and submits this consolidated reply to the briefs
filed by appellees/defendants (the Investor Defendants) and the Securities and
Exchange Commission (the SEC).
ARGUMENT AND CITATIONS OF AUTHORITY
I. This case is governed by operation of law, rather than notions offairness.
The Investor Defendants miscast the basis of the Trustees position, arguing
disingenuously that the result urged by the Trustee and the Committee in this
appeal is premised on principles of fairness. Joint Appellee Brief
(Jt.App.Brf.), Pgs 39-41. Fairness is not the basis of the Trustees claims;
indeed, in his opening brief, the Trustee explicitly disclaimed any notion that the
fairness of requiring an equal sharing of the financial pain among all victims of
IMAs fraud warranted the relief sought. Trustees Appellant Brief (Tr.Brf.),
Pgs 11-12. To the contrary, after the Trustee observed the moral dilemma of
having to choose between a result that leaves the defrauded investor where you
1 Counsel for the Committee has prepared this brief. By agreement with theTrustee, Committee counsel will take the lead role in arguing the matters raisedherein.
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find them as opposed to an approach that seeks to ratably equalize losses among
similarly situated defrauded victims, the Trustee made it explicitly clear that his
pursuit of the avoidance claims in the case was not being justified on some notion
of fairness, but rather because that result is what the law requires: namely,
because IMA investors acquired equity interests in IMA as opposed to claims
against it, none were entitled to receive, as the Investor Defendants did,
distributions greater than the value of his or her ratable share of the enterprise at
the time those distributions were received in exchange for the return of their equity
interests. Id.
While the Bankruptcy Court observed that the fairer result among Ponzi
scheme investors might be to put them all in the same place and assure a ratable
distribution of the Ponzi enterprises assets to them [Doc 38, Pg 13], others can
perhaps as persuasively urge that leaving recovering investors alone is an equal or
even stronger moral imperative. Resolving this case on which virtue should reign
supreme is problematic here, where no answer, grounded on whats the right thing
to do, is inherently correct. Instead, and thankfully so, courts can look to legal
doctrines to guide the outcome and avoid the moral choice that is inherent in a
fairness based analysis. Thus, as the Trustee readily concedes, where investors
make a debtbased investment in what is later found to be a fraudulent enterprise,
even though that enterprise induced the investment with actual fraud and despite
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the fact that every investment transaction it conducted was with its intent to delay,
hinder and defraud, investors are legally permitted to keep what they recover from
the enterprise before the fraud was discovered. That result is so because their
recovery is deemed for value since what they received was in satisfaction of an
antecedent debt -- a claim that is protected from avoidance under Sections 548(c)
and (d) of the Bankruptcy Code and correlative state law (assuming the recovering
investor acted in good faith, and outside the applicable preference period).
Whether that result is viewed as fair to other equally defrauded investors who
had not recovered a dime is not the issue; it is what well-established law requires.
Conversely, in an equity investment scenario where the right conferred is an
interestin an enterprise, the proper legal result is directly opposite to one where the
investment gave rise to a claimagainstit; but here, again, the resolution should not
be premised on it being the fairer result, but rather on what long-standing legal
principles mandate.
A. Surprisingly, the SEC has weighed in on this case for the firsttime, pronouncing what it has determined to be the fair result.
In its amicus brief, the SEC actually attempts to ground its support for the
Investor Defendants position based on its views of what is fair, concluding that
the disruption caused by the Trustees pursuit of claims against innocent investors
who have gotten back money invested goes too far. SEC.Brf., Pg 20.
Conceding that there is arguably some merit in making pro rata distributions
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among equally defrauded equity investors, the SEC nevertheless concludes that
this consideration is outweighed by the hardship that would be inflicted on
individual investors forced to return principal payments received in good faith.
Id. at 21. It is one thing for the Investor Defendants to strenuously urge their
biased notions of what is fair as a defense, though their assessment is anything
but objective. It is much more disconcerting, though, for the SEC, the
governmental body whose fundamental purpose is to properly police, regulate and
assure the integrity of our investment market place, to choose sides on whether the
hardship that might be inflicted on investors forced to return principal recoveries is
entitled to greater dignity than protecting, through the ratable distribution concept,
the plight of other innocent victims, no less defrauded, who were fully invested
when the fraudulent scheme came to light. While the SEC purports to rest its
conclusion on long-standing judicial precedent that innocent victims who recover
their investments before a Ponzi scheme collapses not be required to disgorge the
return of recovered principal, that precedent was developed in debt claim
investment cases. While correct in the debtclaim context, it must be cabined to
that circumstance, and not, as the SEC attempts, expanded on fairness notions to
the equity investment context where legal doctrines developed over hundreds of
years require a different result.
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Even more curious than its decision to opine about what it thinks is a
fairer result is the SECs branding as illusory the Trustees distinction between
debt and equity investments and how they are to be treated under the law.
SEC.Brf., Pg 21. While the SEC concedes at the outset that the answer to the
question posed in this case is important and will have a significant impact on
the treatment of investors defrauded in Ponzi schemes purporting to offer equity
investments [id. at 2], the Commission fails to directly address any of the
arguments advanced by the Trustee to premise the equity versus debt
distinction, with no discussion of 11 U.S.C. 510(b) and correlative judicial
authorities that make manifestly clear that fraud-based tort claims arising from
what initially was an equity investment are entitled to recovery from the fraudulent
enterprise on no basis superior to that of all other similarly situated equity
investors. Id. at 2. This parity in treatment among interest holders principle,
clear in both statutory and judicial authorities, is utterly ignored by the SEC.
For the SEC, the governmentally-appointed watchdog whose purpose it is to
ensure disciplined markets, full and accurate disclosures and the protection of the
investor public, to assail as illusory the Trustees position that signed equity
based investment documents mean nothing and that such investors should be
treated the same as if they loaned money to the fraudulent enterprise would appear
to be totally contrary to the SECs purpose. Contrary to providing predictability
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and bolstering confidence in the publics right to rely upon documents they signed
as the most salient guidepost for measuring their rights, the SECs reasoning seems
antithetical to those goals. Logically extended, its position renders written
agreements an unworthy substitute for what one judge might think from time to
time appears the moral or right thing to do. Nothing could be more destabilizing to
our financial markets.
The SEC endorses the reasoning that merely because the IMA investors
were lured into their investments by fraud, the documents they signed -- which put
all such investors on an equal footing should the enterprise fail for any reason --
should be totally disregarded, thereby fundamentally emasculating the contractual
understanding that such risks were to be equally shared among all equity holders.
True, a fraud claim arises in favor of every deceived investor as of the date they
were deceived, but for multiple reasons the justification for permitting some to
recover on a basis superior to other similarly situated defrauded investors cannot
be premised on the fraud, and the failure to see that distinction is the fundamental
flaw in the SECs reasoning.2
2 In any event, the SECs positions should be afforded no special deference bythis Court. Generally, courts defer to determinations of a governmental agencywhere the agency offers a reasonable interpretation of a legal issue under astatutory framework in which Congress explicitly or implicitly delegated authorityto the agency. See Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Such deference is not extended
(footnote continued on next page)
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B. This Court should reject the Investor Defendants additionalextraneous arguments as either wholly unavailing or not properly
before the Court.
Aside from miscasting the Trustees position as being based on fairness, the
Investor Defendants other arguments not devoted to the for value inquiry -- the
sole issue before this Court -- are likewise unavailing. As to the Investor
Defendants strained statute of limitations analogy [Jt.App.Brf., Pgs 38-40], while,
as in every field of law, statutes of limitations may bar some claims but not others,
the fact that a limitations period may bar the Trustee from the pursuit of certain
investors has no relevance to whether well-established rules of law, rather than
personal views of what is fair, ought to govern whether a line is drawn or a
distinction is made between holders of debt and equity. There are, indeed,
(footnote continued from previous page)
to agency positions that are wholly unsupported by regulations, rulings, or
administrative practice. Ashoff v. City of Ukiah, 130 F.3d 409, 411 (9th Cir.1997). The United States Court of Appeals for the Second Circuit, in In re NewTimes Securities Services, Inc., reasoned that the SECs interpretation of provisionsof the Securities Investor Protection Act was entitled to no special deference underChevron because the SEC had never previously proffered its interpretation in arule, regulation or other form. 371 F.3d 68, 81-82 (2nd Cir. 2004). Accordingly,the Second Circuit deemed the SECs positions worthy only of non-controllingconsideration, and only to the extent that that the court deemed its arguments to bepersuasive. Id. at 83, 87; see alsoSkidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct.
161, 89 L.Ed. 124 (1944). Because (i) the SECs positions asserted herein are notbased on a conferral of authority by Congress, (ii) the SEC has no special claim toexpertise regarding the issues at stake in this appeal, (iii) the SEC has not assertedany interpretations based on rules or regulations that are within its area ofexpertise, and (iv) the SECs arguments simply are not persuasive, this Courtshould give no deference to the SECs arguments.
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winners and losers irrespective of which view this Court adopts on the legal
question presented; but that fact, or the consequence that a statute of limitations
defense might alter the result for some, does not mean that this Court should not
premise who wins or loses other than by applying sound legal analyses and
rigorously adhering to statutes and well-developed legal principles that govern the
treatment of equity investors inter se.3
The Investor Defendants also attempt to buttress the correctness of the
Bankruptcy Courts decision to not permit recovery of principal paid by IMA to
the Investor Defendants on the notion that the costs of such litigation will likely
exceed the recoveries. Jt.App.Brf, Pgs 40-41. This contention rests on nothing
more than pure conjecture. Without any evidence to support their contention, the
Investor Defendants boldly assert that the Trustees pursuit of the claims at bar will
actually cause a dilution of estate assets, presumptively because the
administrative costs of pursuit of the claims will be significant and because in
3 Moreover, the Investor Defendants try to make much more of their statute oflimitations argument that in fact exists. Quick to find something purportedlyarbitrary about the Trustees line-drawing distinction between debt and equity, theInvestor Defendants offer the alleged statute of limitations inequity as illustrative
of arbitrariness without advising this Court that the Bankruptcy Court, in a decisionrendered on April 9, 2010, found that the statute of limitations otherwise applicableto the subject avoidance claims in this case was tolled until the fraudulent nature ofIMAs scheme became public. See Perkins v. TBC Capital, Inc. et al, UnitedStates Bankruptcy Court for the Northern District of Georgia, Case No. 08-06623-PWB, Docket Entry No. 23.
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many instances [the Investor Defendants] may be incapable of paying funds back
to the Estate because they do not have the resources to do so. Id. Needless to say,
the Trustee conducted his own cost-benefit analysis before commencing suit and
concluded that pursuit of the claims at issue here made financial sense. Indeed,
determinations were made about which recovering investors to sue based on the
cost of such litigation as compared to the amounts sought to be recovered. Investor
Defendants, who obviously have reasons to see the calculus differently, have no
standing to raise the administrative cost argument as a defense, and that is
especially so where their contention rests entirely on rank speculation regarding the
non-collectability of judgments against some of the Investor Defendants.
Aside from whether the Investor Defendants can pay judgments rendered
against them, the pursuit of the claims at bar is vitally important to assuring
appropriate future distributions to those who presently sit empty handed.4 The
Trustee notes that many of the Investor Defendants have recovered some, but not
all, of the amount they invested, and thus stand to further recover from the estate.
4 Contrary to the Investor Defendants contentions, the Trustee is pursing
meaningful additional recoveries for the estate beyond the claims asserted againstthe Investor Defendants. See, e.g., Perkins v. Smith, Gambrell & Russell, LLP etal, United States District Court for the Northern District of Georgia, Civil ActionNo. 1:08-CV-2673-JEC, Docket Entry No. 91 (denying defendants motion forsummary judgment on estates legal malpractice claim against IMAs pre-petitionlaw firm).
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Hence, on what basis such partially recovering investors should share in future
distributions is raised by this appeal as well. If the Trustee prevails on the theory
that those who recovered all or a portion of their equity investment in IMA must
disgorge those recoveries to create a level playing field among all of the Ponzi
scheme victims, then apart from whether all the Investor Defendants have the
ability pay the judgments against them, those that recovered in part, but still hold
claims, would, at a minimum, not be entitled to receive any further distributions
until all injured investors had recovered the same percentage of their investment.
Conversely, if the Trustee fails in pursuit of the avoidance claims sub judice, any
distributions made to the Investor Defendants would be ratable to the amount they
still claim.5
The Investor Defendants also attempt to re-raise to this Court the res
judicata and estoppel arguments that were presented to, and were explicitly
rejected by, the Bankruptcy Court below. Jt.App.Brf., Pgs 41-47. The Investor
Defendants argue that the Trustees formal acknowledgement in the Plan and
Disclosure Statement of the now-known fraud claims of all of IMAs defrauded
5
Thus, if Able and Baker each invested $500,000 in IMA, and Baker hadrecovered $300,000 of his investment before IMAs fraudulent scheme hadbecome public, unless this Court adopts the Trustees equality of treatment theoryhere asserted, both Baker and Able would share in any distributions ratably fromthe first dollar now or hereafter distributed, even though Baker had alreadyrecovered 3/5 of his investment.
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investors should bar the Trustee from seeking to avoid transfers made to the
Investor Defendants on the basis that they received disproportionate distributions
in respect of their equity interests in IMA. Id. The Investor Defendants estoppel
and res judicata defenses to the avoidance actions sub judice are meritless. First,
those defenses are not before this Court because only the for value defense was
certified for immediate review. Second, the mere fact that the Plan and Disclosure
Statement provided that all deceived investors were to be treated as tort claimants
did not waive the Trustees right to pursue the avoidance actions. As previously
observed, the fact that defrauded IMA investors held tort claims, though
unarticulated, arising from the date they were deceived into making their IMA
investment, begs the question whether those who were fortunate to receive
distributions from IMA can defeat avoidance actions to recover those distributions.
Contrary to the Investor Defendants contentions, the Disclosure Statement made
the Trustees intention to pursue such avoidance actions explicit, and finding
nothing in the Plan unclear, the Bankruptcy Court agreed. Doc 37, Pgs 84, 88.
Finally, in a separate brief filled by Investor Defendants James, Nathaniel
and Simone Bronner (the Bronners), the Bronners argue that, if the Court deems
IMAs investors to be solely equity holders, the Trustees fraudulent transfer
claims would be precluded because the Trustee would be unable to satisfy certain
elements of his prima facie case for avoidance claims against the Investor
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Defendants. The Bankruptcy Court did not treat the Bronners arguments in its
Order because, for purposes of its consideration of the value issue, both in the
Bankruptcy Court below and for purposes of its certification for immediate appeal,
the Bankruptcy Court assumed that the Trustee had established his prima facie
case. Doc 37, Pg 77. Hence, the issues raised by the Bronners are not properly
before this Court, and should be disregarded. To the extent that this Court wishes
to even consider the Bronners arguments, the Trustee refers the Court to the
Trustees extensive treatment of this topic in his reply briefing to the Bankruptcy
Court below. Doc 31, Pgs 17-26. Certainly, the Bronners will have an opportunity
to address these arguments to the Bankruptcy Court on remand, at such time as the
Bankruptcy Court affirmatively considers the issue of whether the Trustee can
establish, as he fully anticipates the overwhelming evidence will support, hisprima
facie case.
II. The Investor Defendants and the SEC fail to demonstrate why
historically decided Ponzi scheme case law should be extended to afford
redeeming equity holders the same treatment as distributions to debt
holders.
The Investor Defendants and the SEC predictably focus on the line of
judicial reasoning developed in the fraudulent investment scheme context holding
that defrauded investors who recover investments from a fraudulent enterprise
prior to the frauds discovery are entitled to retain all of what they recovered up to
the full amount of the principal they invested, based on a legal fiction whereby
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payments made to the schemes victims in respect of their principal investments
can be retroactively recharacterized as having been paid to satisfy unasserted, and
then unknown, fraudulent inducement claims that arose when each investor
initially invested in the scheme. The Trustee fully acknowledged the existence of
this line of judicial reasoning in his opening brief, and, in fact, does not contest the
appropriate application of such reasoning in factual circumstances where defrauded
investors initial investments were in the nature of debt claims from the outset.
However, where, as here, the defrauded investors initial investments were in the
nature of equity interests, the application of such reasoning inappropriately
operates to retroactively recharacterize distributions affirmatively made in respect
of equity interests into transfers in respect of debt claims. By this retroactive
recharacterization process, the transfers made to the Investor Defendants in
satisfaction of their previously unasserted and unarticulated fraud claims, totally
circumvents the extensive litigation process required to prove a fraud claim,
wholly disregards requisite notice requirements to other affected interest holders,
and violates the principles of Section 510(b) of the Bankruptcy Code, discussed
infra, that prohibit the assertion of fraud claims by equity holders to elevate their
distribution status.
The Investor Defendants and the SEC argue that the distinction between
being an investor creditor as opposed to an investor interest holder is irrelevant to
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the value exchange analysis in the avoidance context, because the mere existence
of a potential fraud claim (though unarticulated) should be sufficient to make an
equity investor into a creditor claimant investor. The Investor Defendants and the
SEC compare the facts of the instant case to those found inEby v. Ashley, and in a
line of cases following Eby, and argue that this Court should afford the Investor
Defendants the same protections provided to defrauded investors by theEby court
and those courts that have followed its reasoning. Eby v. Ashley, 1 F.2d 971 (4th
Cir. 1924), cert. denied, 266 U.S. 631, 45 S.Ct. 197, 69 L.Ed. 478 (1925). While
all fraudulent investment scheme cases share common themes and symmetries
among them, the facts of the case at bar clearly differ from Eby and its progeny,
and create a meaningful distinction that should preventEbys reasoning from being
extended to this case.
As set forth in the Trustees opening brief, the investors in the Eby scheme
unquestionably held, from the outset, claims against the fraudulent scheme, based
on the debt nature of their investments. In reasoning that the transfers to those
defrauded investors satisfied their fraudulent inducement claims, the Eby court
merely acknowledged the existence of an alternate and distinct basis for a debt
claim against that scheme -- one based on the initial nature of the investment that
gave rise to the investors right of repayment from the outset, and the other on
account of the defrauded investors fraudulent inducement claim (what the Trustee
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denominates Claim2 in his opening brief). The Trustee has never contested the
analysis inEby and its progeny that a potential fraudulent inducement claim arose
at the time each defrauded investor made his investment into the scheme, and does
not contest the analysis undertaken by cases that have appropriately applied the
Claim2 concept where there are two separate and distinct bases for debt claims
against the Ponzi entity -- i.e., where the investments made by those defrauded
gave rise to contractual debt claims from the outset.6 However, neither the Eby
court nor the vast majority of courts that adopted its reasoning in any way involved
the transmutation of what was originally an equity interestinto a fraud-based debt
claim. Accordingly, for the reasons set forth herein and in the Trustees opening
brief, this Court should deem inapposite the analysis from Eby and its debt-
investment case progeny.
6 As set forth in the Trustees opening brief, the Trustee does not contest theapplication of the Claim2 analysis in debt cases because, aside from the assertedfraud, the investor, with limited exceptions, had a right to be preferred over otherinvestors. Whereas the claim of a holder of a legitimate debt against an enterprise
may properly be paid prior to and in preference over other similarly situated debtholders, outside some statutory preference period, and provided that the investorhas acted in good faith, by contrast, state and bankruptcy law clearly mandatethat payments in excess of the value of an investors ratable interest in theenterprise are prohibited, thereby assuring the equality of treatment among allequity holders. See Tr.Brf., Pgs 31-36.
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A. This Court should refuse to follow the Ninth Circuits ruling inIn re AFI Holding, Inc. because that court relied on inapposite
precedent, wholly failing to analyze fundamental legal
considerations that bear on the assertion of fraud claims by equity
holders.
Only one court in theEby line has addressed an equity investment structure
similar to that before this Court. In his opening brief, the Trustee extensively
addressed the decision inIn re AFI Holding, Inc., 525 F.3d 700 (9th Cir. 2008), in
which the United States Court of Appeals for the Ninth Circuit extended Ebys
Claim2
reasoning to factual circumstances where the investors were equity interest
holders, not debt claimants, in the fraudulent enterprise. Id. at 708-09; Tr.Brf., Pgs
36-50. In reaching its conclusion that distributions in respect of equity interests
may be retroactively deemed to be in satisfaction of unasserted, unarticulated fraud
claims, the AFIcourt relied almost exclusively on the reasoning of a prior Ninth
Circuit case,In re United Energy Corp., 944 F.2d 589 (9th Cir. 1991). Id. United
Energy undeniably involved factual circumstances where the investors were debt
claimants from the outset; thus, United Energy no more supported
recharacterization of a transfer in respect of an original equity interest into a
transfer in respect of a debtclaim than didEby. See id.
The AFI court, however, completely disregarded that critical fact, and
simply extended the Claim2 reasoning to its equity investment facts. Id. at 708.
AFIs total reliance on United Energy was misplaced, and by improperly relying on
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United Energy without any critical analysis of the fact that United Energy was a
Claim2 case, the AFI court wholly failed to conduct any reasoned analysis
regarding the fundamental legal issues that should be addressed in connection with
any attempt to transmute the character of a distribution in respect of an equity
investment into a distribution in respect of a debt claim. Specifically, the AFI
court completely missed applicable fundamental legal considerations, as raised by
the Trustee both to this Court and to the Bankruptcy Court below, that absolutely
should have shaped its analysis, such as (i) the propriety of retroactive
transmutation of equity interests into debt claims without any prior articulation of
such claims, (ii) due process concerns in light of claims being fully recognized and
deemed satisfied without any prior notice to other equity investors at the time the
claims were deemed satisfied and paid, (iii) the uniform state law proscription of
disproportionate distributions to equity holders, and (iv) the operation of
Bankruptcy Code provisions mandating equality in treatment among similarly
situated parties, and precluding equity holders from obtaining superior treatment
by asserting fraud claims. Essentially, theAFIcourt just sought to harmonize two
prior Ninth Circuit cases, neither of which was on all fours with its facts, and
merely parroted the reasoning from the United Energy debt-investment case
without any analysis of whether the result should be the same where the case at bar
concerned the rights ofequity interest holders. Therefore, this Court should give
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no persuasive weight to the Ninth Circuits ruling in AFI, and recognize that the
specific matters and arguments before this Court essentially are of first impression.
In contrast to AFI, the United States Bankruptcy Court for the Middle
District of Alabama, inIn re Terry Mfg. Co., Inc., 2007 WL 274319 (Bankr. M.D.
Ala. 2007), recognized that fundamental distinctions exist between equity interests
and debt claims, and concluded that such distinctions do not permit courts to
simply transmute a distribution in respect of an equity interest into a distribution in
respect of a debt claim. Id. at *6-7. The Investor Defendants and the SEC argue
that Terry is inapposite because it did not involve a fraudulent scheme from its
inception. This argument is wholly without merit, because there is no distinction
between an inceptive fraud claim and one that arises at some later point in time in
the context of an equity holder seeking to retroactively transmute his interest into a
claim. See In re Granite Partners, 208 B.R. 332 (Bankr. S.D.N.Y. 1997)
(reasoning that subordination under Section 510(b) properly applies to later arising
fraud claims as well as inceptive fraud claims). In either case, the defrauded equity
holders seek to assert, later in time, a previously unarticulated fraud claim as a
basis for protecting prior distributions affirmatively made in exchange for an
equity position. Unlike AFI, the Terry court appropriately considered the impact
of patent fundamental distinctions that exist between the rights of equity holders
and debt holders, particularly the impact of those distinctions where defrauded
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equity holders seek to assert fraud claims to elevate their distribution status. Terry
at *6-7. In light of such distinctions, the Terry court appropriately refused to
convert equity interests into debt claims by retroactively recognizing and deeming
satisfied previously unasserted fraud claims. Id. No court in Ebys line, and
specifically AFI, ever undertook any such reasoned analysis as did the court in
Terry. Consistent with Terry, and consistent with the Trustees arguments herein,
the Trustee respectfully requests that this Court consider and apply the wealth of
legal principles that bear on the matters before this Court, beyond the inapposite
rulings ofEby and its progeny.
III. Section 510(b) of the Bankruptcy Code mandates that fraud-based
rescission claims of equity holders be subordinated to the claims or
interests of similarly situated equity holders; thus, the principles of
Section 510(b), read together with Sections 1123(a)(4) and 1129(b)(1),
prohibit defrauded equity holders who assert fraud-based rescission
claims from receiving better treatment than similarly situated equity
holders.
In addition to the Trustees arguments asserted herein and in his opening
brief, Section 510(b) of the Bankruptcy Code provides an incremental and
independent basis for this Court to reject the arguments of the Investor Defendants
and the SEC that the Investor Defendants previously unasserted fraud claims can
now be retroactively recognized and deemed satisfied through the Debtors
bankruptcy cases. The Investor Defendants have now asserted for the very first
time, during the pendency of the Debtors bankruptcy case, fraudulent inducement
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claims against the Debtors arising from their purchase of equity interests in the
Debtors. No Investor Defendant claims that he or she ever asserted a fraudulent
inducement claim against a Debtor at the time of the distributions that the Investor
Defendant received from the Debtors.7 Both the Investor Defendants and the SEC
go to great length to explain how the Bankruptcy Codes expansive definition of
the term claim should encompass the Investor Defendants newly asserted
fraudulent inducement claims against the Debtors. Jt.App.Brf., Pgs 15-17;
SEC.Brf, Pgs 11-12. This is a red herring argument because the Trustee has never
contested that all of IMAs defrauded investors had potential fraudulent
inducement claims against the Debtors arising from the date that each of IMAs
investors were defrauded by Kirk Wright.8 The Trustee asserts that the proper
treatment of the now recognized fraud claims ofallof IMAs defrauded investors,
including those asserted by the Investor Defendants, must be governed by
applicable provisions and policies of the Bankruptcy Code and consistent judicial
interpretations thereof. Given that the Investor Defendants and the SEC rely so
7 Had any Investor Defendant previously asserted a fraud claim, suchassertion would destroy the Investor Defendants ability to establish good faithreceipt of the distribution. See Tr.Brf., Pgs 55-57.
8 Both in the Plan and the accompanying Disclosure Statement, the Trusteereferred to the defrauded IMA equity investors as holders of Investor TortClaims because the Trustee acknowledged that they should be, and he expectedthat they would be, treated as tort claimants once their fraud claims were allowedin a public judicial forum.
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heavily on the Bankruptcy Code to support the existence of the Investor
Defendants fraud claims against the Debtors, certainly they cannot deny that the
other provisions of the Bankruptcy Code should govern the treatment of the very
claims that the Bankruptcy Code provides.
As discussed further below, for well over a century, courts have considered
attempts by equity holders to improve their distribution position relative both to
general creditors and to other similarly situated equity holders through the
assertion of fraud claims against the failed enterprise in which they invested. But
as the United States Court of Appeals for the Eighth Circuit as long ago as 1896
warned, When a corporation becomes bankrupt, the temptation to lay aside the
garb of a shareholder, on one pretense or another, and to assume the role of a
creditor, is very strong, and all attempts of that kind should be viewed with
suspicion. Newton National Bank v. Newbegin, 74 F. 135, 140 (8th Cir. 1896).
The Eighth Circuits warning foreshadowed contemporary judicial and statutory
recognition of the need to proscribe retroactive conversions from equity to debt.
Since 1896, the judicial treatment of equity holder fraud claims has evolved
such that today, and for more than thirty years, a fraud-based claim of an equity
holder is given no better treatment than what that investor would receive in respect
of his equity interest in the fraudulent enterprise. Not only have judicial authorities
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adopted this approach, but when Congress enacted the 1978 Bankruptcy Code, it
made this result abundantly clear.
A. The history of the enactment of Section 510(b) of the BankruptcyCode indicates that Congress clearly mandated that equity
holders cannot utilize fraud claims to elevate their positions to be
equal to general creditors nor even ahead of similarly situated
equity holders.
Section 510(b) of the Bankruptcy Code mandates that an equity holders
fraud-based rescission claim must be subordinated to claims or interests that are
senior or equal to the equity holders underlying equity position, such that an
equity holders fraud-based rescission claim cannot be used to elevate his
distribution position over that of his similarly situated equity holder peers. 11
U.S.C. 510(b). Prior to the enactment of Section 510(b) in 1978, the law had not
always been so clear. As chronicled by the United States Court of Appeals for the
Tenth Circuit in In re Geneva Steel Co., 281 F.3d 1173 (10th Cir. 2002), courts
struggled for over a century to determine the appropriate treatment of fraud claims
asserted by equity holders in a failed enterprise. Id. at 1175-76. Prior to 1900,
courts generally reasoned, like contemporary courts, that equity investors could not
utilize fraud claims to elevate their distribution position. Id. at 1176. By the
1930s, however, equity investors were generally permitted to rescind their equity
purchases, and be treated equal with, or even superior to, creditor claims. Id.; see
also Oppenheimer v. Harriman Nat'l Bank & Trust Co., 301 U.S. 206, 215, 57
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S.Ct. 719, 81 L.Ed. 1042 (1937). Over forty years later, with the enactment of the
sweeping Bankruptcy Reform Act of 1978, Congress clearly mandated that the law
no longer support defrauded equity holders efforts to utilize their fraud claims to
elevate their distribution status, and enacted Section 510 of the Bankruptcy Code to
expressly provide both that equity holders fraud claims must be subordinated to
creditor claims, and, as is critical to this case, that equity holders fraud claims
cannot be afforded more favorable treatment than the claims or interests of
similarly situated equity holders.
Contemporaneously with Congressional consideration of the proposed
language of Section 510, but shortly before its enactment, the United States Court
of Appeals for the Second Circuit, in the bankruptcy case ofJezarian v. Raichle (In
re Stirling Homex Corp.), 579 F.2d 206, 213 (2d Cir. 1978), considered whether
claims of defrauded equity holders should be subordinated to creditor claims under
the Bankruptcy Act.9Id. at 208. The Second Circuit expressly considered both the
proposed language of Section 510, as well as the House Report on the proposed
bill. Id. at 214-15; H.R.Rep.No.95-595, 95th Cong., 1st Sess. (1977). While not
controlling authority, the court found the reasoning behind the proposed bill
persuasive, and ruled that the subordination of equity fraud claims to general
9The Bankruptcy Act preceded, and was substantially overhauled by, the
Bankruptcy Reform Act of 1978, as codified, the Bankruptcy Code.
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creditor claims similarly was required by the standards of the Bankruptcy Act. Id.
at 215.
With the enactment of Section 510(b) of the Bankruptcy Code, and the
contemporaneous ruling by the Second Circuit in Stirling, both current statutory
provisions as well as judicial authorities clearly establish that fraud claims of
equity holders no longer provide any basis for a defrauded equity holder to elevate
his right to distributions to be equal to that of general creditors or even to any
priority higher than that of similarly situated equity holders, whether or not they
were likewise victims of fraud.
This Court should reject the Investor Defendants attempts to minimize the
importance of the principles behind Section 510(b) to the facts at bar. The Investor
Defendants mistakenly try to limit the principles of Section 510(b) to only preclude
attempts by defrauded equity holders to elevate their positions above creditor
claims. Jt.App.Brf., Pg 37. While Section 510(b) certainly proscribes defrauded
equity holders from asserting fraud claims to elevate their position relative to
general creditors, it also explicitly prohibits efforts by defrauded equity holders to
elevate their position relative to other similarly situated defrauded equity holders.
The Investor Defendants either miss or ignore this critical feature of Section
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510(b), and their attempt to mischaracterize the import of that feature is quite
telling and necessitates additional discussion.10
B. The application of contemporary principles of Section 510(b) ofthe Bankruptcy Code to the facts at bar shows that the Investor
Defendants clearly are prohibited from receiving better treatment
than their similarly situated equity holder peers, based on the
assertion of fraud claims.
Just like defrauded equity investors before them, the Investor Defendants
seek to use their fraudulent inducement claims to secure superior treatment over
their similarly situated equity holder peers. The Investor Defendants seek to
distance themselves from that impression by calling themselves the Defrauded
Investors, so as to suggest (i) that they are somehow representative of all of the
investors defrauded by the IMA scheme, and (ii) that no other group of defrauded
investors exists relative to whom the Investor Defendants seek to get ahead. In
fact, the Investor Defendants are just those investors who were fortunate enough to
receive material distributions from the Debtors prior to the discovery of the fraud.
There exists a much larger body of defrauded IMA investors who received little or
10 The Investor Defendants devote merely one short paragraph to address the
Trustees arguments under Section 510(b). Jt.App.Brf., Pg 37. The SEC fails toaddress the Trustees Section 510(b) arguments at all. As set forth in the Trusteesopening brief, the Bankruptcy Court, too, mistakenly only considered the import ofSection 510(b) with respect to its application to the absolute priority rule (creditorsbefore equity), failing to consider its impact on the inter se relationship amongequity holders. Doc 38, Pg 12; Tr.Brf, Pgs 44-45.
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no distributions from the scheme, people whose investments effectively funded the
distributions received by the Investor Defendants. It is this body of similarly
defrauded investors over whom the Investor Defendants undeniably seek
materially better treatment, on the basis that their now-asserted fraud claims should
be retroactively recognized and satisfied as of the time of their distributions from
the Debtors.
The Trustee consistently has acknowledged that all of the defrauded
investors in the IMA scheme have potential tort claims that arose at the time each
investor invested in the Debtors, assuming the investors good faith; claims that
may now be formally validated. See Scholes v. Lehmann, 56 F.3d 750 (7th Cir
1995) (recognizing that unknowingly defrauded limited-partner investors were
potential tort creditors, and that their claims made the enterprise insolvent at all
times relevant to transfers). Both in the Plan and the accompanying Disclosure
Statement, the Trustee referred to all of the defrauded IMA equity investors as
holders of Investor Tort Claims because the Trustee acknowledged that they
should be, and he expected that they would be, treated as tort claimants once their
fraud claims were recognized in an open judicial forum of the Bankruptcy Court.
It is precisely this scenario for which Section 510(b) of the Bankruptcy Code was
created -- to govern the interrelationship among similarly defrauded equity holders
in a failed enterprise, and proscribe the assertion of fraud-based rescission claims
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as a means to elevate an equity holders position over that of other similarly
situated equity holders.
Notwithstanding the clear directives of Section 510(b), the Investor
Defendants ask this Court to treat their fraud claims materially better than the fraud
claims of their similarly defrauded peers. They ask this Court to retroactively
deem their just-now-asserted claims to have been asserted and satisfied at an
earlier point in time; by contrast, they ask this Court to treat the fraud claims of
their similarly situated defrauded equity peers like traditional bankruptcy claims,
subject to pro rata distribution of estate assets. Accordingly, the Investor
Defendants seek a result where the recognition of their fraud claims results in them
receiving satisfaction of their claims (or a portion thereof) ahead of similarly
situated equity holders who are now asserting the same claims at the same time.
Put simply, Section 510(b) and the principles behind it do not permit this result.
The Investor Defendants argue that the operation of Section 510(b) should
apply only to the priority of prospective distributions to be made by the IMA estate
on allowed claims. Sections 510(b), 1123(a)(4) and 1129(b)(1), read together,
clearly evidence the Congressional mandate that similarly situated parties cannot
be subject to unfairly discriminatory treatment, and require that (i) similarly
situated parties receive the same treatment, and (ii) defrauded equity holders not be
permitted to elevate their status over similarly situated parties. The legal principles
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undergirding the enactment of these bankruptcy provisions flowed from equitable
considerations regarding the appropriate division of assets of a failed enterprise.
Such principles should apply irrespective of whether the issue is payment of future
distributions or payments made by the estate prior to the frauds discovery, and
should be given no less respect when applied to fraudulent conveyance claims of
the estate as distinct from distributions to be made by the estate. To cabin the
import of Section 510(b) only to prospective estate distributions would
countenance a result whereby some equity holders receive distributions ahead of
other equity holders, which result violates the essential principles of Section
510(b). Accordingly, Section 510(b) critically bears on the analysis of the matters
before this Court, and provides a significant incremental basis to reject the attempts
by the Investor Defendants to elevate their distribution status relative to their
defrauded IMA investor peers.
CONCLUSION
The Trustee respectfully requests that this Court reverse the Bankruptcy
Courts decision, and remand the case for further proceedings consistent with this
Courts opinion.
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Respectfully submitted this 2nd day of August, 2010.
MCKENNA LONG & ALDRIDGE LLP
/s/ Bryan E. BatesMark S. KaufmanGeorgia Bar No. 409194Bryan E. BatesGeorgia Bar No. 140856303 Peachtree Street, Suite 5300Atlanta, Georgia 30308
404-527-4000 (phone)404-527-4198 (fax)
Attorneys for the Plan Committee
Submitted through and with the approval of:
KILPATRICK STOCKTON, LLP
/s/ Colin M. BernardinoColin M. BernardinoGeorgia Bar No. 0548791100 Peachtree Street, Suite 2800Atlanta, Georgia 30309Tel: (404) 815-6500Fax: (404) 815-6555
Attorneys for William F. Perkins, Plan Trustee
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CERTIFICATE OF COMPLIANCE
I certify that this brief complies with the type-volume limitation set forth in
Fed.R.App.P.32(a)(7)(B)(ii) because this brief contains 6,980 words.
MCKENNA LONG & ALDRIDGE LLP
/s/ Bryan E. BatesMark S. KaufmanGeorgia Bar No. 409194Bryan E. BatesGeorgia Bar No. 140856303 Peachtree Street, N.E., Suite 5300Atlanta, Georgia 30308Tel: (404) 527-4000Fax: (404) 527-4198
Attorneys for the Plan Committee
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CERTIFICATE OF SERVICE
I hereby certify that on the 2nd day of August, 2010, I caused to be served a
true and correct copy of the foregoing REPLY BRIEF OF APPELLANT
WILLIAM F. PERKINS, PLAN TRUSTEE FOR INTERNATIONAL
MANAGEMENT ASSOCIATES, LLC via First Class US mail postage prepaid
to the parties listed below.
Service 08/02/2010
James E. Dearing, Jr. PC
Counsel for Alyce and Janis Ware
Suite 560
730 Peachtree St. NEAtlanta, GA 30308
Paul M Spizzirri, Esq.Bernadine H Layne, Esq.
Counsel for Clays
Spizzirri Law Offices
Midtown Proscenium Center1170 Peachtree Street NE, Suite 1200
Atlanta, GA 30309
Michael F. Holbein, Esq.
Counsel for Manuel F. Mair
Arnall Golden Gregory LLP
Suite 2100171 17th Street, NW
Atlanta, GA 30363
David W. Cranshaw, Esq.
Counsel for Joseph P. ThorntonMorris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, GA 30326
Charles H. Louis1308 East Gloria Switch
Lafayette, LA 70507
Rodney Williams-Cochrane
199 Buffalo Avenue
Apt. # 3
Brooklyn, NY 11213-3206
Marco D. Colemanc/o Michael V. Coleman, Esq.
Sharon M. Lewonski, Esq.
Epstein, Becker & Green, P.C.
945 East Paces Ferry Road, Suite 2700Atlanta, Georgia 30326
Jonathan H Fain, Esq.Counsel for X-Spurts Investment et al.,
David Laird, et al.; George Curtis, et al.
Jonathan H. Fain and Assoc., PC
3555 Eaglerock DriveAtlanta, GA 30340
Ibrahim Abdur-Rabbani567 West End Place
Atlanta, GA 30310
Ivy Anderson147-14 229th Street
Springfield, NY 11413
Erroll J. Bailey6 Wieuca Trace
Atlanta, GA 30342
Central Georgia Anesthesia
Services, PCDr. Sanjiwan Tarabadkar
840 Pine Street, Suite 770
Macon, GA 31201
James Braxton
Jo Ann Braxton Davis
Craig Davis
c/o Jerry A. Daniels, LLC33 South Clayton Street, Suite 301
Lawrenceville, GA 30045
Joan Edwards
4720 LaBranchHouston, TX, 77004
David & Deborah H. LairdGeorge Russell Curtis, et al.
c/o Timothy W. Mungovan, Esq.
Nixon Peabody LLP
100 Summer StreetBoston, MA 02110
Nathaniel, Simone & James Bronner
c/o Robert J. Mottern, Esq.
Investment Law Group of Gillett, Mottern
1230 Peachtree Street NE, Ste. 2445Atlanta, GA 30346
Cheryl Edwards
29 Avenida Fiori St.
Henderson, NV 89011
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Delmena Bryan183-26 Arcade Avenue
St. Albans, NY 11412
TBC Capital, Inc., J. Shelton, J. Shelton, III,
K. Burks & Cornell Shelton
c/o Angela R. Fox, Esq.Thomas M. Byrne, Esq.
Sutherland Asbill & Brennan LLP
999 Peachtree St, NE
Atlanta, Georgia 30309-3996
Theodore BurnettSuite 918
8540 South Sepulceda Boulevard
Los Angeles, CA 90045
Theodore Paris
220 Northwest 12th Street
Delray Beach, FL 33444
Elayne R. Rossi Revocable Trust
c/o , Elayne R. Rossi, Trustee
700 South Ute AvenueAspen, CO 81611
Eric Curtright
c/o Lee A. Frison, Jr.
Promenade II, Suite 19001230 Peachtree Street
Atlanta GA, 30309
Booker T. Seymour4260 Wieuca Overlook
Atlanta, GA 30342
Laura Pinkney3996 Degan Blvd.
Los Angeles, CA 90008
Terrence J. Edwards285 Centennial Park Drive
No. 1006
Atlanta, GA 30313
Cara Flint
1870 Crestridge Place
Atlanta, GA 30345
Blaine E. Bishop
3117 West Addison Drive
Alpharetta, GA 30022
William J. Gallassero
1222 Anse Broussard Highway
Breaux Bridge, LA 70517
Keenan P. Gistc/o Edward F. Danowitz, Esq.
Danowitz & Associates, P.C.
300 Galleria Parkway, Suite 960
Atlanta, GA 30339
Paul DeRobbio1019 Delaware Street
Huntington Beach, CA 92648
Duvall & Claude Hall400 Diplomate Parkway, Apt. 611
Hallandale, FL 99009
Joseph and Lydia Gardner
9783 Midship WayBuilding 202 # 202West Palm Beach, FL 33411
Erinn F. Harley-Lewis520 West 43rd Street
New York, NY 10036
Karen Thompkins
550 Peachtree SreetSuite 1275Atlanta, GA 30308
Glenn M. HerbertVocational Rehabilitation Services of Lafayette
222-B Rue DeJean
Lafayette, LA 70508
Akil Kenneth Secret, Esq.Counsel for Joyce Wright
Suite 204
4153-B Flat Shoals Parkway
Decatur, GA 30034
Bruce A. and Cynthia Hines5970 Riverwood Drive NW
Atlanta, GA 30328
Gregory and Lawrence Hooper
c/o Sblend A. Sblendorio, Esq.
Catosha L. Woods, Esq.Hoge Fenton Jones & Appel, Inc.6155 Stoneridge Drive, Ste. 200
Pleasanton, CA 94588
Melvin Bishop
313 West Smithfield DriveDolomite, AL 35061
Thomas Barrett
Registered Agent for International
Medical Systems, LLC7889 Ancon Drive
Fayetville, NC 28304
Linda C. Jackson300 Commons Gate Court
Roswell, GA 30075
Mt. Nebo Baptist Life Center, Inc.c/o Gregory T. Bailey, Esq.
571 Culberson Street
Atlanta, GA 30310
George L. Jeter
1704 Lake Cove Way
Atlanta, GA 30331
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Suzanne Mair6466 West Sample Road
Coral Springs, FL 33065
John & Roxanne Maughanc/o Robert H. McDonnell, Esq.
260 Peachtree Street
Suite 2200
Atlanta, GA 30303
William McDade
c/o Mark G. Trigg, Esq.
Greenberg Traurig LLPSuite 400 The Forum
3290 Northside Parkway
Atlanta, GA 30327
Thomas P. McManners
805 Clemont Drive, NE
Atlanta, GA 30306
Hyacinth Miller
54 Randolph Place
South Orange, NJ 07079
Joseph Moore
c/o Kevin M. Farmer, Esq.
Farmer, Hiers, Bushnell & Drye LLC990 Hammond Drive, Suite 200B
Atlanta, GA 30338
Michelle Peoples-Wisneski
David Wisneski
c/o Christopher D. PhillipsLamberth Cifelli Stokes Ellis & Nason, PA
3342 Peachtree Road, NE Ste. 550
Atlanta, GA 30326
Valerie Peoples3320 Hagger Way
East Point, GA 30344
Paul DeRobbio1161 Montana Avenue
Apt. 103
Los Angeles, CA 90049
Roland Pinkney
370 Prestmoor Place
Atlanta, GA 30331
Mustafa Qudsi
135 Caillouet Place
Lafayette, LA 70501-7807
Fred C. & Sherri D. Redfern
600 Whitney Ranch Drive
Henderson, NV 89014
James Eric Reese6542 Shenandoah Avenue
Los Angeles, CA 90056
Stephen Regan, Sr.1061 Weeping Willow Drive
Breaux Bridge, LA 70517
Anthony Ricciardi901 Donelle Ave
Las Vegas, NV, 89123
Star 6 Investments, Ltd.c/o Ben Chang Wang, Registered Agent
3331 Colbert Avenue
Los Angeles, CA 90066
Algernon O. SteeleMarcia G. Riley
320 West Berwicke Common
Atlanta, GA 30342
Ernest Whonder4 Cypress Lane
Cortland, NY 10567
Takeo Spikes5005 Heatherwood Court
Roswell, GA 30075
Kheisha Friday6031 Hitt Lake Court
Stone Mountain, GA 30087
Bruce & Renee Withers18700 Kuhlman Road
Bend, OR 97701
Cheryl Worthy-Pickett
2129 Briarlake DriveAtlanta, GA 30345
William T. Perkins
c/o Rodney L. Eason, Esq.
The Eason Law Firm6150 Old National Highway, Suite 200
College Park, GA 30349-4367
Charles I. Pollack & William R. Lester, Esqs.
Counsel for Atlanta Perinatal, Page,
Bootstaylor, Grone, Dorsey, Andrews, PageSegal, Fryer, Shuster & Lester, P.C.
1050 Crown Pointe Parkway, Suite 410
Atlanta, GA 30338
Erich G. Randolph & DeCarlo, Amanda Eskridge &Laverne Jones
c/o Kevin A. Stine, Esq.Joshua N. Tropper
Baker Donelson
Monarch Plaza, Suite 16003414 Peachtree Road, N.E.
Atlanta, GA 30326
Edwana Adams
2607 Willow Grove Road, NW
Acworth, GA 30101
Mario & Charisse Brossard
7714 13th St. NW
Washington, DC 20012
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Frederick T. WorkOne Baltimore Place
Suite 400
Atlanta, GA 30308
Carol Pinkney13521 Brandy Oaks Drive
Chesterfield, VA 23832
Roger O'Neal Family TrustRoger O'Neal, Trustee
c/o GTO Development, LLC
2301 Rosecrans Avenue
El Segundo, CA 90245
Stephen Atwater
2510 Sugarloaf Club Drive
Duluth, GA 30097
Marcus Bishop
c/o Max C. Pope, Jr. Esq.
1929 Third Avenue North, Suite 700Birmingham, AL 35203
AENA HAINES
c/o ARYEH D. SCHWARTZSCHWARTZ LAW FIRM, P.L.L.C.201 N. Central Avenue
33rd FloorPHOENIX, AZ 85004
Annette K. Bondc/o James K. Knight, Jr.
401 Atlanta Street
Marietta, GA 30060
William J. GallasseroPO Box 1443
Breaux Bridge, LA 70517
Jessie & Joyce Champagnec/o Thomas D. Brumbaugh, Esq.
Champagne & Brumbaugh
P.O. Box 3764Lafayette, LA 70502
David and Joni Robison
9100 Eagle Hills Drive
Las Vegas, NV 89134
Robert L. Edwards, III
1350 Audubon Estates SW
Atlanta, GA 30311
John & Roxanne Maughan
c/o Robert H. McDonnell, Esq.
260 Peachtree Street, Suite 2200Atlanta, GA 30303
Keeling Hall7653 NW 122nd Drive
Parkland, FL 33076
Valerie July
c/o Kaaren Anderson Robinson
Kaaren Anderson Robinson, P.C.P. O. Box 1835
Lithia Springs, GA 30122
Horace Noble5555 West Desert Inn Road
Las Vegas, NV 89146
Craig A. & Carole Wilson
c/o Herbert C. Broadfoot, Esq.Ragsdale Beals Seigler Patterson & Gray
229 Peachtree Street, NE2400 International Tower, Peachtree Center
Atlanta, GA 30303
Evelyn Hall7653 Northwest 122nd Drive
Parkland, FL 33076
Martin D. Jeffries
c/o Heather D. Brownn, Esq.Mark A. Kelley, Esq.Kitchens Kelley Gaynes, P.C.
Eleven Piedmont Center,Suite 900Atlanta, Georgia 30305
Todd Perman
848 Greenwood Avenue
Atlanta, GA 30306
Dr. Lloyd Geddes
345 Boulevard NE
Atlanta, GA 30312
Jenny Lynn Perman
4565 Fitzpatrick Way
Norcross, GA 30092-1002
Dr. Lloyd Geddes
465 Winn Way
Ste 231Decatur, Georgia 30030
Dr. Lloyd Geddes
511 Peachtree Street, N.E.Atlanta, GA 30308
David M. Becker, Esq., Mark D. Cahn, Esq.
Jacob H. Stillman, Esq., Katharine B.
Gresham, Esq.
Morgan Bradylyons, Esq.Securities and Exchange Commission
100 F St. NE
Washington, DC 20549-8030
Clarence and Valerie July
c/o Kaaren Anderson Robinson
Kaaren Anderson Robinson, P.C.
P. O. Box 1835Lithia Springs, GA 30122
Case: 10-10683 Date Filed: 08/02/2010 Page: 39 of 40
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This 2nd day of August, 2010.
KILPATRICK STOCKTON, LLP
/s/ Colin M. Bernardino
Colin M. Bernardino
Georgia Bar No. 054879
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309
Tel: (404) 815-6500
Fax: (404) 815-6555
Attorneys for William F. Perkins, Plan Trustee
Case: 10-10683 Date Filed: 08/02/2010 Page: 40 of 40