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Case 3:18-cv-00252-CWR-FKB Document 137 Filed 03/14/19 Page 1 of 5

UNITED STATES DISTR ICT COURT


SOUTHERN DISTR ICT OF M ISS ISS IPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE Case No. 3:18-cv-252


COMMISSION,

Plaintiff, Hon. Carlton W. Reeves, District Judge

v. Hon. F. Keith Ball, Magistrate Judge


ARTHUR LAMAR ADAMS AND
MADISON TIMBER PROPERTIES, LLC,

Defendants.

ORDER APPROVING SETTLEMENT

Before the Court is the Motion for Approval of Settlements filed by Alysson Mills, in her

capacity as the court-appointed receiver (the “Receiver”) for Arthur Lamar Adams and Madison

Timber Properties, LLC. No party has filed any objections to this motion.

The motion asks the Court to approve the Receiver’s Settlement Agreement with Drake

and Summer Adams (“Mr. and Mrs. Adams”). After consideration, the Court finds that settlement

with Mr. and Mrs. Adams on the proposed terms without litigation is in the Receivership Estate’s

best interests. The Court thus GRANTS the Receiver’s motion.

BACKGROUND

The Receiver’s duties

The Receiver has a duty “to take custody, control, and possession of all Receivership

Property, Receivership Records, and any assets traceable to assets owned by the Receivership
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Estate” 1 and to investigate and “bring such legal actions based on law or equity in any state, federal

or foreign court as the Receiver deems necessary or appropriate in discharging her duties as

Receiver.” 2

Immediately following her appointment, the Receiver and her counsel began investigating

claims against potential defendants who may be in possession of assets of the Receivership Estate,

including against individuals and entities who received cash gifts from Lamar Adams or Madison

Timber

Gifts to Mr. and Mrs. Adams

The Receiver represents that she determined that from January 1, 2010 to the present date,

Lamar Adams’s children and their spouses received cash gifts that she believes were proceeds of

the Madison Timber Ponzi scheme. These cash gifts were made with funds from bank accounts in

Lamar Adams’s name and from a bank account he shared with his wife, Vickie Adams. Of these

cash gifts, Drake Adams, Lamar Adams’s son, and his wife, Summer, received $56,000.

The Receiver notified Mr. and Mrs. Adams of her findings. They, along with Brandon

Kennedy, in turn voluntarily disclosed to the Receiver that Lamar Adams separately had given

Brandon Kennedy and Drake Adams an interest in a home in Indianola, Mississippi, in which his

mother has a life estate (the “Indianola Property”).

The Receiver represents that she has no evidence that Mr. and Mrs. Adams were involved

in any wrongdoing associated with the Madison Timber Ponzi scheme. The Receiver and Mr. and

1
Docket No. 33, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss).
2
Docket No. 33, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss). By order
dated August 22, 2018, the Court eliminated the requirement that the Receiver obtain “prior approval of this Court
upon ex parte request” before bringing any legal action. Docket No. 38, Securities & Exchange Commission vs.
Adams, et al., No. 3:18-cv-00252 (S.D. Miss).
Case 3:18-cv-00252-CWR-FKB Document 137 Filed 03/14/19 Page 3 of 5

Mrs. Adams undertook to resolve the Receivership Estate’s claims to gifts made to Mr. and Mrs.

Adams without litigation.

The parties have now reached an agreement whereby Mr. and Mrs. Adams shall return to

the Receivership Estate $40,000 in settlement of the Receivership Estate’s claims for gifts made

to them by Lamar Adams. Separately, Mr. and Mrs. Adams shall contribute one-half of $25,000,

or $12,500, in settlement of the Receivership Estate’s claims to their interest in the Indianola

Property. The Receiver represents that the proposed settlement agreement follows meaningful,

informed, arm’s length negotiations between the Receiver and Mrs. and Mrs. Adams, all

represented by highly capable counsel.

The Receiver believes the proposed settlement agreement is in the Receivership Estate’s

best interests. The Receiver represents that she is satisfied that the total amount received pursuant

to the proposed settlement agreement exceeds the net amount the Receivership Estate would

actually receive if she litigated her potential claims against Mr. and Mrs. Adams to final judgment.

The time and money spent on litigation, which would be funded on an hourly basis, is time and

money the Receivership Estate would never recover and would almost certainly exceed any

discount given in consideration for the avoidance of litigation. The Receiver notes that she values,

too, that Mr. and Mrs. Adams have cooperated with her and have agreed to make their payment

immediately, within 30 days of approval.

ORDER

After consideration, the Court finds that the terms of the Settlement Agreement and the

terms are adequate, fair, reasonable, and equitable. The Settlement Agreement and should be and

is hereby APPROVED.
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Accordingly, the Court hereby ORDERS as follows:

1. The terms used in this Order Approving Settlement that are defined in the Settlement

Agreement, unless expressly otherwise defined herein, shall have the same meaning as in the

Settlement Agreement.

2. This Court has jurisdiction over the subject matter of this action, and the Receiver is

a proper party to seek entry of this Order Approving Settlement.

3. The Settlement Agreement followed meaningful, informed, arm’s length negotiations

between the Receiver and Mr. and Mrs. Adams, all represented by highly capable counsel.

4. The parties and their counsel have at all times complied with the requirements of Rule

11 of the Federal Rules of Civil Procedure.

5. The Settlement Agreement is, in all respects, fair, reasonable, and adequate and is

hereby fully and finally approved. The parties are directed to implement and consummate the

Settlement Agreement in accordance with its terms and with this Order Approving Settlement.

6. Nothing in this Order Approving Settlement or the Settlement Agreement, and no

aspect of the Settlement Agreement or negotiation thereof is or shall be construed to be an

admission or concession of any violation of any statute or law, of any fault, liability, or

wrongdoing, or of any infirmity in the claims or defenses of any party in any other proceeding.

7. Mr. and Mrs. Adams shall deliver or cause to be delivered the Settlement Payment in

accordance with the terms of the Settlement Agreement.

8. Without in any way affecting the finality of this Order Approving Settlement, the

Court retains continuing and exclusive jurisdiction over the parties for the purposes of, among

other things, the administration, interpretation, consummation, and enforcement of the Settlement

Agreement.
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SO ORDERED, this the 14th day of March, 2019.


s/ CARLTON W. REEVES
United States District Judge
Case 3:18-cv-00252-CWR-FKB Document 136 Filed 03/14/19 Page 1 of 5

UNITED STATES DISTR ICT COURT


SOUTHERN DISTR ICT OF M ISS ISS IPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE Case No. 3:18-cv-252


COMMISSION,

Plaintiff, Hon. Carlton W. Reeves, District Judge

v. Hon. F. Keith Ball, Magistrate Judge


ARTHUR LAMAR ADAMS AND
MADISON TIMBER PROPERTIES, LLC,

Defendants.

ORDER APPROVING SETTLEMENT

Before the Court is the Motion for Approval of Settlements filed by Alysson Mills, in her

capacity as the court-appointed receiver (the “Receiver”) for Arthur Lamar Adams and Madison

Timber Properties, LLC. No objections to this motion have been filed.

The motion asks the Court to approve the Receiver’s Settlement Agreement with Brandon

and Foster Kennedy (“Mr. and Mrs. Kennedy”). After consideration, the Court finds that

settlement with Mr. and Mrs. Kennedy on the proposed terms without litigation is in the

Receivership Estate’s best interests. The Court thus GRANTS the Receiver’s motion.

BACKGROUND

The Receiver’s duties

The Receiver has a duty “to take custody, control, and possession of all Receivership

Property, Receivership Records, and any assets traceable to assets owned by the Receivership
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Estate” 1 and to investigate and “bring such legal actions based on law or equity in any state, federal

or foreign court as the Receiver deems necessary or appropriate in discharging her duties as

Receiver.” 2

Immediately following her appointment, the Receiver and her counsel began investigating

claims against potential defendants who may be in possession of assets of the Receivership Estate,

including against individuals and entities who received cash gifts from Lamar Adams or Madison

Timber.

Gifts to Mr. and Mrs. Kennedy

The Receiver represents that she determined that from January 1, 2010 to the present date,

Lamar Adams’s children and their spouses received cash gifts that she believes were proceeds of

the Madison Timber Ponzi scheme. These cash gifts were made with funds from bank accounts in

Lamar Adams’s name and from a bank account he shared with his wife, Vickie Adams. Of these

cash gifts, Brandon Kennedy, Lamar Adams’s daughter, and her husband, Foster, received

$152,470.60.

The Receiver notified Mr. and Mrs. Kennedy of her findings. They, along with Drake

Adams, in turn voluntarily disclosed to the Receiver that Lamar Adams separately had given

Brandon Kennedy and Drake Adams an interest in a home in Indianola, Mississippi, in which his

mother has a life estate (the “Indianola Property”).

The Receiver represents that she has no evidence that Mr. and Mrs. Kennedy were involved

in any wrongdoing associated with the Madison Timber Ponzi scheme. The Receiver and Mr. and

1
Docket No. 33, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss).
2
Docket No. 33, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss). By order
dated August 22, 2018, the Court eliminated the requirement that the Receiver obtain “prior approval of this Court
upon ex parte request” before bringing any legal action. Docket No. 38, Securities & Exchange Commission vs.
Adams, et al., No. 3:18-cv-00252 (S.D. Miss).
Case 3:18-cv-00252-CWR-FKB Document 136 Filed 03/14/19 Page 3 of 5

Mrs. Kennedy undertook to resolve the Receivership Estate’s claims to gifts made to Mr. and Mrs.

Kennedy without litigation.

The parties have now reached an agreement whereby Mr. and Mrs. Kennedy shall return

to the Receivership Estate $105,000 in settlement of the Receivership Estate’s claims for gifts

made to them by Lamar Adams. Separately, Mr. and Mrs. Kennedy shall contribute one-half of

$25,000, or $12,500, in settlement of the Receivership Estate’s claims to their interest in the

Indianola Property. The Receiver represents that the proposed settlement agreement follows

meaningful, informed, arm’s length negotiations between the Receiver and Mrs. and Mrs.

Kennedy, all represented by highly capable counsel.

The Receiver believes the proposed settlement agreement is in the Receivership Estate’s

best interests. The Receiver represents that she is satisfied that the total amount received pursuant

to the proposed settlement agreement exceeds the net amount the Receivership Estate would

actually receive if she litigated her potential claims against Mr. and Mrs. Kennedy to final

judgment. The time and money spent on litigation, which would be funded on an hourly basis, is

time and money the Receivership Estate would never recover and would almost certainly exceed

any discount given in consideration for the avoidance of litigation. The Receiver notes that she

values, too, that Mr. and Mrs. Kennedy have cooperated with her and have agreed to make their

payment immediately, within 30 days of approval.

ORDER

After consideration, the Court finds that the terms of the Settlement Agreement and the

terms are adequate, fair, reasonable, and equitable. The Settlement Agreement should be and is

hereby APPROVED.
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Accordingly, the Court hereby ORDERS as follows:

1. The terms used in this Order Approving Settlement that are defined in the Settlement

Agreement, unless expressly otherwise defined herein, shall have the same meaning as in the

Settlement Agreement.

2. This Court has jurisdiction over the subject matter of this action, and the Receiver is

a proper party to seek entry of this Order Approving Settlement.

3. The Settlement Agreement followed meaningful, informed, arm’s length negotiations

between the Receiver and Mr. and Mrs. Kennedy, all represented by highly capable counsel.

4. The parties and their counsel have at all times complied with the requirements of Rule

11 of the Federal Rules of Civil Procedure.

5. The Settlement Agreement is, in all respects, fair, reasonable, and adequate and is

hereby fully and finally approved. The parties are directed to implement and consummate the

Settlement Agreement in accordance with its terms and with this Order Approving Settlement.

6. Nothing in this Order Approving Settlement or the Settlement Agreement, and no

aspect of the Settlement Agreement or negotiation thereof is or shall be construed to be an

admission or concession of any violation of any statute or law, of any fault, liability, or

wrongdoing, or of any infirmity in the claims or defenses of any party in any other proceeding.

7. Mr. and Mrs. Kennedy shall deliver or cause to be delivered the Settlement Payment

in accordance with the terms of the Settlement Agreement.

8. Without in any way affecting the finality of this Order Approving Settlement, the

Court retains continuing and exclusive jurisdiction over the parties for the purposes of, among

other things, the administration, interpretation, consummation, and enforcement of the Settlement

Agreement.
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SO ORDERED, this 14th day of March, 2019.


s/ CARLTON W. REEVES
United States District Judge
Case 3:18-cv-00252-CWR-FKB Document 133 Filed 03/13/19 Page 1 of 9

____________________

No. 3:18-cv-252-CWR-FKB

SECURITIES AND EXCHANGE


COMMISSION,
Plaintiff,

v.

ARTHUR LAMAR ADAMS AND


MADISON TIMBER PROPERTIES, LLC,
Defendants.
___________________

ORDER GRANTING MOTION FOR CONTEMPT


____________________

Before CARLTON W. REEVES, District Judge.


The Receiver moved to hold in civil contempt Alexander Sea-
wright Timber Fund LLC, Jon Seawright, and Brent Alexan-
der (collectively “respondents”). Docket No. 56. On Decem-
ber 19, 2018 the Court heard oral argument on the motion.
“[C]ourts have inherent power to enforce compliance with
their lawful orders through civil contempt.” Shillitani v.
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United States, 384 U.S. 364, 370 (1966). To hold a respondent in


civil contempt of a court order, the moving party must prove
by clear and convincing evidence: “(1) that a court order was
in effect; (2) that the order required certain conduct by the re-
spondent; and (3) that the respondent failed to comply with
the court’s order.” Petroleos Mexicanos v. Crawford Enters., 826
F.2d 392, 401 (5th Cir. 1987). “The contemptuous actions need
not be willful so long as the contemnor actually failed to com-
ply with the court’s order.” Am. Airlines, Inc. v. Allied Pilots
Ass’n, 228 F.3d 574, 581 (5th Cir. 2000).
“Judicial sanctions in civil contempt proceedings, may in a
proper case, be employed for either or both of two purposes:
to coerce the defendant into compliance with the court’s or-
der, and to compensate the complainant for losses sustained.”
Id. at 585 (quotation marks and citation omitted). Courts have
“broad discretion” when determining appropriate damages.
Id.
I
The Court’s Order
In June 2018, this Court appointed the Receiver to “assume
and control the operation of the Receivership Defendants.”
Docket No. 33 at 5. The Receivership Defendants include La-
mar Adams and Madison Timber Properties (“MTP”). In the
Order establishing the Receivership, the Court vested the Re-
ceiver with “all powers and authority of a receiver in equity
under all applicable state and federal law” and tasked her
with “manag[ing], control[ling], operat[ing] and main-
tain[ing] the Receivership Estate.” Id. at 5–7.
The Receivership Estate includes “all property interests” of
Adams and MTP. Receivership Property includes, but is not

2
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limited to, “monies, funds, securities, credits, effects, goods,


chattels, lands, premises, leases, claims, rights and other assets
. . . .” Id. at 6 (emphasis added). The Receiver is tasked with
finding and evaluating all Receivership Property and ulti-
mately taking it into her possession through a lawsuit, settle-
ment, or other means. Id. at 7.
The Order “restrained and enjoined” the Receivership De-
fendants and “all persons receiving notice of th[e] Order”
from taking any action which would “hinder, obstruct, or oth-
erwise interfere with the Receiver in the performance of her
duties” and from taking any action which would “dissipate
or otherwise diminish the value of any Receivership Prop-
erty.” Id. at 11. The Order also stayed all ongoing actions
which involved Receivership Property. Id. at 12–13.
II
The Required Conduct
The Order prohibited any interference with Receivership
Property. This, in effect, froze varying types of activities. Vic-
tims could not commence or pursue their own lawsuits; LLCs
in which Adams was a member could not dissolve without
the Receiver’s approval; and cases against Receivership De-
fendants and recruiters for MTP were stayed in state court.
This list is not exhaustive.
In the simplest terms, the Order positions the Receiver as if
she was the first person in line to board a Southwest Airlines
flight, where there is limited capacity and there are no re-
served seats. If someone cuts in front of the Receiver, her
choices become more limited. The Order also prevents victims
from jostling for a position closer to the front of the line.

3
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Ultimately, the goal is to preserve the value of Receivership


Property and ensure that all victims are treated fairly. This is
the common practice for receiverships across the country. See
SEC v. Stanford Int'l Bank Ltd., 424 F. App’x 338, 340–41 (5th
Cir. 2011) (“It is axiomatic that a district court has broad au-
thority to issue blanket stays of litigation to preserve the prop-
erty placed in receivership pursuant to SEC actions.”); SEC v.
Byers, 609 F.3d 87, 93 (2d Cir. 2010) (“The current injunction
prevents small groups of creditors from placing some entities
into bankruptcy, thereby removing assets from the receiver-
ship estate to the potential detriment of all.”); SEC v. Wencke,
622 F.2d 1363, 1369 (9th Cir. 1980) (“The blanket stay was
found by the district court necessary to achieve the purposes
of the receivership.”). “The receivership court has a valid in-
terest in both the value of the claims themselves and the costs
of defending any suit as a drain on receivership assets.”
Liberte Capital Group, LLC v. Capwill, 462 F.3d 543, 551 (6th Cir.
2006).
III
The Respondents’ Conduct
Brent Alexander is a senior public policy advisor at Baker Do-
nelson. Jon Seawright is a shareholder and a member of the
national board of directors of the same firm. Together, they
ran Alexander Seawright Timber Fund. Their LLC invested in
MTP. When MTP went bottom-up, investors in Alexander
Seawright Timber Fund lost money.
In what they claim was an attempt to return money to their
investors, Alexander, Seawright, and their counsel began to
research possible legal claims. They contemplated legal action
against Adams and MTP but ultimately halted that plan after

4
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the Court issued its Order. See Docket No. 68 at 5. There is no


dispute they knew of the Court’s Order.
With one door closed, respondents looked for another open-
ing. Lamar Adams had taken his fake timber deeds to local
UPS stores for notarization. The deeds contained fraudulent
signatures, forged by Adams himself. The notaries, nonethe-
less, provided their stamp of approval to the deeds. Adams
gave the deeds to investors as proof of the legitimacy of the
operation. Of course, we know that nothing about MTP was
legitimate, including Adams’ signatures.
Respondents told the UPS store they had legal claims on be-
half of the investors in Alexander Seawright Timber Fund.
They threatened to sue. That brought UPS to the table.
Respondents agreed that in exchange for receiving $100,000
they would release all liability against UPS arising from the
actions of the notaries on nine separate occasions from March
2017 through March 2018. This settlement would be covered
by UPS’s liability insurance policy, a policy, as respondents’
counsel admitted at oral argument, that he had not read. Re-
spondents attest that after the attorney’s fees were paid, what
remained of the $100,000 went directly to compensate inves-
tors in Alexander Seawright Timber Fund. 1
The Receiver argues that Alexander Seawright Timber Fund,
acting through Seawright and Alexander, violated the Order.

1 At the hearing, it was revealed that counsel for respondents invested in


Alexander Seawright Timber Fund. Of course, he would benefit twice
from any settlement: he would recover from the settlement once for his
legal services and then as a victim. Obviously, this raises concerns as to
whether counsel has prioritized his own recovery ahead of other victims.

5
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By settling claims against UPS, respondents have diminished


the value of the Receivership Estate’s claims and put them-
selves ahead of other victims.
Respondents contend that the Receiver does not have stand-
ing to bring claims on behalf of victims, and because their set-
tlement is between themselves and UPS, it is not a violation
of this Court’s Order. Furthermore, they believe the Receiver-
ship Estate has no claims of value against UPS, so the settle-
ment does not dissipate the value of Receivership Property.
IV
Violation of the Court’s Order
First, as already established, a district court has the authority
to issue a broad stay for the preservation of the Receivership
Estate. This includes enjoining actions which the Receiver
does not have the standing to bring but which nonetheless
risk depleting Receivership Property. See Rishmague v. Winter,
616 F. App’x 138, 139 (5th Cir. 2015) (“[S]everal courts have
recognized the importance of preserving a receivership
court’s ability to issue orders preventing interference with its
administration of the receivership property.”)
Second, respondents are incorrect when they assert that the
Receiver could not sue UPS. 2 “This Court has held that the
Receiver may assert tort claims against third parties based on
allegations that the third parties’ torts contributed to the lia-
bilities of the Receivership Estate.” Official Stanford Inv’rs

2 The Receiver’s standing to pursue third party claims is addressed in


more detail in another order, issued today, denying the motion for a dec-
laration of rights by the Lehan parties.

6
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Comm. v. Greenberg Traurig, LLP, No. 3:12-CV-4641-N, 2014


WL 12572881, at *4 (N.D. Tex. Dec. 17, 2014). In fact, as Re-
ceiver’s counsel indicated at oral argument, the Receiver is
developing claims against UPS. Recently filed subpoenas sup-
port her argument. See Docket Nos. 95–109.
This Court issued an Order that prevented recipients from in-
terfering with the Receiver and dissipating Receivership
Property. The respondents were aware of that Order, as
shown by the emails submitted by their counsel at oral argu-
ment, where they informed LLC members about the Order.
See Docket No. 68. They understood that the Order prevented
them from pursuing action against Adams because his assets
were now a part of Receivership Property. They also under-
stood that the Receiver was tasked with collecting all of the
Receivership’s assets and ultimately redistributing them to
victims. They submitted the losses of their own LLC members
to be included in that distribution process. They are sophisti-
cated individuals; they had legal counsel and together they
were researching their legal claims.
Yet, respondents then asserted and settled a claim with a third
party that the Receivership Estate also has claims against, all
without ever seeking the input of the Receiver or this Court.3
They interfered with the Receiver’s job and diminished the
value of potential Receivership Property, in violation of the
Court’s Order. Therefore, the contempt motion is granted.

3Other parties, when presented with this dilemma, have filed a motion
asking this Court to lift the stay as to their claims.

7
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Victims are understandably anxious to recoup the money


they have lost through this Ponzi scheme. That is evinced by
other motions pending on this docket. But receivership law
balances an individual victim’s interests with the overall prin-
ciples of equity and judicial economy for the benefit of all vic-
tims.
Imagine what would happen if the Court approved this set-
tlement: every victim would race to court to recover her losses
and every possible defendant would pick off plaintiffs to seek
favorable settlements and to avoid larger liability. The Re-
ceiver would quickly be consumed with tracking ancillary
cases and halting ones that improperly involve Receivership
Property. The Receiver would incur unnecessary costs, de-
pleting the Receivership Estate’s assets before she ever had
the chance to pursue claims on behalf of the Receivership Es-
tate. See SEC v. Stanford Int’l Bank, Ltd., No. 3:09-CV-298, 2010
WL 11454481, at *3 (N.D. Tex. Mar. 8, 2010) (denying request
to lift stay for victims to pursue ancillary litigation because an
award of damages might deplete receivership property and
the receiver would incur additional costs having to monitor
and possibly intervene in the action), aff’d, 424 F. App’x 338,
341 (5th Cir. 2011). The Court will not authorize the private
pursuit of these claims since “very early in a receivership even
the most meritorious claims might fail to justify lifting a stay
given the possible disruption of the receiver’s duties.” Id.
(quotation marks and citation omitted).

8
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V
Conclusion
As with the other orders issued today, the Court reiterates its
broad authority to protect Receivership Property. See SEC v.
Safety Fin. Serv., Inc., 674 F.2d 368, 373 (5th Cir. 1982) (“wide
discretionary powers [are accorded] to a court of equity
charged with overseeing a receivership.”). Having found that
the Receiver has met her burden, it is ordered that Respond-
ents are in civil contempt. Further proceedings are necessary
to determine an appropriate remedy. Ideally, the parties will
be put back in the same position as they were prior to the set-
tlement, without the need for the Court to impose fees or
fines.
SO ORDERED, this the 13th day of March, 2019.
s/ CARLTON W. REEVES
United States District Judge

9
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UNITED STATES DISTRICT COURT


SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE No: 3:18-cv-252


COMMISSION,
Carlton W. Reeves, District Judge
Plaintiffs,

v.

ARTHUR LAMAR ADAMS AND


MADISON TIMBER PROPERTIES, LLC,

Defendants.

MOTION FOR CONTEMPT

Alysson Mills, in her capacity as the court-appointed receiver (the “Receiver”) for Arthur

Lamar Adams (“Adams”) and Madison Timber Properties, LLC (“Madison Timber”), through

undersigned counsel, respectfully files this Motion for Contempt, and states as follows:

1.

This Court’s order dated June 22, 2018, instructed the Receiver “to determine the nature,

location, and value of all property interests” of the Receivership Estate “including but not limited

to … claims, rights, and other assets.” Doc. 33 at p. 6. These property interests are “Receivership

Property.” Id.

2.

The Court’s order separately “restrain[s] and enjoin[s]” any person receiving notice of the

order “from directly or indirectly taking any action or causing any action to be taken, without the

express written agreement of the Receiver” which would “dissipate or otherwise diminish the value

of any Receivership Property.” Doc. 33 at p. 11. “[S]uch prohibited actions include but are not
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limited to releasing claims or disposing, transferring, exchanging, assigning, or in any way

conveying any Receivership Property.” Id.

3.

Finally, the Court’s order separately expressly stays “all civil legal proceedings of any

nature … or other actions involving … any Receivership Property.” Doc. 33 at 13.

4.

Among the many “claims, rights, and other assets” of the Receivership Estate that the

Receiver has identified are claims against notaries who notarized the fake deeds and promissory

notes that Madison Timber recruiters gave to their investors. These claims are Receivership

Property and belong to the Receivership Estate. At a minimum, any actions involving the notaries

in question and their employers “involve” Receivership Property and the Receivership Estate.

5.

Nevertheless, on October 30, 2018, Alexander Seawright Timber Fund, LLC, acting under

the direction of Jon Seawright and Brent Alexander, purported to “release, acquit and forever

discharge” three notaries, the UPS store that employed them, the UPS store’s owners, and the UPS

store’s insurer from “any and all actions … in any way of [sic] growing out of … [specified] signed

notarized documents” for the sum of $100,000.

6.

Understandably, many investors would like to independently pursue claims against third

parties such as notaries, law firms, and banks—but they have respected this Court’s stay, mindful

that the Receivership Estate must be permitted to do its work first. The Court’s stay is intended to

preserve assets that otherwise could be picked apart, to maximize funds available for equitable

2
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distribution to victims—but it is also intended to ensure that interested parties (here Jon Seawright

and Brent Alexander) cannot compromise valuable claims without the Receiver’s input.

7.

It is bold of Jon Seawright and Brent Alexander, themselves facing potential liability for

their roles in the Madison Timber Ponzi scheme, to purport to release for the sum of $100,000

valuable claims against a UPS store whose employees notarized the fake deeds and promissory

notes that Jon Seawright and Brent Alexander turned around and gave to their own investors.

8.

The Receiver wishes to advise the Court that Alexander Seawright Timber Fund, LLC, Jon

Seawright, and Brent Alexander violated the Court’s order by purporting to release claims that

unquestionably “involve” Receivership Property and the Receivership Estate. The Receiver

submits that the injury to the Receivership Estate can be cured by entry of an order that:

• commands Alexander Seawright Timber Fund, LLC, Jon Seawright, and Brent Alexander
to turnover to the Receivership Estate any money they received in exchange for their
purported release;

• commands Kim Breese to turnover to the Receivership Estate any money he retained for
his negotiation of the purported release;

• declares the release non-binding on the Receiver and the Receivership Estate; and

• commands Alexander Seawright Timber Fund, LLC, Jon Seawright, and Brent Alexander
to pay the Receivership Estate’s attorneys fees and costs in litigating this matter.

The Receiver takes no position on what other sanction would be appropriate to remedy their
disregard of the Court’s order.

WHEREFORE, the Receiver respectfully asks that the Court take such action as it deems
appropriate, including if necessary by holding a hearing at which Alexander Seawright Timber
Fund, LLC, Jon Seawright, and Brent Alexander might show cause why the relief requested should
not be granted.

3
Case 3:18-cv-00252-CWR-FKB Document 56 Filed 11/19/18 Page 4 of 5

November 19, 2018


Respectfully submitted,

/s/ Lilli Evans Bass /s/ Brent B. Barriere


BROWN BASS & JETER, PLLC FISHMAN HAYGOOD, LLP
Lilli Evans Bass, Miss. Bar No. 102896 Brent B. Barriere, Primary Counsel
1755 Lelia Drive, Suite 400 201 St. Charles Avenue, Suite 4600
Jackson, Mississippi 39216 New Orleans, Louisiana 70170
Tel: 601-487-8448 Tel: 504-586-5253
Fax: 601-510-9934 Fax: 504-586-5250
bass@bbjlawyers.com bbarriere@fishmanhaygood.com
Receiver’s counsel Receiver’s counsel

4
Case 3:18-cv-00252-CWR-FKB Document 56 Filed 11/19/18 Page 5 of 5

CERTIFICATE OF SERVICE

I certify that I electronically filed the foregoing with the Clerk of Court using the ECF

system which sent notification of filing to all counsel of record.

In addition, I have separately emailed a copy of the foregoing to:

Jon D. Seawright
Brent Alexander
Alexander Seawright LLC
One Eastover Center
100 Vision Drive, Suite 400
Jackson, Mississippi 39211

Jon D. Seawright
Brent Alexander
Baker Donelson
One Eastover Center
100 Vision Drive, Suite 400
Jackson, Mississippi 39211
jseawright@bakerdonelson.com
balexander@bakerdonelson.com

Frank C. “Kim” Breese, III


800 Woodlands Pkwy., Suite 103
Ridgeland, Mississippi 39157
kim@breeselaw.com

R. David Kaufman
The Brunini Firm
190 East Capitol Street
The Pinnacle Building, Suite 100
Jackson, Mississippi 39201
dkaufman@brunini.com

Date: November 19, 2018 /s/ Lilli Evans Bass

5
Case 3:18-cv-00252-CWR-FKB Document 94 Filed 02/20/19 Page 1 of 6

UNITED STATES DISTR ICT COURT


SOUTHERN DISTR ICT OF M ISS ISS IPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE Case No. 3:18-cv-252


COMMISSION,

Plaintiff, Hon. Carlton W. Reeves, District Judge

v. Hon. F. Keith Ball, Magistrate Judge


ARTHUR LAMAR ADAMS AND
MADISON TIMBER PROPERTIES, LLC,

Defendants.

ORDER APPROVING SETTLEMENT

Before the Court is the Motion for Approval of Settlement filed by Alysson Mills, in her

capacity as the court-appointed receiver (the “Receiver”) for Arthur Lamar Adams and Madison

Timber Properties, LLC.

The motion asks the Court to approve the Receiver’s Marital Property Settlement

Agreement with the Vickie Lynn Adams (“Mrs. Adams”). After consideration, the Court finds

that settlement with Mrs. Adams on the proposed terms without litigation is in the Receivership

Estate’s best interests. The Court thus GRANTS the Receiver’s motion.
Case 3:18-cv-00252-CWR-FKB Document 94 Filed 02/20/19 Page 2 of 6

BACKGROUND

The Receiver has a duty “to take custody, control, and possession of all Receivership

Property, Receivership Records, and any assets traceable to assets owned by the Receivership

Estate” 1 Mrs. Adams has been married to Lamar Adams since August 3, 1978, and is the one-half

owner of certain Receivership Property acquired by Mr. and Mrs. Adams which constitutes marital

assets under the laws of the State of Mississippi. Mrs. Adams wishes to obtain a divorce from

Lamar Adams, and the Receiver wishes to allocate the subject marital assets in advance. The

Receiver and Mrs. Adams have agreed to allocate those marital assets as set forth in the Marital

Property Settlement Agreement attached as Exhibit A to the Receiver’s Motion to Approve. 2

The proposed Marital Property Settlement Agreement provides:

1. Except as specifically set forth in the Agreement, the Receiver shall retain all property of
any type or description acquired by Mr. and Mrs. Adams from the date of their marriage
through the date the Agreement is executed, save assets separately acquired by Mr. Adams
or Mrs. Adams from other sources;

2. The Adams family home located at 134 St. Andrews Drive, Jackson, Mississippi 39211
(the “Jackson Property”) shall be sold, with the first $200,000 of net proceeds allocated
50% to the Receiver and 50% to Mrs. Adams, the next $20,000 of net proceeds allocated
100% to the Receiver, and any net proceeds in excess of $220,000 allocated 90% to the
Receiver and 10% to Mrs. Adams;

3. The Adams home at 2150 Anderson Road, Condo #504, Oxford, Mississippi 38655 (the
“Oxford Property”) shall be sold, with the first $145,000 of net proceeds allocated 90% to
the Receiver and 10% to Mrs. Adams, and any net proceeds in excess of $145,000 allocated
50% to the Receiver and 50% to Mrs. Adams;

4. The 2018 Lexus LX 570 titled in the name of Mrs. Adams shall be sold, with 65% of the
proceeds allocated to the Receiver and 35% of the sales proceeds allocated to Mrs. Adams;

5. The Hartford Life and Annuity Insurance Company Policy, No. IU3153772 shall be
liquidated, with 25% of the proceeds allocated to the Receiver and 75% of the proceeds
allocated to Mrs. Adams;

1
Docket No. 33, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss).
2
No objections to the Receiver’s motion have been filed by any party.
Case 3:18-cv-00252-CWR-FKB Document 94 Filed 02/20/19 Page 3 of 6

6. Certain pieces of jewelry shall be separately allocated between the Receiver and Mrs.
Adams;

7. Furniture, fixtures, and equipment (“FFE”) located at the Jackson Property and the Oxford
Property shall be separately allocated between the Receiver and Mrs. Adams; and

8. Mrs. Adams will retain ownership of certain checking accounts at Community Bank, but
disclaims and releases to the Receiver any ownership or other interest she may have in any
other checking, savings, money market, or other banking or brokerage accounts now or
formerly maintained in the names of Mr. Adams, Madison Timber or the names of any
other limited liability company, partnership, corporation, or other entity in which the
Receivership Estate has an interest.

In the proposed Marital Property Settlement Agreement, Mrs. Adams represents and

warrants that:

1. She has disclosed to the Receiver all marital assets except the specific FFE at the Jackson
and Oxford Properties, assets with an individual value of less than $250 or a collective
value of less than $5000, or assets seized by the F.B.I. or the United States Attorney’s
Office for the Southern District of Mississippi;

2. She has disclosed to the Receiver all jewelry in which she has an interest regardless of
whether that jewelry is in her possession;

3. She is not aware of any marital asserts in possession of any other person or entity except
as has been disclosed in writing to the Receiver;

4. She has not transferred any marital assets during the past 24 months except as described in
writing to the Receiver;

5. She has provided to the Receiver all appraisals of marital assets known to her;

6. She has surrendered or terminated all credit cards and other credit accounts for which the
Receiver may be liable; and

7. She will cooperate with the Receiver to effectuate the agreements and other transactions
set forth in the Agreement.

Mrs. Adams further specifically warrants and represents that prior to Lamar Adams’

meeting with representatives of the F.B.I and the United States Attorney’s Office on April 19,

2018, she had no knowledge of the fraudulent and illegal activities of Mr. Adams and Madison

Timber.
Case 3:18-cv-00252-CWR-FKB Document 94 Filed 02/20/19 Page 4 of 6

Mrs. Adams represents and warrants that she has not discussed with any person or

representative of any entity the prospect of investing in Madison Timber; that she was not aware

the timber deeds and cutting agreements executed by various purported owners and Madison

Timber and by Madison Timber in favor of investors were fabrications; that she believed and

understood that Madison Timber and Lamar Adams were engaged in legitimate transactions

involving timber holdings; and that she had no knowledge or suspicion of that Mr. Adams or

Madison Timber were engaged in fraudulent or illegal activities or of the Ponzi scheme detailed

in the Bill of Information filed in the United States District Court for the Southern District of

Mississippi Northern Division.

Mrs. Adams’s representations and warranties were a material inducement to the Receiver’s

entering the Marital Property Settlement Agreement, and Mrs. Adams represents to the Receiver

and this Court that they may rely upon the accuracy of those representations and warranties.

The Receiver and Mrs. Adams have also requested that this Court grant Mrs. Adams

limited relief from the stay of litigation currently in effect pursuant to the June 22, 2018 Order

Appointing Receiver, Docket No. 33, for the sole purpose of permitting Mrs. Adams to file and

proceed with a petition for divorce.


Case 3:18-cv-00252-CWR-FKB Document 94 Filed 02/20/19 Page 5 of 6

ORDER APPROVING SETTLEMENT

After consideration, the Court finds that the terms of the Marital Property Settlement

Agreement are adequate, fair, reasonable, and equitable. The Marital Property Settlement

Agreement should be and is hereby APPROVED.

Accordingly, the Court hereby ORDERS as follows:

1. The terms used in this Order Approving Settlement that are defined in the Settlement

Agreement between the Receiver and Mrs. Adams, unless expressly otherwise defined herein, shall

have the same meaning as in the Marital Property Settlement Agreement.

2. This Court has jurisdiction over the subject matter of this action, and the Receiver is

a proper party to seek entry of this Order Approving Settlement.

3. The Marital Property Settlement Agreement followed meaningful, informed, arm’s

length negotiations between the Receiver and Mrs. Adams, both represented by highly capable

counsel.

4. The parties and their counsel have at all times complied with the requirements of Rule

11 of the Federal Rules of Civil Procedure.

5. The Marital Property Settlement Agreement is, in all respects, fair, reasonable, and

adequate and is hereby fully and finally approved. The parties are directed to implement and

consummate the Marital Property Settlement Agreement in accordance with its terms and with this

Order Approving Settlement.

6. Nothing in this Order Approving Settlement or the Marital Property Settlement

Agreement and no aspect of the Marital Property Settlement Agreement or negotiation thereof is

or shall be construed to be an admission or concession of any violation of any statute or law, of


Case 3:18-cv-00252-CWR-FKB Document 94 Filed 02/20/19 Page 6 of 6

any fault, liability, or wrongdoing, or of any infirmity in the claims or defenses of any party in any

other proceeding.

7. Mrs. Adams shall deliver or cause to be delivered to the Receiver the Marital Asserts

other than those Mrs. Adams specifically retains in the Marital Property Settlement Agreement in

accordance with the terms of the Agreement.

8. Notwithstanding the June 22, 2018 Order of this Court staying litigation involving

Receivership Property and Receivership Defendants, Mrs. Adams may initiate, in a court of

competent jurisdiction and venue, divorce proceedings against Lamar Adams. Those proceedings

shall not affect Receivership Property except as is provided in the Marital Property Settlement

Agreement, and this Order in no way contemplates lifting the stay of litigation for any purpose

other than Mrs. Adams’s divorce proceedings.

9. Without in any way affecting the finality of this Order Approving Settlement, the

Court retains continuing and exclusive jurisdiction over the parties for the purposes of, among

other things, the administration, interpretation, consummation, and enforcement of the Marital

Property Settlement Agreement.

SO ORDERED, this the 20th day of February, 2019.


s/ CARLTON W. REEVES
United States District Judge
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 1 of 18

IN THE UNITED STATES DISTRICT COURT


FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE


COMMISSION PLAINTIFF

V. CAUSE NO: 3:18-cv-252-CWR-FKB

ARTHUR LAMAR ADAMS AND


MADISON TIMBER PROPERTIES, LLC DEFENDANTS

MEMORANDUM BRIEF IN SUPPORT OF


MOTION FOR DECLARATION OF RIGHTS REGARDING
AUTHORITY OF RECEIVER TO PURSUE CERTAIN CLAIMS

Jeanne Lehan (“Jeanne”), on behalf of the beneficiaries of the Jeanne M. Lehan

Trust (the “Jeanne Trust”), and Pamela Lehan-Siegel (“Pamela”), on behalf of the

beneficiaries of the Pamela Lehan-Siegel Trust (the “Pamela Trust”) (sometimes collectively

referred to as the “Lehan Parties”), file this their Memorandum in Support of the Motion

for Declaration of Rights Regarding Authority of Receiver to Pursue Certain Claims

(“Motion for Declaration”). In support of the same, the Lehan Parties would show the

Court as follows:

I. INTRODUCTION

Constitutional standing is a question that must be answered at the commencement

of a lawsuit, not at the end of one. The question presented here is does the Receiver

appointed in this case have constitutional standing to intervene and assert claims in a

Mississippi state court case or institute her own case and assert claims therein that are

neither claims of the Receivership Defendants nor implicate the Receivership Estate?

Simply put, the answer is no. The Receiver does not have standing to pursue those claims.

The claims asserted by the Lehan Parties against Pinnacle Trust Company LLC

(“Pinnacle Trust”) in the case styled Jeanne Lehan, on behalf of the beneficiaries of the
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 2 of 18

Jeanne M. Lehan Trust, and Pamela Lehan-Siegel, on behalf of the beneficiaries of the

Pamela Lehan-Siegel Trust v. Pinnacle Trust Company LLC and John Does 1-10, Cause

No. 2018-603B, in the Chancery Court of Madison County, Mississippi (the “Lehan Case”)

are, with the possibility of one exception, such claims that the Receiver lacks standing to

pursue.

In the Lehan Case, the Lehan Parties, as beneficiaries of the Jeanne Trust and the

Pamela Trust, asserted that Pinnacle Trust committed breaches of trust, fiduciary duties,

and loyalty, and acted with negligence/gross negligence. The claims stem from Pinnacle

Trust’s actions and/or inactions as Trustee of the Jeanne Trust and the Pamela Trust

including impermissible loans made to Madison Timber Properties LLC (“Madison

Timber”) by Foxglove LLC (“Foxglove”). Foxglove is a Mississippi limited liability company

that is solely owned by the Jeanne Trust and the Pamela Trust and managed by Pinnacle

Trust as the Trustee of such trusts. Pinnacle Trust directed, controlled, managed, and

oversaw the formation of Foxglove and the preparation of its LLC Agreement. The LLC

Agreement for Foxglove provides that its managers shall not make loans or advances to

anyone. Pinnacle Trust also directed, controlled, managed, and oversaw the impermissible

loans made by Foxglove to Madison Timber, which were part of a ponzi scheme perpetrated

by Lamar Adams (“Adams”) and others. The funds loaned by Foxglove to Madison Timber

were a majority of the assets owned by the Jeanne Trust and the Pamela Trust, and the loss

of such funds has resulted in damages to the Lehan Parties due to Pinnacle Trust's actions

and/or inactions as Trustee of such trusts.

In the Lehan Case, the Lehan Parties did not assert any claims against Adams,

Madison Timber, or any of their officers, directors, managers, agents, or partners. As such,

2
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 3 of 18

their claims are not on behalf of or against any of the Receivership Defendants and do not

involve any Receivership Property. Rather, the Lehan Parties’ claims are predicated solely

on the actions and/or inactions taken by Pinnacle Trust as Trustee of the Jeanne Trust and

the Pamela Trust. Despite the nature of the Lehan Parties’ claims (i.e. Trust related claims)

and the parties involved (i.e. the beneficiaries and Trustee of such Trust), the Receiver

issued a letter to counsel in the Lehan Case stating that, in her opinion, she believed the

Lehan Case should be stayed. The Lehan Case, however, should not be stayed.

The Receiver should not be allowed to stay or pursue any claims in the Lehan Case,

other than possible claims concerning Pinnacle Trust’s receipt of recruitment fees and/or

kickbacks, if any, because the Receiver lacks the constitutional standing to do so. Neither

the Receivership Defendants nor the Receivership Estate have suffered any injury caused

by Pinnacle Trust’s actions and/or inactions as Trustee of the Jeanne Trust and the Pamela

Trust that could be redressed by a Court of competent jurisdiction. The Lehan Parties’

claims against Pinnacle Trust are causes of action unique to them as beneficiaries of the

Jeanne Trust and the Pamela Trust, and such claims do not involve the Receivership

Defendants or any Receivership Property, which might confer standing on the Receiver to

stay or pursue those claims. In addition, neither the Order Appointing Receiver nor

applicable state or federal law gives standing to the Receiver so that she can stay or pursue

the claims asserted by the Lehan Parties in the Lehan Case.

For these reasons, which are discussed in more detail below, this Court should find

that the Receiver lacks standing to stay or pursue any of the Lehan Parties’ claims against

Pinnacle Trust asserted in the Lehan Case, and the Lehan Case should not be stayed.

3
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 4 of 18

II. RELEVANT FACTS

On June 22, 2018, this Court entered the Order Appointing Receiver [ECF #33],1 and

appointed Alysson Mills as the Receiver. In the Order Appointing Receiver, this Court set

out the powers and duties of the Receiver. Such powers and duties included the Receiver’s

power to “assume and control the operation of the Receivership Defendants and shall

pursue and preserve all of their claims.” See Order Appointing Receiver, pg. 5. The Order

Appointing Receiver also stayed litigation in Ancillary Proceedings, which included claims

involving the Receiver in her capacity as Receiver, any Receivership Property, any of the

Receivership Defendants, and any of the Receivership Defendants’ or Receivership Estate’s

past or present officers, directors, managers, agents, or partners. Id. at pg. 13. The stay of

litigation did not extend to any claims that are not considered Ancillary Proceedings as

defined in the Order Appointing Receiver.

On June 28, 2018, the Lehan Parties filed their Complaint [MEC #3] against

Pinnacle Trust in the Lehan Case. See Ex. A.2 Their claims stem from Pinnacle Trust’s

actions and/or inactions as Trustee of the Jeanne Trust and the Pamela Trust including

impermissible loans made to Madison Timber by Foxglove, a company owned by the

Jeanne Trust and the Pamela Trust. Pinnacle Trust directed, controlled, managed, and

oversaw the formation of Foxglove and the preparation of its LLC Agreement, which

prohibits its managers from making loans to anyone, and the impermissible loans made by

1
Throughout this Memorandum, the citations to the docket entries from this case will be
cited as [ECF #X] and the citations to docket entries in the Lehan Case will be designated as [MEC
#Y] in order to distinguish the filings in the separate cases.
2
Unless otherwise noted, the Exhibits referred to herein are attached to the Lehan Parties’
Motion for Declaration.

4
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 5 of 18

Foxglove to Madison Timber, which were part of a ponzi scheme perpetrated by Lamar

Adams ("Adams") and others. The funds loaned by Foxglove to Madison Timber were a

majority of the assets owned by the Jeanne Trust and the Pamela Trust, and the loss of such

funds has resulted in damages to the Lehan Parties due to Pinnacle Trust's actions and/or

inactions as Trustee of such trusts.

On August 12, 2018, Pinnacle Trust filed its Motion to Dismiss or Stay Proceedings

and Compel Arbitration (“Motion to Compel Arbitration”) [MEC #10] and its Memorandum

in Support [MEC #11]. Pinnacle Trust requested that the Chancery Court compel all of the

Lehan Parties' claims to arbitration and dismiss or stay the proceedings based on an

inapplicable disclosure agreement signed by Jeanne and Pamela on behalf of an unrelated

limited liability company. On August 31, 2018, the Lehan Parties filed their Response in

Opposition to the Motion to Compel Arbitration (the “Response to the Motion to Compel

Arbitration”) [MEC #16] and Memorandum in Support [MEC #17] and asserted that the

disclosure agreement was inapplicable to the Lehan Parties’ claims. The Motion to Compel

Arbitration is currently pending before the Chancery Court and was previously set for a

hearing on December 4, 2018. The hearing, however, was postponed for the reasons set

forth below and it has not been reset as of the filing of the Motion for Declaration.

On November 30, 2018, the Receiver issued a letter to all counsel in the Lehan Case

and stated that she was in the process of evaluating the claims of the Receivership Estate,

that she had not ruled out any claims against Pinnacle Trust, and that the Lehan Case, in

her opinion, should be stayed. See Ex. B. On December 3, 2018, Pinnacle Trust filed a

Motion to Stay [MEC #27] arguing that the Lehan Case should be stayed based on the

November 30, 2018 letter from the Receiver. See Ex. C.

5
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 6 of 18

On December 13, 2018, the Lehan Parties filed their Request for Additional Time to

Respond and Partial Response to the Motion to Stay All Proceedings [MEC #28] asking the

Chancery Court to delay any ruling on the Motion to Stay until discussions between counsel

for the Lehan Parties and the Receiver, which were ongoing at the time, had concluded. See

Ex. D. The Lehan Parties, however, did not concede that the Lehan Case should be stayed

due to the proceedings in this case. Id.

In order to fully respond to the Motion to Stay and to pursue their claims in the

Lehan Case, the Lehan Parties file this Motion for Declaration and request that this Court

determine whether the Receiver has standing to stay or pursue any of the claims asserted

by the Lehan Parties in the Lehan Case, and, if the Lehan Case must be stayed by the

litigation stay included in the Order Appointing Receiver [ECF #33], the Lehan Parties

request permission from this Court to proceed with the Lehan Case.

III. ARGUMENT AND AUTHORITIES

As a threshold question, the Court must determine whether the Constitution confers

standing on a party to pursue certain claims. “In its constitutional dimension, standing

imports justiciability: whether the plaintiff has made out a ‘case or controversy’ between

himself and the defendant[.]” Florida Dept. of Ins. v. Chase Bank of Texas Nat. Ass’n, 274

F.3d 924, 929 (5th Cir. 2001) (quoting Warth v. Seldin, 422 U.S. 490, 498-99 (1975)). “As

an aspect of justiciability, the standing question is whether the plaintiff has ‘alleged such

a personal stake in the outcome of the controversy’ as to warrant his invocation of federal-

court jurisdiction and to justify exercise of the court’s remedial powers on his behalf.” Id.

As articulated by the [United States] Supreme Court in Lujan v. Defenders


of Wildlife, the elements of constitutional standing are: (1) that the plaintiff
have suffered an “injury in fact-an invasion of a legally protected interest

6
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 7 of 18

which is (a) concrete and particularized, and (b) actual or imminent”; (2) that
there is “a causal connection between the injury and the conduct complained
of”; and (3) that the injury is likely to be redressed by a favorable decision.

Id. (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)).

“If the plaintiff is not the party who sustained the concrete and particularized injury

for which a remedy is sought, and is not the assignee or designated representative of the

injured party, then it does not have standing.” Id. In the context of receivers, “[a]n equity

receiver, like a bankruptcy trustee, has standing for all claims that would belong to the

entity in receivership, and which would thus benefit its creditors and investors, but no

standing to represent the creditors and investors in their individual claims.” Miller v.

Harding, 248 F.3d 1127, *2 (1st Cir. 2000) (unpublished disposition) (citing Scholes v.

Lehmann, 56 F.3d 750, 753 (7th Cir. 1995)).

The United States Supreme Court, as well as the Fifth Circuit, has made clear that

if a party does not suffer an injury, it does not have standing to pursue causes of action

based on an injury. While Courts and statutory law have imbued receivers, like the Receiver

in this case, with expanded powers over claims involving receivership defendants and

receivership property, no Court or statute has permitted a receiver to pursue a claim in

which the receiver lacks constitutional standing. This precedent is expansive and is

applicable to this case. In applying this precedent, the outcome is clear: the Receiver simply

lacks standing to stay or pursue the Lehan Parties’ claims in the Lehan Case. The Receiver

has suffered no injury due to the actions and/or inactions of Pinnacle Trust as Trustee of

the Jeanne Trust and the Pamela Trust as alleged by the Lehan Parties in the Lehan Case.

This lack of standing precludes the application of the stay of litigation to the Lehan Case as

it is not an Ancillary Proceeding within the meaning of the Order Appointing Receiver and

7
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 8 of 18

precludes the Receiver from asserting such claims. Therefore, this Court should determine

that the Receiver cannot pursue the trust related claims belonging to the Lehan Parties and

permit the Lehan Parties to pursue those claims.

As an initial point, the Lehan Parties concede that the Receiver may have standing

to pursue claims that arise from or relate to one of the factual allegations asserted by the

Lehan Parties in their Complaint. The Lehan Parties, however, do not concede that the

Receiver has standing to pursue any of the causes of action asserted by the Lehan Parties

in the Lehan Case. The Lehan Parties made allegations in their Complaint concerning

recruitment fees and/or kickbacks received by Pinnacle Trust or its owners, directors,

officers, managers, employees, and/or agents tied to the loans it made to Madison Timber

as Trustee of the Jeanne Trust and the Pamela Trust. See Ex. A generally. The Lehan

Parties asserted that Pinnacle Trust failed to inform them of such recruitment fees and/or

kickbacks in violation of the Trust Agreement. Id. at pg. 7. This assertion is made in the

Lehan Parties’ cause of action for breach of trust, but is not the only factual allegation relied

on by the Lehan Parties to support that claim. Id. at pg. 10. In the request for damages, the

Lehan Parties requested that the Court order Pinnacle Trust to reimburse or be disgorged

of any recruitment fees and/or kickbacks it received in connection with the loans

mentioned above. Id. at pg. 13.

While claims and/or damages concerning recruitment fees and/or kickbacks

received by Pinnacle Trust may be construed to be claims by the Receivership Defendants

and/or involve Receivership Property, those are the only potential claims involved in the

Lehan Case that the Receiver may have standing to pursue. The remaining causes of action

and damages stem from Pinnacle Trust’s actions and/or inactions as Trustee of the Jeanne

8
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 9 of 18

Trust and the Pamela Trust, which, for the reasons detailed below, do not implicate the

Receivership Defendants and/or the Receivership Estate such that the Receiver lacks

standing to pursue those claims. Though, as stated above, the Lehan Parties made factual

allegations and requests for damages in their Complaint based on recruitment fees and/or

kickbacks, none of the Lehan Parties’ causes of action or claims for damages are solely

based on injuries stemming from recruitment fees and/or kickbacks. Therefore, if this

Court does find that the Receiver has standing to pursue any claims and/or damages based

on recruitment fees and/or kickbacks received by Pinnacle Trust, if any, from the

Receivership Defendants, this Court should also find that the Lehan Parties should be

allowed to continue to pursue their other claims and attempt to recover their other damages

at issue in the Lehan Case as the Receiver lacks standing to pursue those separate and

distinct claims.

As stated above, the first consideration in determining if a party has constitutional

standing is whether that party has suffered an injury, or, more particularly, whether a party

has suffered an injury in fact that is “(a) concrete and particularized, and (b) actual or

imminent[.]” Florida Dept. of Ins., 274 F.3d at 929 (quoting Lujan, 504 U.S. at 560-61).

To have standing, therefore, the Receiver must prove that Pinnacle Trust caused an injury

to the Receivership Defendants and/or the Receivership Estate similar to that of the Lehan

Parties. The Receiver cannot show such an injury occurred.

In their Complaint, the Lehan Parties alleged that Pinnacle Trust, as Trustee, caused

the Lehan Parties to suffer damages by taking actions and/or inactions concerning the

loaning of funds from the Jeanne Trust and the Pamela Trust, through Foxglove, to

Madison Timber. Pinnacle Trust, in violation of the terms of the Trust Agreement creating

9
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 10 of 18

the Jeanne Trust and the Pamela Trust and in violation of the LLC Agreement for Foxglove,

which was agreed to and executed by Pinnacle Trust as Trustee of the Jeanne Trust and the

Pamela Trust, made impermissible loans to Madison Timber that were unsecured and for

consideration that was less than the amount loaned. See Ex. A generally. Further, Pinnacle

Trust, in its role as Trustee, did not do sufficient, if any, due diligence concerning the loans

made to Madison Timber that it directed, controlled, managed, and oversaw as Trustee.

Id. On May 1, 2018, Pinnacle Trust sent an email to all Pinnacle Trust clients, which stated

that Pinnacle Trust deemed Madison Timber to be unsuitable for investment in 2011, and

since that time, Pinnacle Trust had not managed or directed any loans or investments in

Madison Timber or its affiliates. See Ex. D attached to the Complaint in Ex. A. This

statement contradicts the fact that subsequent to 2011, Pinnacle Trust directed and/or

controlled the lending of trust funds from the Jeanne Trust and the Pamela Trust to

Madison Timber. See Ex. A at pg. 8. As a result of these actions and/or inactions by

Pinnacle Trust, the Lehan Parties suffered the damages described in their Complaint.

The actions and/or inactions by Pinnacle Trust described above caused a concrete

and actual injury to the Lehan Parties. Further, there is “a causal connection between the

injury and the conduct complained of” as Pinnacle Trust’s actions and/or inactions caused

funds in the Jeanne Trust and the Pamela Trust to be lost. Florida Dept. of Ins., 274 F.3d

at 929 (quoting Lujan, 504 U.S. at 560-61). Also, the injury is “likely to be redressed by a

favorable decision” against Pinnacle Trust in that Pinnacle Trust, as Trustee, clearly

violated the terms of the Trust Agreement and the LLC Agreement, and clearly failed to

meet the standard of care of a Trustee in compliance with applicable Mississippi law. Id.

Therefore, the Lehan Parties have standing to pursue the claims in the Lehan Case.

10
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 11 of 18

In comparison, under the framework set forth in Lujan, the Receiver lacks standing

to pursue the above mentioned claims as none of the actions/inactions and

injuries/damages complained of by the Lehan Parties, other than those involving

recruitment fees and/or kickbacks, concern the Receivership Defendants and/or the

Receivership Estate. As previously stated, “[a]n equity receiver, like a bankruptcy trustee,

has standing for all claims that would belong to the entity in receivership, and which would

thus benefit its creditors and investors, but no standing to represent the creditors and

investors in their individual claims.” Miller, 248 F.3d at *2 (citing Scholes, 56 F.3d at 753).

None of the Lehan Parties’ claims, however, belong to the Receivership Defendants or

would benefit all of the creditors and investors through the Receivership Estate. Therefore,

the Receiver lacks standing.

First, none of the claims by the Lehan Parties belong to the Receivership Defendants.

Pinnacle Trust was not acting as Trustee for the Receivership Defendants or the

Receivership Estate, Pinnacle Trust does not owe any fiduciary duty or duty of loyalty to

Receivership Defendants or the Receivership Estate, and Pinnacle Trust did not breach any

duty or standard of care owed to the Receivership Defendants of the Receivership Estate

by loaning funds from the Jeanne Trust or the Pamela Trust to Madison Timber. Also, none

of the Lehan Parties have assigned their claims to the Receiver or the Receivership

Defendants or designated them as a representative of the Lehan Parties. Florida Dept. of

Ins., 274 F.3d at 929 (quoting Lujan, 504 U.S. at 560-61). As such, the Receiver lacks

standing because the Receivership Defendants do not have causes of action that are the

same as the ones being pursued by the Lehan Parties.

11
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Further, none of the Lehan Parties’ claims involve the Receivership Estate. As stated

above, the Lehan Parties admit that the Receiver may have certain limited claims against

Pinnacle Trust, however, none of those claims, other than the previously conceded

allegations concerning recruitment fees and/or kickbacks, are present in the Lehan Case.

All of the damages sought by the Lehan Parties are from Pinnacle Trust and/or its liability

insurance carrier, and are not from any of the Receivership Defendants or the Receivership

Estate. Based on the above, the Receiver lacks constitutional standing as dictated under

Lujan to maintain the claims by the Lehan Parties against Pinnacle Trust in its capacity as

Trustee of the Jeanne Trust and the Pamela Trust.

Since the Receiver lacks standing to pursue the Lehan Parties’ claims and damages,

the Lehan Case should not be stayed and the Lehan Parties should be able to pursue their

claims against Pinnacle Trust. In her November 30, 2018 letter, the Receiver stated that

in her opinion the Lehan Case, in its entirety, should be stayed. See Ex. B. The Lehan Case,

however, should not be stayed as the Order Appointing Receiver does not require the same.

The Order Appointing Receiver dictates the categories of cases that qualify as Ancillary

Proceedings, in which the Receiver could pursue claims and the stay of litigation would

apply. None of those categories would include the Lehan Parties’ claims in the Lehan Case.

The Order Appointing Receiver states that the stay of litigation applies to cases involving:

(1) the Receiver in her capacity as Receiver;

(2) any Receivership Property, wherever located;

(3) any of the Receivership Defendants, including subsidiaries and


partnerships; or

(4) any of the Receivership Defendants’ or Receivership Estate’s past or


present officers, directors, managers, agents, or general or limited

12
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 13 of 18

partners sued for, or in connection with, any action taken by them


while acting in such capacity of any nature, whether as plaintiff,
defendant, third-party plaintiff, third-party defendant, or otherwise.

See Order Appointing Receiver, pgs. 12-13. As none of the claims or parties in the Lehan

Case, other than what has been previously conceded, fall into the categories listed above,

the Lehan Case should not be stayed and the Lehan Parties should be able to continue their

suit against Pinnacle Trust.

It is anticipated that the Receiver may argue that whether litigation should be stayed

is not a question of the Receiver’s standing, but rather a question of the administration and

equity of this Court and its litigation stay in the Order Appointing Receiver.3 The Receiver

has previously argued that the Court’s authority to stay litigation extends to all claims

concerning claims by or against the Receiver and claims that could “diminish the value of

the Receivership Estate's claims[,]” and does not involve the question of the Receiver’s

standing. See Reply Memorandum, pg. 2. This argument by the Receiver, however, is

without merit.

The Receiver’s standing is directly related to the stay of litigation. If standing were

not an issue, then the Court’s stay of litigation could in theory apply to any claim in any

court concerning any issue and any party regardless of its connection to the Receivership

Defendants and the Receivership Estate. That simply cannot be the case. The purpose of

3
The issue of the Receiver’s standing and this Courts authority to stay certain claims has
previously been argued before this Court in the Motion for Contempt [ECF #56] filed by the
Receiver against Brent Alexander (“Alexander”) and Jon Seawright (“Seawright”), Alexander and
Seawright’s Response to the Motion for Contempt [ECF #62] (“Response to Motion for Contempt”),
and the Receiver’s Reply Memorandum in Further Support of Motion for Contempt [ECF #66]
(“Reply Memorandum”). A hearing on the above Motion for Contempt proceedings was held on
December 19, 2018. At the time of the filing of the Motion for Declaration, this Court has not ruled
on the Motion for Contempt.

13
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 14 of 18

the stay is to either preserve and/or pursue claims belonging to or made against the

Receivership Defendants, and/or to preserve the Receivership Estate for the benefit of all

victims. If the Receiver lacks standing, the underlying purpose of the stay cannot be

fulfilled as standing is an absolute requirement for a party, in this case the Receiver, to

pursue or defend against claims. This standing requirement would apply whether the

claims involved the Receivership Defendants or the Receivership Estate. If the Receiver

cannot prove standing, the stay has no effect as the Receiver could not assert or defend any

claims or recover or preserve any property in the Receivership Estate. As such, the stay

cannot extend to claims in which the Receiver lacks standing, and would not extend to the

claims in the Lehan Case.

The Receiver may argue that any payment to the Lehan Parties in connection with

the Lehan Case could affect the overall amount available to victims of wrongdoing by

Pinnacle Trust in connection with the actions of the Receivership Defendants. In her Reply

Memorandum in the Alexander Seawright matter, the Receiver argued that the collection

of money from UPS would deplete the funds available for other victims who may also have

claims against UPS. Alexander and Seawright sued the UPS Store in Madison, Mississippi,

the store owners, and three notaries employed there based on their involvement in

notarized fake timber deeds used as part of Adams’ ponzi scheme. Alexander and

Seawright negotiated a settlement with UPS’s insurance carrier for $100,000 to be paid to

Alexander and Seawright’s clients, all of whom were victims of Adams’ ponzi scheme.

Under the Receiver’s argument, if Alexander and Seawright’s clients received the $100,000

settlement, which would result in fewer, if any, funds available for other victims from UPS’s

insurance carrier after the payout. The Lehan Case, however, is clearly distinguishable.

14
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 15 of 18

First, unlike the UPS scenario in which there could be additional victims who have

claims against UPS stemming from the notarized fake timber deeds, which Alexander and

Seawright admitted could have been used to defraud others in addition to their clients, the

Lehan Parties are the only parties who have claims against Pinnacle Trust stemming from

Pinnacle Trust's action and/or inactions as Trustee of the Jeanne Trust and the Pamela

Trust regarding impermissible loans made by such trusts to Madison Timber. Second, even

if the Receiver had claims against Pinnacle Trust, those claims would be based on the

recruitment fees and/or kickbacks received by Pinnacle Trust, if any, and not based on acts

by Pinnacle Trust as Trustee of the Jeanne Trust and the Pamela Trust. Based upon

information available to the Lehan Parties to date, it does not appear that Pinnacle Trust

received any recruitment fees and/or kickbacks, which, if correct, would mean that the

Receiver would not have any claims to assert against Pinnacle Trust. Regardless, the Lehan

Parties would be the only parties who could collect from Pinnacle Trust based on the Lehan

Parties’ separate and distinct claims as the Lehan Parties know of no other person who has

a breach of trust, breach of fiduciary duty, breach of loyalty, or negligence/gross negligence

claim relating to Pinnacle Trust in its position as a Trustee of a trust. Therefore, even under

the Receiver’s anticipated argument, the litigation stay would not apply to the Lehan

Parties’ claims, other than those specifically conceded above.

In addition, the Lehan Parties claims against Pinnacle Trust are covered, or at least

potentially covered, by a liability insurance policy insuring Pinnacle Trust against

malfeasance in its duties as a Trustee. The Lehan Parties do not know of any liability

insurance polices insuring Pinnacle Trust that would provide coverage for any claim that

could be asserted by the Receiver against Pinnacle Trust. Certainly, any claim by the

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Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 16 of 18

Receiver against Pinnacle Trust for receipt of recruitment fees and/or kickbacks would not

be the types of claims covered by a liability insurance policy.

IV. CONCLUSION

Based on the above, the Receiver lacks constitutional standing to pursue the claims

asserted by the Lehan Parties in the Lehan Case. Though the Lehan Parties concede that

the Receiver may have claims that arise from or relate to the allegations in their Complaint

concerning recruitment fees and/or kickbacks received by Pinnacle Trust, if any, or its

officers, directors, managers, employees, representatives, and/or agents, none of the Lehan

Parties’ causes of action or requests for damages solely rely on those allegations and can be

severed or removed from their Complaint and not pursued by the Lehan Parties. Aside

from the potential claims concerning recruitment fees and/or kickbacks, the Receiver lacks

standing to pursue any of the Lehan Parties other claims as none of those claims belong to

the Receivership Defendants or involve Receivership Property. As such, the Receiver

cannot pursue any of those claims. Further, the stay of litigation in the Order Appointing

Receiver does not apply to the Lehan Parties’ claims as standing is a threshold requirement

and the Court’s powers of administration and equity cannot supercede this requirement.

Therefore, the Lehan Parties request that this Court enter an Order declaring that the

Receiver does not have standing to pursue the claims asserted by the Lehan Parties in the

Lehan Case, and that the stay of litigation does not apply to the Lehan Case and the Lehan

Parties be allowed to continue to pursue their claims against Pinnacle Trust.

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Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 17 of 18

RESPECTFULLY SUBMITTED, this the 14th day of January, 2019.

JEANNE LEHAN, ON BEHALF OF


THE BENEFICIARIES OF THE
JEANNE M. LEHAN TRUST AND
PAMELA LEHAN-SIEGEL, ON
BEHALF OF THE BENEFICIARIES
OF THE PAMELA LEHAN-SIEGEL TRUST

By: /s/ G. Todd Burwell

OF COUNSEL:

John Davidson (MSB #9073)


jdavidson@dbslawfirm.net
DAVIDSON BOWIE, PLC
2506 Lakeland Drive, Suite 501
Flowood, MS 39232
Tel: 601-932-0028

G. Todd Burwell (MSB #8832)


tburwell@gtbpa.com
Emily K. Lindsay (MSB #104963)
elindsay@gtbpa.com
G. TODD BURWELL, P.A.
618 Crescent Blvd., Suite 200
Ridgeland, MS 39157
Tel: 601-427-4470

17
Case 3:18-cv-00252-CWR-FKB Document 80 Filed 01/14/19 Page 18 of 18

CERTIFICATE OF SERVICE

I, G. Todd Burwell, one of the attorneys for the Lehan Parties, do hereby certify that

on this the14th day of January, 2019, I electronically filed the foregoing with the Clerk of

Court using the CM/ECF system. I certify that I have this day forwarded via the ECF

system, a true and correct copy of the foregoing to all counsel of record who have registered

with that system in this case. In addition, a true and correct copy of the foregoing has been

sent via email and/or U.S. Mail, First Class, to:

Luke Dove
Dove and Chill
1020 Highland Col Pkwy Ste 412
Ridgeland, MS 39157-8719
lukedove@dovechill.com
Attorney for Pinnacle Trust Company, LLC

/s/ G. Todd Burwell

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Case 3:18-cv-00252-CWR-FKB Document 79 Filed 01/14/19 Page 1 of 9

IN THE UNITED STATES DISTRICT COURT


FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE


COMMISSION PLAINTIFF

V. CAUSE NO: 3:18-cv-252-CWR-FKB

ARTHUR LAMAR ADAMS AND


MADISON TIMBER PROPERTIES, LLC DEFENDANTS

MOTION FOR DECLARATION OF RIGHTS REGARDING


AUTHORITY OF RECEIVER TO PURSUE CERTAIN CLAIMS

Jeanne Lehan (“Jeanne”), on behalf of the beneficiaries of the Jeanne M. Lehan

Trust (the “Jeanne Trust”), and Pamela Lehan-Siegel (“Pamela”), on behalf of the

beneficiaries of the Pamela Lehan-Siegel Trust (the “Pamela Trust”) (sometimes collectively

referred to as the “Lehan Parties”), file this their Motion for Declaration of Rights regarding

Authority of Receiver to Pursue Certain Claims (the “Motion for Declaration”). In support

of the same, the Lehan Parties would show the Court as follows:

1. On June 22, 2018, this Court entered the Order Appointing Receiver [ECF

#33], and appointed Alysson Mills as the Receiver. On June 28, 2018, the Lehan Parties

filed their Complaint [MEC #3]1 in the case styled Jeanne Lehan, on behalf of the

beneficiaries of the Jeanne M. Lehan Trust, and Pamela Lehan-Siegel, on behalf of the

beneficiaries of the Pamela Lehan-Siegel Trust v. Pinnacle Trust Company LLC and John

Does 1-10, Cause No. 2018-603B, in the Chancery Court of Madison County, Mississippi

1
Throughout this Motion, the citations to the docket entries from this case will be
cited as [ECF #X] and the citations to docket entries in the Lehan Case will be designated
as [MEC #Y] in order to distinguish the filings in the separate cases.

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Case 3:18-cv-00252-CWR-FKB Document 79 Filed 01/14/19 Page 2 of 9

(the “Lehan Case”).

2. In the Lehan Case, the Lehan Parties, as beneficiaries of the Jeanne Trust and

the Pamela Trust, asserted that Pinnacle Trust Company LLC (“Pinnacle Trust”) committed

breaches of trust, fiduciary duties, and loyalty, and acted with negligence/gross negligence.

The claims stem from Pinnacle Trust’s actions and/or inactions as Trustee of the Jeanne

Trust and the Pamela Trust including impermissible loans made to Madison Timber

Properties LLC (“Madison Timber”) by Foxglove LLC (“Foxglove”). Foxglove is a

Mississippi limited liability company that is solely owned by the Jeanne Trust and the

Pamela Trust and managed by Pinnacle Trust as the Trustee of such trusts. Pinnacle Trust

directed, controlled, managed, and oversaw the formation of Foxglove and the preparation

of its LLC Agreement. The LLC Agreement for Foxglove provides that its manager shall not

make any loans or advances to anyone. Pinnacle Trust also directed, controlled, managed,

and oversaw the impermissible loans made by Foxglove to Madison Timber, which were

part of a ponzi scheme perpetrated by Lamar Adams (“Adams”) and others. The funds

loaned by Foxglove to Madison Timber were a majority of the assets owned by the Jeanne

Trust and the Pamela Trust, and the loss of such funds has resulted in damages to the

Lehan Parties due to Pinnacle Trust’s actions and/or inactions as Trustee of such trusts.

In the Lehan Case, the Lehan Parties did not assert any claims against Adams, Madison

Timber, or any of their officers, directors, managers, agents, or partners.

3. On August 12, 2018, Pinnacle Trust filed its Motion to Dismiss or Stay

Proceedings and Compel Arbitration (“Motion to Compel Arbitration”) [MEC #10] and its

Memorandum in Support [MEC #11] in the Lehan Case. Pinnacle Trust requested that the

Chancery Court compel all of the Lehan Parties’ claims to arbitration and dismiss or stay

2
Case 3:18-cv-00252-CWR-FKB Document 79 Filed 01/14/19 Page 3 of 9

the proceedings based on an inapplicable disclosure agreement signed by Jeanne and

Pamela on behalf of an unrelated limited liability company. On August 31, 2018, the Lehan

Parties filed their Response in Opposition to the Motion to Compel Arbitration (the

“Response to the Motion to Compel Arbitration”) [MEC #16] and Memorandum in Support

[MEC #17] and asserted that the disclosure agreement was inapplicable to the Lehan

Parties’ claims. The Motion to Compel Arbitration is currently pending before the Chancery

Court and was previously set for a hearing on December 4, 2018. The hearing, however,

was postponed for the reasons set forth below and it has not been reset.

4. On November 30, 2018, the Receiver issued a letter to all counsel in the Lehan

Case and stated that she was in the process of evaluating the claims of the Receivership

Estate, that she had not ruled out any claims against Pinnacle Trust, and that the Lehan

Case, in her opinion, should be stayed. On December 3, 2018, Pinnacle Trust filed a Motion

to Stay [MEC #27] arguing that the Lehan Case should be stayed based on the November

30, 2018 letter from the Receiver. On December 13, 2018, the Lehan Parties filed their

Request for Additional Time to Respond and Partial Response to the Motion to Stay All

Proceedings [MEC #28] asking the Chancery Court to delay any ruling on the Motion to

Stay until discussions between counsel for the Lehan Parties and the Receiver, which were

ongoing at the time, had concluded. The Lehan Parties, however, did not concede that the

Lehan Case should be stayed due to the proceedings in this case.

5. In order to fully respond to the Motion to Stay and to pursue their claims in

the Lehan Case, the Lehan Parties file this Motion for Declaration and request that this

Court determine whether the Receiver has standing to pursue any claims in the Lehan Case,

and, if the Lehan Case must be stayed pursuant to the Order Appointing Receiver [ECF

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Case 3:18-cv-00252-CWR-FKB Document 79 Filed 01/14/19 Page 4 of 9

#33], the Lehan Parties request permission from this Court to proceed with the Lehan Case.

The Lehan Case should not be stayed because the Receiver does not have constitutional

standing to pursue any claims asserted by the Lehan Parties in the Lehan Case, other than

those concerning Pinnacle Trust’s receipt of recruitments fees and/or kickbacks, if any.

Further, neither the Order Appointing Receiver nor applicable state or federal law gives the

Receiver the authority to stay or pursue any claims in which the Receiver lacks standing,

or in which no Receivership Property is involved, which is the case here. Therefore, this

Court should find that the Receiver lacks standing to pursue the Lehan Parties’ claims

against Pinnacle Trust, the Lehan Case should not be stayed, and the Lehan Parties should

be allowed to pursue their claims against Pinnacle Trust in the Lehan Case.

6. As an initial point, the Complaint [MEC #3] in the Lehan Case asserted claims

for breaches of trust, fiduciary duty, and duty of loyalty, and for negligence/gross

negligence. As part of the factual allegations, the Lehan Parties asserted that owners,

officers, managers, employees, agents, and/or representatives of Pinnacle Trust received

recruitment fees and/or kickbacks for getting clients to loan money to or invest in Madison

Timber. In their request for damages, the Lehan Parties requested a disgorgement and/or

repayment of the recruitment fees and/or kickbacks. The Lehan Parties did not assert a

claim or seek damages solely based on any recruitment fees and/or kickbacks, but do

concede that the Receiver may have standing to pursue claims based on the recruitment

fees and/or kickbacks paid to Pinnacle Trust. However, based upon information available

to the Lehan Parties to date, it does not appear that Pinnacle Trust received any

recruitment fees and/or kickbacks, which, if correct, would mean that the Receiver would

not have any claims to assert against Pinnacle Trust. Even so, the Lehan Parties do not

4
Case 3:18-cv-00252-CWR-FKB Document 79 Filed 01/14/19 Page 5 of 9

intend to pursue any claims or damages based on the same, and this should not prevent the

Lehan Parties from pursuing their other claims in the Lehan Case.

7. Aside from any potential claims concerning recruitment fees and/or

kickbacks, the Receiver lacks constitutional standing to assert any of the Lehan Parties’

claims on behalf of the Receivership Defendants or the Receivership Estate. Neither the

Receivership Defendants nor the Receivership Estate was injured by the actions and/or

inactions of Pinnacle Trust as the Trustee of the Jeanne Trust and the Pamela Trust or as

the manager of Foxglove, which is owned by such trusts, concerning funds loaned by

Foxglove to Madison Timber. Without an injury caused by the actions and/or inactions of

Pinnacle Trust described above that can be redressed by a Court of competent jurisdiction,

the Receiver lacks constitutional standing to stay or bring the claims asserted by the Lehan

Parties in the Lehan Case.

8. The claims asserted in the Lehan Case are unique to the Lehan Parties and are

not claims that could be asserted by the Receiver on behalf of the Receivership Defendants.

The Receivership Defendants are not beneficiaries under the Trust Agreement establishing

the Jeanne Trust and the Pamela Trust, Pinnacle Trust did not act as the Trustee for the

Receivership Defendants in relation to the Jeanne Trust and the Pamela Trust, and

Pinnacle Trust did not commit any breaches of trust, fiduciary duties, or loyalty or commit

any acts of negligence/gross negligence in connection with the funds of the Jeanne Trust

and the Pamela Trust loaned to Madison Timber that could have caused any injury to the

Receivership Defendants. As such, the Receivership Defendants have not suffered any

injury that would place them in the same position as the Lehan Parties, which precludes the

Receiver from pursuing any of the claims of the Lehan Parties in the Lehan Case. If

5
Case 3:18-cv-00252-CWR-FKB Document 79 Filed 01/14/19 Page 6 of 9

Pinnacle Trust did somehow injure the Receivership Defendants to the extent that the

Receiver would have standing to pursue claims against Pinnacle Trust, those claims would

be completely separate and distinguishable from the claims asserted by the Lehan Parties

in the Lehan Case.

9. In addition, neither the Order Appointing Receiver nor applicable state or

federal law gives the Receiver the authority to stay or pursue any claims in which the

Receiver lacks standing, or in which no Receivership Property is involved. The Order

Appointing Receiver [ECF #33] permits the Receiver to pursue claims belonging to the

Receivership Defendants and/or involving Receivership Property. The stay of litigation as

issued in the Order Appointing Receiver [ECF #33] applies only to Ancillary Proceedings,

which include actions by the Receiver in her capacity as Receiver, and any actions involving

the Receivership Defendants, Receivership Property, or any of the Receivership Defendants

or Receivership Estate's officers, directors, managers, agents, or partners.

10. The claims in the Lehan Case, however, do not fall into any of the categories

of Ancillary Proceedings specifically designated in the Order Appointing Receiver [ECF

#33]. The claims in the Lehan Case are causes of action unique to the Lehan Parties (i.e.

beneficiaries of trusts asserting claims against the Trustee of such trusts for breach of trust

and other related claims), they do not involve any claim by or against the Receivership

Defendants (i.e. Adams, Madison Timber, or any of their officers, directors, managers,

agents, or partners), and they do not involve any Receivership Property (i.e. all property

interest of Receivership Defendants). Any recovery by the Lehan Parties in the Lehan Case

would not involve Receivership Property or the Receivership Estate as the Lehan Parties

would receive any award of damages from Pinnacle Trust and/or its liability insurer, which

6
Case 3:18-cv-00252-CWR-FKB Document 79 Filed 01/14/19 Page 7 of 9

would not implicate any Receivership Property. Therefore, the Lehan Case is not an

Ancillary Proceeding and the Receiver lacks standing to stay or to pursue any of the claims

in the Lehan Case.

11. In the alternative, if this Court finds that the stay of litigation does apply to

any of their claims, then the Lehan Parties request that this Court enter an Order granting

them relief from the stay, and allowing them to proceed with their claims in the Lehan Case,

other than those claims that the Receiver may have standing to pursue against Pinnacle

Trust on behalf of the Receivership Defendants and/or the Receivership Estate, if any.

12. In support of the Motion for Declaration, the Lehan Parties attach hereto, and

incorporate herein by reference, the following exhibits:

Ex. “A” The Complaint filed in the Lehan Case

Ex. “B” The November 30, 2018 Letter from the Receiver

Ex. “C” The Motion to Stay filed in the Lehan Case

Ex. “D” The Lehan Parties’ Response to the Motion to Stay filed in the
Lehan Case

13. In further support of the Motion for Declaration, the Lehan Parties adopt and

incorporate herein by reference, their Memorandum Brief in Support of the Motion for

Declaration of Rights.

WHEREFORE, PREMISES CONSIDERED, the Lehan Parties respectfully request

that this Court enter an Order declaring that the Receiver lacks standing to pursue the

Lehan Parties’ claims in the Lehan Case and the stay of litigation does not apply to the

Lehan Case or, in the alternative, enter an Order declaring that the Receiver has standing

to pursue only certain claims in the Lehan Case, and allowing the Lehan Parties to proceed

with the remainder of their claims in the Lehan Case. The Lehan Parties also respectfully

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Case 3:18-cv-00252-CWR-FKB Document 79 Filed 01/14/19 Page 8 of 9

request any further relief they may be entitled to under the circumstances.

RESPECTFULLY SUBMITTED, this the 14th day of January, 2019.

JEANNE LEHAN, ON BEHALF OF


THE BENEFICIARIES OF THE
JEANNE M. LEHAN TRUST AND
PAMELA LEHAN-SIEGEL, ON
BEHALF OF THE BENEFICIARIES
OF THE PAMELA LEHAN-SIEGEL TRUST

By: /s/ G. Todd Burwell

OF COUNSEL:

John Davidson (MSB #9073)


jdavidson@dbslawfirm.net
DAVIDSON BOWIE, PLC
2506 Lakeland Drive, Suite 501
Flowood, MS 39232
Tel: 601-932-0028

G. Todd Burwell (MSB #8832)


tburwell@gtbpa.com
Emily K. Lindsay (MSB #104963)
elindsay@gtbpa.com
G. TODD BURWELL, P.A.
618 Crescent Blvd., Suite 200
Ridgeland, MS 39157
Tel: 601-427-4470

8
Case 3:18-cv-00252-CWR-FKB Document 79 Filed 01/14/19 Page 9 of 9

CERTIFICATE OF SERVICE

I, G. Todd Burwell, one of the attorneys for the Lehan Parties, do hereby certify that

on this the 14th day of January, 2019, I electronically filed the foregoing with the Clerk of

Court using the CM/ECF system. I certify that I have this day forwarded via the ECF

system, a true and correct copy of the foregoing to all counsel of record who have registered

with that system in this case. In addition, a true and correct copy of the foregoing has been

sent via email and/or U.S. Mail to:

Luke Dove
Dove and Chill
1020 Highland Col Pkwy Ste 412
Ridgeland, MS 39157-8719
lukedove@dovechill.com
Attorney for Pinnacle Trust Company, LLC

/s/ G. Todd Burwell

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Case 3:18-cv-00252-CWR-FKB Document 29 Filed 06/06/18 Page 1 of 4

IN THE UNITED STATES DISTRICT COURT


FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES & EXCHANGE PLAINTIFFS


COMMISSION, et al.,

V. CAUSE NO. 3:18-CV-252-CWR-FKB

ARTHUR LAMAR ADAMS, DEFENDANTS


et al.

ORDER FOR INTERIM RELIEF PENDING


APPOINTMENT OF A TEMPORARY RECEIVER

This Court, having determined that certain interim relief is appropriate to preserve the

assets of the Defendants pending the selection of a Temporary Receiver, orders as follows:

A. The Defendants and all persons receiving notice of this Order by personal service,

facsimile or otherwise, are hereby restrained and enjoined from directly or indirectly taking any

action or causing any action to be taken, without the prior order from this Court, which would:

1. Interfere with the Temporary Receiver’s eventual efforts to take control,


possession, or management of monies, funds, securities, credits, effects, goods, chattels,
lands, premises, leases, claims, rights and other assets, together with all rents, profits,
dividends, interest or other income attributable thereto, of whatever kind, which the
Defendants own, possess, have a beneficial interest in, or controls directly or indirectly
(“Receivership Property” or, collectively, the “Receivership Estate”); such prohibited
actions include but are not limited to, using self-help or executing or issuing or causing
the execution or issuance of any court attachment, subpoena, replevin, execution, or other
process for the purpose of impounding or taking possession of or interfering with or
creating or enforcing a lien upon any Receivership Property;

2. Dissipate or otherwise diminish the value of any Receivership Property;


such prohibited actions include but are not limited to, releasing claims or disposing,
transferring, exchanging, assigning or in any way conveying any Receivership Property,
enforcing judgments, assessments or claims against any Receivership Property or any
Receivership Defendant, attempting to modify, cancel, terminate, call, extinguish, revoke
or accelerate (the due date), of any lease, loan, mortgage, indebtedness, security
agreement or other agreement executed by any Defendant or which otherwise affects any
Receivership Property; or,
Case 3:18-cv-00252-CWR-FKB Document 29 Filed 06/06/18 Page 2 of 4

3. Interfere in any manner with the exclusive jurisdiction of this Court over
the Receivership Estate.

4. Nothing in paragraph A herein shall prohibit any business in which either


defendant owns an interest and which is managed by a third party from entering into
commercially reasonable agreements on behalf of that business or continuing to pay
operating expenses for that business as they come due in the ordinary course of business.
Management of any such businesses shall maintain a list of any such agreements and
payments and shall, upon appointment of a Temporary Receiver in this matter, provide
that list to the Temporary Receiver. This paragraph specifically authorizes the majority
owners of Delta Farm Land Investments LLC (“DFLI”), a Mississippi limited liability
company in which Defendant, Arthur Lamar Adams, owns a one-third interest, to take the
following actions:

a. To continue to operate and manage DFLI, including temporarily replacing


Arthur Lamar Adams as the managing member and registered agent for
service of process until the appointment of a Temporary Receiver (and the
filing with the Mississippi Secretary of State the documentation necessary to
effectuate such temporary appointment);
b. To open and maintain bank accounts and to make deposits and withdrawals
therefrom so as to continue to receive income and pay expenses, including all
taxes and assessments of any kind, as they come due in the ordinary course of
business (subject to audit and challenge as specified below by the Temporary
Receiver);
c. With regard to the real property described on the Promissory Note attached
hereto as Exhibit “A” (the “Subject Property”), which is owned by DFLI and
pledged as collateral for the Promissory Note, to make all payments as and
when due under the terms of the Promissory Note. The next such payment is
due on June 30, 2018, in the amount of $43,356.00. The majority members of
DFLI are authorized to make all payments due under the Promissory Note,
including the portion of such payments that would otherwise be due from
Arthur Lamar Adams. The majority members of DFLI are authorized to
recoup the amount of payments made on behalf of Arthur Lamar Adams from
future revenue of DFLI, including revenue from lease agreements or the
proceeds from a sale of the Subject Property, provided that no such
recoupment shall decrease Arthur Lamar Adams’s membership interest in
DFLI;
d. To enter into the following agreements regarding the Subject Property, which
are substantially similar to arrangements DFLI has previously entered into and
which generate revenue for DFLI: (i) an Agricultural Lease Contract in the
form attached hereto as Exhibit “B” and (ii) a Hunting Lease Agreement in
the form attached hereto as Exhibit “C”;
e. To continue to collect the income on and to renew when necessary, two
Conservation Reserve Program Contracts attached hereto as Exhibits “D” and
“E”; and
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f. To continue to market for sale the Subject Property, provided that the
approval of the final terms of any sale of the Subject Property will be reserved
to this Court or the receiver, as appropriate.

DFLI shall maintain a list of payments and agreements necessary to effectuate the actions
listed above to be provided to this Court and the Temporary Receiver upon appointment.
The Temporary Receiver may challenge any of the actions taken pursuant to this
paragraph only on the basis of (1) not being in the ordinary course of business; (2)
pursuant to any contractual right that Arthur Lamar Adams may have under the DFLI
operating agreements; or (3) pursuant to any rights provided by Mississippi law to
minority members of limited liability companies.

B. As set forth in detail below, the following proceedings, excluding the instant

proceeding and all police or regulatory actions and actions of the Commission related to the

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

All civil legal proceedings of any nature, including, but not limited to, bankruptcy
proceedings, arbitration proceedings, foreclosure actions, default proceedings, or other
actions of any nature involving: (a) any Receivership Property, wherever located; (b) any
of the Defendants, including but not limited to its subsidiaries and partnerships; or, (c)
any of the Defendants’ past or present officers, directors, managers, agents, or general or
limited partners sued for, or in connection with, any action taken by them while acting in
such capacity of any nature, whether as plaintiff, defendant, third-party plaintiff, third-
party defendant, or otherwise (such proceedings are hereinafter referred to as “Ancillary
Proceedings”).

C. The parties to any and all Ancillary Proceedings are enjoined from commencing

or continuing any such legal proceeding, or from taking any action, in connection with any such

proceeding, including, but not limited to, the issuance or employment of process.

D. All Ancillary Proceedings are stayed in their entirety, and all Courts having any

jurisdiction thereof are enjoined from taking or permitting any action until further Order of this

Court. Further, as to a cause of action accrued or accruing in favor of one or more of the

Defendants against a third person or party, any applicable statute of limitation is tolled during the

period in which this injunction against commencement of legal proceedings is in effect as to that

cause of action.
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E. The provisions of Paragraphs B – D above bar any person or entity from placing

either of the Defendants in bankruptcy proceedings.

SO ORDERED, this the 5th day of June, 2018.

s/ Carlton W. Reeves
UNITED STATES DISTRICT JUDGE
Case 3:18-cv-00252-CWR-FKB Document 33 Filed 06/22/18 Page 1 of 15

____________________

No. 3:18-CV-00252-CWR-FKB

SECURITIES & EXCHANGE COMMISSION,


Plaintiff,

v.

ARTHUR LAMAR ADAMS,


et al.,
Defendants.
____________________

ORDER APPOINTING RECEIVER


____________________

Before CARLTON W. REEVES, District Judge.


Defendants engaged in a multi-million dollar Ponzi scheme
that defrauded hundreds of investors. This order appoints a
receiver to manage Defendants’ estates and describes the
scope of receivership.
Thirty applicants submitted receivership applications to the
Court. This pool of men and women was extremely impres-
sive and unusually diverse. Applicants included lawyers
Case 3:18-cv-00252-CWR-FKB Document 33 Filed 06/22/18 Page 2 of 15

(ranging from solo practitioners to partners in law firms


larger than any in Mississippi), accountants, academics, and
other professionals from a dozen states across the country.
Out-of-state applicants recognized the talents of Mississippi
attorneys by proposing substantive alliances with them. The
Secretary of State was right to support an open application
process, without which many would never have had the op-
portunity to reveal their talents to this Court. Applicants of-
fered compelling reasons for their appointment. The breadth
and depth of their experiences made this Court’s choice a dif-
ficult one.
The Court considered many factors when screening applica-
tions. A number of applicants lacked the appropriate profes-
sional experience for this case. Some with the right experience
proposed hourly rates that were too high to justify, including
rates of over $1,000 an hour. Others proposed to work with
partner professionals less qualified than others in the pool.
Occasionally, applicants or the firms they partnered with had,
in practicing before this Court, demonstrated that they are un-
suited to serve as a receiver.
Nearly all candidates, however, proposed laudable and bold
steps to ensure that their recruitment and retention policies
were inclusive. The Court was particularly impressed with
members of the Mississippi bar who crossed long-established
lines to forge entrepreneurial partnerships. The diversity of
the applicant pool and the creativity of the respective pro-
posals is worth noting.
Encouraging diversity in the judiciary is not a cure-all for the
lack of that feature in the broader legal profession. Nor is en-
couraging diversity destined to result in true representation,

2
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rather than tokenism masquerading as such. Nevertheless, in


order to do justice, the judiciary must incorporate a wide ar-
ray of experiences, facts, and perspectives into its deci-
sionmaking processes – including the decisionmaking pro-
cess of receivers, who act as extensions of the courts. When
courts hire and appoint individuals to assist in their mission,
they must ensure those opportunities are extended to all
whom the judiciary serves. As this case proves, doing so en-
hances – rather than diminishes – the quality of the applicant
pool.
Of all the candidate qualifications the Court took into account,
perhaps the most important was the ability to exercise disin-
terested and informed judgment. This case involves what
may be the largest Ponzi scheme in Mississippi’s history, one
in which many Mississippi residents and entities are entan-
gled. Mississippi is a small state. The Receiver and her staff
must be close enough to the state to understand its workings.
But the Receiver must also be distant enough to preserve her
impartiality, a key trait in a process that may involve clawing
back funds from the connected and powerful. Many other-
wise capable candidates were unequipped to navigate the real
and apparent conflicts of interest their appointment would
create.1
After weighing the applicants’ professional experience,
hourly rates, candor, judgment, and other qualifications, the
Court believes that Alysson L. Mills, a member of the Missis-
sippi bar and partner at the Louisiana firm of Fishman

1 This should come as no surprise to the parties, given their discussion of


a specific candidate’s conflicts of interest at the hearing on this matter.

3
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Haygood, LLP, is best suited to be Receiver. Mills is a gradu-


ate of the University of Mississippi School of Law, and clerked
for Fifth Circuit Judge E. Grady Jolly. She has extensive fed-
eral court experience, including representation of bankruptcy
trustees and securities purchasers in suits involving fraud and
mismanagement. She has authored Supreme Court briefs and
frequently argues in the Fifth Circuit.
Mills has proposed an experienced team of lawyers from Fish-
man Haygood to serve as her counsel, including individuals
who have handled matters involving Ponzi schemes, complex
bankruptcy disputes, and securities arbitration. Her team has
represented individuals, companies, pension funds, hospi-
tals, cities, and states. Firm partner Brent B. Barriere’s experi-
ence makes him particularly qualified to serve as primary
counsel to the Receiver. Most team members will bill at rates
not to exceed $275 an hour, while two partners will bill at
rates not to exceed $325 an hour.
The Court is satisfied that Mills has the experience, judgment,
and talent to perform the duties and responsibilities of a re-
ceiver and act as an officer of the Court. Therefore, it is hereby
ORDERED that Alysson L. Mills is appointed to serve with-
out bond as Receiver for the estate of the Receivership De-
fendants, Arthur Lamar Adams and Madison Timber Proper-
ties, LLC. The Receiver shall take possession of the entirety of
the Receivership Defendants’ assets. The Receiver is author-
ized to retain the services of Fishman Haygood, LLP and
other appropriate professionals. The scope of receivership is
as follows.

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I
General Powers & Duties of Receiver
The Receiver shall have all powers, authorities, rights, and
privileges now possessed by the officers, managers, and in-
terest holders of and relating to the Receivership Defendants,
in addition to all powers and authority of a receiver at equity
under all applicable state and federal law in accordance the
provisions of 28 U.S.C. §§ 754, 959, and 1692, and Fed. R. Civ.
P. 66, and shall assume and control the operation of the Re-
ceivership Defendants and shall pursue and preserve all of
their claims.
No person holding or claiming any position of any sort with
the Receivership Defendants shall possess any authority to act
by or on behalf of the Receivership Defendants, with the ex-
ception that attorneys representing Defendant Adams in U.S.
v. Adams, Case No. 3:18-CR-0088-CWR-LRA (S.D. Miss) may
continue their representation.
The Receiver and her agents, acting within the scope of such
agency as Retained Personnel, are entitled to rely on all out-
standing rules of law and Orders of this Court and shall not
be liable to anyone for their own good faith compliance with
any order, rule, law, judgment, or decree. In no event shall the
Receiver or Retained Personnel be liable to anyone for their
good faith compliance with their duties and responsibilities
as Receiver or Retained Personnel, nor shall the Receiver or
Retained Personnel be liable to anyone for any actions taken
or omitted by them except upon a finding by this Court that
they acted or failed to act as a result of malfeasance, bad faith,
gross negligence, or in reckless disregard of their duties.

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The Receivership Defendants shall indemnify, defend, and


hold harmless the Receiver and the Retained Personnel from
and against all actions (pending or threatened and whether at
law or in equity in any forum), liabilities, damages, losses,
costs, and expenses, including but not limited to reasonable
attorneys’ and other professionals’ fees, arising from conduct
or omission of the Receiver and the Retained Personnel under
the terms of this Order, except for any such conduct or omis-
sion adjudged by this Court to be the result of gross negli-
gence or willful misconduct.
Subject to the specific provisions below, the Receiver shall
have the following general powers and duties:
(1) to use reasonable efforts to determine the nature,
location, and value of all property interests of the Re-
ceivership Defendants, including but not limited to
monies, funds, securities, credits, effects, goods, chat-
tels, lands, premises, leases, claims, rights and other as-
sets, together with all rents, profits, dividends, interest
or other income attributable thereto, of whatever kind
and description, wherever located, which the Receiv-
ership Defendants own, possess, have a beneficial in-
terest in, or control directly or indirectly (“Receiver-
ship Property” or, collectively, the “Receivership Es-
tate”), including, but not limited to, (i) the following
bank accounts: First Bank of Clarksdale, Account No.
7315736, Southern Bancorp Account Nos. 6454774,
6454367, and 6454359, and River Hills Bank Account
No. 6755060 and (ii) Defendant Adams’ principal resi-
dence located at 134 Saint Andrews Drive, Jackson,
Mississippi, 39211;

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(2) to use reasonable efforts to determine the nature


and location of the books and records, client lists, ac-
count statements, financial and accounting documents,
computers, computer hard drives, computer disks, in-
ternet exchange servers, telephones, personal digital
devices and other informational resources, of whatever
kind and description, wherever located, in possession
of the Receivership Defendants, or issued by the Re-
ceivership Defendants and in possession of third par-
ties (“Receivership Records”);
(3) to take custody, control, and possession of all Re-
ceivership Property, Receivership Records, and any as-
sets traceable to assets owned by the Receivership Es-
tate; and, with prior approval of this Court upon ex
parte request, institute such actions or proceedings to
impose a constructive trust, to sue for and collect, re-
cover, receive or take into possession from third parties
all Receivership Property, Receivership Records, and
any assets traceable to assets of the Receivership Es-
tate;
(4) to manage, control, operate, and maintain the Re-
ceivership Estate and hold in her possession, custody,
and control all Receivership Property, pending further
Order of this Court;
(5) to open bank accounts for the Receivership Defend-
ants;
(6) to use Receivership Property for the benefit of the
Receivership Estate, making payments and disburse-
ments and incurring expenses as may be necessary or

7
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advisable in the ordinary course of business in dis-


charging her duties as Receiver;
(7) to take any action which, prior to the entry of this
Order, could have been taken by the officers, manag-
ers, and agents of and relating to the Receivership De-
fendants; including the termination of any personnel
that the Receiver deems appropriate;
(8) to terminate any and all leases of the Receivership
Defendants’ personal or real property, or to sell any of
the Receivership Defendants’ personal or real prop-
erty;
(9) to access all of the Receivership Defendants’ bank
accounts, securities accounts, and IT systems;
(10) to collect any management or advisory fees due
and owing to the Receivership Defendant;
(11) to produce Receivership Defendants’ records and
to share information as reasonably requested with the
staff of the Commission without a subpoena;
(12) with this Court’s approval, to engage and employ
persons in her discretion to assist her in carrying out
her duties and responsibilities hereunder, including
but not limited to accountants, attorneys, securities
traders, registered representatives, financial or busi-
ness advisers, liquidating agents, real estate agents, fo-
rensic experts, brokers, traders, or auctioneers;
(13) to take such action as necessary and appropriate
for the preservation of Receivership Property or to pre-
vent the dissipation or concealment of Receivership
Property;

8
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(14) to obtain, by presentation of this Order, docu-


ments, books, records, accounts, deposits, testimony,
or other information within the custody or control of
any person or entity sufficient to identify accounts,
properties, assets, liabilities, or agents of and relating
to the Receivership Estate or Receivership Defendants;
(15) without further order of this Court, to issue sub-
poenas for documents and testimony consistent with
the Federal Rules of Civil Procedure;
(16) to investigate and, following this Court’s approval
upon ex parte request, to bring such legal actions based
on law or equity in any state, federal, or foreign court
as the Receiver deems necessary or appropriate in dis-
charging her duties as Receiver;
(17) following this Court’s approval upon ex parte re-
quest, to file a petition in bankruptcy for either or both
the Receivership Defendants if the Receiver deter-
mines it to be necessary; and
(18) to take such other action as may be approved by
this Court.
II
Duty to File Recommendation & Report
Within 60 days, the Receiver shall file a report with the Court
as to the status of the Receivership Estate. Such report shall
include:
(1) a description of all known assets of the Receivership
Estate, their location, and to the extent possible, the Re-
ceiver’s good faith estimate of the value of those assets;

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(2) a list of secured creditors and other financial insti-


tutions with an interest in the Receivership Estate;
(3) to the extent practicable, a list of investors in the se-
curities sold by the Receivership Defendants;
(4) any other known liabilities of the Receivership Es-
tate;
(5) the Receiver’s preliminary plan for the administra-
tion of the Receivership Estate, including a recommen-
dation regarding whether bankruptcy cases should be
filed for all or a portion of the assets subject to the re-
ceivership, a recommendation as to the appropriate-
ness of forfeiture proceedings for any assets subject to
the receivership, and a recommendation as to whether
litigation against third parties should be commenced
on a contingent fee basis to recover assets for the ben-
efit of the receivership;
(6) to the extent not provided in response to the prior
subject matters, the Receiver’s preliminary recommen-
dation as to the most reasonable and efficient methods
for recovery, liquidation, and distribution of the Re-
ceivership Estate;
(7) the Receiver’s recommendation as to whether the
receivership created by this Order should be continued
and the benefits of any such action; and
(8) any additional information that the Receiver deems
relevant.
Upon consideration of this report, the Court shall consider
whether to terminate the receivership or order such other re-
lief as it deems appropriate.

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III
Injunction Against Interference with Receiver
The Receivership Defendants and all persons receiving notice
of this Order by personal service, facsimile, or otherwise, are
hereby restrained and enjoined from directly or indirectly tak-
ing any action or causing any action to be taken, without the
express written agreement of the Receiver, which would:
(1) interfere with the Receiver’s efforts to take control,
possession, or management of any Receivership Prop-
erty; such prohibited actions include but are not lim-
ited to, using self-help or executing or issuing or caus-
ing the execution or issuance of any court attachment,
subpoena, replevin, execution, or other process for the
purpose of impounding or taking possession of or in-
terfering with or creating or enforcing a lien upon any
Receivership Property;
(2) hinder, obstruct, or otherwise interfere with the Re-
ceiver in the performance of her duties; such prohib-
ited actions include but are not limited to concealing,
destroying, or altering records or information;
(3) dissipate or otherwise diminish the value of any Re-
ceivership Property; such prohibited actions include
but are not limited to releasing claims or disposing,
transferring, exchanging, assigning, or in any way con-
veying any Receivership Property, enforcing judg-
ments, assessments or claims against any Receivership
Property or any Receivership Defendant, attempting to
modify, cancel, terminate, call, extinguish, revoke, or
accelerate the due date of any lease, loan, mortgage, in-
debtedness, security agreement, or other agreement

11
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executed by any Receivership Defendant or which oth-


erwise affects any Receivership Property; or
(4) interfere with or harass the Receiver, or interfere in
any manner with the exclusive jurisdiction of this
Court over the Receivership Estate.
The Receivership Defendants and their past or present offic-
ers, managers, and agents and all persons in active concert or
participation with them, including any financial institution,
shall provide the Receiver immediate access to and control
and possession of Receivership Records and the Receivership
Estate’s assets, including securities and property of any kind,
real and personal, as well as all keys, passwords, entry codes,
and the original of all books, records, documents, accounts,
computer printouts, disks, and the like.
The Receivership Defendants shall cooperate with and assist
the Receiver in the performance of her duties, including by
promptly acknowledging to third parties the Receiver’s au-
thority to act on behalf of the Receivership Estate and by
providing such authorizations, signatures, releases, attesta-
tions, and access as the Receiver may reasonably request.
The Receiver shall promptly notify the Court and the Com-
mission of any failure or apparent failure of any person or en-
tity to comply in any way with the terms of this Order.
IV
Stay of Litigation
The following Ancillary Proceedings, excluding the instant
proceeding and all police or regulatory actions and actions of
the Commission related to the above-captioned enforcement
action, are stayed until further Order of this Court: all civil

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legal proceedings of any nature, including but not limited to


bankruptcy proceedings, arbitration proceedings, foreclosure
actions, default proceedings, or other actions of any nature in-
volving:
(1) the Receiver, in her capacity as Receiver;
(2) any Receivership Property, wherever located;
(3) any of the Receivership Defendants, including sub-
sidiaries and partnerships; or
(4) any of the Receivership Defendants’ or Receiver-
ship Estate’s past or present officers, directors, manag-
ers, agents, or general or limited partners sued for, or
in connection with, any action taken by them while act-
ing in such capacity of any nature, whether as plaintiff,
defendant, third-party plaintiff, third-party defendant,
or otherwise.
The parties to any and all Ancillary Proceedings are enjoined
from commencing or continuing any such legal proceeding,
or from taking any action, in connection with any such pro-
ceeding, including but not limited to the issuance or employ-
ment of process.
All Ancillary Proceedings are stayed in their entirety, and all
Courts having any jurisdiction thereof are enjoined from tak-
ing or permitting any action until further Order of this Court.
Further, as to a cause of action accrued or accruing in favor of
one or more of the Receivership Defendants against a third
person or party, any applicable statute of limitation is tolled
during the period in which this injunction against commence-
ment of legal proceedings is in effect as to that cause of action.

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These provisions bar any person or entity, other than the Re-
ceiver, from placing either of the Receivership Defendants in
bankruptcy proceedings.
V
Receiver Compensation
The Receiver is to be paid her reasonable compensation and
expense reimbursement from the Receivership Estate. Such
compensation and expense reimbursement shall require the
prior approval of this Court.
Within 30 days after the end of each full month while the Re-
ceivership is in effect, the Receiver shall apply to this Court
for compensation and expense reimbursement from the Re-
ceivership Estate through Monthly Fee Applications.
Monthly Fee Applications shall contain representations that:
(i) the fees and expenses included therein were incurred in the
best interests of the Receivership Estate; and (ii) with the ex-
ception of her Receivership application, the Receiver has not
entered into any agreement, written or oral, express or im-
plied, with any person or entity concerning the amount of
compensation paid or to be paid from the Receivership Estate,
or any sharing thereof.
Monthly Fee Applications will be interim and will be subject
to cost-benefit and final reviews at the close of the receiver-
ship. At the close of the receivership, the Receiver will file a
final fee application, describing in detail the costs and benefits
associated with all litigation and other actions pursued by the
Receiver during the course of the receivership.
Monthly Fee Applications may, in the Court’s discretion, be
subject to a holdback in the amount of 25% of the amount of

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fees and expenses for each application filed with the Court.
The total amounts held back during the course of the receiv-
ership will be paid out at the discretion of the Court as part of
the final fee application submitted at the close of the receiver-
ship.
At the close of the receivership, the Receiver shall submit a
Final Accounting, in a format to be provided by Commission
staff, as well as the Receiver’s final application for compensa-
tion and expense reimbursement.
This Order supersedes prior orders of this Court only to the
extent they conflict.
SO ORDERED, this the 22nd day of June, 2018.
s/ CARLTON W. REEVES
United States District Judge

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IN THE UNITED STATES DISTRICT COURT


FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES & EXCHANGE PLAINTIFFS


COMMISSION, et al.,

V. CAUSE NO. 3:18-CV-252-CWR-FKB

ARTHUR LAMAR ADAMS, DEFENDANTS


et al.

ORDER FOR INTERIM RELIEF PENDING


APPOINTMENT OF A TEMPORARY RECEIVER

This Court, having determined that certain interim relief is appropriate to preserve the

assets of the Defendants pending the selection of a Temporary Receiver, orders as follows:

A. The Defendants and all persons receiving notice of this Order by personal service,

facsimile or otherwise, are hereby restrained and enjoined from directly or indirectly taking any

action or causing any action to be taken, without the prior order from this Court, which would:

1. Interfere with the Temporary Receiver’s eventual efforts to take control,


possession, or management of monies, funds, securities, credits, effects, goods, chattels,
lands, premises, leases, claims, rights and other assets, together with all rents, profits,
dividends, interest or other income attributable thereto, of whatever kind, which the
Defendants own, possess, have a beneficial interest in, or controls directly or indirectly
(“Receivership Property” or, collectively, the “Receivership Estate”); such prohibited
actions include but are not limited to, using self-help or executing or issuing or causing
the execution or issuance of any court attachment, subpoena, replevin, execution, or other
process for the purpose of impounding or taking possession of or interfering with or
creating or enforcing a lien upon any Receivership Property;

2. Dissipate or otherwise diminish the value of any Receivership Property;


such prohibited actions include but are not limited to, releasing claims or disposing,
transferring, exchanging, assigning or in any way conveying any Receivership Property,
enforcing judgments, assessments or claims against any Receivership Property or any
Receivership Defendant, attempting to modify, cancel, terminate, call, extinguish, revoke
or accelerate (the due date), of any lease, loan, mortgage, indebtedness, security
agreement or other agreement executed by any Defendant or which otherwise affects any
Receivership Property; or,
Case 3:18-cv-00252-CWR-FKB Document 29 Filed 06/06/18 Page 2 of 4

3. Interfere in any manner with the exclusive jurisdiction of this Court over
the Receivership Estate.

4. Nothing in paragraph A herein shall prohibit any business in which either


defendant owns an interest and which is managed by a third party from entering into
commercially reasonable agreements on behalf of that business or continuing to pay
operating expenses for that business as they come due in the ordinary course of business.
Management of any such businesses shall maintain a list of any such agreements and
payments and shall, upon appointment of a Temporary Receiver in this matter, provide
that list to the Temporary Receiver. This paragraph specifically authorizes the majority
owners of Delta Farm Land Investments LLC (“DFLI”), a Mississippi limited liability
company in which Defendant, Arthur Lamar Adams, owns a one-third interest, to take the
following actions:

a. To continue to operate and manage DFLI, including temporarily replacing


Arthur Lamar Adams as the managing member and registered agent for
service of process until the appointment of a Temporary Receiver (and the
filing with the Mississippi Secretary of State the documentation necessary to
effectuate such temporary appointment);
b. To open and maintain bank accounts and to make deposits and withdrawals
therefrom so as to continue to receive income and pay expenses, including all
taxes and assessments of any kind, as they come due in the ordinary course of
business (subject to audit and challenge as specified below by the Temporary
Receiver);
c. With regard to the real property described on the Promissory Note attached
hereto as Exhibit “A” (the “Subject Property”), which is owned by DFLI and
pledged as collateral for the Promissory Note, to make all payments as and
when due under the terms of the Promissory Note. The next such payment is
due on June 30, 2018, in the amount of $43,356.00. The majority members of
DFLI are authorized to make all payments due under the Promissory Note,
including the portion of such payments that would otherwise be due from
Arthur Lamar Adams. The majority members of DFLI are authorized to
recoup the amount of payments made on behalf of Arthur Lamar Adams from
future revenue of DFLI, including revenue from lease agreements or the
proceeds from a sale of the Subject Property, provided that no such
recoupment shall decrease Arthur Lamar Adams’s membership interest in
DFLI;
d. To enter into the following agreements regarding the Subject Property, which
are substantially similar to arrangements DFLI has previously entered into and
which generate revenue for DFLI: (i) an Agricultural Lease Contract in the
form attached hereto as Exhibit “B” and (ii) a Hunting Lease Agreement in
the form attached hereto as Exhibit “C”;
e. To continue to collect the income on and to renew when necessary, two
Conservation Reserve Program Contracts attached hereto as Exhibits “D” and
“E”; and
Case 3:18-cv-00252-CWR-FKB Document 29 Filed 06/06/18 Page 3 of 4

f. To continue to market for sale the Subject Property, provided that the
approval of the final terms of any sale of the Subject Property will be reserved
to this Court or the receiver, as appropriate.

DFLI shall maintain a list of payments and agreements necessary to effectuate the actions
listed above to be provided to this Court and the Temporary Receiver upon appointment.
The Temporary Receiver may challenge any of the actions taken pursuant to this
paragraph only on the basis of (1) not being in the ordinary course of business; (2)
pursuant to any contractual right that Arthur Lamar Adams may have under the DFLI
operating agreements; or (3) pursuant to any rights provided by Mississippi law to
minority members of limited liability companies.

B. As set forth in detail below, the following proceedings, excluding the instant

proceeding and all police or regulatory actions and actions of the Commission related to the

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

All civil legal proceedings of any nature, including, but not limited to, bankruptcy
proceedings, arbitration proceedings, foreclosure actions, default proceedings, or other
actions of any nature involving: (a) any Receivership Property, wherever located; (b) any
of the Defendants, including but not limited to its subsidiaries and partnerships; or, (c)
any of the Defendants’ past or present officers, directors, managers, agents, or general or
limited partners sued for, or in connection with, any action taken by them while acting in
such capacity of any nature, whether as plaintiff, defendant, third-party plaintiff, third-
party defendant, or otherwise (such proceedings are hereinafter referred to as “Ancillary
Proceedings”).

C. The parties to any and all Ancillary Proceedings are enjoined from commencing

or continuing any such legal proceeding, or from taking any action, in connection with any such

proceeding, including, but not limited to, the issuance or employment of process.

D. All Ancillary Proceedings are stayed in their entirety, and all Courts having any

jurisdiction thereof are enjoined from taking or permitting any action until further Order of this

Court. Further, as to a cause of action accrued or accruing in favor of one or more of the

Defendants against a third person or party, any applicable statute of limitation is tolled during the

period in which this injunction against commencement of legal proceedings is in effect as to that

cause of action.
Case 3:18-cv-00252-CWR-FKB Document 29 Filed 06/06/18 Page 4 of 4

E. The provisions of Paragraphs B – D above bar any person or entity from placing

either of the Defendants in bankruptcy proceedings.

SO ORDERED, this the 5th day of June, 2018.

s/ Carlton W. Reeves
UNITED STATES DISTRICT JUDGE
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 1 of 3

____________________

No. 3:18-CV-252-CWR-FKB

SECURITIES & EXCHANGE COMMISSION,


et al.,
Plaintiffs,

v.

ARTHUR LAMAR ADAMS,


et al.,
Defendants.
____________________

ORDER ON RECEIVERSHIP
____________________

Before CARLTON W. REEVES, District Judge.


This case involves a multi-million dollar Ponzi scheme that
defrauded hundreds of investors. The ill-gotten gains of that
scheme now reside in Defendants’ estates. Both the Securities
and Exchange Commission and the Mississippi Secretary of
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 2 of 3

State have requested the appointment of a receiver to control


those estates and protect investor interests.1
District courts have a “well-established” power to appoint a
receiver in a case brought by the Commission when there is a
“showing of fraud and mismanagement, absent insolvency.”2
The architect of this Ponzi scheme has already pleaded guilty
to systematic fraud and mismanagement, and the relevant es-
tates likely contain millions of dollars.3 The motions to ap-
point a receiver are GRANTED.
The next question is whom this Court should appoint as re-
ceiver. A receiver is “a representative of the court” who acts
on “behalf of all parties,” rather than on behalf of a particular
party.4 The discretion to select a qualified receiver therefore
lies with the Court, not the parties.5
After considering the written and oral arguments of counsel,
the Court believes that the fairest method of selecting a re-
ceiver is as follows. On May 31, 2018, the Court will enter a

1 Emergency Motion, Docket No. 11; Emergency Motion, Docket No. 21.
2 Sec. & Exch. Comm'n v. First Fin. Grp. of Texas, 645 F.2d 429, 438 (5th Cir.
1981) (quoting Sec. & Exch. Comm'n v. Keller Corp., 323 F.2d 397, 403 (7th
Cir. 1963)).
3 See Plea Agreement, Docket No. 11 in United States v. Arthur Lamar Adams,

3:18-CR-88-CWR-LRA (S.D. Miss).


4 Booth v. Clark, 58 U.S. 322, 331 (1854).
5 See Adelman v. CGS Sci. Corp., 332 F. Supp. 137, 149 (E.D. Pa. 1971); accord

Securities & Exchange Commission Office of the Inspector General, Over-


sight of Receivers and Distribution Agents, Report. No. 432 (2007) (“While a
judge in a securities case brought by the Commission usually appoints a
receiver recommended by Enforcement staff, the judge may select any
qualified receiver.”).

2
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 3 of 3

Request For Proposals Order soliciting bids for the receiver-


ship and the receiver’s primary counsel. By close of business
on May 29, therefore, the parties shall submit draft RFP Or-
ders containing the receivership application and schedule
they propose the Court adopt.
The parties have expressed concerns about immediate threats
to investors’ interests. The federal government retains great
power to address many of those threats through its prosecu-
tion of the parallel criminal case. If, however, the parties or
any other potential intervener believes that Defendants could
themselves mitigate immediate harm to investors’ interests
were it not for the existing Consent Order [Docket No. 5], they
may file an appropriate motion and a proposed Agreed Order
amending that Consent Order.
SO ORDERED, this the 25th day of May, 2018.
s/ CARLTON W. REEVES
United States District Judge

3
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 1 of 3

____________________

No. 3:18-CV-252-CWR-FKB

SECURITIES & EXCHANGE COMMISSION,


et al.,
Plaintiffs,

v.

ARTHUR LAMAR ADAMS,


et al.,
Defendants.
____________________

ORDER ON RECEIVERSHIP
____________________

Before CARLTON W. REEVES, District Judge.


This case involves a multi-million dollar Ponzi scheme that
defrauded hundreds of investors. The ill-gotten gains of that
scheme now reside in Defendants’ estates. Both the Securities
and Exchange Commission and the Mississippi Secretary of
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 2 of 3

State have requested the appointment of a receiver to control


those estates and protect investor interests.1
District courts have a “well-established” power to appoint a
receiver in a case brought by the Commission when there is a
“showing of fraud and mismanagement, absent insolvency.”2
The architect of this Ponzi scheme has already pleaded guilty
to systematic fraud and mismanagement, and the relevant es-
tates likely contain millions of dollars.3 The motions to ap-
point a receiver are GRANTED.
The next question is whom this Court should appoint as re-
ceiver. A receiver is “a representative of the court” who acts
on “behalf of all parties,” rather than on behalf of a particular
party.4 The discretion to select a qualified receiver therefore
lies with the Court, not the parties.5
After considering the written and oral arguments of counsel,
the Court believes that the fairest method of selecting a re-
ceiver is as follows. On May 31, 2018, the Court will enter a

1 Emergency Motion, Docket No. 11; Emergency Motion, Docket No. 21.
2 Sec. & Exch. Comm'n v. First Fin. Grp. of Texas, 645 F.2d 429, 438 (5th Cir.
1981) (quoting Sec. & Exch. Comm'n v. Keller Corp., 323 F.2d 397, 403 (7th
Cir. 1963)).
3 See Plea Agreement, Docket No. 11 in United States v. Arthur Lamar Adams,

3:18-CR-88-CWR-LRA (S.D. Miss).


4 Booth v. Clark, 58 U.S. 322, 331 (1854).
5 See Adelman v. CGS Sci. Corp., 332 F. Supp. 137, 149 (E.D. Pa. 1971); accord

Securities & Exchange Commission Office of the Inspector General, Over-


sight of Receivers and Distribution Agents, Report. No. 432 (2007) (“While a
judge in a securities case brought by the Commission usually appoints a
receiver recommended by Enforcement staff, the judge may select any
qualified receiver.”).

2
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 3 of 3

Request For Proposals Order soliciting bids for the receiver-


ship and the receiver’s primary counsel. By close of business
on May 29, therefore, the parties shall submit draft RFP Or-
ders containing the receivership application and schedule
they propose the Court adopt.
The parties have expressed concerns about immediate threats
to investors’ interests. The federal government retains great
power to address many of those threats through its prosecu-
tion of the parallel criminal case. If, however, the parties or
any other potential intervener believes that Defendants could
themselves mitigate immediate harm to investors’ interests
were it not for the existing Consent Order [Docket No. 5], they
may file an appropriate motion and a proposed Agreed Order
amending that Consent Order.
SO ORDERED, this the 25th day of May, 2018.
s/ CARLTON W. REEVES
United States District Judge

3
Case 3:18-cv-00252-CWR-FKB Document 26-1 Filed 06/01/18 Page 1 of 6
Case 3:18-cv-00252-CWR-FKB Document 26-1 Filed 06/01/18 Page 2 of 6

1. What professional experience and skills qualify you to be receiver in this case?

C. RECEIVERSHIP STAFFING
1. What steps will you take to guarantee that your hiring pracices are as inclusive as possible, and what – if
any – billable hour targets do you aim to achieve?

2. Describe the law firms or other entities you hire to assist you, their qualifications, proposed rates, and
whether those rates reflect a discount from their standard rates.

3. Describe and justify the hourly rates for yourself and whether your rates reflect any discount from your
standard rate.

2
Case 3:18-cv-00252-CWR-FKB Document 26-1 Filed 06/01/18 Page 3 of 6

4. How will you and your staff take steps to minimize the expenses of the receivership?

5. How will you and your staff communicate with investors and keep them informed of proceedings?

D. CONFLICTS OF INTEREST
1. What potential conflicts of interest may arise during your receivership, including those of yourself and
any accounting firms, legal firms, or other support staff that you plan to hire?

2. Before your appointment, what steps will you take to check for (and eliminate) any of the above conflicts?

3
Case 3:18-cv-00252-CWR-FKB Document 26-1 Filed 06/01/18 Page 4 of 6

3. After your appointment, how will you guard against (and respond to) any conflicts that arise?

E. ADDITIONAL INFORMATION
Provide any further information you believe relevant to your candidacy for receivership.

F. SIGNATURE
By signing the below, you affirm that you have truthfully answered the above questions as an officer of the
court.

Signature of Applicant

Date

4
Case 3:18-cv-00252-CWR-FKB Document 26-1 Filed 06/01/18 Page 5 of 6

CONFLICTS OF INTEREST AND BACKGROUND INFORMATION FORM

Please complete a document that responds to all prompts listed below. Attach that document to this form
and sign the declaration below.

Except where otherwise noted, for purposes of the information request below, “you” means you as an
individual, as well as any spouse or dependents, and separately, any firm, partnership, joint venture, or
other business in which you are an officer or director, or in which you have a substantial financial interest.

Except where otherwise noted, this information is requested for any responsive matters existing during the last five
years. Also, if during the course of your duties you become aware of responsive information concerning a
potential claimant in the matter listed above, you must promptly supplement your response to disclose that
information.

1. List all contracts, consulting engagements, employment, service as an officer or director, or other work of
any kind you have performed for any defendant/respondent in this matter, or any of its parents, subsidiaries, or
other affiliates, or any claimant in this matter. Include any responsive matters existing during the last ten years.

2. List any financial interests in or with the defendant/respondent, its parents, subsidiaries, or other affiliates,
or any claimant in this matter (e.g., stocks, bonds, options, other debt or equity interests, partnerships, retirement
plans).

3. List all other personal or professional relationships or interests in or with the defendant/respondent, its
parents, subsidiaries, or other affiliates, or with any of their officers or directors, or any claimant in this matter, not
listed above.

4. List all matters in which you have been retained as a Receiver, Distribution Fund Administrator,
Distribution Consultant, or as a subcontractor, agent or other service provider, in connection with any civil action
or administrative proceeding by the Commission.

5. List all other prior or existing cases, matters, or proceedings in which the Commission or the Mississippi
Secretary of State has an interest, in which you have been retained or served as a witness, consultant, or other
expert.

6. Identify any disciplinary proceedings, felony criminal indictment or information (or equivalent formal
charge) or a misdemeanor criminal information (or equivalent formal charge), civil proceedings or actions against
you personally by any Federal, state, local, or foreign entities and the results of those proceedings. Include any
responsive matters regardless of when they arose.

7. Identify any actual or potential conflicts of which you are aware, regardless of when they arose, that are not
identified or addressed in paragraphs 1 through 5 above, but that may affect the performance of your duties under
this appointment.

5
Case 3:18-cv-00252-CWR-FKB Document 26-1 Filed 06/01/18 Page 6 of 6

DECLARATION

Under penalty of perjury, I declare the following:

I am providing the United States District Court for the Southern District of Mississippi with the following conflict
of interest and background information concerning the receivership created in the civil litigation styled Securities
& Exchange Commission, et al. v. Arthur Lamar Adams, et al., Case Number 3:18-cv-00252-CWR-FKB, in the
U.S. District Court for the Southern District of Mississippi, Northern Division. I agree to supplement this
information if any of the information herein changes, within thirty days of such change. I agree to provide such
other Conflict of Interest information as requested by the Court or its staff.

I have examined the information given in this statement, and attached hereto, and, to the best of my
knowledge and belief, it is true, correct, and complete. I understand that I am submitting this
information to the Court as an officer of the Court.

By: _______________________________________
Signature

Name: _______________________________________

Date: _______________________________________

6
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 1 of 3

____________________

No. 3:18-CV-252-CWR-FKB

SECURITIES & EXCHANGE COMMISSION,


et al.,
Plaintiffs,

v.

ARTHUR LAMAR ADAMS,


et al.,
Defendants.
____________________

ORDER ON RECEIVERSHIP
____________________

Before CARLTON W. REEVES, District Judge.


This case involves a multi-million dollar Ponzi scheme that
defrauded hundreds of investors. The ill-gotten gains of that
scheme now reside in Defendants’ estates. Both the Securities
and Exchange Commission and the Mississippi Secretary of
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 2 of 3

State have requested the appointment of a receiver to control


those estates and protect investor interests.1
District courts have a “well-established” power to appoint a
receiver in a case brought by the Commission when there is a
“showing of fraud and mismanagement, absent insolvency.”2
The architect of this Ponzi scheme has already pleaded guilty
to systematic fraud and mismanagement, and the relevant es-
tates likely contain millions of dollars.3 The motions to ap-
point a receiver are GRANTED.
The next question is whom this Court should appoint as re-
ceiver. A receiver is “a representative of the court” who acts
on “behalf of all parties,” rather than on behalf of a particular
party.4 The discretion to select a qualified receiver therefore
lies with the Court, not the parties.5
After considering the written and oral arguments of counsel,
the Court believes that the fairest method of selecting a re-
ceiver is as follows. On May 31, 2018, the Court will enter a

1 Emergency Motion, Docket No. 11; Emergency Motion, Docket No. 21.
2 Sec. & Exch. Comm'n v. First Fin. Grp. of Texas, 645 F.2d 429, 438 (5th Cir.
1981) (quoting Sec. & Exch. Comm'n v. Keller Corp., 323 F.2d 397, 403 (7th
Cir. 1963)).
3 See Plea Agreement, Docket No. 11 in United States v. Arthur Lamar Adams,

3:18-CR-88-CWR-LRA (S.D. Miss).


4 Booth v. Clark, 58 U.S. 322, 331 (1854).
5 See Adelman v. CGS Sci. Corp., 332 F. Supp. 137, 149 (E.D. Pa. 1971); accord

Securities & Exchange Commission Office of the Inspector General, Over-


sight of Receivers and Distribution Agents, Report. No. 432 (2007) (“While a
judge in a securities case brought by the Commission usually appoints a
receiver recommended by Enforcement staff, the judge may select any
qualified receiver.”).

2
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 3 of 3

Request For Proposals Order soliciting bids for the receiver-


ship and the receiver’s primary counsel. By close of business
on May 29, therefore, the parties shall submit draft RFP Or-
ders containing the receivership application and schedule
they propose the Court adopt.
The parties have expressed concerns about immediate threats
to investors’ interests. The federal government retains great
power to address many of those threats through its prosecu-
tion of the parallel criminal case. If, however, the parties or
any other potential intervener believes that Defendants could
themselves mitigate immediate harm to investors’ interests
were it not for the existing Consent Order [Docket No. 5], they
may file an appropriate motion and a proposed Agreed Order
amending that Consent Order.
SO ORDERED, this the 25th day of May, 2018.
s/ CARLTON W. REEVES
United States District Judge

3
Case 3:18-cv-00252-CWR-FKB Document 13 Filed 05/11/18 Page 1 of 4

UNITED STATES DISTRICT COURT


FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE


COMMISSION,

Plaintiff,

v. Civil Action No.


3:18 –cv-252-CWR-FKB
ARTHUR LAMAR ADAMS AND
MADISON TIMBER PROPERTIES,
LLC

Defendants,

MISSISSIPPI SECRETARY OF STATE’S UNOPPOSED


MOTION TO INTERVENE FOR THE LIMITED PURPOSE
OF OPPOSING THE SEC’S EXPEDITED MOTION
TO APPOINT TEMPORARY RECEIVER

The Mississippi Secretary of State (the “Secretary”) respectfully moves this Court, pursuant to

Fed. R. Civ. P. 24, for an order permitting the Secretary to intervene in the above-captioned action (the

“Madison Timber Action”) for the limited purpose of opposing the Securities and Exchange

Commission’s (“SEC”) Expedited Motion to Appoint Temporary Receiver and making his own

recommendation for the candidate to be chosen as the receiver in the above-styled action. In support of

this motion to intervene, the Secretary states as follows:

1. The Madison Timber Action was filed on April 20, 2018. The SEC filed its

complaint based on information and belief that Defendants committed securities fraud by operating a

Ponzi scheme, and it alleged that Defendants defrauded more than 150 investors out of at least $85

million.
Case 3:18-cv-00252-CWR-FKB Document 13 Filed 05/11/18 Page 2 of 4

2. The SEC requested injunctive relief that included freezing the assets of Defendants, relief

which requires the appointment of a receiver.

3. Defendant Adams, on April 20, 2018, entered a Consent Order, consenting to the

freezing of Defendants’ assets, to the appointment of a receiver, and to the transfer of all seized assets to

the Court-Appointed Receiver or the Registry of the Court.

4. On May 9, 2018, Defendant Adams pled guilty to a criminal charge of wire fraud.

5. On May 10, 2018, the SEC notified the Secretary of its intention to file its Expedited

Motion to Appoint Temporary Receiver with this Court, and it notified the Secretary that it was proposing

a Miami, Florida-based candidate for the position of receiver.

6. Defendants are Mississippi citizens. Upon information and believe, a large majority of

the investors in Defendants’ Ponzi scheme are Mississippi citizens.

7. Upon information and belief, most of the assets are situated in Mississippi.

8. The securities law violations alleged against Defendants, if proven, also constitute

violations of the Mississippi Security Act, under which the Secretary can assess fines, penalties, and other

sanctions such as restitution on behalf of Mississippi investors.

9. The Secretary has a significant interest in the appointment of receiver in this action, given

the number of Mississippi investors involved, significant assets being located in the State, the Secretary’s

own interest in the assets with respect to fines, penalties, and restitution to Mississippi investors, and the

receiver’s obligations and abilities to administer the recovery and restitution of investors’ funds. The

Secretary does not believe the SEC’s recommended appointment can protect those interests adequately

and effectively.

2
Case 3:18-cv-00252-CWR-FKB Document 13 Filed 05/11/18 Page 3 of 4

10. The Secretary has an alternative receiver candidate, situated in Mississippi, to

recommend to this Court, as to avoid any undue delay or prejudice. A copy of the Secretary’s alternative

receiver is attached hereto as Exhibit “A”.

11. Because the Secretary is not a party to the Madison Timber action, the Secretary has no

avenue to oppose the SEC’s recommendation for appointment of receiver in this action, or recommend

an alternative candidate. But the Secretary is charged with enforcing the Mississippi Securities Act and

protecting Mississippi investors and has significant interests in the property that is the subject of the action

and therefore seeks to intervene.

12. The Secretary therefore respectfully submits that he is entitled to intervene as of right

pursuant to Fed. R. Civ. P. Rule 24(a)(2) because the Court’s appointment of receiver may impair the

Secretary’s ability to protect the interests of Mississippi investors harmed by this scheme and may impair

the Secretary’s ability to discharge his duties under the Mississippi Securities Act.

13. In accordance with Local Rule 7(b)(10), the Secretary has conferred with counsel for

Defendants and counsel for the SEC. The Motion is unopposed by both counsel for the Defendants and

counsel for the SEC.

THIS the 11th day of May 2018.

Respectfully Submitted,
C. DELBERT HOSEMANN, JR., in his Official
Capacity as MISSISSIPPI SECRETARY OF
STATE

BY: JIM HOOD, ATTORNEY GENERAL FOR THE


STATE OF MISSISSIPPI

BY: /s/ Douglas T. Miracle


DOUGLAS T. MIRACLE, MSB # 9648
SPECIAL ASSISTANT ATTORNEY GENERAL
OFFICE OF THE ATTORNEY GENERAL
CIVIL LITIGATION DIVISION
Post Office Box 220

3
Case 3:18-cv-00252-CWR-FKB Document 13 Filed 05/11/18 Page 4 of 4

Jackson, Mississippi 39205


Telephone No. (601) 359-5654
Facsimile No. (601) 359-2003
dmira@ago.state.ms.us

OF COUNSEL
Jessica Leigh Long
Assistant Secretary of State
MSB #103316

Jeffrey L. Lee
Senior Attorney
MSB # 103180

Office of the Mississippi Secretary of State


Securities Division
125 S. Congress Street
Jackson, MS 39201
Telephone No. (601) 359-1650
Facsimile No. (601) 359-9070

CERTIFICATE OF SERVICE
I, Douglas T. Miracle, Special Assistant Attorney General for the State of Mississippi, do

hereby certify that on this date I electronically filed the foregoing document with the Clerk of

this Court using the ECF system, which sent notification of this filing to all counsel of record.

THIS the 11th day of May, 2018.

/s/ Douglas T. Miracle


DOUGLAS T. MIRACLE

4
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 1 of 10

UNITED STATES DISTRICT COURT


SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE


COMMISSION,

Plaintiff,

v. Case No.

ARTHUR LAMAR ADAMS AND 3:18-cv-252-CWR-FKB


MADISON TIMBER PROPERTIES, LLC,

Defendants,

MEMORADUM OF LAW IN SUPPORT OF


EXPEDITED MOTION TO APPOINT TEMPORARY RECEIVER

In this securities fraud action, Plaintiff Securities and Exchange Commission

(“Commission”) respectfully moves the Court to appoint a temporary receiver over

Defendants’ assets to preserve them for the benefit of investors. Due to the continued

risk of dissipation of those assets, the Commission asks that the motion be heard as

expeditiously as the Court’s schedule permits.

I. Introduction and Background

In its Complaint, the Commission claims that, beginning in approximately

2004, Defendant Arthur Lamar Adams (“Adams”), through his wholly-owned


Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 2 of 10

company, Madison Timber Properties, LLC (“MT Properties”), committed securities

fraud by operating a Ponzi scheme. [Dkt. 3, Compl., ¶ 1]. The Commission alleges

that Adams and MT Properties have raised at least $85 million from over 150

investors in multiple states. [Dkt. 3, Compl., ¶ 2].

Defendant Adams does not contest that he used MT Properties to conduct a

Ponzi scheme. At Adams’ change of plea hearing on May 9, 2018 in United States v.

Adams, No. 3:18-CR-88-CWR-LRA (S.D. Miss.), Adams pled guilty to the Bill of

Information filed against him for bank and wire fraud based on the same conduct.

Defendants and their agents still have control and possession of investor funds

as well as certain assets purchased with investor funds. Counsel for Defendant

Adams has identified interests owned by Adams in at least four real estate ventures.

See Exhibit A (May 8, 2018, Letter from John M. Colette). Upon information and

belief, Adams acquired at least some of these interests while the scheme alleged in

the Complaint was on-going. It is, thus, highly likely that such interests were

acquired, in whole or in part, with investor funds. Counsel for Adams has also

advised that several payments are coming due this month to maintain Adams’

ownership interests in these ventures. Id.

In addition, individual investors recently have filed lawsuits against Adams

and Madison Timber related to this scheme. See, e.g., Exhibit B. Absent a receiver

and the associated stay of third party litigation that would accompany his or her

2
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 3 of 10

appointment, there will be a “race to the courthouse” and the attendant possibility for

certain investors to obtain preferential treatment with respect to Defendants’ assets.

The Commission’s ability to seek receivership serves as a critical tool in

enforcing the federal securities laws. In light of the estimated size of the fraud –

nearly $100 million – and the number of investors, a receiver is necessary in this case

to preserve and analyze Defendants’ and third parties’ documents and financial

records to determine the full extent of investor losses, to discover if there are viable

claims against third parties, and to establish a claims process to facilitate a fair and

orderly distribution of remaining assets to investors. Moreover, in order to marshal

and preserve Defendants’ assets and identify other possible assets for the benefit of

the defrauded investors, the Commission asks the Court to use its equitable powers to

appoint a receiver to take control of those assets.

The Commission therefore seeks the appointment of a temporary receiver who

will, within 60 days, file a report that includes a preliminary plan for the

administration of the receivership estate, including recommendations as to the most

efficient means for marshalling, liquidating and distributing assets within that estate.

The Court, with input from the Commission, can then better determine whether the

receivership should be continued.

3
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 4 of 10

II. Equitable Power of District Courts to Order a Receivership

The Fifth Circuit and other courts have repeatedly emphasized the broad

equitable powers of district courts to shape remedies necessary to effectuate the

purposes of the federal securities laws, to preserve a defendant’s assets, and to ensure

that wrongdoers do not profit from their unlawful conduct. SEC v. Wencke, 622 F.2d

1393, 1371 (9th Cir. 1980); SEC v. Safety Fin. Serv., Inc., 674 F.2d 368, 372-73 (5th

Cir.1982) (“the district court has broad powers and wide discretion to determine . . .

relief in an equity receivership”); SEC v. Blatt, 583 F.2d 1325, 1335-1336 (5th Cir.

1978).

Based on long-standing principles of equity, a receiver serves as a disinterested

court officer who collects and possesses all property subject to the receivership,

known as the receivership “estate.” See, e.g., Atlantic Trust Co. v. Chapman, 208

U.S. 360, 370-71 (1908). The court holds custody of the receivership estate and

administers it through the receiver. Id.; see also Chicago Deposit Vault Co. v.

McNulta, 153 U.S. 554 (1894). The receiver’s possession, therefore, is the court’s

possession. Id. When a district court creates a receivership, the receiver’s focus is

“to safeguard the assets, administer the property as suitable, and to assist the district

court in achieving a final, equitable distribution of the assets if necessary.” Liberte

Capital Group, LLC v. Capwill, 462 F.3d 543, 551 (6th Cir. 2006).

4
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 5 of 10

The decision to create a receivership rests in the Court’s discretion. Bookout v.

First Nat. Mortg. & Discount Co., Inc., 514 F.2d 757, 758 (5th Cir. 1975).

III. Appointment of an SEC Receiver is Well-Established in the Fifth Circuit

The Fifth Circuit has recognized that “[t]he appointment of a receiver is a

well-established equitable remedy available to the SEC in its civil enforcement

proceedings for injunctive relief.” SEC v. First Fin. Group of Texas, 645 F.2d 429,

438 (5th Cir. 1981); see also Netsphere, Inc. v. Baron, 703 F.3d 296, 306 (5th Cir.

2012) (“Thus, in cases of non-compliance with SEC regulations, a receiver may be

appointed to prevent the corporation from dissipating corporate assets and to pay

defrauded investors.”). This discretion derives from the inherent powers of an equity

court to fashion relief. Id.

The Fifth Circuit has also recognized that an evidentiary hearing is not

required on the Commission’s request to appoint a receiver where the record

discloses sufficient facts to warrant such an appointment. Bookout v. Atlas Fin.

Corp., 395 F. Supp. 1338, 1342 (N.D. Ga. 1974), aff’d, 514 F.2d 757 (5th Cir. 1975).

The Court may appoint a receiver on a prima facie showing of fraud and

mismanagement. See First Fin. Group, 645 F.2d at 438. Factors courts have

considered that indicate the need for a receivership include the following: “a valid

claim by the party seeking the appointment; the probability that fraudulent conduct

has occurred or will occur to frustrate that claim; imminent danger that property will

5
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 6 of 10

be concealed, lost, or diminished in value; inadequacy of legal remedies; lack of a

less drastic equitable remedy; and likelihood that appointing the receiver will do

more good than harm.” Santibanez v. Wier McMahon & Co., 105 F.3d 234, 242 (5th

Cir. 1997), quoting Aviation Supply Corp. v. R.S.B.I. Aerospace, Inc., 999 F.2d 314,

316-17 (8th Cir. 1993).

IV. This Court Should Create a Receivership in this Case

Defendants do not dispute that they operated a Ponzi scheme that involved

hundreds of investors and close to a $100 million dollars. Indeed, Defendant Adams

has pled guilty to criminal charges of wire fraud and bank fraud based on the same

conduct. Thus, there is no dispute that fraudulent conduct occurred. It is in the

interest of justice, and to the benefit to the investors, to have a court-appointed

receiver to oversee the process of returning the remaining funds in as fair and

economical manner as possible. The appointment of a receiver will also prevent

investors from obtaining preferential treatment to Defendants assets by filing

individual lawsuits.

Moreover, in addition to the funds frozen in various accounts, there are a

number of illiquid assets at stake. Mr. Adams has invested in various real estate

projects. See Exhibit A (Letter from John M. Colette). These investments will likely

be included in the receivership estate because, among other things, Adams

presumably purchased or maintained some or all of those real estate projects with

6
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 7 of 10

investor funds. Indeed, Adams’ counsel has advised that almost $200,000 in

payments to various real estate investments are coming due, and that such payments

must be made to preserve Adams’ interest in those investments. Id. A receiver is

needed to determine whether maintaining those investments is in the best interest of

defrauded investors, particularly because the potential estate has minimal liquid

assets at the moment.

Accordingly, the Court should appoint a receiver over Defendants’ assets to

marshal Defendants’ assets, and preserve and maximize their value for the benefit of

the defrauded investors.

V. The SEC’s Receiver Recommendation

Generally, courts rely on the SEC to recommend a receiver to the court.

Anticipating that the Court may ask the Commission to recommend a potential

receiver here, the Commission sought three proposals from individuals who have

served as receivers in other SEC cases. If the Court prefers to rely on the

Commission’s recommendation rather than select its own receiver, the Commission

respectfully recommends that the Court appoint Kenneth D. Murena, Esq., of

Damian & Valori, LLP, in Miami, Florida, as the receiver in this matter. See Exhibit

C (Murena’s résumé and list of receivership cases). Mr. Murena has extensive

experience serving as a receiver, both in SEC matters and other civil contexts, and in

particular he is very familiar with this sort of fraud and the types of assets that the

7
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 8 of 10

Commission believes will compose the estate. While Mr. Murena is located in

Miami, he has committed that, if appointed, he will not bill the estate for expenses

incurred while traveling between Miami and Mississippi.

The Commission respectfully requests that this Court enter the proposed order

appointing Kenneth D. Murena as a temporary receiver over the Defendants’ assets.

VI. Conclusion

Based on the foregoing, the Commission respectfully requests that the Court

grant its motion and enter the proposed order appointing Kenneth D. Murena, Esq.,

of Damian & Valori LLP, as a temporary receiver over Defendants’ assets.

Dated this 10th day of May, 2018.

Respectfully submitted,

s/ W. Shawn Murnahan
W. Shawn Murnahan
Senior Trial Counsel
Georgia Bar No. 529940
Tel: (404) 842-7669
Email: murnahanw@sec.gov

M. Graham Loomis
Regional Trial Counsel
Georgia Bar No. 457868
Tel: (404) 842-7622
Email: loomism@sec.gov

Justin Delfino
Senior Counsel
Georgia Bar No. 570206
Tel: (404) 942-0698
8
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 9 of 10

Email: delfinoj@sec.gov

COUNSEL FOR PLAINTIFF


Securities and Exchange Commission
Atlanta Regional Office
950 East Paces Ferry Road, N.E., Suite 900
Atlanta, GA 30326-1382
Tel (main): (404) 842-7600
Fax: (703) 813-9364

OF COUNSEL

D. Michael Hurst, Jr.


United States Attorney

s/Kristi H. Johnson
Kristi H. Johnson
Assistant United States Attorney
MS Bar No. 102891

Marc Perez
Assistant United States Attorney
WA Bar No. 33907

Civil Division
United States Attorney's Office
Southern District of Mississippi
501 East Court Street, Suite 4-430
Jackson, MS 39201
Tel: (601) 973-2887
Fax: (601) 965-4409

9
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 10 of 10

UNITED STATES DISTRICT COURT


SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE


COMMISSION,

Plaintiff,

v. Case No. 3:18-CV-252-


CWR-FKB

ARTHUR LAMAR ADAMS AND


MADISON TIMBER PROPERTIES, LLC,

Defendants,

CERTIFICATE OF SERVICE

I hereby certify that on this day, I served a true and correct copy of the

Plaintiff’s Memorandum of Law in Support of its Expedited Motion to Appoint

Receiver on John M. Colette, Esq., as counsel for Defendants, via email and by

United Parcel Service.

Dated this 10th day of May, 2018.


Respectfully submitted,

s/Kristi H. Johnson
Kristi H. Johnson
Case 3:18-cv-00252-CWR-FKB Document 11 Filed 05/10/18 Page 1 of 6

UNITED STATES DISTRICT COURT


SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE


COMMISSION,

Plaintiff,

v. Case No.

ARTHUR LAMAR ADAMS AND 3:18-cv-252-CWR-FKB


MADISON TIMBER PROPERTIES, LLC,

Defendants,

EXPEDITED MOTION TO APPOINT TEMPORARY RECEIVER

Plaintiff Securities and Exchange Commission (“Commission”) files this

Expedited Motion for the Appointment of a Temporary Receiver for Defendants in

this matter. Due to the continued risk of dissipation of those assets, the Commission

asks that the motion be heard as expeditiously as the Court’s schedule permits.

In support of its motion, the SEC contemporaneously files a memorandum

brief and the following supportive exhibits:

Exhibit A: Letter from John M. Colette

Exhibit B: Individual Investor Lawsuit


Case 3:18-cv-00252-CWR-FKB Document 11 Filed 05/10/18 Page 2 of 6

Exhibit C: Murena’s résumé and list of receivership cases

As set forth in the Complaint, the Commission alleges that Defendants

defrauded numerous investors via a Ponzi scheme. While Defendants have not yet

responded to the Complaint, Defendants’ counsel has indicated that Defendants do

not contest the core allegation that they conducted a Ponzi scheme. Indeed, during

the change of plea hearing on May 9, 2018 in United States v. Adams, No. 3:18-CR-

88-CWR-LRA (S.D.Miss.), Defendant Adams pled guilty to the Bill of Information

filed against him for bank and wire fraud based on the same conduct.

Under these circumstances, a receiver is necessary to take control of the

Defendants’ assets for the benefit of investors in order to marshal and preserve those

assets. The primary purpose of equity receiverships in an SEC action is to promote

orderly and efficient administration of the estate by the district court for the benefit of

investors. SEC v. Hardy, 803 F.2d 1034, 1038 (9th Cir. 1986). “The appointment of

a receiver is a well-established equitable remedy available to the SEC in its civil

enforcement proceedings for injunctive relief.” SEC v. First Fin. Group of Texas,

645 F.2d 429, 438 (5th Cir. 1981). Moreover, because the Commission remains

concerned about the potential for dissipation of investor funds and assets, the

Commission requests that this motion be heard on an expedited basis.

Based on common law principles of equity, a receiver serves as a disinterested

court officer who collects and possesses all property subject to the receivership,

known as the receivership “estate.” See, e.g., Atlantic Trust Co. v. Chapman, 208
2
Case 3:18-cv-00252-CWR-FKB Document 11 Filed 05/10/18 Page 3 of 6

U.S. 360, 370-71 (1908). The court holds custody of the receivership estate and

administers it through the receiver. Id.; see also Chicago Deposit Vault Co. v.

McNulta, 153 U.S. 554 (1894). The receiver’s possession, therefore, is the court’s

possession. Id. In this case, the Commission anticipates the receiver ultimately

distributing the estate assets back to defrauded investors.

The Commission’s ability to seek receivership serves as a critical tool in

enforcing the federal securities laws. In light of the estimated size of the fraud –

nearly $100 million – and the number of investors, a receiver is necessary in this case

to preserve and analyze Defendants’ and third parties’ documents and financial

records to determine the full extent of investor losses, to discover if there are viable

claims against third parties, and to establish a claims process to facilitate a fair and

orderly distribution of remaining assets to investors.

The Commission seeks the appointment of a temporary receiver who will,

within 60 days, file a report that includes a preliminary plan for the administration of

the receivership estate, including recommendations as to the most efficient means for

marshalling, liquidating and distributing assets within that estate. The Court, with

input from the Commission, can then better determine whether the receivership

should be continued.

The Commission, therefore, respectfully asks that the Court enter an order in

the form filed concurrently herewith appointing a temporary receiver in this case.

3
Case 3:18-cv-00252-CWR-FKB Document 11 Filed 05/10/18 Page 4 of 6

Dated this 10th day of May, 2018.

Respectfully submitted,

s/ W. Shawn Murnahan
W. Shawn Murnahan
Senior Trial Counsel
Georgia Bar No. 529940
Tel: (404) 842-7669
Email: murnahanw@sec.gov

M. Graham Loomis
Regional Trial Counsel
Georgia Bar No. 457868
Tel: (404) 842-7622
Email: loomism@sec.gov

Justin Delfino
Senior Counsel
Georgia Bar No. 570206
Tel: (404) 942-0698
Email: delfinoj@sec.gov

COUNSEL FOR PLAINTIFF


Securities and Exchange Commission
Atlanta Regional Office
950 East Paces Ferry Road, N.E., Suite 900
Atlanta, GA 30326-1382
Tel (main): (404) 842-7600
Fax: (703) 813-9364

4
Case 3:18-cv-00252-CWR-FKB Document 11 Filed 05/10/18 Page 5 of 6

OF COUNSEL

D. Michael Hurst, Jr.


United States Attorney

s/Kristi H. Johnson
Kristi H. Johnson
Assistant United States Attorney
MS Bar No. 102891

Marc Perez
Assistant United States Attorney
WA Bar No. 33907

Civil Division
United States Attorney's Office
Southern District of Mississippi
501 East Court Street, Suite 4-430
Jackson, MS 39201
Tel: (601) 973-2887
Fax: (601) 965-4409

5
Case 3:18-cv-00252-CWR-FKB Document 11 Filed 05/10/18 Page 6 of 6

UNITED STATES DISTRICT COURT


SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE


COMMISSION,

Plaintiff,

v. Case No. 3:18-CV-252-


CWR-FKB

ARTHUR LAMAR ADAMS AND


MADISON TIMBER PROPERTIES, LLC,

Defendants,

CERTIFICATE OF SERVICE

I hereby certify that on this day, I served a true and correct copy of the

Plaintiff’s Expedited Motion to Appoint Temporary Receiver on John M. Colette,

Esq., as counsel for Defendants, via email and by United Parcel Service.

Dated this 10th day of May, 2018.

Respectfully submitted,

s/Kristi H. Johnson
Kristi H. Johnson
Case 3:18-cv-00252-CWR-FKB Document 11-1 Filed 05/10/18 Page 1 of 1

EXHIBIT
A

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