Free Reply in Support of Motion - District Court of Arizona - Arizona

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Guttilla & Murphy, PC
4150 West Northern Ave Phoenix, Arizona 85051 (623) 937-2795

Guttilla & Murphy, PC
Firm No. 00133300 Ryan W. Anderson (No. 020974) 4150 West Northern Ave. Phoenix, Arizona 85051 (623) 937-2795 [email protected]

Attorneys for the Receiver

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Lawrence J. Warfield, Receiver, Plaintiff, v. Michael Alaniz, et al. ) ) Cause No. CV 03-2390 PHX JAT ) ) ) RECEIVER'S REPLY IN SUPPORT OF ) MOTION FOR CLARIFICATION, OR ) ALTERNATIVELY, MOTION FOR ) RECONSIDERATION ) ) )

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Defendants.

The Receiver files this Reply in Support of his Motion for Clarification, or Alternatively, Motion for Reconsideration ("Motion") regarding the Court's Order on the parties' cross-motions for summary judgment (Doc. #507) ("Order"). As the Defendant's Response1 to the Receiver's Motion demonstrates, all of the parties agree that the proper interpretation of the Court's Order is that the Receiver has proven his claim of fraudulent transfer as a matter of law, but there remains for the trier

The Defendants' Response to Motion for Reconsideration goes beyond the scope of the Receiver's Motion in subparagraphs (c) and (d), at page two of the Response. Accordingly, those points are not addressed here.
Document 513 Filed 08/29/2006 Page 1 of 4

Case 2:03-cv-02390-JAT

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Guttilla & Murphy, PC
4150 West Northern Ave Phoenix, Arizona 85051 (623) 937-2795

of fact to determine whether the Defendants' have established their affirmative defense under A.R.S. § 44-108(A).2 Nevertheless, for the reasons set forth in the Receiver's Motion, the Order should be clarified to correct the language that suggests that the Defendant's knowledge of or participation in Dillie's Ponzi scheme is an element of the Receiver's fraudulent transfer claim. This is particularly important in light of the fact that the Court's decision is widely available to future litigants (Slip Copy, 2006 WL 2190563 (D. Ariz.). 3 As noted in the Motion, the troublesome language of the Order is found at pages 26 and 27 of the Order. After noting Dillie's plea and conviction, the Court added that that while " . . . Dillie admitted to using Mid-America to solicit the Defendants to further his Ponzi scheme, there is absolutely no indication by Dillie that the independent brokers, were "running," or "operating," or had any knowledge of the Ponzi scheme or the fact that the investors would not be paid." (Order, 26:24-26.)4 This statement is then followed by the following:

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The affirmative defense set forth in A.R.S. § 44-1008(A) requires a Defendant to prove he (1) "took in good faith" and (2) "for reasonably equivalent value". The Court examines what the transferee objectively knew or should have known in questions of good faith. In re: Agricultural Research & Tech Group, Inc., 916 F.2d at 535-36. Agents selling unregistered securities have been held by at least one Circuit not to have given "reasonably equivalent value". Warfield v. Byron, 436 F.3d 551 (5th Cir. 2006). 3 If the Court holds that both parties have incorrectly interpreted the Court's Order regarding what is left to be proven at trial on the Receiver's fraudulent transfer claim, the Receiver respectfully urges the Court to reconsider its previous Order for those reasons set forth in the Receiver's Motion. 4 The Court also stated:

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Defendants argue that Dillie's guilty plea does not establish that these defendants had an actual intent to defraud. The Court agrees. A plea 22 agreement admitting to the operation of a Ponzi scheme is direct evidence of that individual's intend to defraud. In re Slatkin, 310 B.R. 740, 748 (C.D. 23 Cal. 2004). However, the Rada Defendants have not admitted to operating a Case 2:03-cv-02390-JAT Document 513 2 Filed 08/29/2006 Page 2 of 4

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The Court finds that the parties have presented conflicting evidence, creating a material question of fact, as to whether the Defendants had actual knowledge of the Ponzi scheme and/or the fraudulent nature of the business. Order, 26:27 ­ 27:2

4 The Defendants' actual knowledge of the Ponzi scheme or the fraudulent nature of 5 Dillie's business is not an element of the Receiver's claim.5 It is these parts of the Order 6 that causes the confusion and should be clarified or corrected. 7 Accordingly, the Receiver requests that the Court clarify its Order so that the 8 parties in this case and those who may rely on the Court's decision in the future, have a 9
Guttilla & Murphy, PC

clear understanding that the undisputed evidence of Dillie's Ponzi scheme establishes the
4150 West Northern Ave Phoenix, Arizona 85051 (623) 937-2795

10 Receiver claim of fraudulent transfers, subject to the Defendants' establishing their 11 affirmative defense under A.R.S. § 44-1008(A). 12 Respectfully submitted this 29th day of August, 2006. 13 GUTTILLA & MURPHY, PC 14 15 16 17 18 19 20 Ponzi scheme. In fact, they content (sic) that they were completely unaware of Dillie's scheme. (Emphasis Added.) s/Ryan W. Anderson Ryan W. Anderson Attorneys for the Receiver

Order, 26:10-15. 5 Neither was the Defendants' actual knowledge of Dillie's fraud an issue as to 21 affirmative defense of the Defendants that was addressed by the Receiver's Motion for Summary Judgment (Doc # 464). The Receiver argued in his motion that the affirmative 22 defense was unavailable to these Defendants because (1) they failed to ask for and receive financial statements for Mid-America, and (2) they sold charitable gift annuities 23 that were not registered or otherwise did not comply with applicable state laws. See Receiver's Motion for Summary Judgment at pages 9 through 35 (Doc # 464). Case 2:03-cv-02390-JAT Document 513 3 Filed 08/29/2006 Page 3 of 4

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Guttilla & Murphy, PC
4150 West Northern Ave Phoenix, Arizona 85051 (623) 937-2795

A true copy of the foregoing has been filed electronically this 29th day of August, 2006, and following persons designated as ECF Registered Users will be served with notice of same by the Court's ECF system: Burton M. Bentley ECF Registered [email protected] Attorney for Defendants Leonard and Elizabeth Bestgen, Robert Carroll, Rudy and Mary Crosswell, David Cutshall, Charles Davis, Richard Derk, Orville Frazier, Ronald Kerher, Dwight Lankford, John and Candes Rada, Paul Richards, Fera Shivaee, Patrick and Andrea Wehrly and Donald Muchmore Gregory Shebest ECF Registered [email protected] Attorney for Heritage Marketing David L. Kagel John Torbett ECF Registered [email protected] [email protected] Attorneys for Paul Pichie Copy of the foregoing mailed this 29th day of August, 2006, to: Steve A. Bryant Steve Bryant & Associates 3618 Mt. Vernon Street, Suite A Houston, TX 77006 Attorneys for Dwight Lankford Robert Tretiak 4615 N. Ft. Apache Road Las Vegas, NV 89129 Defendant Pro Se Ren Bidwell 3430 Pacific Ave SE Olympia, WA 98501 Defendant Pro Se By _s/Jeanie Knaack
0758-011(54580)

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Case 2:03-cv-02390-JAT

Document 513

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