Free Motion for Summary Judgment - District Court of Arizona - Arizona

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MOLLY M. WHITE, Cal. Bar No. 171448 E-mail: [email protected] Attorneys for Plaintiff Securities and Exchange Commission Rosalind R. Tyson, Acting Regional Director Michele Wein Layne, Associate Regional Director Andrew G. Petillon, Associate Regional Director 5670 Wilshire Boulevard, 11th Floor Los Angeles, California 90036 Telephone: (323) 965-3998 Facsimile: (323) 965-3908 UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. Case No. CV-03-2323-PHX-JWS SEPARATE STATEMENT OF MATERIAL FACTS SUPPORTING MOTION FOR SUMMARY JUDGMENT AGAINST GRANT D. SEEGER

SECURITY TRUST COMPANY, N.A., et al., Local Rule 56.1(a) Defendants.

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Pursuant to Civil Local Rule 56.1(a), Plaintiff Securities and Exchange Commission ("Commission") files this Separate Statement of Material Fact.

Statement of Material Fact 1. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d)(1) and 22(a) of the Securities Act of 1933, Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27 of the Securities Exchange Act of 1934, and Sections 42(d), 42(e)(1) and 44 of the Investment Company Act of 1940. 2. Defendants have, directly or indirectly, made use of the means or instrumentalities of interstate commerce, of the mails, or of the facilities of a national securities exchange in connection with the transactions, acts, practices and courses of business alleged in this Complaint. 3. Venue is proper in this district pursuant to Section 22(a) of the Securities Act, Section 27 of the Exchange Act, and Section 44 of the Investment Company Act, because certain of the transactions, acts, practices and courses of conduct constituting violations of the federal securities laws occurred within this district.

Evidentiary Support Declaration of Molly M. White ("White Dec.) Ex. D (Complaint ¶ 1); White Dec. Ex. E (Answer ¶ 1).

White Dec. Ex. D (Complaint ¶ 1); White Dec. Ex. E (Answer ¶ 1).

White Dec. Ex. D (Complaint ¶ 2); White Dec. Ex. E (Answer ¶ 2).

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Statement of Material Fact 4. Security Trust Company, N.A., based in Phoenix, Arizona, was an uninsured national banking association that provided trust and custody-related services to high net-worth individuals, private trusts and entities, and retirement plans and their administrators. 5. STC did not hold deposits, was not a public

Evidentiary Support White Dec. Ex. D (Complaint ¶ 8); White Dec. Ex. E (Answer ¶ 8).

White Dec. Ex. D (Complaint

company and was not registered with the Securities ¶ 8); White Dec. Ex. E and Exchange Commission in any capacity. (Answer ¶ 8).

6. As of August 31, 2003, STC reported that it had White Dec. Ex. D (Complaint $12.9 billion in assets under administration. ¶ 8); White Dec. Ex. E (Answer ¶ 8). 7. From about 1998 to October 5, 2003, Grant Seeger was the CEO of Security Trust Company. White Dec. Ex. D (Complaint ¶ 9); White Dec. Ex. E (Answer ¶ 9); White Dec Ex. U (Plea Agreement ¶ 3); White Dec Ex. V (Allocution p. 6:15-18); White Dec. Ex. C (Seeger Depo., pp. 70:16-22, 72:10-21 & 75:16-76:21.) 8. Seeger held a Series 7 license, which allowed him to buy and sell securities, up until STC was formed. 9. Seeger also held a state securities license before White Dec. Ex. C (Seeger forming STC. Depo., pp 18:3-20:7.) White Dec. Ex. C (Seeger Depo., pp 18:3-20:7.)

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Statement of Material Fact 10. In 1991, Seeger formed STC's predecessor, Security Investment Management & Trust, to engage in securities sales to private custodial accounts. 11. In 1998, Seeger shifted STC's business to serving as a custodian for retirement plans and their third party administrators, or TPAs. 12. At that time, STC developed an electronic trading platform that allows retirement plan participants to trade multiple mutual funds in a single day. 13. The platform relies on STC's access to an interface sponsored by the National Securities Clearing Corporation ("NSCC") that enabled simultaneous trading in thousands of mutual funds through an NSCC subsidiary corporation known as Defined Contribution Clearance & Settlement. 14. STC's platform was designed primarily for processing trades made by TPAs.

Evidentiary Support White Dec. Ex. D (Complaint ¶ 13); White Dec. Ex. E (Answer ¶ 13).

White Dec. Ex. D (Complaint ¶ 13); White Dec. Ex. E (Answer ¶ 13). White Dec. Ex. D (Complaint ¶ 13); White Dec. Ex. E (Answer ¶ 13).

White Dec. Ex. D (Complaint ¶ 13); White Dec. Ex. E (Answer ¶ 13).

White Dec. Ex. D (Complaint ¶ 13); White Dec. Ex. E (Answer ¶ 13).

15. STC processed mutual fund trades, primarily on behalf of retirement funds.

White Dec. Ex. U (Plea Agreement ¶ 3); White Dec. Ex. V (Allocution, p. 6:1920); White Dec. Ex. C (Seeger Depo., pp. 70:16-22, 72:10-21 & 75:16-76:21.)

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Statement of Material Fact 16. A share of a mutual fund is a type of security which is sold to the public.

Evidentiary Support White Dec. Ex. U (Plea Agreement ¶ 3); White Dec. Ex. V (Allocution, p. 6:2122); White Dec. Ex. C (Seeger Depo., pp. 70:16-22, 72:10-21 & 75:16-76:21.)

17. STC's mutual fund trades were processed through National Securities Clearing Corporation in New York County, New York.

White Dec. Ex. U (Plea Agreement ¶ 3); White Dec. Ex. V (Allocution, p. 6:2325); White Dec. Ex. C (Seeger Depo., pp. 70:16-22, 72:10-21 & 75:16-76:21.)

18. STC's trade processing for TPAs involved several steps.

White Dec. Ex. D (Complaint ¶ 14); White Dec. Ex. E. (Answer ¶ 14).

19. First, retirement plan sponsors collected orders White Dec. Ex. D (Complaint for the purchase and sale of mutual fund shares ¶ 14); White Dec. Ex. E

from plan participants during the day and then shut (Answer ¶ 14). off the participants' ability to enter trading orders at 4:00 p.m. EST, when the markets close. 20. Next, by approximately 6:30 p.m. EST, STC provided its TPA clients with a file showing that day's net asset value or "NAV" for all mutual funds that could be traded through its platform. White Dec. Ex. D (Complaint ¶ 14); White Dec. Ex. E (Answer ¶ 14).

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Statement of Material Fact

Evidentiary Support

21. TPAs then created a trade file listing the trades White Dec. Ex. D (Complaint for all plan participants and delivered the files electronically to STC by approximately 9:00 p.m. EST. 22. STC processed these files through internal, proprietary databases and sent them electronically to NSCC in a single, consolidated file. 23. NSCC then executed and settled the trades with the various mutual funds, and provided confirmations to STC that were forwarded to the TPAs. 24. In 2000, Seeger was contacted by two hedge funds that were engaged in market timing ­ Samaritan and Canary. White Dec. Ex. U (Plea Agreement ¶ 3); White Dec. Ex. V (Allocution, p. 7:2-5); White Dec. Ex. E (Answer ¶ 15); White Dec. Ex. C (Seeger Depo., pp. 77:8-78:4 & 78:21-79:8.) 25. In early discussions with STC, the hedge funds White Dec. Ex. D (Complaint learned that they could submit trades through STC ¶ 17); White Dec. Ex. E White Dec. Ex. D (Complaint ¶ 14); White Ex. E (Answer ¶ 14). White Dec. Ex. D (Complaint ¶ 14); White Dec. Ex. E (Answer ¶ 14). ¶ 14); White Dec. Ex. E (Answer ¶ 14).

as late as 9:00 p.m. EST and still receive that day's (Answer ¶ 17); see also NAV for the mutual funds traded because of STC's White Dec. Ex. C (Seeger trade processing procedures for TPAs. Depo., pp. 82:14-83:16.)

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Statement of Material Fact 26. Seeger specifically confirmed this fact to the hedge funds.

Evidentiary Support White Dec. Ex. D (Complaint ¶ 17); White Dec. Ex. E (Answer ¶ 17); see also White Dec. Ex. C (Seeger Depo., pp. 82:14-83:16.)

27. These hedge funds wanted to use STC to process their trades to the mutual funds.

White Dec. Ex. U (Plea Agreement ¶ 3); White Dec. Ex. V (Allocution, p. 7:6-8); White Dec. Ex. C (Seeger Depo., pp. 70:16-22, 72:1021 & 75:16-76:21.)

28. The reason they wanted to do this was to attempt to hide from the mutual funds the fact they were market timing.

White Dec. Ex. U (Plea Agreement ¶ 3); White Dec. Ex. V (Allocution, p. 7:8-10); White Dec. Ex. C (Seeger Depo., pp. 70:16-22, 72:1021 & 75:16-76:21.)

29. The hedge funds opened several accounts at STC in May 2000.

White Dec. Ex. E (Answer ¶ 18); see White Dec. Ex. N (Hartz Master Custody Agreement, Dated May 22, 2000); White Dec. Ex. C (Seeger Depo., p. 97:8-13.)

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Statement of Material Fact 30. From Approximately May 2000 to September 2003, Mr. Seeger agreed to cause STC to process these trades on behalf of Samaritan and Canary.

Evidentiary Support White Dec. Ex. U (Plea Agreement ¶ 3); White Dec. Ex. V (Allocution, p. 7:1117); White Dec. Ex. C (Seeger Depo., pp. 70:16-22, 72:10-21 & 75:16-76:21.)

31. Mr. Seeger asked Mr. Kenyon to oversee the development of software that would allow the creation of omnibus accounts, there by allowing the hedge funds' trades to be hidden among the

White Dec. Ex. U (Plea Agreement ¶ 3); White Dec. Ex. V (Allocution, p. 7:1423); White Dec. Ex. C

trades made by retirement and pension plans which (Seeger Depo., pp. 70:16-22, were being processed by STC. Mr. Seeger and others at STC referred to this as "piggybacking." 32. STC opened omnibus accounts for the hedge funds in 2000. 33. STC's tax ID number was used for the omnibus accounts. 34. Mr. Seeger later learned that some of these White Dec. Ex. E. (Answer ¶ 24). White Dec. Ex. E (Answer ¶ 25). White Dec. Ex. U (Plea 72:10-21 & 75:16-76:21.)

trades were submitted through Lam Research 401K Agreement ¶ 3); White Dec. Saving Plus Plan's account. Ex. V (Allocution, p. 7:248:1); White Dec. Ex. C (Seeger Depo., pp. 70:16-22, 72:10-21 & 75:16-76:21.)

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Statement of Material Fact 35. Mr. Seeger knew that if mutual funds had known that the money was from hedge funds and that the hedge funds were market timing, some of

Evidentiary Support White Dec. Ex. U (Plea Agreement ¶ 3); White Dec. Ex. V (Allocution, p. 8:3-7);

the mutual funds would have refused to allow these White Dec. Ex. C (Seeger trades to occur. Depo., pp. 70:16-22, 72:1021 & 75:16-76:21.) 36. One of the funds was Fidelity Advisor Funds, and the value of the trades with Fidelity Advisor Funds exceeded $50,000. White Dec. Ex. U (Plea Agreement ¶ 3); White Dec. Ex. V (Allocution, p. 8:8-12); White Dec. Ex. C (Seeger Depo., pp. 70:16-22, 72:1021 & 75:16-76:21.) 37. Mr. Seeger discussed this trading with Paul Flynn from CIBC. White Dec. Ex. U (Plea Agreement ¶ 3); White Dec. Ex. V (Allocution, p. 8:2122); White Dec. Ex. C (Seeger Depo., pp. 70:16-22, 72:10-21 & 75:16-76:21.) 38. Mr. Flynn learned that STC was processing trades from pension plans together with private hedge funds in omnibus accounts, or "piggybacking" the trades, in order to hide the true identity of the traders form the mutual fund companies. White Dec. Ex. U (Plea Agreement ¶ 3); White Dec. Ex. V (Allocution, p. 8:229:4); White Dec. Ex. C (Seeger Depo., pp. 70:16-22, 72:10-21 & 75:16-76:21.)

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Statement of Material Fact

Evidentiary Support

39. STC had a compensation arrangement with the White Dec. Ex. E (Answer ¶ Hedge Funds that included a custodial fee and a profit sharing agreement. 40. In October of 2000, Seeger received an email from an STC employee forwarding a complaint by a mutual fund company that Hartz was buying in large dollars and liquidating rapidly. 41. In March of 2002, Seeger received an email from an STC employee forwarding a complaint by White Dec. Ex. C (Seeger Depo., pp. 138:9-140:11); White Dec. Ex. P (October 10, 2000 email chain). White Dec. Ex. C (Seeger Depo., pp. 170:15-172:3); 6).

a mutual fund company that Hartz was engaging in White Dec. Ex. T (March market timing. 2002 email chain).

42. Hartz Trading signed an exclusivity agreement White Dec. Ex. C (Seeger with STC, pursuant to which STC agreed that Hartz, Samaritan, and DaVinci could participate in active market timing, but no others could. Depo., pp. 97:8-13 & 121:14122:8); White Dec. Ex. N (Hartz Mater Custody Agreement, p. SEC005732). 43. Hartz submitted 99% of its trades to STC after 4:00 p.m. eastern time. 44. Samaritan submitted 80% of its trades to STC after 4:00 p.m. eastern time. Declaration of Jonathan Ngo ¶ 5 & Ex. 1. Declaration of Jonathan Ngo ¶ 5 & Ex. 2.

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Statement of Material Fact 45. In October of 2000, Seeger received an email

Evidentiary Support White Dec. Ex. C (Seeger

from an STC employee expressing her concern that Depo., pp. 142:14-144:2); STC was receiving trades from Hartz Trading Company after the close of the market at 4:00 p.m. White Dec. Ex. P (October 10, 2000 email chain); White Dec. Ex. Q (October 10, 2000 email chain); White Dec. Ex. A (Geremina (McDermott) Depo., pp. 64:16-69:19, 70:21-73:11 & 80:12-22.) 46. In her October 10, 2000 email to Seeger and others concerning Hartz's trades, the STC employee referenced her concern that the SEC might have a problem with STC's trading practices. 47. In response to another employee's suggestion that Hartz might submit its trade file before 4:00 p.m., Seeger responded "[w]e do not necessarily need their trade file but we do need the addendum and hold harmless," referring to an agreement between Hartz and STC. White Dec. Ex. P (October 10, 2000 email chain). White Dec. Ex. P (October 10, 2000 email chain); White Dec. Ex. Q (October 10, 2000 email chain)

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Statement of Material Fact 48. Hartz signed an agreement with STC, dated October 10, 2000, pursuant to which Hartz agreed that all instructions delivered to STC on any business day "shall have been received by [Hartz] from the Client-shareholder by the close of trading (currently 4:00 pm EST) on the New York Stock Exchange . . . on such business day." 49. In the October 2000 time frame, Seeger did not consciously think about whether the Securities and Exchange Commission, or other entities that regulated the stock market, might have a problem with people making trade decisions after the market closed and being able to obtain the price before the close of the market. 50. William A. Kenyon was President and Secretary of Security Trust Company from June of 1998 until November 1, 2003. 51. Mr. Kenyon reported to Grant Seeger the entire time that Mr. Kenyon worked at Security Trust Company.

Evidentiary Support White Dec. Ex. N (Addendum to Master Custody Agreement, p. SEC 005728; White Dec. Ex. C (Seeger Depo., p. 97:8-13.)

White Dec. Ex. C (Seeger Depo., p. 151:8-16.)

White Dec. Ex. B (Kenyon Depo., pp. 13:25-14:10.)

White Dec. Ex. B (Kenyon Depo., pp 86:14-87:1); White Dec. Ex. J (STC organization chart).

52. Mr. Kenyon and Mr. Seeger were members of STC's board of directors from June of 1998 until November 1, 2003.

White Dec. Ex. B (Kenyon Depo., pp. 76:19-77:8); White Dec. Ex. C (Seeger Depo., pp. 38:12-39:3 & 39:17-25.)

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Statement of Material Fact 53. On November 10, 1999, Convergent Capital Management ("CCM") purchased all the shares of Security Trust Company ("STC").

Evidentiary Support White Dec. Ex. B (Kenyon Depo., p. 29:16-20); White Dec. Ex. C (Seeger Depo., pp. 34:23-35:5, pp. 36:9-12 & 43:4-9); White Dec. Ex. I (Liquidity Agreement).

54. Before CCM purchased all of the stock ownership of STC, Grant Seeger and Hayden Holland each owned 50% of STC.

White Dec. Ex. B (Kenyon Depo. pp. 21:21-22:8); White Dec. Ex. C (Seeger, Depo., p. 34:2-22.)

55. In connection with CCM's acquisition of STC, White Dec. Ex. B (Kenyon Grant Seeger and William Kenyon received Class C shares of stock in CCM. Depo., pp. 23:7-11, 24:10-13, 25:12-19; & 30:6-31:11); White Dec. Ex. I (Liquidity Agreement); White Dec. Ex. C (Seeger Depo., pp. 41:2043:3 & 43:21-44:8.) 56. CCM paid dividends on the Class C shares of its stock. White Dec. Ex. B (Kenyon Depo., p. 26:9-10); White Dec. Ex. C (Seeger Depo., p. 44:18-20.) 57. The dividends were calculated pursuant to a formula. White Dec. Ex. B (Kenyon Depo., p. 26:11-19); White Dec. Ex. C (Seeger Depo., pp. 44:21-45:6.)

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Statement of Material Fact 58. The formula by which the dividends on the Class C shares were calculated was purely driven by STC's revenue.

Evidentiary Support White Dec. Ex. B (Kenyon Depo., pp. 42:24-43:3); White Dec. Ex. C (Seeger Depo., pp. 44:21-45:6.)

59. When CCM acquired STC, CCM agreed to provide STC with $1 million in working capital. 60. If STC's working capital exceeded $1 million, STC was supposed to make distributions to CCM.

White Dec. Ex. B (Kenyon Depo., pp. 39:6-40:2.) White Dec. Ex. B (Kenyon Depo., pp. 41:20-42:2); White Dec. Ex. H (Kenyon Employment Agreement, clause 1(d)).

61. From the time that CCM acquired STC, William Kenyon calculated the formula to determine the amount of money that STC was to distribute to CCM.

White Dec. Ex. B (Kenyon Depo., pp. 43:12-44:5); White Dec. Ex. G (sample dividend calculation); White Dec. Ex. C (Seeger Depo., pp. 44:21-45:17.)

62. CCM did its own calculations to confirm that Mr. Kenyon's calculations were consistent.

White Dec. Ex. B (Kenyon Depo., p. 43:19-23); White Dec. Ex. C (Seeger Depo., pp. 44:21-45:17.)

63. Mr. Kenyon prepared a spreadsheet reflecting the actual results of STC's operations as they pertained to the formula for distributable revenues.

White Dec. Ex. B (Kenyon Depo., p. 51:2-17); White Dec. Ex. F (Kenyon's dividend-tracking spreadsheet).

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Statement of Material Fact 64. Mr. Kenyon maintained the spreadsheet on his computer.

Evidentiary Support White Dec. Ex. B (Kenyon Depo., p. 53:14-16); White Dec. Ex. F (Kenyon's dividend-tracking spreadsheet).

65. Mr. Kenyon updated the spreadsheet quarterly and he saved the document to his computer.

White Dec. Ex. B (Kenyon Depo., pp. 53:17-54:4); White Dec. Ex. F (Kenyon's dividend-tracking spreadsheet).

66. Mr. Kenyon tracked the actual dollars that were being moved from STC to CCM.

White Dec. Ex. B (Kenyon Depo., pp. 55:25-56:8 & 59:3-6); White Dec. Ex. F (Kenyon's dividend-tracking spreadsheet).

67. Mr. Kenyon knows that his spreadsheet, Exhibit 5, is accurate because he shared the information with CCM, and if there were any discrepancies between Mr. Kenyon's numbers and CCM's numbers, they would figure out what the difference was and Mr. Kenyon would correct his spreadsheet. 68. Mr. Kenyon also tracked on his spreadsheet the dividends that were due to the Class C shareholders from CCM.

White Dec. Ex. B (Kenyon Depo., pp. 61:9-62:10); White Dec. Ex. F (Kenyon's dividend-tracking spreadsheet).

White Dec. Ex. B (Kenyon Depo. p. 59:7-10.)

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Statement of Material Fact 69. From February of 2001 through the end of 2002, CCM paid Mr. Seeger and Mr. Kenyon a total of $1,099,233.51 in dividends on the Class C shares.

Evidentiary Support White Dec. Ex. B (Kenyon Depo., pp. 59:19-60:16); White Dec. Ex. F (Kenyon's dividend-tracking spreadsheet).

70. CCM actually distributed $1,099,233.51 in Class C dividends to Seeger and Kenyon, even though CCM should have paid Seeger and Kenyon a total of about $2.3 million in dividends. 71. Mr. Kenyon received 20% of the dividends on the Class C shares, because he owned 20% of the Class C shares. 72. Mr. Seeger received about 80% of the dividends on the Class C shares because he held 79.9% of the Class C stock.

White Dec. Ex. B (Kenyon Depo., pp. 64:3-18.)

White Dec. Ex. B (Kenyon Depo., p. 60:17-25.)

White Dec. Ex. B (Kenyon Depo., pp. 60:17-61:8.)

73. CCM did not pay Seeger and Kenyon all of the White Dec. Ex. B (Kenyon $1,099,233.51 in dividends in cash; some of the disbursements were non-cash disbursements. Depo., pp. 65:8-67:6); White Dec. Ex. F (Kenyon's dividend-tracking spreadsheet).

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Statement of Material Fact 74. From July of 2000 through June 30, 2003, STC received compensation from the Canary hedge funds totaling $5,844,992.

Evidentiary Support Declaration of Kent Woo ¶ 4 & Ex. 1; White Dec. Ex. S (Hartz invoices); White Dec. Ex. B (Kenyon Depo., pp. 119:18-120:7); White Dec. Ex. A. (Geremina (McDermott) Depo., pp. 125:13-127:3.)

75. STC's audited financial statements for the year White Dec. Ex. K (financial ended December 31, 2000 show that STC earned $10,450,929 in total revenue, but that $5,575,125 of that revenue was for "advisory services." Thus, STC's gross revenue for the year ended December 31, 2000, less advisory services fees, was $4,875,804. 76. STC's audited financial statements for the year White Dec. Ex. L (financial ended December 31, 2001 show that STC earned $16,429,289 in total revenue, but that $7,950,112 of that revenue was for "advisory services." Thus, STC's total revenue for the year ended December 31, 2000, less advisory services fees, was $8,479,177. statement for the year ended 12/31/2001, p.3); White Dec. Ex. B (Kenyon Depo., pp. 96:15-25.) statement for the year ended 12/31/2000, p.3); White Dec. Ex. B (Kenyon Depo., pp. 92:20-93:16.)

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Statement of Material Fact

Evidentiary Support

77. STC's audited financial statements for the year White Dec. Ex. M (financial ended December 31, 2002 show that STC earned statement for the year ended

$27,709, 294 in total revenue, but that $15,554,733 12/31/2002, p.3); White Dec. of that revenue was for "advisory services." Thus, STC's total revenue for the year ended December 31, 2000, less advisory services fees, was $12,154,561. 78. Grant Seeger told William Kenyon that Hartz Trading was investing "family money" with STC. 79. When calculating the formula for the distribution of dividends, Mr. Kenyon did not include fees for advisory services because STC did not receive that income. 80. In July of 2000, one of STC's employees, Jay Marran, raised concerns with Seeger that some of the hedge funds were market timing the mutual funds. White Dec. Ex. C (Seeger Depo., pp. 98:1-100:23); White Dec. Ex. O (July 27, 2000 email chain); White Dec. Ex. A (Geremina (McDermott) Depo., pp. 137:21-141:22); White Dec. Ex. B (Kenyon Depo., pp. 103:7-105:17.) White Dec. Ex. B (Kenyon Depo., pp. 99:24-100:10.) White Dec. Ex. B (Kenyon Depo., pp. 92:20-96:5.) Ex. B (Kenyon Depo., pp. 97:6-18.)

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Statement of Material Fact 81. The STC employee told Seeger he was concerned that some of the mutual funds might shut down certain of STC's trades because of "churning" in the mutual funds.

Evidentiary Support White Dec. Ex. O (July 27, 2000 email chain); White Dec. Ex. C (Seeger Depo., pp. 98:1-99:2); White Dec. Ex. A (Geremina (McDermott) Depo., pp. 137:21-141:22); White Dec. Ex. B (Kenyon Depo., pp. 103:7-105:17.)

82. Hartz Trading Company was the investment arm of the Stern family, a well-known, highly respected family. Because the family made its fortune through the Hartz Pet Food Company, the

White Dec. Ex. B (Kenyon Depo., pp. 98:20-99:12); White Dec. Ex. A (Germina (McDermott) Depo., pp.

Hartz Trading Company adopted the convention of 97:24-99:1.) naming its affiliated companies after birds, like "Canary" and "Cockatoo." 83. During his deposition in this litigation, Seeger admitted that the facts that he admitted in his plea agreement are true. 84. Pursuant to the September 1, 2000 fee agreement between Hartz and STC, Hartz paid STC a 4% profit-sharing fee. White Dec. Ex. C (Seeger Depo., pp. 72:10-21 & 75:1676:21.) White Dec. Ex. R (Hartz fee schedule); White Dec. Ex. B (Kenyon Depo., pp. 116:8117:7.) 85. The fees that the Hedge Funds paid STC were a significant revenue stream for STC. White Dec. Ex. A (Geremina (McDermott) Depo., pp. 127:4-132:8.)
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Statement of Material Fact

Evidentiary Support

86. During his deposition, Seeger indicated that he White Dec. Ex. C (Seeger regretted entering the guilty plea in NYAG's action Depo., pp. 72:22-75:15.) because he did not feel he did anything criminal or illegal. 87. During her deposition, Nicole (McDermott) White Dec. Ex. A (Geremina

Geremina, who was the STC employee who ran the (McDermott) Depo., pp. retirement business, testified that the fees the Hedge Funds paid STC were the largest revenue stream at STC. 88. It was her belief that STC's "ability to make money was predicated upon the revenue streams that [STC was] getting through [the Hedge Funds]." White Dec. Ex. A (Geremina (McDermott) Depo., pp. 127:4-129:16.) 127:4-132:8.)

DATED: July 26, 2007

/s/ Molly M. White MOLLY M. WHITE Attorney for Plaintiff Securities and Exchange Commission

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Case 2:03-cv-02323-JWS

PROOF OF SERVICE I am over the age of 18 years and not a party to this action. My business address is: [X] U.S. SECURITIES AND EXCHANGE COMMISSION, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036.

Telephone: (323) 965-3998 Fax: (323) 965-3908 On July 26, 2007, I caused to be served the document entitled SEPARATE STATEMENT OF MATERIAL FACTS SUPPORTING MOTION FOR SUMMARY JUDGMENT AGAINST GRANT D. SEEGER upon the parties to this action addressed as stated on the attached service list: [X] OFFICE MAIL: By placing in sealed envelope(s), which I placed for collection and mailing today following ordinary business practices. I am readily familiar with this agency's practice for collection and processing of correspondence for mailing; such correspondence would be deposited with the U.S. Postal Service on the same day in the ordinary course of business. [ ] PERSONAL DEPOSIT IN MAIL: By placing in sealed envelope(s), which I personally deposited with the U.S. Postal Service. Each such envelope was deposited with the U.S. Postal Service at Los Angeles, California, with first class postage thereon fully prepaid. EXPRESS U.S. MAIL: Each such envelope was deposited in a facility regularly maintained at the U.S. Postal Service for receipt of Express Mail at Los Angeles, California, with Express Mail postage paid.

[ ]

[ ] [ ]

PERSONAL SERVICE: I caused to be personally delivered each such envelope by hand to the office of the addressee. FEDERAL EXPRESS: By placing in sealed envelope(s) designated by Federal Express with delivery fees paid or provided for, which I deposited in a facility regularly maintained by Federal Express or delivered to a Federal Express courier, at Los Angeles, California. ELECTRONIC MAIL: By transmitting the document by electronic mail to the electronic mail address as stated on the attached service list. FAX (BY AGREEMENT ONLY): By transmitting the document by facsimile transmission. The transmission was reported as complete and without error. (Federal) I declare that I am employed in the office of a member of the bar of this Court, at whose direction the service was made. I declare under penalty of perjury that the foregoing is true and correct. /s/ Molly M. White MOLLY M. WHITE

[ ] [ ]

[X]

Date: July 26, 2007

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SEC v. Security Trust Company, et al. United States District Court - District of Arizona Case No. CV 03-2323 PHX JWS (LA-2781) SERVICE LIST Jess A. Lorona, Esq. Dodge Anderson Mableson Steiner Jones & Horowitz, Ltd. 3003 N. Central Avenue, Suite 1800 Phoenix, AZ 85012-2909 Email: [email protected] Attorney for Defendant Grant D. Seeger

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