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

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Guttilla Murphy Anderson, P.C.

Guttilla Murphy Anderson, PC
Firm No. 00133300

Ryan W. Anderson (Ariz. No. 020974) Stephen J. Womack (Ariz. No. 025097)
[email protected] [email protected] 4150 West Northern Ave. Phoenix, Arizona 85051 (623) 937-2795

Attorneys for the Receiver UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Cause No. CV 03-1825 PHX PGR ) ) Plaintiff, ) ) vs. ) RECEIVER'S REPLY TO ) BURTON M. BENTLEY'S RESPONSE Ronald Stephen Holt; and International ) TO PETITION NO. 13 Funding Association, ) ) Defendants, ) ) and ) ) Annette Holt; American Assets Limited ) Trust; Leonora Street Trust; Dover ) Childrens Trust; Clarendon Avenue ) Holding Trust; Dublin Holding Trust; ) Jeffery Williams (aka Jeffrey Williams); ) Mari Ann Alston; Pacific Central Asset ) Consolidated for Purposes of Receivership Administration with: Management; and American Benefit ) Card Services, Inc. ) ) Commodity Futures Trading Commission v. International Funding Association etc, Defendants Solely for ) Cause No. CV 03-1826 PHX PGR Purposes of Equitable Relief. ) Securities and Exchange Commission, Lawrence J. Warfield, the court-appointed receiver (the "Receiver"), respectfully replies to Burton M. Bentley's Response to Petition No. 13 for Turnover Order ("Bentley's Response").
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I. Introduction Through Petition No. 13, the Receiver seeks an order directing Burton M. Bentley, P.C. ("Bentley") to disgorge all Receivership Assets in his possession, custody, or control, including at least $10,000 known to have been transferred to Bentley. In response, Bentley argues that he ought not be made to disgorge the funds because he did not know at the time of receipt that the funds were derived from Receivership Assets and he has since spent the Receivership Assets paying himself for legal services he provided to Ronald or Rose Holt. While Bentley may not have been aware of the tainted origins of the funds when he received them, Bentley admits that he learned of the Receiver's claim to the funds just days later. Moreover, according to the invoices submitted in support of Bentley's Response, the services Bentley provided were actually provided after he was put on notice that the funds constituted Receivership Assets. Additionally, Bentley argues the Receiver's petition for disgorgement is

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untimely pursuant to the Uniform Fraudulent Transfer Act ("UFTA"), limitations applying to certain tort actions, and the doctrine of latches. The Receiver, however, petitioned the Court within the statutory period prescribed by the UFTA and the balance of equities are against permitting Bentley to keep funds he spent on himself after learning such funds derived from Receivership Assets, regardless of the services he provided. So, the Receiver's claim is not untimely. The Receiver, in Petition No. 13, detailed his claim to at least $10,000.00 in Receivership Assets transferred to Bentley. Bentley's responses to the Receiver's claim are without merit. Accordingly, Petition No. 13 should be granted.
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II. Discussion A. Bentley did not in good faith exchange reasonably equivalent legal services for the $10,000 in Receivership Assets wrongfully transferred to him. Bentley argues that he provided in good faith legal services to Ronald Holt or his mother Rose Holt in good faith in exchange for the $10,000 in Receivership Assets wrongfully transferred to him. As shown immediately below, Bentley did not do so. Therefore, he must disgorge the funds. 1. Bentley is not, in good faith, holding the Receivership Assets.

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Soon after receipt, Bentley received notice the funds constituted Receivership Assets. Bentley admits to receiving the funds about October 3, 2003. Bentley's

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Response, Memorandum, ¶ 3.

Bentley further admits to receiving notice from the

Receiver's counsel in which the Receiver maintained that the funds constituted Receivership Assets. Bentley's Response, Memorandum, ¶ 6. In fact, Bentley

recognized the receipt of the funds were problematic in an e-mail to the Receiver's counsel dated October 9, 2003. Bentley's Response, Memorandum, ¶ 9, and Exhibits Index, Exhibit B. Bentley explains his refusal to disgorge the funds at that time, saying "the SEC was asking for the $10,000..., Rose Holt's legal counsel [was] also asking for the return of her $10,000..., and it appeared safe at that time to withhold payment from both claimants, as no matter who won, the other side was threatening enforcement of their claims against me." Declaration of Burton M. Bentley in Support of

Bentley/Respondent's Response to Petition No. 13 for Turnover Order, ¶ 6. If Bentley had been genuinely concerned with the ownership of the funds, he could have paid them

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into the Court's registry. Bentley was well aware that the ownership of the funds was disputed and, in a self-interested move, resolved to keep the money. Regardless, Bentley's knowledge of the fraudulent nature of the funds is immaterial. See In re Grafton Partners, 321 B.R. 527, 532 (9th Cir. BAP 2005) (proof that the transferor was running a Ponzi scheme can suffice to warrant a finding of actual fraud); In re Cohen, 199 B.R. 709, 717 (9th Cir. BAP 1996) (proof of a Ponzi scheme is sufficient to establish the operator's actual intent to hinder, delay, or defraud creditors for purposes of actually fraudulent transfers); In re Agricultural Research and Tech. Group, Inc. v. Palm Seedlings Partners-A, 916 F.2d 528, 535 (9th Cir. 1990) (debtor's actual intent to hinder, delay or defraud its creditors may be inferred from the mere existence of a Ponzi scheme); In re World Vision, 275 B.R. 641, 656 (Bankr. M.D. Fla. 2002) (in cases involving a Ponzi scheme, the analysis is simplified because fraudulent intent is inferred.); In re Slatkin, 310 B.R. 740, 748 (C.D. Cal. 2004) (holding intent to defraud future investors may be inferred from the mere fact that an individual was running a Ponzi scheme, because no other reasonable inference is possible). 2. Bentley did not, in good faith, provide services in exchange for the Receivership Assets. Bentley intends to use the funds to pay himself for his legal services. Bentley admits to receiving the funds about October 3, 2003 and to receiving notice of the funds disputed ownership on October 6, 2003. Bentley's Response, Memorandum, ¶¶ 3 and 6, respectively. As evidence of the legal services he provided, Bentley submits through the Exhibit Index, filed in support of Bentley's Response, invoices of services Bentley provided. Such invoices, however, show that, prior to receiving notice of the tainted
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nature of the funds on October 6, 2007, he provided, at most, $4,125 in services to Ron Holt, but that he had received other monies for doing so. See Exhibits Index, Exhibit A ("Holt Payments" Schedule), and Exhibit D (Invoices 10498, 10499, and 10450). Therefore, Bentley actually provided the legal services he seeks to pay for with the funds after he was put on notice that the funds constituted Receivership Assets. For this reason, Bentley cannot be said to have provided such services in exchange for the funds in good faith. Because Bentley did not, in good faith, hold the Receivership Assets or provide legal services in exchange for the assets, he should be made to disgorge such assets. B. The Receiver timely petitioned the Court for disgorgement. 1. The Receiver's claim is not barred by UFTA's statutes of repose or limitations because the transfers took place less than four years before Petition No. 13 was filed. Bentley argues the Receiver's claims are barred by the UFTA's four-year statute of repose. Under the UFTA, a claim for recovery of a transfer made with actual

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fraudulent intent must be filed "within four years after the transfer was made or the obligation was incurred or, if later, within one year after the fraudulent nature of the transfer or obligation was or through the exercise of reasonable diligence could have been discovered by the claimant" A.R.S. § 44-1009(1); see A.R.S. § 44-1004(A)(1); and see In re Southwest Supermarkets, L.L.C., 315 B.R. 565, 570, 577 (Bankr.D.Ariz. 2004) ("Arizona's fraudulent transfer statute, like the uniform act, expressly provides a discovery rule for actual fraudulent conveyance claims, requiring that if they are brought later than four years after the transaction, they must be brought within one year of when
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the creditor knew or, with reasonable diligence, should have known of the existence of the cause of action"). A claim for recovery of a transfer made with constructive

fraudulent intent must be filed "within four years after the transfer was made or the obligation was incurred." A.R.S. § 44-1009(2); see A.R.S. §§ 44-1004(A)(2) and 441005; see Warfield v. Alaniz, 453 F.Supp.2d 1118, 1130 (D.Ariz. 2006)(statutes of repose are not subject to tolling). Bentley admits to receiving the funds on October 3, 2003. Bentley's Response, Memorandum, ¶ 3. The Receiver filed Petition No. 13 on July 19, 2007, less than four years after the transfers in question. Therefore, the Receiver's claims are not barred by the UFTA's limitations periods. 2. The Receiver's claim is not barred by latches because Bentley has not been unjustly prejudiced by the timing of the filing of Petition No. 13. Bentley argues that the doctrine of latches bars the Receiver's claims. Pursuant to the doctrine of latches, "[a] claim is considered unenforceable in an action in equity where, under the totality of circumstances, the claim, by reason of delay in prosecution, would produce an unjust result." Harris v. Purcell, 193 Ariz. 409, 410 n. 2, 973 P.2d 1166, 1167 n. 2 (Ariz. 1998). Bentley argues, in effect, the Receiver should have more forcefully sought recovery of the funds before Bentley had a chance to run up legal fees. Bentley's Response, § III. Bentley is not unjustly prejudiced by the timing of the filing of Petition No. 13 because he was on notice of the Receiver's claim well before Bentley provided the underlying services. See § A (2), above, for timing of legal services. Also, equity should favor return of such funds to defrauded investors. For these reasons, the Receiver's claim against Bentley is timely.

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III. Conclusion The Receiver seeks an order directing Bentley to disgorge all Receivership Assets in his possession, custody, or control. Despite his arguments to the contrary, Bentley did not in good faith exchange reasonably equivalent legal services for the $10,000 in Receivership Assets wrongfully transferred to him, and the Receiver timely petitioned the Court for disgorgement. Therefore, the Court should grant the Receiver's request for an order directing respondent Burton M. Bentley, P.C. to turn over to the Receiver Receivership Assets in Bentley's possession or control, including but not limited to $10,000 because such funds constitute Receivership Assets to which Bentley has no rightful claim. IV. Prayer WHEREFORE, the Receiver respectfully requests that the Court enter an order requiring: 1. Burton M. Bentley, P.C. to turn over to the Receiver all Receivership

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Assets in its possession or control, including but not limited to $10,000.00 plus interest, within five business days of the entry of the order; 2. Such other relief to which the Receiver might show himself entitled.

Dated August 13, 2007. GUTTILLA MURPHY ANDERSON, P.C. _s/Ryan W. Anderson_____________ Ryan W. Anderson Attorneys for the Receiver

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PROOF OF SERVICE This is to certify that on the August 13, 2007, I electronically transmitted the foregoing document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the CM/ECF registrants on the attached Master Service List; and that the persons on the attached Master Service List who are not registered participants of the CM/ECF System have been served with a copy of the foregoing document by first class mail this date. This is to also certify that a copy of the foregoing document was also mailed to Burton M. Bentley, P.C., by first class mail at the following address: Burton M. Bentley, P.C. 5343 North 16th Street Suite 480 Phoenix, Arizona 85016 s/Ryan W. Anderson____________ Ryan W. Anderson
0835-018(65569)

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MASTER SERVICE LIST
SEC v. Ronald Stephen Holt, et al. United States District Court for the District of Arizona CV 03-1825 PHX FJM
(Rev. April 9, 2007)

Lawrence J. Warfield International Funding 14555 North Scottsdale Road, #340 Scottsdale, AZ 85254 Receiver Patrick M. Murphy Guttilla Murphy Anderson, P.C. 4150 West Northern Avenue Phoenix, Arizona 85051 Registered CM/ECF: [email protected] Counsel for Receiver Marshall M. Gandy Securities and Exchange Commission 801 Cherry Street, Suite 1900 Fort Worth, TX 76102 Registered CM/ECF: [email protected] Counsel for SEC Merwin D. Grant Grant & Vaughn, P.C. 6225 North 24th Street Suite 125 Phoenix, Arizona 85016 Registered CM/ECF: [email protected] Attorney for Relief Defendant Annette Holt

Ronald Stephen Holt and International Funding Association, Leonora Street Trust, Dover Children's Trust, Clarendon Avenue Holding Trust Dublin Holding Trust, Pacific Central Asset Management, American Benefit Card Services, Inc. Ronald Stephen Holt Central Arizona Detention Center Detainee Ronald Holt 82642008 1155 N. Pinal Parkway Florence, Arizona 85232 Robert L. Stanford Jeffery Williams aka Jeffrey Williams 8415 W. Alex Avenue Peoria, Arizona 85382. Relief Defendant American Assets Limited Trust c/o Registered Agent Michael Bloomquist 4410 W. Union Hills #7-233 Glendale, Arizona 85308 Relief Defendant Mari Ann Alston 305 Nordina Street Redlands, California 92373 Relief Defendant

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James Vaughn 100 South Antietam Place Tucson, Arizona 85710 Suzanne Ingold Burch & Cracchiolo, P.A. 702 E. Osborn Rd. #200 P.O. Box 16882 Phoenix, Arizona 85014-5281 Timothy J. Mulreany Commodity Futures Trading Commission Division of Enforcement 1155 21st Street, N.W. Washington, D.C. 20581 Thomas M. Connelly 2425 East Camelback Rd. Suite 880 Phoenix, Arizona 85016-4208 Michael S. Reeves Attorney at Law 1212 E. Osborn Phoenix, AZ 85014-5533 Registered CM/ECF: [email protected] Attorney for Defendant Ronald S. Holt

0835-001(19488)

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