Free Motion for Release of Funds - District Court of Colorado - Colorado

Case 1:01-cv-00645-JLK

Document 208

Filed 04/07/2008

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 01-cv-00645-JLK SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. KENNETH ROY WEARE, a/k/a ROY WEAVER, J & K GLOBAL MARKETING CORPORATION, and AAA-AUCTION.COM, INC., Defendants. _____________________________________________________________________ DEFENDANT KENNETH ROY WEARE'S MOTION TO RELEASE FUNDS FOR PAYMENT OF RESTITUTION

Kenneth Roy Weare, by and through undersigned counsel, Virginia L. Grady, moves for an Order authorizing the release of funds recovered by the SEC and maintained in the Registry of the Court, to pay the claims of victims who are eligible to collect restitution as a result of the judgement entered in 03-cr-00121-EWN. In support thereof, Mr. Weare states: 1. In 03-cr-00121-EWN, Mr. Weare was ordered at sentencing to pay

restitution in the amount of $1,199,355.00 in scheduled payments as a condition of supervised release. That order was based on the FBI's report of claims made by 645 investors. Those claims were made in response to the FBI's solicitation for claims during the investigation of the defendant.

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2.

As this Court knows, more than $3.7 million dollars of investor funds was

recovered by the SEC and deposited into the Registry of the Court. This Court appointed Patten, MacPhee & Associates as Receiver to establish and administer a claims process for identifying investors and returning their recovered funds. The Receiver then conducted an exhaustive search for claimants and examination of claims. Among those solicited were the 643 individuals listed in the FBI's claim report. The Receiver instructed all potential claimants to respond, even if they had already registered a claim with the FBI. As of December, 2007, the Receiver had fully or partially allowed a total of 1,798 claims, totaling $2,206,955. (See Receiver's Ninth and Final Report to the Court, docket # 200, Main Document). Those funds have now been disbursed. After payment of all fees to the Receiver, Trustee, other professional fees and taxes, a balance of more than $1.4 million dollars remains in the registry of the Court. 3. Counsel has met with the Receiver to compare the list of victims which he

identified and paid with the list of victims identified by the FBI and incorporated into Judge Nottingham's restitution order. Counsel then met with Patricia McGee-Wake, a representative of the Financial Litigation Unit of the United States Attorney's Office, as well as Ms. Carol Henderson of the United States District Court Clerk's Office to disclose the disposition of claims processed by the Receiver relative to the claims identified by the FBI. 4. As stated earlier, all 643 victims identified by the FBI and incorporated

into Judge Nottingham's restitution order were solicited by the Receiver. Of these, 239 filed claims totaling $367,475.00. These claims were paid by the Receiver, leaving 404 2

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unpaid victims . Of these 404, 12 were denied payment (a total of $16,525.00) because the Receiver concluded that these victims profited from their investments. Another 346 victims identified by the FBI's list and contacted by the Receiver opted out of the claims process altogether (a total of $487,815) in claims, and 11 (representing $6,325.00 in claims) actually un-subscribed to the Receiver's emails. A net balance of 35 victims identified on the FBI list, totaling $67,300.00 in claims, could not be located by the Receiver at all. The sum of all 404 of these unpaid claims is $577,965.1 Attachment A is a color-coded spread sheet identifying the foregoing unpaid investors.2 As of April 7, 2008, $1,428,212.80 in principal and $9,385.67 in interest is being held in the Court Registry. This amount is more than enough money ­ for which there appears no other use ­ to pay these remaining investors, and, accordingly, Mr. Weare is simultaneously seeking a modification of the terms and conditions of his supervised release to strike the condition that he make restitution payments. 5. In summary, restitution to those victims who have made valid, verified

claims has been satisfied with the funds seized by the SEC. All fees have been paid. In the unlikely event the remaining, unpaid victims on the criminal side assert their claims, they are entitled to collect from the balance of investor funds which remain in

Some claims made by victims to the FBI were larger than those made by the same victims to the Receiver, most likely because the Receiver required the victims to provide documentation to substantiate the losses. Because the ECF system cannot accommodate space for this color filing, a courtesy copy of this motion and color copy of the attachment will be hand -delivered to the Court and mailed to the parties. 3
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the Court Registry. These funds should not be deposited to the United States Treasury. 6. Counsel has attempted to reach counsel for the SEC, Ms. Leslie Hughes,

for her position on this motion. Counsel has left a message via email and another via voice mail, but has received no response. On the criminal side, AUSA Thomas O'Rourke has advised counsel that he will oppose a motion to modify Mr. Weare's conditions of supervised release because there are unpaid claims. Accordingly, Mr. Weare respectfully requests that the Court set a hearing on this request. Because he resides in Wisconsin, he asks that his appearance be waived and requests that undersigned counsel be permitted to appear on his behalf. Respectfully submitted, RAYMOND P. MOORE Federal Public Defender

s/ Virginia L. Grady VIRGINIA L. GRADY Assistant Federal Public Defender 633 Seventeenth Street, Suite 1000 Denver, Colorado 80202 Telephone: (303) 294-7002 Facsimile: (303) 294-1192 [email protected] Attorney for Defendant

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CERTIFICATE OF SERVICE

I hereby certify that on April 7, 2008, I electronically filed the foregoing DEFENDANT KENNETH ROY WEARE'S MOTION TO RELEASE FUNDS FOR PAYMENT OF RESTITUTION with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: Leslie J. Hughes Securities and Exchange Commission [email protected]

and I hereby certify that I have mailed or served the document or paper to the following non CM/ECF participant in the manner (email, mail, etc.) indicated by the nonparticipant's name: Thomas O'Rourke, AUSA Thomas.O'[email protected] (via e-mail)

Michael Burns, Esq. [email protected]

(via e-mail)

Fred Bach U.S. Probation Department [email protected]

(via email)

Joseph L. Madia [email protected]

(via email)

Patricia McGee-Wake U.S. Attorney's Office [email protected]

(via email)

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Carol Henderson US District Court (via email) [email protected]

(via email)

Kenneth Roy Weare

(via U.S. Mail)

s/ Virginia L. Grady VIRGINIA L. GRADY Assistant Federal Public Defender 633 Seventeenth Street, Suite 1000 Denver, Colorado 80202 Telephone: (303) 294-7002 Facsimile: (303) 294-1192 [email protected] Attorney for Defendant

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