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

Case 1:01-cv-00645-JLK

Document 111

Filed 01/06/2006

Page 1 of 5

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 01-CV-0645 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. MOTION FOR PAYMENT OF ATTORNEY FEES The Securities and Exchange Commission requests that the Court order the payment out of funds held in the registry of the court of $17,225.16 in legal fees incurred to recover funds held by defendant Kenneth Weare in Luxembourg. As grounds for its motion, the SEC makes the following showing of facts. On January 15, 2002 this court entered a final judgment against defendants Weare, J&K Global Marketing, and AAA-Auction.com which ordered, in pertinent part, Weare and J&K Global Marketing to jointly disgorge $6,278,334.91 in illegal gains. Although the court's judgment required the defendants to repatriate to accounts within the Untied States and to pay disgorgement within 14 days of entry of the order, they failed to do so. On October 29, 2002, this court held Weare and J&K Global marketing in contempt for failing to repatriate funds or pay disgorgement. Weare was arrested on November 13, 2002 and held in custody on the contempt until November 12, 2004. After November 14, 2004, Weare

Case 1:01-cv-00645-JLK

Document 111

Filed 01/06/2006

Page 2 of 5

remained in custody on related criminal charges. Weare never purged his contempt by repatriating the funds he held in Luxembourg. The SEC hired Turk & Prum, attorneys located in Luxembourg, to file a suit to request the court in Luxembourg to recognize this court's judgment and order the transfer of funds frozen in Weare's Luxembourg bank account to the registry of this court. These attorneys obtained recognition of the judgment and release of the Luxembourg funds on November 11, 2005. They have submitted a statement of fees and expenses totaling $17,225.16 for the work they performed from April 2004 through November 2005 to recover the funds in Luxembourg. See attached Exhibit 1 with account information redacted. On November 11, 2005, Turk & Prum obtained release of, and wire transferred $2,916,635.56 to the registry of the court from the Luxembourg account. The balance in the Luxembourg accounts as of January 2, 2001 was $2,856,330.68. So the sum transferred to the registry of the court includes approximately $60,304.88 in interest collected on investors' funds. Absent statutory or contractual authorization, the allowance of attorneys' fees is disfavored. Hall v. Cole, 412 U.S. 1, 4 (1973). Federal courts, however, have the power to award attorneys' fees in the exercise of their equitable powers. Id. at 5. In order to prevent unjust enrichment, federal courts have the power to award attorneys' fees when "successful litigation confers `a substantial benefit on the members of an ascertainable class, and where the court's jurisdiction over the subject matter of the suit makes possible an award that will operate to spread the costs proportionately among them.'" Id.; see also Wininger v. SI Management L.P., 301 F.3d 1115, 1120, (9th Cir. 2002). The court's ability to award attorney's fees to a litigant or a lawyer who recovers a common fund for the benefit of persons other than himself or his client is recognized as the common fund exception. Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980). The 2

Case 1:01-cv-00645-JLK

Document 111

Filed 01/06/2006

Page 3 of 5

exception allows the fee movant to obtain recovery of attorney's fees from a fund created, enhanced, protected or otherwise affected by the litigation. The exception applies (1) when the fund created redounds to the benefit of both the fee movant and other beneficiaries who are not named parties to the action, and (2) when a fee assessment against the fund would serve to spread the cost of the litigation among all of those beneficiaries. 10 Moore's Federal Practice 3rd, §54. 171[2][a]. The principle of a common fund has been recognized in the Tenth Circuit in Jordan v. Heckler, 744 F.2d 1397 (10th Cir. 1984). In securities law receiverships, the awarding of attorney's fees rests in the district judge's discretion. SEC v. First Sec. Co., 528 F.2d 449, 451 (7th Cir. 1976). This court has jurisdiction over the funds recovered through the legal activities of the attorneys' in Luxembourg. These legal activities benefited all the investors by recovering a sizeable amount of money which will be repaid to them. Payment of these legal fees out of the proceeds and interest recovered from Luxembourg is reasonable because defendant Weare failed to repatriate the funds. There was no other means for the SEC to recover this money for repayment to investors. Because most of the investors invested $375 in Weare's investment scheme, it was unlikely that any of them would undertake a lawsuit in a foreign country to recover these moneys. All the investors who file claims against the fund will receive a benefit from the legal work done by Turk & Prum. The attorneys' fees and expenses of Turk and Prum are reasonable for the efforts of the attorneys over a two-year period, and in light of their successful recovery of approximately $2.9 million.

3

Case 1:01-cv-00645-JLK

Document 111

Filed 01/06/2006

Page 4 of 5

For these reasons, the SEC respectfully requests that the Court order the Clerk of the Court to pay Turk & Prum $17,225.16 out of funds held in this case in the registry of the court. Dated this 6th day of January 2006.

s/Leslie Hendrickson Hughes____________ Leslie Hendrickson Hughes (Colo. 15043) Thomas J. Krysa (Colo. 28440) Securities and Exchange Commission 1801 California Street, Suite 1500 Denver, Colorado 80202-2656 Telephone (303) 844-1000

4

Case 1:01-cv-00645-JLK

Document 111

Filed 01/06/2006

Page 5 of 5

CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing MOTION FOR PAYMENT OF ATTORNEY FEES and proposed Order was mailed postage pre-paid, addressed as follows this 6th day of JANUARY 2006. Kenneth Weare 84168-198 FCI Terminal Island Federal Correctional Institution 1299 Seaside Avenue Terminal Island, CA 90731 (Individually and as agent for J&K Global Marketing and AAA-Auction.com) John Paul Anderson Patton MacPhee & Associates, Inc. 1775 Sherman Street, Suite 2900 Denver, CO 80203 (Receiver)

s/Leslie Hendrickson Hughes

5