Free Motion for Appointment - District Court of Colorado - Colorado

Case 1:01-cv-00645-JLK

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Filed 12/22/2005

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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. SEC'S MOTION TO APPOINT A TAX ADMINISTRATOR The Securities and Exchange Commission respectfully requests that the Court enter an Order appointing Damasco & Associates as Tax Administrator to execute all income tax reporting requirements, including the preparation and filing of tax returns, with respect to funds under this Court's jurisdiction in this case. By order dated January 15, 2002, the Court entered Final Judgment as to Defendants Kenneth Roy Weare, a/k/a Roy Weaver, J&K Global Marketing Corporation, and AAAAuction.com, Inc. pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. Pursuant to the Final Judgment, on October 7, 2004 the SEC deposited into the registry of the Court 2,509 money orders and cashier checks payable to defendant J&K Global Marketing, which it recovered from the defendant's bank account in Grenada. These items, when presented for collection, totaled $803,728.49, which is to be applied to the disgorgement that J&K Global

Case 1:01-cv-00645-JLK

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Marketing was ordered to pay (the "Distribution Fund"). The Distribution Fund was thereafter deposited in an interest bearing account, account number 01 CV 00645-JLK, under the case name designation "SEC v. Kenneth Roy Weare, et al." On November 16, 2005, the SEC collected an additional $2,916,365.58 from the Luxembourg bank account of defendant Kenneth Weare which is to be applied to the disgorgement that Weare was ordered to pay. These funds were deposited into the interest bearing Distribution Fund referenced above with the registry of the Court. The Distribution Fund constitutes a Qualified Settlement Fund (QSF) under section 468B (g) of the Internal Revenue Code (IRC), 26 U.S.C. § 468B (g), and related regulations, 26 C.F.R. §§ 1.468B-1 through 1.468B-5. A Tax administrator, on behalf of the Distribution Fund, should be appointed and authorized to take all necessary steps to enable the Distribution Fund to obtain and maintain the status of a taxable QSF, including the filing of all required elections and statements contemplated by those provisions. The Tax Administrator would cause the Distribution Fund to pay taxes in a manner consistent with treatment of the Distribution Fund as a QSF. The reasonable costs, fees, and other expenses incurred in the performance of the Tax Administrator's duties would be paid by the Distribution Fund in accordance with the agreement between the Commission and the Tax Administrator. In summary, this agreement provides for compensation for services and expenses as follows: SERVICE FUND STATUS FIXED FEE

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Case 1:01-cv-00645-JLK

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SERVICE Current year income tax returns, including

FUND STATUS

FIXED FEE

Funds with no tax liability items 1-6 (below). Current year income tax returns, including Funds with tax liability items 1-6 (below). Delinquent year income tax returns, including Funds with no tax liability. items 1-6 (below). Delinquent year income tax returns, including Funds with tax liability. items 1-6 (below). Loss Carry back (claim for refund) returns. For all funds.

$1200

$1500

$1300

$1500

$500

Fixed fee tax compliance services include:1 1. 2. 3. Obtain a federal tax identification number ("FEIN") for the QSF. Prepare and file federal and state income tax returns, as required. Where required, calculate quarterly estimated tax payments and provide

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These fixed fees include all copying and routine postage expenses. They also include any internal expenses of the

Tax Administrator in performing these services, such as facsimile fees and telephone charges. Expenses that are not included are expedited delivery fees (such as Federal Express) and other extraordinary costs, such as extended telephone conferences and reports. Additional tax compliance services and services for the administration of the QSF would be provided at the Commission's request and billed at the Tax Administrator's current rates discounted by 20%.

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information to the Court so that payments may be made timely. 4. Assist SEC counsel to prepare motion(s) and supporting documentation to move the Court to disburse funds to pay tax obligations and the Tax Administrator's fees and expenses. Calculate and recommend retention of a reserve, if necessary, for penalties and interest to be assessed as a result of any late filing of tax returns and late payment of taxes. Determine and comply with tax reporting obligations of the QSF relating to distributions or payments to vendors, if applicable.

5.

6.

WHEREFORE, for all the foregoing reasons, the Commission respectfully requests that this Court enter the attached Proposed Order and grant such other relief as the Court deems just and proper. Dated: December 22, 2005 Respectfully submitted,

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

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Case 1:01-cv-00645-JLK

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CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing SEC'S MOTION TO APPOINT A TAX ADMINISTRATOR and proposed Order was mailed postage pre-paid, addressed as follows this 22th day of December 2005. 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

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