Free Status Report - District Court of Colorado - Colorado

Case 1:03-cv-00923-REB-CBS

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MARSHALL GANDY Attorney for Plaintiff UNITED STATES SECURITIES AND EXCHANGE COMMISSION Texas Bar No. 07616500 Burnett Plaza, Suite 1900 801 Cherry Street, Unit #18 Fort Worth, Texas 76102-6882 Telephone: (817) 978-6464 Facsimile: (817) 978-4927 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 03-cv-00923 REB-CBS SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. CAPITAL HOLDINGS, L.L.C.; et al. Defendants, FAST TRACK L.L.C.; et al. Defendants Solely for Purposes of Equitable Relief. Plaintiff's Status Report Pursuant to the Minute Order entered on June 25, 2007, Plaintiff Securities and Exchange Commission has been working diligently to secure and file interim and final settlement agreements in this matter. After dozens of conversations with retained counsel, pro se

defendants and relief defendants, several of whom are in federal custody in various locations around the country, and court-appointed counsel in related criminal cases, the Commission submits the following status report:

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I.

Relevant Procedural History 1. On May 21, 2003, the Commission filed its Complaint in the above matter

seeking disgorgement of ill-gotten gains from the Defendants, plus prejudgment interest, and civil penalties, which alleged, among other things, that the Defendants had violated the enumerated sections of the federal securities laws and disgorgement, plus prejudgment interest, from the Relief Defendants. 2. On March 18, 2004, a federal Grand Jury sitting in the District of Colorado

returned an indictment against defendants N. Schmidt, Beros, Lewis, Smith, Weed, and Relief Defendant McLain-Schmidt on numerous counts of mail fraud, wire fraud, securities fraud and money laundering arising out of the same facts alleged in the Commission's Complaint. [USA v. Schmidt, et al. Case No. 04-cr-00103-REB] 3. On March 7, 2005, the United States Attorneys Office for the District of

Colorado ("USAO") filed a Motion to Intervene and Motion to Stay Proceedings ("Motion to Intervene") in the above-captioned case. 4. On April 22, 2005, Magistrate Judge Shaffer entered a Memorandum Order

Regarding Motion to Intervene and Motion to Stay Proceedings making recommendations to the Judge Blackburn, which the Court later adopted, limiting discovery and requiring the Commission to respond to any pending written discovery served by a defendant in this action. 5. In accord with the above referenced order, only limited written discovery has

been taken by the parties. 6. On June 25, 2007, a telephonic status conference was held before Magistrate

Judge Craig B. Shaffer after which a Minute Order was entered requiring within forty-five (45)

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days of that date; plaintiff to file an agreed judgment of permanent injunction with the court. Further, Plaintiff is required to file a status report with the court within five (5) days of the final criminal sentencing in the criminal case. 7. criminal case. On August 3, 2007, Defendant George Beros was sentenced in the related Sentencing dates for Norman Schmidt, Charles Lewis, George Weed, and

Michael Smith in the related criminal case has been continued until October 19, 2007. II. Status report on progress of settlement negotiations A. DEFENDANTS Norman E. Schmidt Mr. Schmidt remains in federal custody. After conversations with the defendant and his court-appointed counsel in the related criminal case, the parties have reached a settlement in principle. The Commission has forwarded the necessary settlement documents to the defendant and to date he has signed and returned some of those documents. As late as August 13, 2007, defendant stated that he would sign the remaining documents and send them to the Commission. George Beros After conversations with the defendant and his court-appointed counsel in the related criminal case, the parties have reached a settlement in principle. The Commission has forwarded the necessary settlement documents to the defendant and is awaiting the return of those documents. Charles F. Lewis After conversations with the defendant and his court-appointed counsel in the related criminal case, the parties have reached a settlement in principle. The Commission

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has forwarded the necessary settlement documents to the defendant and is awaiting the return of those documents. Terry Lorenzen After conversations with the defendant and his retained counsel, the parties have reached a settlement in principle. The Commission has forwarded the necessary settlement documents to the defendant's counsel and is awaiting the return of those documents. Jeffrey D. Mitchell After conversations with the pro se defendant the parties have reached a settlement in principle. The Commission has forwarded the necessary settlement documents to the defendant and is awaiting the return of those documents. John J. Schlabach After conversations with the pro se defendant the parties have not yet reached a settlement in principle. The Commission has forwarded the necessary settlement documents to the defendant and is continuing settlement negotiations. Michael D. Smith After conversations with the defendant and his retained counsel, the parties have reached a settlement in principle. The Commission has forwarded the necessary settlement documents to the defendant and is awaiting the return of those documents. Although retained counsel has not filed a motion to withdraw, on August 13, 2007 the defendant informed the Commission that he would be representing himself for the remainder of the case.

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Michael Vallone After conversations with the defendant and his court-appointed counsel in the related criminal case, the parties have reached a settlement in principle. The Commission has forwarded the necessary settlement documents to the defendant and is awaiting the return of those documents. Roy R. Chavers After conversations with the defendant the parties have reached a settlement in principle. The Commission has forwarded the necessary settlement documents to the defendant and the defendant has signed and returned those documents. Gary N. Herbert On November 30, 2006, counsel for defendant Herbert gave notice to the Court that Herbert had died in May 2006. Plaintiff's counsel will so advise the Commission and seek authorization to move for a dismissal as to Herbert. George A. Weed After conversations with the defendant and his court-appointed counsel in the related criminal case, the parties have reached a settlement in principle. The Commission has forwarded the necessary settlement documents to the defendant and is awaiting the return of those documents. B. RELIEF DEFENDANTS Jannice McLain and Scott Schmidt These relief defendants have provided full relief on the Commission's claim for disgorgement. Accordingly on August 13, 2007, the Commission filed a motion to dismiss as to each.

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III.

CONCLUSION The Commission respectfully requests an additional thirty (30) days to finalize settlement

negotiations and file interim judgments of permanent injunction.

If unable to file interim

judgments by that time, the Commission will again file a status report with the Court and respectfully requests that the Court enter an order setting the case for a status, settlement and scheduling conference before Magistrate Judge Craig B. Shaffer and require all parties and their counsel to attend the conference in person.

Dated: August 14, 2007

Respectfully submitted,

s/ Marshall Gandy MARSHALL GANDY Texas Bar No. 07616500 Attorney for Plaintiff SECURITIES AND EXCHANGE COMMISSION Fort Worth District Office Burnett Plaza, Suite 1900 801 Cherry Street, Unit #18 Fort Worth, TX 76102-6882 Telephone: (817) 978-6464 Facsimile: (817) 978-4927 [email protected]

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CERTIFICATE OF SERVICE I affirm that on August 14, 2007, I electronically filed the foregoing Plaintiff's Status Report with the Clerk of the Court for the District of Colorado by using the CM/ECF system which will send a notice of electronic filing to the following CM/ECF participants:
· · · · · ·

Marshall Milby Gandy [email protected],[email protected],[email protected],[email protected] Matthew T. Kirsch [email protected],[email protected],[email protected] Robert T. McAllister [email protected],[email protected] Declan Joseph O'Donnell [email protected] Daniel Charles Stiles [email protected],[email protected] David A. Zisser [email protected],[email protected]

s/ Marshall Gandy MARSHALL GANDY

I further certify that on August 14, 2007, I served a true and correct copy of the foregoing document and the notice of electronic filing by depositing a copy thereof in an authorized Federal Express depository at Fort Worth, Texas, with overnight express charges prepaid and addressed to the following parties and persons entitled to notice that are non-CM/ECF participants: Glen Andrew Anderson Washington State Attorney General's Office 629 Woodland Square Loop SE P.O. Box 40126 Olympia, WA 98504-0126 Roy R. Chavers 2401 Belmont Place Plano, TX 75023 Heritage America c/o Michael Vallone 11901 Brookshire Drive Orland Park, IL 60467
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Jeffrey D. Mitchell 7115 North Division Street Suite B-360 Spokane, WA 99208 National Marketing Solutions, LLC North West Group, LLC 9986 N. Newport Hwy., #378 Spokane, WA 99218 John J. Schlabach 12128 North Division Street #176 Spokane, WA 99218 Michael Vallone 11901 Brookshire Drive Orland Park, IL 60467

s/ Marshall Gandy MARSHALL GANDY

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