Free Response in Opposition to Motion - District Court of California - California

Case 3:08-cv-00764-BEN-NLS

Document 41-2

Filed 07/25/2008

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1 JOHN M. McCOY III, CaL. Bar

No.166244

Email: mccoyjêsec.gov

2 MARC J. BLAU, CaL. BarNo. 198162

Email: blaumêsec.gov

3 PETER F. DEL GRECO, CaL. BarNo. 164925
Email: delgrecopêsec.gov

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5

Attorneys for Plaintiff Securities and Exchange Commission Rosalind R. Tyson, Regional Director 6 Michele Wein Layne, Associate Regional Director 5670 Wilshire Boulevard, 11 th Floor
7 Los Angeles, California 90036

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Telephone: (323) 965-3998 Facsimile: (323) 965-3908

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA
SECURITIES AND EXCHANGE COMMISSION, Case No. 3:08 CV-0764 BEN (NLS)

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Plaintiff,
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DECLARTION OF JOHN M.
McCOY III IN SUPPORT OF PLAINTIFF'S OPPOSITION TO DEFENDANT MATTHEW LA MARID'S MOTION FOR STAY OF PROCEEDINGS

vs.
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PLUS MONEY, INC, and MATTHEW LA MADRID

16 Defendants,

17 and
18 THE PREMIUM RETURN FUND LIMITEDLIABILITY LIMITED PARTNERSHIP, 19 THE PREMIUM RETURN FUND II LIMITEDLIABILITY LIMITED PARTNERSHIP, 20 THE PREMIUM RETURN FUND III LIMITEDLIABILITY LIMITED PARTNERSHIP, RETURN
21 FUND, LLC, RETURN FUND II, LLC, RETURN

FUND III, LLC, RETURN FUND IV, LLC, 22 RETURN FUND V, LLC, RETURN FUND VI, LLC, PALLADIUM HOLDING COMPANY, and 23 DONALD LOPEZ,

24 Relief Defendants.
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08-CV-0764 BEN (NLS)

Case 3:08-cv-00764-BEN-NLS

Document 41-2

Filed 07/25/2008

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1 I, John M. McCoy III, declare as follows:
2 1. I am an active member of the Bar of the State of Californa and am employed by
3 the United States Securities and Exchange Commission ("Commission") as Regional Trial

4 Counsel for Commission's Los Angeles Regional Office. I am one ofthe attorneys responsible
5 for handling this matter on behalf of the Commission. Except to the extent otherwise indicated, I
6 have personal knowledge of each of

the matters set forth below.

7 2. I caused the Summons and Complaint in this action to be served on defendant

8 Matthew La Madrid shortly after the case was filed. After service had been effected on Mr. La
9 Madrid, I received an executed waiver of service from Mr. La Madrid's counsel, Joseph N.
10 Casas. I agreed with Mr. Casas that we would use the waiver of service date to calculate Mr. La
11

Madrid's deadline to move, answer, or otherwise respond to the Complaint, which made Mr. La

12 Madrid's response due on or before July 8,2008.
13 3. When we received no response to the Complaint by that date, my colleague, Peter
14 F. Del Greco, contacted Mr. Casas to inquire about the status of

Mr. La Madrid's Answer. Mr.

15 Casas informed us that he was takng the position, on behalf of

Mr. La Madrid, that the filing of
his obligation to file a timely response to the

16 the instant motion to stay relieved Mr. La Madrid of

17 Complaint.
18 4. On or about June 12,2008, I wrote to Mr. La Madrid to point out that Mr. La
19 Madrid was in violation of ths Court's order, in Section XIII of

the Preliminar Injunction, that

20 Mr. La Madrid file with the Court and provide the Commission and the cour-appointed Receiver

21 with a detailed Statement of Assets. Mr. Casas responded that Mr. La Madrid would not be
22 complying with that portion of the Preliminary Injunction in reliance upon his Fifth Amendment

23 right against self-incrimination. Attached hereto as Exhbit 1 is a tre and correct copy of a
24 recent letter from Mr. Casas to the Court confirming that position.
25 5. The Commission is stil investigating the scope of conduct by Mr. La Madrid and

26 others who may have acted in concert with him. Weare receiving information that suggests that

27 Mr. La Madrid's fraudulent conduct was much broader than what we were aware of at the time

28 we filed the original complaint. For example, we have heard in the last few days from investors
1
08-CV-0764 BEN (NLS)

Case 3:08-cv-00764-BEN-NLS

Document 41-2

Filed 07/25/2008

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1 who report that Mr. La Madrid convinced them to take second mortgages on their homes through
2 a d/b/a or affiliate of

his and then invest the loan proceeds in a purorted investment vehicle

3 under his management (that is, vehicles other than the Premium Return Funds). It also appears
4 that Mr. La Madrid passed the funds he received through signficant number of shell companes

5 or other entities or individuals, the identities of which we are stil in the process of uncovering.

6 We wil move to amend the Complaint if and when it appears we have a sufficient evidentiar
7 basis to do so, but to date the complexity of

Mr. La Madrd's financial records, the
the records available to us and the receiver, and Mr.

8 incompleteness and general unreliabilty of

9 La Madrid's refusal to provide us with critical information as required by this Court's

10 preliminar injunction have made the process slow and difficult. Ifwe are not able to conduct
11 formal discovery in this case, unaveling the web of entities and transactions created by Mr. La
12 Madrid and his cohorts wil be substantially more difficult.

13 I declare under penalty of perjury under the laws of the United States of America that the
14 foregoing is tre and correct. Executed this 25th day of July 2008 in Los Angeles, California.

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08-CV-0764 BEN (NLS)

Case 3:08-cv-00764-BEN-NLS

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PROOF OF SERVICE
1

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I am over the age of 18 years and not a party to this action. My business address is:
(X)

U.S. SECURITIES AND EXCHANGE COMMISSION, 5670 Wilshire Boulevard, 11 th Floor, Los Angeles, California 90036-3648

4 Telephone No. (323) 965-3998; Facsimile No. (323) 965-3908.

5 On July 25,2008, I caused to be served the document entitled DECLARTION OF JOHN M. McCOY III IN SUPPORT OF PLAINTIFF'S OPPOSITION TO DEFENDANT 6 MATTHEW LA MARID'S MOTION FOR STAY OF PROCEEDINGS on all the parties
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to this action addressed as stated on the attached service list:
(X)
OFFICE MAIL: By placing in sealed envelope(s), which I placed for collection and mailing today following ordinar business practices. I am readily familar with this agency's practice for collection and processing of correspondence for mailng; such correspondence would be deposited with the U.S. Postal Service on the same day in the ordinar course of business.

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() PERSONAL DEPOSIT IN MAIL: By placing in sealed envelope(s), which I

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personally deposited with the U.S. Postal Service. Each such envelope was deposited with the U.S. Postal Service at Los Angeles, California, with first class postage thereon fully prepaid.
maintained at the U.S. Postal Service for receipt of

() EXPRESS U.S. MAIL: Each such envelope was deposited in a facility regularly
Express Mail at Los Angeles,
Californa, with Express Mail postage paid.
( )

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( )

HAND DELIVRY: I caused to be hand delivered each such envelope to the office of the addressee as stated on the attached service list.
FEDERAL EXPRESS: By placing in sealed envelope(s) designated by Federal Express with delivery fees paid or provided for, which I deposited in a facility regularly maintained by Federal Express or delivered to a Federal Express courier, at Los Angeles, California.

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(X)

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( )

ELECTRONIC MAIL: By transmitting the document by electronic mail to the electronic mail address as stated on the attached service list.
FAX: By transmitting the document by facsimile transmission. The transmission was reported as complete and without error.
this Cour, the bar of (Federal) I declare that I am employed in the office of a member of at whose direction the service was made. I declare under penalty of perjury that the foregoing is true and correct.
Isl John M. McCoy III John M. McCoy III

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(X)

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Date: July 25.2008

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3
08-CV-0764 BEN (NLS)

Case 3:08-cv-00764-BEN-NLS

Document 41-2

Filed 07/25/2008

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1

SEC v. PLUS MONEY. INC.. et aL.

United States District Court - Southern District of California
Case No. 08-CV-0764 BEN (NLS) (LA-3486)
SERVICE LIST

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Joseph N. Casas, Esq. Casas Law Group, P.C. 2323 Broadway, Suite 202 San Diego, CA 92102
Telephone: (619) 692-3146

Facsimile: (619) 692-3196
Email: iose?h~casaslaw.com

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Attorney for Defendant Matthew La Madrid
Robert J. Liskey, Esq. Tyler & Wilson LLP
5455 Wilshire Boulevard, Suite 1925

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Los Angeles, CA 90036
Telephone: (323) 655-7180

Facsimile: (323) 655-7122
Email: ri1~tyler-law.com

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Attorney for Defendant Donald Lopez

16 17 18

David L. Osias, Esq. Allen Matkins Leck Gamble Mallory & N atsis
501 W. Broadway, 15th Floor

San Diego, CA 92101-3547
Telephone: (619) 233-1155

Facsimile: (619) 233-1158
Email: dosias~allenmatkins.com

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Attorney for Receiver Stephen J. Donell

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08-CV-0764 BEN (NLS)

Case 3:08-cv-00764-BEN-NLS

Document 41-2

Filed 07/25/2008

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EXHIBIT 1

Case 3:08-cv-00764-BEN-NLS

Document 41-2

Filed 07/25/2008

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CASAS LAW G RO UP
BIG FIRM POWER I SMALL FIRM FEEL

c~

Joseph N. Casas
C.E.a. & MANAGING ATTORNEY

, !'jos~i;hØ),~asaslaw.com
i j:

EMAIL ADDRESS

ii

July 23, 2008

Via U.S. Mail
The Honorable Roger T. Benitez United States District Judge
Edward J. Schwarz U.S. Courhouse

940 Front Street San Diego, CA 9210J -8900

Re: SEC v. Plus Money, Inc., et al. Case No.: 3:08 CV-0764 BEN (NS)
To the Honorable Cour:
We are writing to request clarfication regarding Section XIII of

Exhibit "A". '
2008. A copy of Pursuant to Section XII of

Injunction and Order dated May 16, 2008 (the "Preliminar Injunction") in the above-entitled case, in light of defendant Matthew La Madrd's ("Mr. La Madrid") Motion for Stay of Civil Proceedings Pending Resolution of Criminal Case ("Motion to Stay"), which was fied on July 7, the Preliminar Injunction is attached to this letter for the Cour's reference as

the Cour's Preliminary

the Preliminar Injunction, Mr. La Madrd was to prepare and deliver a schedule of assets to the U.S. Securties and Exchange Commission.. Sïnce the filing of

the Preliminar Injunction, however, the United States Attorney's Offc(: has increased its
criminal investigation of Mr. La Madrid relating to his management of Plus Money, Inc. and the Premium Retu Funds (collectively, the "Funds"), and Mr. La Madrid is now informed and believes that his criminal indictment is imminent.

The schedule of assets ordered in the Preliminar Injunction would contain a full
the sources of those assets. Mr. La Madrd is unable to fully account for the provenance of his assets without revealing potentially incriminating information related to his management of the Funds. In order to preserve his defenses in the criminal investigation he now faces, Mr. La Madrid objects to producing the schedule of assets at this time and invokes his Fift Anendmi~nt rights. On June
Mr. La Madrid's property and financial accounts, and a description of inventory of

18, 2008, we informed the SEC of the same via correspondence. (See Co:rrespondence from
Joseph N. Casas to Joshua A. Del Castilo attached hereto as Exhbit "a".)

Casas Law Group, P.e. I Attorneys at Law

Exhibit

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Page

2323 Broadway Avenue, Studio 202, San Diego, CA 92102 TEL 619.692.3146 FAX619.692.3196 \X'EE casCislaw.com

Case 3:08-cv-00764-BEN-NLS
The Honorable Roger T. Benitez
July 23,2008
Page 2

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As discussed in Mr. La Madrid's Motion to Stay, which is set for h(~ariiig on August 11,

2008, Mr. La Madrid is curently defending himself in multiple civil actions as well as a criminal
investigation involving the same set of facts. He curently faces the une:nvíable decision of

disclosing potentially incriminating information in the schedule of ass(,ts which the U.S. Attorney's Offce could then use to prosecute him, or invoking his Fifth Amendment rights and facing possible sanctions in ths case by not producing the schedule of asse:ts as ordered in the
the Fifth Amendment "should not be made unecessarily costly" for defendants in Mr. La Madrid's precarious position. See SEC v. Healthsouth, 261 F.Supp.2d 1298, 1316 (N.D. Ala. 2003) (quoting United States v.
Certain Real Property, 55 F.3d 78, 84 (2nd Cir. 1995)).
Preliminar Injunction. Cours have observed that the exercise of

Because of changed circumstances since the Preliminar Injunction \vas entered on May the U.S. Attorney's criminal investigation, the imminent criminal indictment, the prejudice to Mr. La Madrid's constitutional rights to due process and against self-incrimination, and the filing of Mr. La Madrid's Motion to Stly), Mr. La Madrid respectfully asks the Cour for clarfication that he may await the Cour's ruling on the pending Motion to Stay prior to producing the schedule of assets. Mr. La Madrd begs the mercy and patience of the Cour and respectfully proposes that the issue of producing the schedule of assets be addressed at the hearing on the Motion to Stay and/or in the Cour's ruling.on the motion.
16,2008 (i.e., the increased intensity of

Very Truly Yoms,

l-~,
cc: (w/o encl.)

Joseph . Casas, J.D., M.B.A. LA W GROUP

~

A Professional Corporation
John M. McCoy, III, Esq. Peter F. Del Greco, Esq.
U.S. Securties and Exchange Commission

Los Angeles Regional Office 5670 Wilshire Boulevard, 11 th Floor Los Angeles, Californa 90036-3648 Attorneysfor Plaintif Us. Securities and Exchange Commission
Joshua A. Del Castilo, Esq.

David Osias, Esq. Allen Matkins Leck Gamble Mallory & Natsis LLP
5 i 5 South Figueroa Street, 9th Floor

Los Angeles, Californa 90071-3309
Attorneys for the court-appointed Receiver, Stephen J. Donnell

Exhibit

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