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

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MARSHALL GANDY Attorney for Plaintiff 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 ARIZONA PHOENIX DIVISION

Securities and Exchange Commission, Plaintiff,

CASE NO. CV 03-1825-PHX-PGR Plaintiff's Response to Defendant Ronald Stephen Holt's Motion to Reconsider Order Holding Ronald Holt in Civil Contempt

11 vs. 12 Ronald Stephen Holt, et al. 13 Defendants, 14 and 15 Annette Holt, et al. 16 17 18 19 20 21 22
Plaintiff's Response to Defendant Ronald Stephen Holt's Motion to Reconsider Order Holding Ronald Holt in Civil Contempt SEC vs. Ronald Stephen Holt, et al.

Related Cases: CFTC v. International Funding Association, et al. Case Number: 03-CV-1826PHX-PGR Investors in IFA, et al. v. International Funding Association, et al. Case Number: 03-CV-1302 PHX-PG

Defendants Solely for Purposes of Equitable Relief.

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Pursuant to the Court's Order of January 30, 2006, Plaintiff, Securities and Exchange Commission ("Commission"), related case Plaintiff, Commodity Futures Trading Commission ("CFTC") and Lawrence J. Warfield, the court-appointed receiver ("Receiver"), jointly file this Plaintiff's Response to Defendant Ronald Stephen Holt's Motion to Reconsider Order Holding Ronald Holt in Civil Contempt and based on the following respectfully request that the Court, after a hearing, enter an order denying Defendant Ronald Stephen Holt's ("Defendant" or "Holt") motion for his release from custody for civil contempt. I. Relevant Procedural History 1. On September 18, 2003, the Commission and the Commodities Futures

Trading Commission ("CFTC") filed Complaints in their respective causes of action. 2. On September 25, 2003, the Court conducted a hearing on Defendant's

motion to dissolve the Commission's Temporary Restraining Order. During the hearing, Holt testified that he was the manager of International Funding Associates. Further, Holt admitted responsibility for transferring at least $3 million of investors' funds to overseas accounts, though he denied any specific knowledge of the whereabouts of the money at the time of the hearing. 3. On September 29, 2003, the court entered an Order Appointing Receiver,

and later on November 10, 2003, the Court modified the order and entered an Amended Order Appointing Receiver. The receivership orders in part provided:

Plaintiff's Response to Defendant Ronald Stephen Holt's Motion to Reconsider Order Holding Ronald Holt in Civil Contempt SEC vs. Ronald Stephen Holt, et al.

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1 2 3 4 5 6 7 8 4. 9 under FED. R. CIV. P. 26(a)(1). Included in Defendant's disclosures is a document 10 evidencing Holt's knowledge of the location and control of $3 million of investors' 11 funds. [See attached as Exhibit A-Re: AUDIT OF SEC EVIDENCE COMPUTER DISC] 12 5. 13 of record at the time, to return those funds to the United States and turn them over to the 14 Receiver. Holt has refused to comply with or even acknowledge the Receiver's demand. 15 6. 16 Joint Motion for an Order to Show Cause and Order Holding Defendant Ronald Stephen 17 Holt in Contempt ("Joint Motion").1 18 19 20 21 22
The subject matter and evidence contained in this joint response was previously included in the Joint Motion.
Plaintiff's Response to Defendant Ronald Stephen Holt's Motion to Reconsider Order Holding Ronald Holt in Civil Contempt SEC vs. Ronald Stephen Holt, et al. PAGE 3
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All persons, including Defendants and Relief Defendants, named in the first paragraph of this Amended Order, above, and their officers, agents, servants, employees, attorneys, and all persons in active concert or participation with them, who receive actual notice of this Amended Order by personal service or otherwise, are enjoined from in any way interfering with the operation of the Receivership or in any way disturbing the Receivership Assets and from filing or prosecuting any actions or proceedings which involve the Receiver or which affect the Receivership Assets, specifically including any proceeding initiated pursuant to the United States Bankruptcy Code, except with the prior permission of this Court. (emphasis added) Any actions so authorized to determine disputes relating to Receivership Assets shall be filed in this Court. Subsequently, Holt made his initial disclosures in this action as provided

On April 22, 2004, the Receiver made demand on Holt, through his counsel

On May 24, 2004, Plaintiffs in the related cases and the Receiver filed a

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7.

On July 27, 2004 after a hearing, the Court found by clear and convincing

evidence, that Holt had committed at least twenty-five acts of contempt of the Court's orders, found his explanations unworthy of belief, and entered an Order Holding Ronald Holt in Civil Contempt ("Contempt Order"). Among other things, the Contempt Order required Holt to turn over to the Receiver all Receivership Assets whether located within or outside the United States, including the $3 million that Holt previously testified that he had transferred offshore. 8. On no less than four occasions since the entry of the above Contempt

Order, Holt has asserted that he has purged his contempt and requested that the Court release him from incarceration. On each occasion, after a hearing, the Court has found that contrary to the Defendant's assertions not only has he failed to purge his contempt, but he has committed further acts of contempt while on furlough and noting that he has done nothing to account for or turn over missing receivership assets. 9. On January 3, 2006, after an allowed holiday furlough, Defendant filed a

motion to extend furlough. The Court denied Defendant's emergency relief and his motion is pending.2 10. On January 30, 2006 after another furlough to attend a family funeral, the

Defendant filed his most recent motion yet again asking the Court to reconsider its Contempt Order.

Receiver and Plaintiffs responded to the Defendant's motion to extend furlough on January 18,
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2006.
Plaintiff's Response to Defendant Ronald Stephen Holt's Motion to Reconsider Order Holding Ronald Holt in Civil Contempt SEC vs. Ronald Stephen Holt, et al.

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II.

Argument In his motion to reconsider, the Defendant suggests that the Court may have erred

because his counsel can find no "filing" containing a document which evidences that Holt currently has knowledge of the existence, location and control of $3 million of investor funds. In fact, as fully discussed in the original Joint Motion, and again attached to this response, the document referred to in the Contempt Order was included in Holt's Rule 26(a) initial disclosures. [See attached as Exhibit A] In sworn testimony before this Court after admitting responsibility for transferring overseas at least $3 million in investor funds, Holt then inquires of his previous counsel whether the Plaintiffs might accept those transferred funds in settlement. Allowing for the fact that this document is only one instance in a huge volume of evasion, contradiction and deceit perpetrated on this Court by the Defendant since the day this case was filed, admittedly it is one of the more blatant examples of his contemptuous behavior. Further contrary to assertions in his motion to reconsider, at no time has Holt ever denied being the author of this document. Counsel for the Defendant concludes that Holt's position has been that the Defendant has no means or ability to return or produce the defrauded investors' funds. Given the record in this matter, it is difficult to discern from where such a conclusion is drawn. Holt has changed his story, frequently in the middle of sworn testimony, as often one would change clothes. In the Contempt Order the Court clearly found that Holt had wholly failed to establish the defense of impossibility at the show cause hearing. In fact,
Plaintiff's Response to Defendant Ronald Stephen Holt's Motion to Reconsider Order Holding Ronald Holt in Civil Contempt SEC vs. Ronald Stephen Holt, et al. PAGE 5

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Holt's only consistent position in this case has been one of deceit and although he has repeatedly been caught in his own lies, he has never wavered from path. The Court even noted at the conclusion of the last hearing in this matter, that Holt had the ability to tell the truth, but that so far the coercive effect of civil contempt had failed to produce that long desired result. In addition, Holt has been given every opportunity by this Court, including an extended furlough from incarceration last summer to meet with the Receiver's staff and account for the missing investor funds. Consistent with his past behavior, Holt also spurned this opportunity and wasted the Receiver's time and resources. Rather than confirm the validity of the Receiver's forensic accounting Holt insisted that there were other funds not accounted for that were derived from real estate deals, that the house on Leonora Street was purchased with independent funds, and that there were only small amounts of cash provided by investors and that Holt did not handle that cash. Notwithstanding repeated requests, Holt was unable to produce evidence of the claimed independent sources of funds and the evidence in fact showed that Holt often handled that cash, including placing large sums of it in his brief case.

Plaintiff's Response to Defendant Ronald Stephen Holt's Motion to Reconsider Order Holding Ronald Holt in Civil Contempt SEC vs. Ronald Stephen Holt, et al.

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III.

Conclusion Based on the forgoing, the Commission would respectfully request that the Court

deny Defendant's motion to reconsider the Contempt Order.

Dated: February 6, 2006. 5 Respectfully submitted, 6 7 8 9 10 11 12 13 Jointly submitted: 14 15 16 17 18 19 20 21 22
Plaintiff's Response to Defendant Ronald Stephen Holt's Motion to Reconsider Order Holding Ronald Holt in Civil Contempt SEC vs. Ronald Stephen Holt, et al. PAGE 7

/s/ Marshall Gandy MARSHALL GANDY Texas Bar No. 07616500 Attorney for Plaintiff Securities and Exchange Commission Burnett Plaza, Suite 1900 801 Cherry Street, Unit #18 Fort Worth, Texas 76102-6882 Telephone: (817) 978-6464 Facsimile: (817) 978-4927

/s/ Timothy J. Mulreany TIMOTHY J. MULREANY Chief Trial Attorney D.C. Fed. Bar No.: 467478 Division of Enforcement U.S. Commodity Futures Trading Commission Three Lafayette Centre, 1155 21st Street, NW Washington, D.C. 20581 Telephone: (202) 418-5306 Facsimile: (202) 418-5542

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/s/ Patrick M. Murphy PATRICK M. MURPHY Arizona Bar No. 002964 Attorney for the Receiver Lawrence J. Warfield Guttilla & Murphy, P.C. 4150 West Northern Avenue Phoenix, Arizona 85051 Telephone: (623) 937-2795 Fax: (623) 937-6897

/s/ Susanne Elizabeth Ingold SUSANNE ELIZABETH INGOLD Arizona Bar No. 019143 Attorneys for the Plaintiffs Investors in IFA, et al. v. International Funding Association, et al. Cause Number: 03-CV-1302-PHX-PGR Burch & Cracchiolo PA PO Box 16882 Phoenix, AZ 85011-6882 Telephone: (602) 274-7611 Facsimile: (602) 234-0341

Plaintiff's Response to Defendant Ronald Stephen Holt's Motion to Reconsider Order Holding Ronald Holt in Civil Contempt SEC vs. Ronald Stephen Holt, et al.

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1 2 3 4 5 Burton M Bentley 6 Marshall Gandy 7 Merwin D Grant 8 Patrick M Murphy 9 Michael S Reeves 10 11 12 13 14 15 16 17 18 19 20 21 22 Lawrence J Warfield Warfield & Company CPA 14555 N Scottsdale Rd No 340 Scottsdale, AZ 85254 Mario DiFelice 28 Oak Hill Rd Prosperity, SC 29127

Certificate of Service

I affirm that on February 6, 2006, I electronically filed the foregoing Plaintiff's Response to Defendant Ronald Stephen Holt's Motion to Reconsider Order Holding Ronald Holt in Civil Contempt with the Clerk of the Court for the District of Arizona, Phoenix Division, by using the CM/ECF system which will send a notice of electronic filing to the following CM/ECF participants: [email protected] [email protected] [email protected] [email protected] [email protected], [email protected]

I further certify that on this 6th day of February, 2006, 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:

Plaintiff's Response to Defendant Ronald Stephen Holt's Motion to Reconsider Order Holding Ronald Holt in Civil Contempt SEC vs. Ronald Stephen Holt, et al.

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