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Case 3:18-cv-00252-CWR-FKB Document 29 Filed 06/06/18 Page 1 of 4

IN THE UNITED STATES DISTRICT COURT


FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES & EXCHANGE PLAINTIFFS


COMMISSION, et al.,

V. CAUSE NO. 3:18-CV-252-CWR-FKB

ARTHUR LAMAR ADAMS, DEFENDANTS


et al.

ORDER FOR INTERIM RELIEF PENDING


APPOINTMENT OF A TEMPORARY RECEIVER

This Court, having determined that certain interim relief is appropriate to preserve the

assets of the Defendants pending the selection of a Temporary Receiver, orders as follows:

A. The Defendants and all persons receiving notice of this Order by personal service,

facsimile or otherwise, are hereby restrained and enjoined from directly or indirectly taking any

action or causing any action to be taken, without the prior order from this Court, which would:

1. Interfere with the Temporary Receiver’s eventual efforts to take control,


possession, or management of monies, funds, securities, credits, effects, goods, chattels,
lands, premises, leases, claims, rights and other assets, together with all rents, profits,
dividends, interest or other income attributable thereto, of whatever kind, which the
Defendants own, possess, have a beneficial interest in, or controls directly or indirectly
(“Receivership Property” or, collectively, the “Receivership Estate”); such prohibited
actions include but are not limited to, using self-help or executing or issuing or causing
the execution or issuance of any court attachment, subpoena, replevin, execution, or other
process for the purpose of impounding or taking possession of or interfering with or
creating or enforcing a lien upon any Receivership Property;

2. Dissipate or otherwise diminish the value of any Receivership Property;


such prohibited actions include but are not limited to, releasing claims or disposing,
transferring, exchanging, assigning or in any way conveying any Receivership Property,
enforcing judgments, assessments or claims against any Receivership Property or any
Receivership Defendant, attempting to modify, cancel, terminate, call, extinguish, revoke
or accelerate (the due date), of any lease, loan, mortgage, indebtedness, security
agreement or other agreement executed by any Defendant or which otherwise affects any
Receivership Property; or,
Case 3:18-cv-00252-CWR-FKB Document 29 Filed 06/06/18 Page 2 of 4

3. Interfere in any manner with the exclusive jurisdiction of this Court over
the Receivership Estate.

4. Nothing in paragraph A herein shall prohibit any business in which either


defendant owns an interest and which is managed by a third party from entering into
commercially reasonable agreements on behalf of that business or continuing to pay
operating expenses for that business as they come due in the ordinary course of business.
Management of any such businesses shall maintain a list of any such agreements and
payments and shall, upon appointment of a Temporary Receiver in this matter, provide
that list to the Temporary Receiver. This paragraph specifically authorizes the majority
owners of Delta Farm Land Investments LLC (“DFLI”), a Mississippi limited liability
company in which Defendant, Arthur Lamar Adams, owns a one-third interest, to take the
following actions:

a. To continue to operate and manage DFLI, including temporarily replacing


Arthur Lamar Adams as the managing member and registered agent for
service of process until the appointment of a Temporary Receiver (and the
filing with the Mississippi Secretary of State the documentation necessary to
effectuate such temporary appointment);
b. To open and maintain bank accounts and to make deposits and withdrawals
therefrom so as to continue to receive income and pay expenses, including all
taxes and assessments of any kind, as they come due in the ordinary course of
business (subject to audit and challenge as specified below by the Temporary
Receiver);
c. With regard to the real property described on the Promissory Note attached
hereto as Exhibit “A” (the “Subject Property”), which is owned by DFLI and
pledged as collateral for the Promissory Note, to make all payments as and
when due under the terms of the Promissory Note. The next such payment is
due on June 30, 2018, in the amount of $43,356.00. The majority members of
DFLI are authorized to make all payments due under the Promissory Note,
including the portion of such payments that would otherwise be due from
Arthur Lamar Adams. The majority members of DFLI are authorized to
recoup the amount of payments made on behalf of Arthur Lamar Adams from
future revenue of DFLI, including revenue from lease agreements or the
proceeds from a sale of the Subject Property, provided that no such
recoupment shall decrease Arthur Lamar Adams’s membership interest in
DFLI;
d. To enter into the following agreements regarding the Subject Property, which
are substantially similar to arrangements DFLI has previously entered into and
which generate revenue for DFLI: (i) an Agricultural Lease Contract in the
form attached hereto as Exhibit “B” and (ii) a Hunting Lease Agreement in
the form attached hereto as Exhibit “C”;
e. To continue to collect the income on and to renew when necessary, two
Conservation Reserve Program Contracts attached hereto as Exhibits “D” and
“E”; and
Case 3:18-cv-00252-CWR-FKB Document 29 Filed 06/06/18 Page 3 of 4

f. To continue to market for sale the Subject Property, provided that the
approval of the final terms of any sale of the Subject Property will be reserved
to this Court or the receiver, as appropriate.

DFLI shall maintain a list of payments and agreements necessary to effectuate the actions
listed above to be provided to this Court and the Temporary Receiver upon appointment.
The Temporary Receiver may challenge any of the actions taken pursuant to this
paragraph only on the basis of (1) not being in the ordinary course of business; (2)
pursuant to any contractual right that Arthur Lamar Adams may have under the DFLI
operating agreements; or (3) pursuant to any rights provided by Mississippi law to
minority members of limited liability companies.

B. As set forth in detail below, the following proceedings, excluding the instant

proceeding and all police or regulatory actions and actions of the Commission related to the

above-captioned enforcement action, are stayed until further Order of this Court:

All civil legal proceedings of any nature, including, but not limited to, bankruptcy
proceedings, arbitration proceedings, foreclosure actions, default proceedings, or other
actions of any nature involving: (a) any Receivership Property, wherever located; (b) any
of the Defendants, including but not limited to its subsidiaries and partnerships; or, (c)
any of the Defendants’ past or present officers, directors, managers, agents, or general or
limited partners sued for, or in connection with, any action taken by them while acting in
such capacity of any nature, whether as plaintiff, defendant, third-party plaintiff, third-
party defendant, or otherwise (such proceedings are hereinafter referred to as “Ancillary
Proceedings”).

C. The parties to any and all Ancillary Proceedings are enjoined from commencing

or continuing any such legal proceeding, or from taking any action, in connection with any such

proceeding, including, but not limited to, the issuance or employment of process.

D. All Ancillary Proceedings are stayed in their entirety, and all Courts having any

jurisdiction thereof are enjoined from taking or permitting any action until further Order of this

Court. Further, as to a cause of action accrued or accruing in favor of one or more of the

Defendants against a third person or party, any applicable statute of limitation is tolled during the

period in which this injunction against commencement of legal proceedings is in effect as to that

cause of action.
Case 3:18-cv-00252-CWR-FKB Document 29 Filed 06/06/18 Page 4 of 4

E. The provisions of Paragraphs B – D above bar any person or entity from placing

either of the Defendants in bankruptcy proceedings.

SO ORDERED, this the 5th day of June, 2018.

s/ Carlton W. Reeves
UNITED STATES DISTRICT JUDGE
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 1 of 3

____________________

No. 3:18-CV-252-CWR-FKB

SECURITIES & EXCHANGE COMMISSION,


et al.,
Plaintiffs,

v.

ARTHUR LAMAR ADAMS,


et al.,
Defendants.
____________________

ORDER ON RECEIVERSHIP
____________________

Before CARLTON W. REEVES, District Judge.


This case involves a multi-million dollar Ponzi scheme that
defrauded hundreds of investors. The ill-gotten gains of that
scheme now reside in Defendants’ estates. Both the Securities
and Exchange Commission and the Mississippi Secretary of
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 2 of 3

State have requested the appointment of a receiver to control


those estates and protect investor interests.1
District courts have a “well-established” power to appoint a
receiver in a case brought by the Commission when there is a
“showing of fraud and mismanagement, absent insolvency.”2
The architect of this Ponzi scheme has already pleaded guilty
to systematic fraud and mismanagement, and the relevant es-
tates likely contain millions of dollars.3 The motions to ap-
point a receiver are GRANTED.
The next question is whom this Court should appoint as re-
ceiver. A receiver is “a representative of the court” who acts
on “behalf of all parties,” rather than on behalf of a particular
party.4 The discretion to select a qualified receiver therefore
lies with the Court, not the parties.5
After considering the written and oral arguments of counsel,
the Court believes that the fairest method of selecting a re-
ceiver is as follows. On May 31, 2018, the Court will enter a

1 Emergency Motion, Docket No. 11; Emergency Motion, Docket No. 21.
2 Sec. & Exch. Comm'n v. First Fin. Grp. of Texas, 645 F.2d 429, 438 (5th Cir.
1981) (quoting Sec. & Exch. Comm'n v. Keller Corp., 323 F.2d 397, 403 (7th
Cir. 1963)).
3 See Plea Agreement, Docket No. 11 in United States v. Arthur Lamar Adams,

3:18-CR-88-CWR-LRA (S.D. Miss).


4 Booth v. Clark, 58 U.S. 322, 331 (1854).
5 See Adelman v. CGS Sci. Corp., 332 F. Supp. 137, 149 (E.D. Pa. 1971); accord

Securities & Exchange Commission Office of the Inspector General, Over-


sight of Receivers and Distribution Agents, Report. No. 432 (2007) (“While a
judge in a securities case brought by the Commission usually appoints a
receiver recommended by Enforcement staff, the judge may select any
qualified receiver.”).

2
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 3 of 3

Request For Proposals Order soliciting bids for the receiver-


ship and the receiver’s primary counsel. By close of business
on May 29, therefore, the parties shall submit draft RFP Or-
ders containing the receivership application and schedule
they propose the Court adopt.
The parties have expressed concerns about immediate threats
to investors’ interests. The federal government retains great
power to address many of those threats through its prosecu-
tion of the parallel criminal case. If, however, the parties or
any other potential intervener believes that Defendants could
themselves mitigate immediate harm to investors’ interests
were it not for the existing Consent Order [Docket No. 5], they
may file an appropriate motion and a proposed Agreed Order
amending that Consent Order.
SO ORDERED, this the 25th day of May, 2018.
s/ CARLTON W. REEVES
United States District Judge

3
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 1 of 3

____________________

No. 3:18-CV-252-CWR-FKB

SECURITIES & EXCHANGE COMMISSION,


et al.,
Plaintiffs,

v.

ARTHUR LAMAR ADAMS,


et al.,
Defendants.
____________________

ORDER ON RECEIVERSHIP
____________________

Before CARLTON W. REEVES, District Judge.


This case involves a multi-million dollar Ponzi scheme that
defrauded hundreds of investors. The ill-gotten gains of that
scheme now reside in Defendants’ estates. Both the Securities
and Exchange Commission and the Mississippi Secretary of
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 2 of 3

State have requested the appointment of a receiver to control


those estates and protect investor interests.1
District courts have a “well-established” power to appoint a
receiver in a case brought by the Commission when there is a
“showing of fraud and mismanagement, absent insolvency.”2
The architect of this Ponzi scheme has already pleaded guilty
to systematic fraud and mismanagement, and the relevant es-
tates likely contain millions of dollars.3 The motions to ap-
point a receiver are GRANTED.
The next question is whom this Court should appoint as re-
ceiver. A receiver is “a representative of the court” who acts
on “behalf of all parties,” rather than on behalf of a particular
party.4 The discretion to select a qualified receiver therefore
lies with the Court, not the parties.5
After considering the written and oral arguments of counsel,
the Court believes that the fairest method of selecting a re-
ceiver is as follows. On May 31, 2018, the Court will enter a

1 Emergency Motion, Docket No. 11; Emergency Motion, Docket No. 21.
2 Sec. & Exch. Comm'n v. First Fin. Grp. of Texas, 645 F.2d 429, 438 (5th Cir.
1981) (quoting Sec. & Exch. Comm'n v. Keller Corp., 323 F.2d 397, 403 (7th
Cir. 1963)).
3 See Plea Agreement, Docket No. 11 in United States v. Arthur Lamar Adams,

3:18-CR-88-CWR-LRA (S.D. Miss).


4 Booth v. Clark, 58 U.S. 322, 331 (1854).
5 See Adelman v. CGS Sci. Corp., 332 F. Supp. 137, 149 (E.D. Pa. 1971); accord

Securities & Exchange Commission Office of the Inspector General, Over-


sight of Receivers and Distribution Agents, Report. No. 432 (2007) (“While a
judge in a securities case brought by the Commission usually appoints a
receiver recommended by Enforcement staff, the judge may select any
qualified receiver.”).

2
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 3 of 3

Request For Proposals Order soliciting bids for the receiver-


ship and the receiver’s primary counsel. By close of business
on May 29, therefore, the parties shall submit draft RFP Or-
ders containing the receivership application and schedule
they propose the Court adopt.
The parties have expressed concerns about immediate threats
to investors’ interests. The federal government retains great
power to address many of those threats through its prosecu-
tion of the parallel criminal case. If, however, the parties or
any other potential intervener believes that Defendants could
themselves mitigate immediate harm to investors’ interests
were it not for the existing Consent Order [Docket No. 5], they
may file an appropriate motion and a proposed Agreed Order
amending that Consent Order.
SO ORDERED, this the 25th day of May, 2018.
s/ CARLTON W. REEVES
United States District Judge

3
Case 3:18-cv-00252-CWR-FKB Document 26-1 Filed 06/01/18 Page 1 of 6
Case 3:18-cv-00252-CWR-FKB Document 26-1 Filed 06/01/18 Page 2 of 6

1. What professional experience and skills qualify you to be receiver in this case?

C. RECEIVERSHIP STAFFING
1. What steps will you take to guarantee that your hiring pracices are as inclusive as possible, and what – if
any – billable hour targets do you aim to achieve?

2. Describe the law firms or other entities you hire to assist you, their qualifications, proposed rates, and
whether those rates reflect a discount from their standard rates.

3. Describe and justify the hourly rates for yourself and whether your rates reflect any discount from your
standard rate.

2
Case 3:18-cv-00252-CWR-FKB Document 26-1 Filed 06/01/18 Page 3 of 6

4. How will you and your staff take steps to minimize the expenses of the receivership?

5. How will you and your staff communicate with investors and keep them informed of proceedings?

D. CONFLICTS OF INTEREST
1. What potential conflicts of interest may arise during your receivership, including those of yourself and
any accounting firms, legal firms, or other support staff that you plan to hire?

2. Before your appointment, what steps will you take to check for (and eliminate) any of the above conflicts?

3
Case 3:18-cv-00252-CWR-FKB Document 26-1 Filed 06/01/18 Page 4 of 6

3. After your appointment, how will you guard against (and respond to) any conflicts that arise?

E. ADDITIONAL INFORMATION
Provide any further information you believe relevant to your candidacy for receivership.

F. SIGNATURE
By signing the below, you affirm that you have truthfully answered the above questions as an officer of the
court.

Signature of Applicant

Date

4
Case 3:18-cv-00252-CWR-FKB Document 26-1 Filed 06/01/18 Page 5 of 6

CONFLICTS OF INTEREST AND BACKGROUND INFORMATION FORM

Please complete a document that responds to all prompts listed below. Attach that document to this form
and sign the declaration below.

Except where otherwise noted, for purposes of the information request below, “you” means you as an
individual, as well as any spouse or dependents, and separately, any firm, partnership, joint venture, or
other business in which you are an officer or director, or in which you have a substantial financial interest.

Except where otherwise noted, this information is requested for any responsive matters existing during the last five
years. Also, if during the course of your duties you become aware of responsive information concerning a
potential claimant in the matter listed above, you must promptly supplement your response to disclose that
information.

1. List all contracts, consulting engagements, employment, service as an officer or director, or other work of
any kind you have performed for any defendant/respondent in this matter, or any of its parents, subsidiaries, or
other affiliates, or any claimant in this matter. Include any responsive matters existing during the last ten years.

2. List any financial interests in or with the defendant/respondent, its parents, subsidiaries, or other affiliates,
or any claimant in this matter (e.g., stocks, bonds, options, other debt or equity interests, partnerships, retirement
plans).

3. List all other personal or professional relationships or interests in or with the defendant/respondent, its
parents, subsidiaries, or other affiliates, or with any of their officers or directors, or any claimant in this matter, not
listed above.

4. List all matters in which you have been retained as a Receiver, Distribution Fund Administrator,
Distribution Consultant, or as a subcontractor, agent or other service provider, in connection with any civil action
or administrative proceeding by the Commission.

5. List all other prior or existing cases, matters, or proceedings in which the Commission or the Mississippi
Secretary of State has an interest, in which you have been retained or served as a witness, consultant, or other
expert.

6. Identify any disciplinary proceedings, felony criminal indictment or information (or equivalent formal
charge) or a misdemeanor criminal information (or equivalent formal charge), civil proceedings or actions against
you personally by any Federal, state, local, or foreign entities and the results of those proceedings. Include any
responsive matters regardless of when they arose.

7. Identify any actual or potential conflicts of which you are aware, regardless of when they arose, that are not
identified or addressed in paragraphs 1 through 5 above, but that may affect the performance of your duties under
this appointment.

5
Case 3:18-cv-00252-CWR-FKB Document 26-1 Filed 06/01/18 Page 6 of 6

DECLARATION

Under penalty of perjury, I declare the following:

I am providing the United States District Court for the Southern District of Mississippi with the following conflict
of interest and background information concerning the receivership created in the civil litigation styled Securities
& Exchange Commission, et al. v. Arthur Lamar Adams, et al., Case Number 3:18-cv-00252-CWR-FKB, in the
U.S. District Court for the Southern District of Mississippi, Northern Division. I agree to supplement this
information if any of the information herein changes, within thirty days of such change. I agree to provide such
other Conflict of Interest information as requested by the Court or its staff.

I have examined the information given in this statement, and attached hereto, and, to the best of my
knowledge and belief, it is true, correct, and complete. I understand that I am submitting this
information to the Court as an officer of the Court.

By: _______________________________________
Signature

Name: _______________________________________

Date: _______________________________________

6
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 1 of 3

____________________

No. 3:18-CV-252-CWR-FKB

SECURITIES & EXCHANGE COMMISSION,


et al.,
Plaintiffs,

v.

ARTHUR LAMAR ADAMS,


et al.,
Defendants.
____________________

ORDER ON RECEIVERSHIP
____________________

Before CARLTON W. REEVES, District Judge.


This case involves a multi-million dollar Ponzi scheme that
defrauded hundreds of investors. The ill-gotten gains of that
scheme now reside in Defendants’ estates. Both the Securities
and Exchange Commission and the Mississippi Secretary of
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 2 of 3

State have requested the appointment of a receiver to control


those estates and protect investor interests.1
District courts have a “well-established” power to appoint a
receiver in a case brought by the Commission when there is a
“showing of fraud and mismanagement, absent insolvency.”2
The architect of this Ponzi scheme has already pleaded guilty
to systematic fraud and mismanagement, and the relevant es-
tates likely contain millions of dollars.3 The motions to ap-
point a receiver are GRANTED.
The next question is whom this Court should appoint as re-
ceiver. A receiver is “a representative of the court” who acts
on “behalf of all parties,” rather than on behalf of a particular
party.4 The discretion to select a qualified receiver therefore
lies with the Court, not the parties.5
After considering the written and oral arguments of counsel,
the Court believes that the fairest method of selecting a re-
ceiver is as follows. On May 31, 2018, the Court will enter a

1 Emergency Motion, Docket No. 11; Emergency Motion, Docket No. 21.
2 Sec. & Exch. Comm'n v. First Fin. Grp. of Texas, 645 F.2d 429, 438 (5th Cir.
1981) (quoting Sec. & Exch. Comm'n v. Keller Corp., 323 F.2d 397, 403 (7th
Cir. 1963)).
3 See Plea Agreement, Docket No. 11 in United States v. Arthur Lamar Adams,

3:18-CR-88-CWR-LRA (S.D. Miss).


4 Booth v. Clark, 58 U.S. 322, 331 (1854).
5 See Adelman v. CGS Sci. Corp., 332 F. Supp. 137, 149 (E.D. Pa. 1971); accord

Securities & Exchange Commission Office of the Inspector General, Over-


sight of Receivers and Distribution Agents, Report. No. 432 (2007) (“While a
judge in a securities case brought by the Commission usually appoints a
receiver recommended by Enforcement staff, the judge may select any
qualified receiver.”).

2
Case 3:18-cv-00252-CWR-FKB Document 25 Filed 05/25/18 Page 3 of 3

Request For Proposals Order soliciting bids for the receiver-


ship and the receiver’s primary counsel. By close of business
on May 29, therefore, the parties shall submit draft RFP Or-
ders containing the receivership application and schedule
they propose the Court adopt.
The parties have expressed concerns about immediate threats
to investors’ interests. The federal government retains great
power to address many of those threats through its prosecu-
tion of the parallel criminal case. If, however, the parties or
any other potential intervener believes that Defendants could
themselves mitigate immediate harm to investors’ interests
were it not for the existing Consent Order [Docket No. 5], they
may file an appropriate motion and a proposed Agreed Order
amending that Consent Order.
SO ORDERED, this the 25th day of May, 2018.
s/ CARLTON W. REEVES
United States District Judge

3
Case 3:18-cv-00252-CWR-FKB Document 13 Filed 05/11/18 Page 1 of 4

UNITED STATES DISTRICT COURT


FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE


COMMISSION,

Plaintiff,

v. Civil Action No.


3:18 –cv-252-CWR-FKB
ARTHUR LAMAR ADAMS AND
MADISON TIMBER PROPERTIES,
LLC

Defendants,

MISSISSIPPI SECRETARY OF STATE’S UNOPPOSED


MOTION TO INTERVENE FOR THE LIMITED PURPOSE
OF OPPOSING THE SEC’S EXPEDITED MOTION
TO APPOINT TEMPORARY RECEIVER

The Mississippi Secretary of State (the “Secretary”) respectfully moves this Court, pursuant to

Fed. R. Civ. P. 24, for an order permitting the Secretary to intervene in the above-captioned action (the

“Madison Timber Action”) for the limited purpose of opposing the Securities and Exchange

Commission’s (“SEC”) Expedited Motion to Appoint Temporary Receiver and making his own

recommendation for the candidate to be chosen as the receiver in the above-styled action. In support of

this motion to intervene, the Secretary states as follows:

1. The Madison Timber Action was filed on April 20, 2018. The SEC filed its

complaint based on information and belief that Defendants committed securities fraud by operating a

Ponzi scheme, and it alleged that Defendants defrauded more than 150 investors out of at least $85

million.
Case 3:18-cv-00252-CWR-FKB Document 13 Filed 05/11/18 Page 2 of 4

2. The SEC requested injunctive relief that included freezing the assets of Defendants, relief

which requires the appointment of a receiver.

3. Defendant Adams, on April 20, 2018, entered a Consent Order, consenting to the

freezing of Defendants’ assets, to the appointment of a receiver, and to the transfer of all seized assets to

the Court-Appointed Receiver or the Registry of the Court.

4. On May 9, 2018, Defendant Adams pled guilty to a criminal charge of wire fraud.

5. On May 10, 2018, the SEC notified the Secretary of its intention to file its Expedited

Motion to Appoint Temporary Receiver with this Court, and it notified the Secretary that it was proposing

a Miami, Florida-based candidate for the position of receiver.

6. Defendants are Mississippi citizens. Upon information and believe, a large majority of

the investors in Defendants’ Ponzi scheme are Mississippi citizens.

7. Upon information and belief, most of the assets are situated in Mississippi.

8. The securities law violations alleged against Defendants, if proven, also constitute

violations of the Mississippi Security Act, under which the Secretary can assess fines, penalties, and other

sanctions such as restitution on behalf of Mississippi investors.

9. The Secretary has a significant interest in the appointment of receiver in this action, given

the number of Mississippi investors involved, significant assets being located in the State, the Secretary’s

own interest in the assets with respect to fines, penalties, and restitution to Mississippi investors, and the

receiver’s obligations and abilities to administer the recovery and restitution of investors’ funds. The

Secretary does not believe the SEC’s recommended appointment can protect those interests adequately

and effectively.

2
Case 3:18-cv-00252-CWR-FKB Document 13 Filed 05/11/18 Page 3 of 4

10. The Secretary has an alternative receiver candidate, situated in Mississippi, to

recommend to this Court, as to avoid any undue delay or prejudice. A copy of the Secretary’s alternative

receiver is attached hereto as Exhibit “A”.

11. Because the Secretary is not a party to the Madison Timber action, the Secretary has no

avenue to oppose the SEC’s recommendation for appointment of receiver in this action, or recommend

an alternative candidate. But the Secretary is charged with enforcing the Mississippi Securities Act and

protecting Mississippi investors and has significant interests in the property that is the subject of the action

and therefore seeks to intervene.

12. The Secretary therefore respectfully submits that he is entitled to intervene as of right

pursuant to Fed. R. Civ. P. Rule 24(a)(2) because the Court’s appointment of receiver may impair the

Secretary’s ability to protect the interests of Mississippi investors harmed by this scheme and may impair

the Secretary’s ability to discharge his duties under the Mississippi Securities Act.

13. In accordance with Local Rule 7(b)(10), the Secretary has conferred with counsel for

Defendants and counsel for the SEC. The Motion is unopposed by both counsel for the Defendants and

counsel for the SEC.

THIS the 11th day of May 2018.

Respectfully Submitted,
C. DELBERT HOSEMANN, JR., in his Official
Capacity as MISSISSIPPI SECRETARY OF
STATE

BY: JIM HOOD, ATTORNEY GENERAL FOR THE


STATE OF MISSISSIPPI

BY: /s/ Douglas T. Miracle


DOUGLAS T. MIRACLE, MSB # 9648
SPECIAL ASSISTANT ATTORNEY GENERAL
OFFICE OF THE ATTORNEY GENERAL
CIVIL LITIGATION DIVISION
Post Office Box 220

3
Case 3:18-cv-00252-CWR-FKB Document 13 Filed 05/11/18 Page 4 of 4

Jackson, Mississippi 39205


Telephone No. (601) 359-5654
Facsimile No. (601) 359-2003
dmira@ago.state.ms.us

OF COUNSEL
Jessica Leigh Long
Assistant Secretary of State
MSB #103316

Jeffrey L. Lee
Senior Attorney
MSB # 103180

Office of the Mississippi Secretary of State


Securities Division
125 S. Congress Street
Jackson, MS 39201
Telephone No. (601) 359-1650
Facsimile No. (601) 359-9070

CERTIFICATE OF SERVICE
I, Douglas T. Miracle, Special Assistant Attorney General for the State of Mississippi, do

hereby certify that on this date I electronically filed the foregoing document with the Clerk of

this Court using the ECF system, which sent notification of this filing to all counsel of record.

THIS the 11th day of May, 2018.

/s/ Douglas T. Miracle


DOUGLAS T. MIRACLE

4
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 1 of 10

UNITED STATES DISTRICT COURT


SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE


COMMISSION,

Plaintiff,

v. Case No.

ARTHUR LAMAR ADAMS AND 3:18-cv-252-CWR-FKB


MADISON TIMBER PROPERTIES, LLC,

Defendants,

MEMORADUM OF LAW IN SUPPORT OF


EXPEDITED MOTION TO APPOINT TEMPORARY RECEIVER

In this securities fraud action, Plaintiff Securities and Exchange Commission

(“Commission”) respectfully moves the Court to appoint a temporary receiver over

Defendants’ assets to preserve them for the benefit of investors. Due to the continued

risk of dissipation of those assets, the Commission asks that the motion be heard as

expeditiously as the Court’s schedule permits.

I. Introduction and Background

In its Complaint, the Commission claims that, beginning in approximately

2004, Defendant Arthur Lamar Adams (“Adams”), through his wholly-owned


Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 2 of 10

company, Madison Timber Properties, LLC (“MT Properties”), committed securities

fraud by operating a Ponzi scheme. [Dkt. 3, Compl., ¶ 1]. The Commission alleges

that Adams and MT Properties have raised at least $85 million from over 150

investors in multiple states. [Dkt. 3, Compl., ¶ 2].

Defendant Adams does not contest that he used MT Properties to conduct a

Ponzi scheme. At Adams’ change of plea hearing on May 9, 2018 in United States v.

Adams, No. 3:18-CR-88-CWR-LRA (S.D. Miss.), Adams pled guilty to the Bill of

Information filed against him for bank and wire fraud based on the same conduct.

Defendants and their agents still have control and possession of investor funds

as well as certain assets purchased with investor funds. Counsel for Defendant

Adams has identified interests owned by Adams in at least four real estate ventures.

See Exhibit A (May 8, 2018, Letter from John M. Colette). Upon information and

belief, Adams acquired at least some of these interests while the scheme alleged in

the Complaint was on-going. It is, thus, highly likely that such interests were

acquired, in whole or in part, with investor funds. Counsel for Adams has also

advised that several payments are coming due this month to maintain Adams’

ownership interests in these ventures. Id.

In addition, individual investors recently have filed lawsuits against Adams

and Madison Timber related to this scheme. See, e.g., Exhibit B. Absent a receiver

and the associated stay of third party litigation that would accompany his or her

2
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 3 of 10

appointment, there will be a “race to the courthouse” and the attendant possibility for

certain investors to obtain preferential treatment with respect to Defendants’ assets.

The Commission’s ability to seek receivership serves as a critical tool in

enforcing the federal securities laws. In light of the estimated size of the fraud –

nearly $100 million – and the number of investors, a receiver is necessary in this case

to preserve and analyze Defendants’ and third parties’ documents and financial

records to determine the full extent of investor losses, to discover if there are viable

claims against third parties, and to establish a claims process to facilitate a fair and

orderly distribution of remaining assets to investors. Moreover, in order to marshal

and preserve Defendants’ assets and identify other possible assets for the benefit of

the defrauded investors, the Commission asks the Court to use its equitable powers to

appoint a receiver to take control of those assets.

The Commission therefore seeks the appointment of a temporary receiver who

will, within 60 days, file a report that includes a preliminary plan for the

administration of the receivership estate, including recommendations as to the most

efficient means for marshalling, liquidating and distributing assets within that estate.

The Court, with input from the Commission, can then better determine whether the

receivership should be continued.

3
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 4 of 10

II. Equitable Power of District Courts to Order a Receivership

The Fifth Circuit and other courts have repeatedly emphasized the broad

equitable powers of district courts to shape remedies necessary to effectuate the

purposes of the federal securities laws, to preserve a defendant’s assets, and to ensure

that wrongdoers do not profit from their unlawful conduct. SEC v. Wencke, 622 F.2d

1393, 1371 (9th Cir. 1980); SEC v. Safety Fin. Serv., Inc., 674 F.2d 368, 372-73 (5th

Cir.1982) (“the district court has broad powers and wide discretion to determine . . .

relief in an equity receivership”); SEC v. Blatt, 583 F.2d 1325, 1335-1336 (5th Cir.

1978).

Based on long-standing principles of equity, a receiver serves as a disinterested

court officer who collects and possesses all property subject to the receivership,

known as the receivership “estate.” See, e.g., Atlantic Trust Co. v. Chapman, 208

U.S. 360, 370-71 (1908). The court holds custody of the receivership estate and

administers it through the receiver. Id.; see also Chicago Deposit Vault Co. v.

McNulta, 153 U.S. 554 (1894). The receiver’s possession, therefore, is the court’s

possession. Id. When a district court creates a receivership, the receiver’s focus is

“to safeguard the assets, administer the property as suitable, and to assist the district

court in achieving a final, equitable distribution of the assets if necessary.” Liberte

Capital Group, LLC v. Capwill, 462 F.3d 543, 551 (6th Cir. 2006).

4
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 5 of 10

The decision to create a receivership rests in the Court’s discretion. Bookout v.

First Nat. Mortg. & Discount Co., Inc., 514 F.2d 757, 758 (5th Cir. 1975).

III. Appointment of an SEC Receiver is Well-Established in the Fifth Circuit

The Fifth Circuit has recognized that “[t]he appointment of a receiver is a

well-established equitable remedy available to the SEC in its civil enforcement

proceedings for injunctive relief.” SEC v. First Fin. Group of Texas, 645 F.2d 429,

438 (5th Cir. 1981); see also Netsphere, Inc. v. Baron, 703 F.3d 296, 306 (5th Cir.

2012) (“Thus, in cases of non-compliance with SEC regulations, a receiver may be

appointed to prevent the corporation from dissipating corporate assets and to pay

defrauded investors.”). This discretion derives from the inherent powers of an equity

court to fashion relief. Id.

The Fifth Circuit has also recognized that an evidentiary hearing is not

required on the Commission’s request to appoint a receiver where the record

discloses sufficient facts to warrant such an appointment. Bookout v. Atlas Fin.

Corp., 395 F. Supp. 1338, 1342 (N.D. Ga. 1974), aff’d, 514 F.2d 757 (5th Cir. 1975).

The Court may appoint a receiver on a prima facie showing of fraud and

mismanagement. See First Fin. Group, 645 F.2d at 438. Factors courts have

considered that indicate the need for a receivership include the following: “a valid

claim by the party seeking the appointment; the probability that fraudulent conduct

has occurred or will occur to frustrate that claim; imminent danger that property will

5
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 6 of 10

be concealed, lost, or diminished in value; inadequacy of legal remedies; lack of a

less drastic equitable remedy; and likelihood that appointing the receiver will do

more good than harm.” Santibanez v. Wier McMahon & Co., 105 F.3d 234, 242 (5th

Cir. 1997), quoting Aviation Supply Corp. v. R.S.B.I. Aerospace, Inc., 999 F.2d 314,

316-17 (8th Cir. 1993).

IV. This Court Should Create a Receivership in this Case

Defendants do not dispute that they operated a Ponzi scheme that involved

hundreds of investors and close to a $100 million dollars. Indeed, Defendant Adams

has pled guilty to criminal charges of wire fraud and bank fraud based on the same

conduct. Thus, there is no dispute that fraudulent conduct occurred. It is in the

interest of justice, and to the benefit to the investors, to have a court-appointed

receiver to oversee the process of returning the remaining funds in as fair and

economical manner as possible. The appointment of a receiver will also prevent

investors from obtaining preferential treatment to Defendants assets by filing

individual lawsuits.

Moreover, in addition to the funds frozen in various accounts, there are a

number of illiquid assets at stake. Mr. Adams has invested in various real estate

projects. See Exhibit A (Letter from John M. Colette). These investments will likely

be included in the receivership estate because, among other things, Adams

presumably purchased or maintained some or all of those real estate projects with

6
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 7 of 10

investor funds. Indeed, Adams’ counsel has advised that almost $200,000 in

payments to various real estate investments are coming due, and that such payments

must be made to preserve Adams’ interest in those investments. Id. A receiver is

needed to determine whether maintaining those investments is in the best interest of

defrauded investors, particularly because the potential estate has minimal liquid

assets at the moment.

Accordingly, the Court should appoint a receiver over Defendants’ assets to

marshal Defendants’ assets, and preserve and maximize their value for the benefit of

the defrauded investors.

V. The SEC’s Receiver Recommendation

Generally, courts rely on the SEC to recommend a receiver to the court.

Anticipating that the Court may ask the Commission to recommend a potential

receiver here, the Commission sought three proposals from individuals who have

served as receivers in other SEC cases. If the Court prefers to rely on the

Commission’s recommendation rather than select its own receiver, the Commission

respectfully recommends that the Court appoint Kenneth D. Murena, Esq., of

Damian & Valori, LLP, in Miami, Florida, as the receiver in this matter. See Exhibit

C (Murena’s résumé and list of receivership cases). Mr. Murena has extensive

experience serving as a receiver, both in SEC matters and other civil contexts, and in

particular he is very familiar with this sort of fraud and the types of assets that the

7
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 8 of 10

Commission believes will compose the estate. While Mr. Murena is located in

Miami, he has committed that, if appointed, he will not bill the estate for expenses

incurred while traveling between Miami and Mississippi.

The Commission respectfully requests that this Court enter the proposed order

appointing Kenneth D. Murena as a temporary receiver over the Defendants’ assets.

VI. Conclusion

Based on the foregoing, the Commission respectfully requests that the Court

grant its motion and enter the proposed order appointing Kenneth D. Murena, Esq.,

of Damian & Valori LLP, as a temporary receiver over Defendants’ assets.

Dated this 10th day of May, 2018.

Respectfully submitted,

s/ W. Shawn Murnahan
W. Shawn Murnahan
Senior Trial Counsel
Georgia Bar No. 529940
Tel: (404) 842-7669
Email: murnahanw@sec.gov

M. Graham Loomis
Regional Trial Counsel
Georgia Bar No. 457868
Tel: (404) 842-7622
Email: loomism@sec.gov

Justin Delfino
Senior Counsel
Georgia Bar No. 570206
Tel: (404) 942-0698
8
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 9 of 10

Email: delfinoj@sec.gov

COUNSEL FOR PLAINTIFF


Securities and Exchange Commission
Atlanta Regional Office
950 East Paces Ferry Road, N.E., Suite 900
Atlanta, GA 30326-1382
Tel (main): (404) 842-7600
Fax: (703) 813-9364

OF COUNSEL

D. Michael Hurst, Jr.


United States Attorney

s/Kristi H. Johnson
Kristi H. Johnson
Assistant United States Attorney
MS Bar No. 102891

Marc Perez
Assistant United States Attorney
WA Bar No. 33907

Civil Division
United States Attorney's Office
Southern District of Mississippi
501 East Court Street, Suite 4-430
Jackson, MS 39201
Tel: (601) 973-2887
Fax: (601) 965-4409

9
Case 3:18-cv-00252-CWR-FKB Document 12 Filed 05/10/18 Page 10 of 10

UNITED STATES DISTRICT COURT


SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE


COMMISSION,

Plaintiff,

v. Case No. 3:18-CV-252-


CWR-FKB

ARTHUR LAMAR ADAMS AND


MADISON TIMBER PROPERTIES, LLC,

Defendants,

CERTIFICATE OF SERVICE

I hereby certify that on this day, I served a true and correct copy of the

Plaintiff’s Memorandum of Law in Support of its Expedited Motion to Appoint

Receiver on John M. Colette, Esq., as counsel for Defendants, via email and by

United Parcel Service.

Dated this 10th day of May, 2018.


Respectfully submitted,

s/Kristi H. Johnson
Kristi H. Johnson
Case 3:18-cv-00252-CWR-FKB Document 11 Filed 05/10/18 Page 1 of 6

UNITED STATES DISTRICT COURT


SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE


COMMISSION,

Plaintiff,

v. Case No.

ARTHUR LAMAR ADAMS AND 3:18-cv-252-CWR-FKB


MADISON TIMBER PROPERTIES, LLC,

Defendants,

EXPEDITED MOTION TO APPOINT TEMPORARY RECEIVER

Plaintiff Securities and Exchange Commission (“Commission”) files this

Expedited Motion for the Appointment of a Temporary Receiver for Defendants in

this matter. Due to the continued risk of dissipation of those assets, the Commission

asks that the motion be heard as expeditiously as the Court’s schedule permits.

In support of its motion, the SEC contemporaneously files a memorandum

brief and the following supportive exhibits:

Exhibit A: Letter from John M. Colette

Exhibit B: Individual Investor Lawsuit


Case 3:18-cv-00252-CWR-FKB Document 11 Filed 05/10/18 Page 2 of 6

Exhibit C: Murena’s résumé and list of receivership cases

As set forth in the Complaint, the Commission alleges that Defendants

defrauded numerous investors via a Ponzi scheme. While Defendants have not yet

responded to the Complaint, Defendants’ counsel has indicated that Defendants do

not contest the core allegation that they conducted a Ponzi scheme. Indeed, during

the change of plea hearing on May 9, 2018 in United States v. Adams, No. 3:18-CR-

88-CWR-LRA (S.D.Miss.), Defendant Adams pled guilty to the Bill of Information

filed against him for bank and wire fraud based on the same conduct.

Under these circumstances, a receiver is necessary to take control of the

Defendants’ assets for the benefit of investors in order to marshal and preserve those

assets. The primary purpose of equity receiverships in an SEC action is to promote

orderly and efficient administration of the estate by the district court for the benefit of

investors. SEC v. Hardy, 803 F.2d 1034, 1038 (9th Cir. 1986). “The appointment of

a receiver is a well-established equitable remedy available to the SEC in its civil

enforcement proceedings for injunctive relief.” SEC v. First Fin. Group of Texas,

645 F.2d 429, 438 (5th Cir. 1981). Moreover, because the Commission remains

concerned about the potential for dissipation of investor funds and assets, the

Commission requests that this motion be heard on an expedited basis.

Based on common law principles of equity, a receiver serves as a disinterested

court officer who collects and possesses all property subject to the receivership,

known as the receivership “estate.” See, e.g., Atlantic Trust Co. v. Chapman, 208
2
Case 3:18-cv-00252-CWR-FKB Document 11 Filed 05/10/18 Page 3 of 6

U.S. 360, 370-71 (1908). The court holds custody of the receivership estate and

administers it through the receiver. Id.; see also Chicago Deposit Vault Co. v.

McNulta, 153 U.S. 554 (1894). The receiver’s possession, therefore, is the court’s

possession. Id. In this case, the Commission anticipates the receiver ultimately

distributing the estate assets back to defrauded investors.

The Commission’s ability to seek receivership serves as a critical tool in

enforcing the federal securities laws. In light of the estimated size of the fraud –

nearly $100 million – and the number of investors, a receiver is necessary in this case

to preserve and analyze Defendants’ and third parties’ documents and financial

records to determine the full extent of investor losses, to discover if there are viable

claims against third parties, and to establish a claims process to facilitate a fair and

orderly distribution of remaining assets to investors.

The Commission seeks the appointment of a temporary receiver who will,

within 60 days, file a report that includes a preliminary plan for the administration of

the receivership estate, including recommendations as to the most efficient means for

marshalling, liquidating and distributing assets within that estate. The Court, with

input from the Commission, can then better determine whether the receivership

should be continued.

The Commission, therefore, respectfully asks that the Court enter an order in

the form filed concurrently herewith appointing a temporary receiver in this case.

3
Case 3:18-cv-00252-CWR-FKB Document 11 Filed 05/10/18 Page 4 of 6

Dated this 10th day of May, 2018.

Respectfully submitted,

s/ W. Shawn Murnahan
W. Shawn Murnahan
Senior Trial Counsel
Georgia Bar No. 529940
Tel: (404) 842-7669
Email: murnahanw@sec.gov

M. Graham Loomis
Regional Trial Counsel
Georgia Bar No. 457868
Tel: (404) 842-7622
Email: loomism@sec.gov

Justin Delfino
Senior Counsel
Georgia Bar No. 570206
Tel: (404) 942-0698
Email: delfinoj@sec.gov

COUNSEL FOR PLAINTIFF


Securities and Exchange Commission
Atlanta Regional Office
950 East Paces Ferry Road, N.E., Suite 900
Atlanta, GA 30326-1382
Tel (main): (404) 842-7600
Fax: (703) 813-9364

4
Case 3:18-cv-00252-CWR-FKB Document 11 Filed 05/10/18 Page 5 of 6

OF COUNSEL

D. Michael Hurst, Jr.


United States Attorney

s/Kristi H. Johnson
Kristi H. Johnson
Assistant United States Attorney
MS Bar No. 102891

Marc Perez
Assistant United States Attorney
WA Bar No. 33907

Civil Division
United States Attorney's Office
Southern District of Mississippi
501 East Court Street, Suite 4-430
Jackson, MS 39201
Tel: (601) 973-2887
Fax: (601) 965-4409

5
Case 3:18-cv-00252-CWR-FKB Document 11 Filed 05/10/18 Page 6 of 6

UNITED STATES DISTRICT COURT


SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

SECURITIES AND EXCHANGE


COMMISSION,

Plaintiff,

v. Case No. 3:18-CV-252-


CWR-FKB

ARTHUR LAMAR ADAMS AND


MADISON TIMBER PROPERTIES, LLC,

Defendants,

CERTIFICATE OF SERVICE

I hereby certify that on this day, I served a true and correct copy of the

Plaintiff’s Expedited Motion to Appoint Temporary Receiver on John M. Colette,

Esq., as counsel for Defendants, via email and by United Parcel Service.

Dated this 10th day of May, 2018.

Respectfully submitted,

s/Kristi H. Johnson
Kristi H. Johnson
Case 3:18-cv-00252-CWR-FKB Document 11-1 Filed 05/10/18 Page 1 of 1

EXHIBIT
A