HomeMy WebLinkAboutRelease #30
TEMECULA PUBLIC FINANCING AUTHORITY RELEASE NO. 30 Dated: March 17, 2009 Relating to $51,250,000 Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh
Ranch), 2006 Special Tax Bonds (the “Bonds”) Maturity (September 1) CUSIP No. Maturity (September 1) CUSIP No. Maturity (September 1) CUSIP No. 2009 87972Y BX3 2013 87972Y CB0 2026 87972Y
CM6 2010 87972Y BY1 2014 87972Y CC8 2036 87972Y CN4 2011 87972Y BZ8 2015 87972Y CD6 2012 87972Y CA2 2016 87972Y CE4 The Temecula Public Financing Authority (the “Authority”) has previously
issued its Releases Nos. 1 through 29. In addition, on February 25, 2009, the Authority issued its Annual Continuing Disclosure Report (the “Report”). This Release No. 30 does not purport
to include every item that may be of interest to owners of the Bonds, nor does it purport to present “full and fair disclosure” with respect to the Bonds within the meaning of applicable
federal and state securities laws. Capitalized terms used but not defined in this Release No. 30 have the meanings given those terms in the official statement dated April 13, 2006 relating
to the Bonds (the “Official Statement”). Settlement Relating to Claims by USA Capital As disclosed in prior Releases, on April 13, 2006, USA Commercial Mortgage Company (“USA Capital”)
and other related entities (the “USA Capital Debtors”) filed bankruptcy petitions in the U.S. Bankruptcy Court, District of Nevada (Las Vegas) (the “Bankruptcy Court”). As disclosed
in prior Releases, before the bankruptcy filing, both USA Capital and USA Investment Partners, LLC were under common control by Joseph D. Milanowski and Thomas Hantges. USA Investment
Partners, LLC is a member of Ashby USA, LLC (the “Developer”). On March 5, 2009, the Bankruptcy Court issued an order (the “Order”) approving a Settlement Agreement and Release (the
“Settlement”) between, on one hand, the Trustee of the USACM Liquidating Trust as successor to the USA Capital Debtors (the “Plaintiff”), and, on the other hand, certain entities related
to Richard Ashby, including the Developer and Ashby Development Company, Inc. (which is a managing member of the Developer) (collectively, the “Defendants”), settling certain litigation
filed by the Plaintiff in the Bankruptcy Court. Copies of the Order and the Settlement together with other related documents are attached to this Release No. 30 as Exhibit A. The Settlement
resolves the Plaintiff’s claims that the Defendants engaged in inappropriate transactions with USA Capital and related entities before the USA Capital Debtors’ bankruptcy filing. Under
the terms of the Settlement, among other provisions, the Defendants (excepting the Developer and Richard Ashby) agreed to judgment against them of $4.98 million. The Order and the Settlement
do not explain why the Developer is the only non-individual Defendant not responsible for the payment of this amount. However, on page 6 of 9 in the Plaintiff’s motion for approval of
the Settlement, which is included in Exhibit A, the Plaintiff states that based on depositions it
2 conducted in connection with the Settlement, it alleges that it learned that the Developer “is insolvent, in default of its loan obligations, and expects its lender to proceed with
foreclosure on its only substantial asset soon….” Steps by Beneficial Owners to Augment Transmission of Notices Owners of the Bonds should be aware of steps that they can take to augment
the transmission of notices with respect to the Bonds. In order to be assured of receiving notice, beneficial owners of the Bonds may wish to ascertain that the nominee who holds the
Bonds for their benefit has agreed to obtain and transmit notices to the beneficial owners, or in the alternative, beneficial owners may wish to provide their names and addresses to
the Authority and request that copies of future notices be provided directly to them. Such requests should be sent to: Temecula Public Financing Authority c/o Richards, Watson & Gershon
355 South Grand Avenue, 40th Floor Los Angeles, California 90071 Attn: Peter Thorson or may be sent by e-mail to pthorson@rwglaw.com. Any requests to receive any prior Releases by the
Authority should be made to the same address or e-mail. Concluding Matters. ANY SUBSEQUENT STATEMENTS REGARDING THE BONDS, OTHER THAN A STATEMENT MADE BY THE AUTHORITY IN AN OFFICIAL
RELEASE OR SUBSEQUENT NOTICE AND/OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD OR A NATIONALLY RECOGNIZED MUNICIPAL SECURITIES INFORMATION REPOSITORY, ARE NOT AUTHORIZED BY
THE AUTHORITY. THE AUTHORITY SHALL NOT BE RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENT. THIS OFFICIAL RELEASE MAY CONTAIN INFORMATION MATERIAL
TO BONDOWNERS AND DOES NOT PURPORT TO CONTAIN ALL MATERIAL INFORMATION WITH RESPECT TO THE BONDS OR THE FINANCIAL CONDITION OF THE COMMUNITY FACILITIES DISTRICT. THE INFORMATION CONTAINED
IN THIS OFFICIAL RELEASE IS NOT GUARANTEED AS TO ACCURACY OR COMPLETENESS.
EXHIBIT A BANKRUPTCY COURT ORDER AND SETTLEMENT
DIAMOND MCCARTHY LLP LEWIS AND ROCA LLP 909 Fannin, Suite 1500 3993 Howard Hughes Parkway, Suite 600 Houston, Texas 77010 Las Vegas, NV 89169-5996 Telephone (713) 333-5100 Telephone
(702) 949-8320 Facsimile (713) 333-5199 Facsimile (702) 949-8321 Allan B. Diamond, TX State Bar No. 05801800 Rob Charles, NV State Bar No. 006593 Email: adiamond@diamondmccarthy.com
Email: rcharles@lrlaw.com Eric D. Madden, TX State Bar No. 24013079 Email: emadden@diamondmccarthy.com Special Litigation Counsel for USACM Liquidating Trust Counsel for USACM Liquidating
Trust 154755-1 123456789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA In re: USA COMMERCIAL MORTGAGE COMPANY, Debtor. In re: USA
CAPITAL REALTY ADVISORS, LLC, Debtor. In re: USA CAPITAL DIVERSIFIED TRUST DEED FUND, LLC, Debtor. In re: USA CAPITAL FIRST TRUST DEED FUND, LLC, Debtor. In re: USA SECURITIES, LLC,
Debtor. Affects: All Debtors USA Commercial Mortgage Company USA Capital Realty Advisors, LLC USA USA Capital Diversified Trust Deed Fund, LLC USA Capital First Trust Deed Fund,
LLC USA Securities, LLC Case Nos.: BK-S-06-10725-LBR BK-S-06-10726-LBR BK-S-06-10727-LBR BK-S-06-10728-LBR BK-S-06-10729-LBR JOINTLY ADMINISTERED Chapter 11 Cases Judge Linda B. Riegle
NOTICE OF ENTRY OF ORDER APPROVING MOTION FOR APPROVAL OF SETTLEMENT PURSUANT TO RULE 9019 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE USACM LIQUIDATING TRUST, Plaintiff, v. FIESTA
DEVELOPMENT, INC., ASHBY USA, LLC, RICHARD K. ASHBY, and RANDOM DEVELOPMENTS, LLC, Defendants. Adv. No. 08-01123-lbr NOTICE OF ENTRY OF ORDER APPROVING MOTION FOR APPROVAL OF SETTLEMENT
PURSUANT TO RULE 9019 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE E-filed on 03/05/09 Case 08-01123-lbr Doc 43 Entered 03/05/09 15:20:58 Page 1 of 8
2 123456789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 PLEASE TAKE NOTICE that an Order Approving Motion for Approval of Settlement Pursuant to Rule 9019 of the Federal Rules
of Bankruptcy Procedure (DE #6899) was entered on the 5th day of March 2009, a true and correct copy of which is attached hereto as Exhibit “A.” Dated: March 5, 2009. DIAMOND MCCARTHY
LLP By: /s/J. Maxwell Beatty Allan B. Diamond, TX 05801800 (pro hac vice) Stephen T. Loden, TX 24002489 (pro hac vice) J. Maxwell Beatty, TX 24051740 (pro hac vice) 909 Fannin, Suite
1500 Houston, TX 77010 (713) 333-5100 (telephone) (713) 333-5199 (facsimile) Special Litigation Counsel for Plaintiff USACM Liquidating Trust LEWIS AND ROCA LLP By: /s/Rob Charles Rob
Charles, NV 6593 3993 Howard Hughes Parkway, Suite 600 Las Vegas, Nevada 89169-5996 (702) 949-8320 (telephone) (702) 949-8321 (facsimile) Counsel for USACM Liquidating Trust Case 08-01123-lbr
Doc 43 Entered 03/05/09 15:20:58 Page 2 of 8
3 123456789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 CERTIFICATE OF SERVICE I hereby certify that I am an employee of the law firm of DIAMOND MCCARTHY LLP, and that on the
5th day of March 2009, a true and correct copy of the NOTICE OF ENTRY OF ORDER APPROVING MOTION FOR APPROVAL OF SETTLEMENT PURSUANT TO RULE 9019 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE
was served by electronic transmission to all parties on the Post Effective Date Service List and counsel for parties to the settlement as set forth below: Richard F. Holley, Esq. Ogonna
M. Atamoh, Esq. Santoro, Driggs, Walch, Kearney, Holey & Thompson 400 South Fourth Street, Third Floor Las Vegas, NV 89101 rholley@nevadafirm.com oatamoh@nevadafirm.com /s/Catherine
A. Burrow, CLA Catherine A. Burrow, CLA Diamond McCarthy LLP Case 08-01123-lbr Doc 43 Entered 03/05/09 15:20:58 Page 3 of 8
EXHIBIT A Case 08-01123-lbr Doc 43 Entered 03/05/09 15:20:58 Page 4 of 8
__________________________________ Hon. Linda B. Riegle ____________________________________U_n_i_te_d _S_ta_te_s_ B_a_nk_r_up_t_cy_ J_u_d_g_e___ Entered on Docket March 05, 2009 CCaasese
0 068-1-01712253-lb-lbr r D Dooc c6 4839 9 E Entnetreerde d0 30/30/50/50/90 91 50:62:05:25:83 0 P Pagaeg e5 1o fo 8f 4
CCaasese 0 068-1-01712253-lb-lbr r D Dooc c6 4839 9 E Entnetreerde d0 30/30/50/50/90 91 50:62:05:25:83 0 P Pagaeg e6 2o fo 8f 4
CCaasese 0 068-1-01712253-lb-lbr r D Dooc c6 4839 9 E Entnetreerde d0 30/30/50/50/90 91 50:62:05:25:83 0 P Pagaeg e7 3o fo 8f 4
CCaasese 0 068-1-01712253-lb-lbr r D Dooc c6 4839 9 E Entnetreerde d0 30/30/50/50/90 91 50:62:05:25:83 0 P Pagaeg e8 4o fo 8f 4
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 E-filed on 2/10/2009 DIAMOND MCCARTHY LLP LEWIS AND ROCA LLP 909 Fannin, Suite 1500 3993 Howard Hughes Parkway, Suite 600
Houston, Texas 77010 Las Vegas, NV 89169-5996 Telephone (713) 333-5100 Telephone (702) 949-8320 Facsimile (713) 333-5199 Facsimile (702) 949-8321 Allan B. Diamond, TX State Bar No. 05801800
Email: adiamond@diamondmccarthy.com Eric D. Madden, TX State Bar No. 24013079 Rob Charles, NV State Bar No. 006593 Email: emadden@diamondmccarthy.com Email: rcharles@lrlaw.com Special
Litigation Counsel for USACM Liquidating Trust Counsel for USACM Liquidating Trust UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA In re: USA COMMERCIAL MORTGAGE COMPANY, Debtor. In
re: USA CAPITAL REALTY ADVISORS, LLC, Debtor. In re: USA CAPITAL DIVERSIFIED TRUST DEED FUND, LLC, Debtor. In re: USA CAPITAL FIRST TRUST DEED FUND, LLC, Debtor. In re: USA SECURITIES,
LLC, Debtor. Affects: All Debtors USA Commercial Mortgage Company USA Capital Realty Advisors, LLC USA Capital Diversified Trust Deed Fund, LLC USA Capital First Trust Deed
Fund, LLC USA Securities, LLC Case Nos.: BK-S-06-10725-LBR BK-S-06-10726-LBR BK-S-06-10727-LBR BK-S-06-10728-LBR BK-S-06-10729-LBR JOINTLY ADMINISTERED Chapter 11 Cases Judge Linda
B. Riegle MOTION FOR APPROVAL OF SETTLEMENT PURSUANT TO RULE 9019 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE Hearing Date: February 20, 2009 Hearing Time: 10:30 a.m. PST Geoffrey Berman,
Trustee of the USACM Liquidating Trust (the “USACM Trust”), hereby files this Motion for Approval of Settlement Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure (the
“Motion”), and respectfully moves this Honorable Court for an order approving the Proposed Settlement (defined below) between the USACM Trust, Fiesta Page 1 of 9 Case 06-10725-lbr Doc
6794 Entered 02/10/09 13:17:27 Page 1 of 29
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Development, Inc. (“Fiesta”), Ashby USA, LLC (“Ashby USA”), Richard K. Ashby (“Ashby”), Random Developments, LLC (“Random”),
and Ashby Development Company, Inc. (“Ashby Development”)1 (collectively, the “Parties”). A proposed form of order is attached as Exhibit “A.” This Motion is made pursuant to Federal
Rule of Bankruptcy Procedure 9019 and is based upon the points and authorities listed herein, the Declaration of Geoffrey Berman in Support of the Motion for Approval of Settlement Pursuant
to Rule 9019 the Federal Rules of Bankruptcy Procedure (the “Berman Declaration,” hereto attached as Exhibit “B”), and any evidence and argument to be presented at the time of the hearing
of this Motion. BACKGROUND FACTS On April 13, 2006 (the “Petition Date”), USA Commercial Mortgage Company (“USACM”) and certain of its affiliated companies and subsidiaries (collectively,
the “Debtors”), each filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the
District of Nevada (the “Bankruptcy Court”). The Debtors’ chapter 11 cases are being jointly administered under Bankruptcy Case No. BK-S-06-10725-LBR (the “USA Capital Bankruptcy Case”).
On January 8, 2007, the Bankruptcy Court confirmed the Third Amended Joint Chapter 11 Plan of Reorganization (the “Joint Plan”), and on March 12, 2007, the Joint Plan became effective.
The USACM Trust was created pursuant to the Joint Plan and is governed by the provisions of the Liquidating Trust Agreement (the “USACM Trust Agreement”). The Joint Plan expressly retained
the Debtors’ causes of action for enforcement by the USACM Trust, pursuant to 11 U.S.C. § 1123(b)(3)(B). Accordingly, the USACM Trust now holds any and all 1 Fiesta, Ashby, Ashby USA,
Random, and Ashby Development are collectively referred to as the “Defendants.” Page 2 of 9 Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 2 of 29
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 potential claims and causes of action, whether arising pre-petition or post-petition, that USACM and the USACM Trust may
have or may at any time have had against the Defendants. The Pending Litigation On April 11, 2008, the USACM Trust commenced adversary proceeding number 08-01123-LBR, entitled USACM
Liquidating Trust v. Fiesta Development, Inc., et al. (the “Adversary Proceeding”) seeking to recover approximately $4.9 million in USACM funds that were transferred to the Defendants
as a part of Thomas Hantges and Joseph Milanowski’s fraudulent looting and self-dealing scheme. Ex. B, ¶ 4. These funds were transferred either directly to the Defendants or indirectly
through USA Investment Partners, LLC (“USAIP”) in order to satisfy USAIP’s obligations to make capital contributions to certain of the Defendants. Ex. B, ¶ 4. In the Adversary Proceeding,
the USACM Trust asserts that USACM received no benefit for these transfers, and that they were recoverable under applicable federal and state fraudulent transfer statutes. In addition,
the USACM Trust filed claims for unjust enrichment, money had and received, and Nevada Revised Statute § 41.580 seeking recovery of these funds. The Proposed Settlement Following a settlement
conference conducted on January 20, 2009 before Judge Randall J. Newsome, the Parties reached an agreement to resolve the Adversary Proceeding subject to the execution of a settlement
agreement that is approved by the Bankruptcy Court (a form copy the “Proposed Settlement,” attached hereto as Exhibit “C”). Ex. B, ¶ 5. The material terms of the Proposed Settlement
are summarized as follows2: • Defendants will pay $82,500.00 within five business days of the Court’s approval of the Proposed Settlement (the “Settlement Payment”); 2 The following
is solely a summary of the terms of the Settlement Agreement, and in no way is intended as an amendment, modification, or supplementation of the Settlement Agreement terms. The terms
of the written written settlement agreement between the Parties shall prevail in the event of any conflict with this summary. Page 3 of 9 Case 06-10725-lbr Doc 6794 Entered 02/10/09
13:17:27 Page 3 of 29
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 • Ashby Development, Fiesta, and Random, shall execute a Stipulated Judgment to be entered by the Bankruptcy Court in favor
of the USACM Trust for joint and several liability on the Judgment in the aggregate sum of $4,980,266.49; • Parties contributing to the Settlement Payment agree to refrain from filing
a voluntary bankruptcy for ninety days following the USACM Trust’s receipt of the Settlement Payment; • Upon approval this Court’s of the Proposed Settlement and receipt of the Settlement
Payment, the USACM Trust shall release Ashby, his wife and children, Ashby USA, and Larry Redman (the “Released Parties”) from claims brought by the USACM Trust; • The USACM Trust covenants
not to sue Larry Redman’s wife or children; • Upon this Court’s approval of the Proposed Settlement and receipt of the Settlement Payment, the Released Parties shall release the USACM
Trust from all potential claims they may have against the USACM Trust; • Upon this Court’s approval of the Proposed Settlement and receipt of the Settlement Payment, the USACM Trust
will dismiss the Adversary Proceeding, with prejudice. ARGUMENT The Joint Plan does not expressly require Bankruptcy Court approval of proposed settlements. Rather, the Joint Plan provides
that the USACM Trust shall have the discretion to: commence, prosecute, defend against, recover on account of, and settle all rights, Claims, causes of action, defenses, and counterclaims
in their sole discretion in accordance with what is in the best interests, and for the benefit, of the Debtors or the Post-Effective Date Entities. Joint Plan, pps. 47-48, 59. In an
abundance of caution, and as required by the Proposed Settlement, the USACM Trust seeks the Bankruptcy Court’s approval of the Proposed Settlement pursuant to Bankruptcy Rule 9019. Bankruptcy
Rule 9019 provides that, “[o]n motion by the Trustee and after notice and a hearing, the court may approve a compromise or settlement.” FED. R. BANKR. P. 9019. In order Page 4 of 9 Case
06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 4 of 29
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 to approve a compromise and settlement, the Court must find that it is fair and equitable to the estate and, “[i]n determining
the fairness, reasonableness and adequacy of a proposed settlement, the court must consider: (a) the probability of success in the litigation; (b) the difficulties, if any, to be encountered
in the matter of collection; (c) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; and (d) the paramount interest of the creditors
and a proper deference to their reasonable views in the premises.” Arden v. Motel Partners (In re: Arden), 156 F.3d 729 (9th Cir. 1999); Martin v. Kane (In re A&C Properties), 784 F.2d
1377 (9th Cir. 1986), cert. denied, 479 U.S. 854 (1986). The USACM Trust is not required to satisfy each of these factors as long as the factors as a whole favor approving the settlement.
See In re Pacific Gas & Electric Co., 304 B.R. 395, 416 (Bankr. N.D.Cal. 2004). In considering the factors, “a precise determination of the likely outcome is not required, since an exact
judicial determination of the values at issue would defeat the purpose of compromising the claim.” In re Telesphere Comm’s, Inc., 179 B.R. 544, 553 (Bankr. N.D.Ill. 1994) (internal quotations
omitted). Thus, rather than determining various issues of fact and law, the court should “canvass the issues and see whether the settlement fall[s] below the lowest point in the range
of reasonableness.” In re Lion Capital Group, 49 B.R. 163, 175 (Bankr. S.D.N.Y. 1985) (internal quotations omitted). The USACM Trust respectfully submits that the Proposed Settlement
satisfies each of these factors. If the USACM Trust and the Defendants do not enter into the Proposed Settlement, or if it is not approved by this Court, the USACM Trust will be required
to expend significant resources in pursuit of the Adversary Proceeding. Ex. B, ¶ 6. The Parties would also likely call multiple expert witnesses to testify on issues such as insolvency
and forensic Page 5 of 9 Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 5 of 29
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 accounting. As such, trial of this matter will likely be protracted, complex, and expensive, and there are no guarantees
as to the ultimate outcome. Ex. B, ¶ 6. Moreover, even were the USACM Trust ultimately successful at trial, there is substantial doubt as to the ability to recover any judgment from
the Defendants. During settlement discussions, Defendants provided the USACM Trust with a liquidation analysis for the Defendants and substantial supporting documentation. Prior to the
settlement conference before Judge Newsome, the USACM Trust conducted the depositions of Ashby and Fiesta, through its accountant, Daniel Limone. During these depositions, the USACM
Trust learned that: (1) Fiesta development is nearing bankruptcy; (2) Ashby USA is insolvent, in default of its loan obligations, and expects its lender to proceed with foreclosure on
its only substantial asset soon; (3) Random development has no assets of value, and the property it was previously developing has been foreclosed on; (4) Ashby has several lawsuits against
him related to personal guarantees in excess of $300 million, has outstanding judgments against him of over $9 million, and does not have sufficient assets to repay these obligations;
and (4) Ashby Development is likewise insolvent, without any significant assets. Ex. B, ¶ 7. As a result of these depositions, the USACM Trust believes that any assets available for
settlement at this point would be likely completely depleted if the USACM Trust proceeded to trial. Ex. B, ¶ 7. If approved, however, the Proposed Settlement will allow the USACM Trust
to avoid protracted and complex litigation with the Defendants, bring value to the USACM Trust through the Defendants’ immediate payment of the Settlement Payment, provide the USACM
Trust with value in the form of claims in the Defendants’ potential bankruptcy estates, and resolve all claims in the Adversary Proceeding. The amount of the settlement is fair in light
of the stage of the Adversary Proceeding, the uncertainty surrounding the collection of any judgment against the Page 6 of 9 Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page
6 of 29
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Defendants, and the complexity, expense and risks associated with trial. The terms of the Proposed Settlement fall within
the reasonable range of likely outcomes of the Adversary Proceeding when considering the issues revolving around collection. This settlement eliminates litigation risk, cost, and delay,
and provides a prompt and substantial recovery to the USACM Trust’s estate. Ex. B, ¶ 6. The Proposed Settlement is the product of arms’ length bargaining, without fraud or collusion.
Ex. B, ¶ 5. The Proposed Settlement will thus facilitate recoveries for the benefit of the beneficiaries of the USACM Trust who have suffered a loss as a result of the events leading
to the USACM bankruptcy. Accordingly, the USACM Trust has concluded in the exercise of its reasonable business judgment that the benefits gained by resolving the Adversary Proceeding
on the terms set forth in the Proposed Settlement exceed any benefit that the USACM Trust would receive in fully litigating this matter. Ex. B, ¶ 8. CONCLUSION For the foregoing reasons,
the USACM Trust respectfully requests that this Court approve the Proposed Settlement on the terms set forth above and provide such other and further relief as the Court deems appropriate.
DATED: February 10, 2009. Respectfully Submitted, Page 7 of 9 Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 7 of 29
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 DIAMOND MCCARTHY LLP By: /s/Stephen T. Loden Allan B. Diamond, TX 05801800 (pro hac vice) Stephen T. Loden, TX 24002489
(pro hac vice) J. Maxwell Beatty, TX 24051740 (pro hac vice) 909 Fannin, Suite 1500 Houston, Texas 77010 (713) 333-5100 (telephone) (713) 333-5199 (facsimile) Special Litigation Counsel
for USACM Liquidating Trust LEWIS AND ROCA LLP By: /s/Rob Charles Rob Charles, NV 6593 3993 Howard Hughes Parkway, Suite 600 Las Vegas, Nevada 89169-5996 (702) 949-8320 (telephone) (702)
949-8321 (facsimile) Counsel for USACM Liquidating Trust Page 8 of 9 Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 8 of 29
Page 9 of 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 CERTIFICATE OF SERVICE I hereby certify that I am an employee of the law firm of DIAMOND MCCARTHY LLP, and
that on the 10th day of February 2009, I served a true and correct copy of the foregoing MOTION FOR APPROVAL OF SETTLEMENT PURSUANT TO RULE 9019 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE
by electronic transmission to all parties on the Post Effective Date Service List and counsel for all Defendants as set forth below: Richard F. Holley Santoro, Driggs, Walch, Kearney,
Holley & Thompson 400 South Fourth Street, Third Floor Las Vegas, NV 89101 rholley@nevadafirm.com /s/Catherine A. Burrow, CLA Catherine A. Burrow, CLA Diamond McCarthy LLP Case 06-10725-lbr
Doc 6794 Entered 02/10/09 13:17:27 Page 9 of 29
EXHIBIT A Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 10 of 29
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA In re: USA COMMERCIAL MORTGAGE COMPANY, Debtor. In re: USA CAPITAL REALTY
ADVISORS, LLC, Debtor. In re: USA CAPITAL DIVERSIFIED TRUST DEED FUND, LLC, Debtor. In re: USA CAPITAL FIRST TRUST DEED FUND, LLC, Debtor. In re: USA SECURITIES, LLC, Debtor. Affects:
All Debtors USA Commercial Mortgage Company USA Capital Realty Advisors, LLC USA Capital Diversified Trust Deed Fund, LLC USA Capital First Trust Deed Fund, LLC USA Securities,
LLC Case Nos.: BK-S-06-10725-LBR BK-S-06-10726-LBR BK-S-06-10727-LBR BK-S-06-10728-LBR BK-S-06-10729-LBR JOINTLY ADMINISTERED Chapter 11 Cases Judge Linda B. Riegle ORDER APPROVING MOTION
FOR APPROVAL OF SETTLEMENT PURSUANT TO RULE 9019 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE On February 20, 2009, this Court held a hearing on the Motion for Approval of Settlement
Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure filed by Geoffrey Berman, Trustee of the USACM Liquidating Trust (the “USACM Trust”). The Motion requested this court
enter an order approving the Settlement Agreement and Release dated Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 11 of 29
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 February 5, 2009 between the USACM Trust, Fiesta Development, Inc., Ashby USA, LLC, Richard K. Ashby, Random Developments,
LLC, and Ashby Development Company, Inc. (the “Proposed Settlement”). The relief requested is hereby GRANTED. Pursuant to the Motion this Court hereby GRANTS the following relief: 1.
The Proposed Settlement is approved pursuant to Federal Rule of Bankruptcy Procedure 9019. 2. This Court shall retain jurisdiction to interpret and enforce the terms of the Settlement
Agreement and this Order Approving Settlement. ### Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 12 of 29
EXHIBIT B Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 13 of 29
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA In re: USA COMMERCIAL MORTGAGE COMPANY, Debtor. In re: USA CAPITAL REALTY
ADVISORS, LLC, Debtor. In re: USA CAPITAL DIVERSIFIED TRUST DEED FUND, LLC, Debtor. In re: USA CAPITAL FIRST TRUST DEED FUND, LLC, Debtor. In re: USA SECURITIES, LLC, Debtor. Affects:
All Debtors USA Commercial Mortgage Company USA Capital Realty Advisors, LLC USA Capital Diversified Trust Deed Fund, LLC USA Capital First Trust Deed Fund, LLC USA Securities,
LLC Case Nos.: BK-S-06-10725-LBR BK-S-06-10726-LBR BK-S-06-10727-LBR BK-S-06-10728-LBR BK-S-06-10729-LBR JOINTLY ADMINISTERED Chapter 11 Cases Judge Linda B. Riegle DECLARATION OF GEOFFREY
L. BERMAN IN SUPPORT OF MOTION FOR APPROVAL OF SETTLEMENT PURSUANT TO RULE 9019 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE DECLARATION OF GEOFFREY L. BERMAN IN SUPPORT OF MOTION FOR
APPROVAL OF SETTLEMENT PURSUANT TO RULE 9019 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE Geoffrey L. Berman, in his capacity as the Court-appointed Trustee of the USACM Liquidating
Trust (the “USACM Trust”), declares under penalty of perjury as follows: 1. I am an adult person competent to testify in court. I make the following statements based upon my personal
knowledge except where otherwise indicated. Page 1 of 4 Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 14 of 29
1 7 11 17 21 23 2 3 4 5 6 8 9 10 12 13 14 15 16 18 19 20 22 2. I am the Court-appointed trustee of the USACM Trust pursuant to the order confirming the “Debtors’ Third Amended Joint
Chapter 11 Plan of Reorganization” (the
“Joint Plan”) entered on January 8, 2007 in In re USA Commercial Mortgage, Cause No. BK-S-06-10725 pending in the United States Bankruptcy Court for the District of Nevada (the “Bankruptcy
Court”), and submit this declaration in that capacity. The Joint Plan became effective on March 12, 2007 (the “Effective Date”). 3. I submit this declaration in support of the USACM
Trust’s Motion for Approval of Settlement Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure (the “Motion”). As discussed in the Motion, the USACM Trust seeks Bankruptcy
Court approval of the Proposed Settlement1 between the USACM Trust and the Defendants. 4. In the Adversary Proceeding, the USACM Trust seeks to recover approximately $4.9 million in
USACM funds that were transferred to the Defendants as a part part of Thomas Hantges and Joseph Milanowski’s fraudulent looting and self-dealing scheme. These funds were transferred
either directly to the Defendants or indirectly through USA Investment Partners, LLC (“USAIP”) in order to satisfy USAIP’s obligations to make capital contributions to certain of the
Defendants. 5. On January 20, 2009, I participated in the Bankruptcy Court-ordered settlement conference with the Defendants before Judge Randall J. Newsome in an attempt to resolve
the Adversary Proceeding prior to trial. The Parties ultimately reached agreement as documented by the Proposed Settlement, subject to Bankruptcy Court approval. 6. As discussed in the
Motion, I believe the Proposed Settlement represents a fair and reasonable compromise of the Adversary Proceeding that will result in a recovery for the 1 Unless otherwise defined herein,
capitalized terms are used as defined in the Motion. Page 2 of 4 Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 15 of 29
1 2 3 4 5 6 21 7 8 9 10 11 12 13 14 15 16 17 18 19 20 22 23 beneficiaries of the USACM Trust without the expense, time, and risks of further litigation, trial, and efforts to collect
on any judgment the USACM Trust may ultimately obtain. If the Proposed Settlement is not approved, the USACM Trust will be required to incur significant additional expenses to pursue
the Adversary Proceeding through what will likely be a protracted, complex, and expensive trial. 7. Moreover, even if the USACM Trust was ultimately successful at trial, there is substantial
doubt concerning the ability to recover any resulting judgment from the Defendants. During settlement discussions, Defendants provided the USACM Trust with a liquidation analysis for
the Defendants and substantial supporting documentation. Prior to the settlement conference, the USACM Trust conducted the depositions of Mr. Richard K. Ashby and Fiesta, through its
accountant, Daniel Limone. During these depositions, the USACM Trust learned that: (1) Fiesta development is nearing bankruptcy; (2) Ashby USA is insolvent, is in default of its loan
obligations, and expects its lender to proceed with foreclosure on its only substantial asset soon; (3) Random development has no assets of value, and the property it was previously
developing has been foreclosed on; (4) Ashby has several lawsuits against him related to personal guarantees in excess of $300 million, has outstanding judgments against him of over
$9 million, and does not have sufficient assets to repay his obligations; and (4) Ashby Development is likewise insolvent, without any significant assets. As a result of these depositions,
I believe that any assets available for settlement at this point would be likely completely depleted if the USACM Trust proceeded to trial. 8. The Proposed Settlement falls within what
I believe to be the reasonable range of likely outcomes of the Adversary Proceeding, after accounting for litigation risks, costs, delay associated with trial and any appeal, and perhaps
most importantly, difficulties encountered in Page 3 of 4 Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 16 of 29
Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 17 of 29
EXHIBIT C Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 18 of 29
Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 19 of 29
Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 20 of 29
Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 21 of 29
Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 22 of 29
Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 23 of 29
Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 24 of 29
Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 25 of 29
Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 26 of 29
Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 27 of 29
Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 28 of 29
Case 06-10725-lbr Doc 6794 Entered 02/10/09 13:17:27 Page 29 of 29