UDF Motion Denied! Numerous Misrepresentations, Omissions, False/Misleading Statements Made by UDF

0
UDF Motion Denied! Numerous Misrepresentations, Omissions, False/Misleading Statements Made by UDF
mohamed_hassan / Pixabay

UDF motion denied. Excerpt from the November 23, 2021 Order is below:

Get The Full Walter Schloss Series in PDF

Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q3 2021 hedge fund letters, conferences and more

Carlson’s Double Black Diamond Ends 2021 On A High

Black DiamondIn December, a strong performance helped Carlson Capital's Double Black Diamond fund achieve a double-digit return in 2021. Q4 2021 hedge fund letters, conferences and more Double-Digit Return According to a copy of the latest investor update, which ValueWalk has been able to review, Clint Carlson's Double Black Diamond fund returned 2.9% in December and Read More

[T]he Court agrees with the Government’s statement that the "indictment details the numerous misrepresentations and omissions made by the defendants in public filings, including false and misleading information, including but not limited to statements about the source of the funds used to make past payments of distributions and bank loans."

In The United States District Court For The Northern District Of Texas Fort Worth Division

United States Of America,

Plaintiff,

v.

Hollis Morrison Greenlaw, et al.,

Defendants.

UDF Motion Denied

Before the Court are Defendants’ Motion to Compel Production of Grand Jury Colloquy Transcripts (ECF No. 63), filed November 8, 2021, and Government’s Response in Opposition to Defendants’ Motion to Compel Production of Grand Jury Colloquy Transcripts (ECF No. 84), filed November 22. For the following reasons, the Court finds this motion should be DENIED.

Defendants seek production of the grand jury colloquy transcripts under Federal Rule of Criminal Procedure 6(e)(3)(E). Mot. 1, ECF No. 63. Specifically, the motion seeks transcripts from portions of the session “where there is no witness in the room and the prosecutors are speaking to the grand jury.” Id. at 2. Under Rule 6(e)(3)(E)(ii), the Court has discretion to order the disclosure of grand jury transcripts if there is a “showing that grounds may exist for a motion to dismiss the indictment because of matters occurring before the grand jury.” Fed. R. Crim. P. 6(e)(3)(E)(ii). The Fifth Circuit held a party seeking disclosure of grand jury materials must “show that ‘a particularized need’ exists for the materials that outweighs the policy of secrecy.” United States v. Miramontez, 995 F.2d 56, 59 (5th Cir. 1993).

“In order to meet this burden, [Defendants] must demonstrate that (1) the material [they] seek[] is needed to avoid a possible injustice in another judicial proceeding, (2) the need for disclosure is greater than the need for continued secrecy, and (3) [their] request is structured to cover only material so needed.” Id. The Court finds Defendants failed to meet their burden to show “‘a particularized need’ exists for the materials that outweighs the policy of secrecy.” Id. (“The proper functioning of the grand jury system depends upon the secrecy of the grand jury proceedings.”).

Defendants argue these transcripts potentially reveal grounds for dismissal of the indictment. Mot. 1, ECF No. 63. They further argue they “have substantial grounds to believe that the Government misinformed the grand jury regarding the applicable legal standards here, and this erroneous instruction of law may reveal grounds for a motion to dismiss the indictment.” Id.

Specifically, Defendants first allege, “[g]iven the allegations in the Indictment, UDF Executives have substantial grounds to believe that the Government provided legally incorrect instructions to the grand jury regarding the legal significance of UDF III’s history of paying monthly 9.75% distributions.” Id. at 3. Next, they allege, given the indictment, “substantial grounds to believe that the government mis-instructed the Grand Jury by claiming that UDF promised investors a 9.75% monthly distribution.” Id. at 7. Based on these allegations, Defendants argue the requested disclosure is required to “ensure the integrity of the grand jury process, incentivize prosecutors to be careful in instructing a grand jury, and give some teeth to the grand jury’s ‘shield’ function.” Id. at 3 (quoting United States v. Facteau, No. 1:15-cr-10076-ADB, 2016 WL 4445741, at *5 (D. Mass. Aug. 22, 2016)).

The Court is unpersuaded by these theories and agrees with the Government that these statements mischaracterize the indictment. See Resp. 4, ECF No. 84. Rather, the indictment states:

Beginning at least on or about March 31, 2010, defendants Hollis Morrison Greenlaw, Cara Delin Obert, and others caused filings to be submitted to the SEC, and disclosed to the public, that stated Fund III paid monthly distributions to limited partners at an annualized rate of return of 9.75%. Greenlaw, Obert, and others further caused filings to be submitted to the SEC, and disclosed to the public, which stated that cash available for distributions are the funds received by [Fund III] from operations.

Indictment ¶ 39, ECF No. 1. There are no allegations of a promise to pay a 9.75% monthly distribution. Id. When analyzing Defendants’ motion in light of what the indictment alleges, Defendants lack grounds for their requested relief. They have no “substantial grounds to believe” there was wrongdoing.

Notwithstanding the analysis above, Defendants similarly fail to meet their burden to show that a “ground may exist to dismiss the indictment because of a matter that occurred before the grand jury.” Fed. R. Crim. P. 6(e)(3)(E)(ii). Notably, “dismissal of the indictment [for prosecutorial error] is appropriate only if it is established that the violation substantially influenced the grand jury’s decision to indict, or if there is grave doubt that the decision to indict was free from the substantial influence of such violations.” Bank of Nova Scotia v. United States, 487 U.S. 250, 256 (1988) (internal quotations omitted). That is not the case here. Even if improper instructions were given, the Court agrees with the Government’s statement that the “[i]ndictment details the numerous misrepresentations and omissions made by the defendants in public filings, including false and misleading information, including but not limited to statements about the source of the funds used to make past payments of distributions and bank loans.” Resp. 9, ECF No. 84. For example, the indictment alleges Defendants “acting in furtherance of the scheme to defraud, caused Fund III and Fund V to file Forms 10-K and 10-Q with the SEC containing false and fraudulent representation” regarding the source of funds used to pay distributions and loans, and the use of the funds. Indictment ¶ 51, ECF No. 1.

Ultimately, Defendants did not offer any reason sufficient to require disclosure of the grand jury proceedings, and the arguments discussed above do not justify disclosure. Therefore, the Court DENIES this motion.

SO ORDERED on this 23rd day of November, 2021.

Updated on

No posts to display