The petitioning creditors ( Petitioners ) in the above referenced involuntary Chapter 11

Transcription

1 The Honorable Samuel Steiner UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE In re: Meridian Mortgage Investors Fund V, LLC Meridian Mortgage Investors Fund VII, LLC Meridian Mortgage Investors Fund VIII, LLC Meridian Mortgage Investors Fund II, LLC, Putative Debtors. Robert Staudacher, Gary Stevens, Joseph Robert Waskom III, Drew Thoresen, Tacor Properties, LLC, Eric Gulotta, Kenneth and Loretta Story, Tom Friedland, Jim and Lisa O Neal, Plaintiffs, v. Meridian Mortgage Investors Fund II, LLC, Meridian Mortgage Investors Fund V, LLC, Meridian Mortgage Investors Fund VII, LLC, Meridian Mortgage Investors Fund VIII, LLC, MPM Investor Services, Inc., Meridian Partnership Management, Inc., and F. Darren Berg, Defendants. Case No. - SJS (FUND V) Case No. - SJS (FUND VII) Case No. - SJS (FUND VIII) Case No. - SJS (FUND II) Involuntary Chapter Adv. Pro. No. COMPLAINT FOR INJUNCTIVE RELIEF AND TURNOVER OF PROPERTY OF BANKRUPTCY ESTATE The petitioning creditors ( Petitioners ) in the above referenced involuntary Chapter -, -,) Page 1 THIRD AVENUE, SUITE 0 TELEPHONE: () -00 FACSIMILE: () -

2 proceeding, by their attorneys, John Mellen, of Keller Rohrback L.L.P and Cynthia A. Kuno, of Hanson Baker Ludlow Drumheller PS ( Hanson Baker )(for petitioning creditors of Funds V, VII, and VIII), and Jane Pearson, of Foster Pepper, LLC (for petitioning creditors of Fund II) allege as follows: GENERAL ALLEGATIONS 1. This Court has jurisdiction under U.S.C. and and U.S.C. 1(b) and (e) and 1. This adversary proceeding is a core proceeding, under U.S.C. 1 (b)()(a), (E), and (O), arising under Title U.S.C. and arising in the above-referenced case under Chapter of the Bankruptcy Code, now pending in this Court.. Venue is proper in this Court pursuant to U.S.C. as the Chapter case is pending in the above-stated federal judicial district.. This action arises under and relates to the involuntary Chapter proceedings of Mortgage Investors Fund V LLC, Bankruptcy No. -; Meridian Mortgage Investors Fund VII L.L.C, Bankruptcy No. - and Meridian Mortgage Investors Fund VIII L.L.C, Bankruptcy No. -; Meridian Mortgage Investors Fund II, L.L.C., Bankruptcy No. - (Putative Debtors, hereafter Debtors ).. Plaintiffs filed the involuntary Chapter petition initiating the Mortgage Investors Fund V, LLC Bankruptcy Case on July,. Meridian Mortgage Investors Fund VII L.L.C, Bankruptcy No. - and Meridian Mortgage Investors Fund VIII, LLC, Bankruptcy No. -; Meridian Mortgage Investors Fund II, LL., Bankruptcy No. - were also filed on July, (the Petition Dates ).. Plaintiff seeks temporary and permanent injunctions requiring the Defendants, (Debtors, MPM Investor Services, Inc., Meridian Partnership Management, Inc., and F. Darren Berg) and Defendants agents, employees, attorneys, and those persons in active concert or participation with any of the Debtors, other Defendants, and/or F. Darren Berg (collectively, -, -,) Page THIRD AVENUE, SUITE 0 TELEPHONE: () -00 FACSIMILE: () -

3 the Debtor Parties ) to turn over (1) all cash or checks of the Debtors, () all information regarding the identity of each of Debtors bank accounts including bank statements and passwords, () all written and electronic accounting records of the Debtors, including all computer, computer system, and software passwords, () all bit-stream images of all digitally stored data on all computers used by the Debtors to retain written and electronic accounting records, including any written and electronic accounting records maintained on the personal computer of Darren Berg or retained in offsite storage, to be provided in a mirror or other reasonable electronic format, and () all notes, mortgages, deeds of trust, real estate contracts, and all other assets held by or on behalf of any of the Debtors, to any Chapter Trustee appointed for the Debtors and, until such appointment has been made, to counsel for the Fund V, VII and VIII Petitioning Creditors (the Custodial Counsel ).. Plaintiffs further request that any banks which are in possession of any of the Alleged Debtors property, funds or accounts are hereby ordered to prohibit access by the Alleged Debtors and freeze such accounts immediately pending further Order of this Court. Further, the Debtor Parties are hereby prohibited from withdrawing funds from any of the Alleged Debtors bank accounts or obtaining any property of the Alleged Debtors that may be in possession of any bank or other third party. DEFENDANTS. Meridian Mortgage Investors Fund II, LLC, Meridian Mortgage Investors Fund V, LLC, Meridian Mortgage Investors Fund VII, LLC, and Meridian Mortgage Investors Fund VIII, LLC are the debtors in the involuntary bankruptcy cases.. MPM Investor Services, Inc. is the agent for the Noteholders in Funds V and VII.. Meridian Partnership Management, Inc. is the manager for each Fund.. F. Darren Berg is the owner and manager of all other Defendants. FACTUAL BACKGROUND. Debtors are investment companies dealing in mortgage backed securities. -, -,) Page THIRD AVENUE, SUITE 0 TELEPHONE: () -00 FACSIMILE: () -

4 Debtors purchase mortgages and real estate contracts, and make short term loans secured by commercial real estate. 1. The persons and entities investing in Debtors receive short-term promissory Notes that pay interest at fixed rates. 1. Debtors are liable on Notes of over $ million. 1. Despite the recent problems in the real estate and mortgage markets, the 0 year-end financial statements (the 0 Statements ) showed Debtors to be in good financial health. Further, Debtors remained current on all interest payments through May. 1. In June, Debtors defaulted on interest payments of approximately $1. million. 1. Based on the 0 Statements and their purported revenue and expenses, Debtors should have had substantially more cash than the amount owed for June interest.. Berg initially claimed that he mailed out the checks for the June interest payments, but after numerous investors reported not receiving the payments, Berg finally admitted that he had not mailed out the checks because Debtors did not have the money to make these payments.. All financial records of Debtors are under Berg s control and kept secret from all other employees of Debtors.. The timing of the decline in the financial position of Debtors is unknown at this time.. On June,, Berg, through Meridian Partnership Management, Inc., advised Noteholders that the Funds intended to file bankruptcy, and that no payments would be made to Noteholders until authorized by the Bankruptcy Court. Berg also made similar statement to employees. However, none of the funds have filed voluntary bankruptcy petitions.. Since the default in the payment of interest, several unusual events have occurred, including the redirection and commingling of revenue of Debtors into a new bank -, -,) Page THIRD AVENUE, SUITE 0 TELEPHONE: () -00 FACSIMILE: () -

5 account at a new bank under the name of a different Meridian entity, the shredding of documents at Debtors place of business at night after other employees have left, the firing of most employees, and efforts to liquidate or monetize assets of other Meridian entities controlled by Berg. FIRST CLAIM FOR RELIEF: INJUNCTIVE RELIEF. The Plaintiffs request that the Court enter a temporary restraining order, preliminary injunction, and permanent injunction, prohibiting each of the Defendants, and their agents, employees, attorneys, and those persons in active concert or participation with each Defendant, from continuing to operate, use, acquire, or dispose of property of the Debtors.. The Defendants should be prohibited from deleting, damaging, or destroying any records of or related to any of the Debtors, including any and all electronic records.. The Defendants should be prohibited from transferring funds, or making any payments or advances to any other Debtor, including without limitation any payments pursuant to any notes that are assets of any Debtor (each a Debtor Note ). If any of the Debtor Parties receive any payments under any Debtor Note, or otherwise comes into possession or control of any funds owed to any of the Debtors, such Debtor Party should be required to immediately transfer the funds to any Chapter Trustee appointed for the Debtors and, until such appointment has been made, to Custodial Counsel who shall hold such funds in trust pending further order from this Court. The Debtor Parties should be prohibited from interfering in any way with the payment to the Debtors of any payments owed to such Debtor by any obligor under a note, mortgage, deed of trust, real estate contract, or other asset of the Alleged Debtor.. The Debtor Parties should be prohibited from transferring any and all assets of any of the Debtors until the appointment of the Chapter Trustee or dismissal of the respective involuntary proceeding. All assets should be protected to the fullest extent possible, and if any asset is subject to exigent risk, the Debtor Parties shall notify Custodial Counsel who shall be authorized to request a Court order as may be necessary under the circumstances -, -,) Page THIRD AVENUE, SUITE 0 TELEPHONE: () -00 FACSIMILE: () -

6 SECOND CLAIM FOR RELIEF: TURNOVER OF PROPERTY TO THE DEBTOR. Plaintiffs repeat and re-allege every allegation contained in paragraphs 1 through as if fully set forth herein.. The Plaintiffs request that the Court order each of the Defendants to turn over (1) all cash or checks of the Debtors, () all information regarding the identity of each of Debtors bank accounts including bank statements and passwords, () all written and electronic accounting records of the Debtors, including all computer, computer system, and software passwords () all bit-stream images of all digitally stored data on all computers used by the Debtors to retain written and electronic accounting records, including any written and electronic accounting records maintained on the personal computer of Darren Berg or retained in offsite storage, to be provided in a mirror or other reasonable electronic format and () all notes, mortgages, deeds of trust, real estate contracts, and all other assets held by or on behalf of any of the Debtors, to any Chapter Trustee appointed for the Debtors and, until such appointment has been made, to counsel for the Fund V, VII, and VIII Petitioning Creditors. WHEREFORE, Plaintiffs pray for the following relief:. For injunctive relief against each of the Defendants and any person acting in concert with any of the Defendants as specified herein.. For an order requiring each of the Defendants to turn over all property of the Debtor in each Defendant s custody and/or control. 0. Such other and further relief as the court deems just and equitable. DATED this day of July,. HANSON BAKER LUDLOW DRUMHELLER, P.S. By: /s/cynthia A. Kuno Cynthia A. Kuno, WSBA # Attorneys for Plaintiffs and Petitioning Creditors on Funds V, VII, and VIII -, -,) Page THIRD AVENUE, SUITE 0 TELEPHONE: () -00 FACSIMILE: () -

7 KELLER ROHRBACK, L.L.P. By: /s/john Mellen John Mellen, WSBA # Attorneys for Plaintiffs and Petitioning Creditors on Funds V, VII, and VIII FOSTER PEPPER PLLC By: /s/jane Pearson Jane Pearson, WSBA #1 Attorneys for Plaintiffs and Petitioning Creditors on Fund II , -,) Page THIRD AVENUE, SUITE 0 TELEPHONE: () -00 FACSIMILE: () -