Case 3:17-cv RS Document 421 Filed 06/28/18 Page 1 of 28 UNITED STATES DISTRICT COURT SAN FRANCISCO DIVISION

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1 Case :-cv-00-rs Document Filed 0// Page of Elizabeth Berke-Dreyfuss (Bar No. ) WENDEL, ROSEN, BLACK & DEAN LLP Broadway, th Floor Oakland, California 0-0 Telephone: (0) -00 Fax: (0) - edreyfuss@wendel.com Attorneys for Susan L. Uecker, Receiver UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION 0 Broadway, th Floor Oakland, California SECURITIES AND EXCHANGE COMMISSION, vs. Plaintiff, SAN FRANCISCO REGIONAL CENTER, LLC; THOMAS M. HENDERSON; CALIFORNIA GOLD MEDAL, L.P.; CALLSOCKET, L.P.; CALLSOCKET II, L.P.; CALLSOCKET III, L.P.; COMPREHENSIVE CARE OF OAKLAND, L.P.; NAPL, L.P.; WEST OAKLAND PLAZA, L.P.; CALLSOCKET, LLC; CALLSOCKET II, LLC; CALLSOCKET III, LLC; COMPREHENSIVE CARE OF CALIFORNIA, LLC; IMMEDIA, LLC; and NORTH AMERICA PL, LLC Defendants, Case No. :-CV-00-RS NOTICE OF MOTION AND MOTION FOR ORDER AUTHORIZING RECEIVER () TO RETURN INVESTORS CAPITAL CONTRIBUTIONS HELD IN ESCROW; AND () TO PAY FEES TO ESCROW COMPANY Date: August, 0 Time: :0 p.m. Place.: 0 Golden Gate Ave. th Floor, Ctrm. San Francisco, CA 0 Judge: The Hon. Richard Seeborg -and- CALLSOCKET HOLDING COMPANY, LLC; CALLSOCKET III HOLDING COMPANY, LLC; BERKELEY HEALTHCARE DYNAMICS, LLC; CENTRAL CALIFORNIA FARMS, LLC; and JL GATEWAY, LLC, Relief Defendants \0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

2 Case :-cv-00-rs Document Filed 0// Page of TABLE OF CONTENTS Page Broadway, th Floor Oakland, California I. INTRODUCTION... II. FACTUAL BACKGROUND... A. The Escrow Funds... B. The Immigration Status Of The Investors... C. The Impact Of A Refund Of Escrow Funds On Investors Immigration Status... III. PROPOSED ACTION... IV. LEGAL AUTHORITY... A. District Court Has Power To Administer The Receivership.... B. The Receiver Has Authority To Manage The Assets Of The Receivership Entities... C. Deference To The Receiver s Business Judgment... D. Under The Terms Of The Partnership And Subscription Agreements, Because The Investors I- Petitions Are Subject To Denial or Revocation, The Receiver Should Be Authorized To Return The Escrow Funds.... Background of the Partnerships.... The Escrow Funds... a. CallSocket... 0 b. NAPL... 0 c. Gold Medal.... Under The Terms Of The Partnership And Subscription Agreements, Because The Investor Funds Remained In Escrow And The Investors I- Petitions Will Likely Be Denied, The Receiver Should Be Authorized To Return The Funds To The Investors... a. CallSocket Investor... b. NAPL Investor... c. Gold Medal Investors.... Even If The Limited Partnership Agreements And Subscription Agreements Do Not Control, The Equities Require That The Receiver Return Escrow Funds To The Investors \0. MOTION FOR ORDER AUTHORIZING RECEIVER TO i :-CV-00-RS

3 Case :-cv-00-rs Document Filed 0// Page of. The Receiver Should Be Authorized To Report Each Return of Capital Investment To The USCIS... E. Escrow Fees Owed To The Escrow Company Should Be Paid Out Of The Gold Medal Investors Capital Contributions... V. CONCLUSION... 0 Broadway, th Floor Oakland, California \0. MOTION FOR ORDER AUTHORIZING RECEIVER TO ii :-CV-00-RS

4 Case :-cv-00-rs Document Filed 0// Page of TABLE OF AUTHORITIES Broadway, th Floor Oakland, California CASES Page Bennett v. Williams, F.d (th Cir. )... CFTC v. Tooworth Int l., Ltd., 0 F.d 0 (th Cir. )... In re San Vicente Med. Partners Ltd., F.d 0 (th Cir. )... In re Thinking Machines Corp., B.R. (D. Mass. )... JMR Construction Corp. v. Environmental Assessment and Remediation Mgmt., Inc., Cal.App. th, (0)... North American Broadcasting, LLC v. United States, 0 Fed.Appx. (th Cir. 00)... Platt Pacific, Inc. v. Andelson, Cal. th 0 ()... S.E.C. v. American Capital Investments, Inc., F.d (th Cir. )... S.E.C. v. Schooler, 0 WL 0, * (S.D. Cal. March, 0)..., 0 SEC v. Basic Energy & Affiliated Resources, F.d (th Cir. 00)... SEC v. Capital Consultants, LLC, F.d (th Cir. 00)... SEC v. Elliot, F.d 0 (th Cir. )... SEC v. Forex Asset Management, LLC, F.d (th Cir. 00)... SEC v. Hardy, 0 F.d 0 (th Cir. )... SEC v. Wang, F.d 0 (d Cir. )... Southwestern Media, Inc. v. Rau, 0 F.d (th Cir. ) \0. MOTION FOR ORDER AUTHORIZING RECEIVER TO iii :-CV-00-RS

5 Case :-cv-00-rs Document Filed 0// Page of Steel Co. v. Citizens for a Better Environment, U.S. S.Ct. 00 ()... STATUTES U.S.C.... California Civil Code... 0 Broadway, th Floor Oakland, California \0. MOTION FOR ORDER AUTHORIZING RECEIVER TO iv :-CV-00-RS

6 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California Susan L. Uecker, the duly appointed receiver (the Receiver ) for Defendants CallSocket, L.P., NAPL, L.P., and California Gold Medal, L.P., as well as the remaining named entity Defendants and Relief Defendants (collectively the Receivership Entities ), will and does hereby move the above-captioned Court on August, 0, at :0 p.m. (or as soon thereafter as the Court may hear) for an order with respect to the Receiver s Motion for Order Authorizing Receiver () to Return Investors Capital Contributions Held in Escrow; and () to Pay Fees to Escrow Company ( Motion ). The Receiver seeks authority pursuant to the Order Appointing Receiver and Monitor (Dkt. No. 00), including, but not limited to the powers given to her under Paragraph thereof, to return of the capital investment and subscription fees of certain investors held in escrow at the time of the Receiver s appointment because it is unlikely that their I- Petitions or their Forms I- will be approved, and to pay the escrow fees associated with the transactions. The Receiver s Motion is supported by the following Memorandum, the declaration of Susan L. Uecker and the exhibits thereto, and the declarations of Robert C. Divine, James Yang, Richard Tashjian, and Elizabeth Berke-Dreyfuss and the proposed form of Order granting this Motion attached hereto as Exhibit A. MEMORANDUM IN SUPPORT OF MOTION I. INTRODUCTION This matter was initially brought before the Court pursuant to the Complaint filed on January, 0, by the Securities and Exchange Commission (the SEC ), alleging that the named Defendants had exploited a federal EB- visa program by defrauding investors seeking to invest in the job creation program, earn a return on their investments and obtain a permanent U.S. visa as a way towards United States residency. (Dkt. No. ). On January 0, 0, the SEC filed a motion seeking, among other things, an order appointing a receiver over the entity Defendants and Relief Defendants. (Dkt. No. 0). The Court entered an Order Granting Motion for Preliminary Injunction and to Appoint a Receiver on March, 0 (Dkt. No. ) and its Order Appointing Receiver and Monitor on March, 0 (Dkt No. 00) ( Appointment Order ). By the Appointment Order, the Court, 00.00\0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

7 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California among other things, appointed Susan L. Uecker, as Receiver, over most of the Defendant entities, including CallSocket, L.P. ( CallSocket ), NAPL, L.P. ( NAPL ), and California Gold Medal, L.P. ( Gold Medal ) and Monitor over four entities. Thereafter, on June, 0, the Court entered its Order Extending Scope of Receivership (Dkt. No. ) ( Order Extending Receivership ) by which the Receiver was appointed receiver over the remaining four Defendant entities. Pursuant to the provisions of the Appointment Order, on June, 0, the Receiver filed her Recovery Plan. (Appointment Order,, Dkt. No. 00; Dkt. No. ). That plan addressed crucial issues with respect to the Receivership Entities and whether investors have a realistic opportunity to secure their immigration benefits through the EB- program given that, as alleged in the SEC s Complaint, investor funds had been diverted and/or commingled, and the possibility that SFRC would lose its regional center status from the USCIS. In bringing this Motion, the Receiver has relied on the recommendations made by her special immigration counsel, Robert C. Divine of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, with respect to the impact of refunding investor funds may have on the investors immigration status. II. FACTUAL BACKGROUND A. The Escrow Funds Upon her appointment, the Receiver was informed that Defendant San Francisco Regional Center, LLC ( SFRC ), on behalf of the defendant EB- limited partnerships, entered into escrow agreements with Central Escrow, Inc. ( Central Escrow ), whereby Central Escrow acted as the escrow agent for holding investor funds pending release into the defendant limited partnerships. Thereafter, the Receiver contacted Central Escrow. In response, on or about March, 0, On October, 0, U.S. Citizenship and Immigration Services ( USCIS ) sent a Notice of Intent to Terminate ( NOIT ) San Francisco Regional Center, LLC s participation in the Regional Center Program. (Filed herein on November, 0, Dkt. No. ). On November, 0, the Receiver, along with counsel for certain of the investors in Defendants CallSocket and CallSocket II, L.P., CallSocket III, L.P., and Comprehensive Care of Oakland, L.P., filed responses to the NOIT. The Receiver is awaiting a response from the USCIS. Declaration of Susan L. Uecker in Support of Motion for Order Authorizing Receiver () to Use Funds Disbursed from Escrow Accounts; () to Pay Fees to Escrow Company; and () to Return Investor Capital Contributions Held in Escrow ( Uecker Decl. ), \0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

8 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California Central Escrow turned over to the Receiver the sum of $,,0 held on account of investors in Defendant Gold Medal. In addition, on or about April, 0, Central Escrow released to the Receiver the sum of $,0 held on account of one investor in Defendant NAPL. On April, 0, Central Escrow released to the Receiver the sum of $0,000 held on account of one investor in Defendant CallSocket. Uecker Decl.,. The Receiver is currently holding all investor funds turned over by Central Escrow in the total amount of $,, in a separate accounts. Id. B. The Immigration Status Of The Investors Of the investors in Gold Medal, the USCIS has yet to approve any of the investors I- petitions. See, Declaration of James D. Yang ( Yang Decl. ), ; Declaration of Richard of Richard Tashjian ( Tashjian Decl. ). The one CallSocket investor had her I- petition approved on or about February, 0, and based on her approved I- petition, she was admitted into the U.S. on June, 0, and received her conditional lawful permanent residence (conditional green card) on the same day. On June, 0, USCIS received that investor s Form I- to remove the conditions on her permanent residence status. Yang Decl.,. The one NAPL investor submitted her I- petition to USCIS on August 0, 0. Her I- petition was approved on March, 0. Based on her approved I- petition, the NAPL investor applied for an immigrant visa. However, because at this time there are no more immigrant visas available for someone in her category. The NAPL investor is outside of the U.S. waiting for an immigrant visa to become available. Once an immigrant visa becomes available to her, she will be scheduled a visa interview by an U.S. Consulate abroad. Upon passing her visa interview and obtaining her immigrant visa, she can be admitted into the U.S. as a conditional lawful permanent resident. Yang Decl.,. See Standardized Fund Accounting Et. Etc. (For January, 0 to March, 0), filed on April, 0 (Dkt. No. ), p., fn \0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

9 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California C. The Impact Of A Refund Of Escrow Funds On Investors Immigration Status Immigration special counsel opined as follows with respect to the potential impact of refunds of the funds that were remaining in Central Escrow on the date of the appointment of the Receiver: It is my understanding that the investment capital of.... [the investor] (into CallSocket, L.P.) and.... [the investor] (into NAPL, L.P.) was uniquely left in escrow with Central Escrow... until the receivership was established, and after receivership has been released to the respective L.P. capital accounts established by the Receiver but not spent from there..... [the CallSocket investor] has been admitted to the U.S. as a conditional resident, completed two years of conditional residence, and filed Form I-. [The NAPL investor]... has an approved I- petition but because of visa number unavailability has not yet been admitted to conditional residence. It is my understanding also that the receiver holds and has not spent the capital of investors in California Gold Medal, L.P. (CGM), and all of those investors' I- petitions are pending. I have been asked to opine about the immigration consequences of a proposed refund of capital to these two investors and the CGM investors on the notion that for whatever reason their capital never was used according to the business plan. It is my understanding that the business funded by CallSocket, L.P. has been closed and is not planned to be revived, that the business funded by NAPL, L.P. (North America PL, LLC) has been discontinued and is not likely to be continued, and that the business funded by CGM (Cyrstal Golden LLC) has been discontinued and not likely to be continued. In these circumstances, if made known to USCIS, it seems highly unlikely that any of the investors above could be found to have a likelihood of sustaining their investment in the job creating enterprise and creating the requisite jobs or to have sustained the investment in the job creating project as required by USCIS policy to receive approval of Form I- to remove conditions on permanent residence, and... [NAPL investor s] I- is subject to revocation for lack of likelihood of meeting the requirement in the future. In addition, termination of the regional center's designation would be an independent basis for denial or revocation of the I- petitions of the CGM investors and [NAPL investor s]. Thus, with or without a refund, these investors seem highly unlikely to retain their immigration benefits based on the investment (meaning that those not yet admitted probably will not be admitted as a conditional lawful permanent resident, and those who have been admitted as CLPRs will become subject to removal from the U.S. unless they have become eligible for permanent residence through some other path), and a refund to them is unlikely to make any difference in immigration outcome. Declaration of Robert C. Divine ( Divine Decl. ), \0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

10 Case :-cv-00-rs Document Filed 0// Page 0 of III. PROPOSED ACTION The funds at issue in the Motion are the capital contributions and syndication fees paid by Broadway, th Floor Oakland, California certain limited partner investors of CallSocket, NAPL, and Gold Medal, which had not yet been released from the escrow accounts at Central Escrow prior to the appointment of the Receiver. Those funds were disbursed to the Receiver by Central Escrow in March and April 0, and have been held by the Receiver in a separate accounts. Uecker Decl.,. The Motion seeks to treat all investors who are the subject of the Motion equally by returning all funds (capital contributions and syndication fees) to the investors, less certain costs. The Receiver s special immigration counsel generally opined that because each of the limited partnerships businesses (JCEs) have been discontinued, are not likely to be continued, or revived, if made known to the USCIS, it is unlikely the investors could be found to have sustained their investment in a job creating enterprise, or creating the requisite jobs as required by USCIS policy. Thus, it is highly unlikely that the investors would be able to retain or obtain their immigration benefits whether or not they receive a refund of their capital contributions (and syndication fee). Therefore, the Receiver s proposes, as outlined below, to refund to the Gold Medal investors the capital contributions (and syndication fees) held by the Receiver in the Gold Medal account, less the escrow fees for each investors account, on the grounds that the those funds remained in escrow at the time of the Receiver s appointment and Gold Medal s JCE never commenced its EB- project. The Gold Medal limited partner investors are identified in Exhibit A to the Uecker Declaration. For similar reasons the Receiver proposes to refund the funds for the other two investors: $0,000 paid by one investor to CallSocket, which included $0,000 in syndication fees; and $0,0.00 paid by one investor to NAPL, which included $0,000 in syndication fees. The Receiver proposes to return those funds to the respective investors because, those investors funds remained in escrow at the time of the Receiver s appointment and were never used in the respective JCEs EB- project. It is unlikely that those investors could be found to have sustained their investment in a job creating enterprise or creating the requisite jobs as required by USCIS policy \0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

11 Case :-cv-00-rs Document Filed 0// Page of In addition, Central Escrow has not received its fees for those escrow accounts that were transferred to the Receiver in March and April 0. Consequently, by this Motion the Receiver also seeks authority to pay all such escrow fees owed to Central Escrow and to pay such fees from each of the capital contribution funds deposited by the individual limited partners before any such funds are returned to the limited partner. Uecker Decl.,. IV. LEGAL AUTHORITY A. District Court Has Power To Administer The Receivership. A district court s power to administer an equity receivership is extremely broad. SEC v. Broadway, th Floor Oakland, California Hardy, 0 F.d 0, 0 (th Cir. ); SEC v. Forex Asset Management, LLC, F.d (th Cir. 00); SEC v. Basic Energy & Affiliated Resources, F.d, (th Cir. 00); SEC v. Elliot, F.d 0, (th Cir. ); SEC v. Wang, F.d 0, (d Cir. ). The primary purpose of equity receiverships is to promote orderly and efficient administration of the estate by the district court for the benefit of creditors. Hardy, 0 F.d at 0. The Ninth Circuit has explained: A district court s power to supervise an equity receivership and to determine the appropriate action to be taken in the administration of the receivership is extremely broad. The district court has broad powers and wide discretion to determine the appropriate relief in an equity receivership. The basis for this broad deference to the district court s supervisory role in equity receiverships arises out of the fact that most receiverships involve multiple parties and complex transactions. SEC v. Capital Consultants, LLC, F.d, (th Cir. 00) (citations omitted); see also, CFTC v. Tooworth Int l., Ltd., 0 F.d 0, (th Cir. ) ( This court affords broad deference to the court s supervisory role, and we generally uphold reasonable procedures instituted by the district court that serve th[e] purpose of orderly and efficient administration of the receivership for the benefit of creditors. ). Accordingly, this Court has broad equitable powers and discretion in formulating procedures, schedules and guidelines for administration of the estate, and should authorize the Receiver s actions as proposed in her Motion \0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

12 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California B. The Receiver Has Authority To Manage The Assets Of The Receivership Entities The Receiver is an officer of the court and it is the court itself that has the care of the property in dispute and the Receiver has the powers conferred upon her by the order of her appointment and the practice of the court. North American Broadcasting, LLC v. United States, 0 Fed.Appx., (th Cir. 00). In the Ninth Circuit, district courts have extremely broad authority in federal equity receiverships, which includes the authority to place a nonparty s property under a receivership even where the nonparty is not accused of any wrongdoing. S.E.C. v. Schooler, 0 WL 0, * (S.D. Cal. March, 0); see also In re San Vicente Med. Partners Ltd., F.d 0, 0 (th Cir. ). The Receiver was appointed receiver for Defendants CallSocket, NAPL and Gold Medal (collectively referred to as the Partnerships ). As such, she manages the Partnerships and their assets as an officer of the court. Because the Partnerships and their property are clearly within the scope of the Appointment Order, [t]he Receiver [is] therefore vested with complete jurisdiction and control of all such property.... U.S.C. (emphasis added). S.E.C. v. American Capital Investments, Inc., F.d, (th Cir. ), abrogated on other grounds by Steel Co. v. Citizens for a Better Environment, U.S., S.Ct. 00 (). The Appointment Order (Dkt. No. 00) and the Order Extending Receivership (Dkt. No. ) vest in the Receiver broad authority and control over the Partnerships and their assets. The Receiver s authority to manage the Partnerships does not stem from the partnership agreements, but rather from her authority as an officer of the Court tasked with managing the property under the Court s control. S.E.C. v. Schooler, supra, 0 WL 0, *. C. Deference To The Receiver s Business Judgment In the estate administration context, courts are deferential to the business judgment of bankruptcy trustees, receivers, and similar estate custodians. See, e.g., Bennett v. Williams, F.d, (th Cir. ) ( [W]e are deferential to the business management decisions of a bankruptcy trustee. ); Southwestern Media, Inc. v. Rau, 0 F.d, (th Cir. ) ( The decision concerning the form of [estate administration] rested with the business judgment of the 00.00\0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

13 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California trustee. ); In re Thinking Machines Corp., B.R., (D. Mass. ) ( The application of the business judgment rule and the high degree of deference usually afforded purely economic decisions of trustees, makes court refusal unlikely. ) (rev d on other grounds, In re Thinking Machines Corp., F.d 0 (st Cir. )). The Receiver has determined, in her business judgment, as set forth in greater detail below, that the CallSocket, NAPL and Gold Medal capital contribution and syndication fee funds which were held in escrow accounts at the time the Receiver was appointed and subsequently disbursed to the Receiver by Central Escrow, should be returned to those individual investors who withdraw their I- petitions and the investors receive an acknowledgement of withdrawal, or be held by the Receiver for those investors who choose to wait for a determination of their I- petitions by USCIS, until such time as the USCIS issues a ruling on those pending petitions. D. Under The Terms Of The Partnership And Subscription Agreements, Because The Investors I- Petitions Are Subject To Denial or Revocation, The Receiver Should Be Authorized To Return The Escrow Funds The Receiver s proposed treatment of the escrow funds is based on the partnership agreements, the subscription agreements, the opinion of immigration of counsel, and the equities of circumstances of the investors. Each of the three limited partnerships had its own limited partnership agreement, and subscription agreements which among other things, identified the partnerships rights to the capital contributions and syndication fees paid by the limited partners and use of those funds by the partnership. In the circumstances presented, the Receiver believes refund of the investors capital contributions and syndication fees are required and should be authorized. The Receiver, based on the suggestion of immigration counsel, believes that the refund of the investor funds should be structured to investors who withdraw their I- petitions and the investors receive an acknowledgement of withdrawal, or be held by the Receiver for those investors who choose to wait for a determination of their I- petitions by USCIS, until such time as the USCIS issues a ruling on those pending petitions. The Receiver has been advised by the SEC that they disagree with Receiver holding investor funds if an investor does not withdraw an I- petition, and the refund should be made upon the granting of the motion \0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

14 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California Background of the Partnerships CallSocket was formed on September, 0. Uecker Decl.,, Exhibit B. The General Partner is CallSocket, LLC, of which SFRC is the managing member. Id.; Uecker Decl.,, Exhibit B, p.. The Limited Partnership Agreement Of CallSocket, L.P. A California Limited Partnership ( CallSocket Agreement ) is attached as Exhibit C to the Uecker Decl., 0. The NAPL partnership was formed on February, 0. Uecker Decl.,, Exhibit D. The General Partner is San Francisco Regional Center, LLC ( SFRC ). Id.; Uecker Decl.,, Exhibit D, p.. The Limited Partnership Agreement Of NAPL, L.P. A California Limited Partnership ( NAPL Agreement ) is attached as Exhibit E to the Uecker Decl.,. The Gold Medal partnership was formed on March, 0. Uecker Decl.,, Exhibit F. The General Partner is SFRC. Id.; Uecker Decl.,, Exhibit F, p.. The Limited Partnership Agreement Of California Gold Medal, L.P. A California Limited Partnership ( Gold Medal Agreement ) is attached as Exhibit G to the Uecker Decl.,. Under the CallSocket, NAPL and Gold Medal partnership agreements, each of the limited partners was to make an initial capital contribution of $00,000. CallSocket Agreement,.0(); NAPL Agreement,.0(); Gold Medal Agreement,.0(). The CallSocket limited partners also each paid a $0,000 syndication fee, while the limited partners of NAPL and Gold Medal each paid a $0,000 syndication fee. NAPL Agreement,.0(); CallSocket Agreement,.0(); Gold Medal Agreement,.0().. The Escrow Funds Each of the partnership agreements called for establishment of separate escrow or segregated bank accounts for deposit of each limited partner s capital contribution and syndication fee. NAPL Agreement,.0(); CallSocket Agreement,.0(); Gold Medal Agreement,.0(). Each of the limited partners entered into a separate escrow agreement with the partnership and the escrow agent. Uecker Decl.,, Exhibits H, I and J. Pursuant to the terms of the escrow agreements, each of the escrow accounts was a non-interest bearing demand deposit account. Uecker Decl.,, Exhibits H, III.., I, III.., J, III \0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

15 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California a. CallSocket Section.0 of the CallSocket Agreement provided that the initial Capital Contribution of each limited partner shall be $00,000, and shall be deposited into an escrow or segregated bank account. Uecker Decl., 0, Exhibit C, CallSocket Agreement, p.,.0(), (). The Capital Contribution was to be released to the Partnership upon admission of the Limited Partner in accordance with Section.0, which provided for admission upon the approval of the Limited Partner s I- petition or the written approval of the General Partner authorizing admission Id. at.0(),.0. Each investor also signed a Subscription Agreement, which provided that [i]n the event the USCIS denies the Investor s I- Petition... the Subscription Price... [$0,000] deposited into the Escrow Account by the Investor, including the Syndication Fee portion of the Subscription Price... together with all interest accrued on the funds deposited in the Escrow Account by the Investor, will be refunded to the Investor. The Subscription Agreement further provided [i]f the Investor s I- Petition is denied, the Partnership shall refund the Investor s Capital Contribution and Syndication Fee (i.e., $0,000), together with all interest accrued on the funds deposited in the Escrow Account by the Investor, within ninety days of the Investor s written request. Declaration of Elizabeth Berke-Dreyfuss ( Dreyfuss Decl. ),, Exhibit A, CallSocket, L.P. Subscription Agreement, p., D., p... b. NAPL Section.0 of the NAPL Agreement provided that the initial Capital Contribution of each limited partner shall be $00,000, and shall be deposited into an escrow or segregated bank account maintained by the Partnership in a commercial bank, as authorized by the General Partner in its sole discretion (the Escrow ). Uecker Decl.,, Exhibit E, NAPL Agreement, p., Both the CallSocket Agreement and Subscription Agreement limit or preclude refund of an investor s capital contribution upon denial of an investor s I- for any reason. See, CallSocket Agreement, Uecker Decl., 0, Exhibit C, p., Sec..0, ; Subscription Agreement, Dreyfuss Decl.,, Exhibit A, p., B.. The Receiver submits that these provisions are inapplicable, since the partnership, CallSocket, never received the investor s funds in the first instance, and the funds remained in escrow at all times. Even if those provisions were applicable, the Receiver s authority as an officer of the Court tasked with managing property under the Court s control (S.E.C. v. Schooler, supra, 0 WL 0, *), would compel the same result, a disregard of the contractual provisions because the funds remained in escrow and return of the funds to the investor \0. MOTION FOR ORDER AUTHORIZING RECEIVER TO 0 :-CV-00-RS

16 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California (), (). As with CallSocket, the Capital Contribution was to be released to the Partnership upon admission of the Limited Partner in accordance with Section.0, which provided for admission upon the approval of the Limited Partner s I- petition or the written approval of the General Partner authorizing admission. Id. at.0(),.0. Each investor also signed a Subscription Agreement, which provided that [i]n the event the USCIS denies the Investor s I- Petition... the Subscription Price...[$0,000] deposited into the Escrow Account by the Investor, including the Syndication Fee portion of the Subscription Price..., together with all interest accrued on the funds deposited in the Escrow Account by the Investor, will be refunded to the Investor. The Subscription Agreement further provided [i]f the Investor s I- Petition is denied, the Partnership shall refund the Investor s Capital Contribution and Syndication Fee (i.e., $0,000), together with all interest accrued on the funds deposited in the Escrow Account by the Investor, within ninety days of the Investor s written request. Dreyfuss Decl.,, Exhibit B, NAPL, L.P. Subscription Agreement, p., D., p... c. Gold Medal Like the other agreements, Section.0 of the Gold Medal Agreement provided that the initial Capital Contribution of each limited partner shall be $00,000, and shall be deposited into an escrow or segregated bank account maintained by the Partnership in a commercial bank, as authorized by the General Partner in its sole discretion (the Escrow ). Uecker Decl.,, Exhibit G, GM Agreement, p.,.0(), (). The Capital Contribution was to be released to the Partnership upon admission of the Limited Partner in accordance with Section.0, which provided for admission after the Limited Partner s I- petition was approved, or after receipt of the Limited Partner s petition by USCIS and the Limited Partner s signed release. Id. at.0(),.0. Like the CallSocket and NAPL investors, each Gold Medal investor signed a Subscription Agreement, which provided that [i]n the event the USCIS denies the Investor s I- Petition... the Subscription Price...[$0,000] deposited into the Escrow Account by the Investor, including the Syndication Fee portion of the Subscription Price..., together with all interest accrued on the funds deposited in the Escrow Account by the Investor, will be refunded to the Investor. The Subscription Agreement further provided [i]f the Investor s I- Petition is 00.00\0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

17 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California denied, the Partnership shall refund the Investor s Capital Contribution and Syndication Fee (i.e., $0,000), together with all interest accrued on the funds deposited in the Escrow Account by the Investor, within ninety days of the Investor s written request. Dreyfuss Decl.,, Exhibit C, California Gold Medal, L.P. Subscription Agreement, p., D., p.... Under The Terms Of The Partnership And Subscription Agreements, Because The Investor Funds Remained In Escrow And The Investors I- Petitions Will Likely Be Denied, The Receiver Should Be Authorized To Return The Funds To The Investors The partnership agreements are governed by California law. CallSocket Agreement, p.,.0; NAPL Agreement, p.,.0. Under California law, parties to an agreement may expressly agree that a right is conditional upon the occurrence or nonoccurrence of an act or event. See Cal. Civ. Code ; Platt Pacific, Inc. v. Andelson, Cal. th 0, (). A condition precedent is either an act of a party that must be performed or an uncertain event that must happen before the contractual right accrues or the contractual duty arises. Platt Pacific, Inc. v. Andelson, Cal. th at ; see also JMR Construction Corp. v. Environmental Assessment and Remediation Mgmt., Inc., Cal.App. th, (0). a. CallSocket Investor Under Section.0(i) of the CallSocket Agreement, once an investor s I- petition is approved, the limited partner is admitted, and the capital contribution and syndication fee funds held in escrow may be released to the partnership under Section.0()(i). All of the CallSocket limited partners obtained their I- approvals. USCIS Notice of Intent to Terminate dated October, 0 (Dkt. No. ), p.. It appears that all of the funds in the CallSocket limited partners escrow accounts were previously disbursed to the partnership, except for the one limited partner s capital contribution and syndication fees that is the subject of this Motion. That limited partner is identified in the Uecker Decl.,, and available records show that limited partner s I - petition was approved February, 0. Yang Decl.,. The Receiver s special immigration counsel has previously opined that [d]iversion of capital from...[callsocket] into other entities or to Mr. Henderson personally and commingling with other entities, all before the Investors reached the end of their sustainment period, could be 00.00\0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

18 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California found to undermine the Investors eligibility even if the jobs were created and even if the capital actually started at...[callsocket]. Declaration of Robert C. Divine In Support of Receiver s Recovery Plan, Dkt. No. -, Exhibit A,. In addition, Mr. Divine also opined that if it were made known to the USCIS that the one CallSocket investor s funds remained in escrow and were never used according to the business plan, it seems highly unlikely that any of the investors... could be found to have a likelihood of sustaining their investment in the job creating enterprise and creating the requisite jobs or to have sustained the investment in the job creating project as required by USCIS policy to receive approval of Form I- to remove conditions on permanent residence. Divine Dec.,. Immigration counsel also opined that not only is it unlikely that these investors will obtain or retain their immigration benefits based on investment but investors who have been admitted as conditional lawful permanent residents ( CLPR ) (like the one CallSocket investor) will be subject to removal (unless permanent they have some other path to become eligible for residency). Id. Thus, because the CallSocket investor s funds remained in escrow, were never used according to the CallSocket business plan, and will likely result in a denial of the investor s Form I-, subjecting her to potential removal, the Receiver believes based on the equities of the case, she should be authorized to return the investor s capital contribution and subscription fee less the escrow costs to the investor. Uecker Decl.,. b. NAPL Investor As with CallSocket, all that is required for release of a limited partner s capital contribution to the partnership, is the approval of the investor s I- petition. NAPL Agreement,.0(),.0. The single limited partner whose capital contribution and syndication fee are at issue (identified in the Uecker Decl., ) received I- petition approval on March, 0. Yang Decl.,. Immigration counsel previously opined that because few of the NAPL investors had immigrated, termination of regional center (SFRC) would give rise to I- petition denials or revocations. Similar to CallSocket, as with the other projects, diversion and commingling could pose the greatest challenge to the investors. In addition, in the NAPL JCE, it was not likely that the requisite jobs were created (prior to closing), meaning that the chances of investors being able 00.00\0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

19 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California to obtain I- approval, admission and Form I- approval seem quite low. Declaration of Robert C. Divine In Support of Receiver s Recovery Plan, Dkt. No. -, Exhibit A, -. With respect to the NAPL investor, immigration counsel opined that if it were made known to the USCIS that the one investor s funds remained in escrow and were never used according to the business plan, it seems highly unlikely that any of the investors... could be found to have a likelihood of sustaining their investment in the job creating enterprise and creating the requisite jobs or to have sustained the investment in the job creating project as required by USCIS policy to receive approval of Form I- to remove conditions on permanent residence. As to the NAPL investor, the I- petition is subject to revocation for lack of likelihood of meeting the requirement in the future. In addition, termination of the regional center's designation would also be an independent basis for denial. Divine Dec.,. As with the CallSocket investor, the NAPL investor is highly unlikely to obtain or retain her immigration benefits based on investment, and as an investor not yet admitted, will probably not be admitted as a CLPR. Id. Thus, because the NAPL investor s funds remained in escrow, were never used according to the NAPL business plan, and will likely result in a denial of the investor s I- petition, and the investor will most likely not be entitled to be admitted as a CLPR, the Receiver believes under the terms of the Subscription Agreement and the equities of the case, she should be authorized to return the investor s capital contribution and subscription fee less the escrow costs to the investor. Id. c. Gold Medal Investors The evidence available to the Receiver indicates that the conditions for return of the capital contributions and subscription fees of the Gold Medal investors who are the subject of this Motion to the partnership have also been met. None of the I- petitions have been approved. Yang Decl., ; Tashjian Decl. The Receiver has been advised that USCIS approval of I- petitions for Gold Medal investors is quite unlikely due to issues of diversion and comingling and lack of credibility of the business plan. Declaration of Robert C. Divine In Support of Receiver s Recovery Plan, Dkt. No. -, -. And as with both the CallSocket and NAPL investors, once it becomes known to the USCIS that the investors funds remained in escrow, and were not used according to the Gold Medal business plan, it is unlikely that the Gold Medal investors 00.00\0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

20 Case :-cv-00-rs Document Filed 0// Page 0 of Broadway, th Floor Oakland, California could be found to have a likelihood of sustaining their investment in the job creating enterprise and creating the requisite jobs or to have sustained the investment in the job creating project as required by USCIS policy to receive approval of Form I- to remove conditions on permanent residence. As to the Gold Medal investors, the I- petitions are subject to revocation for lack of likelihood of meeting the requirement in the future. In addition, termination of the regional center's designation would also be an independent basis for denial. Divine Dec.,. The Receiver has been advised by counsel for some of the limited partners that in February 0 one limited partner in Gold Medal received a Notice of Intent to Deny ( NOID ) the limited partner s I- petition from USCIS. See Dkt. No.. Given the grounds for denial set forth in the NOID, it is anticipated that some or all of the other Gold Medal limited partners will receive similar notices. In the event that the I- petitions are denied, the capital contributions that were deposited by the limited partners into escrow and were still held in escrow at the time the Receiver was appointed, will have to be returned to the limited partners. Furthermore, there is no evidence that the alternative condition for release of the capital contributions submission of a signed release by the individual investor accompanied by a copy of the USCIS receipt of that investor s I- petition was satisfied. The Receiver has not located any evidence that the subject Gold Medal investors signed releases authorizing the release of the capital contributions to the partnership after they filed their I- petitions (which apparently occurred with investors whose funds had been released by the Central Escrow and transferred to the partnership prior to the Receiver s appointment). Uecker Decl.,. It is unclear how long the USCIS may take to act upon the pending I- petitions. If, while the I- petitions are pending, one or more of the Gold Medal limited partners chooses to withdraw his or her petition, in light of the NOID and with input from immigration counsel, the Receiver believes it is in the best interest of the Receivership Estate to deem any such withdrawal of an I- petition by an investor to be a denial of that petition by USCIS within the meaning of Section.0() of the Gold Medal Agreement and Subscription Agreement. Consequently, with respect to those funds (totaling $,,000), for any investor who chooses to withdraw his or her I- petition from consideration by the USCIS, the Receiver seeks authorization to treat 00.00\0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

21 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California the withdrawal as a USCIS denial of the I- petition and return the capital contributions (and syndication fees) to the individual investors upon receipt of an acknowledgement by the USCIS of the investor s withdrawal of the I- petition, less any sums due to the escrow company for those escrow accounts. Uecker Decl.,. With respect to any Gold Medal investor who chooses to wait for a determination of his or her I- petition by USCIS, the Receiver seeks authorization from the Court to continue to hold such capital contributions until any such determinations by USCIS, as well as authority to distribute such funds to the individual investors, less any sums due to the escrow company for those escrow accounts.. Even If The Limited Partnership Agreements And Subscription Agreements Do Not Control, The Equities Require That The Receiver Return Escrow Funds To The Investors Setting aside the limited partnership and subscription agreements, the equities of the circumstances of the investors require the Receiver be authorized to return the escrow funds to the investors. All of the investors at issue in this Motion, whether CallSocket, NAPL, or Gold Medal, through no fault of their own, are unlikely to obtain or retain their immigration benefits if for no other reason than their funds were never used according to the respective business plans, never created jobs, or sustained investments. In the Recovery Plan, immigration counsel previously opined that investors in CallSocket, NAPL and Gold Medal may be unlikely to retain any immigration benefits due to serious issues of diversion/commingling of investor funds. The 0 Receiver believes a refund of the capital contributions and syndication fees to the investors is equitable under the circumstances since denial or revocation of their I- petitions will only create a requirement on the part of the Receivership Estate to refund the respective investors funds. Moreover, denial of the investors I- petitions and Form I- may subject those This is particularly true with the Gold Medal investors where the JCE, Crystal Golden, LLC was supposed to develop a high temperature dairy in connection with Relief Defendant Central California Farms, LLC; the project was never operational despite the fact that investor funds for investors were used and none of the investors I- petitions had been approved. Declaration of Robert C. Divine in Support of Receiver s Recovery Plan (Docket No. -, Exhibit A, -0, -, -.) 00.00\0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

22 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California investors who are CLPR to removal proceedings and those who have not entered the U.S., may not be entitled to enter, establishing good cause to return their funds. Uecker Decl.,. Nor is there any detriment or harm to the other investors by refunding the escrow funds to the investors to which they belong. Immigration counsel has opined that a refund in these circumstances should not negatively impact the other investors because the failure to invest the capital by the NCE in the JCE was outside of the investors control, and a receiver was in place. Devine Decl.,. There is no harm to the other investors whose funds were withdrawn prior to the appointment of the Receiver by returning the escrow funds to the investors whose funds were in escrow on the date of the appointment of the Receiver. The investors who are receiving a refund are only receiving that to which they are entitled their capital contribution and syndication fees that were never invested in their respective JCE EB- project according to the respective business plans. To deny the Receiver s Motion and deny the investors refund would be inequitable, since none of the JCEs for CallSocket, NAPL and Gold Medal are continuing to conduct business, and the investors could never at this point sustain their investment in a job creating enterprise or project with this regional center. As immigration counsel notes, all of these investors are unlikely to retain or obtain their immigration status whether or not they receive a refund, and on that basis, the equities should dictate the funds (capital contributions and syndication fees), less escrow costs, be returned to investors. Uecker Decl.,.. The Receiver Should Be Authorized To Report Each Return of Capital Investment To The USCIS Because the Receiver is the manager of SFRC, the regional center, with obligations to assist USCIS in protecting the integrity of the EB- program, and because return of an investor's funds before they have ever been actually invested in a job creating project renders the investor unable to meet the requirements for EB- eligibility, the Receiver is obligated to notify USCIS (through counsel by to the USCIS Investor Program Office) of any refunds of an investor's capital investment. On an annual basis the regional center is required to file Form I-A, which requires a report of the amount of investment made into the NCE and then on from the NCE to the JCE. The form is not explicit about negative investment, but the Receiver as the representative of 00.00\0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS

23 Case :-cv-00-rs Document Filed 0// Page of Broadway, th Floor Oakland, California SFRC as the regional center would expect to annotate the report to reflect the refund of capital by the NCE to any investors. Uecker Decl.,. Thus the Receiver seeks authorization to take any and all acts to report the return or refund of the capital investment and subscription fees to the USCIS. E. Escrow Fees Owed To The Escrow Company Should Be Paid Out Of The Gold Medal Investors Capital Contributions The escrow agreements were tri-partite agreements between Central Escrow, the individual investor and the partnership. Any escrow fees that are due and owing to the Central Escrow, should be deducted from each investor s capital account funds, with the remainder of those funds then distributed to the individual investors. The Receiver makes this request for several reasons. The escrow fees per investor are de minimis, ranging from $0 to $,000, for a total of approximately $,000. If these fees are not paid by the investors, then the Receivership Estate, and all of the investors who are not receiving a refund their capital contributions and subscription fees (primarily all non-gold Medal investors), will be funding the return of approximately $ million to the Gold Medal, CallSocket and NAPL investors. The equities of the situation demand that the investors receiving refunds pay their own escrow transaction costs. Uecker Decl., 0. V. CONCLUSION WHEREFORE, the Receiver prays for an order of this Court that:. Authorizes the Receiver pursuant to Paragraph of the Appointment Order to return the capital contributions and subscription fees, less escrow costs set forth in the Motion;. Authorizes the Receiver to report any refund of any capital investment and subscription fees to an investor to the USCIS;. Authorizes the Receiver to pay the escrow fees and costs associated with the refunds to Central Escrow as set forth in the Motion; and 00.00\0. MOTION FOR ORDER AUTHORIZING RECEIVER TO :-CV-00-RS