Case 3:17-cv RS Document 10 Filed 01/20/17 Page 1 of 39

Transcription

1 Case :-cv-00-rs Document Filed 0// Page of JINA L. CHOI (NY Bar No. ) ERIN E. SCHNEIDER (Cal. Bar No. ) schneidere@sec.gov STEVEN D. BUCHHOLZ (Cal. Bar No. ) buchholzs@sec.gov ANDREW J. HEFTY (Cal. Bar No. 0) heftya@sec.gov SUSAN F. LAMARCA (Cal. Bar No. ) lamarcas@sec.gov THOMAS J. EME (Ill. Bar No. 0) emet@sec.gov Attorneys for Plaintiff SECURITIES AND EXCHANGE COMMISSION Montgomery Street, Suite 00 San Francisco, CA () 0-00 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION SECURITIES AND EXCHANGE COMMISSION, v. 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; NORTH AMERICA PL, LLC; Defendants, CALLSOCKET HOLDING COMPANY, LLC; CALLSOCKET III HOLDING COMPANY, LLC; CENTRAL CALIFORNIA FARMS, LLC; BERKELEY HEALTHCARE DYNAMICS, LLC; JL GATEWAY, LLC; Relief Defendants. Case No. :-cv-00-rs PLAINTIFF SECURITIES AND EXCHANGE COMMISSION S MOTION FOR PRELIMINARY INJUNCTION AND FOR, AND MEMORANDUM IN SUPPORT THEREOF COURTROOM:, th Floor DATE: Thursday, March, TIME: :0 p.m. CASE NO. :-CV-00-RS

2 Case :-cv-00-rs Document Filed 0// Page of TABLE OF CONTENTS I. INTRODUCTION... II. STATEMENT OF FACTS... A. Henderson, Using Entity Defendants He Controls, Raised Funds and Issued Securities to Develop Seven EB- Projects... B. Henderson Used At Least $. Million from SFRC Accounts with Commingled Investor Funds to Benefit Himself... C. Henderson Improperly Used $. Million in Capital Contributions to Pay Finders... D. Henderson Purported to Create Seven Separate EB- Projects.... Comprehensive Care of Oakland Nursing Facility Project.... The Three CallSocket Call Center Projects.... NAPL, L.P. Warehousing Project.... West Oakland Plaza Retail Center Project.... California Gold Medal Dairy Processing Project... E. Henderson Improperly Commingled and Misappropriated Investor Funds in an Elaborate Shell Game... III. ARGUMENT... A. Standard For Injunctive Relief In SEC Enforcement Actions... B. The SEC Has Made a Prima Facie Showing That Defendants Have Violated, and Continue to Violate, the Securities Laws.... Defendants Henderson, SFRC, the Limited Partnerships and Their General Partners Made Materially False and Misleading Statements.... Defendants Engaged in an Illegal Scheme to Defraud... C. Defendants Violations Will Likely Continue... IV. THE COURT SHOULD APPOINT A RECEIVER OVER ALL OF THE DEFENDANTS AND RELIEF DEFENDANTS... A. Standard for Appointment of a Receiver... i CASE NO. :-CV-00-RS

3 Case :-cv-00-rs Document Filed 0// Page of B. Appointment of a Receiver Is Critical to Rectify Defendants Fraud... C. The Court Should Enjoin the State Receivership... V. CONCLUSION... ii CASE NO. :-CV-00-RS

4 Case :-cv-00-rs Document Filed 0// Page of Cases TABLE OF AUTHORITIES Aaron v. SEC, U.S. 0 (0)... Avis Budget Group, Inc. v. California State Teachers Retirement System, U.S. (0)... Basic Inc. v. Levinson, U.S. ()... City of Monroe Emps. Ret. Sys. v. Bridgestone Corp., F.d (th Cir. 0)... City of Roseville Employees Ret. Sys. v. EnergySolutions, Inc., F. Supp. d (S.D.N.Y. )... Cooper v. Pickett, F.d (th Cir. )... In re Cylink Secs. Litig., F. Supp. d (N.D. Cal. 0)... - Ernst & Ernst v. Hochfelder, U.S. ()... Hicks ex rel. Feiock v. Feiock, U.S. ()... Hollinger v. Titan Capital Corp., F.d (th Cir. 0)... - Matter of Izumi, I&N Dec. (Assoc. Comm r )... Janus Capital Group, Inc. v. First Derivative Traders, U.S. ()... SEC v. Capital Consultants, LLC, F.d (th Cir. 0)... SEC v. Capital Cove Bancorp, LLC, WL 00 (C.D. Cal. Sept., )... SEC v. Credit First Fund, LP, 0 WL 0 (C.D. Cal. Feb., 0)..., SEC v. eadgear, Inc., U.S. Dist. LEXIS 0 (N.D. Cal. Dec., )... SEC v. Fehn, F.d (th Cir. )... SEC v. Fifth Ave. Coach Lines, Inc., F. Supp. (S.D.N.Y. )... iii CASE NO. :-CV-00-RS

5 Case :-cv-00-rs Document Filed 0// Page of SEC v. First Fin. Group, F.d (th Cir. )... SEC v. Dain Rauscher, Inc., F.d (th Cir. 0)... SEC v. Hardy, 0 F.d (th Cir. )..., SEC v. Homestead Props., L.P., 0 WL (C.D. Cal. Dec., 0)... SEC v. Jensen, F.d 0, - (th Cir. )... SEC v. Manor Nursing Centers, Inc., F.d (d Cir. )... SEC v. Mgmt. Dynamics, Inc., F.d 0 (d Cir. )... SEC v. Murphy, F.d (th Cir. 0)... SEC v. Pac. West Capital Group, Inc., WL 0 (C.D. Cal. June, )... SEC v. Schooler, 0 F. Supp. d (S.D. Cal. )... SEC v. Sells, WL (N.D. Cal. Aug., )... SEC v. Trabulse, F. Supp. d 0 (N.D. Cal. 0)... SEC v. Unique Fin. Concepts, Inc., F.d (th Cir. )... SEC v. United Fin. Group, Inc., F.d (th Cir. )..., SEC v. Universal Fin., 0 F.d (th Cir. )... SEC v. Wencke, F.d (th Cir. )... SEC v. Wencke, F.d (th Cir. 0)... -, SEC v. Wencke, F.d (th Cir. )... SEC v. Zandford, U.S. (0)... - Simpson v. AOL Time Warner Inc., F.d 0 (th Cir. 0)... iv CASE NO. :-CV-00-RS

6 Case :-cv-00-rs Document Filed 0// Page of In re Software Toolworks, Inc., 0 F.d (th Cir. )... In re Stillwater Capital Partners Inc., F. Supp. d (S.D.N.Y. )... United States v. Odessa Union Warehouse Co-op, F.d (th Cir. )... Vernazza v. SEC, F.d (th Cir. 0)... - Statutes U.S.C. (b)()(a)... U.S.C. q(a)..., U.S.C. t(b)..., U.S.C. j(b)... -, U.S.C. u(d)..., U.S.C.... Federal Rules and Regulations C.F.R..(m)... C.F.R. 0.b-..., - Fed. R. Civ. P.... v CASE NO. :-CV-00-RS

7 Case :-cv-00-rs Document Filed 0// Page of MOTION FOR PRELIMINARY INJUNCTION AND FOR Plaintiff Securities and Exchange Commission (the SEC or Commission ), on Thursday, March, at :0 p.m. (or as soon thereafter as the Court may order), will move the Court for a preliminary injunction against defendants 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 (collectively defendants ). In particular, the Commission moves for an order: () enjoining defendants from violating the antifraud provisions of the federal securities laws; () enjoining defendants from directly or indirectly participating in the issuance, offer, or sale of any security of any entity controlled by, or under joint control with, any of them; and () prohibiting the destruction of documents by defendants, and by relief defendants CallSocket Holding Company, LLC; CallSocket III Holding Company, LLC; Central California Farms, LLC; Berkeley Healthcare Dynamics, LLC; and JL Gateway, LLC (collectively relief defendants ). The Commission also moves for an order appointing a receiver over all defendants except Thomas M. Henderson and all relief defendants to ensure that their remaining assets are not dissipated or unnecessarily subject to loss in value during the pendency of this litigation. The Commission s motion for a preliminary injunction is brought pursuant to Section (b) of the Securities Act of, U.S.C. t(b), and Section (d) of the Securities Exchange Act of, U.S.C. u(d), which authorize injunctions upon the Commission s proper showing. The Commission s motion for appointment of a receiver is brought pursuant to these same provisions and pursuant to this Court s inherent equitable authority, which empowers the Court to make ancillary orders to effect complete equitable relief in SEC enforcement matters. The motion is also made in conformity with Federal Rule of Civil Procedure and Local Civil Rule -. Because the facts supporting the request for a preliminary injunction overlap with those supporting the request for a receiver, the Commission brings these related requests as a single motion with a contemporaneously filed administrative motion under Local Civil Rule - to extend the page limit specified by Local Civil Rule -(b). CASE NO. :-CV-00-RS

8 Case :-cv-00-rs Document Filed 0// Page of The Commission s motion is supported by the Memorandum herein; the simultaneously filed Declarations of Thomas J. Eme and Ellen Chen and the exhibits thereto; the [Proposed] Order Granting Preliminary Injunction; and the [Proposed] Order Appointing a Receiver. MEMORANDUM IN SUPPORT OF MOTION I. INTRODUCTION Since September, defendants Thomas Henderson and his companies have defrauded at least persons who have invested approximately $ million in businesses under Henderson s control, along with an additional $. million in fees. Henderson used his companies, including San Francisco Regional Center, LLC ( SFRC ), to entice foreign nationals to invest in specific businesses that purportedly qualified under the Employment-Based Immigration Fifth Preference program, also known as the EB- program, a federal program administered by the U.S. Citizenship and Immigration Services ( USCIS ) that provides a means for foreign nationals to qualify for U.S. residency by investing $00,000 or more in a specified project determined to have created or preserved at least jobs for United States workers. Over the past five years, Henderson, through SFRC, has sponsored a total of seven business projects under the EB- program ( EB- Projects ). He and the entities he controls solicit funds from investors using Private Placement Memoranda ( PPM ) and Business Plans unique to each project. Each investor invests $00,000 in exchange for a security constituting an interest in a limited partnership that purports to use the investors money to operate, or make loans to, a specific, jobcreating business. Rather than using each investor s funds solely for the project for which they were solicited, Henderson siphoned off millions of dollars of investors funds for his own use and to fund his non- EB- business ventures. Henderson also sent millions of dollars of investors contributions to overseas marketing agents, contrary to representations to investors and the law governing the EB- program. Finally, Henderson engaged in an elaborate shell game of using funds solicited for one EB- Project to fund other EB- Projects, which was again contrary to representations to investors who were told their investment would be used for a specific EB- Project. Henderson s actions have seriously jeopardized both the investors prospects for an economic return, as well as their ability to CASE NO. :-CV-00-RS

9 Case :-cv-00-rs Document Filed 0// Page of obtain permanent residency through the EB- program. To halt this fraud, the SEC seeks an order enjoining defendants from further violations and specifically prohibiting defendants from soliciting new investments. The SEC also seeks the appointment of a receiver to marshal and preserve the entity defendants and relief defendants assets during the pendency of this action. II. STATEMENT OF FACTS A. Henderson, Using Entity Defendants He Controls, Raised Funds and Issued Securities to Develop Seven EB- Projects Beginning in September, Henderson began soliciting investors for his first EB- Project, a skilled nursing facility in Oakland, California. A year later, Henderson received authorization from USCIS to operate SFRC as an EB- Regional Center that would sponsor EB- projects in and around Oakland, California. Declaration of Thomas J. Eme in Support of Motion for Preliminary Injunction and for Appointment of Receiver ( Eme Decl. ),, Ex.. Over the next five years, Henderson used SFRC to sponsor continued investments in the skilled nursing facility as well as six additional EB- Projects, including three call centers, a warehousing/logistics business, a retail grocery and restaurant business, and a dairy processing business. For each EB- Project, Henderson reviewed and approved a Business Plan and a Private Placement Memorandum ( PPM ) used to solicit prospective investors. See Eme Decl., Ex. at :-:, :-0:, :-. Each PPM identified a limited partnership as the issuer of securities, a general partner as the entity that would control and manage the project, and Henderson as the person who controlled the general partner. See generally infra Section II.D. The PPMs for each EB- Project represented that the investors capital contributions of $00,000 per investor would be used for the particular project in which they invested. See, e.g., Eme Decl., Ex. at -,. The PPMs for each EB- Project also represented that a separate syndication fee, which ranged from an additional $0,000 to $0,000, depending on the project, would be used to pay () the initial expenses associated with the establishment of each partnership and the offering of the partnership units, including legal and promotional fees, including a finder s fee, and () the legal fees incurred in connection with preparation of partnership related documents that the investors request for submission of their application for classification as an alien entrepreneur CASE NO. :-CV-00-RS

10 Case :-cv-00-rs Document Filed 0// Page of (hereafter referred to as offering expenses ). See, e.g., id., Ex. at -, -. The separation of the syndication fees from investors capital contributions was intended to assure that the full amount of investors capital contributions was available to the EB-Projects for job-creating investments. See id. A total of approximately $. million was paid in syndication fees by investors across the seven EB- Projects. See Declaration of Ellen Chen in Support of Motion for Preliminary Injunction and for Appointment of Receiver ( Chen Decl. ),, and Tables,. Henderson paid far in excess of that amount approximately $. million in finders fees, at least $. million of which came directly from investor capital contributions. Id. -, Tables, and Ex. 0. Henderson also diverted millions of dollars for purposes that did not further job creation by the EB- Projects, including for his own personal use, as described below. B. Henderson Used At Least $. Million from SFRC Accounts with Commingled Investor Funds to Benefit Himself Rather than use investor funds solely to develop the projects, as he represented to investors, Henderson diverted millions of dollars from accounts commingled with investor money to support his non-eb- business ventures, to acquire a personal residence, and to pay himself, none of which was disclosed in the offering materials he provided to investors. From approximately March through November, the SFRC-related EB- entities obtained approximately $. million in so-called capital contributions from EB- investors. Chen Decl. and Table. But instead of using this money solely for the respective EB- Projects for which it was solicited as he and SFRC had promised to investors Henderson commingled the funds from all seven EB- Projects into bank accounts he controlled, principally in the name of SFRC, as well as, in some cases, Immedia, LLC. From approximately October through December, Henderson opened at least nine bank accounts in the name of SFRC. Chen Decl., and Table. Henderson was the sole signatory on all those accounts, Id. and Table, and he controlled them along with bank accounts used by the EB- Projects, Eme Decl., Ex. at :-, :-:, :-, and :-:. Beginning in November (which, as indicated below, is shortly after a lawsuit was filed in California state court against SFRC and Henderson), Henderson opened two bank accounts in the name of an entity called Immedia, LLC ( Immedia ). Chen Decl., and Table. Henderson was the sole signatory on those two accounts. Id., Table. According to SFRC s own accounting records and as confirmed by bank records, Henderson routinely moved EB- investor funds (and at times revenues from the EB- Projects) from the EB- limited partnership accounts into accounts for SFRC, and later Immedia. Id. - and Tables -. Immedia, wholly owned by Footnote continued on next page CASE NO. :-CV-00-RS

11 Case :-cv-00-rs Document Filed 0// Page of He then diverted the money from these accounts on an ad hoc basis for whatever purposes he chose, including siphoning off millions of dollars for himself. For example, in November, Henderson used approximately $,000 of funds that had been obtained from investments for one of the call center EB- Projects, called CallSocket III, L.P., towards the purchase of his $. million personal residence in Oakland, California. Chen Decl. -, Diagram H, and Exs. -. And from December through November, Henderson caused SFRC to pay $,000 from its commingled accounts to himself or for items and services for his personal benefit. Chen Decl. - and Exs. 0-. Henderson also used millions of dollars from accounts commingled with investor funds on non-eb- business ventures that personally benefited him. For example, Henderson used approximately $. million from commingled SFRC accounts with investor funds to build out and operate two restaurants in Oakland, California. Chen Decl. -, Ex.. Henderson had an indirect ownership interest in both restaurants, as well as a right to net profits, through his ownership interest in SFRC. Eme Decl.,, Ex. at :-; Ex.. Neither restaurant is related to any of the EB- Project businesses, and the offering materials provided to EB- investors by Henderson and other defendants did not disclose that their funds would be used for these restaurants. Eme Decl., Ex. at :-:; :-:; :-:; see generally Eme Decl. -, -; Exs. -, -. Similarly, at Henderson s direction, from January to December, a net of approximately $,000 was paid to or on behalf of Starr Brand, LLC from an SFRC account. Chen Decl..G. Starr Brand, LLC is an entity in which Henderson held an indirect ownership interest through SFRC. Eme Decl., ; Ex. at :-, Ex.. According to Henderson, Starr Brand, LLC never conducted any business. Eme Decl., Ex. at :-. And the offering materials provided to EB- investors by Henderson and other defendants failed to disclose that their funds would be paid to or on behalf of Starr Brand, LLC. See generally Eme Decl. -, -; Exs. -, -. Henderson and SFRC, appears to have operated purely as a conduit for opening bank accounts to take in SFRC-related money and does not appear to have any other business operations. See Eme Decl., ; Ex. at :-: and Ex.. CASE NO. :-CV-00-RS

12 Case :-cv-00-rs Document Filed 0// Page of Likewise, in November, Henderson, making transfers through SFRC, used approximately $. million from investors in CallSocket I to purchase a warehouse located at 00 th Street in Oakland, California. Chen Decl. -, Exs. -. He placed title in non-party Berkeley Healthcare Dynamics, L.P., an entity in which he has an indirect ownership interest. Eme Decl.,,, ; Ex. at :-; Exs., 0, ; Chen Decl., Ex.. Over the period November through January, Henderson transferred an additional approximately $. million from SFRC bank accounts with commingled investor funds to this same non-party. Chen Decl. and Ex.. In February, Henderson then formed the limited partnership NAPL, L.P. for a new warehouse EB- Project, which received its first investor funds in May. Chen Decl. ; Eme Decl., Ex. at. That EB- Project is located at the warehouse property and, for at least some period of time, paid rent to the current title holder, Relief Defendant Berkeley Healthcare Dynamics, LLC, another entity in which Henderson has either a direct or indirect ownership interest. Eme Decl.,,,, Ex. at :-, :-, :-:, :-, Ex. at, Ex. 0, Ex. ; Chen Decl., Ex.. Further, in December, Henderson commingled funds from NAPL, L.P. and CallSocket III and on December, used $0,000 of the commingled funds toward the purchase of a shopping complex located at Market Street in Oakland, California. Chen Decl. -, Exs. - and Diagram G. Henderson placed title in Relief Defendant JL Gateway, LLC, which is owned percent by SFRC, an entity owned in part by Henderson. Chen Decl., Ex. ; Eme Decl.,, ; Ex. at :-, 0:-:, Ex., Ex.. The PPMs and business plans for NAPL, L.P. and CallSocket III did not disclose that investors funds for those Projects would be used to purchase this property. See Eme Decl. -, Exs. -. Instead, the Business Plan for the West Oakland Plaza EB- Project states that that Project would develop a grocery store/restaurant and commercial kitchen at the Market Street location. See Eme Decl., Ex. at,,. But the limited partnership for that Project was not even formed until January, a month Even after forming this EB- Project, Henderson continued to fund it from unauthorized sources. From April to August, Henderson caused West Oakland Plaza, L.P. to pay approximately $,000 of investors funds to North America PL, LLC. Chen Decl. and Table. CASE NO. :-CV-00-RS

13 Case :-cv-00-rs Document Filed 0// Page of after the purchase of the property and the first investor funds raised specifically for that Project were not received until November. Eme Decl., Ex. at ; Chen Decl., Table. Furthermore, from at least May to November, West Oakland Plaza made rent payments to JL Gateway, LLC, an entity in which Henderson has an indirect ownership interest through SFRC. Eme Decl., ; Ex. at :-, Ex. ; Chen Decl., Ex.. Thus, Henderson used investor funds from two EB- Projects towards the purchase of property that would come to be used by a third EB- Project that pays rent to an entity in which Henderson has an indirect ownership interest and Henderson also gave himself an ownership interest in the underlying property itself. Henderson thus siphoned off at least $. million from accounts with commingled investor funds. And, as discussed below, this figure does not include Henderson s use of an additional $. million from another EB- limited partnership, California Gold Medal, L.P., to purchase real estate that he ultimately placed in another entity he part owns. See infra Section II.E; Chen Decl. 0- (describing purchase pertaining to relief defendant Central California Farms, LLC). Finally, in addition to taking cash to purchase his private residence and to fund his restaurants and other personal ventures, Henderson also converted assets that were purchased with EB- investor funds to his own purposes. For instance, Henderson purchased the landmark Tribune Tower in Oakland using capital contributions from investors in the nursing facility EB- Project, Comprehensive Care of Oakland, L.P. See infra Section II.E. But Henderson used the Tribune Tower to benefit himself and his businesses. He thus allowed one of his restaurant ventures to operate from the building for a period without paying rent. Eme Decl., Ex. at :--. In addition, as of November, several companies with which Henderson is associated, including a law firm that has provided services to Henderson, were occupying space in the building, either without paying rent or paying significantly below-market rent. Id., Ex. at and Ex. B. In addition to converting money and property that belonged to the various EB- Projects to himself or his own business ventures, Henderson also carried out a more complex scheme in which he moved the money from investors in and out of SFRC s bank accounts in an elaborate shell game, as described below. CASE NO. :-CV-00-RS

14 Case :-cv-00-rs Document Filed 0// Page of C. Henderson Improperly Used $. Million in Capital Contributions to Pay Finders Contrary to representations to investors, Henderson used capital contributions to pay finders fees to overseas agents who marketed the EB- Projects to investors. As indicated below, the PPMs for each Project represent that promotional/finders fees would be paid from the Syndication Fees that investors paid, to assure that the entire $00,000 capital contribution was available to the Partnership for job-creating investments. The Limited Partnership Agreements likewise state that promotional/finders fees would be paid from Syndication Fees, and also made clear that none of the capital contribution would be used to pay promotional/finders fees. Despite these representations, Henderson used at least $. million of capital contributions to pay finders fees to overseas agents. Chen Decl. -0, Tables -, Diagram C. Indeed, adherence to these representations was critical to ensure that investors could submit EB- petitions for U.S. residency in connection with their investments in the EB- Projects sponsored by SFRC, since the relevant statute and regulations require that all investor capital contributions be used for job creation activities in the United States. See U.S.C. (b)()(a) (EB- capital invested must benefit the United States economy and create full-time employment for not fewer than United States citizens or aliens lawfully admitted for permanent residence or other immigrants lawfully authorized to be employed in the United States ); CFR.(m) (EB- investors may count indirect jobs created toward requirement, but jobs must still be for qualifying employee, defined as United States citizen, lawfully admitted permanent resident, or other immigrant lawfully authorized to be employed in the United States). D. Henderson Purported to Create Seven Separate EB- Projects. Comprehensive Care of Oakland Nursing Facility Project Comprehensive Care of Oakland, L.P. ( CCOO ) was formed in September. Eme Decl., Ex. at. During its first year, CCOO acted as a stand-alone EB- enterprise. See id., ; In total, Henderson caused the payment of at least $. million to overseas marketing agents or finders, including approximately $. million from the accounts of SFRC and Immedia and approximately $ million from EB- Project accounts that he controlled. Chen Decl. and Table. CASE NO. :-CV-00-RS

15 Case :-cv-00-rs Document Filed 0// Page of Ex. at, Ex.. After Henderson received approval from USCIS in for SFRC to be a Regional Center, investors were solicited for CCOO as an SFRC-sponsored project. See id. According to the Business Plan provided to investors after SFRC began to sponsor the project, sixteen investors filed petitions with USCIS based on CCOO as a stand-alone EB- enterprise, with others contributing to CCOO as a project of the San Francisco Regional Center. Id., Ex. at. CCOO ultimately raised a total of approximately $ million in capital contributions from investors, plus syndication fees totaling approximately $0,000. See Chen Decl. and Table. Investors in CCOO were provided with both a Business Plan and a PPM, each of which was approved by Henderson. See Eme Decl. -, Ex. at :-:, :-0:, :-, Exs. -. The PPM states that the investment objective of the Partnership [CCOO] is to invest [amount of capital contributions raised] into the Comprehensive Care of Oakland, LP business and that the Partnership intends to invest all of each investor s capital contribution of $00,000 in Comprehensive Care of Oakland, LP that should protect the principal amount of investment as much as reasonably possible. Id., ; Ex. at iii,, Ex. at iii, -. The Business Plan also represents that investor money will be used by CCOO to capitalize, own and operate a subacute care skilled nursing facility in Oakland, California. See id., ; Ex. at -; Ex. at,. It provides an analysis of the use of investors funds, including the purchase of an existing skilled nursing facility and other expenditures for renovations, insurance, staffing, and operating expenses. See id. Ex. at -, Ex. at -. According to the PPM, CCOO is managed and operated by its general partner, Comprehensive Care of California, LLC, of which Henderson was Managing Member, President and CEO. See id., ; Ex. at, ; Ex. at,. The Limited Partnership Agreement also identifies SFRC as a managing member of the general partner. Id. Ex. at SEC-USCIS-E-00, Ex. at SEC-USCIS-E-00. The PPM also provides that a separate $0,000 to $0,000 Syndication Fee paid by investors in addition to the $00,000 capital contribution is to be used to pay offering expenses. Id., ; Ex. at iii, n., -; Ex. at -. The additional Syndication Fee is described as the means for paying the finder s fee; and the separation of these fees from the capital contribution is intended to assure that the entire Unit Price of $00,000 is capital contribution and available to the CASE NO. :-CV-00-RS

16 Case :-cv-00-rs Document Filed 0// Page of Partnership for job-creating investments. Id. Ex. at -, Ex. at. The PPM attached the Limited Partnership Agreement, which similarly provided that [n]o part of the initial Capital Contribution made by a Limited Partner (i.e. $00,000) shall be diverted to pay expenses of the Partnership incurred in connection with (i) the formation of the Partnership and the Offering of the Units... including a finders fee. Id. Ex. at SEC-USCIS-E-00-, Ex. at SEC-USCIS-E-00. Henderson, as Managing Member of SFRC, signed the Limited Partnership Agreement for Comprehensive Care of California, LLC (the General Partner of CCOO). Id. Ex. SEC-USCIS-E- 00, Ex. at SEC-USCIS-E-00.. The Three CallSocket Call Center Projects Beginning in after SFRC was designated a Regional Center, Henderson formed three call center EB- Projects. The first, CallSocket, L.P. ( CallSocket I ), was formed in September. Eme Decl., Ex. at. The PPM identifies the general partner as either SFRC or CallSocket, LLC, with Henderson as Managing Member, Principal, and CEO of SFRC. Id., ; Ex. at, ; Ex. at,. See also id., Ex. (Certificate of Limited Partnership identifying CallSocket, LLC as general partner of CallSocket I). According to the PPM, the offering is for up to 0 units of limited partnership interests for $0,000 per investor, consisting of a $00,000 capital contribution and a $0,000 Syndication Fee. See id., Ex. at -,. CallSocket I ultimately raised approximately $ million in capital contributions from approximately investors, plus syndication fees totaling approximately $. million, from April to June. Chen Decl. and Table. Henderson formed the second call center EB- Project, CallSocket II, L.P. ( CallSocket II ), in June. Eme Decl., Ex. at. Consistent with the first, its general partner is called CallSocket II, LLC, whose Managing Member is SFRC; the PPM also identifies Henderson as the Managing Member, Principal, and CEO of SFRC. Id. Ex. at,. Also like the first call center, each investor was to pay a total of $0,000 each, divided into a $00,000 capital contribution and a $0,000 Syndication Fee. Id. Ex. at -,. CallSocket II raised a total of $. million in capital contributions from investors, plus syndication fees totaling approximately $. million, from November to June. Chen Decl. and Table. CASE NO. :-CV-00-RS

17 Case :-cv-00-rs Document Filed 0// Page of Henderson formed the third call center EB- Project in January, as CallSocket III, L.P. ( CallSocket III ). Eme Decl., Ex. at. The PPM specifies the same structure as provided for the first two call centers: the General Partner is CallSocket III, LLC; SFRC is the Managing Member of CallSocket III, LLC; and Henderson is identified as the Managing Member, Principal, and CEO of SFRC. Id. Ex. at,. The limited partnership interests are also sold for $0,000 each, with the same split of $00,000 toward a capital contribution and $0,000 toward a Syndication Fee. Id. Ex. at -,. CallSocket III raised approximately $. million in capital contributions plus a total of approximately $. million in syndication fees from investors, from November to January. Chen Decl. and Table. Investors for each of the three CallSocket EB- Projects were provided with both a Business Plan and a PPM for the respective entity in which they were investing, and these offering materials were approved by Henderson. See Eme Decl.,, -; Ex. at :-:, :-0:, :-, Exs., -. The Business Plans for each respective CallSocket entity elaborate on the particular call center business, describing, for example, their planned locations in different buildings, and specifying each of the three Projects startup expenses by categories such as Design and Engineering, Equipment and Furnishings, [Office] Startup Expenses, and Labor and Payroll Expenses, which total $ million for each of the three CallSocket Projects. See id.,, ; Ex. at -; Ex. at -; Ex. at -. The PPMs for each of the three investments describe the separate uses of the capital contribution and the Syndication Fee, stating that the investment objective of the [limited] Partnership is to invest $ million into CallSocket, LP [and for II and III, CallSocket II, LP and CallSocket III, LP] business and that the Partnership intends to invest all of each investor s capital contribution of $00,000 in CallSocket, LP [and for II and III, CallSocket II, LP and CallSocket III, LP] that should protect the principal amount of investment as much as reasonably possible. Id.,, ; Ex. at, Ex. at, Ex. at. The PPMs further provide that the Syndication Fee is to be used to pay offering expenses, including a finder s fee, which is intended to assure that the entire Unit Price of $00,000 is capital contribution and available to the Partnership for job-creating investments. Id. Ex. at -, Ex. at -, Ex. at -. And, the PPMs each attach a Limited CASE NO. :-CV-00-RS

18 Case :-cv-00-rs Document Filed 0// Page of Partnership Agreement which states that [n]o part of the initial Capital Contribution made by a Limited Partner (i.e. $00,000) shall be diverted [at least one Agreement uses expended ] to pay expenses of the Partnership incurred in connection with (i) the formation of the Partnership and the Offering of the Units... including a finders fee. Id. Ex. at SEC-SFRC-E-000, Ex. at SEC-SFRC-E-000, Ex. at SEC-SFRC-E-000. Henderson, as Managing Member of SFRC, signed each of the attached Limited Partnership Agreements for the respective general partner. Id., Ex. at SEC-SFRC-E-000, Ex. at SEC-SFRC-E-000, Ex. at SEC-SFRC-E NAPL, L.P. Warehousing Project In February, Henderson formed another of the EB- Projects, a warehousing business called NAPL, L.P. See Eme Decl., Ex. at. NAPL, L.P. raised approximately $ million in capital contributions and approximately $ million in Syndication Fees from approximately 0 investors from May to March. Chen Decl. and Table. The PPM provided to investors for NAPL, L.P. and approved by Henderson identifies SFRC as the general partner and Henderson as the Managing Member, Principal, and CEO of SFRC. Eme Decl., ; Ex. at :-:, :-0:, :-; Ex. at,. According to the PPM, up to 0 units of limited partnership interests would be sold for $0,000, consisting of the $00,000 capital contribution and the $0,000 Syndication Fee. See id., Ex. at. The PPM describes how the limited partnership that issues the securities will make a $ million dollar [sic] loan to North America PL, LLC to fund the development, construction, and initial operating expenses of a warehouse/ rd party logistics facility. Id. Ex. at. Like the earlier projects, the PPM specifies that the Partnership intends to invest all of each investor s capital contribution of $00,000 in NAPL, LP that should protect the principal amount of investment as much as reasonably possible. Id. Ex. at. The Business Plan provided to investors and approved by Henderson states that NAPL, L.P. will raise $M [million] of equity from up to 0 EB- investors and loan the $M to NAPL, LLC (the Job Creating Entity) which will use the funds to support its development and operations of a warehousing/third-party logistics business that supports importers and exporters moving goods through the Port of Oakland. Id., CASE NO. :-CV-00-RS

19 Case :-cv-00-rs Document Filed 0// Page of ; Ex. at :-:, :-0:, :-; Ex. at. Like the earlier EB- Projects, the Business Plan sets forth the budget with costs and expenses totaling $ million. See id., Ex. at -. Ultimately, North America PL, LLC is to pay back the loan to the limited partnership, NAPL, L.P., plus interest paid in quarterly installments. Id. Ex. at -. The PPM further states that the Syndication Fee will be used to pay offering expenses, and this is intended to assure that $00,000 of each Subscription Price is capital contribution and available to the Partnership for job-creating investments. Id., Ex. at. The PPM similarly attaches the Limited Partnership Agreement, signed by Henderson, Managing Member of SFRC, for the general partner, SFRC, which states that the Syndication Fee includes a finders fee, and makes clear that [n]o part of the initial Capital Contribution made by a Limited Partner (i.e. $00,000) shall be diverted to pay expenses of the Partnership incurred in connection with (i) the formation of the Partnership and the Offering of the Units... including legal and promotional fees, including a finders fee. Id. Ex. at SEC-SFRC-E-000-,,.. West Oakland Plaza Retail Center Project In January, Henderson and SFRC formed the next EB- Project, West Oakland Plaza, L.P. ( West Oakland Plaza ) to develop and operate a retail food service and grocery business in West Oakland, California. Eme Decl., Ex. at -. West Oakland Plaza has raised approximately $ million in capital contributions and $0,000 in Syndication Fees from four investors, from November to September. Chen Decl. and Table. The PPM Henderson approved for content and distribution to investors for West Oakland Plaza identifies SFRC as its general partner and Henderson as the Managing Member, Principal, and CEO of SFRC. See id., ; Ex. at :-:, :-0:, :-; Ex. at,. The PPM is for the sale of up to units of limited partnership interests for $0,000 per investor, consisting of a $00,000 capital contribution and a $0,000 Syndication Fee. Id., Ex. at -. Similar to the NAPL, L.P. warehousing project, the investment was to be structured so that the limited partnership makes a $ million loan to another entity, in this case West End Market, LLC, to fund the development, construction, and initial operating expenses of a food service and grocery business. Id. Ex. at. The PPM states that the Partnership intends to invest all of each CASE NO. :-CV-00-RS

20 Case :-cv-00-rs Document Filed 0// Page of investor s capital contribution of $00,000 in WEST OAKLAND PLAZA, L.P. in a manner that should protect the principal amount of investment as much as reasonably possible. Id. Ex. at. The Business Plan for West Oakland Plaza provided to investors and approved by Henderson similarly describes how the loan of $ million from the limited partnership to West End Market, LLC (a California Limited Liability Company) the job creating entity, is to be used for development and operations of a grocery store/restaurant and related commercial kitchen in an existing shopping complex. Id., ; Ex. at :-:, :-0:, :-; Ex. at. According to the Business Plan, [t]he entire $ million will be used to fund the renovation and operational startup of the grocery store, including in-store dining, and a commercial kitchen in West Oakland. Id., Ex. at. The Business Plan provides a general timetable for repayment of the loan, as well as a summary of start-up expenses, that totaled $ million. See id. Ex. at, -. Like the other projects, the additional $0,000 Syndication Fee is to be used for offering expenses, and the PPM states that it is intended to assure that the entire Unit Price of $00,000 is capital contribution and available to the Partnership for job-creating investments. Id., Ex. at -. Also like the prior projects, the PPM attached the Limited Partnership Agreement, signed by Henderson, Managing Member of SFRC, for the general partner, SFRC, specifying that [n]o part of the initial Capital Contribution made by a Limited Partner (i.e. $00,000) shall be diverted to pay expenses of the Partnership incurred in connection with (i) the formation of the Partnership and the Offering of the Units, including legal and promotional fees. Id. Ex. at SEC-SFRC-E-0000, 0, 0.. California Gold Medal Dairy Processing Project In March, Henderson and SFRC formed the last of the EB- Projects that is the subject of this motion, California Gold Medal, L.P. ( California Gold Medal ), to fund the development, construction and initial operating expenses of a production and worldwide distribution facility for dairy products. Eme Decl., Ex. at -. California Gold Medal has, as of November 0,, raised approximately $. million in capital contributions and $. million in Syndication Fees from investors from August to November. Chen Decl. and Table. As of CASE NO. :-CV-00-RS

21 Case :-cv-00-rs Document Filed 0// Page of November 0,, approximately $. million of the total raised was held in California Gold Medal s accounts. Chen Decl. and Table. The PPM provided to investors and approved by Henderson identifies SFRC as the general partner of California Gold Medal and Henderson as the Managing Member, Principal, and CEO of SFRC. See Eme Decl., ; Ex. at :-:, :-0:, :-; Ex. at,. According to the PPM, up to 0 limited partnership units would be sold for $0,000 per investor, consisting of the $00,000 capital contribution and the $0,000 Syndication Fee. See id., Ex. at. The PPM describes the use of funds in a structure similar to the NAPL, L.P. and West Oakland Plaza, L.P. EB- Projects, in which the limited partnership is to make a $0 million loan to another entity, in this case Crystal Golden, LLC, to fund the development, construction, and initial operating expenses of a production and worldwide distribution facility for dairy products. Id. Ex. at. The Business Plan for California Gold Medal, also provided to investors and approved by Henderson, further describes how the limited partnership will raise $0 million from 0 EB- investors and loan these funds to Crystal Golden, LLC (the Job Creating Entity), which will use the funds to support its development and operations of a dairy processing company that will source California milk and process it into UHT dairy products specifically for the export market. Id., ; Ex. at :-:, :-0:, :-; Ex. at,. According to the Business Plan, [t]he entire $0 million loan will be used by Crystal Golden, LLC... to fund the start-up expenses for the company, including milk sourcing and the ground up renovation of an existing, but sorely out of date, dairy processing facility. Id., Ex. at. The Business Plan provides a general timetable for repayment of the loan, as well as a summary of projected start-up expenses of $0 million. See id. Ex. at, -. The PPM contains the same limitations on the use of funds as the prior projects, including that the additional Syndication Fee is to be used to pay offering expenses in order to assure that the entire Unit Price of $00,000 is capital contribution and available to the Partnership for job-creating investments. Id., Ex. at -. Like the other projects, the PPM attaches the Limited Partnership Agreement, signed by Henderson, Managing Member of SFRC, for the general partner, CASE NO. :-CV-00-RS

22 Case :-cv-00-rs Document Filed 0// Page of SFRC, which makes clear that [n]o part of the initial Capital Contribution made by a Limited Partner (i.e. $00,000) shall be diverted to pay expenses of the Partnership incurred in connection with (i) the formation of the Partnership and the Offering of the Units, including legal and promotional fees. Id. Ex. at SEC-SFRC-E-000,,. E. Henderson Improperly Commingled and Misappropriated Investor Funds in an Elaborate Shell Game Despite the clear dictates of the PPMs and Business Plans provided to investors to use funds raised from investors solely for the designated EB- Project, Henderson routinely used funds solicited for one project to fund other EB- Projects. Indeed, as described below, Henderson s fraud continued even in the face of a state court lawsuit brought by one of his partners against him. The bank accounts for SFRC and Immedia were the primary tools Henderson used to both misappropriate funds among the EB- Projects and siphon funds away from them entirely. Henderson routinely commingled funds from the EB- Projects in these two entities accounts and then used them indiscriminately for whatever he chose. For example, on November,, Henderson transferred approximately $0,000 from an investor in CallSocket II to an account for SFRC which at the time held only $,000. Chen Decl.. That same day, several payments were made from the account, including $0,000 to CallSocket I, $0,000 to Berkeley Healthcare Dynamics, L.P. (a non-party in which SFRC holds an ownership interest), $0,000 to CallSocket Holding Company, LLC, $0,000 to CallSocket III Holding Company, LLC, and $,000 to Starr Brand, LLC (a non-party in which SFRC holds an ownership interest). Id. -, Table and Ex.. Similarly, on December,, Henderson transferred $0,000 from West Oakland Plaza to Immedia, where it was commingled with $,. Id., Diagram B, Ex.. Henderson then transferred $,000 from this commingled Immedia account to other entities, with $,000 going to CallSocket II, $,000 going to CallSocket I, and $,000 going to Immedia s payroll account. Id. These examples just scratch the surface. Between November and June, Henderson transferred a total of approximately $0. million of capital contributions, syndication fees, and to some extent revenues from EB- Project-related entities into SFRC and Immedia. Chen Decl. - CASE NO. :-CV-00-RS

23 Case :-cv-00-rs Document Filed 0// Page of and Table. During this same period of time, he transferred $. million back to these EB- Project entities accounts, resulting in a net deficit of $. million for the EB- Projects. Id. The following are among the larger net transfers: From November to March, Henderson transferred a net of approximately $. million from CallSocket II to SFRC and Immedia that was not returned to the account for CallSocket II. Chen Decl. and Table. _ From March to March, Henderson transferred a net of approximately $ million, including a net of approximately $. million in capital contributions, from CallSocket III to SFRC and Immedia that was not returned to the account for CallSocket III. Id. and Table. From March to March, Henderson transferred a net of approximately $. million from NAPL, L.P. and North America PL, LLC, including at net of at least $. million in capital contributions, to SFRC and Immedia that was not returned to the accounts for NAPL, L.P. or North America PL, LLC. Id. and Table. From March to June, Henderson transferred a net of approximately $. million from CCOO to SFRC and Immedia that was not returned to the account for CCOO. Id. and Table. From April to November, Henderson transferred a net of approximately $. million from California Gold Medal to Immedia and SFRC that was not returned to the account for California Gold Medal. Id. and Table. And it is clear why the resulting deficit is so large. In addition to siphoning off at least $. million for himself and his own separate businesses and misappropriating at least another $. million in capital contributions to pay overseas marketing agents or so-called finders (as described above), Henderson also used EB- Project money to make large real estate purchases. At least seven times, Henderson used funds solicited for one EB- Project to purchase property that was used by These EB- Project-related entities include the following: Defendants CCOO; CallSocket I; CallSocket II; CallSocket III; NAPL, L.P.; North America PL, LLC; West Oakland Plaza; California Gold Medal; and relief defendants CallSocket Holding Company, LLC; CallSocket III Holding Company, LLC; Central California Farms, LLC; and JL Gateway, LLC. Chen Decl..A. The transfers that result in the approximately $. million deficit are described in net terms to account for Henderson s frequent transfers in and out of the bank accounts. See Chen Decl. and Table. In addition, SFRC s accounting records attribute a net of approximately $ million toward expenses that were paid by SFRC and Immedia, some of which may have been incurred by the various EB- Projects. Id..H. and Table. But even if all of the expenses were spent for the EB- Projects (and there is not a record to support such an assumption), it would only decrease the deficit to approximately $. million. Id.. CASE NO. :-CV-00-RS

24 Case :-cv-00-rs Document Filed 0// Page of another Project. Henderson would place title to the property in an entity that did not reflect the source of the funds used, and he often owned some or all of the title-holding entity, as follows: In December, Henderson used $. million of CCOO s capital contributions toward the purchase of the Tribune Tower in Oakland, California. Chen Decl. - and Diagram D. The PPM and Business Plan for CCOO did not disclose that investor funds would be used for this purchase. See Eme Decl. -, Exs. -. Instead, the Business Plan for the CallSocket I EB- Project stated that CallSocket I would operate from the Tribune Tower. Id., Ex. at. Henderson recorded title in the name of relief defendant CallSocket Holding Company, LLC, an entity owned 0% by SFRC (which is, in turn, owned in part by Henderson). Eme Decl.,, ; Ex. at :-; Exs.,. Further compounding the misuse of CCOO investor funds, Henderson then caused SFRC to execute a Resolution of Trust Declaration and a Declaration of Trust stating that the property was held in trust for the benefit of the limited partners of CallSocket, L.P. Id. -, Exs. and. As described above, Henderson further misused this asset by allowing businesses affiliated with him, and a law firm providing services to him, to occupy space in the building while paying no or belowmarket rent. See supra Section II.B. In December, the receiver appointed by a state court over the assets of the CallSocket entities sold the Tribune Tower, generating approximately $. million in proceeds. Eme Decl., Ex.. As described above, in November, Henderson used approximately $. million from CallSocket I, including at least $. million in capital contributions, to purchase a warehouse. The PPM and Business Plan for CallSocket I do not disclose that investor funds would be used for this purchase. Henderson placed title in an entity in which he has an indirect ownership interest, and North America PL, LLC has rented the property for at least On July,, Alan Young, one of Henderson s alleged business partners on the CallSocket Projects, sued Henderson and SFRC and others in California Superior Court, Alameda County. Eme Decl., Ex.. As described in detail below (Section IV.C), a Receiver was appointed in March and has liquidated some of the properties. CASE NO. :-CV-00-RS