SEC, et al v. Albert Kaleta
- Summarized by Lars Fuller , BakerHostetler
- 5 years 7 months ago
- Case Type:
- Business
- Case Status:
- Dismissed
- Citation:
- 18-20579 (5th Circuit, May 15,2019) Not Published
- Tag(s):
-
- Ruling:
- In non-bankruptcy SEC receivership case, 5th Circuit dismissed for lack of jurisdiction movants' appeal of district court's (SD Tex.) denial of their motion for leave to sue SEC receiver and motion for new trial. Movants failed to file proper notice of appeal within 30 day limit under FRAP 3. Movants' motion for reconsideration, which could be construed as a FRCP 59 or 60 motion, could not be construed as a notice of appeal, nor could movants' motion for extension of time to file appeal. Only cognizable notice of appeal was outside 30 day limit.
- Procedural context:
- In district court (SD Tex.) SEC receivership action, district court granted Receiver's motion to approve final plan of distribution of receivership assets. Investors in one of the debtors objected to the Final Plan almost two months after the district court’s order. District court overruled objections as untimely. District court also overruled their objections on the merits.
- Facts:
- Two investors invested $100k in "Fund" formed and managed by "Bajjali" and "Wallace." Investors received a limited partnership interest in the fund. Partnership agreement limited amount of the Fund's investment in any one entity to no more than 33% of total funds raised. Fund violated agreement, making substantial investment in "BizRadio" beyond the 33% threshold. BizRadio was creation of "Kaleta" and "Frishberg." Kaleta and Frishberg created network of affiliated companies to solicit investors to invest with "KCM" (Kaleta Capital Management) through promissory note securities. With these investments, KCM loaned money to BizRadio and "DFFS" (Frishberg).
In 2009, the Securities and Exchange Commission (“SEC”) began an investigation into Kaleta and KCM’s actions in misrepresenting important facts regarding the promissory-note offering. In late 2009, the SEC filed a complaint against Kaleta, KCM, BizRadio, and DFFS. The complaint alleged violations of the Securities Act of 1933, 15 U.S.C. § 77a, et seq.; the Securities and Exchange Act of 1934, 15 U.S.C. § 78a, et. seq.; and the Investment Advisers Act of 1940, 15 U.S.C. § 80a–1, et seq. The SEC alleged that among other actions, “KCM, a private company owned and controlled by Kaleta . . . raised approximately $10 million from approximately 50 investors in a fraudulent offering of promissory-note securities.” In December 2009, "Taylor" was appointed as Receiver for KCM. In 2010, Taylor’s receivership was expanded to include BizRadio and DFFS. In July 2016, the district court granted Taylor’s motion to approve [the] final plan of distribution of receivership assets (the “Final Plan”). As an investor in BizRadio, the Fund received money from the receivership estate. The Investors did not object to the Final Plan until almost two months after the district court’s order. Thus, the district court overruled the Investors’ objections as untimely. The district court also overruled their objections on the merits, determining that the Fund’s bankruptcy estate was the correct recipient of the receivership funds, not the Investors.
- Judge(s):
- Stewart, Graves, Duncan
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