Federal Trade Commission v. Stefanchik et al, No. 2:2004cv01852 - Document 155 (W.D. Wash. 2011)

Court Description: STIPULATED SUPPLEMENTAL FINAL ORDER TO MODIFY FINAL JUDGMENT AND ORDER 154 Stipulated Motion by Judge Ricardo S Martinez.(MD)

Download PDF

Federal Trade Commission v. Stefanchik et al Doc. 155 1 The Honorable Ricardo S. Martinez 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 FEDERAL TRADE COMMISSION, Case No. CV04-1852RSM 11 Plaintiff, 12 v. 13 JOHN STEFANCHIK, individually and as an officer and director of Beringer Corporation, et al., 14 STIPULATED SUPPLEMENTAL FINAL ORDER TO MODIFY FINAL JUDGMENT AND ORDER PURSUANT TO FED. R. CIV. P. 60(b) Defendants. 15 16 Plaintiff, the Federal Trade Commission (“Commission” or “FTC”), pursuant to Federal 17 18 Rule of Civil Procedure 60(b), and defendants John Stefanchik and Beringer Corporation 19 (“Defendants”), by and through their attorneys, submit this Stipulated Supplemental Final Order 20 to Modify Final Judgment and Order Pursuant to Fed. R. Civ. P. 60(b) (“Stipulated Supplemental 21 Order”) for approval by this Court in order to resolve the FTC’s monetary claims against the 22 Defendants arising from the Final Judgment and Order entered against Defendants on April 3, 23 2007. 24 25 Being fully advised in the premises and acting upon stipulation of the parties to enter this Stipulated Supplemental Order, the Court finds and orders: FINDINGS 26 27 28 1. This Court entered a Final Judgment and Order For Permanent Injunction and Other Equitable Relief (“Final Order”) against Defendants on April 3, 2007. This Court has Stipulated Supplement Final Order To Modify Final Judgment & Order - Page 1 FEDERAL TRADE COMMISSION 915 Second Ave., Su. 2896 Seattle, Washington 98174 (206) 220-6350 Dockets.Justia.com 1 jurisdiction under Paragraph X of the Final Order, which provides that the Court retains 2 jurisdiction of this matter for purposes of construction, modification, and enforcement of the 3 Final Order. 4 2. In the Final Order, the Court found that uncontroverted evidence established that 5 Defendants violated Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a), and 6 Sections 310.3(a)(2)(iii) and 310.3(a)(4) of the Telemarketing Sales Rule (“TSR”), 16 C.F.R. 7 §§310.3(a)(2)(iii) and 310.3(a)(4). 8 9 3. Under Paragraph IV.A of the Final Order, the Court entered judgment for equitable monetary relief against Defendants, jointly and severally, and in favor of the FTC in 10 the amount of $17,775,369.00, to be paid within ten days of entry of the Final Order. Paragraph 11 IV.C of the Final Order provides that, in the event Defendants fail to pay the Commission the 12 judgment amount, interest computed at the rate prescribed under 28 U.S.C. § 1691, as amended, 13 shall immediately begin to accrue on the unpaid balance. 14 4. The Ninth Circuit Court of Appeals subsequently affirmed this Court’s judgment 15 against Defendants and in favor of the Commission. FTC v. Stefanchik, 559 F.3d 924 (9th Cir. 16 2009). None of the parties filed a further appeal of that decision and the order is final. 17 5. Defendants have not paid any amount of the judgment to the Commission and, 18 consequently, owe the Commission, jointly and severally, the entire judgment amount of 19 $17,775,369.00, plus the interest accrued. On or about May 7, 2007, the Commission filed a 20 judgment lien against the real property where John Stefanchik resided at the time of judgment: 21 9022 North Mercer Way, Mercer Island, Washington. 22 6. Warwick Properties LLC (“Warwick”), among other things, holds title to the real 23 property located at 9022 North Mercer Way, Mercer Island, Washington (the “Property”). On or 24 about October 6, 2008, Warwick filed a petition for relief in the U.S. Bankruptcy Court for the 25 Western District of Washington, under Chapter 11 of Title 11 of the U.S. Bankruptcy Code. 26 Defendant John Stefanchik’s wife, Heidi Fogg, is the manager of Warwick. To pursue its 27 judgment lien against the Property, the FTC filed a secured claim in the Warwick bankruptcy 28 case, and Warwick stated that it intends to dispute the Commission’s claim. Stipulated Supplement Final Order To Modify Final Judgment & Order - Page 2 FEDERAL TRADE COMMISSION 915 Second Ave., Su. 2896 Seattle, Washington 98174 (206) 220-6350 7. 1 In addition to filing a secured claim, on December 11, 2009, the Commission 2 filed an adversary proceeding, naming Warwick, John Stefanchik and Heidi Fogg as defendants 3 (the “Adversary Proceeding”). FTC v. Warwick Properties LLC, et al., Adversary No. 09-01584 4 (Bankr. W.D. Wash.). In the Adversary Proceeding, the Commission made various claims 5 against John Stefanchik, Heidi Fogg and Warwick, including a reverse veil-piercing claim 6 alleging that Warwick is a sham or the alter ego of John Stefanchik. 8. 7 On or about May 10, 2010, the bankruptcy court confirmed Warwick’s Fourth 8 Amended Plan of Reorganization (the “Plan”). Warwick’s Plan provides for the sale of the 9 Property and for the distribution of the proceeds of the sale to its creditors. Starting in June 10 2010, the marketing and sale of the Property will be conducted by one of the banks holding a 11 secured claim on the Property. 9. 12 The Defendants, Heidi Fogg, and Warwick, along with the FTC, have agreed to 13 resolve the claims in the Adversary Proceeding and a potential dispute over the proof of claim 14 the FTC filed in the Warwick Bankruptcy Case, as reflected in the attached stipulated orders 15 (Exhibits A and B). 10. 16 In addition, Heidi Fogg and Warwick have agreed to be bound by the terms of 17 this Stipulated Supplemental Order and stipulate and agree to entry of this Stipulated 18 Supplemental Order to settle and resolve the Commission’s monetary claim against Defendants. 11. 19 Except as modified by this Stipulated Supplemental Order, the Final Order 20 entered on April 3, 2007, shall remain in full force and effect unless otherwise ordered by this 21 Court. 22 12. The parties agree that the effective date of this agreement is defined as the date on 23 which this Court’s order approving the Stipulated Supplemental Order becomes final and is not 24 subject to appeal. If this Stipulated Supplemental Order is not approved by this Court, then the 25 parties also agree that this Stipulated Supplemental Order will automatically terminate and be of 26 no further force and effect. 27 13. Entry of this Stipulated Supplemental Order is in the public interest. 28 Stipulated Supplement Final Order To Modify Final Judgment & Order - Page 3 FEDERAL TRADE COMMISSION 915 Second Ave., Su. 2896 Seattle, Washington 98174 (206) 220-6350 1 2 14. The Defendants, Heidi Fogg, and Warwick further waive all rights to appeal or otherwise challenge or contest the validity of this Stipulated Supplemental Order. DEFINITIONS 3 4 1. “Adversary Proceeding” means the adversary proceeding the Commission filed 5 on December 11, 2009 in the Warwick Bankruptcy Case, naming Warwick, John Stefanchik, and 6 Heidi Fogg as defendants. FTC v. Warwick Properties LLC, et al., Adversary No. 09-01584 7 (Bankr. W.D. Wash.). 8 9 10 2. “Bankruptcy Court” means the U.S. Bankruptcy Court for the Western District of Washington, which presides over the Warwick Bankruptcy Case. 3. “Defendants” means John Stefanchik, individually and as an officer and director 11 of Beringer Corporation, and Beringer Corporation, formerly d.b.a. The Stefanchik Organization, 12 as well as its successors and assigns, whether acting directly or through any corporation, 13 subsidiary, division, or other device. 14 15 16 4. “Heidi Fogg” means Heidi Fogg and/or Heidi Stefanchik, by any name, individually and as an officer and manager of Warwick. 5. “Monetary Judgment” means the entire judgment amount of $17,775,369.00, 17 plus the interest from April 3, 2007 forward at the rate prescribed under 28 U.S.C. § 1961, as 18 amended, that Defendants, jointly and severally, owe to the Commission under the Final Order. 19 6. “Property” means the real property described in the King County real property 20 records as “Lot 21, Sunnybank” with a street address of 9022 North Mercer Way, Mercer Island, 21 Washington. 22 23 24 7. “Warwick” means Warwick Properties LLC, as well as its successors and assigns, whether acting directly or through any corporation, subsidiary, division, or other device. 8. “Warwick Bankruptcy Case” means the Chapter 11 bankruptcy case filed by 25 Warwick Properties, LLC, in the U.S. Bankruptcy Court for the Western District of Washington, 26 Case No. 08-16620. 27 28 Stipulated Supplement Final Order To Modify Final Judgment & Order - Page 4 FEDERAL TRADE COMMISSION 915 Second Ave., Su. 2896 Seattle, Washington 98174 (206) 220-6350 1 ORDER 2 I. MONETARY JUDGMENT 3 IT IS HEREBY ORDERED that: 4 A. Defendants, Fogg, and Warwick agree to partially satisfy the Monetary Judgment 5 in accordance with the terms and conditions in Subsections B through D of this Section. Upon 6 satisfaction of all terms and conditions in Subsections B through D, the Monetary Judgment 7 shall be suspended against Defendants, but remains subject to reinstatement under Section II. 8 9 B. Within ten (10) days of the date of entry of this Order, Defendants and Heidi Fogg, in accordance with the directions provided by the Commission, shall pay to the 10 Commission, by wire transfer, certified check, or money order, nine hundred thousand dollars 11 ($900,000.00). In addition, Defendants and Heidi Fogg agree to transfer to the Commission all 12 of their (singular, collective and/or joint) legal and equitable rights, title and/or interest(s) in the 13 funds described in the attached Exhibit C. 14 C. Within five (5) days from the date of the closing on the sale of the Property 15 pursuant to the Warwick Bankruptcy Case, John Stefanchik and Heidi Fogg shall fully cooperate 16 with James G. Murphy Co. (“JGM”) to take such steps as JGM may require to take full 17 possession of the personal property described in the attached Exhibit D, and, to enter into an 18 agreement with JGM to dispose of said property. Until John Stefanchik and Heidi Fogg 19 surrender possession of the personal property described in the attached Exhibit D to JGM, they 20 shall maintain and take no action to diminish the value of said property. As soon as is 21 reasonably possible after taking possession of said personal property, JGM shall, in accordance 22 with the agreement between JGM, John Stefanchik, and Heidi Fogg, liquidate the personal 23 property. After all of said personal property has been liquidated, JGM shall account for the net 24 proceeds derived therefrom, and transfer all such net proceeds to the Commission in accordance 25 with instructions provided by the Commission. 26 D. The Defendants, Heidi Fogg, and Warwick shall have stipulated to, and the 27 Bankruptcy Court shall have entered, an order in the Bankruptcy Case authorizing Warwick to 28 enter into: a) this Stipulated Supplemental Order; b) the Claim Order (as defined below); and, the Stipulated Supplement Final Order To Modify Final Judgment & Order - Page 5 FEDERAL TRADE COMMISSION 915 Second Ave., Su. 2896 Seattle, Washington 98174 (206) 220-6350 1 Judgment and Order (as defined below), which order shall have become final and non- 2 appealable. In addition, the Bankruptcy Court shall have entered orders: a) allowing the 3 Commission’s claim as a secured claim under 11 U.S.C. §§ 502 and 506 in the Warwick 4 Bankruptcy Case, and as reflected in the attached order allowing claim (Exhibit A, the “Claim 5 Order”); and b) resolving the parties’ claims in the Adversary Proceeding, as reflected in the 6 Judgment and Order (attached hereto as Exhibit B), both of which orders shall have become 7 final and non-appealable. 8 E. Defendants, Heidi Fogg, and Warwick agree that they will not, whether acting 9 directly or through any corporation, partnership, limited liability company, division, subsidiary, 10 trade name, or other entity or device, submit to any federal or state tax authority any tax return, 11 amended tax return, or other official document that takes a deduction for, or seeks a tax refund or 12 any other tax benefit for, the payments that are to be made pursuant to Subsections I.B and I.C of 13 this Stipulated Supplemental Order. 14 F. To ensure compliance with Subsection I.E of this Stipulated Supplemental Order: 15 (i) Defendants, Heidi Fogg, and Warwick each shall deliver to the Commission copies of all of 16 their respective signed and completed federal and state income tax returns, and all amended 17 returns (if any), including all related forms, schedules, statements, and attachments, that they file 18 for each year in which payments are made pursuant to Subsections I.B and I.C of this Stipulated 19 Supplemental Order. The aforementioned deliveries shall be made to the Commission within ten 20 (10) days after each such return and amended return (if any), is officially filed with the Internal 21 Revenue Service or a state tax authority; and (ii) for each year in which any part of the payments 22 described in Subsections I.B and I.C of this Stipulated Supplemental Order are made, the 23 Defendants, Heidi Fogg, and Warwick each shall, within thirty (30) days after their respective 24 final date for filing an amended federal tax return for that year, sign and submit to the Internal 25 Revenue Service (“IRS”) IRS Form 4506, along with a payment to the IRS of the Form 4506 fee, 26 directing the IRS to send to the Regional Director, FTC Northwest Region, 915 Second Avenue, 27 Suite 2896, Seattle, WA 98174 copies of their respective original tax return and all amended tax 28 returns (if any) that they filed with the IRS for that year. Stipulated Supplement Final Order To Modify Final Judgment & Order - Page 6 FEDERAL TRADE COMMISSION 915 Second Ave., Su. 2896 Seattle, Washington 98174 (206) 220-6350 1 G. All money paid to the Commission pursuant to this Order shall be deposited into a 2 fund administered by the Commission or its representatives to be used for equitable relief, 3 including consumer redress and any attendant expenses for the administration of any redress 4 fund. If direct redress to consumers is wholly or partially impracticable or money remains after 5 redress is completed, the Commission may apply any remaining money for such other equitable 6 relief (including consumer information remedies) as it determines to be reasonably related to 7 Defendants’ practices alleged in the Complaint. Any monies not used for such equitable relief 8 shall be deposited to the U.S. Treasury as disgorgement. Defendants, Heidi Fogg, and Warwick 9 shall have no right to challenge any actions the Commission or its representatives may take 10 11 pursuant to this Section. H. In accordance with 31 U.S.C. § 7701, Defendants, Heidi Fogg, and Warwick are 12 hereby required, unless they have done so already, to furnish to the Commission each of their 13 taxpayer identifying numbers (social security numbers or employer identification numbers), 14 which shall be used for purposes of collecting and reporting on any delinquent amount arising 15 out of their relationship with the government; 16 I. Defendants, Heidi Fogg, and Warwick relinquish all dominion, control, and title 17 to the funds paid to the fullest extent permitted by law. Defendants, Heidi Fogg, and Warwick 18 shall make no claim to, or demand return of, the funds, directly or indirectly, through counsel or 19 otherwise; and 20 J. Defendants and Heidi Fogg agree that the facts alleged in the Complaint filed in 21 this action shall be taken as true without further proof in any bankruptcy case or subsequent civil 22 litigation pursued by the Commission to enforce its rights to any payment or money judgment 23 pursuant to this Stipulated Supplemental Order, including, but not limited to, a 24 nondischargeability complaint in any bankruptcy case. Defendants and Heidi Fogg further 25 stipulate and agree that the facts alleged in the Complaint establish all elements necessary to 26 sustain an action pursuant to, and that this Stipulated Supplemental Order and the Final Order 27 shall have collateral estoppel effect for purposes of, Section 523(a)(2)(A) of the Bankruptcy 28 Code, 11 U.S.C. § 523(a)(2)(A). In addition, Defendants and Heidi Fogg agree that if any of Stipulated Supplement Final Order To Modify Final Judgment & Order - Page 7 FEDERAL TRADE COMMISSION 915 Second Ave., Su. 2896 Seattle, Washington 98174 (206) 220-6350 1 them file a petition for relief or a petition for relief is filed against them (jointly or separately) 2 under 11 U.S.C. § 101, et seq., and the payment to the Commission under Subsection B above is 3 subsequently recovered or avoided by the debtor, trustee, or a creditor, the Monetary Judgment 4 shall not be suspended as described in Subsection A above and the Commission will hold an 5 allowed, unsecured claim in the bankruptcy case in the amount of the Monetary Judgment, plus 6 interest from April 3, 2007 at the rate prescribed under 28 U.S.C. § 1961, as amended. II. RIGHT TO REOPEN 7 8 IT IS FURTHER ORDERED that: 9 A. By agreeing to this Stipulated Supplemental Order, Defendants, Heidi Fogg, and 10 Warwick reaffirm and attest to the truthfulness, accuracy, and completeness of the financial 11 statements that each of them prepared and transmitted to the Commission, including the 12 following: (1) completed individual financial statement for John Stefanchik and Heidi Fogg 13 (executed on May 25, 2010); (2) completed Corporate Financial Statements for Beringer 14 Corporation (executed on May 21, 2010) and Warwick Properties, LLC (executed on June 25, 15 2010); (3) true and correct copies of individual 2007 and 2008 tax returns for John Stefanchik 16 and Heidi Fogg, which were previously filed with the Internal Revenue Service (“IRS”); (4) a 17 complete list of John Stefanchik’s and Heidi Fogg’s personal property, including furnishings, 18 jewelry, and art, which has a potential sale value of, or for which they paid, $2,500.00 or more 19 per item (lists provided by letters to the FTC dated June 14, 2010, and July 2, 2010, and by 20 electronic mail from Sims Weymuller to Nadine Samter, dated June 22, 2010); and (5) 21 Declaration of John Stefanchik executed July 19, 2010, and the Exhibits attached thereto 22 (hereafter, collectively referred to as “Financial Statements”). The Commission’s agreement to 23 this Stipulated Supplemental Order is expressly premised upon the truthfulness, accuracy, and 24 completeness of the Financial Statements, which contain material information upon which the 25 Commission relied in negotiating and agreeing to the terms of this Stipulated Supplemental 26 Order; 27 28 Stipulated Supplement Final Order To Modify Final Judgment & Order - Page 8 FEDERAL TRADE COMMISSION 915 Second Ave., Su. 2896 Seattle, Washington 98174 (206) 220-6350 1 B. Defendants, Heidi Fogg, and Warwick certify that they have each individually 2 and jointly disclosed all assets in which any of them holds any beneficial, remainder, or actual 3 interest, whether partial or whole, including, but not limited to any jointly held assets. 4 C. If, upon motion by the FTC, this Court finds that any or all of Defendants, Heidi 5 Fogg or Warwick has failed to disclose any material asset, or misrepresented the value of any 6 asset, or made any other misrepresentation in, or omission from, the Financial Statements, then 7 as to Defendants, any suspension of the Monetary Judgment (in the amount of $17,775,369.00, 8 plus interest), less amounts already paid, shall be lifted, the Monetary Judgment shall become 9 immediately due, and interest computed pursuant to 28 U.S.C. § 1961, as amended, shall 10 continue to accrue on the unpaid balance. Provided, however, that in all other respects, this 11 Stipulated Supplemental Order shall remain in full force and effect unless otherwise ordered by 12 this Court; and 13 D. Proceedings instituted under this Section are in addition to, and not in lieu of, any 14 other civil or criminal remedies as may be provided by law, including any other proceedings the 15 Commission may initiate to enforce this Stipulated Supplemental Order. III. ACKNOWLEDGMENT OF RECEIPT OF STIPULATED SUPPLEMENTAL ORDER 16 17 18 19 20 IT IS FURTHER ORDERED that within five (5) business days of receipt of this Stipulated Supplemental Order as entered by the Court, Defendants, Heidi Fogg, and Warwick must submit to the Commission a truthful sworn statement acknowledging receipt of this Stipulated Supplemental Order. 21 22 23 24 IV. CONTINUED JURISDICTION IT IS FURTHER ORDERED that this Court will retain jurisdiction of this matter for all purposes. SO ORDERED, this 22 day of February 2011. 25 26 27 28 A RICARDO S. MARTINEZ UNITED STATES DISTRICT JUDGE Stipulated Supplement Final Order To Modify Final Judgment & Order - Page 9 FEDERAL TRADE COMMISSION 915 Second Ave., Su. 2896 Seattle, Washington 98174 (206) 220-6350 1 2 NADINE S. SAMTER, WSBA # 23881 3 Attorney for Plaintiff 4 Federal Trade Commission 915 Second Avenue, Suite 2896 5 Seattle, Washington 98174 (206) 220-6350 6 Fax: (206) 220-6366 Email: nsamter@ftc.gov 7 8 9 JOHN STEFANCHIK, individually and as 10 an officer of Beringer Corporation 11 12 13 HEIDI FOGG individually and as an officer, manager, or 14 principal of Warwick, LLC 15 16 SIMS WEYMULLER, WSBA # 33026 17 Attorney for John Stefanchik, Beringer Corp., and Heidi Fogg 18 Johnson Flora, PLLC 19 2505 Second Avenue, Suite 500 Seattle, WA 98121 20 (206) 386-5566 Fax: (206) 682-0675 21 Email: www.johnsonflora.com 22 23 24 25 26 27 28 Stipulated Supplement Final Order To Modify Final Judgment & Order - Page 10 FEDERAL TRADE COMMISSION 915 Second Ave., Su. 2896 Seattle, Washington 98174 (206) 220-6350

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.