Securities and Exchange Commission v. Profit Connect Wealth Services Inc et al, No. 2:2021cv01298 - Document 26 (D. Nev. 2021)
Court Description: ORDER granting 25 Stipulation; IT IS ORDERED that a video-conference status hearing concerning the receivership, is set for 3:00 p.m. on September 21, 2021. ORDER denying 7 Motion to Appoint Receiver and 8 Motion for Preliminary Injunc tion. IT IS FURTHER ORDERED that the hearing on the SEC's motions for a preliminary injunction and to appoint a permanent receiver (ECF Nos. 7 , 8 ), set for 4:00 p.m. on August 9, 2021, is VACATED. Signed by Judge Jennifer A. Dorsey on 8/6/2021. (Copies have been distributed pursuant to the NEF - HAM)
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Securities and Exchange Commission v. Profit Connect Wealth Services Inc et al 1 2 3 4 5 6 7 Doc. 26 KATHRYN C. WANNER, (Cal. Bar No. 269310) Email: wannerk@sec.gov TERI M. MELSON (Cal. Bar No. 185209) Email: melsont@sec.gov Attorneys for Plaintiff Securities and Exchange Commission Michele Wein Layne, Regional Director Katharine Zoladz, Associate Regional Director Amy J. Longo, Regional Trial Counsel 444 S. Flower Street, Suite 900 Los Angeles, California 90071 Telephone: (323) 965-3998 Facsimile: (213) 443-1904 8 9 UNITED STATES DISTRICT COURT 10 DISTRICT OF NEVADA 11 12 13 SECURITIES AND EXCHANGE COMMISSION, 14 Plaintiff, 15 16 vs. 17 PROFIT CONNECT WEALTH SERVICES, INC., JOY I. KOVAR, and BRENT CARSON KOVAR, 18 Defendants. 19 20 21 22 23 24 Case No.: 2:21-cv-01298-JAD-BNW Order: (A) Granting Parties' Stipulation to Enter a Preliminary Injunction and Order for Related Relief (1) Freezing Assets, (2) Prohibiting the Destruction of Documents, (3) Appointing a Permanent Receiver, and (4) Permitting Joy Kovar to Open a Bank Account for Certain Income; (B) Setting video status conference about the receivership; and (C) Vacating Hearing on the SEC's Motions for a Preliminary and to Appoint a Permanent Receiver ECF Nos. 7, 8, 25 [ECF No. 25] 25 26 27 28 1 Dockets.Justia.com 1 This matter came before the Court upon the Stipulated Request by All Parties 2 for a Preliminary Injunction Order and Orders (1) Freezing Assets; (2) Prohibiting the 3 Destruction of Documents; (3) Appointing a Permanent Receiver; and (4) Permitting 4 Joy Kovar to Open a Bank Account for Certain Income filed by Plaintiff Securities 5 and Exchange Commission (“SEC”) and Defendants Brent C. Kovar (“B. Kovar”), 6 Joy I. Kovar (“J. Kovar”), and Profit Connect Wealth Services, Inc. (“Profit 7 Connect”) (collectively, “Defendants”). The SEC seeks an order preliminarily 8 enjoining Defendants from engaging in specified conduct and Defendants do not 9 oppose the requested relief, and Defendants consent and agree to a continued asset 10 freeze, and an order prohibiting the destruction of documents, and the SEC and 11 Defendants jointly request the appointment of a permanent receiver over Profit 12 Connect, and all of its subsidiaries and affiliates. The SEC and J. Kovar further 13 stipulate and agree that J. Kovar be permitted to open a new bank account, free and 14 clear from the asset freeze, to deposit her social security and teacher’s retirement fund 15 income. Finally, the SEC and J. Kovar further stipulate and agree that $3,320.81 in 16 funds that were deposited into a frozen account on July 30, 2021, by the California 17 State Teacher’s Retirement System (CalSTRS Account XXX9748) be immediately 18 released to J. Kovar; 19 The Court, having considered the SEC’s Complaint and the parties’ Stipulated 20 Request for a Preliminary Injunction Order and Orders (1) Freezing Assets; (2) 21 Prohibiting the Destruction of Documents; (3) Appointing a Permanent Receiver; and 22 (4) Permitting Joy Kovar to Open a Bank Account for Certain Income, finds that: 23 A. This Court has jurisdiction over the parties to, and the subject matter of, 24 this action, pursuant to Sections 20(b), 20(d)(1) and 22(a) of the 25 Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77t(b), 77t(d)(1) 26 & 77v(a), and Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27(a) of the 27 Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. 28 §§78u(d)(1), 78u(d)(3)(A), 78u(e) & 78aa(a). 2 1 B. Venue properly lies in this district pursuant to Section 22(a) of the 2 Securities Act, 15 U.S.C. § 77v(a) and Section 27(a) of the Exchange 3 Act, 15 U.S.C. § 78aa(a), because certain of the transactions, acts, 4 practices and courses of conduct constituting alleged violations of the 5 federal securities laws occurred within this district. In addition, venue is 6 proper in this district because Defendant Profit Connect has its principal 7 place of business in this district. 8 C. 9 Defendants do not dispute that the SEC is able to make the requisite showing for the requested relief pursuant to Section 20(b) of the 10 Securities Act [15 U.S.C. s 77t(b)] and Section 21(d) of the Exchange 11 Act [15 U.S.C. § 78u(b)] in order to prevent violations of federal 12 securities laws during the pendency of the litigation. 13 D. Defendants do not dispute that the SEC is able to establish that good 14 cause exists to believe that, unless restrained and enjoined by order of 15 this Court, Defendants could dissipate, conceal, or transfer assets which 16 could be the subject to an order directing disgorgement or the payment 17 of civil money penalties in this action. It is appropriate for the Court to 18 issue this Preliminary Injunction preventing the dissipation of assets. 19 E. 20 21 Defendants do not dispute that the SEC is able to establish that good cause exists to believe that an accounting of assets is necessary.. F. Defendants do not dispute that the SEC is able to establish that good 22 cause exists to believe that, unless restrained and enjoined by order of 23 this Court, Defendants could alter or destroy documents relevant to this 24 action. 25 G. Good cause exists to warrant the appointment of a permanent receiver 26 over Profit Connect, and all of its subsidiaries and affiliates. 27 I. 28 IT IS HEREBY ORDERED that the SEC and Defendants’ Stipulated Request 3 1 for a Preliminary Injunction Order and Orders (1) Freezing Assets; (2) Prohibiting the 2 Destruction of Documents; (3) Appointing a Permanent Receiver; and (5) Permitting 3 Joy Kovar to Open a Bank Account for certain income is GRANTED. 4 II. 5 IT IS FURTHER ORDERED that Defendants J. Kovar, B. Kovar, and Profit 6 Connect, and their officers, agents, servants, employees, attorneys, subsidiaries and 7 affiliates, and those persons in active concert or participation with any of them, who 8 receive actual notice of this Order, by personal service or otherwise, and each of 9 them, be and hereby are preliminarily restrained and enjoined from, directly or 10 indirectly, in the offer or sale of any securities, by the use of any means or 11 instruments of transportation or communication in interstate commerce or by the use 12 of the mails: 13 A. employing any device, scheme or artifice to defraud; 14 B. obtaining money or property by means of any untrue statement of a 15 material fact or any omission to state a material fact necessary in order to 16 make the statements made, in light of the circumstances under which 17 they were made, not misleading; or 18 C. engaging in any transaction, practice, or course of business which 19 operates or would operate as a fraud or deceit upon the purchaser; in 20 violation of Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a). 21 III. 22 IT IS FURTHER ORDERED that Defendants J. Kovar, B. Kovar, and Profit 23 Connect, and their officers, agents, servants, employees, attorneys, subsidiaries and 24 affiliates, and those persons in active concert or participation with any of them, who 25 receive actual notice of this Order, by personal service or otherwise, and each of 26 them, be and hereby are preliminarily restrained and enjoined from, directly or 27 indirectly, in connection with the purchase or sale of any security, by the use of any 28 means or instrumentality of interstate commerce, or of the mails, or of any facility of 4 1 any national securities exchange: 2 A. employing any device, scheme or artifice to defraud; 3 B. making any untrue statement of a material fact or omitting to state a 4 material fact necessary in order to make the statements made, in the light 5 of the circumstances under which they were made, not misleading; or 6 C. engaging in any act, practice, or course of business which operates or 7 would operate as a fraud or deceit upon any person; in violation of 8 Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 9 thereunder, 17 C.F.R. § 240.10b-5. 10 11 IV. IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, 12 Defendants J. Kovar, B. Kovar, and Profit Connect, and their officers, agents, 13 servants, employees, attorneys, subsidiaries and affiliates, and those persons in active 14 concert with them, who receive actual notice of this Order, by personal service or 15 otherwise, and each of them, be and hereby are preliminarily restrained and enjoined 16 from, directly or indirectly, transferring, assigning, selling, hypothecating, changing, 17 wasting, dissipating, converting, concealing, encumbering, or otherwise disposing of, 18 in any manner, any funds, assets, securities, claims or other real or personal property, 19 including any notes or deeds of trust or other interest in real property, wherever 20 located, of any one of the Defendants, or their subsidiaries or affiliates, owned by, 21 controlled by, managed by or in the possession or custody of any of them, and from 22 transferring, encumbering dissipating, incurring charges or cash advances on any 23 debit or credit card of the credit arrangement of any one of the Defendants, or their 24 subsidiaries and affiliates. 25 26 V. IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, 27 the freeze previously ordered by this Court shall continue on all monies and assets 28 (with an allowance for necessary and expenses to be granted only upon good cause 5 1 shown by application to the Court with notice to and an opportunity for the SEC to be 2 heard (with the expectation that Defendants J. Kovar and B. Kovar intend to bring 3 such motion and the SEC shall so stipulate if good cause is shown) in all accounts at 4 any bank, financial institution or brokerage firm, or third-payment payment 5 processor, all certificates of deposit, and other funds or assets, held in the name of, 6 for the benefit of, or over which account authority is held by Defendants J. Kovar, B. 7 Kovar, and Profit Connect, and/or all of their subsidiaries and affiliates and, including 8 but not limited to, the accounts listed below: 9 BANK NAME 10 11 12 Bank of America Bank of America 13 14 Bank of America 15 16 Bank of America ACCOUNT NAME Profit Connect Wealth Services, Inc. Profit Connect Wealth Services, Inc. Profit Connect Wealth Services, Inc. Profit Connect Wealth Services, ACCOUNT NO. XXXXXX8677 XXXXXX6622 XXXXXX7665 XXXXXX7678 Inc. 17 Bank of America Profit Connect-Agent XXXXXX8722 18 Bank of America XXXXXX7043 19 JPMorgan Chase & Co. Joy Kovar Profit Connect Wealth Services, 20 Inc. Profit Connect Wealth Services, 21 JPMorgan Chase & Co. 22 Navy Federal Credit Inc. Profit Connect Wealth Services, 23 Union Navy Federal Credit Inc. Profit Connect Wealth Services, Union Wells Fargo Bank, Inc. Profit Connect Wealth Services, N.A. Inc. Coinbase Global, Inc. Joy Kovar 24 25 26 27 XXXXXX9032 XXXXXX8820 XXXXXX1215 XXXXXX3304 XXXXXX6831 N/A 28 6 1 2 BANK NAME PayPal 3 ACCOUNT NAME Profit Connect Wealth Services, Inc. ACCOUNT NO. Paypal Merchant ID: XXXXXEUA 4 5 6 7 8 9 10 11 12 13 Any bank, financial institution or brokerage firm, or third-party payment processor holding such monies and assets described above shall hold and retain within their control and prohibit the withdrawal, removal, transfer or other disposal of any such funds or other assets except as otherwise ordered by this Court, or except as provided as follows: all banks, financial institutions, or brokerage firms shall take direction from the receiver and shall cooperate with the receiver to allow for, notwithstanding the asset freeze provided for herein, the immediate release of funds necessary to make payroll, pay operating expenses, and/or meet any other payment obligations, as deemed necessary by the permanent receiver. VI. 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, an immediate freeze shall be placed on the title of the following properties, which shall not be mortgaged, transferred, or otherwise hypothecated: Property Address Owners Searchlight Property at Parcel Numbers: Profit Connect Wealth Services, 243-34-301-007 Inc. 243-34-201-002 243-34-101-006 243-34-201-014 243-27-701-004 243-27-701-005 7043 Calvert Cliffs Street, North Las Vegas, Profit Connect Wealth Services, NV 89084 Inc. 7 1 2 3 4 5 Should the Receiver determine that selling the property is necessary in light of his ongoing assessment of continuation of the business, Defendants J. Kovar and B. Kovar will vacate the property held in the name of Profit Connect at 7043 Calvert Cliffs Street, North Las Vegas, NV 89084, no later than sixty days after the date of entry of this Order. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 VII. IT IS FURTHER ORDERED that J. Kovar may open a new bank account solely for the purposes of (1) depositing funds that were not and are not subject to the asset freeze provisions of the Preliminary Injunction, and withdraw such funds from the new account for payment of at least part of her reasonable and necessary living expenses. J. Kovar will provide counsel for the SEC on three (3) days written notice with copies of all bank records associated with the proposed new account, including the account opening documents, monthly statements, and documents evidencing account transactions (including all credits and debits) in order for counsel for the SEC to ensure that their use of this new account does not violate the asset freeze provisions of the Preliminary Injunction. VIII. IT IS FURTHER ORDERED that any person who receives actual notice of this Order by personal service or otherwise, and who holds, possesses or controls assets exceeding $5,000 that are subject to the asset freeze in this case for the account or benefit of any one of the Defendants, shall within 5 days of receiving actual notice of this Order provide counsel for the SEC with a written statement identifying all such assets, the value of such assets, or best approximation thereof, and any account numbers or account names in which the assets are held. IX. IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, each of the Defendants J. Kovar, B. Kovar, and Profit Connect, and their officers, 28 8 1 agents, servants, employees, attorneys, subsidiaries and affiliates, and those persons 2 in active concert or participation with any of them, who receive actual notice of this 3 Order, by personal service or otherwise, and each of them, be and hereby are 4 preliminarily restrained and enjoined from, directly or indirectly: destroying, 5 mutilating, concealing, transferring, altering, or otherwise disposing of, in any 6 manner, any documents, which includes all books, records, computer programs, 7 computer files, computer printouts, contracts, emails, correspondence, memoranda, 8 brochures, or any other documents of any kind in their possession, custody or control, 9 however created, produced, or stored (manually, mechanically, electronically, or 10 otherwise), pertaining in any manner to Defendants J. Kovar, B. Kovar, and Profit 11 Connect. 12 X. 13 IT IS FURTHER ORDERED that Geoff Winkler of American Fiduciary 14 Services LLC is appointed as permanent receiver of Defendant Profit Connect and its 15 subsidiaries and affiliates, with full powers of an equity receiver, including, but not 16 limited to, full power over all funds, assets, collateral, premises (whether owned, 17 leased, occupied, or otherwise controlled), choses in action, books, records, papers 18 and other property belonging to, being managed by or in the possession of or control 19 of Defendant Profit Connect and its subsidiaries and affiliates, and that such receiver 20 is immediately authorized, empowered and directed: 21 A. to have access to and to collect and take custody, control, possession, 22 and charge of all funds, assets, collateral, premises (whether owned, 23 leased, pledged as collateral, occupied, or otherwise controlled), choses 24 in action, books, records, papers and other real or personal property, 25 wherever located, of or managed by Defendant Profit Connect and its 26 subsidiaries and affiliates (collectively, the “Assets”), with full power to 27 sue, foreclose, marshal, collect, receive, and take into possession all such 28 Assets (including access to and taking custody, control, and possession 9 1 2 of all such Assets); B. to assume full control of Defendant Profit Connect as the receiver deems 3 necessary or advisable, any director, officer, attorney, independent 4 contractor, employee, or agent of Defendant Profit Connect and its 5 subsidiaries and affiliates, including any named Defendant, from control 6 of, management of, or participation in, the affairs of Defendant Profit 7 Connect; 8 C. 9 to have control of, and to be added as the sole authorized signatory for, all accounts of the entities in receivership, including all accounts at any 10 bank, title company, escrow agent, financial institution or brokerage firm 11 (including any futures commission merchant) which has possession, 12 custody or control of any Assets, or which maintains accounts over 13 which Defendant Profit Connect, and its subsidiaries and affiliates, 14 and/or any of its employees or agents have signatory authority; 15 D. to conduct such investigation and discovery as may be necessary to 16 locate and account for all of the assets of or managed by Defendant 17 Profit Connect and its subsidiaries and affiliates, and to engage and 18 employ attorneys, accountants and other persons to assist in such 19 investigation and discovery; 20 E. to assess the viability and future profitability of the Profit Connect 21 business in determining the value of permitting the company to continue 22 conducting business; 23 F. to take such action as is necessary and appropriate to preserve and take 24 control of and to prevent the dissipation, concealment, or disposition of 25 any Assets; 26 G. to choose, engage, and employ attorneys, accountants, appraisers, and 27 other independent contractors and technical specialists, as the receiver 28 deems advisable or necessary in the performance of duties and 10 1 2 responsibilities under the authority granted by this Order; H. to make an accounting, as soon as practicable, to this Court and the SEC 3 of the assets and financial condition of Defendant Profit Connect and to 4 file the accounting with the Court and deliver copies thereof to all 5 parties; 6 I. to make such payments and disbursements from the Assets taken into 7 custody, control, and possession or thereafter received by him or her, 8 and to incur, or authorize the making of, such agreements as may be 9 necessary and advisable in discharging his duties as permanent receiver; 10 J. to investigate and, where appropriate, to institute, pursue, and prosecute 11 all claims and causes of action of whatever kind and nature that may 12 now or hereafter exist as a result of the activities of present or past 13 employees or agents of Defendant Profit Connect, and its subsidiaries 14 and affiliates 15 K. to institute, compromise, adjust, appear in, intervene in, or become party 16 to such actions or proceedings in state, federal, or foreign courts, which 17 (i) the receiver deems necessary and advisable to preserve or recover any 18 Assets, or (ii) the receiver deems necessary and advisable to carry out 19 the receiver’s mandate under this Order; and 20 L. to have access to and monitor all mail, electronic mail, and video phone 21 of the entities in receivership in order to review such mail, electronic 22 mail, and video phone which he deems relates to their business and the 23 discharging of his duties as permanent receiver. 24 25 XI. IT IS FURTHER ORDERED that Defendant Profit Connect and its 26 subsidiaries and affiliates, including any of the other entities in receivership, and their 27 officers, agents, servants, employees and attorneys, and any other persons who are in 28 custody, possession or control of any assets, collateral, books, records, papers or 11 1 other property of or managed by any of the entities in receivership, shall forthwith 2 give access to and control of such property to the permanent receiver. 3 XII. 4 IT IS FURTHER ORDERED that no officer, agent, servant, employee or 5 attorney of Defendant Profit Connect shall take any action or purport to take any 6 action, in the name of or on behalf of Defendant Profit Connect without the written 7 consent of the permanent receiver or order of this Court. 8 9 XIII. IT IS FURTHER ORDERED that, except by leave of this Court, during the 10 pendency of this receivership, all clients, investors, trust beneficiaries, note holders, 11 creditors, claimants, lessors and all other persons or entities seeking relief of any 12 kind, in law or in equity, from Defendant Profit Connect, or its subsidiaries or 13 affiliates, and all persons acting on behalf of any such investor, trust beneficiary, note 14 holder, creditor, claimant, lessor, consultant group or other person, including sheriffs, 15 marshals, servants, agents, employees and attorneys, are hereby restrained and 16 enjoined from, directly or indirectly, with respect to these persons and entities: 17 A. commencing, prosecuting, continuing or enforcing any suit or 18 proceeding (other than the present action by the SEC or any other action 19 by the government) against any of them; 20 B. using self-help or executing or issuing or causing the execution or 21 issuance of any court attachment, subpoena, replevin, execution or other 22 process for the purpose of impounding or taking possession of or 23 interfering with or creating or enforcing a lien upon any property or 24 property interests owned by or in the possession of Defendant Profit 25 Connect; and 26 C. doing any act or thing whatsoever to interfere with taking control, 27 possession or management by the permanent receiver appointed 28 hereunder of the property and assets owned, controlled or managed by or 12 1 in the possession of Defendant Profit Connect, or in any way to interfere 2 with or harass the permanent receiver or her attorneys, accountants, 3 employees, or agents or to interfere in any manner with the discharge of 4 the permanent receiver’s duties and responsibilities hereunder. 5 XIV. 6 IT IS FURTHER ORDERED that Defendants J. Kovar, B. Kovar, and Profit 7 Connect, and their subsidiaries, affiliates, officers, agents, servants, employees and 8 attorneys, shall cooperate with and assist the permanent receiver and shall take no 9 action, directly or indirectly, to hinder, obstruct, or otherwise interfere with the 10 permanent receiver or his attorneys, accountants, employees or agents, in the conduct 11 of the permanent receiver’s duties or to interfere in any manner, directly or indirectly, 12 with the custody, possession, management, or control by the permanent receiver of 13 the funds, assets, collateral, premises, and choses in action described above. 14 XV. 15 IT IS FURTHER ORDERED that Defendant Profit Connect, and its 16 subsidiaries and affiliates, shall pay the costs, fees and expenses of the permanent 17 receiver incurred in connection with the performance of his duties described in this 18 Order, including the costs and expenses of those persons who may be engaged or 19 employed by the permanent receiver to assist him in carrying out his duties and 20 obligations. All applications for costs, fees, and expenses for services rendered in 21 connection with the receivership other than routine and necessary business expenses 22 in conducting the receivership, such as salaries, rent, and any and all other reasonable 23 operating expenses, shall be made by application setting forth in reasonable detail the 24 nature of the services and shall be heard by the Court. 25 XVI. 26 IT IS FURTHER ORDERED that no bond shall be required in connection with 27 the appointment of the permanent receiver. Except for an act of gross negligence, the 28 permanent receiver shall not be liable for any loss or damage incurred by any of the 13 1 defendants, their officers, agents, servants, employees and attorneys or any other 2 person, by reason of any act performed or omitted to be performed by the permanent 3 receiver in connection with the discharge of his duties and responsibilities. 4 5 XVII. IT IS FURTHER ORDERED that representatives of the SEC and any other 6 government agency are authorized to have continuing access to inspect or copy any 7 or all of the corporate books and records and other documents of Defendant Profit 8 Connect and its affiliates and subsidiaries, , and continuing access to inspect their 9 funds, property, assets and collateral, wherever located. 10 11 XVIII. IT IS FURTHER ORDERED that this Court shall retain jurisdiction over this 12 action for the purpose of implementing and carrying out the terms of all orders and 13 decrees which may be entered herein and to entertain any suitable application or 14 motion for additional relief within the jurisdiction of this Court. 15 16 17 18 XX. IT IS FURTHER ORDERED that a video-conference status hearing concerning the receivership, is set for 3:00 p.m. on September 21, 2021. 19 20 IT IS FURTHER ORDERED that the hearing on the SEC's motions for a 21 preliminary injunction and to appoint a permanent receiver [ECF Nos. 7, 8], set 22 for 4:00 p.m. on August 9, 2021, is VACATED., and the corresponding motions 23 [ECF Nos. 7, 8] are DENIED as moot in light of this stipulation. 24 25 26 27 28 ________________________________ U.S. District Judge Jennifer A. Dorsey Dated: August 6, 2021 14
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