Commodity Futures Trading Commission v. Financial Tree ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 COMMODITY FUTURES TRADING No. 2:20-cv-01184-TLN-AC COMMISSION, 12 Plaintiff, 13 v. ORDER 14 15 F TI RN EA EN TC RI UA SL T T ; R FE INE A d Nba C F IAIN LA SN OC LI UA TL I ON GROUP dba FINANCIAL SOLUTION 16 GROUP TRUST; NEW MONEY ADVISORS, LLC; THE LAW FIRM OF 17 JOHN GLENN, P.C.; JOHN D. BLACK aka JOHN BARNES; CHRISTOPHER 18 MANCUSO; JOSEPH TUFO; and JOHN P. GLENN, 19 Defendants; 20 SUISSE GROUP (USA) LLC; JMC 21 INDUSTRIES LLC; LANDES CAPITAL MANAGEMENT, LLC; KINGDOM 22 TRUST LLC; HERBERT CASWELL; ANNE MANCUSO; and TYLER 23 MANCUSO, 24 Relief Defendants. 25 26 /// 27 /// 28 /// 1 Presently before the Court is Plaintiff Commodity Futures Trading Commission (“CFTC”) 2 and Defendant John P. Glenn’s (“Glenn”) Joint Motion to Modify Preliminary Injunction with 3 Respect to Defendant John P. Glenn. (ECF No. 62.) No party objects to this motion. For the 4 reasons set forth below, CFTC and Glenn’s joint motion is GRANTED. 5 I. FACTUAL AND PROCEDURAL BACKGROUND 6 On July 2, 2020, this Court issued a Statutory Restraining Order (“SRO”), freezing assets, 7 prohibiting the destruction of records, and requiring CFTC be provided immediate access to those 8 records. (ECF No. 9.) On July 28, 2020, the Court issued a Preliminary Injunction (“PI”) that 9 continued the terms set forth in the SRO and additionally required a complete accounting from 10 Defendants and Relief Defendants1 and prohibited Defendants from committing future violations 11 of the Commodity Exchange Act (“Act”) and Commission Regulations or engaging in 12 commodity-related activities. (ECF No. 33.) 13 In a joint motion submitted by counsel for CFTC, the parties currently seek to modify the 14 conditions of the asset freeze as it pertains to Glenn, so that he may use money from legitimate 15 sources of income earned, obtained, and/or borrowed from third parties after July 2, 2020 (the 16 effective date of the SRO) (ECF No. 9), that is not derived from the conduct alleged in the 17 Complaint (ECF No. 1) and is not otherwise related to this case (“Legitimate New Income”) to 18 pay for: (1) his reasonable living expenses (“Glenn Living Expenses”); (2) certain reasonable 19 living expenses for his daughter, Genevieve Glenn (“Genevieve Living Expenses”); (3) 20 reasonable attorney’s fees in connection with the instant litigation (“Glenn Attorney Fees”); and 21 (4) reasonable business expenses of Glenn’s law firm (“Glenn Law Firm Business Expenses”) 22 (collectively, “Reasonable New Glenn Expenses”). (ECF No. 62 at 1–2.) 23 II. STANDARD OF LAW 24 “The district court has inherent power as a court of equity to order such temporary, 25 1 The July 28, 2020 PI was issued against Defendants John D. Black and his affiliated entities Financial Tree, Financial Solution Group, and New Money Advisors, LLC; Christopher 26 Mancuso; Joseph Tufo; and Glenn and The Law Firm of John Glenn, P.C. (collectively, 27 “Defendants”) and Relief Defendants Suisse Group (USA) LLC; JMC Industries LLC; Landes Capital Management, LLC; Kingdom Trust LLC; Herbert Caswell; Anne Mancuso; and Tyler 28 Mancuso (collectively, “Relief Defendants”). (ECF No. 33.) 1 ancillary relief in order to preserve the status quo so that an ultimate decision for the [CFTC] 2 could be effective.” CFTC v. Muller, 570 F.2d 1296, 1300 (5th Cir. 1978) (citing SEC v. Manor 3 Nursing Centers, Inc., 458 F.2d 1082, 1105–06 (2d Cir. 1972)). “When modifying a preliminary 4 injunction, a court is charged with the exercise of the same discretion it exercised in granting or 5 denying injunctive relief in the first place.” Sierra Club v. U.S. Army Corps of Eng’rs, 732 F.2d 6 253, 256 (2d Cir.1984); see also Gonzalez v. Axess Trade Co., Inc., No. 04 Civ. 3762(RCC), 2005 7 WL 1384019, at *4 (S.D.N.Y. Jun. 9, 2005). The same is true for equitable relief, like the PI in 8 this case, that has been issued under the Act. See CFTC v. British Am. Commodity Options 9 Corp., 560 F.2d 135, 141 (2d Cir.1977) (holding that courts are vested with continuing equitable 10 discretion over statutory injunctions); see also CFTC v. Battoo, 66 F. Supp. 3d 1095, 1096 (N.D. 11 Ill. 2014), aff’d, 790 F.3d 748 (7th Cir. 2015) (district judge has discretion to revise a preliminary 12 remedy if persuaded that change had benefits for the parties and the public interest). 13 III. ANALYSIS 14 Here, the Court finds good cause exists to grant the requested modification to the PI. 15 Permitting the Reasonable New Glenn Expenses provides an incentive and ability for Glenn to 16 continue operating his business, which is important to ensure Glenn’s ability to satisfy any 17 judgment that may ultimately be entered against him. See CFTC v. Morgan, Harris & Scott, Ltd., 18 484 F. Supp. 669, 678 (S.D.N.Y. 1979) (purpose of granting injunctive relief was, in part, to 19 ensure ability to later compensate defrauded consumers). Furthermore, permitting such expenses 20 enables Glenn to purchase basic necessities as well as engage in constitutionally-protected 21 activity (such as spending untainted income on reasonable attorney’s fees in connection with any 22 related criminal investigation). (See ECF No. 62 at 2.) Finally, the Court notes that the proposed 23 modification appears reasonable because it is narrowly-tailored to permit Glenn to use only 24 legitimate income, while safeguarding CFTC’s right to object to any expenditure as unreasonable 25 and to request any and all appropriate relief from the Court. (See id.) Accordingly, the Court 26 finds good cause exists to lift the asset freeze as it pertains specifically to Glenn, and only to the 27 extent that he may use Legitimate New Income to pay for his Reasonable New Glenn Expenses as 28 detailed herein. 1 IV. CONCLUSION 2 For the foregoing reasons, the parties’ joint motion is GRANTED. (ECF No. 62.) The 3 Court hereby modifies the July 28, 2020 PI (ECF No. 33) as follows: 4 1. Except as modified herein, the PI issued on July 28, 2020 (ECF No. 33), shall remain 5 in full force and effect pending trial, final disposition of this action, or further order of this Court, 6 and the Court retains jurisdiction of this matter for all purposes. 7 2. Nothing in the PI shall prevent Glenn from earning income from legitimate business 8 activities. Subject to the reporting requirements of this Order, Glenn may use Legitimate New 9 Income for the aforementioned Reasonable New Glenn Expenses. To facilitate those 10 expenditures, Glenn may open the following bank accounts at the Bank of Colorado: 11 a) One personal bank account in Glenn’s name (“New Glenn Personal Account”); 12 b) One business operating account in the name of John Glenn Law, LLC (“New 13 Glenn Law Firm Business Account”), a new entity registered with the 14 Colorado Secretary of State, separate from Glenn’s existing law firm (The Law 15 Firm of John Glenn, P.C., which is a Defendant in this case); and 16 c) One IOLTA (COLTAF) trust account in the name of John Glenn Law, LLC 17 COLTAF (“New Glenn Law Firm IOLTA Account”) (collectively, the “New 18 Glenn Bank Accounts”). 19 3. As a condition of the expenditures and activities permitted by Paragraph 2, Glenn must 20 comply with the following: 21 a) The New Glenn Personal Account shall be in Glenn’s name only. 22 b) The New Glenn Law Firm Business Account and the New Glenn Law Firm 23 IOLTA Account shall be in the name of John Glenn Law, LLC only. 24 c) Glenn is prohibited from providing any other entity or individual any control, 25 direct or indirect beneficial interest, discretionary authority, signatory 26 authority, or power of attorney over any New Glenn Bank Account. 27 d) Upon opening each New Glenn Bank Account, Glenn shall immediately notify 28 CFTC as to the type of account (i.e., checking, savings, etc.), the account 1 number, and the name on the account. 2 e) Glenn shall deposit all Legitimate New Income into one or more New Glenn 3 Bank Accounts. 4 f) Glenn shall not open any safety deposit boxes. 5 g) Within 30 days of the date of electronic filing of this Order, Glenn shall 6 provide CFTC with three months of personal and business financial records 7 preceding July 2, 2020, sufficient to substantiate Glenn’s living expenses, 8 Glenn’s expenditures on Genevieve Glenn’s living expenses, and Glenn’s 9 business expenses during that three-month period. The purpose of this 10 provision is to provide a baseline to assess the reasonableness of the New 11 Glenn Expenses. 12 h) Within 30 days of the date of electronic filing of this Order, and every 30 days 13 thereafter, Glenn shall provide CFTC with a detailed description of all 14 Legitimate New Income and all expenditures made by Glenn and the New 15 Glenn Law Firm within the preceding 30-day period. The description shall 16 make clear the nature of each expense and be supported by records sufficient to 17 substantiate each expense, to enable CFTC to assess whether, in CFTC’s view, 18 the expenses constitute Reasonable New Glenn Expenses, as opposed to 19 expenses that are unreasonable or otherwise disallowed by this Order. Such 20 records shall include, at minimum, monthly account statements from each New 21 Glenn Bank Account, with notations, if necessary, to clarify the nature of each 22 expenditure. 23 i) To the extent Glenn borrows money from third parties to pay Glenn attorney 24 fees, Glenn shall, within 30 days of borrowing such funds, submit to CFTC: (i) 25 documents sufficient to evidence the provision of funds to Glenn, any 26 repayment terms, and the transfer of funds to Glenn’s attorney; (ii) an affidavit 27 from the third party establishing that such funds were not derived, directly or 28 indirectly, from the conduct alleged in the Complaint (ECF No. 1); and (iii) an 1 affidavit from Glenn establishing that Glenn intends to repay the loan with 2 future Legitimate New Income. 3 j) If any New Glenn Bank Account is closed, either by Glenn or the bank, then 4 Glenn shall immediately notify CFTC and provide copies of documents 5 relating to the closing of the accounts, including close-out statements and all 6 documents reflecting the reason the accounts were closed. 7 k) Glenn shall cooperate with all reasonable CFTC requests for additional 8 information, including follow-up requests for additional documents or 9 information substantiating Glenn’s expenditures. 10 4. CFTC retains the right to object to any expenditure as unreasonable or otherwise 11 disallowed by this Order, and to request any and all appropriate relief from this Court in the event 12 of such expenditures. 13 IT IS SO ORDERED. 14 DATED: October 8, 2020 15 16 17 18 19 20 21 22 23 24 25 26 27 28